Executive Summary / Key Takeaways

• ProPetro Holding Corp. is strategically transforming into a diversified energy solutions provider, leveraging its Permian Basin expertise and a capital-light, industrialized operating model.
• The company is aggressively expanding its PROPWR segment into high-growth power generation markets, including oilfield microgrids and data centers, securing significant long-term contracts and substantial equipment orders.
• PUMP's core hydraulic fracturing business is shifting towards next-generation, lower-emissions equipment (FORCE electric and Tier IV DGB dual-fuel), with a majority of active horsepower now under long-term contracts, enhancing earnings stability.
• Despite a challenging and volatile energy market, ProPetro's completions business continues to generate sustainable free cash flow, which is crucial for funding the rapid growth of the PROPWR segment.
• Disciplined capital allocation, a robust balance sheet, and a focus on contracted revenue streams are central to ProPetro's strategy, positioning it for sustained value creation amidst industry consolidation.

A Strategic Transformation in the Permian Basin

ProPetro Holding Corp., founded in 2007, has evolved from a specialized oilfield services provider in the Permian Basin into a diversified energy solutions company. Its core business, deeply rooted in hydraulic fracturing, wireline, and cementing services, has undergone a significant transformation, now emphasizing next-generation equipment and a new, high-growth power generation segment, PROPWR. This strategic pivot aims to leverage an industrialized operating model to generate sustainable free cash flow, which in turn fuels the company's expansion into new energy frontiers.

The company operates primarily in the Permian Basin, a region widely recognized as one of the most prolific oil-producing areas in the United States. This concentrated presence has allowed ProPetro to cultivate longstanding relationships with leading exploration and production (E&P) companies. The industry landscape is characterized by volatility, influenced by commodity prices, geopolitical events, and a growing demand for lower-emissions operations. In response, ProPetro has strategically positioned itself as a leader in providing efficient, technologically advanced services that meet these evolving customer needs.

The competitive environment in oilfield services is intense, with a mix of large integrated players like Halliburton Company , Schlumberger NV , and Baker Hughes Company (BKR), alongside specialized peers such as Liberty Oilfield Services Inc. and numerous private entities. ProPetro's regional expertise and established customer relationships in the Permian Basin provide a significant competitive advantage, fostering loyalty and enabling efficient project deployment. While larger competitors boast global scale and extensive technological R&D, ProPetro differentiates itself through its focused operational excellence, cost-effective solutions tailored to domestic requirements, and a growing portfolio of next-generation equipment. The company's disciplined capital allocation over recent years has contributed to market stability, providing operational and commercial leverage against less disciplined, subscale frac providers who often struggle to sustain returns at lower price points. This dynamic is leading to market consolidation through attrition, favoring well-capitalized providers like ProPetro.

Technological Edge and Operational Evolution

ProPetro's technological differentiation is central to its investment thesis, particularly within its hydraulic fracturing segment. The company has made substantial investments to transition its fleet from conventional diesel-only equipment to lower-emissions alternatives. As of September 30, 2025, approximately 75% of ProPetro's hydraulic fracturing fleet consists of next-generation gas-burning equipment, comprising 445,000 HHP of Tier IV Dynamic Gas Blending (DGB) dual-fuel equipment and 312,000 HHP of FORCE electric-powered equipment. This transition offers tangible benefits, including enhanced efficiency, reduced fuel costs for customers, and a lower emissions profile, which is increasingly critical in the current regulatory and environmental landscape.

The FORCE electric fleets, in particular, represent a significant technological leap. These fleets boast a 30% to 50% lower maintenance capital expenditure intensity compared to conventional frac assets. This is primarily due to the replacement of complex diesel engines with more robust and simpler components like transformers and variable frequency drive boxes, drastically reducing the number of moving parts and associated wear and tear. This translates directly into higher uptime, lower operating costs, and improved profitability for ProPetro. The company also highlights the benefits of simultaneous hydraulic fracturing (Simul-Frac) with its electric fleets, which offers superior safety and cost efficiency for well completions. Furthermore, the integration of services like Aqua Prop (wet sand solutions) and Silvertip Wireline with its frac fleets has yielded some of the best efficiencies across ProPetro's portfolio.

Looking ahead, ProPetro plans to continue allocating capital to its FORCE electric equipment, aiming to transition into more e-fleets at a rate of one to two per year in perpetuity. This strategic roadmap is driven by the high demand for electric fleets, their ability to secure long-term contracts, and the commercial leverage they provide, which collectively de-risks future earnings.

PROPWR: A Transformational Growth Engine

A pivotal element of ProPetro's strategic evolution is the launch and rapid scaling of PROPWR, its power generation subsidiary. Formed in the fourth quarter of 2024, PROPWR began revenue-generating activities in the third quarter of 2025, marking a significant diversification beyond traditional oilfield services. PROPWR provides turnkey power generation services utilizing mobile natural gas-fueled equipment for both oil and gas producers and non-oil and gas applications, including general industrial projects and data centers.

The growth trajectory for PROPWR is ambitious and well-supported by initial contracts and equipment orders. The company has already secured long-term contracts for over 150 megawatts (MW) of power generation capacity. This includes an inaugural 10-year contract for 80 MW to a distributed oilfield microgrid installation and a long-term contract for 60 MW to support a hyperscaler data center in the Midwest, signaling ProPetro's strategic entry into the burgeoning data center power market. The company is also in advanced negotiations for a 70 MW agreement with a large Permian E&P operator. ProPetro expects to reach at least 220 MW contracted by year-end 2025.

To meet this accelerating demand, ProPetro has placed orders for an additional 140 MW of equipment, bringing its total delivered or on-order capacity to 360 MW, with full delivery anticipated by early 2027. The company projects reaching 750 MW delivered by year-end 2028 and exceeding 1 gigawatt (GW) by 2030. The equipment mix includes both natural gas reciprocating generators (3 MW and up) and turbines (5 MW and up), along with battery energy storage systems, providing flexibility and technological expertise to compete across various sectors. The total cost of this equipment, including the balance of plant, is estimated to average approximately $1.1 million per megawatt. The economics for both oilfield and data center power projects are currently seen as similar, targeting approximately four-year paybacks and generating around $300,000 of EBITDA per megawatt per year. PROPWR focuses exclusively on prime power applications, avoiding the less economically viable bridge or backup power markets.

To fund this aggressive growth, ProPetro has secured a letter of intent for a $350 million leasing facility with an investment-grade partner. This flexible financing arrangement, combined with organic free cash flow from its completions business, is designed to accelerate PROPWR's expansion while preserving a healthy balance sheet. Management views PROPWR as a "contract compression" type business, capable of supporting more leverage than traditional oilfield services due to its long-term, take-or-pay contracts.

Financial Performance and Capital Discipline

ProPetro's financial performance in the nine months ended September 30, 2025, reflects a challenging market environment alongside strategic investments. Total revenue for the nine months ended September 30, 2025, was $979.48 million, a decrease from $1.12 billion in the prior year. The hydraulic fracturing segment, which accounts for approximately 71.5% of total revenues, saw a 15.2% decrease in revenue for the nine months ended September 30, 2025, primarily due to decreased customer activity and the idling of fleets. This also impacted profitability, with the segment's Adjusted EBITDA margin declining to 21.5% from 25.3% in the prior year period. The cost of services in hydraulic fracturing, as a percentage of revenue, increased to 76.6% for the nine months ended September 30, 2025, driven by customer price decreases and general cost inflation.

The company's overall financial health is also reflected in its profitability margins, which have faced pressure from market dynamics.

Despite these headwinds, ProPetro's industrialized operating model enabled its completions business to generate sustainable free cash flow. Net cash provided by operating activities for the nine months ended September 30, 2025, was $150.56 million. The company's total liquidity as of September 30, 2025, stood at approximately $157.6 million, comprising $66.54 million in cash and cash equivalents and $91.1 million available under its ABL Credit Facility.

The robust cash flow generation supports the company's liquidity position, providing a strong foundation for future investments and operations.

Capital expenditures incurred for the full year 2025 are projected to be between $270 million and $290 million. Of this, the completions business is expected to account for a reduced $80 million to $100 million, reflecting ongoing cost optimization. The PROPWR business is allocated approximately $190 million, with a significant portion ($104 million) already financed. For 2026, PROPWR CapEx is projected between $200 million and $250 million. The company's share repurchase program, extended through December 31, 2026, with $89.2 million remaining authorized, underscores its commitment to shareholder returns, although no repurchases were made in the recent nine-month period as capital was prioritized for PROPWR growth.

Outlook, Risks, and Competitive Dynamics

ProPetro anticipates the challenging operating environment in the completions market to persist into at least the first half of 2026, influenced by factors such as tariffs, rising OPEC+ production, and a decline in the Permian Basin rig count to 251 by September 2025 from 304 at the end of 2024. The company expects to operate an average of 10 to 11 active frac fleets in the fourth quarter of 2025, a level it aims to sustain into 2026, while accounting for normal holiday seasonality. Management has explicitly stated a commitment to not operate assets at sub-economic levels, choosing to idle fleets to preserve equipment and margins. This disciplined approach is expected to lead to continued market consolidation through attrition, benefiting well-capitalized providers with next-generation assets.

The PROPWR segment, however, is expected to provide a sequential improvement, bolstering overall margins and offsetting some of the challenges in the completions business. The demand for power in the Permian, particularly for production and midstream applications, is seen as largely independent of drilling and completions activity, offering a more stable revenue stream. The company also faces risks common to the energy sector, including commodity price volatility, inflation, and increased interest rates impacting operational costs. Tragically, a recent incident highlighted the inherent safety risks in field operations, an area where ProPetro emphasizes paramount importance.

ProPetro's competitive positioning is strengthened by its focus on the Permian, its next-generation fleet, and its growing portfolio of long-term contracts. While larger, more diversified competitors like Halliburton Company (HAL) and Schlumberger NV (SLB) offer broader global reach and extensive technological R&D, ProPetro's specialized expertise and cost-effective solutions in its core region provide a strong value proposition. Against direct peers like Liberty Oilfield Services Inc. (LBRT), ProPetro's larger fleet capacity and strategic investments in electric frac and power generation offer a differentiated growth path. The company's ability to secure long-term, take-or-pay contracts for its PROPWR business is a significant competitive differentiator, providing revenue stability akin to midstream assets.

Conclusion

ProPetro Holding Corp. is executing a compelling strategic transformation, pivoting from a traditional oilfield services provider to a diversified energy solutions company. The core investment thesis hinges on the company's ability to leverage its disciplined, industrialized completions business to generate free cash flow, which in turn fuels the rapid expansion of its high-growth PROPWR segment. This dual-engine strategy, combining advanced hydraulic fracturing technology with a burgeoning power generation offering, positions ProPetro for long-term value creation.

The company's commitment to next-generation electric and dual-fuel frac fleets, coupled with the significant contractual momentum in PROPWR, is creating a more resilient and predictable earnings profile. With substantial contracted power generation capacity and ambitious growth targets, PROPWR is poised to become a material contributor to future earnings, diversifying revenue streams and providing stability in a volatile energy market. While near-term challenges and competitive pressures persist, ProPetro's strong balance sheet, disciplined capital allocation, and strategic focus on technological leadership and long-term contracts underscore its potential to emerge stronger and deliver sustained shareholder value.