Business Overview and Company History
ProPetro Holding Corp (PUMP) is a leading integrated energy service company, strategically headquartered in Midland, Texas and primarily focused on providing innovative hydraulic fracturing, wireline, and other complementary energy and power generation services to major upstream oil and gas companies in the prolific Permian Basin.
ProPetro was founded in 2007 and has since established itself as a prominent player in the oilfield services industry, cultivating long-standing relationships with some of the region's most active and well-capitalized exploration and production (E&P) companies. The company's operations are primarily concentrated in the Permian Basin, which is widely regarded as one of the most productive oil and natural gas regions in the United States.
In 2018, ProPetro made a significant strategic move by acquiring certain pressure pumping assets and real property from Pioneer Natural Resources USA, Inc. and Pioneer Pumping Services, LLC, further solidifying its presence in the Permian Basin. This acquisition not only expanded ProPetro's service offerings but also deepened its ties with key customers in the region.
Building on its growth strategy, ProPetro acquired Silvertip Completion Services Operating, LLC in 2022. This acquisition complemented the company's existing service offerings and enhanced its ability to serve both the Midland and Delaware sub-basins of the Permian, further strengthening its market position.
Throughout its history, ProPetro has faced various challenges, including volatility in commodity prices, supply chain disruptions, and the impact of the COVID-19 pandemic. In 2020, the company underwent a significant internal review when its audit committee initiated an investigation into the company's accounting practices. This led to the restatement of certain financial statements and an SEC investigation, which was ultimately resolved. Despite these obstacles, ProPetro has demonstrated resilience and a continued focus on operational excellence and maintaining strong customer relationships.
Recognizing the industry's shift towards lower-emissions equipment, ProPetro has actively invested in the transition to next-generation technologies, including its Tier IV Dynamic Gas Blending (DGB) dual-fuel and FORCE electric-powered hydraulic fracturing fleets. As of December 31, 2024, approximately 75% of ProPetro's fleet consisted of these advanced, environmentally-friendly assets, which have been in high demand from customers prioritizing efficiency, fuel cost savings, and emissions reductions.
In 2024, ProPetro took a transformative step by launching its newest business line, PROPWR, to provide power generation services to oil and gas producers and other industrial customers, including data centers. This strategic diversification allows the company to capitalize on the growing demand for reliable, low-emissions power solutions in the Permian Basin and beyond.
Financial Performance
ProPetro's financial performance in 2024 was marked by resilience in the face of challenging market conditions. The company reported revenue of $1.44 billion, a decline of 11.4% from the previous year, largely attributable to decreased customer activity levels and pricing pressure. Despite these headwinds, ProPetro's disciplined capital allocation and operational efficiency enabled it to generate $118 million in free cash flow, a significant improvement of over 900% compared to 2023.
The company's net loss for 2024 was $137.9 million, compared to net income of $85.6 million in the prior year. This loss included $188.6 million in property and equipment impairment expense related to the company's conventional Tier II diesel-only hydraulic fracturing pumping units and $23.6 million in goodwill impairment expense related to the wireline operating segment.
ProPetro's Adjusted EBITDA, a non-GAAP financial measure, was $283.2 million for the year ended December 31, 2024, down 29.9% from the prior year. The company's operating cash flow for 2024 was $252.3 million.
In the fourth quarter of 2024, ProPetro reported revenue of $320.6 million and a net loss of $17.1 million. The company generated strong free cash flow in Q4 2024 despite typical seasonality and market softness.
Liquidity
The company's balance sheet remains strong, with $50.4 million in cash and $160.9 million in total liquidity as of December 31, 2024. ProPetro's debt level is well-managed, with a debt-to-equity ratio of 0.21, providing ample financial flexibility to navigate market conditions and pursue strategic initiatives.
ProPetro has a $225 million asset-based revolving credit facility, with $110.5 million available as of December 31, 2024, after $45 million in borrowings. The company's current ratio stands at 1.31, and its quick ratio is 1.24, indicating a healthy short-term liquidity position.
Operational Highlights and Strategic Initiatives
Throughout 2024, ProPetro continued to demonstrate its industry leadership and operational excellence. The company maintained an average of 14 active hydraulic fracturing fleets during the fourth quarter, despite typical seasonal headwinds, and expects to operate between 14 and 15 fleets in the first quarter of 2025.
ProPetro's commitment to innovation is exemplified by its FORCE electric-powered hydraulic fracturing fleets, which now account for four of the company's active fleets, with a fifth fleet expected to be deployed in the first half of 2025. These electric fleets have delivered industry-leading performance and efficiency, contributing to ProPetro's ability to maintain strong customer relationships and command premium pricing.
The company's strategic diversification into power generation services through PROPWR represents a transformational growth opportunity. ProPetro has already secured orders for 140 megawatts of natural gas-fueled power generation equipment, which it expects to begin deploying in the second half of 2025 and early 2026. The company is actively negotiating long-term contracts with customers, leveraging its existing relationships and expertise to capitalize on the burgeoning demand for reliable, low-emissions power solutions in the Permian Basin and beyond.
In addition to its fleet transition and PROPWR initiatives, ProPetro has remained disciplined in its capital allocation strategy. During 2024, the company repurchased approximately 13 million shares, or 11% of its outstanding shares, for a total of $111 million, underscoring its commitment to creating long-term value for shareholders.
Business Segments
Hydraulic Fracturing Segment The hydraulic fracturing segment is a significant component of ProPetro's business, accounting for approximately 75.6% of the company's total revenue in 2024, generating $1.09 billion. ProPetro's hydraulic fracturing operations provide services intended to optimize hydrocarbon flow paths during the completion phase of horizontal shale wellbores in the Permian Basin. The company's total available hydraulic horsepower (HHP) at the end of 2024 was 1.56 million HHP, comprised of 450,000 HHP of Tier IV Dynamic Gas Blending (DGB) dual-fuel equipment, 294,000 HHP of FORCE electric-powered equipment, and 812,500 HHP of conventional Tier II equipment.
ProPetro's hydraulic fracturing fleets range from approximately 50,000 to 80,000 HHP depending on the job design and customer demand at the wellsite. The company's equipment has been designed to handle the operating conditions and high-intensity well completions, including simultaneous hydraulic fracturing (Simul-Frac), which are commonly encountered in the Permian Basin.
Wireline Segment
ProPetro's wireline segment provides wireline and ancillary services on new oil well completions in the Permian Basin. The company's wireline services utilize equipment with a drum of wireline to deploy perforating guns in the well to perforate the casing, cement, and formation. ProPetro currently has 26 wireline units available to perform these well completion services. In 2024, the wireline segment generated revenue of $203.2 million.
Cementing Segment
ProPetro's cementing segment provides cementing services for the completion of new wells and remedial work on existing wells. Cementing services use pressure pumping equipment to deliver a slurry of liquid cement that is pumped down a well between the casing and the borehole. ProPetro currently has 29 cementing units. The cementing segment generated revenue of $149.4 million in 2024.
Power Generation Services Segment (PROPWR) In the fourth quarter of 2024, ProPetro formed a new subsidiary, ProPetro Energy Solutions, LLC (PROPWR), to provide power generation services to oil and gas producers and non-oil and gas applications such as general industrial projects and data centers. This new subsidiary has ordered equipment but has not yet begun any revenue-generating activities.
Recent Acquisitions and Divestitures
ProPetro has been active in strategic acquisitions and divestitures to optimize its business portfolio:
1. On May 31, 2024, the company acquired Aqua Prop, LLC (AquaProp), which provides wet sand solutions for hydraulic fracturing at well sites, expanding ProPetro's business to include wet sand services.
2. On December 1, 2023, ProPetro completed the acquisition of the assets and operations of Par Five Energy Services LLC, which provides cementing services in the Delaware Basin, complementing the company's existing cementing business.
3. On November 1, 2024, the company sold its cementing business located in Vernal, Utah to a business owned by a former employee as part of a strategic repositioning.
Industry Trends
The Permian Basin, where ProPetro primarily operates, is widely regarded as one of the most prolific oil and natural gas producing areas in the United States. According to the company's estimates, the Permian Basin has approximately 85 full-time active frac fleets, of which around 90% is held and operated by the top seven largest pressure pumping brands, demonstrating the healthy and consolidated state of the market.
Risks and Challenges
While ProPetro has demonstrated resilience and adaptability, the company faces several risks and challenges common to the oilfield services industry. The cyclical nature of the oil and gas industry, characterized by volatile commodity prices and fluctuating drilling and completion activity, can significantly impact ProPetro's financial performance. The company's concentration in the Permian Basin also exposes it to regional supply and demand dynamics, as well as potential regulatory changes that could affect oil and gas operations in the basin.
The ongoing transition to lower-emissions equipment, while a strategic priority for ProPetro, also presents operational and financial challenges. The capital-intensive nature of this transition and the potential pricing pressure associated with the adoption of new technologies could impact the company's profitability and cash flow generation.
Additionally, ProPetro faces intense competition from both large, well-capitalized oilfield service providers and smaller, more nimble competitors. Maintaining a competitive edge in terms of service quality, technological innovation, and cost-effectiveness is crucial for the company's long-term success.
Outlook and Guidance
Despite the challenges faced in 2024, ProPetro remains well-positioned for the future. The company's focus on operational efficiency, disciplined capital allocation, and strategic diversification into power generation services position it to navigate the evolving energy landscape and capitalize on growth opportunities.
ProPetro's guidance for 2025 suggests cautious optimism, with the company expecting capital expenditures to range between $300 million and $400 million. Of this total, $150 million to $200 million will be allocated to the completions businesses (hydraulic fracturing, wireline, cementing), and an additional $150 million to $200 million will be for growth capital expenditures in the new Pro Power business.
The company expects to run between 14 and 15 frac fleets in Q1 2025, which they believe is a good run rate to use through the end of the year. For the Pro Power business, ProPetro currently has 140 megawatts of power generation equipment on order, with the majority expected for delivery in the second half of 2025 and early 2026, bringing their total capacity to between 150 and 200 megawatts in early 2026. The company anticipates the Pro Power business to have an EBITDA contribution of $300,000 to $400,000 per megawatt per year once the initial 150-200 megawatts are fully operational in 2026.
As ProPetro continues to execute on its strategic priorities, investors will closely monitor the company's ability to maintain its operational excellence, adapt to industry changes, and deliver sustainable financial performance. With its strong balance sheet, innovative service offerings, and diversified business model, ProPetro appears well-equipped to weather the cyclical nature of the oilfield services industry and emerge as a leader in the evolving energy landscape.