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Dynamic quotes 
OFFON

PROPETRO HOLDING CORP.

(PUMP)
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PROPETRO HOLDING CORP. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

11/04/2021 | 04:04pm EST
The financial information, discussion and analysis that follow should be
read in conjunction with our consolidated financial statements and the related
notes included in the Form 10-K as well as the financial and other information
included therein.
     Unless otherwise indicated, references in this "Management's Discussion and
Analysis of Financial Condition and Results of Operations" to the "Company,"
"we," "our," "us" or like terms refer to ProPetro Holding Corp. and its
subsidiary.
Overview
     We are a Midland, Texas-based oilfield services company providing hydraulic
fracturing and other complementary services to leading upstream oil and gas
companies engaged in the exploration and production ("E&P") of North American
unconventional oil and natural gas resources. Our operations are primarily
focused in the Permian Basin, where we have cultivated long-standing customer
relationships with some of the region's most active and well-capitalized E&P
companies. The Permian Basin is widely regarded as one of the most prolific
oil-producing area in the United States, and we believe we are one of the
largest providers of hydraulic fracturing services in the region by hydraulic
horsepower ("HHP").
     Our total available HHP as of September 30, 2021, was 1,423,000 HHP, which
was comprised of 70,000 HHP of our Tier IV Dynamic Gas Blending ("DGB")
equipment, 1,245,000 HHP of conventional Tier II equipment and 108,000 HHP of
our DuraStim® electric hydraulic fracturing equipment. Our fleet could range
from approximately 50,000 to 80,000 HHP depending on the job design and customer
demand at the wellsite. With the industry transition to lower emissions
equipment and simultaneous hydraulic fracturing, in addition to several other
changes to our customers' job designs, we believe that our available fleet
capacity could decline if we decide to reconfigure our fleets to increase active
HHP and backup HHP at the wellsites based on our customers' operational needs or
as we retire and replace our conventional Tier II equipment. In addition, in
September 2021, we placed an order with our equipment manufacturers for 125,000
HHP of additional Tier IV DGB equipment, which we expect to be delivered at
different times beginning in December 2021, and continuing through the first
half of 2022. We expect to use this new equipment to convert some of our
existing conventional Tier II equipment to lower emissions Tier IV DGB
equipment.

     In 2019, we entered into a purchase commitment for 108,000 HHP of DuraStim®
electric powered hydraulic fracturing equipment, which is currently undergoing
periodic field trials and has yet to be commercialized. During the second
quarter of 2021, we increased the scope of our DuraStim® equipment field trials
by increasing the number of DuraStim® pumps deployed to our customer's
wellsites. As we continue with our field trials, the ideal number of DuraStim®
pumps that constitute a fleet will depend on a combination of factors, including
the ultimate operating performance of DuraStim® pumps following the completion
of testing, the particular shale formation where a well is completed, customer
service requirements and job design. The Company intends to commercialize its
first DuraStim® fleet in 2022, subject to the completion of successful testing.
Largely due to supply chain disruptions impacting the continuing testing
process, the timing for the Company's ultimate decisions regarding DuraStim®
commercialization may be extended. We also have an option to purchase up to an
additional 108,000 HHP of DuraStim® hydraulic fracturing equipment in the future
through July 31, 2022. We currently have two gas turbines, one of which has
provided electrical power to our DuraStim® fleet. In the future, we may utilize
alternative power solutions for our electric equipment, and, consequently, may
lease or sell one or both of the gas turbines.
     Our competitors include many large and small oilfield services companies,
including Halliburton Company, Liberty Oilfield Services Inc., Nextier Oilfield
Solutions Inc., Patterson-UTI Energy Inc., RPC, Inc., FTS International Inc. and
a number of private and locally-oriented businesses. The markets in which we
operate are highly competitive. To be successful, an oilfield services company
must provide services that meet the specific needs of E&P companies at
competitive prices. Competitive factors impacting sales of our services are
price, reputation, technical expertise, emissions profile, service and equipment
design and quality, and health and safety standards. Although our customers
consider all of these factors, we believe price is a key factor in E&P
companies' criteria in choosing a service provider. However, we have recently
observed the energy industry and our customers shift to lower emissions
equipment, which we believe will be an increasingly important factor in an E&P
company's selection of a service provider. The transition to lower emissions
equipment has been challenging for companies in the service industry because of
the capital requirements, and the continuing depressed pricing experienced by
the service industry. While we seek to price our services competitively, we
believe many of our customers elect to work with us based on our operational
efficiencies, productivity, equipment quality, reliability, ability to manage
complex logistics challenges, commitment to safety and the ability of our people
to handle the most complex Permian Basin well completions.
     Our substantial market presence in the Permian Basin positions us well to
capitalize on drilling and completion activity in the region. Primarily, our
operational focus has been in the Permian Basin's Midland sub-basin, where our
customers have operated. However, we are well-positioned to increase our
activity in the Delaware sub-basin in response to demand from our customers.
Over time, we expect the Permian Basin's Midland and Delaware sub-basins to
continue to command a disproportionate share of future North American E&P
spending.


                                      -19-
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     Through our pressure pumping segment (which also includes our cementing
operations), we primarily provide hydraulic fracturing services to E&P companies
in the Permian Basin. Our hydraulic fracturing fleet has been designed to handle
Permian Basin specific operating conditions and the region's increasingly
high-intensity well completions (including simultaneous hydraulic fracturing),
which are characterized by longer horizontal wellbores, more stages per lateral
and increasing amounts of proppant per well.

In addition to our core pressure pumping segment operations, which includes our cementing operations, we also offer coiled tubing services. We believe our coiled tubing services create operational efficiencies for our customers and could allow us to capture a greater portion of their capital spending across the lifecycle of a well. Commodity Price and Other Economic Conditions

     The oil and gas industry has traditionally been volatile and is influenced
by a combination of long-term, short-term and cyclical trends, including
domestic and international supply and demand for oil and gas, current and
expected future prices for oil and gas and the perceived stability and
sustainability of those prices, and capital investments of E&P companies toward
their development and production of oil and gas reserves. The oil and gas
industry is also impacted by general domestic and international economic
conditions such as supply chain disruptions and inflation, political instability
in oil producing countries, government regulations (both in the United States
and internationally), levels of consumer demand, adverse weather conditions, and
other factors that are beyond our control.
     The global public health crisis associated with the COVID-19 pandemic could
continue to have an adverse effect on global economic activity for the
foreseeable future. Some of the challenges resulting from the COVID-19 pandemic
that have impacted our business include restrictions on movement of personnel
and associated gatherings, shortage of skilled labor, cost inflation and supply
chain disruptions. Additionally, with most of the large, capitalized E&P
companies in the United States, including our customers, closely managing their
operating budget and exercising capital discipline, we do not currently expect
significant increases in crude oil production over the short-to-medium term.
Furthermore, OPEC+ has indicated that they will continue with their plans to
manage production levels by gradually increasing crude oil output.With the
tightness in crude oil production and growing demand for crude oil, there has
been a significant increase in rig count and WTI crude oil prices have increased
to over $84 per barrel in October 2021 from its lowest point of $20 per barrel
in March 2020. The Permian Basin rig count has increased significantly from
approximately 124 at the beginning of August 2020 to approximately 268 at the
end of October 2021, according to Baker Hughes. Although crude oil prices are
currently at a 7-year high, the oilfield services industry, including the
pressure pumping segment, has not fully recovered as evidenced by continued
depressed pricing for most of our services, and shortages of skilled labor force
in the Permian Basin. However, we still believe that the Permian Basin, our
primary area of operation, will be the most attractive basin to E&P companies
and should command higher prices and associated profitability, if the overall
demand for crude oil and our services continue to increase.
     Government regulations and investors are demanding the oil and gas industry
transition to a lower emissions operating environment, including the upstream
and oilfield service companies. As a result, we are working with our customers
and equipment manufacturers to transition to a lower emissions profile.
Currently, a number of lower emission solutions for pumping equipment, including
Tier IV DGB, electric, direct drive gas turbine and other technologies have been
developed, and we expect additional lower emission solutions will be developed
in the future. We are continually evaluating these technologies and other
investment and acquisition opportunities that would support our existing and new
customer relationships. The transition to lower emissions equipment is quickly
evolving and will be capital intensive. Over time, we may be required to convert
substantially all of our conventional Tier II equipment to lower emissions
equipment. If we are unable to quickly transition to lower emissions equipment
and meet our and our customers' emissions goals, the demand for our services
could be adversely impacted.
     The Permian Basin rig count increase, WTI crude oil price increase and
costs inflation could be indicative of an energy market recovery. If the rig
count and market conditions continue to improve, including improved customers'
pricing and labor availability, and we are able to meet our customers' lower
emissions equipment demands, we believe our operational and financial results
will also continue to improve. However, if market conditions do not improve, and
we are unable to increase our pricing or pass-through future cost increases to
our customers, there could be a material adverse impact on our business, results
of operations and cash flows.
     Our results of operations have historically reflected seasonal tendencies,
typically in the fourth quarter, relating to the holiday season, inclement
winter weather and exhaustion of our customers' annual budgets. As a result, we
typically experience declines in our operating and financial results in November
and December, even in a stable commodity price and operations environment.


                                      -20-
--------------------------------------------------------------------------------

How We Evaluate Our Operations

Our management uses Adjusted EBITDA or Adjusted EBITDA margin to evaluate and analyze the performance of our various operating segments. Adjusted EBITDA and Adjusted EBITDA Margin

     We view Adjusted EBITDA and Adjusted EBITDA margin as important indicators
of performance. We define EBITDA as our earnings, before (i) interest expense,
(ii) income taxes and (iii) depreciation and amortization. We define Adjusted
EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) stock-based
compensation, and (iii) other unusual or nonrecurring (income)/expenses, such as
impairment charges, severance, costs related to asset acquisitions, insurance
recoveries and one-time professional fees on legal settlements. Adjusted EBITDA
margin reflects our Adjusted EBITDA as a percentage of our revenues.
     Adjusted EBITDA and Adjusted EBITDA margin are supplemental measures
utilized by our management and other users of our financial statements such as
investors, commercial banks, and research analysts, to assess our financial
performance because it allows us and other users to compare our operating
performance on a consistent basis across periods by removing the effects of our
capital structure (such as varying levels of interest expense), asset base (such
as depreciation and amortization), nonrecurring (income)/expenses and items
outside the control of our management team (such as income taxes). Adjusted
EBITDA and Adjusted EBITDA margin have limitations as analytical tools and
should not be considered as an alternative to net income/(loss), operating
income/(loss), cash flow from operating activities or any other measure of
financial performance presented in accordance with GAAP.
Note Regarding Non-GAAP Financial Measures
     Adjusted EBITDA and Adjusted EBITDA margin are not financial measures
presented in accordance with GAAP ("non-GAAP"), except when specifically
required to be disclosed by GAAP in the financial statements. We believe that
the presentation of Adjusted EBITDA and Adjusted EBITDA margin provide useful
information to investors in assessing our financial condition and results of
operations because it allows them to compare our operating performance on a
consistent basis across periods by removing the effects of our capital
structure, asset base, nonrecurring expenses (income) and items outside the
control of the Company. Net income (loss) is the GAAP measure most directly
comparable to Adjusted EBITDA.  Adjusted EBITDA and Adjusted EBITDA margin
should not be considered as alternatives to the most directly comparable GAAP
financial measure. Each of these non-GAAP financial measures has important
limitations as analytical tools because they exclude some, but not all, items
that affect the most directly comparable GAAP financial measures. You should not
consider Adjusted EBITDA or Adjusted EBITDA margin in isolation or as a
substitute for an analysis of our results as reported under GAAP. Because
Adjusted EBITDA and Adjusted EBITDA margin may be defined differently by other
companies in our industry, our definitions of these non-GAAP financial measures
may not be comparable to similarly titled measures of other companies, thereby
diminishing their utility.


                                      -21-
--------------------------------------------------------------------------------

Reconciliation of net income (loss) to Adjusted EBITDA (in thousands):

                                                                   Three 

Months Ended September 30, 2021

                                                           Pressure Pumping        All Other            Total
Net income (loss)                                          $       9,058          $ (14,125)         $  (5,067)
Depreciation and amortization                                     32,536                995             33,531
Interest expense                                                       -                143                143
Income tax benefit                                                     -             (1,279)            (1,279)
Loss on disposal of assets                                        12,381                 43             12,424
Stock-based compensation                                               -              3,009              3,009
Other expense                                                          -                309                309
Other general and administrative expense(1)                            -               (972)              (972)
Adjusted EBITDA                                            $      53,975          $ (11,877)         $  42,098

                                                                   Three

Months Ended September 30, 2020

                                                           Pressure Pumping        All Other            Total
Net loss                                                   $     (20,920)         $  (8,264)         $ (29,184)
Depreciation and amortization                                     36,326              1,141             37,467
Interest expense                                                       -                137                137
Income tax benefit                                                     -             (7,717)            (7,717)
Loss on disposal of assets                                        11,256                 30             11,286
Stock-based compensation                                               -              2,535              2,535
Other expense                                                          -                312                312
Other general and administrative expense(1)                            -              2,481              2,481
Severance expense                                                      -                 37                 37
Adjusted EBITDA                                            $      26,662          $  (9,308)         $  17,354




                                      -22-
--------------------------------------------------------------------------------

                                                                   Nine 

Months Ended September 30, 2021

                                                          Pressure Pumping        All Other            Total
Net loss                                                  $      (5,426)         $ (28,527)         $ (33,953)
Depreciation and amortization                                    97,307              2,946            100,253
Interest expense                                                      -                477                477
Income tax benefit                                                    -            (11,639)           (11,639)
Loss (gain) on disposal of assets                                40,792               (292)            40,500
Stock-based compensation                                              -              8,405              8,405
Other income                                                          -             (1,178)            (1,178)
Other general and administrative expense (1)                          -             (5,670)            (5,670)
Severance expense                                                     -                612                612
Adjusted EBITDA                                           $     132,673          $ (34,866)         $  97,807

                                                                   Nine

Months Ended September 30, 2020

                                                          Pressure Pumping        All Other            Total
Net loss                                                  $     (30,140)         $ (32,768)         $ (62,908)
Depreciation and amortization                                   114,205              3,639            117,844
Impairment expense                                               15,559              1,095             16,654
Interest expense                                                      1              2,207              2,208
Income tax benefit                                                    -            (15,087)           (15,087)
Loss on disposal of assets                                       39,659                216             39,875
Stock-based compensation                                              -              5,968              5,968
Other expense                                                         -                583                583
Other general and administrative expense (1)                          -             12,418             12,418
Retention bonus and severance expense                                75                 58                133
Adjusted EBITDA                                           $     139,359          $ (21,671)         $ 117,688


(1)Other general and administrative expense, (net of reimbursement from
insurance carriers) relates to nonrecurring professional fees paid to external
consultants in connection with the Company's pending SEC investigation and
shareholder litigation, net of insurance recoveries. During the three and nine
months ended September 30, 2021, we received reimbursement of approximately $1.4
million and $8.1 million, respectively, from our insurance carriers in
connection with the SEC investigation and shareholder litigation.



                                      -23-
--------------------------------------------------------------------------------

Results of Operations

     We conducted our business through three operating segments: hydraulic
fracturing, cementing and coiled tubing. In March 2020, the Company shut down
its flowback operating segment and subsequently disposed of the assets for
approximately $1.6 million. In September 2020, the Company disposed of all of
its drilling rigs and ancillary assets for approximately $0.5 million and shut
down its drilling operations. For reporting purposes, the hydraulic fracturing
and cementing operating segments are aggregated into our one reportable
segment-pressure pumping. The coiled tubing operating segment and corporate
administrative expenses (inclusive of our total income tax expense (benefit),
other (income) and expense and interest expense) are included in the "all other"
category. Total corporate administrative expense for the three and nine months
ended September 30, 2021 was $13.5 million and $25.1 million, respectively. The
corporate administrative expense for the three and nine months ended
September 30, 2020 was $7.0 million and $27.9 million, respectively.
     Our hydraulic fracturing operating segment revenue approximated 93.4% and
93.5% of our pressure pumping revenue during the three and nine months ended
September 30, 2021, respectively. During the three and nine months ended
September 30, 2020, our hydraulic fracturing operating segment revenue
approximated 95.2% and 94.0% of our pressure pumping revenue, respectively.
     The following table sets forth the results of operations for the periods
presented:
(in thousands, except for percentages)                 Three Months Ended                             Change
                                                          September 30,                         Increase (Decrease)
                                                    2021                2020                  $                    %
Revenue                                         $  250,099          $  133,710          $  116,389                 87.0  %
Less (Add):
Cost of services (1)                               188,690              99,592              89,098                 89.5  %
General and administrative expense (2)              21,348              21,817                (469)                (2.1) %
Depreciation and amortization                       33,531              37,467              (3,936)               (10.5) %
Loss on disposal of assets                          12,424              11,286               1,138                 10.1  %
Interest expense                                       143                 137                   6                  4.4  %
Other expense                                          309                 312                  (3)                (1.0) %
Income tax benefit                                  (1,279)             (7,717)             (6,438)               (83.4) %
Net loss                                        $   (5,067)         $  (29,184)         $  (24,117)               (82.6) %

Adjusted EBITDA (3)                             $   42,098          $   17,354          $   24,744                142.6  %
Adjusted EBITDA Margin (3)                            16.8  %             13.0  %              3.8   %             29.2  %

Pressure pumping segment results of
operations:
Revenue                                         $  245,641          $  131,321          $  114,320                 87.1  %
Cost of services                                $  184,972          $   97,362          $   87,610                 90.0  %
Adjusted EBITDA (3)                             $   53,975          $   26,662          $   27,313                102.4  %
Adjusted EBITDA Margin (4)                            22.0  %             20.3  %              1.7   %              8.4  %


(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 to our most
directly comparable financial measures calculated in accordance with GAAP,
please read "How We Evaluate Our Operations". Included in our Adjusted EBITDA is
idle fees of $0 and $6.9 million for the three months ended September 30, 2021
and 2020, respectively.
(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 revenue for the pressure pumping segment.


                                      -24-
--------------------------------------------------------------------------------

Three Months Ended September 30, 2021 Compared to the Three Months Ended September 30, 2020

     Revenues.  Revenues increased 87.0%, or $116.4 million, to $250.1
million during the three months ended September 30, 2021, as compared to $133.7
million during the three months ended September 30, 2020. Our pressure pumping
segment revenues increased 87.1%, or $114.3 million, for the three months ended
September 30, 2021, as compared to the three months ended September 30, 2020.
The increases were primarily attributable to the significant increase in demand
for pressure pumping services, following the rebound from the depressed oil
prices and slowdown in economic activity resulting from the COVID-19 pandemic.
The increase in demand for our pressure pumping services resulted in a
significant increase in our average effectively utilized fleet count to
approximately 13.8 active fleets during the three months ended September 30,
2021 from approximately 8.5 active fleets for the three months ended
September 30, 2020. In addition, we increased our operational efficiencies and
improved pricing across our customer base during the three months ended
September 30, 2021. Included in our revenue for the three months ended
September 30, 2021 and 2020 was revenue generated from idle fees charged to our
customer of approximately $0 and $6.9 million, respectively.
     Revenues from services other than pressure pumping increased 86.6%, or $2.1
million, to $4.5 million for the three months ended September 30, 2021, as
compared to $2.4 million for the three months ended September 30, 2020. The
increase in revenue from services other than pressure pumping was primarily
attributable to the increase in utilization experienced by our coiled tubing
operations, which was driven by increased E&P completions activity following the
recovery from the depressed oil prices and impact of the COVID-19 pandemic.
     Cost of Services.  Cost of services increased 89.5%, or $89.1 million, to
$188.7 million for the three months ended September 30, 2021, as compared to
$99.6 million during the three months ended September 30, 2020. Cost of services
in our pressure pumping segment increased $87.6 million for the three months
ended September 30, 2021, as compared to the three months ended September 30,
2020. These increases were primarily attributable to the significantly increased
activity levels resulting from the increased demand for our services following
the rebound from the depressed oil prices and economic slowdown caused by the
COVID-19 pandemic that negatively impacted E&P completions activity in 2020. As
a percentage of pressure pumping segment revenues (including idle fees),
pressure pumping cost of services was 75.3% for the three months ended
September 30, 2021, as compared to 74.1% for the three months ended
September 30, 2020. Our revenue during the three months ended September 30,
2020, included significant idle fee revenue. Excluding idle fees revenue of $0
and $6.9 million recorded during the three months ended September 30, 2021 and
2020, respectively, our pressure pumping cost of services as a percentage of
pressure pumping revenues decreased to 75.3% during the three months ended
September 30, 2021, as compared to 78.3% for the three months ended
September 30, 2020. The decrease was a result of increased customer activity
levels and operational efficiencies.
     General and Administrative Expenses.  There was no significant change in
general and administrative expenses. General and administrative expenses
decreased 2.1%, or $0.5 million, to $21.3 million for the three months ended
September 30, 2021, as compared to $21.8 million for the three months ended
September 30, 2020.
     Depreciation and Amortization.  Depreciation and amortization decreased
10.5%, or $3.9 million, to $33.5 million for the three months ended
September 30, 2021, as compared to $37.5 million for the three months ended
September 30, 2020. The decrease was primarily attributable to the decrease in
our fixed asset base, partly attributable to the impairment and disposal of
certain fixed assets in 2020.
     Loss on Disposal of Assets.  Loss on the disposal of assets increased
10.1%, or $1.1 million, to $12.4 million for the three months ended
September 30, 2021, as compared to $11.3 million for the three months ended
September 30, 2020. The increase was primarily attributable to the significant
increase in utilization resulting in an increase in the operational intensity on
our equipment. Upon sale or retirement of property and equipment, including
certain major components of our pressure pumping equipment that are replaced,
the cost and related accumulated depreciation are removed from the balance sheet
and the net amount is recognized as loss on disposal of assets.
     Interest Expense.  There was no significant change in interest expense.
Interest expense was relatively flat at $0.1 million for the three months ended
September 30, 2021, as compared to $0.1 million for the three months ended
September 30, 2020. During the three months ended September 30, 2021 and three
months ended September 30, 2020, the Company had a zero debt balance, and the
interest expense in the three months ended September 30, 2021 and three months
ended September 30, 2020, relates primarily to the amortization of our
capitalized loan origination cost.
     Other Expense.  There was no significant change in other expense. Other
expense was $0.3 million for the three months ended September 30, 2021, as
compared to $0.3 million for the three months ended September 30, 2020. A
significant portion of our other expense consists of our lender's commitment
fees.


                                      -25-
--------------------------------------------------------------------------------

     Income Taxes.  Total income tax benefit was $1.3 million resulting in an
effective tax rate of 20.1% for the three months ended September 30, 2021, as
compared to income tax benefit of $7.7 million or an effective tax rate of 20.9%
for the three months ended September 30, 2020. The reduction in the income tax
benefit recorded in the three months ended September 30, 2021 is primarily
attributable to the Company projecting a much lower pre-tax loss in 2021 as
compared to that in 2020. Furthermore, there was no significant change in the
effective tax rate from 20.9% to 20.1% in the three months ended September 30,
2021.
     The following table sets forth the results of operations for the periods
presented:
(in thousands, except for percentages)                   Nine Months Ended                             Change
                                                           September 30,                         Increase (Decrease)
                                                     2021                2020                  $                    %
Revenue                                          $  628,444          $  634,888          $   (6,444)                 (1.0) %
Less (Add):
Cost of services (1)                                474,905             468,633               6,272                   1.3  %
General and administrative expense (2)               59,079              67,086              (8,007)                (11.9) %
Depreciation and amortization                       100,253             117,844             (17,591)                (14.9) %
Impairment expense                                        -              16,654             (16,654)               (100.0) %
Loss on disposal of assets                           40,500              39,875                 625                   1.6  %
Interest expense                                        477               2,208              (1,731)                (78.4) %
Other (income)/expense                               (1,178)                583              (1,761)               (302.1) %
Income tax benefit                                  (11,639)            (15,087)             (3,448)                (22.9) %
Net loss                                         $  (33,953)         $  (62,908)         $  (28,955)                (46.0) %

Adjusted EBITDA (3)                              $   97,807          $  117,688          $  (19,881)                (16.9) %
Adjusted EBITDA Margin (3)                             15.6  %             18.5  %             (2.9)  %             (15.7) %

Pressure pumping segment results of
operations:
Revenue                                          $  617,293          $  622,055          $   (4,762)                 (0.8) %
Cost of services                                 $  464,230          $  457,577          $    6,653                   1.5  %
Adjusted EBITDA (3)                              $  132,673          $  139,359          $   (6,686)                 (4.8) %
Adjusted EBITDA Margin (4)                             21.5  %             22.4  %             (0.9)  %              (4.0) %


(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 to our most
directly comparable financial measures calculated in accordance with GAAP,
please read "How We Evaluate Our Operations". Included in our Adjusted EBITDA is
idle fees of $5.3 million and $41.1 million for the nine months ended September
30, 2021 and 2020, respectively.
(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 revenue for the pressure pumping segment.
Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September
30, 2020
     Revenues.  Revenues decreased 1.0%, or $6.4 million, to $628.4 million
during the nine months ended September 30, 2021, as compared to $634.9 million
during the nine months ended September 30, 2020. Our pressure pumping segment
revenues decreased 0.8%, or $4.8 million, for the nine months ended September
30, 2021, as compared to the nine months ended September 30, 2020. The decreases
were primarily attributable to the significant pricing discounts we provided our
customers beginning April 2020, and in part due to substantially all of our
customers directly sourcing certain consumables like sand, chemical, and diesel.
Our average effectively utilized fleet count during the nine months ended
September 30, 2021, was approximately 12.4 active fleets, compared to 10.4
during the nine months ended September 30, 2020. Included in our revenue for the
nine months ended September 30, 2021 and 2020 was revenue generated from idle
fees charged to our customer of approximately $5.3 million and $41.1 million,
respectively. Excluding idle fees, our revenue increased during the nine months
ended September 30, 2021 primarily because of our increased fleet utilization.

Revenues from services other than pressure pumping decreased 13.1%, or $1.7 million, to $11.2 million for the nine months ended September 30, 2021, as compared to $12.8 million for the nine months ended September 30, 2020. The decrease

                                      -26-
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in revenues from services other than pressure pumping was primarily attributable to the disposal of our flowback operations in March 2020.

     Cost of Services.  Cost of services increased 1.3%, or $6.3 million, to
$474.9 million for the nine months ended September 30, 2021, as compared to
$468.6 million during the nine months ended September 30, 2020. Cost of services
in our pressure pumping segment increased $6.7 million for the nine months ended
September 30, 2021, as compared to the nine months ended September 30, 2020. As
a percentage of pressure pumping segment revenues (including idle fees),
pressure pumping cost of services increased to 75.2% for the nine months ended
September 30, 2021, as compared to 73.6% for the nine months ended September 30,
2020. The increase in our cost of services percentage was primarily attributable
to pricing pressure on our services resulting in customer discounts, partially
offset by the idle fees revenue. Excluding idle fees revenue of $5.3 million and
$41.1 million recorded during the nine months ended September 30, 2021 and 2020,
respectively, our pressure pumping cost of services as a percentage of pressure
pumping revenues decreased to 75.9% during the nine months ended September 30,
2021, as compared to 78.8% for the nine months ended September 30, 2020. The
decrease in our pressure pumping cost of services as a percentage of revenue was
a result of increased operational efficiencies and reduction in certain
consumables provided to customers, partially offset by higher costs for certain
commodities and services.
     General and Administrative Expenses.  General and administrative expenses
decreased 11.9%, or $8.0 million, to $59.1 million for the nine months ended
September 30, 2021, as compared to $67.1 million for the nine months ended
September 30, 2020. The net decrease was primarily attributable to a decrease in
(i) nonrecurring advisory and professional fees of $18.1 million paid to
external consultants in connection with the Company's pending SEC investigation
and shareholder litigation, (ii) legal and professional fees of approximately
$3.6 million, which was partially offset by a net increase of approximately
$13.1 million paid in payroll expenses, and $0.6 million in other remaining
general and administrative expenses.
     Depreciation and Amortization.  Depreciation and amortization decreased
14.9%, or $17.6 million, to $100.3 million for the nine months ended September
30, 2021, as compared to $117.8 million for the nine months ended September 30,
2020. The decrease was primarily attributable to the overall decrease in our
fixed asset base in 2020, partly attributable to the impairment and disposal of
certain fixed assets in 2020.
     Impairment Expense.  There was no impairment expense during the nine months
ended September 30, 2021. During the nine months ended September 30, 2020
depressed market conditions, crude oil prices and negative near-term outlook for
the utilization of certain of our equipment resulted in the Company recording an
impairment expense of $16.7 million, of which $9.4 million relates to goodwill
impairment and $7.2 million relates to property and equipment impairment.
     Loss on Disposal of Assets.  Loss on the disposal of assets slightly
increased by 1.6%, or $0.6 million, to $40.5 million for the nine months ended
September 30, 2021, as compared to $39.9 million for nine months ended September
30, 2020.
     Interest Expense.  Interest expense decreased 78.4%, or $1.7 million, to
$0.5 million for the nine months ended September 30, 2021, as compared to $2.2
million for the nine months ended September 30, 2020. The decrease in interest
expense was primarily attributable to the decrease in our average debt balance
during the nine months ended September 30, 2021 compared to the nine months
ended September 30, 2020.
     Other (Income)/Expense.    Other income increased to approximately $1.2
million for the nine months ended September 30, 2021, as compared to $0.6
million in expense for the nine months ended September 30, 2020. The increase in
other income is primarily attributable to the net refund of approximately
$2.1 million to the Company from the sales and excise and use tax audit and
partially offset by an expense related to our lender's commitment fees during
nine months ended September 30, 2021, as compared to the nine months ended
September 30, 2020.
     Income Taxes.  Total income tax benefit was $11.6 million resulting in an
effective tax rate of 25.5% for the nine months ended September 30, 2021, as
compared to income tax benefit of $15.1 million or an effective tax rate of
19.3% for the nine months ended September 30, 2020. The reduction in the income
tax benefit recorded in the nine months ended September 30, 2021 is primarily
attributable to the Company projecting a much lower pre-tax loss in 2021 as
compared to that in 2020. Furthermore, the change in the effective tax rate from
19.3% to 25.5% was primarily attributable to nondeductible expenses and discrete
items such as stock compensation expense that impacted our income tax benefit
during the nine months ended September 30, 2020.


                                      -27-
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Liquidity and Capital Resources

     Our liquidity is currently provided by (i) existing cash balances, (ii)
operating cash flows and (iii) borrowings under our ABL Credit Facility, if any.
Our primary uses of cash will be to continue to fund our operations, support
growth opportunities and satisfy future debt payments, if any. Our borrowing
base, as redetermined monthly, is tied to 85.0% of eligible accounts receivable.
Changes to our operational activity levels have an impact on our total eligible
accounts receivable, which could result in significant changes to our borrowing
base and therefore our availability under our ABL Credit Facility. We believe
our remaining monthly availability under our ABL Credit Facility will be
adversely impacted if the current depressed oil and gas market conditions
continue or worsen.
      As of September 30, 2021, we had no borrowings under our ABL Credit
Facility, and our total liquidity was approximately $153.6 million, consisting
of cash and cash equivalents of $84.6 million and $69.0 million of availability
under our ABL Credit Facility.

As of October 29, 2021, our total liquidity was approximately $158.8 million, consisting of cash and cash equivalents of $91.2 million and $67.6 million of availability under our ABL Credit Facility.

      In 2020, when demand for our services was significantly depressed
following the rapidly rising health crisis associated with the COVID-19 pandemic
and the energy industry disruptions led by depressed WTI crude oil prices, the
Company experienced a significant decrease in its liquidity. The gradual
recovery in the energy industry with the reduction in the COVID-19 infection
rate following the administration of COVID-19 vaccines, along with increasing
demand for crude oil and a significant increase in crude oil prices has
correlated with an increase in demand for our pressure pumping services, thus
improving our future profitability and liquidity outlook. However, the current
market conditions resulting from the COVID-19 pandemic could rapidly change and
there could be a new outbreak of a COVID-19 variant or the vaccines may not be
as effective as anticipated, which which could negatively impact the demand for
our services and our future revenue, results of operations and cash flows. Our
liquidity could also be adversely impacted by our investments in lower emissions
equipment like the Tier IV DGB or any other available technology, particularly
in the event that pressure pumping activity does not continue to improve or we
are otherwise not able to earn an appropriate return on those investments..
      There can be no assurance that operations and other capital resources will
provide cash in sufficient amounts to maintain planned or future levels of
capital expenditures. Future cash flows are subject to a number of variables,
and are highly dependent on the drilling, completion, and production activity by
our customers, which in turn is highly dependent on oil and natural gas prices.
Depending upon market conditions and other factors, we may issue equity and debt
securities or take other actions necessary to fund our business or meet our
future long-term liquidity requirements.
     Our ABL Credit Facility, as amended, has a total borrowing capacity of $300
million (subject to the Borrowing Base limit), with a maturity date of December
19, 2023. The ABL Credit Facility has a borrowing base of 85% of monthly
eligible accounts receivable less customary reserves (the "Borrowing Base"). The
Borrowing Base as of September 30, 2021 was approximately $72.7 million and was
approximately $71.3 million as of October 29, 2021. The ABL Credit Facility
includes a Springing Fixed Charge Coverage Ratio to apply when excess
availability is less than the greater of (i)10% of the lesser of the facility
size or the Borrowing Base or (ii) $22.5 million. Under this facility we are
required to comply, subject to certain exceptions and materiality qualifiers,
with certain customary affirmative and negative covenants, including, but not
limited to, covenants pertaining to our ability to incur liens, indebtedness,
changes in the nature of our business, mergers and other fundamental changes,
disposal of assets, investments and restricted payments, amendments to our
organizational documents or accounting policies, prepayments of certain debt,
dividends, transactions with affiliates, and certain other activities.
Borrowings under the ABL Credit Facility are secured by a first priority lien
and security interest in substantially all assets of the Company.
      Borrowings under the ABL Credit Facility accrue interest based on a
three-tier pricing grid tied to availability, and we may elect for loans to be
based on either LIBOR or base rate, plus the applicable margin, which ranges
from 1.75% to 2.25% for LIBOR loans and 0.75% to 1.25% for base rate loans, with
a LIBOR floor of zero. There were no borrowings under the ABL Credit Facility
for the nine months ended September 30, 2021.
      In July 2017, the United Kingdom's Financial Conduct Authority, which
regulates LIBOR, announced that it intends to phase out LIBOR by the end of
2021. At the present time, the ABL Credit Facility is subject to LIBOR rates but
has a term that extends beyond the end of 2021 when LIBOR will be phased out. We
have not yet pursued any technical amendment or other contractual alternative to
address this matter. We are currently evaluating the potential impact of
eventual replacement of the LIBOR interest rate, although our ABL Credit
Facility agreement allows us to elect an alternative rate (base rate) to accrue
interest.


                                      -28-
--------------------------------------------------------------------------------

Future Sources and Use of Cash and Contractual Obligations

     Our future primary use of cash will be to fund capital expenditures.
Capital expenditures for 2021 are projected to be primarily related to
maintenance capital expenditures to support our existing assets, including costs
to convert our existing conventional Tier II equipment to lower emissions Tier
IV DGB equipment. In September 2021, we ordered 125,000 HHP of additional Tier
IV DGB equipment for approximately $74 million. The 125,000 HHP of Tier IV DGB
equipment will be used to replace existing Tier II diesel HHP, with deliveries
beginning in December 2021 and continuing through the first half of 2022.
Approximately $30 million of the $74 million could be paid in 2021 with the
remainder paid as deliveries continue during the first half of 2022.

     We expect that our currently anticipated capital expenditures will be
funded by existing cash, cash flows from operations, and, if needed, borrowings
under our ABL Credit Facility. However, as noted elsewhere in this quarterly
report, we will continually evaluate opportunities to improve our service
offerings and other investment and acquisition opportunities that we believe
would enhance the competitiveness of our business. Depending upon market
conditions and other factors, we may issue equity and debt securities or take
other actions necessary to fund our future investment or acquisitions.
     In addition, we have option agreements with our equipment manufacturer to
purchase additional 108,000 HHP of DuraStim® hydraulic fracturing equipment
through July 31, 2022. Currently, because of ongoing testing and
commercialization efforts, we cannot reasonably determine whether or not we will
exercise these options before they expire.
     In the normal course of business, we enter into various contractual
obligations and incur expenses in connection with routine growth and maintenance
capital expenditures that impact our future liquidity. There were no other known
future material contractual obligations as of September 30, 2021.
Cash and Cash Flows

The following table sets forth the historical cash flows for the nine months ended September 30, 2021 and 2020:

                                                                        Nine Months Ended September 30,
(in thousands)                                                             2021                2020

Net cash provided by operating activities                              $  109,259          $  118,026
Net cash used in investing activities                                  $  (85,549)         $  (82,179)
Net cash used in financing activities                                  $   

(7,881) $ (130,628)

Cash Flows From Operating Activities

     Net cash provided by operating activities was $109.3 million for the nine
months ended September 30, 2021, compared to $118.0 million for the nine months
ended September 30, 2020. The net decrease of approximately $8.8 million was
primarily due to the timing of collections of our receivables from customers and
payments to vendors.
Cash Flows From Investing Activities
     Net cash used in investing activities increased to $85.5 million for the
nine months ended September 30, 2021, from $82.2 million for the nine months
ended September 30, 2020. The increase was primarily attributable to our
investment in Tier IV DGB equipment.
Cash Flows From Financing Activities
     Net cash used in financing activities decreased to $7.9 million for the
nine months ended September 30, 2021, from $130.6 million for the nine months
ended September 30, 2020. The net decrease in cash used in financing activities
during the nine months ended September 30, 2021, was primarily a result of no
borrowings or repayments under our ABL Credit Facility in 2021. During the nine
months ended September 30, 2020, we fully repaid our borrowings under our ABL
Credit Facility in the amount of $130 million.
Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of September 30, 2021.

                                      -29-
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Critical Accounting Policies and Estimates

      There have been no material changes during the nine months ended September
30, 2021 to the methodology applied by our management for critical accounting
policies previously disclosed in our Form 10-K. Please refer to Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies and Estimates" in our Form 10-K for a
discussion of our critical accounting policies and estimates.
Recently Issued Accounting Standards

Disclosure concerning recently issued accounting standards is incorporated by reference to Note 2 of our Condensed Consolidated Financial Statements (Unaudited) contained in this Form 10-Q.

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