ý
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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26-3685382
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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Title of each class
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Name of each exchange on which registered
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Common Stock ($0.001 par value)
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New York Stock Exchange
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Large accelerated filer
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ý
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Accelerated filer
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o
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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•
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Strong market position in the Permian Basin.
We believe we are one of the largest hydraulic fracturing provider by HHP in the Permian Basin, which is the most prolific oil producing area in the United States. Our longstanding customer relationships and substantial Permian Basin market presence uniquely position us to continue growing in tandem with the basin’s ongoing development. The Permian Basin is a mature, liquids‑rich basin with well known geology and a large, exploitable resource base that delivers attractive E&P producer economics at or below current commodity prices. As a result of its significant size, coupled with the presence of multiple prospective geologic benches and other favorable characteristics, the Permian Basin has become widely recognized as the most attractive and economic oil resource in North America.
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•
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Hydraulic fracturing is highly levered to increasing drilling activity and completion intensity levels.
The combination of an expanding Permian Basin horizontal rig count and more complex well completions has a compounding effect on HHP demand growth. Horizontal drilling has become the default method for E&P operators to most economically extract unconventional resources, and the number of horizontal rigs has increased from 22% of the total Permian Basin rig count in December 2011 to approximately 91% of the Permian Basin rig count at December 31, 2018. As the horizontal rig count has grown, well completion intensity levels have also increased as a result of longer wellbore lateral lengths, more fracturing stages per foot of lateral and increasing amounts of proppant per stage. Furthermore, the ongoing improvement in drilling and completion efficiencies, driven by innovations such as multi‑well pads and zipper fracs, have further increased the demand for HHP. Taken together, these demand drivers have helped contribute to the full utilization of our fleet and have us well positioned to capture future growth opportunities and enhanced pricing for our services.
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•
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Deep relationships and operational alignment with high‑quality, Permian Basin‑focused customers.
Our deep local roots, operational expertise and commitment to safe and reliable service have allowed us to cultivate longstanding customer relationships with the most active and well‑capitalized Permian Basin operators. Many of our current customers have worked with us since our inception and have integrated our fleet scheduling with their well development programs. This high degree of operational alignment and their continued support have allowed us to maintain relatively high utilization rates over time. As our customers increase activity levels, we expect to continue to leverage these strong relationships to keep our fleet fully utilized and selectively expand our platform in response to specific customer demand.
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•
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Standardized fleet of modern, well‑maintained equipment.
We have a large, homogenous fleet of modern equipment that is configured to handle the Permian Basin’s most complex, highest‑intensity, hydraulic fracturing jobs. We believe that our fleet design is a key advantage compared to many of our competitors who have fracturing units that are not optimized for Permian Basin conditions. Our fleet is largely standardized across units to facilitate efficient maintenance and repair, reducing equipment downtime and improving labor efficiency. Furthermore, our strong relationships with a variety of key suppliers and vendors provide us with the reliable access to the equipment necessary to support our continued organic growth strategy.
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•
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Proven cross‑cycle financial performance.
Over the past several years, we have maintained high cross‑cycle fleet utilization rates. Since September 2016 our fleet has consistently recorded a utilization rate of approximately 100%. Our consistent track record of steady growth, coupled with our ability to quickly deploy new HHP on a dedicated and fully utilized basis, has resulted in revenue growth across the industry’s cycles. We believe that we will be able to continue to grow faster than our competitors while preserving attractive EBITDA margins as a result of our differentiated service offerings and a robust backlog of demand for our services. Furthermore, we believe that our philosophy of maintaining modest
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•
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Seasoned management and operating team.
We have a seasoned executive management team, with our senior members contributing more than 100 years of collective industry and financial experience. Members of our management team founded our business and seeded our company with a portion of our original investment capital. We believe their track record of successfully building premier oilfield service companies in the Permian Basin, as well as their deep roots and relationships throughout the West Texas community, provide a meaningful competitive advantage for our business. In addition, our management team has assembled a loyal group of highly‑motivated and talented managers and field personnel, and we have had minimal manager‑level turnover in our core service divisions over the past three years. We employ a balanced decision‑making structure that empowers managerial and field personnel to work directly with customers to develop solutions while leveraging senior management’s oversight. This collaborative approach fosters strong customer links at all levels of the organization and effectively institutionalizes customer relationships beyond the executive suite.
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•
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Capture an increasing share of rising demand for hydraulic fracturing services in the Permian Basin.
We intend to continue to position ourselves as a Permian Basin‑focused hydraulic fracturing business, as we believe the Permian Basin hydraulic fracturing market offers supportive long‑term growth fundamentals. These fundamentals are characterized by increased demand for our HHP, driven by increasing drilling activity and well completion intensity levels. We are currently operating at approximately 100% utilization, and we believe we are strategically positioned to deploy additional hydraulic fracturing equipment as our customers continue to develop their assets in the Midland Basin and Delaware Basin.
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•
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Capitalize on improving efficiency gains.
We intend to continue to work with our customers and vendors to improve our operational efficiencies and enhance our margins. We believe that improving our efficiencies will result in greater revenue and enhanced margins as fixed costs are spread over a broader revenue base.
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•
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Cross‑sell our complementary services.
In addition to our hydraulic fracturing services, we offer a broad range of complementary services in support of our customers’ development activities, including cementing, coiled tubing, flowback services and drilling. These complementary services create operational efficiencies for our customers, and allow us to capture a greater percentage of their capital spending across the lifecycle of an unconventional well. We believe that, as our customers increase spending levels, we are well positioned to continue cross‑selling and growing our complementary service offerings.
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•
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Maintain financial stability and flexibility to pursue growth opportunities.
Consistent with our historical practices, we plan to continue to maintain a conservative balance sheet, which will allow us to better react to potential changes in industry and market conditions and opportunistically grow our business. In the near term, we intend to continue our past practice of aligning our growth capital expenditures with visible customer demand by strategically deploying new equipment on a long‑term, dedicated basis in response to inbound customer requests. We will also selectively evaluate potential strategic acquisitions that increase our scale and capabilities or diversify our operations.
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•
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the domestic and foreign supply of, and demand for, oil and natural gas;
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•
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the level of prices, and expectations about future prices, of oil and natural gas;
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•
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the level of global oil and natural gas exploration and production;
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•
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the cost of exploring for, developing, producing and delivering oil and natural gas;
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•
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the supply of and demand for drilling and hydraulic fracturing equipment;
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•
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the expected decline rates of current production;
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•
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the price and quantity of foreign imports;
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•
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political and economic conditions in oil and natural gas producing countries and regions, including the United States, the Middle East, Africa, South America and Russia;
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•
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actions by the members of Organization of Petroleum Exporting Countries with respect to oil production levels and announcements of potential changes in such levels;
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•
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speculative trading in crude oil and natural gas derivative contracts;
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•
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the level of consumer product demand;
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•
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the discovery rates of new oil and natural gas reserves;
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•
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contractions in the credit market;
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•
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the strength or weakness of the U.S. dollar;
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•
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available pipeline and other transportation capacity;
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•
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the levels of oil and natural gas storage;
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•
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weather conditions and other natural disasters;
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•
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domestic and foreign tax policy;
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•
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domestic and foreign governmental approvals and regulatory requirements and conditions;
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•
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the continued threat of terrorism and the impact of military and other action, including military action in the Middle East;
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technical advances affecting energy consumption;
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•
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the proximity and capacity of oil and natural gas pipelines and other transportation facilities;
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•
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the price and availability of alternative fuels;
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•
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the ability of oil and natural gas producers to raise equity capital and debt financing;
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•
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merger and divestiture activity among oil and natural gas producers; and
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overall domestic and global economic conditions.
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•
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increasing our vulnerability to general adverse economic and industry conditions;
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•
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the covenants that are contained in the agreements governing our indebtedness could limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments;
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•
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our debt covenants could also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;
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•
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any failure to comply with the financial or other debt covenants, including covenants that impose requirements to maintain certain financial ratios, could result in an event of default, which could result in some or all of our indebtedness becoming immediately due and payable;
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•
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our level of debt could impair our ability to obtain additional financing, or obtain additional financing on favorable terms, in the future for working capital, capital expenditures, acquisitions or other general corporate purposes; and
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•
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our business may not generate sufficient cash flow from operations to enable us to meet our obligations under our indebtedness.
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•
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grant liens;
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•
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incur additional indebtedness;
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•
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engage in a merger, consolidation or dissolution;
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•
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enter into transactions with affiliates;
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•
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sell or otherwise dispose of assets, businesses and operations;
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•
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materially alter the character of our business as currently conducted; and
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•
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make acquisitions, investments and capital expenditures.
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requiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions and other general corporate purposes;
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•
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limiting our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements or other cash requirements;
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•
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increasing our vulnerability to economic downturns and changing market conditions;
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•
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placing us at a competitive disadvantage relative to competitors that have less debt; and
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•
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to the extent that our debt is subject to floating interest rates, increasing our vulnerability to fluctuations in market interest rates.
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•
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limitations on the removal of directors;
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•
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limitations on the ability of our shareholders to call special meetings;
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•
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advance notice provisions for shareholder proposals and nominations for elections to the board of directors to be acted upon at meetings of shareholders;
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providing that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and
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establishing advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by shareholders at shareholder meetings.
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Item 5.
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
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Price Per Share
of Common Stock |
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Dividends
Per Share
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||||||
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High
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Low
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|||||
2018
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Fourth quarter
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$
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19.61
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$
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11.68
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N/A
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Third quarter
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$
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17.33
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$
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14.54
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N/A
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Second quarter
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$
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20.49
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$
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14.20
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N/A
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First quarter
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$
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22.49
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$
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15.25
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N/A
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Plan Category
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Number of securities to be issued upon exercise of outstanding options, warrants and rights (1)
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Weighted average exercise price of outstanding options, warrants and rights
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Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
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(a)
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(b)
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(c)
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Equity compensation plans approved by security holders
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5,727,911
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5.14
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3,874,852
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Equity compensation plans not approved by security holders
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N/A
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N/A
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N/A
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Total
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5,727,911
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5.14
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3,874,852
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Date
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Peer Group
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Russell 2000
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ProPetro Holding Corp.
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3/17/2017
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$
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100.0
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$
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100.0
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$
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100.0
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3/31/2017
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$
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97.3
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$
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99.6
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$
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88.9
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6/30/2017
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$
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90.4
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$
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101.7
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$
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96.3
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9/29/2017
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$
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97.3
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$
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107.1
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|
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$
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99.0
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12/29/2017
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$
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104.2
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$
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110.4
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$
|
139.0
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3/29/2018
|
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$
|
83.4
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|
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$
|
109.9
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|
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$
|
109.6
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6/29/2018
|
|
$
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78.6
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|
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$
|
118.1
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|
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$
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108.1
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9/28/2018
|
|
$
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74.8
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$
|
121.9
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|
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$
|
113.7
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12/31/2018
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$
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43.9
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$
|
96.9
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$
|
85.0
|
|
|
Year Ended December 31,
|
||||||||||||||
(In thousands, except for per share data)
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2018
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2017
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2016
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|
2015
|
||||||||
Statement of Operations Data:
|
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|
|
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|
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||||||||
Revenue
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$
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1,704,562
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|
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$
|
981,865
|
|
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$
|
436,920
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$
|
569,618
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Pressure pumping
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1,658,403
|
|
|
945,040
|
|
|
409,014
|
|
|
510,198
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|
||||
All other
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46,159
|
|
|
36,825
|
|
|
27,906
|
|
|
59,420
|
|
||||
Costs and Expenses:
|
|
|
|
|
|
|
|
||||||||
Cost of services
(1)
|
1,270,577
|
|
|
813,823
|
|
|
404,140
|
|
|
483,338
|
|
||||
General and administrative
(2)
|
53,958
|
|
|
49,215
|
|
|
26,613
|
|
|
27,370
|
|
||||
Depreciation and amortization
|
88,138
|
|
|
55,628
|
|
|
43,542
|
|
|
50,134
|
|
||||
Property and equipment impairment expense
|
—
|
|
|
—
|
|
|
6,305
|
|
|
36,609
|
|
||||
Goodwill impairment expense
|
—
|
|
|
—
|
|
|
1,177
|
|
|
—
|
|
||||
Loss on disposal of assets
|
59,220
|
|
|
39,086
|
|
|
22,529
|
|
|
21,268
|
|
||||
Total costs and expenses
|
1,471,893
|
|
|
957,752
|
|
|
504,306
|
|
|
618,719
|
|
||||
Operating Income (Loss)
|
232,669
|
|
|
24,113
|
|
|
(67,386
|
)
|
|
(49,101
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)
|
||||
Other Income (Expense):
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(6,889
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)
|
|
(7,347
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)
|
|
(20,387
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)
|
|
(21,641
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)
|
||||
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
6,975
|
|
|
—
|
|
||||
Other expense
|
(663
|
)
|
|
(1,025
|
)
|
|
(321
|
)
|
|
(499
|
)
|
||||
Total other expense
|
(7,552
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)
|
|
(8,372
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)
|
|
(13,733
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)
|
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(22,140
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)
|
||||
Income (loss) before income taxes
|
225,117
|
|
|
15,741
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|
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(81,119
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)
|
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(71,241
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)
|
||||
Income tax (expense) benefit
|
(51,255
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)
|
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(3,128
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)
|
|
27,972
|
|
|
25,388
|
|
||||
Net income (loss)
|
$
|
173,862
|
|
|
$
|
12,613
|
|
|
$
|
(53,147
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)
|
|
$
|
(45,853
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)
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Per Share Information
|
|
|
|
|
|
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|
||||||||
Net income (loss) per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
2.08
|
|
|
$
|
0.17
|
|
|
$
|
(1.19
|
)
|
|
$
|
(1.31
|
)
|
Diluted
|
$
|
2.00
|
|
|
$
|
0.16
|
|
|
$
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(1.19
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)
|
|
$
|
(1.31
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)
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
83,460
|
|
|
76,371
|
|
|
44,787
|
|
|
34,993
|
|||||
Diluted
|
87,046
|
|
|
79,583
|
|
|
44,787
|
|
|
34,993
|
|||||
Balance Sheet Data as of:
|
|
|
|
|
|
|
|
||||||||
Cash and cash equivalents
|
$
|
132,700
|
|
|
$
|
23,949
|
|
|
$
|
133,596
|
|
|
$
|
34,310
|
|
Property and equipment — net of accumulated depreciation
|
$
|
912,846
|
|
|
$
|
470,910
|
|
|
$
|
263,862
|
|
|
$
|
291,838
|
|
Total assets
|
$
|
1,274,522
|
|
|
$
|
719,032
|
|
|
$
|
541,422
|
|
|
$
|
446,454
|
|
Long-term debt — net of deferred loan costs
|
$
|
70,000
|
|
|
$
|
57,178
|
|
|
$
|
159,407
|
|
|
$
|
236,876
|
|
Total shareholders’ equity
|
$
|
797,355
|
|
|
$
|
413,252
|
|
|
$
|
221,009
|
|
|
$
|
69,571
|
|
Cash Flow Statement Data:
|
|
|
|
|
|
|
|
||||||||
Net cash provided by operating activities
|
$
|
393,079
|
|
|
$
|
109,257
|
|
|
$
|
10,659
|
|
|
$
|
81,230
|
|
Net cash used in investing activities
|
$
|
(280,604
|
)
|
|
$
|
(281,469
|
)
|
|
$
|
(41,688
|
)
|
|
$
|
(62,776
|
)
|
Net cash provided by (used in) financing activities
|
$
|
(3,724
|
)
|
|
$
|
62,565
|
|
|
$
|
130,315
|
|
|
$
|
(15,216
|
)
|
(1)
|
Exclusive of depreciation and amortization.
|
(2)
|
Inclusive of stock‑based compensation.
|
•
|
Purchased and put into service four newbuild hydraulic fracturing fleets;
|
•
|
Consummated the acquisition of pressure pumping and related assets from Pioneer and Pioneer Pumping Services, adding eight hydraulic fracturing fleets, or 510,000 HHP, and ancillary equipment, expanding our total horse power to 1,415,000 HHP or 28 hydraulic fracturing fleets after giving effect to the acquisition;
|
•
|
In connection with the asset acquisition, entered into a long-term strategic relationship with Pioneer, an industry leading E&P company, to provide pressure pumping and related services for a term of up to 10 years;
|
•
|
Increased our ABL Credit Facility from $200.0 million to $300.0 million, while extending the term of the facility; and
|
•
|
Maintained a conservative balance sheet and sufficient liquidity.
|
•
|
Regional sand pumped increased significantly in 2018 from 14.7% in January 2018 to 71.6% in December 2018, which slightly impacted sand revenue offset by increased margin percentage.
|
•
|
Revenue increased
$722.7 million
, or
73.6%
, to
$1,704.6 million
, as compared to
$981.9 million
for the year ended
December 31, 2017
, primarily as a result of the increase in our fleet size;
|
•
|
Cost of services (exclusive of depreciation and amortization) increased
$456.8 million
or
56.1%
to $1,270.6 million, as compared to
$813.8 million
for the year ended
December 31, 2017
, primarily as a result of the increase in fleet size, resulting in higher activity levels. Cost of services as a percentage of revenue decreased to
74.5%
in
2018
compared to
82.9%
for the year ended
December 31, 2017
;
|
•
|
General and administrative expenses, inclusive of stock-based compensation (“G&A”), increased
$4.7 million
, or
9.6%
to
$54.0 million
, as compared to
$49.2 million
for the
December 31, 2017
. G&A as a percentage of revenue decreased to
3.2%
in
2018
from
5.0%
for the year ended
December 31, 2017
;
|
•
|
Diluted net income per common share was
$2.00
, compared to
$0.16
for the year ended
December 31, 2017
.
|
•
|
continuing to enhance our dedicated customer model to drive production efficiencies;
|
•
|
maintaining full utilization of our hydraulic fracturing fleets;
|
•
|
pursuing operational efficiencies and cost reduction strategies;
|
•
|
pursuing expansion opportunities for our non-hydraulic fracturing operations;
|
•
|
maintaining our existing relationships with our vendors and developing strategic relationships with new suppliers to ensure continuity;
|
•
|
exploring potential opportunities for mergers or acquisitions, focused on our growth, market opportunities and creating value to our shareholders.
|
|
Year Ended December 31
|
|||||||
Drilling Type (Permian Basin)
|
2018
|
|
2017
|
|
2016
|
|||
Directional
|
6
|
|
|
6
|
|
|
2
|
|
Horizontal
|
418
|
|
|
311
|
|
|
154
|
|
Vertical
|
43
|
|
|
39
|
|
|
26
|
|
Total
|
467
|
|
|
356
|
|
|
182
|
|
($ in thousands)
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended December 31, 2018
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
253,196
|
|
|
$
|
(79,334
|
)
|
|
$
|
173,862
|
|
Depreciation and amortization
|
83,404
|
|
|
4,734
|
|
|
88,138
|
|
|||
Interest expense
|
—
|
|
|
6,889
|
|
|
6,889
|
|
|||
Income tax expense
|
—
|
|
|
51,255
|
|
|
51,255
|
|
|||
Loss (gain) on disposal of assets
|
59,962
|
|
|
(742
|
)
|
|
59,220
|
|
|||
Stock‑based compensation
|
—
|
|
|
5,482
|
|
|
5,482
|
|
|||
Other expense
|
—
|
|
|
663
|
|
|
663
|
|
|||
Other general and administrative expense
(1)
|
2
|
|
|
203
|
|
|
205
|
|
|||
Deferred IPO Bonus
|
1,832
|
|
|
977
|
|
|
2,809
|
|
|||
Adjusted EBITDA
|
$
|
398,396
|
|
|
$
|
(9,873
|
)
|
|
$
|
388,523
|
|
($ in thousands)
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended December 31, 2017
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
50,417
|
|
|
$
|
(37,804
|
)
|
|
$
|
12,613
|
|
Depreciation and amortization
|
51,155
|
|
|
4,473
|
|
|
55,628
|
|
|||
Interest expense
|
—
|
|
|
7,347
|
|
|
7,347
|
|
|||
Income tax expense
|
—
|
|
|
3,128
|
|
|
3,128
|
|
|||
Loss on disposal of assets
|
38,059
|
|
|
1,027
|
|
|
39,086
|
|
|||
Stock‑based compensation
|
—
|
|
|
9,489
|
|
|
9,489
|
|
|||
Other expense
|
—
|
|
|
1,025
|
|
|
1,025
|
|
|||
Other general and administrative expense
(1)
|
—
|
|
|
722
|
|
|
722
|
|
|||
Deferred IPO Bonus
|
5,491
|
|
|
2,914
|
|
|
8,405
|
|
|||
Adjusted EBITDA
|
$
|
145,122
|
|
|
$
|
(7,679
|
)
|
|
$
|
137,443
|
|
|
|
|
|
|
|
||||||
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended December 31, 2016
|
|
|
|
|
|
||||||
Net loss
|
$
|
(45,316
|
)
|
|
$
|
(7,831
|
)
|
|
$
|
(53,147
|
)
|
Depreciation and amortization
|
37,282
|
|
|
6,260
|
|
|
43,542
|
|
|||
Interest expense
|
—
|
|
|
20,387
|
|
|
20,387
|
|
|||
Income tax benefit
|
—
|
|
|
(27,972
|
)
|
|
(27,972
|
)
|
|||
Loss on disposal of assets
|
23,690
|
|
|
(1,161
|
)
|
|
22,529
|
|
|||
Property and equipment impairment expense
|
—
|
|
|
6,305
|
|
|
6,305
|
|
|||
Goodwill impairment expense
|
—
|
|
|
1,177
|
|
|
1,177
|
|
|||
Gain on extinguishment of debt
|
—
|
|
|
(6,975
|
)
|
|
(6,975
|
)
|
|||
Stock‑based compensation
|
—
|
|
|
1,649
|
|
|
1,649
|
|
|||
Other expense
|
—
|
|
|
321
|
|
|
321
|
|
|||
Adjusted EBITDA
|
$
|
15,656
|
|
|
$
|
(7,840
|
)
|
|
$
|
7,816
|
|
(1)
|
Other general and administrative expense relates to legal settlement expense.
|
(1)
|
Exclusive of depreciation and amortization.
|
(2)
|
Inclusive of stock‑based compensation.
|
(3)
|
For definitions of the non‑GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluate Our Operations”.
|
(4)
|
The non‑GAAP financial measure of Adjusted EBITDA margin for the pressure pumping segment is calculated by taking Adjusted EBITDA for the pressure pumping segment as a percentage of our revenues for the pressure pumping segment.
|
|
|
YEAR ENDED
|
|
CHANGE
|
|||||||||||
($ in thousands, except percentages)
|
|
2017
|
|
2016
|
|
Variance
|
|
%
|
|||||||
Revenue
|
|
$
|
981,865
|
|
|
$
|
436,920
|
|
|
$
|
544,945
|
|
|
124.7
|
%
|
Cost of services
(1)
|
|
813,823
|
|
|
404,140
|
|
|
409,683
|
|
|
101.4
|
%
|
|||
General and administrative expense
(2)
|
|
49,215
|
|
|
26,613
|
|
|
22,602
|
|
|
84.9
|
%
|
|||
Depreciation and amortization
|
|
55,628
|
|
|
43,542
|
|
|
12,086
|
|
|
27.8
|
%
|
|||
Property and equipment impairment
|
|
—
|
|
|
6,305
|
|
|
(6,305
|
)
|
|
(100.0
|
)%
|
|||
Goodwill impairment
|
|
—
|
|
|
1,177
|
|
|
(1,177
|
)
|
|
(100.0
|
)%
|
|||
Loss on disposal of assets
|
|
39,086
|
|
|
22,529
|
|
|
16,557
|
|
|
73.5
|
%
|
|||
Interest expense
|
|
7,347
|
|
|
20,387
|
|
|
(13,040
|
)
|
|
(64.0
|
)%
|
|||
Gain on extinguishment of debt
|
|
—
|
|
|
(6,975
|
)
|
|
(6,975
|
)
|
|
(100.0
|
)%
|
|||
Other expense
|
|
1,025
|
|
|
321
|
|
|
704
|
|
|
219.3
|
%
|
|||
Income tax expense (benefit)
|
|
3,128
|
|
|
(27,972
|
)
|
|
(31,100
|
)
|
|
(111.2
|
)%
|
|||
|
|
|
|
|
|
|
|
|
|||||||
Net income (loss)
|
|
$
|
12,613
|
|
|
$
|
(53,147
|
)
|
|
$
|
65,760
|
|
|
123.7
|
%
|
|
|
|
|
|
|
|
|
|
|||||||
Adjusted EBITDA
(3)
|
|
$
|
137,443
|
|
|
$
|
7,816
|
|
|
$
|
129,627
|
|
|
1,658.5
|
%
|
Adjusted EBITDA Margin
(3)
|
|
14.0
|
%
|
|
1.8
|
%
|
|
12.2
|
%
|
|
677.8
|
%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||||
Pressure pumping segment results of operations:
|
|
|
|
|
|
|
|
|
|||||||
Revenue
|
|
$
|
945,040
|
|
|
$
|
409,014
|
|
|
$
|
536,025
|
|
|
131.1
|
%
|
Cost of services
|
|
$
|
784,349
|
|
|
$
|
379,815
|
|
|
$
|
404,534
|
|
|
106.5
|
%
|
Adjusted EBITDA
|
|
$
|
145,122
|
|
|
$
|
15,656
|
|
|
$
|
129,466
|
|
|
826.9
|
%
|
Adjusted EBITDA Margin
(4)
|
|
15.4
|
%
|
|
3.8
|
%
|
|
11.6
|
%
|
|
305.3
|
%
|
(1)
|
Exclusive of depreciation and amortization.
|
(2)
|
Inclusive of stock‑based compensation.
|
(3)
|
For definitions of the non‑GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to our most directly comparable financial measures calculated in accordance with GAAP, please read ““How We Evaluate Our Operations”.
|
(4)
|
The non‑GAAP financial measure of Adjusted EBITDA margin for the pressure pumping segment is calculated by taking Adjusted EBITDA for the pressure pumping segment as a percentage of our revenues for the pressure pumping segment.
|
|
Year Ended December 31,
|
||||||||||
($ in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Net cash provided by operating activities
|
$
|
393,079
|
|
|
$
|
109,257
|
|
|
$
|
10,659
|
|
Net cash used in investing activities
|
$
|
(280,604
|
)
|
|
$
|
(281,469
|
)
|
|
$
|
(41,688
|
)
|
Net cash (used in) provided by financing activities
|
$
|
(3,724
|
)
|
|
$
|
62,565
|
|
|
$
|
130,315
|
|
($ in thousands)
|
|
|
Payment Due by Period
|
||||||||||||||||
|
Total
|
|
1 year or less |
|
2 - 3 years
|
|
4 - 5 years
|
|
More than
5 years |
||||||||||
ABL Credit Facility
(1)
|
$
|
70,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
70,000
|
|
|
$
|
—
|
|
Operating leases
(2)
|
5,313
|
|
|
892
|
|
|
1,442
|
|
|
2,979
|
|
|
—
|
|
|||||
Total contractual obligations
|
$
|
75,313
|
|
|
$
|
892
|
|
|
$
|
1,442
|
|
|
$
|
72,979
|
|
|
$
|
—
|
|
(1)
|
The ABL Credit Facility balance outstanding is exclusive of future commitment fees, interest or other fees since our potential future obligations thereunder are based on future events and cannot be reasonably estimated.
|
/s/ Dale Redman
|
Dale Redman
Chief Executive Officer and Director
(Principal Executive Officer)
|
/s/ Jeffrey Smith |
Jeffrey Smith
Chief Financial Officer
(Principal Financial Officer)
|
|
2018
|
|
2017
|
||||
ASSETS
|
|
|
|
||||
CURRENT ASSETS:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
132,700
|
|
|
$
|
23,949
|
|
Accounts receivable - net of allowance for doubtful accounts of $100 and $443, respectively
|
202,956
|
|
|
199,656
|
|
||
Inventories
|
6,353
|
|
|
6,184
|
|
||
Prepaid expenses
|
6,610
|
|
|
5,123
|
|
||
Other current assets
|
638
|
|
|
748
|
|
||
Total current assets
|
349,257
|
|
|
235,660
|
|
||
PROPERTY AND EQUIPMENT - Net of accumulated depreciation
|
912,846
|
|
|
470,910
|
|
||
OTHER NONCURRENT ASSETS:
|
|
|
|
||||
Goodwill
|
9,425
|
|
|
9,425
|
|
||
Intangible assets - net of amortization
|
13
|
|
|
301
|
|
||
Deferred revenue rebate - net of amortization
|
—
|
|
|
615
|
|
||
Other noncurrent assets
|
2,981
|
|
|
2,121
|
|
||
Total other noncurrent assets
|
12,419
|
|
|
12,462
|
|
||
TOTAL ASSETS
|
$
|
1,274,522
|
|
|
$
|
719,032
|
|
LIABILITIES AND SHAREHOLDERS’ EQUITY
|
|
|
|
||||
CURRENT LIABILITIES:
|
|
|
|
||||
Accounts payable
|
$
|
214,460
|
|
|
$
|
211,149
|
|
Accrued liabilities
|
138,089
|
|
|
16,607
|
|
||
Current portion of long-term debt
|
—
|
|
|
15,764
|
|
||
Accrued interest payable
|
211
|
|
|
76
|
|
||
Total current liabilities
|
352,760
|
|
|
243,596
|
|
||
DEFERRED INCOME TAXES
|
54,283
|
|
|
4,881
|
|
||
LONG-TERM DEBT
|
70,000
|
|
|
57,178
|
|
||
OTHER LONG-TERM LIABILITIES
|
124
|
|
|
125
|
|
||
Total liabilities
|
477,167
|
|
|
305,780
|
|
||
COMMITMENTS AND CONTINGENCIES (Note 17)
|
|
|
|
|
|
||
SHAREHOLDERS’ EQUITY:
|
|
|
|
||||
Preferred stock, $0.001 par value, 30,000,000 shares authorized, none issued, respectively
|
—
|
|
|
—
|
|
||
Common stock, $0.001 par value, 200,000,000 shares authorized,100,190,126 and 83,039,854 shares issued, respectively
|
100
|
|
|
83
|
|
||
Additional paid-in capital
|
817,690
|
|
|
607,466
|
|
||
Accumulated deficit
|
(20,435
|
)
|
|
(194,297
|
)
|
||
Total shareholders’ equity
|
797,355
|
|
|
413,252
|
|
||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
|
$
|
1,274,522
|
|
|
$
|
719,032
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
REVENUE - Service revenue
|
$
|
1,704,562
|
|
|
$
|
981,865
|
|
|
$
|
436,920
|
|
COSTS AND EXPENSES:
|
|
|
|
|
|
||||||
Cost of services (exclusive of depreciation and amortization)
|
1,270,577
|
|
|
813,823
|
|
|
404,140
|
|
|||
General and administrative (inclusive of stock‑based compensation)
|
53,958
|
|
|
49,215
|
|
|
26,613
|
|
|||
Depreciation and amortization
|
88,138
|
|
|
55,628
|
|
|
43,542
|
|
|||
Property and equipment impairment expense
|
—
|
|
|
—
|
|
|
6,305
|
|
|||
Goodwill impairment expense
|
—
|
|
|
—
|
|
|
1,177
|
|
|||
Loss on disposal of assets
|
59,220
|
|
|
39,086
|
|
|
22,529
|
|
|||
Total costs and expenses
|
1,471,893
|
|
|
957,752
|
|
|
504,306
|
|
|||
OPERATING INCOME (LOSS)
|
232,669
|
|
|
24,113
|
|
|
(67,386
|
)
|
|||
OTHER INCOME (EXPENSE):
|
|
|
|
|
|
||||||
Interest expense
|
(6,889
|
)
|
|
(7,347
|
)
|
|
(20,387
|
)
|
|||
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
6,975
|
|
|||
Other expense
|
(663
|
)
|
|
(1,025
|
)
|
|
(321
|
)
|
|||
Total other income (expense)
|
(7,552
|
)
|
|
(8,372
|
)
|
|
(13,733
|
)
|
|||
INCOME (LOSS) BEFORE INCOME TAXES
|
225,117
|
|
|
15,741
|
|
|
(81,119
|
)
|
|||
INCOME TAX (EXPENSE)/BENEFIT
|
(51,255
|
)
|
|
(3,128
|
)
|
|
27,972
|
|
|||
NET INCOME (LOSS)
|
$
|
173,862
|
|
|
$
|
12,613
|
|
|
$
|
(53,147
|
)
|
NET INCOME (LOSS) PER COMMON SHARE:
|
|
|
|
|
|
||||||
Basic
|
$
|
2.08
|
|
|
$
|
0.17
|
|
|
$
|
(1.19
|
)
|
Diluted
|
$
|
2.00
|
|
|
$
|
0.16
|
|
|
$
|
(1.19
|
)
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
|
|
|
|
|
|
||||||
Basic
|
83,460
|
|
|
76,371
|
|
|
44,787
|
|
|||
Diluted
|
87,046
|
|
|
79,583
|
|
|
44,787
|
|
|
Preferred Stock
|
|
|
|
Common Stock
|
|
|
|
|
|
|
||||||||||||||||||
|
Shares
|
|
Amount
|
|
Preferred
Additional Paid‑In Capital |
|
Shares
|
|
Amount
|
|
Additional
Paid‑In Capital |
|
Accumulated
Deficit |
|
Total
|
||||||||||||||
BALANCE - January 1, 2016
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
34,621
|
|
|
$
|
35
|
|
|
$
|
223,299
|
|
|
$
|
(153,763
|
)
|
|
$
|
69,571
|
|
Stock‑based compensation cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,649
|
|
|
—
|
|
|
1,649
|
|
||||||
Additional equity capitalization, net of costs
|
—
|
|
|
—
|
|
|
—
|
|
|
18,007
|
|
|
18
|
|
|
40,407
|
|
|
—
|
|
|
40,425
|
|
||||||
Preferred equity capitalization, net of costs
|
17,000
|
|
|
17
|
|
|
162,494
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
162,511
|
|
||||||
Net loss
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(53,147
|
)
|
|
(53,147
|
)
|
||||||
BALANCE - December 31, 2016
|
17,000
|
|
|
17
|
|
|
162,494
|
|
|
52,628
|
|
|
53
|
|
|
265,355
|
|
|
(206,910
|
)
|
|
221,009
|
|
||||||
Stock‑based compensation cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,489
|
|
|
—
|
|
|
9,489
|
|
||||||
Initial Public Offering net of costs
|
—
|
|
|
—
|
|
|
—
|
|
|
13,250
|
|
|
13
|
|
|
170,128
|
|
|
—
|
|
|
170,141
|
|
||||||
Conversion of preferred stock to common stock at Initial Public Offering
|
(17,000
|
)
|
|
(17
|
)
|
|
(162,494
|
)
|
|
17,000
|
|
|
17
|
|
|
162,494
|
|
|
—
|
|
|
—
|
|
||||||
Issuance of equity award—net
|
—
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,613
|
|
|
12,613
|
|
||||||
BALANCE - December 31, 2017
|
—
|
|
|
—
|
|
|
—
|
|
|
83,040
|
|
|
83
|
|
|
607,466
|
|
|
(194,297
|
)
|
|
413,252
|
|
||||||
Stock‑based compensation cost
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,482
|
|
|
—
|
|
|
5,482
|
|
||||||
Issuance of equity award—net
|
—
|
|
|
—
|
|
|
—
|
|
|
550
|
|
|
1
|
|
|
246
|
|
|
—
|
|
|
247
|
|
||||||
Issuance of common stock
|
—
|
|
|
—
|
|
|
—
|
|
|
16,600
|
|
|
16
|
|
|
204,496
|
|
|
—
|
|
|
204,512
|
|
||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
173,862
|
|
|
173,862
|
|
||||||
BALANCE - December 31, 2018
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
100,190
|
|
|
$
|
100
|
|
|
$
|
817,690
|
|
|
$
|
(20,435
|
)
|
|
$
|
797,355
|
|
|
2018
|
|
2017
|
|
2016
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
173,862
|
|
|
$
|
12,613
|
|
|
$
|
(53,147
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||||||
Depreciation and amortization
|
88,138
|
|
|
55,628
|
|
|
43,542
|
|
|||
Gain on extinguishment of debt
|
—
|
|
|
—
|
|
|
(6,975
|
)
|
|||
Property and equipment impairment expense
|
—
|
|
|
—
|
|
|
6,305
|
|
|||
Goodwill impairment expense
|
—
|
|
|
—
|
|
|
1,177
|
|
|||
Deferred income tax expense (benefit)
|
49,704
|
|
|
3,430
|
|
|
(27,972
|
)
|
|||
Amortization of deferred revenue rebate
|
615
|
|
|
1,846
|
|
|
1,846
|
|
|||
Amortization of deferred debt issuance costs
|
403
|
|
|
3,403
|
|
|
2,091
|
|
|||
Stock‑based compensation
|
5,482
|
|
|
9,489
|
|
|
1,649
|
|
|||
Loss on disposal of assets
|
59,220
|
|
|
39,086
|
|
|
22,529
|
|
|||
Gain loss on interest rate swap
|
—
|
|
|
(251
|
)
|
|
(205
|
)
|
|||
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|||||
Accounts receivable
|
(3,300
|
)
|
|
(84,477
|
)
|
|
(24,888
|
)
|
|||
Other current assets
|
207
|
|
|
3,304
|
|
|
(563
|
)
|
|||
Inventories
|
(168
|
)
|
|
(1,472
|
)
|
|
3,859
|
|
|||
Prepaid expenses
|
(1,418
|
)
|
|
(468
|
)
|
|
(62
|
)
|
|||
Accounts payable
|
9,720
|
|
|
64,228
|
|
|
37,049
|
|
|||
Accrued liabilities
|
9,853
|
|
|
2,930
|
|
|
4,392
|
|
|||
Accrued interest
|
761
|
|
|
(32
|
)
|
|
32
|
|
|||
Net cash provided by operating activities
|
393,079
|
|
|
109,257
|
|
|
10,659
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
||||||
Capital expenditures
|
(284,197
|
)
|
|
(285,891
|
)
|
|
(42,832
|
)
|
|||
Proceeds from sale of assets
|
3,593
|
|
|
4,422
|
|
|
1,144
|
|
|||
Net cash used in investing activities
|
(280,604
|
)
|
|
(281,469
|
)
|
|
(41,688
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
||||||
Proceeds from borrowings
|
77,378
|
|
|
60,045
|
|
|
—
|
|
|||
Repayments of borrowings
|
(80,946
|
)
|
|
(166,546
|
)
|
|
(41,295
|
)
|
|||
Proceeds from insurance financing
|
5,824
|
|
|
4,125
|
|
|
4,126
|
|
|||
Repayments of insurance financing
|
(4,495
|
)
|
|
(3,807
|
)
|
|
(4,527
|
)
|
|||
Extinguishment of debt
|
—
|
|
|
—
|
|
|
(30,000
|
)
|
|||
Payment of debt extinguishment costs
|
—
|
|
|
—
|
|
|
(525
|
)
|
|||
Payment of debt issuance costs
|
(1,732
|
)
|
|
(1,653
|
)
|
|
(140
|
)
|
|||
Proceeds from exercise of equity awards
|
247
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from additional common equity capitalization
|
—
|
|
|
—
|
|
|
40,425
|
|
|||
Proceeds from preferred equity capitalization
|
—
|
|
|
—
|
|
|
170,000
|
|
|||
Payment of preferred equity capitalization costs
|
—
|
|
|
—
|
|
|
(7,489
|
)
|
|||
Proceeds from IPO
|
—
|
|
|
185,500
|
|
|
—
|
|
|||
Payment of deferred IPO costs
|
—
|
|
|
(15,099
|
)
|
|
(260
|
)
|
|||
Net cash (used in) provided by financing activities
|
(3,724
|
)
|
|
62,565
|
|
|
130,315
|
|
|||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
108,751
|
|
|
(109,647
|
)
|
|
99,286
|
|
|||
CASH AND CASH EQUIVALENTS — Beginning of year
|
23,949
|
|
|
133,596
|
|
|
34,310
|
|
|||
CASH AND CASH EQUIVALENTS — End of year
|
$
|
132,700
|
|
|
$
|
23,949
|
|
|
$
|
133,596
|
|
|
December 31,
|
||||||||||
($ in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Supplemental cash flows disclosures
|
|
|
|
|
|
||||||
Interest paid
|
$
|
5,068
|
|
|
$
|
3,966
|
|
|
$
|
18,249
|
|
Income taxes paid
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3
|
|
Supplemental disclosure of non‑cash investing and financing activities
|
|
|
|
|
|
||||||
Capital expenditures included in accounts payable and accrued liabilities
|
$
|
137,647
|
|
|
$
|
33,850
|
|
|
$
|
3,176
|
|
Conversion of preferred stock to common stock at Initial Public Offering
|
$
|
—
|
|
|
$
|
162,511
|
|
|
$
|
—
|
|
Non-cash purchases of property and equipment
|
$
|
204,512
|
|
|
$
|
—
|
|
|
$
|
—
|
|
($ in thousands)
|
2018
|
|
2017
|
||||
Internally developed software
|
$
|
1,440
|
|
|
$
|
1,440
|
|
Less accumulated amortization
|
1,427
|
|
|
1,139
|
|
||
Intangible assets — net
|
$
|
13
|
|
|
$
|
301
|
|
($ in thousands)
|
|
||
Year
|
Estimated
Future Amortization Expense |
||
2019
|
$
|
13
|
|
2020
|
—
|
|
|
Total
|
$
|
13
|
|
($ in thousands)
|
2018
|
|
2017
|
||||
Land
|
$
|
7,669
|
|
|
$
|
—
|
|
Building
|
23,840
|
|
|
—
|
|
||
Equipment and vehicles
|
1,105,380
|
|
|
646,800
|
|
||
Leasehold improvements
|
5,559
|
|
|
4,987
|
|
||
Subtotal
|
1,142,448
|
|
|
651,787
|
|
||
Less accumulated depreciation
|
229,602
|
|
|
180,877
|
|
||
Property and equipment — net
|
$
|
912,846
|
|
|
$
|
470,910
|
|
($ in thousands)
|
2018
|
|
2017
|
||||
ABL Credit Facility
|
$
|
70,000
|
|
|
$
|
55,000
|
|
Equipment financing
|
—
|
|
|
17,942
|
|
||
Total debt
|
70,000
|
|
|
72,942
|
|
||
Less current portion of long-term debt
|
—
|
|
|
15,764
|
|
||
Total long-term debt
|
$
|
70,000
|
|
|
$
|
57,178
|
|
($ in thousands)
|
2018
|
|
2017
|
||||
Accrued capital expenditure
|
$
|
109,832
|
|
|
$
|
—
|
|
Accrued insurance
|
3,905
|
|
|
2,762
|
|
||
Accrued payroll and related expenses
|
15,854
|
|
|
10,110
|
|
||
Accrued taxes and others
|
8,498
|
|
|
3,735
|
|
||
Total
|
$
|
138,089
|
|
|
$
|
16,607
|
|
($ in thousands)
|
|
|
|
|
|
||||||
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended and as of December 31, 2018
|
|
|
|
|
|
||||||
Service revenue
|
$
|
1,658,403
|
|
|
$
|
46,159
|
|
|
$
|
1,704,562
|
|
Adjusted EBITDA
|
$
|
398,396
|
|
|
$
|
(9,873
|
)
|
|
$
|
388,523
|
|
Depreciation and amortization
|
$
|
83,404
|
|
|
$
|
4,734
|
|
|
$
|
88,138
|
|
Capital expenditures
|
$
|
577,171
|
|
|
$
|
15,431
|
|
|
$
|
592,602
|
|
Goodwill
|
$
|
9,425
|
|
|
$
|
—
|
|
|
$
|
9,425
|
|
Total assets
|
$
|
1,230,830
|
|
|
$
|
43,692
|
|
|
$
|
1,274,522
|
|
|
|
|
|
|
|
||||||
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended and as of December 31, 2017
|
|
|
|
|
|
||||||
Service revenue
|
$
|
945,040
|
|
|
$
|
36,825
|
|
|
$
|
981,865
|
|
Adjusted EBITDA
|
$
|
145,122
|
|
|
$
|
(7,679
|
)
|
|
$
|
137,443
|
|
Depreciation and amortization
|
$
|
51,155
|
|
|
$
|
4,473
|
|
|
$
|
55,628
|
|
Capital expenditures
|
$
|
300,406
|
|
|
$
|
4,893
|
|
|
$
|
305,299
|
|
Goodwill
|
$
|
9,425
|
|
|
$
|
—
|
|
|
$
|
9,425
|
|
Total assets
|
$
|
688,279
|
|
|
$
|
30,753
|
|
|
$
|
719,032
|
|
|
|
|
|
|
|
||||||
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended and as of December 31, 2016
|
|
|
|
|
|
||||||
Service revenue
|
$
|
409,014
|
|
|
$
|
27,906
|
|
|
$
|
436,920
|
|
Adjusted EBITDA
|
$
|
15,656
|
|
|
$
|
(7,840
|
)
|
|
$
|
7,816
|
|
Depreciation and amortization
|
$
|
37,282
|
|
|
$
|
6,260
|
|
|
$
|
43,542
|
|
Property and equipment impairment expense
|
$
|
—
|
|
|
$
|
6,305
|
|
|
$
|
6,305
|
|
Goodwill impairment expense
|
$
|
—
|
|
|
$
|
1,177
|
|
|
$
|
1,177
|
|
Capital expenditures
|
$
|
45,473
|
|
|
$
|
535
|
|
|
$
|
46,008
|
|
Goodwill
|
$
|
9,425
|
|
|
$
|
—
|
|
|
$
|
9,425
|
|
Total assets
|
$
|
501,906
|
|
|
$
|
39,516
|
|
|
$
|
541,422
|
|
($ in thousands)
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended December 31, 2018
|
|
|
|
|
|
||||||
Net income (loss)
|
$
|
253,196
|
|
|
$
|
(79,334
|
)
|
|
$
|
173,862
|
|
Depreciation and amortization
|
83,404
|
|
|
4,734
|
|
|
88,138
|
|
|||
Interest expense
|
—
|
|
|
6,889
|
|
|
6,889
|
|
|||
Income tax expense
|
—
|
|
|
51,255
|
|
|
51,255
|
|
|||
Loss (gain) on disposal of assets
|
59,962
|
|
|
(742
|
)
|
|
59,220
|
|
|||
Stock‑based compensation
|
—
|
|
|
5,482
|
|
|
5,482
|
|
|||
Other expense
|
—
|
|
|
663
|
|
|
663
|
|
|||
Other general and administrative expense
(1)
|
2
|
|
|
203
|
|
|
205
|
|
|||
Deferred IPO Bonus
|
1,832
|
|
|
977
|
|
|
2,809
|
|
|||
Adjusted EBITDA
|
$
|
398,396
|
|
|
$
|
(9,873
|
)
|
|
$
|
388,523
|
|
|
|
|
|
|
|
||||||
Year ended December 31, 2017
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Net income (loss)
|
$
|
50,417
|
|
|
$
|
(37,804
|
)
|
|
$
|
12,613
|
|
Depreciation and amortization
|
51,155
|
|
|
4,473
|
|
|
55,628
|
|
|||
Interest expense
|
—
|
|
|
7,347
|
|
|
7,347
|
|
|||
Income tax expense
|
—
|
|
|
3,128
|
|
|
3,128
|
|
|||
Loss on disposal of assets
|
38,059
|
|
|
1,027
|
|
|
39,086
|
|
|||
Stock‑based compensation
|
—
|
|
|
9,489
|
|
|
9,489
|
|
|||
Other expense
|
—
|
|
|
1,025
|
|
|
1,025
|
|
|||
Other general and administrative expense
(1)
|
—
|
|
|
722
|
|
|
722
|
|
|||
Deferred IPO Bonus
|
5,491
|
|
|
2,914
|
|
|
8,405
|
|
|||
Adjusted EBITDA
|
$
|
145,122
|
|
|
$
|
(7,679
|
)
|
|
$
|
137,443
|
|
|
|
|
|
|
|
||||||
|
Pressure
Pumping |
|
All Other
|
|
Total
|
||||||
Year ended December 31, 2016
|
|
|
|
|
|
||||||
Net loss
|
$
|
(45,316
|
)
|
|
$
|
(7,831
|
)
|
|
$
|
(53,147
|
)
|
Depreciation and amortization
|
37,282
|
|
|
6,260
|
|
|
43,542
|
|
|||
Interest expense
|
—
|
|
|
20,387
|
|
|
20,387
|
|
|||
Income tax benefit
|
—
|
|
|
(27,972
|
)
|
|
(27,972
|
)
|
|||
Loss on disposal of assets
|
23,690
|
|
|
(1,161
|
)
|
|
22,529
|
|
|||
Property and equipment impairment expense
|
—
|
|
|
6,305
|
|
|
6,305
|
|
|||
Goodwill impairment expense
|
—
|
|
|
1,177
|
|
|
1,177
|
|
|||
Gain on extinguishment of debt
|
—
|
|
|
(6,975
|
)
|
|
(6,975
|
)
|
|||
Stock‑based compensation
|
—
|
|
|
1,649
|
|
|
1,649
|
|
|||
Other expense
|
—
|
|
|
321
|
|
|
321
|
|
|||
Adjusted EBITDA
|
$
|
15,656
|
|
|
$
|
(7,840
|
)
|
|
$
|
7,816
|
|
|
2018
|
|
2017
|
|
2016
|
|||
Customer A
|
24.1
|
%
|
|
15.0
|
%
|
|
18.0
|
%
|
Customer B
|
16.5
|
%
|
|
13.8
|
%
|
|
12.5
|
%
|
Customer C
|
12.2
|
%
|
|
12.7
|
%
|
|
8.7
|
%
|
Customer D
|
8.9
|
%
|
|
12.6
|
%
|
|
7.0
|
%
|
Customer E
|
7.1
|
%
|
|
11.8
|
%
|
|
—
|
%
|
(In thousands, except for per share data)
|
2018
|
|
2017
|
|
2016
|
||||||
Numerator (both basic and diluted)
|
|
|
|
|
|
||||||
Net income (loss) relevant to common stockholders
|
$
|
173,862
|
|
|
$
|
12,613
|
|
|
$
|
(53,147
|
)
|
Denominator
|
|
|
|
|
|
||||||
Denominator for basic income (loss) per share
|
83,460
|
|
|
76,371
|
|
|
44,787
|
|
|||
Dilutive effect of stock options
|
3,129
|
|
|
2,903
|
|
|
—
|
|
|||
Dilutive effect of performance stock units
|
277
|
|
|
59
|
|
|
—
|
|
|||
Dilutive effect of non-vested restricted stock units
|
180
|
|
|
250
|
|
|
—
|
|
|||
Denominator for diluted income (loss) per share
|
87,046
|
|
|
79,583
|
|
|
44,787
|
|
|||
Basic net income (loss) per common share
|
$
|
2.08
|
|
|
$
|
0.17
|
|
|
$
|
(1.19
|
)
|
Diluted net income (loss) per common share
|
$
|
2.00
|
|
|
$
|
0.16
|
|
|
$
|
(1.19
|
)
|
(Count in thousands)
|
2018
|
|
2017
|
|
2016
|
|||
Stock options
|
—
|
|
|
—
|
|
|
4,646
|
|
Preferred stock
|
—
|
|
|
—
|
|
|
17,000
|
|
Performance stock units
|
—
|
|
|
—
|
|
|
—
|
|
Non-vested restricted stock units
|
—
|
|
|
—
|
|
|
372
|
|
|
—
|
|
|
—
|
|
|
22,018
|
|
Expected volatility
|
45
|
%
|
|
Expected dividends
|
$
|
—
|
|
Expected term (in years)
|
6.25
|
|
|
Risk free rate
|
1.35
|
%
|
Expected volatility
|
45
|
%
|
|
Expected dividends
|
$
|
—
|
|
Expected term (in years)
|
6.25
|
|
|
Risk free rate
|
1.83
|
%
|
Expected volatility
|
55
|
%
|
|
Expected dividends
|
$
|
—
|
|
Expected term (in years)
|
5.8
|
|
|
Risk free rate
|
1.22
|
%
|
Expected volatility
|
18
|
%
|
|
Expected dividends
|
$
|
—
|
|
Expected term (in years)
|
6.25
|
|
|
Risk free rate
|
2.23
|
%
|
|
Number
of Shares |
|
Weighted
Average Exercise Price |
|||
Outstanding at January 1, 2018
|
4,636,353
|
|
|
$
|
5.20
|
|
Granted
|
—
|
|
|
—
|
|
|
Exercised
|
(49,912
|
)
|
|
$
|
4.95
|
|
Forfeited
|
(29,255
|
)
|
|
$
|
14.00
|
|
Expired
|
—
|
|
|
$
|
—
|
|
Canceled
|
—
|
|
|
$
|
—
|
|
Outstanding at December 31, 2018
|
4,557,186
|
|
|
$
|
5.14
|
|
Exercisable at December 31, 2018
|
3,994,990
|
|
|
$
|
3.90
|
|
|
|
Number of
Shares |
|
Weighted
Average Grant Date Fair Value |
|||
Outstanding at January 1, 2018
|
|
688,744
|
|
|
$
|
13.66
|
|
Granted
|
|
319,250
|
|
|
$
|
18.49
|
|
Vested
|
|
(500,360
|
)
|
|
$
|
13.87
|
|
Exercised
|
|
—
|
|
|
$
|
—
|
|
Forfeited
|
|
(34,129
|
)
|
|
$
|
15.99
|
|
Expired
|
|
—
|
|
|
$
|
—
|
|
Canceled
|
|
—
|
|
|
$
|
—
|
|
Outstanding at December 31, 2018
|
|
473,505
|
|
|
$
|
16.52
|
|
Period
Granted |
|
Target Shares
Outstanding at Beginning of Year |
|
Target
Shares Granted |
|
Target Shares Vested
|
|
Target
Shares Forfeited |
|
Target Shares
Outstanding at End of Year |
|
Weighted
Average Grant Date Fair Value per Share |
|||||||
2017
|
|
169,635
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
169,635
|
|
|
$
|
10.73
|
|
2018
|
|
—
|
|
|
178,975
|
|
|
—
|
|
|
—
|
|
|
178,975
|
|
|
$
|
27.51
|
|
Total
|
|
169,635
|
|
|
178,975
|
|
|
—
|
|
|
—
|
|
|
348,610
|
|
|
$
|
19.34
|
|
($ in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Federal:
|
|
|
|
|
|
||||||
Current
|
$
|
—
|
|
|
$
|
(376
|
)
|
|
$
|
—
|
|
Deferred
|
48,738
|
|
|
3,634
|
|
|
(29,082
|
)
|
|||
|
48,738
|
|
|
3,258
|
|
|
(29,082
|
)
|
|||
State:
|
|
|
|
|
|
||||||
Current
|
1,551
|
|
|
74
|
|
|
—
|
|
|||
Deferred
|
966
|
|
|
(204
|
)
|
|
1,110
|
|
|||
|
2,517
|
|
|
(130
|
)
|
|
1,110
|
|
|||
Total expense (benefit)
|
$
|
51,255
|
|
|
$
|
3,128
|
|
|
$
|
(27,972
|
)
|
($ in thousands)
|
2018
|
|
2017
|
|
2016
|
||||||
Tax at federal statutory rate
|
$
|
47,275
|
|
|
$
|
5,510
|
|
|
$
|
(28,392
|
)
|
State taxes, net of federal benefit
|
1,874
|
|
|
176
|
|
|
(216
|
)
|
|||
Non-deductible expenses
|
2,423
|
|
|
1,582
|
|
|
498
|
|
|||
Stock-based compensation
|
(426
|
)
|
|
(655
|
)
|
|
—
|
|
|||
Valuation allowance
|
(1,151
|
)
|
|
273
|
|
|
879
|
|
|||
Effect of change in enacted Tax Act
|
—
|
|
|
(3,448
|
)
|
|
—
|
|
|||
Other
|
1,260
|
|
|
(310
|
)
|
|
(741
|
)
|
|||
Total expense (benefit)
|
$
|
51,255
|
|
|
$
|
3,128
|
|
|
$
|
(27,972
|
)
|
($ in thousands)
|
2018
|
|
2017
|
||||
Deferred Income Tax Assets
|
|
|
|
||||
Accrued liabilities
|
$
|
769
|
|
|
$
|
1,264
|
|
Allowance for doubtful accounts
|
21
|
|
|
94
|
|
||
Goodwill and other intangible assets
|
4,010
|
|
|
5,304
|
|
||
Stock‑based compensation
|
2,632
|
|
|
2,960
|
|
||
Net operating losses
|
111,580
|
|
|
56,788
|
|
||
Other
|
63
|
|
|
69
|
|
||
Noncurrent deferred tax assets
|
119,075
|
|
|
66,479
|
|
||
Total deferred tax assets
|
119,075
|
|
|
66,479
|
|
||
Valuation allowance
|
—
|
|
|
(1,151
|
)
|
||
Total deferred tax assets — net
|
119,075
|
|
|
65,328
|
|
||
Deferred Income Tax Liabilities
|
|
|
|
||||
Property and equipment
|
(172,164
|
)
|
|
(68,811
|
)
|
||
Prepaid expenses
|
(1,194
|
)
|
|
(965
|
)
|
||
Other
|
—
|
|
|
(131
|
)
|
||
Noncurrent deferred tax liabilities
|
(173,358
|
)
|
|
(69,907
|
)
|
||
Net deferred tax liability
|
$
|
(54,283
|
)
|
|
$
|
(4,579
|
)
|
($ in thousands)
|
|
||
2019
|
$
|
892
|
|
2020
|
721
|
|
|
2021
|
721
|
|
|
2022
|
721
|
|
|
2023 and thereafter
|
2,258
|
|
|
Total
|
$
|
5,313
|
|
|
2018
|
||||||||||||||
(In thousands, except for per share data)
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Service revenue
|
$
|
385,219
|
|
|
$
|
459,888
|
|
|
$
|
434,041
|
|
|
$
|
425,414
|
|
Gross profit
|
$
|
87,097
|
|
|
$
|
108,000
|
|
|
$
|
113,895
|
|
|
$
|
124,993
|
|
Net income
|
$
|
36,708
|
|
|
$
|
39,091
|
|
|
$
|
46,285
|
|
|
$
|
51,778
|
|
Net income per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
0.44
|
|
|
$
|
0.47
|
|
|
$
|
0.55
|
|
|
$
|
0.62
|
|
Diluted
|
$
|
0.42
|
|
|
$
|
0.45
|
|
|
$
|
0.53
|
|
|
$
|
0.59
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
83,081
|
|
|
83,447
|
|
|
83,544
|
|
|
83,758
|
|||||
Diluted
|
86,848
|
|
|
86,878
|
|
|
86,878
|
|
|
87,218
|
|||||
|
|
|
|
|
|
|
|
||||||||
|
2017
|
||||||||||||||
(In thousands, except for per share data)
|
First Quarter
|
|
Second Quarter
|
|
Third Quarter
|
|
Fourth Quarter
|
||||||||
Service revenue
|
$
|
171,931
|
|
|
$
|
213,492
|
|
|
$
|
282,730
|
|
|
$
|
313,712
|
|
Gross profit
|
$
|
22,366
|
|
|
$
|
36,715
|
|
|
$
|
57,297
|
|
|
$
|
51,664
|
|
Net income (loss)
|
$
|
(24,351
|
)
|
|
$
|
4,921
|
|
|
$
|
21,965
|
|
|
$
|
10,078
|
|
Net income (loss) per common share:
|
|
|
|
|
|
|
|
||||||||
Basic
|
$
|
(0.43
|
)
|
|
$
|
0.06
|
|
|
$
|
0.26
|
|
|
$
|
0.12
|
|
Diluted
|
$
|
(0.43
|
)
|
|
$
|
0.06
|
|
|
$
|
0.25
|
|
|
$
|
0.12
|
|
Weighted average common shares outstanding:
|
|
|
|
|
|
|
|
||||||||
Basic
|
55,996
|
|
|
83,040
|
|
|
83,040
|
|
|
83,040
|
|||||
Diluted
|
55,996
|
|
|
86,279
|
|
|
86,264
|
|
|
86,818
|
/s/ Dale Redman |
Dale Redman
Chief Executive Officer and Director |
Signature
|
Title
|
Date
|
|
|
|
/s/ Dale Redman
|
Chief Executive Officer and Director (Principal Executive Officer)
|
February 28, 2019
|
Dale Redman
|
|
|
/s/ Jeff Smith
|
Chief Financial Officer (Principal Financial Officer)
|
February 28, 2019
|
Jeff Smith
|
|
|
/s/ Ian Denholm
|
Chief Accounting Officer (Principal Accounting Officer)
|
February 28, 2019
|
Ian Denholm
|
|
|
/s/ Spencer D. Armour
|
Chairman
|
February 28, 2019
|
Spencer D. Armour, III
|
|
|
/s/ Steve Beal
|
Director
|
February 28, 2019
|
Steve Beal
|
|
|
/s/ Anthony Best
|
Director
|
February 28, 2019
|
Anthony Best
|
|
|
/s/ Pryor Blackwell
|
Director
|
February 28, 2019
|
Pryor Blackwell
|
|
|
/s/ Alan E. Douglas
|
Director
|
February 28, 2019
|
Alan E. Douglas
|
|
|
/s/ Jack Moore
|
Director
|
February 28, 2019
|
Jack Moore
|
|
|
/s/ Royce W. Mitchell
|
Director
|
February 28, 2019
|
Royce W. Mitchell
|
|
|
/s/ Mark Berg
|
Director
|
February 28, 2019
|
Mark Berg
|
|
|
Exhibit
number |
Description
|
2.1
|
|
3.1
|
|
3.2
|
|
4.1
|
|
4.5
|
|
4.6
|
|
10.1
|
|
10.2
|
|
10.3#
|
|
10.4#
|
|
10.5#
|
|
10.6#
|
|
10.7#
|
|
10.8#
|
|
10.9#
|
10.10#
|
|
10.11#
|
|
10.12#
|
|
10.13#
|
|
10.14#
|
|
10.15#
|
|
10.16#
|
|
10.17#
|
|
10.18#
|
|
10.19#
|
|
10.20#
|
|
10.21#
|
|
10.22#
|
|
10.23#
|
|
10.24#
|
|
10.25#
|
10.26#
|
|
10.27#
|
|
10.28#
|
|
10.29
|
|
10.30
|
|
10.31
|
|
10.32
|
|
10.33
|
|
21.1
|
|
23.1
|
|
31.1
|
|
31.2
|
|
32.1
|
|
32.2
|
1.
|
Master Service/Sales Agreement
. This Agreement is subject to the terms and conditions of that certain Amended and Restated Master Service/Sales Agreement by and between Company and Contractor dated May 16, 2016 (as amended, supplemented or otherwise modified, the “
MSSA
”) which is hereby incorporated by reference into this Agreement. In the event of any conflict or inconsistency between the terms and conditions of the MSSA and this Agreement, the terms of this Agreement shall govern.
|
2.
|
Term
.
|
(a)
|
The term of this Agreement shall begin on the Effective Date and shall continue for a period ending December 31, 2028 (the “
Term
”); provided, that Company shall have the right, exercisable in its sole discretion, to terminate this Agreement (a) in whole or (b) in part, with respect to one or more Fleets, effective as of December 31 of each of the calendar years 2022, 2024 and 2026 by providing written notice thereof to Contractor not later than July 1 of such calendar year. Following receipt of written notice from Company to commence initial mobilization, Contractor shall be responsible for the mobilization and demobilization of Contractor’s personnel and equipment and the performance of the Services in accordance with this Agreement. The Parties anticipate that such commencement will occur on or about January 1, 2019 (“
Commencement Date
”).
|
(b)
|
This Agreement supersedes and replaces that certain Pressure Pumping Services Agreement by and between Company and Contractor dated January 23, 2017 (as amended, supplemented or otherwise modified, the “
Existing PPSA
”) in all respects effective as of the Effective Date. Except as provided in this
Article 2(b)
, commencing on the Effective Date, (i) the Parties hereby agree to terminate the Existing PPSA, (ii) Contractor shall cease providing services to Company, and Company will cease obtaining services from Contractor, pursuant to the terms and conditions set forth in the Existing PPSA, and (iii) Contractor will commence providing Services to Company, and Company will commence obtaining Services from Contractor, pursuant to the terms and conditions set forth in this Agreement. Neither Party will be deemed to have waived, or to have released the other Party from, any claim, issue or dispute arising, becoming known or discovered or asserted after the Effective Date but relating to a Party’s performance or nonperformance under the Existing PPSA. The resolution of any such claim, issue or dispute will continue to be governed by the terms and conditions of the Existing PPSA. In addition, Company will remain obligated to pay to Contractor all amounts properly payable by Company pursuant to the Existing PPSA that, in accordance with the regular invoice and payment process, had not been invoiced to or paid by Company as of the Effective Date. The terms of the Existing PPSA shall survive its termination and remain in full effect for purposes of the matters described in this
Article 2(b)
.
|
3.
|
Pricing and Scope of Work
.
|
(a)
|
Contractor shall perform the Services in accordance with each applicable work order or other instrument used by Company to authorize the performance of the Services and Contractor’s net price book that is mutually agreed to between Company and Contractor (the “
Net Price Book
”). Rates for items not included in the Net Price Book or expressly provided herein shall be agreed upon in writing by the Parties. The Net Price Book will be subject to adjustments as set forth in
Article 4
. Company shall not be liable for any markup by Contractor on goods or services provided by any third party subcontractor or supplier of Contractor. Additionally, Company shall not be liable for any detention, demurrage, or non-utilization charges incurred by Contractor in connection with trucking services provided by Contractor or its subcontractors in furtherance of the Services, except if and to the extent that any such detention, demurrage, or non-utilization charges are directly caused by any member of the Company Group (as such term is defined in the MSSA), as determined by Company in good faith.
|
(b)
|
Beginning on the Commencement Date, Contractor shall deliver eight (8) hydraulic fracturing fleets to Company to perform the Services (“
Fleets
”), with such Fleets dedicated exclusively to Company throughout the Term. For each Fleet, there shall be (i) sufficient personnel and equipment capable of sustaining maximum treating pressures of 10,000 pounds per square inch and maximum pump rates of 100 barrels per minute for each well in the performance of the Services, (ii) on-site storage equipment capable of holding a minimum of 5,000,000 pounds of proppant, and (iii) sufficient personnel and equipment capable of providing all pump down operations required in connection with the Services. If Company’s job design for a well requires treating pressures or pump rates in excess of the amounts set forth above, Company will provide Contractor sufficient notice to allow Contractor to secure any additional equipment and materials that may be necessary to satisfy such requirements. Contractor will be solely responsible for the operation of the equipment, and the equipment shall remain under the control of Contractor at all times. Contractor shall provide trained and qualified personnel to perform the Services. In satisfying its Fleet obligations under this Agreement, Contractor will have the sole right to
|
(c)
|
Company hereby grants Contractor a right of first offer (“
ROFO
”) with respect to any coiled tubing services that may be required by Company as part of the Services (the “
Coiled Tubing Services
”), subject to the terms and conditions set forth in this
Article 3(c)
. If Company requires any Coiled Tubing Services, then Company shall provide Contractor with written notice thereof, identifying the location(s), time period(s) and other particulars with respect to the Coiled Tubing Services that Company requires (the “
ROFO Offer
”). If Contractor has sufficient coiled tubing equipment available to perform Coiled Tubing Services at the location(s) and during the time period(s) required per a ROFO Offer, then Contractor shall provide such Coiled Tubing Services to Company under the terms of this Agreement and the Pricing Agreement by and between Company and Contractor effective as of the Effective Date. However, if Contractor does not have such equipment available to perform Coiled Tubing Services at the location(s) and during the time period(s) required per a ROFO Offer, then that ROFO Offer shall be of no further force or effect, the ROFO granted herein shall automatically terminate and be null and void as to the subject Coiled Tubing Services, and Company may procure such Coiled Tubing Services from any third party. Notwithstanding anything to the contrary contained in this
Article 3(c)
: (i) Contractor will not have a ROFO with respect to any Coiled Tubing Services if, at the time that Company wishes to make a ROFO Offer to Contractor, Contractor is not in compliance with the terms of this Agreement; and (ii) the ROFO granted herein shall automatically terminate and be null and void with respect to any and all Coiled Tubing Services that Company requires after such date on which Contractor has failed to meet any of the key performance indicators for the Coiled Tubing Services that are set forth in
Exhibit A
.
|
4.
|
Periodic Pricing Adjustments
.
|
(a)
|
Effective as of such date that is six (6) months after the Effective Date and every six (6) months thereafter during the Term (each a “
Price Adjustment Date
”), Contractor shall apply a price adjustment mechanism that is mutually agreed to between Company and Contractor (the “
PAM
”) to the materials and services that compose the then-current standard job price that is mutually agreed to between Company and Contractor (the “
Standard Job Price
”). Contractor, in consultation with Company, shall make adjustments to the unit prices of line items in the then-current Net Price Book necessary to achieve a revised Standard Job Price reflective of the PAM with the resulting adjustments set forth in a revised Net Price Book to be prepared by Contractor. Such adjustments shall be effective retroactively and prospectively for all Services that are commenced during the applicable six (6)-month period. Contractor shall submit the revised Net Price Book and a revised Standard Job Price to Company, along with a pricing memorandum in a form and format agreed upon by the Parties that details the application of the PAM, in each case by the fifteenth (15
th
) day following the applicable Price Adjustment Date.
|
(b)
|
If a Party (i) implements new technology with respect to the Services that materially improves the quality, efficiency, capability, safety, or other performance metrics of the Fleets hereunder, or (ii) identifies new technology that it believes would, if implemented with respect to the Services, achieve such improvements, then that Party will provide the other Party notice thereof. Promptly thereafter, the Parties will conduct good-faith negotiations (i) if such technology is
|
5.
|
Invoicing; Credits
.
|
(a)
|
Contractor shall issue invoices to Company for the Services on a per-well basis and otherwise in accordance with the MSSA.
|
(b)
|
Without limiting Company’s rights or remedies under this Agreement or at law or in equity, Company may deduct any amount that Company determines in good faith is owed by Contractor to Company under this Agreement (each such deduction, a “
Credit
”) from any charges invoiced by Contractor hereunder or against other amounts owed by Company to Contractor under this Agreement. Company shall notify Contractor in advance of applying any Credit against any charges invoiced by Contractor hereunder or against other amounts owed by Company to Contractor under this Agreement. Such Credits shall not limit or affect any right of Company to recover any damages incurred by Company as a result of any failure by Contractor to perform the Services or any other obligation contemplated by this Agreement. Credits shall not expire and may be held by the Company until fully utilized. Upon the expiration or any termination of this Agreement, any remaining Credits shall be paid or credited to Company, at Company’s election and in its sole discretion.
|
6.
|
Option for Additional Fleets
. Notwithstanding anything contained in
Article 3
above, the Parties agree that in consideration of U.S. $10 paid by Company to Contractor, the receipt and sufficiency of which is hereby acknowledged, Company has the option, but not the obligation, to add additional incremental Fleets from Contractor (each, an “
Additional
Fleet
”), but not more than two (2) Additional Fleets in any calendar year, which Additional Fleets shall be under the same terms and conditions as set forth in this Agreement. Such option shall expire on December 31, 2022. Company shall provide Contractor with nine (9) months’ written notice of its election to exercise its option to add an Additional Fleet. In addition, during the first year of the Term, Company may add one (1) additional incremental Fleet upon at least sixty (60) days’ written notice to Contractor that will consist of Contractor’s then available equipment and will not constitute a new order (the “
First Year Additional Fleet
”). The Parties shall work together in good faith to determine mobilization dates for the First Year Additional Fleet and each Additional Fleet, as applicable; provided, however, Company may postpone the agreed mobilization date for the First Year Additional Fleet by a period of time designated by Company (such postponement period not to exceed thirty (30) days, unless otherwise agreed in writing by the Parties), provided that Company notifies Contractor in writing of such postponement at least thirty (30) days prior to the original agreed mobilization date for the First Year Additional Fleet. Commencing on their applicable mobilization dates, the First Year Additional Fleet and each Additional Fleet shall be considered a Fleet for all purposes hereof.
|
7.
|
Efficiency Rate; Non-Productive Time; Equipment Mobilization
.
|
(a)
|
Contractor shall be capable of performing the Services in accordance with the requirements of this Agreement on a twenty-four (24) hour basis, seven (7) days a week. For each well where Contractor is performing the Services, Contractor shall perform the Services at an efficiency rate of at least ninety percent (90%) (“
Efficiency Rate
”), which shall be calculated as set forth in
Exhibit B
; provided, however, that for purposes of this
Article 7
, neither Fleet Mobilization
|
(b)
|
Subject to
Article 7(a)
, (i) each hour or fractional hour that Contractor does not perform the Services when a Fleet is Mobilized on Location (as defined below) for any reason, other than White Space or an Idle Period (each defined below), that is attributable to the sole fault of any member of the Company Group, will be “
Company Non-Productive Time
” or “
Company NPT
” and (ii) each hour or fractional hour that Contractor does not perform the Services for any reason not attributable to Company NPT will be “
Contractor Non-Productive Time
” or “
Contractor NPT
.”
|
8.
|
Stage Attainment Rate
. Upon the completion of each pad, each Contractor Fleet shall be required to achieve a Stage Attainment Rate (as defined below) of ninety-five (95%) (the “
Per Pad Stage Attainment Rate
”). “
Stage Attainment Rate
” shall be determined as follows:
|
9.
|
Materials and Logistics
. Company shall have the right, in Company’s sole discretion and upon at least ninety (90) days’ prior written notice to Contractor, to supply all or a portion of the proppant, proppant trucking, coiled tubing services, friction reducer, high viscosity friction reducer, surfactant,
|
10.
|
White Space
.
|
(a)
|
“
White Space
” means any full day or period of consecutive full days during which a Fleet is capable of performing the Services in accordance with this Agreement, but is not scheduled by Company to perform the Services. With respect to each Fleet, White Space does not include: (i) the first ten (10) days of Fleet Mobilization Time per quarter; (ii) any Fleet Mobilization Time to the extent Contractor’s time to move such Fleet between pads and set up and be Mobilized on Location exceeds seventy-two (72) hours; (iii) any time period that a Fleet is Mobilized on Location; or (iv) any time period during which a Fleet performs services for a third party customer of Contractor. The Parties shall work together in good faith to maintain a schedule for the Services that minimizes, to the extent commercially reasonable, the potential for White Space.
|
(b)
|
Company shall advise Contractor of any anticipated days of White Space for a Fleet as soon as is reasonably practicable. Company shall provide to Contractor at least seventy-two (72) hours’ notice of the date for the affected Fleet to resume its performance of the Services following the anticipated White Space (the “
Return Date
”). Unless otherwise expressly notified by Company in writing, the affected Fleet shall resume its performance of the Services on such Return Date.
|
11.
|
Idle Periods
.
|
(a)
|
Should Company elect to idle a Fleet, Company may issue a written notice to Contractor regarding such election (an “
Idle Period Notice
”). Any time period that a Fleet is idled pursuant to an Idle Period Notice is an “
Idle Period
.” An Idle Period shall not be considered White Space. Upon receipt of an Idle Period Notice, Contractor shall use commercially reasonable efforts to employ the affected Fleet in work with a substitute customer during any such anticipated Idle Period.
|
(b)
|
During an Idle Period, Company shall not enter into any agreement with a third party to provide stimulation pumping services that could otherwise be timely performed by an idled Fleet in accordance with the terms of this Agreement. If Company wishes to re-activate a Fleet idled pursuant to
Article 11(a)
, Company shall provide at least sixty (60) days’ written notice in advance of the Return Date for such Fleet in order to allow Contractor to timely secure personnel and
|
12.
|
Reservation Periods
. Within ten (10) business days following the beginning of each calendar quarter during the Term, Contractor shall determine the total number of days attributable to (i) White Space for all Fleets that were not subject to an Idle Period during the preceding calendar quarter (the “
White Space Period
”), and (ii) Idle Period(s) for each Fleet that was subject to an Idle Period.
|
13.
|
Venue
. Each Party consents to personal jurisdiction in any action brought in the United States federal and state courts located in the State of Texas with respect to any dispute, claim or controversy arising out of or in relation to or in connection with this Agreement, and each of the Parties agrees that any action with respect to any such dispute, controversy, or claim will be determined exclusively in a state or federal district court located in Dallas County, Texas. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH DISPUTE ARISING OUT OF THIS AGREEMENT BROUGHT IN SUCH COURT OR ANY DEFENSE OF INCONVENIENT FORUM FOR THE MAINTENANCE OF SUCH DISPUTE. EACH PARTY HEREBY IRREVOCABLY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY CLAIM BROUGHT BY IT OR BROUGHT BY THE OTHER PARTY THAT ARISES OUT OF THIS AGREEMENT.
|
14.
|
Remedies
.
|
(a)
|
If Contractor fails to perform any Services in accordance with this Agreement, Company may exercise any one or more of the following remedies:
|
(i)
|
provide the affected Services itself or procure such Services from an alternate source, in which case Contractor shall reimburse Company for the costs incurred by Company in providing or procuring such Services to the extent that such costs exceed the applicable Net Price Book prices for such Services (even if such Net Price Book prices were not paid by Company);
|
(ii)
|
require Contractor to procure the affected Services from a third party selected by Company and have such third party provide such Services to Company at no additional cost to Company;
|
(iii)
|
require Contractor to reimburse Company for any amounts paid by Company to Contractor with respect to the affected Services; and
|
(iv)
|
require Contractor to take any other actions that the Company deems to be necessary to timely address Contractor’s failure to perform, which may include (1) re-performing the relevant job, (2) supplementing the affected Fleet or crew, and (3) replacing the affected Fleet or crew.
|
(b)
|
The rights and remedies of Company provided in this
Article 14
are not exclusive, and are in addition to any other rights and remedies provided under this Agreement or at law or in equity, notwithstanding anything herein to the contrary.
|
15.
|
Termination
.
|
(a)
|
Either Party may terminate this Agreement by delivery of a written termination notice to the other Party, in the event the other Party becomes insolvent, files a petition in bankruptcy, has a petition in involuntary bankruptcy filed against such Party (which petition is not terminated within sixty (60) days of filing), or makes an assignment for the benefit of its creditors. Such termination shall be effective immediately upon delivery of written notice of termination.
|
(b)
|
Company may, by delivery of a written termination notice to Contractor:
|
(i)
|
Terminate this Agreement with respect to a particular Fleet if such Fleet fails to achieve the Per Pad Stage Attainment Rate (A) for three (3) consecutive pads or (B) for three (3) pads within any rolling six (6)-pad period. Such termination shall be effective upon the date specified in Company’s termination notice to Contractor and Company shall not have any termination liability to the Contractor under this Agreement; or
|
(ii)
|
Terminate this Agreement in its entirety in the event of a Change in Control. “
Change in Control
” means the occurrence of any of the following events:
|
(1)
|
The acquisition by any person of beneficial ownership (as defined in Rule 13d‑3 of the Securities Act of 1934) of securities of ProPetro Holding Corp., a Delaware corporation (“
Parent
”), that, together with securities held by such person, constitutes fifty percent (50%) or more of either (x) the then outstanding shares of common stock of Parent (the “
Outstanding Parent Stock
”) or (y) the combined voting power of the then outstanding voting securities of Parent entitled to vote generally in the election of directors (the “
Outstanding Parent Voting Securities
”); provided, however, that for these purposes, an acquisition by any person pursuant to a transaction which complies with clauses (A), (B) and (C) of clause (3) below shall not constitute a Change in Control;
|
(2)
|
A majority of the members of the board of directors of Parent (the “
Board
”) is replaced during any twelve (12)-month period by directors whose appointment or election is not endorsed by a majority of the members constituting the Board prior to the date of the appointment or election;
|
(3)
|
Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of Parent or an acquisition of assets of another
|
(4)
|
Approval by the stockholders of Parent of a complete liquidation or dissolution of Parent;
|
(5)
|
Contractor is no longer a wholly owned subsidiary (or a wholly owned subsidiary of one or more wholly owned subsidiaries) of Parent; and
|
(6)
|
The consummation of a reorganization, merger, consolidation, sale or other disposition of all or substantially all of the assets of Contractor to a person that is not wholly owned subsidiary (or a wholly owned subsidiary of one or more wholly owned subsidiaries) of Parent.
|
(c)
|
Contractor may, by delivery of a written termination notice to Company, terminate this Agreement with respect to a particular Fleet, if Company fails to pay any undisputed invoice for Services properly performed by such Fleet or other payment hereunder when such invoice or payment is due and payable hereunder, unless within sixty (60) days following Company’s receipt of a written notice from Contractor to Company of such non-payment, Company makes such payments in accordance herewith.
|
16.
|
Assignment
. This Agreement shall inure to the benefit of and be binding upon the successors and/or permitted assigns of each Party hereto. This Agreement shall not be assigned, directly or indirectly (whether by merger, operation of law, change in majority ownership of any entity directly or indirectly controlling Contractor or otherwise) in whole or in part, by either Party without the prior written
|
17.
|
Confidentiality
. Except as expressly authorized hereunder or by prior written agreement by an officer of Company, Contractor shall make no public announcement concerning this Agreement and all information contained herein or related to the Services is “
Company Confidential Information
” (as defined in the MSSA) and shall be held in strict confidence by Contractor. Contractor shall not disclose, publish, release, transfer or otherwise make available Company Confidential Information in any form to, or for the use or benefit of, any person or entity without Company’s express written consent. Contractor shall disclose Company Confidential Information only to its personnel who have a need to know in performance of the Services, and Contractor shall ensure that Company Confidential Information is kept strictly confidential by such personnel in accordance with this
Article 17
.
|
18.
|
Health, Safety, Environment, Taxes
.
|
(a)
|
Contractor shall be solely responsible for Contractor Group’s (as defined in the MSSA) safe behavior and work practices while on any Company location. Contractor must immediately report all incidents (including safety hazards, near misses, motor-vehicle accidents, injuries, illnesses, spills, and property damage) that occur on a Company work site or location to the appropriate on-site Company representative. Contractor shall intervene and, if appropriate, stop work activity to ensure safety and operational integrity. If Company performs a root cause analysis (“
RCA
”) or other investigation of an incident, Contractor will fully cooperate with Company and promptly provide all reasonable access, assistance, and materials that Company may request; provided, that such provision would not materially violate Contractor’ applicable policies. For any Contractor Group incident occurring on a Company location, Contractor shall complete an incident report and conduct an incident investigation (to include an RCA) and deliver the non-privileged portions of these to a Company representative within one (1) week of the incident; provided, that if the circumstances of the incident are such that completion of Contractor’s incident investigation and RCA will, in good faith, require a longer period, then Contractor will deliver an initial report of the incident within one (1) week of the incident and the non-privileged portions of the final investigation and RCA as promptly as possible. Contractor’s RCA shall indicate how and why the incident occurred and identify actions that Contractor will take or is taking to prevent a future occurrence of the incident.
|
(b)
|
After an incident, Company may place Contractor on a mutually agreed-upon improvement plan, which may include any of the following:
|
(i)
|
Health, safety and environmental training conducted by Company, Contractor, or a third party;
|
(ii)
|
temporary or permanent removal of any member of Contractor Group from location;
|
(iii)
|
reporting of improvement throughout the process; and
|
(iv)
|
regular inspection of equipment or personnel.
|
(c)
|
If any member of Contractor Group exhibits behavior that creates a safety concern and does not reflect the corrective actions agreed-upon by Contractor and Company, and that personnel does not rectify the behavior within thirty (30) days, then Company may terminate this Agreement, without liability, other than for amounts owed for Services performed up to the time of termination, as of any date specified in a written notice to Contractor.
|
(d)
|
With respect to the personnel performing the Services pursuant to this Agreement, Contractor shall be solely responsible for compliance with all laws applicable to Contractor’s employees, including without limitation all laws and regulations regarding (i) the payment of wages and other compensation, (ii) the payment of any taxes, licenses, fees and other assessments levied upon the wages of the Contractor Group, as described in Section 9 of the MSSA, including any such taxes or similar assessments payable by withholding, and the payment of applicable employment taxes and other withholdings, and (iii) all other employment obligations and liabilities.
|
(e)
|
Without duplication of
Article 18(d)
, Contractor shall pay or cause to be paid all taxes, charges and assessments of every kind and character required by statute or by order of any taxing authority with respect to the provision of the Services. No Party shall be responsible nor liable for any taxes or other charges levied or assessed against the facilities or property of the other Party, including ad valorem taxes (however assessed), or against the net worth or capital stock of such Party.
|
19.
|
Notices
. All notices, requests, demands and other communications which are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given (i) when received if personally delivered; (ii) the day after it is sent, if sent for next day delivery to a domestic address by recognized overnight delivery service (e.g., DHL, UPS or Federal Express); (iii) upon receipt, if sent by certified or registered mail, return receipt requested; or (iv) when verified by automated receipt or electronic logs if sent by email. In each case notice shall be sent as indicated below:
|
If to Company to:
|
Pioneer Natural Resources USA, Inc.
Attn: Alba Tellez
5205 N. O’Connor Blvd. Suite 200
Irving, TX 75039
Email: Alba.Tellez@pxd.com
|
|
With a copy to:
Pioneer Natural Resources USA, Inc.
Attn: Senior Vice President & General Counsel 5205 N. O’Connor Blvd. Suite 200
Irving, TX 75039-3746
Email: Mark.Kleinman@pxd.com
|
If to Contractor to:
|
ProPetro Services, Inc.
Attn: Jeff Smith
P.O. Box 309
Midland, Texas 79702
Email: Jeff.Smith@propetroservices.com
With a copy to:
ProPetro Services, Inc.
Attn: Mark Howell (Legal Department)
P.O. Box 309
Midland, Texas 79702
Email: Mark.Howell@propetroservices.com
|
20.
|
Severability
. If any provision of this Agreement is found by a court of competent jurisdiction to be invalid or unenforceable, said invalid or unenforceable provision shall be disregarded only to the extent of its invalidity or unenforceability, and the balance of the provision and this Agreement shall be enforced as the integrated written agreement of the Parties.
|
21.
|
Waiver
. No failure or delay by either Party in exercising any of its rights under this Agreement shall be deemed to be a waiver of that right, and no waiver by either Party of a breach of any provision of this Agreement shall be deemed to be a waiver of any subsequent breach of the same or any other provision.
|
22.
|
Counterparts
. This Agreement may be executed in a number of identical counterparts which, taken together, shall constitute collectively one (1) agreement. This Agreement may be executed by Company and Contractor by portable document format (.pdf) signature, such that the execution of this Agreement by portable document format (.pdf) signature shall be deemed effective for all purposes as though this Agreement was executed as a “blue ink” original.
|
23.
|
Interpretation
. The Exhibits to this Agreement are hereby incorporated into and deemed part of this Agreement for all purposes. All references to this Agreement include the Exhibits and other documents incorporated by reference into this Agreement, unless the context in which used will otherwise require. Unless otherwise expressly stated, all references to Articles, subsections, other subdivisions, and Exhibits refer to Articles, subsections and other subdivisions of, and Exhibits to, this Agreement. The word “or” is not exclusive and the word “include” and its derivatives will not
|
24.
|
Not a Lease
. Notwithstanding any provisions of this Agreement to the contrary, Company and Contractor acknowledge and agree that (i) Contractor’s provision of equipment, material, supplies and labor under this Agreement is solely in furtherance of Contractor’s performance of the Services for Company; (ii) Contractor shall be permitted to exchange or substitute pieces of equipment used in the performance of Services; and, (iii) no equipment provided by Contractor during the performance of the Services under this Agreement is a right-of-use asset.
|
25.
|
Effective Date
. This Agreement shall become effective at 12:00:01 a.m. Central time on the calendar day immediately following the Closing Date, as such term is defined in the PSA (the “
Effective Date
”).
|
COMPANY
:
PIONEER NATURAL RESOURCES USA, INC.
|
|
By:
|
/s/ Mark H. Kleinman
|
Name:
|
Mark H. Kleinman
|
Title:
|
Senior Vice President and General Counsel
|
CONTRACTOR
:
PROPETRO SERVICES INC.
|
|
By:
|
/s/ Jeffrey D. Smith
|
Name:
|
Jeffrey D. Smith
|
Title:
|
Chief Financial Officer
|
Subsidiary
|
State of Organization
|
|
|
ProPetro Services, Inc.
|
Texas
|
1.
|
I have reviewed this Annual Report on Form 10-K of ProPetro Holding Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
|
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(c)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
/s/ Dale Redman
|
Dale Redman, Chief Executive Officer and Director
(Principal Executive Officer)
|
1.
|
I have reviewed this Annual Report on Form 10-K of ProPetro Holding Corp.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(c)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ Jeff Smith
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Jeff Smith, Chief Financial Officer
(Principal Financial Officer)
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