ProPetro Holding Corp. Aktie

Hello, everyone. Thank you for joining us, and welcome to the ProPetro Holdings First Quarter 2026 Conference Call. [Operator Instructions]

I will now hand the conference over to Matt Augustine, ProPetro's Vice President of Finance and Investor Relations. Please go ahead.

Thank you, and good morning. We appreciate your participation in today's call. With me are Chief Executive Officer, Sam Sledge; Chief Financial Officer, Caleb Weatherl; President and Chief Operating Officer, Adam Munoz; President of PROPWR, Travis Simmering.

This morning, we released our earnings results for the first quarter of 2026. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC.

Also during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question-and-answer session.

With that, I would like to turn the call over to Sam.

Thanks, Matt, and good morning, everyone. The results we generated in the first quarter of 2026 demonstrate the resilience of our business model. Despite weather-related disruptions that significantly impacted revenue and profitability during the quarter, we delivered positive financial results in our completions business, particularly when measured by adjusted EBITDA less incurred capital expenditures.

These results highlight the strength of our industrialized model, which is the result of strategic investments, disciplined asset deployment and rigorous cost management. The strategic actions we implemented throughout 2025 to protect our assets and rightsize our cost structure are now delivering measurable benefits, positioning us for success in the current market environment.

We'll continue to leverage the industrialized nature of our completions business to drive expansion of PROPWR, which we expect to fuel future earnings growth and further strengthen our value proposition.

With respect to the broader environment, we're still in the early stages of assessing the global and domestic implications of the Iran war. While uncertainty remains, we're starting to see signs of recovery across the broader North American oilfield services sector given a strengthening commodity backdrop that is driving early pricing and activity tailwinds across our completions business.

Importantly, structural tightening in the completions market continues to intensify, driven by ongoing attrition, particularly among smaller and less disciplined competitors. This trend was already emerging prior to the onset of the Iran war and has since accelerated with the recent increase in demand for U.S. frac activity.

Notably, there was already very little spare frac equipment capacity even before the conflict began, further amplifying current market constraints. These dynamics, combined with ongoing capital investment discipline and pricing discipline have tempered any plans to expand capacity both within ProPetro and among our close peers in the completion space. Collectively, these factors have created a more constructive supply and demand environment for our business over time.

We do recognize the impact that the Iran war has created for our business. However, the market remains volatile, and we expect this uncertainty to persist until there is more clarity on the disruptions in the Middle East and the subsequent impacts on global supply and demand dynamics. While external conditions are beyond our influence, we remain focused on what we can control, our commitment to operational excellence, exercising rigorous cost discipline and deploying capital strategically.

Our stable and industrialized business model ensures our positioning not only to navigate this volatility, but also to maximize opportunities and emerge stronger as conditions stabilize.

Turning briefly to our fleet. Due to the significant diesel to natural gas price discount currently at play in the Permian Basin, we've seen an uptick in demand for next-generation natural gas burning fleet. Currently, approximately 75% of our fleet is next generation, spanning our Tier 4 DGB dual-fuel and FORCE electric fleet.

Recently, we've also added a small number of 100% natural gas burning direct drive units that operate at the highest performance standard and complement our existing fleet. These additions are measured and are not intended to expand our overall capacity in the environment, but rather to further enhance our portfolio. We anticipate adding a few more units later this year to capture targeted demand as it required.

As we look ahead, early indications suggest that the floor for crude prices has risen and is becoming more stable, which is constructive for our business. Due to the strong demand for next-generation natural gas burning fleet, we're currently sold out across our Tier 4 DGB dual-fuel and FORCE electric fleet, and accordingly expect to run approximately 12 fleets in the second quarter, up from the approximately 11 in the first quarter.

Importantly, we do have a few additional Tier 2 diesel fleets available, which we will deploy only if opportunities meet our economic return threshold. Given disciplined deployments and limited capacity in the completions market, we're well positioned to quickly capitalize on new opportunities as they emerge.

Now moving over to PROPWER. We've made significant progress across several key initiatives this past quarter, highlighted by our recent announcement of a new strategic framework agreement with Caterpillar. This agreement enables PROPWER to acquire up to approximately 2.1 gigawatts of additional power generation capacity over the next 5 years.

When combined with the approximate 550 megawatts previously ordered and upon successful delivery of assets under this agreement, PROPWER is positioned to have approximately 2.6 gigawatts of power generation capacity delivered by year-end 2031 and fully deployed in 2032.

Our nearly 20-year strategic partnership with Caterpillar has been instrumental in shaping our long-term growth plan for PROPWER. This collaboration enables us to pursue shared success while providing PROPWER with reliable access to high-quality assets even amidst the challenges of an exceptionally constrained supply chain.

Together, we're well positioned to capture the future opportunities and drive mutual value. This agreement underscores PROPWER's leadership in deploying innovative energy solutions, and we're excited about the transformative potential it brings to our company.

To support our upsized order backlog, we have built a robust commercial pipeline. Demand for reliable and low-emission power solutions remains very strong, fueling continued growth across the data center, industrial, and oil and gas sectors. Notably, we're pleased to report major advancements representing several hundred megawatts of high potential data center opportunities in a select portion of our data center commercial pipeline. While specific details are contingent on finalizing agreements, these developments highlight our expanding leadership and strategic positioning in the digital infrastructure market.

Additionally, we are engaged in advanced contract negotiations for approximately 100 megawatts to support oil and gas microgrid projects with deployment expected later this year. These commercial developments will rapidly expand our total committed capacity beyond the approximately 240 megawatts currently committed under contract.

We are confident in PROPWER's future growth and expect to secure additional contracts throughout 2026 as we extend and deepen relationships with both new and existing partners. The majority of future megawatts are anticipated to be contracted within the data center and industrial sectors, driven by their larger load requirements and long-term strategic commitment.

Importantly, our near-term focus also remains on disciplined execution, deploying and scaling PROPWER across our contracted customers with a strong emphasis on derisking deployment and building a resilient operational foundation to support sustainable long-term growth and profitability.

As we continue to deploy capital to grow PROPWER, we remain committed to maintaining financial flexibility and a strong balance sheet. Our preferred source of funding continues to be free cash flow generated from our completions. This is supplemented by our strong balance sheet, proceeds from our recent equity offering and access to flexible financing arrangements, including our Caterpillar financing facility and lease financing structures that we already have in place. Given the recent increased orders, we will continue to actively pursue low-cost capital and flexible financing solution to support PROPWER's growth.

Looking ahead, while we're still in the early days for PROPWER, we've already made significant progress to secure customer commitments and have real momentum and real operation that allow us to negotiate additional contracts from a position of strength and proven service quality. As the demand for reliable low emissions power solutions continues to grow, we expect PROPWER to continue to scale and deliver increasing returns over time. Our approach remains consistent. We're staying nimble and disciplined, while continuing to lean into the opportunity we see at PWER.

Stepping back, the strategy we've been executing over the past several years is now working. Our completions business continues to generate resilient financial results and provides the foundation to fund growth, while PROPWER represents a high growth and high return on investment vehicle that we are just beginning to scale.

Importantly, ProPetro is a strong company pursuing value-enhancing growth opportunities from a position of strength. We maintain a healthy balance sheet that provides us with the flexibility to invest in PROPWER. At the same time, we're beginning to see tailwinds emerge in our completions business with early signs of tightening supply and improving pricing dynamics.

We have a strong balance sheet, first-class customers and a first-class team that continue to execute at a high level while operating safely, efficiently and productively. Taken together, we believe we're well positioned to execute through the current environment and create meaningful long-term value.

Thanks, Sam, and good morning, everyone. As Sam mentioned, ProPetro's first quarter performance once again demonstrated the industrialized and resilient nature of our business. Despite lower revenue, we generated positive financial results in our completions study, which continues to highlight the durability of our company. At the same time, we have made meaningful recent progress in PROPWER, including advancing equipment orders and securing additional capital. These efforts position PROPWER to become an increasingly important contributor to the company's future earnings profile.

During the first quarter, ProPetro generated total revenue of $271 million, a decrease of 7% as compared to the prior quarter. Net loss totaled $4 million or $0.03 loss per diluted share compared to net income of $1 million or $0.01 income per diluted share for the fourth quarter of 2025.

Adjusted EBITDA totaled $36 million or 13% of revenue and decreased 29% compared to the prior quarter. This includes the lease expense related to our electric fleets of $16 million. As Sam mentioned, the decrease in adjusted EBITDA this quarter was primarily driven by reduced utilization in the completions business, which was significantly impacted by adverse weather conditions.

Net cash provided by operating activities was $3 million as compared to $81 million in the prior quarter. The decrease is primarily attributable to lower adjusted EBITDA and working capital headwinds in the first quarter, which consumed approximately $32 million in cash and working capital tailwinds in the prior quarter, which were an approximately $35 million source of cash.

During the first quarter, capital expenditures paid were $43 million and capital expenditures incurred were $85 million, including approximately $14 million primarily supporting maintenance in our completions business and approximately $71 million supporting PROPWER orders. Notably, the difference between incurred and paid capital expenditures is primarily comprised of PROPWER-related capital expenditures that have been financed and paid directly by our financing partners and unpaid capital expenditures included in accounts payable and accrued liabilities.

Net cash used in investing activities, as shown on the statement of cash flow, during the first quarter of 2026 was $41 million, which included capital expenditures paid of $43 million, offset by $2 million in proceeds from certain asset sales.

We currently anticipate full year 2026 capital expenditures incurred to be between $540 million and $610 million, up from the $390 million to $435 million range highlighted in our fourth quarter earnings report. Of this, the completions business is expected to account for approximately $140 million to $160 million, including approximately $40 million to $50 million related to planned lease buyouts for a portion of our FORCE electric fleet portfolio.

As a reminder, the 5 FORCE electric fleet leases were secured with an initial 3-year term and include options to either buy out or extend the leases at the end of that period. The intent behind these leases was to defer upfront capital expenditures while securing the equipment at an attractive cost of capital, supported by the earnings from the FORCE electric fleet. This strategy proved successful, enabling ProPetro to rapidly transform our fleet and still generate accretive cash flow.

Our current intent to exercise the upcoming lease buyouts reflects the completion of a deliberate and strategic capital allocation decision. By exercising these options, we will take full ownership of the FORCE fleet. Each buyout will immediately reduce our lease expense, currently reflected in operating expenses and strengthen our commercial flexibility. We expect to buy out all 5 fleets with buyouts anticipated to begin in late 2026 and continue through 2028.

Also, as a reminder, the completions business guidance range includes capital reserve for refurbishing a portion of the existing Tier 4 DGB fleet, investments in fleet automation technology as well as measured investments in direct drive gas frac units.

Investments in our gas burning equipment portfolio are especially valuable in the current market context. Accelerating demand for these fleets is driven by higher diesel prices and a significant diesel to natural gas price discount in the Permian Basin, resulting from the effects of the Iran war. This price differential enhances the economic viability of natural gas-powered fleets, making these investments critical for capitalizing on market opportunities and strengthening our competitive position.

Additionally, we anticipate incurring capital expenditures of approximately $400 million to $450 million for our PROPWER business in 2026. This projected increase is attributable to down payments for future deliveries associated with the recently executed framework agreement with Caterpillar.

While these PROPWER capital expenditure estimates reflect the total cost of the equipment, they do not account for the impact of financing arrangements, which are expected to reduce the near-term actual cash outflows or cash CapEx required from the company.

Cash and liquidity continue to remain healthy. As of March 31, 2026, total cash was $157 million. Total liquidity at the end of the first quarter of 2026 was $289 million, including cash and $132 million of available capacity under the ABL credit facility.

Lastly, and as I mentioned last quarter, we'll continue to take a disciplined approach to deploying capital. This commitment ensures ProPetro remains well positioned to fund the strategic growth of our PROPWER business while maintaining a strong financial foundation.

To reiterate what Sam already mentioned, we are pleased with our current capital position and our ability to support PROPWER's growth. That said, we continue to actively work to source low-cost and flexible financing, especially in light of recent increased orders. Our priority remains maintaining a strong balance sheet while ensuring we have the resources to capitalize on future opportunities.

Sam, back over to you.

Thanks, Caleb. As we wrap up today's call, I'd like to reiterate a few points. We recognize the improving completions market, which is benefiting from a stronger commodity environment and recent market dynamics, including the impact of the Iran war.

Given current supply and demand fundamentals inside the completions market, we remain confident in our ability to respond to additional commercial opportunities as they arrive. At the same time, PROPWR continues to gain momentum, supported by a robust commercial pipeline and our recently announced strategic framework agreement with Caterpillar.

Our focus remains on disciplined execution and building a durable platform for long-term growth. We have a well-positioned company with a strong balance sheet, first-class customers that is all paired with exceptional leaders and teammates that enable our success.

I'm grateful for how our team navigated the first quarter with focus, discipline and ownership. Their work positions us exceptionally well for the opportunities ahead. We remain confident in our strategy and our ability to create value for our shareholders.

With that, operator, we'd now like to open up the call for questions.

[Operator Instructions] Our first question comes from Saurabh Pant with Bank of America.

Sam, obviously, a big day with the announcement of the strategic partnership with CAT. The first one, Sam, I was hoping to -- hoping to ask is just up to 2.1 gigawatt of equipment that you may be getting, right? Maybe can you talk to the mix of this equipment? Is this all natural gas resets? Is there a mix of turbines? And how are you thinking about that mix? Maybe just help us think about life cycle cost, CapEx versus OpEx, fuel cost as you run this equipment over the next 10, 15, 20 years, right? Just maybe help us think about that a little bit.

Sure. Great question, very topical. I'll just make a couple of think high-level remarks, Travis can probably fill in some of the details on the numbers that you asked.

Look, this is -- part of this capacity is going to be a little bit more of the same from an equipment standpoint, mainly in the gas reciprocating arena. And then there's a larger portion of this capacity that we can't really speak to in detail right now, but we'll be providing some more details in the future.

And look, this is something that we've been working on for quite some time, trying to balance the commercial pipeline with the tightness in the supply chain and to be able to do this with a partner that we have almost 20 years of familiarity with is quite big, and I think sets us up really well from an execution standpoint when we start to take delivery and deploy this equipment.

Travis, I don't know if you want to say anything else about economics and fuel efficiency and all that.

Yes. I think we've said from the beginning, Saurabh, that our strategy has been to choose the right technology for the right project. And I think signing up with Caterpillar gives us probably the widest range of options on the market. So we've continued to lean into the reciprocating engines. That's what we're going to do with this framework agreement. And that's really anchored by the fact that larger, more power dense engines that are highly efficient are really required to provide some differentiation in the data center market. So we think that sets us up in a unique way to be able to kind of expand what we're already getting started in that space.

I got it. Okay. Travis, that's helpful. And then one more I think on the financing side of things. I'm getting some questions this morning on that, right? So maybe if you can help us with how should we think about the capital cost of this equipment? I know balance of plants would come later, right, but just the power gen equipment at this point. And then in terms of financing, how are you thinking about financing? Because I'm getting some concerns on potential dilution as you go ahead and seek financing for this, right? I know you've got liquidity, but maybe just help us think through all of that.

Yes. I'll take the first part there, Saurabh. And as far as the cost of equipment, we've updated our guidance to between 1.4 million and 1.5 million per megawatt, and that's really driven by the type of equipment that we're expecting to put into these longer term or infrastructure-type projects to support the data center.

Yes. Saurabh, this is Caleb. Thanks for the question. So when it comes to funding PROPOWR's growth and the CapEx we see coming over the next few years, first of all, we're going to start with the tools that we already have in place, but we do recognize that we'll need to bring in some additional resources as well. So just to go through those, first off, we always look to our own cash as our preferred source of capital. So that means cash on the balance sheet and cash that we're generating organically from our completions business. And then as PROPOWR ramps up later this year, we expect it to start making more meaningful contributions as well.

Secondly, we've got flexible and competitive debt facilities, specifically our ABL and cap finance lines. Third, we have our lease finance facility with Stonebriar, which is committed capital that we can draw down as needed, which we're happy to have. That gives us another layer of strength and flexibility.

And so looking ahead, especially with the updated growth guidance for PROPOWR, we are going to stay proactive in sourcing new capital that's both low cost and flexible. We're focused on keeping our balance sheet strong while supporting the business. And it is worth noting that we have great relationships with the major banks and financial partners in our sector. We're already in discussions and evaluating several financing options with very strong interest expressed in helping us to fund these equipment purchases. So we are confident we'll have the right capital in place as PROPOWR continues to grow to help support these orders.

Yes. And just to add on to what Caleb said, I think it's a great position to be in that we're in today where almost every tools at our disposal. I think the size and scale of our existing business is helpful, but we also have tailwinds kind of in both of these businesses that we're operating in right now.

And the flavor of the day is obviously data centers, AI, all that good stuff. So to be kind of in that trend as well, I think it's just kind of a compounding effect. As Caleb said, I think every bank in the world pitch just about every single tool. So as Caleb said, we're kind of proactively working through that. And I think we feel really good about being able to equip PROPOWR and ProPetro from a capital standpoint moving into the future.

Right. No, that's helpful, guys. And obviously, I think it's helpful that both cylinders are firing now with the completions market looking like it's recovering. So that's a good place to be.

Our next question comes from Ati Modak with Goldman Sachs.

Sam, I think you mentioned the majority of the new capacity is going to data centers. But I'm curious, how do you evaluate the oil and gas landscape versus the data centers, given my understanding is that the microgrid offering in the oilfield is very different from prevailing solutions? I'm wondering if the landscape is not as large? Is there more competition? Just help us understand how you evaluate that.

Yes. I think, first off, you could base kind of the proportion of our work that's going to data centers moving forward, not solely, but in a big way, on how just big some of those opportunities are. So as we sit here today, about 240 megawatts contracted, mostly in the oil and gas space. Just one data center deal could completely flip the distribution of that work to majority data centers. So I think that's probably the biggest variable at play just the size and scale of some of these data center opportunities. We referenced in our materials that we're in extended negotiations on opportunities that are in the several hundred of megawatts ZIP code.

And the other part of it is, I think your question was kind of who -- like how to choose where to go with some of this. And look, it's a very economical decision for us. What does profitability look like compared with contract term. The data center space is extremely appealing from a size and scale standpoint, just like I mentioned. But pricing is very strong. Pricing and paybacks are also very strong in the oil and gas side of the business.

And look, I don't think we can neglect in the last 1.5 years standing up PROPOWR, the opportunity that oil and gas has given us to get to work quickly to prove our services and to be able to have real working equipment and people so that when the next customer calls, whether it be oil and gas or data center customer, we have real operations that we can show them.

Travis, I don't know if there's anything you want to add to that.

I think the only thing I would add is kind of the differentiation between oil and gas and data center, there are some operational nuance. But realistically, the majority of the equipment and the types of services we're performing on site are similar. So we like being able to leverage that across what we're already doing in the oil and gas space, and be able to grow it into the data center space.

That's very helpful. And on the pressure pumping side, I know you talked about the potential to deploy Tier 2 fleets. I'm just wondering how much does pricing need to increase from where leading edge is for the economics to make sense. And is that a little bit more of a Q2, Q3 comment? Would it be fair to assume it's more spot work than a full or multiple quarters? Just any color there.

It's probably more -- that dynamic putting any more equipment to work and especially bringing some equipment from warm stack to hot stack to field ready, and that's mainly just a diesel Tier 2 story for us, as we said, all of our nat gas burning equipment sold out today. That's probably more of a second half story.

That said, there's early indications, and we've experienced some of this in our own portfolio of pricing increases. And if the momentum or developments continue in the direction of which we expect them to, and I think they already are starting to, then it's likely we can make sense of putting some more equipment into the system.

That said, we've got a pretty high bar. We've got a pretty high bar from an economic standpoint and a very high bar from a quality service and people standpoint. We're going to require full calendars to do that as well.

So I think another thing at play here, we get a lot of questions about how much would it cost to put another fleet back to work and all of that. It is a cost, maybe less of one, but it is definitely an operational variable that I don't think is being talked about enough right now is people. And the companies that are able to acquire and deploy people in a quality manner are going to win. There's just not that much equipment laying around right now, whether it's ours or somebody else's. There's a much lesser amount of people that are ready to go to work back on a frac crew or a drilling rig or something like that.

So we've always prided ourselves in being really good at that part of the equation. But I think that that's going to be something to watch for from an execution standpoint, even if pricing does go up, you have to have a workforce to operate, maintain and perform in the field.

Our next question comes from Derek Podhaizer with Piper Sandler.

Back to the power theme. I just wanted to get your thoughts around the balance of plant services that you guys provide and maybe how you see that evolving over time as you get further down these data center contract executions. Just thinking about whether that is batteries or gas delivery or last mile of that gas delivery. This is becoming a bit of a bigger theme here as far as what's going to be provided inside of these contracts. So how should we think about PROPOWR's scope from a balance of plant perspective and how that could evolve over time?

Good question, Derek. So the balance of plant that we're talking about has already included batteries. So we've been thinking about that from the start in the data center space. We think it's super helpful and value add to manage those loads. And then it's clearly some of the electrical equipment required to make sure that we're getting the power to the data center customer in the most efficient way. So we kind of already have that expertise built into what we offer from a balance of plant perspective.

As far as gas delivery goes, that's not something that's been really on the radar in a major way, but obviously being connected to many oil and gas customers as the business that we're in and relationships that we have on the other side of the fence, certainly, that's something we could look at in the future.

Got it. Okay. Exciting. On the frac side, I noticed you've been talking a lot about the direct drive turbine equipment. Obviously, that's 100% natural gas as well. It sounds like it's going to go supplement maybe some of your aging Tier 4 dual-fuel fleets. But maybe just talk to us about that type of kit, how it compares to the FORCE fleets? And would this be something that you would increase over time as far as just your ongoing maintenance cycle or replacement cycle or potential incremental fleets being more direct drive? Just some thoughts around that would be helpful.

It's definitely not incremental capacity. I think we look at it as more along the lines of replacing existing equipment as it retires. That said, and I think this was mentioned in our scripted remarks, there is a premium on just being able to displace diesel right now, whether you do it with electric, dual-fuel or direct gas. So as these units go to work for us right now, they're mainly going to work alongside dual-fuel operations where they're just increasing diesel displacement and therefore increasing our economics and our customers' economics.

[Operator Instructions] Our next question comes from Eddie Kim with Barclays.

You previously talked about 70 fleets -- active fleets in the Permian today compared to around 90 to 100 fleets at the beginning of last year. If we do see a ramp-up in activity in North America from the E&P, what's the number of fleets you expect that could be added in fairly short order with very little investment? Is that going back up to 80 fleets and then the remaining 10 to 20 fleets to get back up to 90 to 100 would require significantly more investment? Just curious on your thoughts there.

Yes. I think across the Permian specifically today, we think that number is probably full-time fleets working is between 70, 75. We've got 12 of those. That said, our simul-frac work has increased a little bit. I think 4 of our 12 today are operating in large simul-frac.

Look, there's been a lot of -- or some really good industry research done around this recently that we agree with. And I think that there's a hot stacked frac fleets, stuff that can go to work pretty quickly and that maybe has access to people fairly quickly for the whole country is probably in the 10 to 15 range. So you got to assume maybe half of that comes -- around half of that could go to the Permian. So maybe the Permian could grow to 80 pretty quickly. And then you get in a situation where, where is the capital, where is the people, where is the equipment? And that could make for a really tight completions market once you get in that ZIP code.

That said, and we've talked about this a little bit in the last couple of quarters, too, that doesn't mean that our pricing and our repositioning inside of our own portfolio can't front run an 80 fleet count in the Permian Basin because as companies start to grab on to the equipment and the people that they want to execute on the projects that they want to, fleets and equipment will start to move around. And when those -- when that happens is when pricing really starts to inflect more aggressively. We already said we're seeing some green shoots of pricing increases in our own portfolio as we sit here today. It's just the beginning. So we don't -- you don't need a wave of capacity to come back to increase pricing. You just need a few customers to make some small decisions to either pick up a rig or a frac fleet or change an existing provider. And then that kind of like leapfrog across the entire sector begins to that's when pricing starts to really change.

Got it. There seems to be a lot of earnings torque in the system right now. So that's great to hear.

Torque, yes.

Shifting over to POWR. Back in October, you announced a 60-megawatt contract with a data center operator. That deployment was expected to begin in the second quarter of '26. We're in 2Q now. So just curious if that equipment has been deployed or is in the process of being deployed at this point? And how is the learning and experience you'll get with that data center deployment? How do you think that will help you secure more contracts in the data center space going forward?

Yes. First of all, that is moving as we expected. It's in process. Equipment is on site being installed and commissioned. We think that's a huge advantage when you look at folks that are actually executing and operating behind-the-meter solutions in data centers. It's a pretty small sample set. So once we get that experience behind us and kind of learn what a few others have learned, we think it's going to provide a really big advantage to go secure additional contracts or expanded contracts with that existing customer.

Got it. And just one really quick follow-up. I mean through that experience, I mean have you had any kind of bottlenecks or anything related to permitting or any issues that maybe took longer than expected? It doesn't seem like that's the case, but I'm just curious if there's anything like that.

No, we haven't. I mean we have the equipment coming well stage, the rest of the supply chain around the balance of plant. I think our team has done a really good job of staying ahead of that, knowing kind of what we need to supply for that type of project. And so we've gotten everything there on site by ordering the right equipment upfront to derisk those deployments.

Our next question comes from Jeff LeBlanc from TPH.

I wanted to see if you could talk on the delivery to deployment timeline as I believe your historical presentation implied a 3- to 6-month delay, while this latest one referenced a 6- to 12-month delay delivery and deployment.

Yes, it's a good question. So these are bigger assets. These are bigger sites. And so we want to give ourselves enough time to deploy and get those set up correctly given that they'll likely be longer term contracts. That's part of why we've kind of driven to this 4- to 6-year payback on these types of projects because they're a lot more infrastructure type build-outs for longer-term tenors on the contract.

Our next question comes from John Daniel with Daniel Energy Partners.

Caleb, maybe this is for you or maybe Adam. But in terms of like inflationary cost pressures right now, can you give us a tour of the P&L, if you will, and walk us around where you're seeing the greatest pressures today and what you might expect if all of a sudden rig count is going up 5%, 10% from here in the next 6 to 9 months, what you'd expect to see?

Yes, John, it's certainly something we're keeping a close eye on. As Sam mentioned, people is always at the forefront of our business. And so that's an area that we want to make sure that we are competitive in so that we can provide the best service to meet our customers' needs. And then we're watching all of the other lines of the P&L closely, things like fuel costs that could drive inflationary pressures and taking actions to mitigate those where possible.

Yes. John, Sam. I also kind of remind you and others, we took some proactive fleet deployment decisions mid second half last year to park some fleets that were turning uneconomic because of pricing requests. And that becomes really helpful in a situation like we are in now. You might not avoid all cost inflation, but you might kind of blunt the blow a little bit initially by having some equipment that's stacked a little warmer because of some decisions that we made proactively last year.

Do you think -- and I'm just making this number up, Sam, but like let's assume there's a 5% to 10% gain in activity out there. Is that so much that it would have inflationary pressures on labor or no?

Possibly, yes. I mean I think that could be possible. I think another place, and this is labor maybe a little bit more indirectly, but it takes a lot of other auxiliary support services to run a completions operation. So do you need help rebuilding an engine? Do you need help with some rental or other on-site service? And that's really probably where the people aspect of this gets more acute. And so that could cause inflation in that direction.

And I think that's where a company of our size and scale in the Permian Basin is really advantaged because we already have really developed and ongoing sustainable relationships in our own supply chain to be able to mitigate trying to hire or bring on a service or a person that we previously didn't have. It's likely that we already have a lot of that working within the system right now, whether it be internal or external, and that's a hedge against some of this inflation that maybe some of our smaller competitors aren't as well positioned.

Fair enough. My final question is when the market, as you guys have alluded to and others for fuel-efficient diesel nat gas-powered equipment is essentially sold out. And I'm curious, is the market tight enough where you think you could force customers into take-or-pay contracts? Or is it still the dedicated agreement type frameworks?

I mean we already have some of those agreements.

No. But on the Tier 4 DGB, I mean, I know you have them on electric, but my impression is that the dedicated or give a little bit more wiggle room than a take-or-pay. So just that's the basis of the question.

Yes. I mean I think it's always possible. We're really proud of how we've contracted a significant of our fleet. So I think we've got a lot of reps in making sure that we're not only like creating value day 1, but we're creating value that can be sustained. And that's things like take-or-pay are always a lever. We use it -- we use an ask like that in particular places for particular reasons.

Our next question comes from Don Crist from Johnson Rice.

Sam, I just wanted to ask one question on the framework agreement. The language seems very specific that you could purchase up to a certain number, and it's not in a specific order. Is this just the availability for delivery slots? Or do you actually -- are those delivery slots now yours and you're already dedicated to those slots? Just a ton of semantics there.

Don, this is Travis. So we have secured those assets. And I think the updated growth trajectory that we showed in our investor deck is our expected timeline to receive those units and deploy them.

Okay. So the decision has been made to actually make this order, right? It's not a future order that you have to make a decision point later in time.

Yes. We have reserved some optionality in the agreement, but for all intents and purposes, they are secured.

Okay. And Sam, if I could ask just one kind of broader macro question. I know you like to opine on this. We've been asking most companies that have reported so far about the disconnect between kind of the physical oil markets and the financial oil markets. And a lot of people are now feel that the strip a couple of years out is really not reflective of what it's going to be. Have you had any customer conversations that are leading you to believe that the strip a couple of years out may be $10 or $15 too low and a lot of activity could come as we move into '27?

Yes. I'm glad you wrote the customer conversations in there at the end because I hate for you to think that I'm a macro expert by any means. But we do read stuff from a lot of smart people. We have a lot of smart customers. It's really quite puzzling, I think, this kind of like physical paper markets. And if even a portion of what's going on in the Middle East and around Iran as it pertains to the Strait of Hormuz and things like that, if even a portion of that is true, we're undergoing some, I think, major structural changes to the supply and demand and flow functions of oil and gas across the globe.

I don't think any of us like war and what -- and all the bad things that come along with war, but I think this is creating a lot of kind of like sobriety and good reality as it pertains to how fragile this whole value chain is. I mean, we're sitting here almost with the oil price almost totally dependent on one narrow waterway on the other side of the world right now. So that's pretty interesting.

The other part of it is that I think traditional energy as it pertains to oil and gas is important today as it ever has been. And I think more of the world and more of the politicians across the world are realizing that. But we've been banging that drum. Shoot, my family has been banging that drum for 3 generations. And we've definitely been banging that drum as an industry out here in the Permian Basin for a long, long time.

So if anything, we're just glad that the spotlight is back on what's important. And what's important is places like the Permian Basin and our country producing the cleanest, most reliable molecule of energy in the world. We get first option to that, living here kind of right on top of this resource. But as a younger guy in the industry right now, seeing some of the structural stuff happen right now, it's pretty -- feels pretty promising to where we're positioned really in the 2 main drivers of our business, this oilfield service completion focused business and our Power-as-a-Service with PROPOWR. We really like where we sit. We think we're going to have great access to capital. And I think there's some major structural tailwinds here.

This concludes the question-and-answer session. I would like to turn the call back over to Sam Sledge for closing remarks.

Yes. Thanks, everybody, for joining us today. As I just mentioned in my last answer to Don's question, we're really excited and confident about the 2 main drivers of our business. PROPOWR being aimed right at the center of the Power-as-a-Service industry today, strong commercial traction, great supply chain position as evidenced by our recent announcement with Caterpillar and already high-quality operational execution in the field. And on the more LFS completion side of the business, great structural tailwinds, a great operating position in the best basin to be in here in the Permian Basin.

So we look forward to talking to all of you again soon. Have a great day.

This concludes today's call. Thank you for attending. You may now disconnect.

Good day, and welcome to the ProPetro Holdings Corp. Fourth Quarter and Full Year 2025 Conference Call. Please note that this event is being recorded. I would now like to turn the call over to Matt Augustine, ProPetro's Vice President of Finance and Investor Relations. Please go ahead.

Thank you, and good morning. We appreciate your participation in today's call. With me are Chief Executive Officer, Sam Sledge; Chief Financial Officer, Caleb Weatherl; President and Chief Operating Officer, Adam Munoz; and President of PROPWR, Travis Simmering.

This morning, we released our earnings results for the fourth quarter of 2025. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC.

Also during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question-and-answer session.

With that, I would like to turn the call over to Sam.

Thanks, Matt. Good morning, everyone, and thanks for joining us today. 2025 was a year that was defined by uncertainty across the broader energy markets. There was a significant slowdown in completions activity as illustrated by our estimates that the Permian is operating with approximately 70 full-time frac fleets, down meaningfully from 90 to 100 fleets just a year ago. This headwind was compounded by tariff impacts and OPEC+ production increases that added pressure to commodity prices throughout the year, affecting budgets and creating a more cautious operator mindset.

Despite these dynamics, ProPetro continued to deliver both operationally and financially and generated strong free cash flow, particularly in the fourth quarter. Our legacy completions business continues to generate sustainable free cash flow even in this tough market environment, which gives us confidence as this business helps fuel investments we are making in PROPWR, our future growth engine.

Our solid fourth quarter performance underscores the industrialized nature of our completions business and the benefits of the technology and next-generation equipment investments we have made over the last several years. While we expect market challenges to persist into 2026, we continue to control what we can and move quickly by streamlining costs across the business, performing a granular analysis and taking decisive action.

I'm proud of our team's ability to adapt quickly, rationalize costs and protect our asset base, thereby supporting our margins and competitiveness in the market. This will remain a key focus in 2026.

ProPetro is a fundamentally strong company. We have low debt, first-class customers operating in the Permian Basin, a refreshed next-generation fleet and a team that continues to execute at a very high level. Even if challenging market conditions persist, our company's unique attributes position us to continue performing. As we've said before, market cycles create opportunities. And with that, we expect attrition among smaller and less disciplined competitors that cannot sustain prolonged market weakness.

We believe this dynamic will provide structural benefits for well-capitalized next-generation operators like ProPetro. I also want to discuss the strategic actions we're taking to support resilient financials.

As a reminder, we currently have the majority of our active frac fleets under contract, providing us with ongoing stability in our operations. Over time, we plan to continue to allocate capital to our FORCE electric equipment, given its strong demand and commercial leverage. However, prior to committing to additional FORCE equipment orders, we require greater visibility into customer demand and growth, especially in the challenging market environment to ensure these investments are both strategically justified and aligned with expected return.

Additionally, in 2026, as a part of our completions CapEx program, which Caleb will discuss in greater detail, we plan to allocate targeted capital to refurbish a portion of our existing Tier IV DGB fleet, make investments in fleet automation technology as well as measured investments in direct drive gas frac units. These direct drive gas units are highly complementary to our current frac asset base and their integration is anticipated to partially offset future capital requirements for investment and refurbishment in our conventional frac.

These new investments, specifically in fleet automation technology and direct drive will reinforce our position as a premier completions provider in the Permian Basin and support our broader goal of further industrializing our business.

Importantly, given the current challenging market dynamics, we remain disciplined in our capital deployment, investing only when there is clear visibility to high returns and strong customer endorsement, principles that are embedded in our way of doing business.

Additionally, 2025 was an exciting year for PROPWR, where we made significant progress as we capitalize on robust customer demand to not only launch the business, but to bring our total committed capacity to now approximately 240 megawatts and to also deploy our first assets into the field.

This total includes recent contract wins supporting production operations for Permian E&P customers secured since our last update in December. Additionally, as announced in December, we placed orders for an additional 190 megawatts of equipment, increasing total delivered or on order capacity to approximately 550 megawatts.

With this order, PROPWR's equipment portfolio is split approximately 70% and 30% between high-efficiency natural gas reciprocating engine generators and low emission modular turbines, respectively. PROPWR anticipates all units will be delivered by year-end 2027 with contracts expected to be secured ahead of delivery.

PROPWR's expected total cost per megawatt for the 550 megawatts ordered today averages approximately $1.1 million, including development plant. We're confident in the business' future growth capabilities and expect to secure additional contracts throughout 2026 due to our flexible asset base, ability to rapidly respond to evolving customer demand and quality execution.

Furthermore, we would like to reaffirm our 5-year growth outlook for PROPWR as communicated last quarter. We are positioned to deliver at least 750 megawatts by year-end 2028 and 1 gigawatt or more by year-end 2030. Our standing in the supply chain not only enables us to meet these milestones, but also provides us the ability to scale beyond these targets if the right opportunities present themselves.

Moreover, we are seeing a growing number of inquiries from potential data center and industrial clients. Over time, we anticipate these opportunities occupy a higher share of our overall capacity, driven by both their larger load needs and longer-term strategic commitment.

These evolving market dynamics, coupled with our strategic partnerships and operational excellence, uniquely position us to capitalize on large-scale long-term demand and drive sustained value for our clients and stakeholders. These growth targets reflect the significant opportunity we see in the market for reliable, low-emission power generation solutions.

PROPWR's momentum is tangible, and we're excited to continue our efforts to expand our reach and drive long-term growth. In terms of capital to fund our PROPWR strategy, our approach remains deliberate and balanced. Resilient free cash flow generated from our completions business continues to serve as the company's preferred capital source. This strong foundation will be further enhanced by contributions from our power business, especially as we exit 2026 and have deployed on multiple projects.

Moreover, our recent equity offering provided approximately $163 million in cash net of fees, strengthening the company's balance sheet and reducing ProPetro's near-term reliance on debt. In addition to the equity offering, our strong balance sheet is bolstered by our refreshed capital structure, which includes our recently expanded $157 million financing facility at favorable cost of capital and on flexible terms with Caterpillar Financial Services Corporation, along with a $350 million leasing financing facility secured in December with Stonebriar Commercial Finance that we will utilize on an as-needed basis.

These sources of capital are key to ensuring we have the financial flexibility to take advantage of the exciting opportunities ahead of PROPWR and across our entire business. Caleb will discuss our financial results in more detail, but as we previewed in our December update, we expected a very strong finish to 2025, and that is exactly what we delivered in the fourth quarter.

Revenue remained resilient, holiday impacts were less pronounced than in prior years and the decisive cost structure actions we took during the third and fourth quarter helped support margin performance.

Pricing remained stable through the quarter, and we continue to stay disciplined on that front. As we've said before, we will not run fleets at subeconomic level as preserving fleet quality remains essential to ensuring readiness for rapid deployment when market conditions do, in fact, improve. Importantly, ProPetro's hallmarks of operational excellence and efficiency continue to prevail as evidenced by our ongoing cost control actions.

As we look ahead, the near-term outlook remains uncertain and headwinds appear likely to persist into 2026. That said, we like what we are seeing currently in our active fleet, and we expect approximately 11 active frac fleets in the first quarter, although winter weather in late January did have a significant impact on our activity, which we expect will meaningfully affect first quarter profitability.

Furthermore, as I mentioned, we are reaffirming our 5-year growth outlook for PROPWR, and we expect the first half of 2026 to focus on derisking deployments and establishing a strong operational foundation, positioning our company for sustainable long-term growth.

By the second half of 2026, we expect PROPWR to begin contributing meaningful earnings. Before I turn the call over to Caleb, I want to reiterate the fundamental strength of ProPetro. Our differentiators are clear. We have a strong balance sheet, first-class customers, a refreshed next-generation asset base, strong free cash flow generation in our completions business and PROPWR as a key growth engine that will drive our earnings profile.

Most importantly, we have a first-class team that continues to execute at a very high level, ensuring that we continue operating safely, efficiently and productively while enhancing our ability to capitalize on the opportunities ahead.

With that, I'll turn it over to Caleb.

Thanks, Sam, and good morning, everyone. As Sam mentioned, ProPetro's performance in the fourth quarter and throughout 2025 showcased the results of our strategy at work. Through disciplined cost control efforts and continued industrialization of our operations, we delivered resilient margins, strong free cash flow from our completions business despite a challenging market environment.

We also advanced PROPWR meaningfully through new contracts, strategic equipment orders and flexible financing arrangement, positioning it as a growing contributor to future earnings.

During the fourth quarter, ProPetro generated total revenue of $290 million, a decrease of 1% as compared to the third quarter. Net income totaled $1 million or $0.01 income per diluted share compared to net loss of $2 million or $0.02 loss per diluted share for the third quarter of 2025.

Adjusted EBITDA totaled $51 million, was 18% of revenue and increased 45% compared to the third quarter. This includes the lease expense related to our electric fleet of $17 million.

Net cash provided by operating activities and net cash used in investing activities, as shown on the statement of cash flows were $81 million and $39 million, respectively. Free cash flow for our completions business was $98 million, supported by strong EBITDA performance and reduced completion CapEx. Additionally, free cash flow was further bolstered by working capital tailwinds, which contributed an additional $28 million in cash.

Moreover, we also generated $14 million from select asset sales and received $11 million from the note receivable related to the sale of our Vernal, Utah cementing operation completed in the fourth quarter of 2024.

As Sam mentioned, our legacy completions business continues to generate sustainable free cash flow, demonstrating what we have consistently communicated over the past several years. Even in today's challenging market environment, our performance has remained steady and reliable.

During the fourth quarter, capital expenditures paid were $64 million and capital expenditures incurred were $71 million, including approximately $12 million primarily supporting maintenance in the company's completion business and approximately $59 million supporting PROPWR orders.

During the quarter, some of the PROPWR spending was accelerated as our supply chain partners have consistently delivered equipment efficiently and on time or ahead of schedule.

Notably, the difference between incurred and paid capital expenditures is primarily comprised of PROPWR-related capital expenditures that have been financed and paid directly by the financing partner and unpaid capital expenditures included in accounts payable and accrued liability.

We will continue to evaluate the market and scale CapEx as activity demand. We currently anticipate full year 2026 capital expenditures to be between $390 million and $435 million. Of this amount, the completions business is expected to account for $140 million to $160 million, including $40 million to $50 million related to lease buyouts for a portion of the company's FORCE electric fleet portfolio.

As a reminder, our 5 FORCE electric fleet leases were secured with an initial 3-year term and include options to either buy out or extend the leases at the end of that period. The intent behind these leases was to defer upfront capital expenditures while securing the equipment at an attractive cost of capital, supported by the contracted earnings from the FORCE electric fleet.

This strategy proved successful, enabling us to rapidly transform our fleet and still generate accretive cash flow. The upcoming lease buyouts reflect the completion of a deliberate and strategic capital allocation decision. By exercising these options, we will take full ownership of the FORCE fleets each buyout will immediately reduce our lease expense, currently reflected in operating expenses and strengthen our commercial flexibility.

We expect to buy out all 5 fleets with buyouts anticipated to begin in late 2026 and through 2028. As Sam mentioned, the completions business guidance range also includes capital reserve for refurbishing a portion of the existing Tier IV DGB fleet, investment in fleet automation technology as well as measured investment in direct drive gas frac unit.

Additionally, the company expects to incur approximately $250 million to $275 million in 2026 for its PROPWR business. This range allows for additional equipment orders and associated down payments. The outlook is based on the current 550 megawatts of PROPWR equipment on order as well as plans to reach at least 750 megawatts delivered by year-end 2028.

While these PROPWR capital expenditure estimates reflect the total cost of the equipment, they do not account for the impact of financing arrangements, which are expected to reduce near-term actual cash outflow or cash CapEx required from the company.

Cash and liquidity continue to remain healthy. As of December 31, 2025, total cash was $91 million and borrowings under the ABL credit facility were $45 million. Total liquidity at the end of the fourth quarter of 2025 was $205 million, including cash and $114 million of available capacity under the ABL credit facility. Notably, as of January 31, 2026, total cash was $236 million and borrowings under the ABL credit facility were $45 million.

Total liquidity as of January 31, 2026, was $325 million, including cash and $89 million of available capacity under the ABL facility. This increase from year-end is primarily due to the approximately $163 million in net proceeds the company received through the equity offering we completed in January.

Lastly, and as I mentioned last quarter, we'll continue to take a disciplined approach to deploying capital. This commitment ensures ProPetro remains well positioned to fund the strategic growth of our PROPWR business while maintaining a strong financial foundation. Resilient free cash flow generated by our completions business, complemented by future contribution from our Power segment serves as the preferred source of capital for these initiatives.

In addition to internally generated free cash flow, we maintain access to flexible financing facilities with favorable terms, which we will utilize diligently and only as needed to preserve financial flexibility and low near-term leverage. Most recently, our equity offering has further strengthened the balance sheet, increasing liquidity and ultimately reducing our reliance on debt to advance PROPWR.

With these resources and actions in place, we are equipped to seize the exciting opportunities ahead for PROPWR and across our entire business while continuing to drive long-term value for our stakeholders. Sam, back over to you.

Thanks, Caleb. As we wrap up today's call, I want to address the significant interest we've received from various stakeholders regarding what differentiates PROPWR in the power market. how the business has positively progressed since its launch in late 2024 and how we foresee its evolution in the future. Some of this will be restating what you've already heard from me earlier in the call.

Since launching the business, PROPWR has demonstrated a unique execution strategy. A key differentiator in our strategy is our belief that there is meaningful value in acting now, deploying assets into the market, capturing market share and then extending and expanding with both existing partners and those in our pipeline.

Rather than waiting for the perfect contract, our speed-to-market advantage and confidence in operational execution enable us to build momentum and secure meaningful contracts over the past year.

Market dynamics have also evolved and continue to evolve in our favor. Demand for power has accelerated in the Permian across the U.S. and global. Since PROPWR's launch, there's been a further awakening to the scarcity of reliable power and the data center and AI boom only amplify this issue. This has led to increasing demand for PROPWR within this arena.

Our first data center contract announced last October was a pivotal moment. They signal our ability to participate in this arena and outside the Permian Basin, where we expect to grow in both deployed megawatts and contract duration over time.

In the oilfield sector, we recognized early the emerging bottlenecks around power availability. Our foundation in the Permian positions us uniquely to solve these challenges for E&P customers, many of whom already know and trust ProPetro based on the proven performance of our legacy business line. We believe that no competitor matches our support infrastructure, logistics capabilities, supply chain expertise and operational experience with heavy machinery and large-scale field assets.

Accordingly, demand remains strong for PROPWR in the oil and gas sector. This part of our commercial pipeline has also gained significant momentum as customers increasingly realize the cost savings of replacing inefficient power setup with efficient infield distributed microgrids that PROPWR can offer.

Moreover, as production matures and well inventory complexity increases, more power is going to be needed to maintain and especially increase production from today's level, placing additional stress on the already overburdened and in some places, nonexistent Permian power grid. Given these dynamics, we anticipate continued growth in oil and gas power demand, which will remain a core opportunity alongside data center and other industrial infrastructure projects. This diversification strengthens our position and underpins our confidence in our growth expectations.

Looking ahead, we will continue to strategically deploy assets where we generate the highest return, a direct function of maximizing free cash flow while balancing the length of contract term. As I already mentioned, our pipeline today suggests increasing opportunities in larger, more substantial projects across the data center and industrial sectors while maintaining a meaningful presence in oil and gas. We are excited for what lies ahead, and we continue to grow, innovate and lead in the evolving power market.

Lastly, it's clear that we've built ProPetro into a resilient company capable of generating cash through cycles while investing in higher return growth. We proved in 2025 that we can respond proactively and decisively to the market. And 2026 will be a year focused on executing across PROPWR and continuing to strengthen our core completions business.

I'm grateful for our team and how they navigated 2025 with urgency, discipline and ownership. Their work positions us exceptionally well for the opportunities ahead. We remain confident in our strategy and in the future of ProPetro.

With that, operator, we'll now open the line for questions.

[Operator Instructions] Your first question comes from the line of Derek Podhaizer of Piper Sandler.

Maybe we'll start with expanding on some of your last comments there, Sam, on PROPWR. Just trying to think about the contracting cadence for 2026. You mentioned you have -- sorry, 240 megawatts committed today. I believe your average term is around 5 years. I know you're primarily addressing oil and gas, but obviously, we have the 60-megawatt data center contract. How should we really think about this mix and term evolving as we work through 2026? And then do you believe we'll be close to additional data center contracts this year?

Yes. Great question. I think for us, it's definitely -- and we've shown this, it's definitely a portfolio approach. I think as we're starting and launching the business from both a commercial and operational standpoint, we value being able to get equipment on the ground, generate returns and prove out our execution.

You also heard in our remarks that we think of a larger share of our work over time is non-oil and gas. Those projects are many times larger and a little bit different from a time horizon standpoint in a very positive way. So we do think our mix will evolve in that direction a little bit more over time. And look, I think we're pretty proud to have contracted well over 200 megawatts in our first year standing up the company.

And if we stick to our 5-year plan, which we think is very doable and executable, I think you can look for that level of contracted equipment from us on almost an annual basis moving forward to get to the 1 gigawatt number 5 years out. So we're really confident in our ability to continue to march down that path.

That said, to the upside of that, some of these non-oil and gas data center, industrial type projects can be much bigger and chunkier in nature. So one of those can potentially change that time line and that mix very significantly if we're able to capitalize on one of those opportunities soon.

Got it. That's helpful. I appreciate the color. Switching over to the completion side of things. And I found it interesting, you mentioned 70 fleets today, down from 90 to 100. And I know one of the big themes as we work towards the end of the year is around frac attrition.

You obviously have your version of frac attrition where you'll be refurbing some of your Tier IV DGBs. You talked about investing in direct drive to help offset some of your legacy Tier 2 diesel assets. My guess is that you'll be replacing those Tier 2 diesel assets, and I think this is a theme that we're seeing across the market.

So maybe just simplistically, does the industry have enough frac equipment to get back to that 90 to 100 level if there is a call on demand? Maybe just some of your thoughts around the potential tightness we could see in this frac market if we do see some activity start coming back as we work towards the end of the year.

I think the short answer on can we get back to that 90 to 100 in the Permian, that's -- I think that would be a major stretch for the existing pressure pumping market. We have been banging the attrition drum loudly the last few years, and a lot of that is because of the information that we get through our own company and our own business and how difficult it is to keep a sizable fleet operating in these market conditions.

That said, all along, when we've been talking about attrition, especially at the bottom end of the market, the smaller, less sophisticated players the market has been shrinking as well. So you haven't had circumstances in a way where that attrition necessarily shows through. That's why we continue to remind people that if and when activity picks up, it's not going to take very much to structurally tighten the market.

That said, it's hard for us to see past what everyone else can see is the potential, crude oil supply glut and what weakness might remain there for kind of the near term. But we all know this business cycles that the supply and demand balance usually fixes itself. If and when that happens, I think we're going to have a frac operation that is very, very well positioned to capitalize on a much tighter market.

We've got a great portfolio of technology starting to dribble in a little bit of direct drive gas equipment. We have one of the premier electric frac operations in the Permian Basin, and we have some very flexible diesel and dual fuel assets that are quite valuable in today's market as well. So we think that we're very, very well positioned to capitalize on that structural tightness when it does come, and we think it will.

Your next question comes from the line of Arun Jayaram of JPMorgan.

I wanted to just talk to you or ask you about, pardon me, just about kind of the mix between finance CapEx versus cash CapEx. In 2025, gentlemen, you financed just under 30% of your $281 million of CapEx incurred. And so is that -- how should we think about that mix relative to the 2026 CapEx program, which is kind of just above $400 million at the midpoint?

Yes. So in terms of funding our CapEx program, we have a lot of different options. We obviously did the equity issuance opportunistically from a position of strength, and we're always going to prioritize our use of sources of capital to fund our growth from a cost flexibility and size standpoint.

So first of all, we like to use cash on the balance sheet, including organically generated cash from our business to fund growth. But like you mentioned, we have several flexible and competitive debt facilities in our ABL and cap finance facility.

And we are also happy to have the Stonebriar lease financing facility in place, which is committed capital that we can draw on as needed. So I think that we have like several different attractive options, and we'll plan to use a mix of those.

Great. And just as my follow-up, you guys have 7 Tier IV DGB fleet, if my notes are correctly. Sam, could you talk about some of the planned upgrades between automation and the investments in the direct drive? Just trying to understand how your DGB fleet will evolve over time.

Yes. We made our first DGB investments probably a little over 5 years ago and built on that pretty aggressively for a couple of years and have held it relatively flat since peaking out around that 7 fleet range.

We obviously have -- we're bringing in some of the direct drive units like we already talked about. We also have our electric offering and our diesel offering. And as I said, that portfolio, we find to be very valuable in the Permian Basin, where there is both stranded gas where we can capitalize on that type of situation with the customer, but also in other places where customers are selling their gas at a very reasonable price and might want to burn diesel or a blend the two.

So it's probably hard to see from an external standpoint, but there's a lot of regional pockets in the Permian in size and sophistication of E&Ps that value all of these different types of offerings. And I think what we have now is a very good portfolio for us to be able to service the biggest, most sophisticated E&Ps in the Permian, but also the growing independence that still exist in an entrepreneurial area like West Texas and New Mexico.

So I think in the near term, Arun, from like a portfolio mix standpoint, it's probably just more of the same for us. We talked about rebuilding some Tier 4s and maintaining kind of that 7 fleet type of capacity for that, but also making a nod to some of the newer technologies like direct drive that certain customers are very interested in.

And on the -- you mentioned the fleet automation technology. Look, that's just really, in some ways, we believe the cost of doing business and the cost of playing the game at the most -- at the highest level in the pressure pumping sector where you've got to be able to bring those types of high-tech solutions to your customers and allow them to fine-tune their completions programs as much as possible, while at the same time, deploying technology internally into our business that allows us to extend equipment life and use more predictive maintenance tools, lots of things like that.

So that's where some of these technology upgrades are coming from us. And I think to sum all that up, these are the types of things you have to do to remain competitive at the highest level in the pressure pumping sector. There's a lot of players that aren't making these moves in these investments back to kind of the structural tightness that we believe will exist in the future because the bar just continues to go higher every day from a performance technology equipment standpoint. And we like our position being able to compete in that game in the future.

Your next question comes from the line of Stephen Gengaro of Stifel.

I had 2 questions, Sam. The first one was just around the demand for power in the oil patch versus the assets getting pulled into other applications for data centers, et cetera. And is there any concern about the cost of power for the e-fracs and how that evolves and how that affects the frac business?

Yes. I'll answer the e-frac question first and maybe let Travis chime in on your first question. I don't think we have any concern around e-frac power right now. We kind of look at that market, and it having matured a bit over the last year or so. That was a very aggressively growing market for a few years there when we were deploying into it and getting power to pair with that electric -- our FORCE electric frac equipment was a bit of a task at the time.

But we think a lot of that equipment that's serving the e-frac market is in a pretty stable place given that, that market is not really growing that fast right now. And a lot of that power is more custom tuned and built for that very application. So it has a little bit of a more difficult time going other places in the power market. Travis, I don't know if you want to take his first question.

Yes. I guess the first question was just on the oil and gas demand relative to the data center markets. Clearly, we see both growing. The data center demand is much higher. We're excited to be able to diversify into both sectors. Really excited that we were able to kind of act quickly and execute in the oilfield here in our backyard and just get confidence and grow our fleet, but also the ability to do that has allowed us to participate in these larger and longer chunkier deals in the data center market.

So we're just -- we're happy to be able to participate in both and have the equipment that I think serves both because of the high efficiency, low emissions that we've done.

And then the follow-up I had was just around when you think about contract duration versus terms on some of the data center contracts that you're looking at, should we think about the returns on the investment being potentially a little bit lower if you're able to secure long-term contracts. We've heard that from others, which when you have visibility of cash flows, it's a big positive, but the returns and our pricing could tend to be a little lower. Is that the right way to think about the blend?

Yes. I think it's a balancing act. I mean we're looking at a diverse group of contracts and duration and even site size. So we look at a number of different variables that we weigh into our return metrics, but there's a possibility as they go really long that we're willing to take something a little bit lower.

Stephen, I'll just add a little bit more to that and watching Travis and his team work through this commercial pipeline. There's always so much time and energy and assets that we can deploy. So I think everything that Travis said is highly accurate. It's definitely a balancing portfolio effort.

That said, we prioritize real conversations with customers that are serious about making moves and cutting deals that are mutually beneficial to both them and what we have to offer in PROPWR. And I think what you've seen from us to date in the contracts that we've and the assets that we're going to deploy are to real projects that are going to generate real earnings and have real time lines.

There's a lot of blue sky out there in this market that I think mostly materializes over time. But from a timing aspect, running a business like we run ours that's highly interested in real work and real earnings, we usually move to the front of the line, the people that are most serious about actually getting a deal done and getting equipment into the field.

Your next question comes from the line of Eddie Kim of Barclays.

Just wanted to ask about the cost of your power equipment and if it changes based on the end market. You mentioned you expect a larger share of your work over time will be towards non-oil and gas applications. To the extent more of your equipment goes toward data centers going forward. Just curious if the mousetrap or configuration is different such that the $1.1 million per megawatt cost estimate increases at all as a result? Any thoughts there would be great.

Yes. That's a good question. So the $1.1 million that we've talked about is for the modular equipment we bought today, definitely works at certain power nodes in both the oil and gas and data center market.

As we evaluate technologies that might be a little bit larger and maybe more infrastructure-esque, I think there's a possibility that, that CapEx goes up a little bit on that equipment, but obviously requires a longer tenor on the contract and maybe larger contract size to justify that investment.

Got it. Got it. And then just sticking on the cost estimate. So you mentioned you expect the cost of the 550 megawatts ordered to date to be that $1.1 million per megawatt, including the [ Dallas ] plant. For the incremental 450 megawatts to get to your 1 gigawatt target by 2030, do you expect that incremental capacity to cost a bit more than your estimate. So just -- I mean, just curious, are the OEMs starting to raise pricing industry-wide? How is the pricing environment for power gen equipment changed, if at all, over the past 6 months or so?

Yes. We're evaluating the mix on the additional 450, have a lot of optionality there right now. I think the important thing is that the return metrics will be the same regardless of the CapEx input. So we're evaluating projects and different industries a little bit different from an equipment perspective, but looking at the same return profile across the board.

Your next question comes from the line of Jeff LeBlanc of TPH.

In the press release, you referenced that the opportunities to deploy incremental fleet is limited, but have you had success transitioning your existing customers from Tier 4 -- excuse me, the Tier 2 to the Tier IV DGB assets? Because I think at some point, you had some assets idle.

Yes, there's been a little bit of that. But I think going back to kind of some things that I mentioned earlier, it's more of a specific tool for a specific customer and region right now. Gas prices can vary greatly across the Permian Basin, depending on where you are and what your pipeline deal is. So it's a little bit less of we need to grow a customer from diesel to dual fuel into electric. That was a game that we played very heavily and very successfully into the last several years.

But I think there's a little bit more stability in the market right now. And I think at the given activity levels, crude prices, gas prices, I think most of the E&Ps that we're dealing with, they know exactly what they want, and they know exactly what fuel sources that they want to utilize wherever their specific acreage might be. So there's still a little bit of that going on, but I'd say that's a little bit less of a game that's being played today than it was maybe a couple of years ago.

Your next question comes from the line of John Daniel of Daniel Energy Partners.

Just a couple of quick housekeeping. Sam, can you say how many of the Tier 2 fleets are working today?

2 or 3.

2 or 3. Okay. And then on the direct drive, I got in a little bit late on the call. Did you specify like how many new units you're adding and just a little bit more on the strategy there?

Yes. We've had a couple of units running for the last 6 months or so. They're part of kind of like a pilot program for us. We're going to add more than that here with kind of the CapEx that we've outlined, but not a lot, John. These aren't like fleets at a time. This is kind of like gradually adding them in with some of the attrition that we're seeing in our own fleet and taking them to very specific customers that have showed an interest in that equipment and committing to it over some period of time.

So it's not -- this is not like a major reinvestment cycle for us. This is kind of an evolution, kind of slow evolution that is being -- listening to certain customers of ours. I guess it's a little bit more of a rifle approach, so yes.

Fair enough. And then last one, just since I'm a traditional energy guy. Can you just give us some thoughts on wireline and cementing and what you're seeing in both of those service lines today?

Yes. Wireline Silvertip team has done a fantastic job over the last year managing the market volatility. I think we've probably been a net market share winner in that business, along with really good margins, really good pricing discipline. There's been maybe a little bit of a flight to quality in the wireline business, and we benefited from that.

Very stable right now. We've got a good amount of overlap with our frac fleets, which also creates good integration and stability, good efficiency. Cementing, we've seen the rig count throughout last year continue to drill lower and it's still at a pretty depressed area. That's hit that business a little bit. But we think the bones are there to have a really great business over time.

I think we're probably top 3 or 4 market share there, very competitive, one of the best labs in both plants in the Permian Basin and a great footprint on the Western side of the basin in the Delaware with the Par Five acquisition that we made a couple of years ago. So that business is down a little bit relatively to something like powerline -- wireline and frac, but still in a really good strong position.

[Operator Instructions] Your next question comes from the line of Scott Gruber of Citigroup.

I want to come back to the power side. Demand for on-site generation for data centers appears to be taking another step higher here, seeing CapEx numbers from the hyperscalers continue to grow. And you mentioned that it's unlikely that the data center market pulls e-frac megawatts due to the design configuration differences.

But is the pull from the data center market starting to improve the terms and conditions and potentially the return profile that you're able to achieve on incremental investment in megawatts into the oilfield microgrids?

Yes, I think it helps. The competition certainly raises all boats, I would say. So the limited amount of megawatts is being certainly recognized by the oilfield players as well, and they see the demand constraint or the supply constraints, both from the utility and from a behind-the-meter perspective. So we see that all as positive for what we're looking at.

With no further questions, that concludes our Q&A session. I will now turn the call back over to Sam Sledge, Chief Executive Officer, for closing remarks.

Thanks, everybody, for joining us today. Thanks for your interest in ProPetro. We look forward to talking to you again soon.

That concludes today's conference call. You may now disconnect.

Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the ProPetro Holdings Third Quarter 2025 Conference Call. [Operator Instructions] It is now my pleasure to turn today's call over to Matt Augustine, Vice President of Finance and Investor Relations. Please go ahead.

Thank you, and good morning. We appreciate your participation in today's call. With me are Chief Executive Officer, Sam Sledge; Chief Financial Officer, Caleb Weatherl; President and Chief Operating Officer, Adam Munoz; and President of PROPWR, Travis Simmering.

This morning, we released our earnings results for the third quarter of 2025. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC. Also, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question-and-answer session.

With that, I would like to turn the call over to Sam.

Thanks, Matt. Good morning, everyone. Thanks for joining us today. In the third quarter, ProPetro once again demonstrated resilience despite continued uncertainty in the broader energy markets, driven by tariffs and rising OPEC+ production. Our operational and financial results proved that the strategy we put in place is working. Our focus on capital-light assets and investments in our company's industrialized operating model helped us achieve another quarter of free cash flow generation in our completions business in an industry that has experienced stagnation.

To put this into perspective, we still believe that approximately 70 full-time frac fleets are currently operating in the Permian as compared to approximately 90 to 100 fleets at the beginning of this year. This demonstrates the depressed activity levels in the completions market in the Permian Basin and is also indicative of a larger slowdown across energy markets.

However, we are proud of the efforts we've made to implement a system focused on reactive cost reductions and flexible capital expenditures that allow our legacy completions business to generate sustainable free cash flow even during challenging periods like this. With sustainable cash flow, ProPetro is able to support and help fuel growth in our PROPWR segment.

As we stated last quarter, we expect the challenging operating environment to continue into at least the first half of next year as impacts from tariffs and OPEC+ production increases drive further uncertainty across the energy markets. That being said, we believe that ProPetro is in a great position to continue to navigate the market as we execute on our plans and ensure we remain disciplined in our approach.

We've built and continue to reinforce the foundation of our business by making strategic capital-light investments in the future of ProPetro with PROPWR and our FORCE electric fleets, both taking priority. We're controlling what we can control and have rigorously analyzed our costs across the business and taking decisive action to implement reductions where needed. We've also implemented measures to help us react quickly to any significant changes in activity levels as we continue to serve our first-class customers.

All these measures have put ProPetro in a position of strength in the Permian, led and operated by our first-class team. We believe that even if the market further weakens, we'll continue our strong performance. As you are all aware, pricing discipline has softened at the lower end of the market, particularly among subscale frac providers.

Fortunately, these operators now represent a much smaller portion of the market than in previous cycles. While we did have opportunities to keep virtually all of our fleets active, we proactively chose to idle certain fleets rather than run our fleets at subeconomic levels, preserving them for favorable market conditions in the future.

The smaller and less disciplined companies are struggling to sustain returns at these undisciplined prices, which over time favors the well-capitalized providers like ProPetro that have next-generation assets and industry-leading efficiencies. We are well-positioned for this reality with a strong balance sheet, deep relationships with first-class customers and a culture anchored in safety and performance. I firmly believe that market cycles present valuable opportunities, and we are committed to emerging from this period even stronger in a completions market that will be healthier and more balanced from a supply and demand perspective due to accelerated attrition among lower-tier competitors.

Before I dive into an overview of our results for the quarter, I want to discuss the strategic actions we're taking to support resilient financials. Recently, we secured an additional contract for 1 frac fleet, increasing our total to 7 contracted fleets, which includes 2 large simul-frac fleets. Approximately 75% of our fleet now consists of next-generation gas burning equipment. Of our active hydraulic horsepower, approximately 70% is committed under long-term contracts. Over time, we plan to continue to allocate capital to our FORCE electric equipment, given its high demand, successful contracts, commercial leverage, which we expect will further derisk future earnings. That said, before ordering additional FORCE equipment, we need additional visibility into customer demand and growth to justify those investments.

On the PROPWR front, we're very excited about the significant progress we've made over the past several months, including the deployment of our first assets in the field where we have observed excellent operational efficiency and reliability. Furthermore, as announced earlier this week, we secured a long-term contract to commit approximately 60 megawatts to support a hyperscaler data center in the Midwest region of the United States, marking our entry into the data center power market.

This builds on our previously announced inaugural contract last quarter, which committed 80 megawatts over a 10-year term to a distributed oilfield microgrid installation. Additionally, during the quarter, we signed another infield power contract to support production operations for a Permian E&P customer.

We are also in advanced negotiations and deployment planning for a long-term 70-megawatt agreement with a large Permian E&P operator that is expected to include asset deployments before year-end and will support a turnkey distributed microgrid installation. In total, we now have over 150 megawatts contracted with expectations to reach at least 220 megawatts contracted by the end of the year. While we are pleased with both our current contracts and those nearing completion, we're even more optimistic about future growth.

Given the accelerating demand for power, our active commercial pipeline and the expansion and extension opportunities available with our existing customers, we believe we are poised to deepen existing relationships, expand our reach to new partners and drive substantial long-term growth.

To support our expanding commercial pipeline, we placed orders for an additional 140 megawatts of equipment, bringing our total delivered or on order capacity to 360 megawatts. We expect all of these units to be delivered by early 2027, with contracts expected to be in place ahead of delivery.

Thanks to our strong relationships with supply chain partners, we are well-positioned to order additional capacity and anticipate 750 megawatts delivered by year-end 2028. Notably, we have also included additional 5-year growth guidance for PROPWR in our updated investor presentation deck. We currently estimate that the total cost of this equipment, including the balance of plant, will average approximately $1.1 million per megawatt.

To help fund this growth, we've executed a letter of intent for a $350 million leasing facility with an investment-grade partner experienced in power generation financing. In today's challenging completions market, access to external capital is critical for scaling our power business. We will utilize this facility judiciously, drawing funds only as necessary to accelerate or expand projects.

With long-term take-or-pay contracts, durable assets and robust expected returns, we believe PROPWR is well-positioned to leverage debt effectively in a disciplined as-needed manner to pursue its growth objectives. This is still just the beginning for PROPWR. Our momentum in securing customer commitments continues, and we are actively negotiating additional long-term contracts. The demand for reliable, low-emission power solutions is accelerating, and we believe we are well-positioned to capture this opportunity. Looking ahead, we intend to grow in our oilfield power projects while also seeking to further expand in the data center arena given the significant build-out underway in that sector.

We see clear potential not just to grow but to multiply our installed capacity with expectations of 1 gigawatt or greater by 2030. Caleb will discuss our financial results in more detail in just a moment, but I wanted to highlight that despite the activity headwinds I've discussed, which led ProPetro to idling three fleets from the second quarter, our team responded quickly and continued to set the standard for operational excellence and efficiency. We've taken a disciplined and aggressive approach to cost controls, particularly regarding maintenance capital spending, which was a key factor sustaining free cash flow.

While we had to take steps to rationalize operating expense given lower activity levels, pricing remained relatively stable as we continue to be disciplined on price. Running our fleets at subeconomic levels would damage our ability to ensure we are best prepared to capitalize on future opportunities as market conditions improve and rapid deployment is needed. Therefore, we will remain disciplined.

Going forward, and as I mentioned briefly above, near-term demand visibility in the completions market remains limited, and we expect the challenging operating environment to persist into 2026. That said, we like what we are seeing for our current active fleets and expect to maintain 10 to 11 active fleets in the fourth quarter with normal holiday seasonality effects. However, the company anticipates a sequential improvement in the PROPWR segment, which should help offset holiday impacts and bolster margins.

Looking ahead and under current market conditions, the company expects to sustain at least this level of frac activity into 2026. Fortunately, ProPetro is in a great position with a strong balance sheet, a refreshed next-generation asset base, and first-class customers. We're excited to continue investing in PROPWR, our key growth engine, which is set to make a significant impact starting in 2026. Our achievements are a direct result of our unwavering dedication and support of our outstanding team. With that, I'll turn it over to Caleb.

Thanks, Sam, and good morning, everyone. As Sam mentioned, the third quarter again demonstrated the industrialized and resilient nature of ProPetro. We're proud of the work we did to generate free cash flow in our Completions segment and the significant progress made in our PROPWR business, including securing a letter of intent for a flexible financing agreement that will help enable future growth in our PROPWR business. Through the quarter, we took targeted actions to optimize costs from legacy completions operations. This has helped us navigate a challenging market dynamics and positions ProPetro for success in this part of the cycle.

Looking at the income statement, financial performance across the third quarter was buoyant despite overall activity levels decreasing from the second quarter. This strength is an indicator of our differentiated service offering, our strong customer base, focus on the Permian, operational excellence, and ability to quickly remove costs from the business. ProPetro generated total revenue of $294 million, a decrease of 10% as compared to the prior quarter. Net loss totaled $2 million or $0.02 loss per diluted share compared to a net loss of $7 million or $0.07 loss per diluted share for the second quarter of 2025.

Adjusted EBITDA totaled $35 million, was 12% of revenue and decreased 29% compared to the prior quarter. This includes the lease expense related to our electric fleets of $15 million. Net cash provided by operating activities and net cash used in investing activities, as shown on the statement of cash flows, were $42 million and $43 million, respectively. Free cash flow for our completions business was $25 million. As Sam mentioned, our legacy completions business continues to generate sustainable free cash flow. Although activity and related revenue declined from the second to third quarter, we effectively optimized our completions CapEx, primarily because our completions business is expected to remain in maintenance mode for the foreseeable future with very disciplined allocation to growth CapEx. This demonstrates what we have consistently communicated over the past several years. Even in today's challenging market environment, we operate with the consistency and reliability expected of a mature industrialized enterprise.

During the third quarter, capital expenditures paid were $44 million, and capital expenditures incurred were $98 million, including approximately $20 million primarily supporting maintenance in the company's completions business and approximately $79 million supporting its PROPWR orders. During the quarter, some of the PROPWR spending was accelerated as our supply chain partners have consistently delivered equipment efficiently and on time or ahead of schedule, allowing us to meet customer demand sooner than expected.

Notably, the difference between incurred and paid capital expenditures is primarily comprised of PROPWR-related CapEx that has been financed and paid directly by the financing partner and unpaid CapEx included in accounts payable and accrued liabilities. We will continue to evaluate the market and scale CapEx as activity demands. But as we sit here right now, the company anticipates full-year 2025 capital expenditures incurred to be between $270 million and $290 million, down from the $270 million to $310 million range highlighted in the company's second-quarter earnings report. Of this, the completions business is now expected to account for $80 million to $100 million, a reduction from last quarter's guidance given the realized decline in completions activity and the ongoing cost optimization efforts.

Additionally, the company now expects to incur approximately $190 million in 2025 for its PROPWR business due to accelerated delivery schedules and down payments to support additional orders. In 2026, capital expenditures for PROPWR are projected to be between $200 million and $250 million, depending on further accelerated delivery schedules and additional orders. This outlook is based on the current 360 megawatts of PROPWR equipment on order with plans to reach a total of 750 megawatts delivered by year-end 2028. While these PROPWR capital expenditure estimates reflect the total cost of the equipment, they do not account for the impact of financing arrangements, which are expected to reduce the near-term actual cash outflows or cash CapEx required from the company. Cash and liquidity continue to remain healthy. As of September 30, 2025, total cash was $67 million, and borrowings under the ABL credit facility were $45 million. Total liquidity at the end of the third quarter of 2025 was $158 million, including cash and $91 million of available capacity under the ABL credit facility.

Lastly, we'll continue to take a disciplined approach when it comes to deploying capital as we look to remain flexible and dynamic, providing us with the ability to pivot between our key priorities and allocate capital to the highest return opportunity. Regarding the $350 million lease financing facility we have agreed to terms on via a letter of intent, I want to again reiterate that this facility is designed to maximize our financial flexibility, enabling us to draw funds only as needed to accelerate or scale PROPWR projects.

We intend to be highly disciplined in how we utilize this facility, ensuring we preserve a healthy balance sheet while also supporting our continued growth in PROPWR. We expect that effective use of this facility will accelerate returns for shareholders and help us achieve our long-term growth objectives more rapidly. Sam, back over to you.

Thanks, Caleb. The work we've done and the investments we've made over the past few years have reshaped ProPetro. Today, we are a dynamic company, well-positioned not just to survive but to thrive. Resiliency is at the core of our business as demonstrated by our ability to successfully navigate market cycles throughout the company's 20-year history while continually evolving into the modern organization we are today.

While we did report lower revenue this quarter, we also demonstrated our nimbleness in reacting to market conditions, successfully maintaining strong free cash flow in our completions business. We've proven that our business is sustainable through cycles as our legacy completions business helps fuel the growth of PROPWR. As demand for power generation continues to ramp, ProPetro will continue to benefit. We're already seeing strong commercial wins, capitalizing on existing demand by ordering more generation capacity and positioning the business for future success by obtaining flexible financing that will enable future growth.

We will continue to execute on our strategy that has allowed us to proactively respond to changing market conditions in a decisive and effective way. The benefits of this approach are evident in our recent results. Despite the challenges currently facing our industry, we remain confident in our strategy and the future of ProPetro. We have positioned ourselves for success through several key strengths, including our best-in-class team, whose dedication and exceptional effort set us apart each and every day. I want to thank them for their performance we delivered this quarter, as they give me and the entirety of our leadership team the confidence to continue pursuing our strategy.

Operator, we'd now like to open the call to questions.

[Operator Instructions] Our first question comes from the line of Derek Podhaizer with Piper Sandler.

The 60 megawatts, just hoping that you can expand on some of the details for us. Maybe first, what type of power solution you're deploying here? I know you have a mix of recipes turbines and batteries. And then just thinking about that 60 megawatts as your starting point, how do we think about this contract expanding over time, both in capacity and duration? Just thinking about the other comps that are out there that we've heard that are up in that 1-to-2-gigawatt range.

Hi, Derek, it's Sam. I just want to make sure we get your question right. I think we missed the first part of your question, but we caught most of the tail end. But is it correct, you're focused in on the announcement we made Monday around the data center?

Yes. Yes, the 60-megawatt data center announcement, the type of kit that you're bringing there. I know you have recipes, turbines and batteries in your portfolio. And then as far as kind of scaling that over time into some of the deal comps that we've seen out there in that 1-to-2-gigawatt range.

Sure. Yes. I don't know if you caught it earlier in Matt's introduction. We have Travis Simmering on the line with us this morning, the President of our PROPWR business to help answer some of these questions. So, I'll let Travis talk a little bit about that.

Derek, this is Travis. So as far as the technology goes, we did mention that it's reciprocating engines and battery energy storage systems for this project. That was actually driven by a customer request. We feel really confident in both turbines and recipes for these types of deployments. And we feel that the battery energy storage systems provide a differentiator for us, which I think is proven out by the customer selecting us for this contract. As far as how this fits into the data center market, we feel like this is just the start for us. This site will have more capacity at it. There will be more sites like this. This is just how the PROPWR technology and our experience fits into the overall site. So, we're excited to see how we can grow with these existing partners in both term and capacity.

And Derek, I'll just add something to that, maybe more kind of high level and fundamental. We've learned and definitely I've learned being mostly or totally an oilfield service person in my entire career that, one, this data center space is very, very quickly evolving. And I think things are changing and moving and flavors are changing very quickly. Also, secondly, there's a lot of different ways to play this data center space. And we presume there will continue to be more layers of opportunity moving forward. We're super excited for this to be our first entrance into this arena with first-class counterparties on the other side. So, it's pretty exciting and more to come.

That's very helpful. Second question, I just wanted maybe some more details around future funding structures. Obviously, you've just implemented that $350 million facility, that brings you with the 1.1 that kind of implies over 300 megawatts there, and that takes care of your initial, the next phase of that 140. But when you start targeting 750 megawatts and then going over 1 gigawatt, obviously, we're going to need some more capital here. Can you just help us understand between some of these long-duration contracts, whether those are ESAs or PPAs. We've seen some peer financing, whether it's converts or maybe some like high-yield debt offerings. Just help us understand that the liquidity runway and the funding gaps that you have and how you might be able to fill that with future sources of capital.

Yes. Great question. I'll make a comment, and Caleb will probably want to opine further on it. But I think first thing we want to do is prioritize the use of our own organic free cash flow in our business. So, I think that's funding mechanism number one. Even in a weak completions market, we still had our completions business spit off $25 million of free cash flow in the third quarter, and we're able to use that money to fund growth initiatives. And then there becomes a point where this business becomes of such significance and kind of compounds on itself where it starts to fund a lot more of its own growth. And I think that happens pretty quickly, maybe even into the back part of next year. And we also have a lot of other options of which you mentioned some, Caleb, I don't know if you want to say anything about any of that.

Yes. Derek, this is Caleb. Thing about the leasing facility, keep in mind is that it's flexible and that we only draw on it as needed, unlike a bond where you immediately have all the cash upfront. And so, like Sam mentioned, even in this challenging market with the significant free cash flow that our completions business generated, we're going to fund as much of the CapEx out of cash flow as we can. It's also important to recognize that PROPWR can support more leverage than a traditional oilfield services business. Like Sam mentioned, we're securing long-term take-or-pay contracts in this business, which is really more like contract compression than traditional frac and those contract compression businesses can support more leverage.

Also, I think putting this lease facility in place just solidifies our ability to fund the CapEx if needed. It doesn't take any other funding options off the table. It only ensures a funding option that we know is attractive with an investment-grade partner that has a deep history and knowledge in the space.

Yes. I guess last thing I'll say is I think about it a little bit more, we're going to be in constant pursuit of flexibility, like Caleb mentioned, and low cost -- low cost of capital. So, what we're doing right now, we think, is the best thing to fit those categories given the current state of our business. If we're able to achieve, which we're very confident in the kind of growth trajectory that we've talked about this morning, the business looks different. The cost of capital can change and the tools that we have access to at that point are much different. So, this is likely kind of a changing funding approach as the business grows and scales into the future.

The next question comes from the line of Eddie Kim with Barclays.

Just wanted to circle back on the 60-megawatt data center contract. I don't believe there was a contract term or duration disclosed with that. Would you be able to talk about, is it similar, longer, shorter than the 10-year contract you signed for the 80 megawatts for the Permian microgrid? And just taking a step back, I mean, how are you thinking about term in this environment? Would you actually prefer shorter-term in anticipation of pricing potentially moving higher over the next several years? Or would you prefer as longer-term as the customer is willing to offer? Just any thoughts there would be great.

Eddie, this is Travis again. So, we did say it's a long-term contract. That's all we're really going to say for competitive reasons on the 60-megawatt contract that we signed. As far as long term versus short term, we evaluate each one of the deals on a kind of case-by-case basis. I think it's a fair point to discuss higher pricing that could happen in the future. But if we see strong partners that are willing to sign up at return thresholds, we're comfortable with, then we're going to sign a long-term deal. And so, we're really excited about having the optionality to be able to look at maybe shorter-term deals with higher margin, but also these long-term partnerships that we can really put sustainable contracts on the books for a long time.

Understood. And then just my follow-up is on the cost of the equipment. You mentioned that the total cost of your equipment, including balance of plant is going to average about $1.1 million per megawatt. I'd imagine that for this data center contract, I mean, that comes with battery storage solutions, which I can't imagine are included for the Permian microgrid. So, could you just maybe talk about the cost differential of the equipment -- on equipment going to data centers versus Permian microgrids?

Yes. I don't think there's a huge delta between the 2. I mean the battery systems are kind of baked into our economics around that 60-megawatts and the CapEx at $1.1 million as an average throughout kind of our portfolio of equipment. So, we've done really a great job, and I'm super proud of what we've done on the supply chain side so far, building out strong partnerships on the OEM side and the packaging side to be able to do what I think is near best-in-class on a cost of capital for this equipment.

Next question comes from the line of Scott Gruber with Citigroup.

Sam, great to see the penetration into the data center market. As you step back and kind of look at the opportunity set, how do you think about deployment of all your megawatts you're talking about here, whether it's the end of '28 or '30, how do you think about those being spread across oilfield contracts, data center contracts or other end markets by the time you kind of get out toward the end of the growth period? Just kind of talk us through how you envision the spread.

Sure. Great question. I think that's something that we're talking about quite a bit as we dedicate or allocate resources and internal energy and attention. If you look at the kind of 220 megawatts or a little bit more than that, that we talked about being contracted by year-end, 60 of that being data center and the balance being oil and gas, I think maybe in the immediate near-term, that kind of distribution might stay pretty similar. But over time, as you've seen with other announcements and other things going on in the data center space, those are probably a bit more chunky in nature to the larger side. So that could change that ratio very quickly as we kind of continue to pursue more of these data center contracts. Is that 50-50? Is it 60-40, one way or the other? Or is it 80-20 one way or the other? I think right now, it's tough to say. I can tell you, which has already kind of been mentioned a couple of times here in our scripted remarks in our Q&A, we're in pursuit of what we believe the best return is, coupled with what we think continues to help us produce long-term opportunities and stability in our business.

And as evidenced by what we've already accomplished in the oil and gas space with our inaugural contract being 80 megawatts in 10 years, it's hard to get even deals like that in certain data center applications. So, it's all about the economics and what projects and relationships help us build kind of compounding relationships into the future. So hard to give you straight numbers, but it will be a balance of both. We're building a team that can help us attack kind of both of those categories and we're excited to be a player in both spaces in a really big way.

And are the economics that you're seeing across the different verticals pretty similar? I mean, obviously, the term you've gotten in the oilfield has been great and kind of matched what we're hearing on the data center side. But can you talk to us about paybacks and other Ts and Cs? Just kind of how do you view the economics of oilfield versus data center as we start to see more contracts flow here?

Yes. Right now, we're seeing economics being pretty similar. The equipment footprint that we have in both areas is very similar. And so, the way we're deploying might be slightly different based on technology. But in most cases, it's relatively similar. And so therefore, the return that we're looking at on both sides based on the contract term is about the same.

Our next question comes from the line of Stephen Gengaro with Stifel.

I think two for me, following, I think, on Scott's question a bit. When you think about the sort of, I guess, the cost of power for you on the frac side, do you get concerned that you're going to get power bid away or you're going to -- like how do you work that arbitrage if data centers are willing to pay more for power? And how do you think that ultimately impacts the frac business?

Yes, it's a good question, and we've thought a bit about that. I think right now, as we sit here today, we feel pretty good about where we sit, especially on our existing electric fleets, who and how those are being powered, the commercial agreements for those. I think the returns for our power providers and ourselves are pretty good in that arena back to kind of my comment earlier about being in pursuit of the best economic return. I think others are -- I wouldn't say that's unique to us. I think power providers in the frac space are the same. We'll see what happens in the long-term.

But I think in the short-term, we feel really good about how we're positioned there. There's also, as Travis has kind of mentioned and talked a little bit about equipment, not all the frac equipment can go do some of the data center stuff and vice versa. So, there's a bit of an equipment makeup gap there that I think kind of helps keep some of that where it is.

And my other question is, when we think about what's going on in the power gen business, one of the things that I struggle with a little bit is, obviously, now the demand growth is excellent and the supply chain is tight. How do you think about -- and you do both, so you have a good perspective on the differentiation you bring to customers on frac versus power gen?

I don't know if I understand your question, like how are we different in those two service lines.

I guess which product line do you think is ultimately more differentiated and where you can bring an advantage to your customers.

I think my quick answer to that is both. And I think it comes down to a focus on the customer. And we've always tried to build and grow our business with that very intense focus on the customer and what their needs are. The inverse of that is us just building whatever we think is cool and trying to push it into the market. That's not the strategy here. And what we think is just running our business in that fashion and very -- like a normal in a logical way is a bit unique.

I think, as we bump into competitors in both of those arenas. And I think what we learn is that it's not just unique from like, say, an operational perspective where you're trying to make sure the customer is getting a very high quality of service, safe. And when they want to make tweaks or adjustments to how we work, that we're there to meet them for that conversation and to help them with that.

I think that's important, and that is at the core of being a successful service company. It's understanding your role and understanding the relationship with the customer and how that benefits. Call it unique in that, but I mean, either way, that's a focus of ours.

The other part of this is how we approach customers commercially that I do not think can be overstated really and taking that kind of listening here, open mind and the basket of creative solutions to each customer individually has benefited both us and our customers significantly in both sides of that business.

It's already benefiting us in the power business, where we constantly hear our approach to that business is a bit unique and different. So, we're pretty proud of that. I'd say you need to maybe go ask 5 or 10 E&P operators in the Permian, what makes companies like us different. But as we see it, I think those are kind of the two main things that make us different. I don't know if -- wants to add to that.

The only thing I'd add on the power side is I think what's unique in this sector is the requirement of having the technology expertise and flexible assets to be able to compete in various sectors. And so, we've done a really good job building out a really strong engineering team to support technologies like battery energy storage systems, which might be unique in the oilfield, but actually, we've got some experience with that. We're going to use those on both production applications as well as data center applications to reach high efficiencies and help manage the technology side of it. So, I think that's something a little bit unique. But as far as the customer approach and the service excellence at its core, I think that differentiation on both sides is there for sure.

Now that's helpful. We get the question a lot. So, I'm glad to get your perspective. I appreciate that.

Our next question comes from the line of John Daniel with Daniel Energy Partners.

I guess I'll show my age and comfort zone and stick to the oil service business. But first, a clarification on fleet count. I'm going back to the basics here. When you're reporting your average fleet count, are you counting the simul-frac fleet as 1 or is that 2 fleets?

Yes. We're still just counting that as 1.

And then your EBITDA margins in frac were about 17% in Q3. And I'm assuming there is a noticeable gap between, say, your contracted FORCE fleets versus the other fleets. And I guess, first, is that a fair assessment? And if it is, at what point would you look to maybe park those lowest 1 or 2 fleets that is not contracted?

Yes. I think your assessment of the difference between contracted and noncontracted is accurate. We did, in fact, I mean, what you're kind of alluding to, when would you decide to park more fleets? I think we did a very good, disciplined job of that in Q3 as evidenced by the 3 fleets that we took out of the system. We could be fully utilized today easily. I think that's kind of an obvious statement. We chose not to be because the lower end of the market is just in a spot where we think is unsustainable.

So, we'll let others kind of play in that area and preserve our equipment for better times and better pricing. We have the balance sheet and the stability, and I think the position here in the Permian to be able to do that.

So, we're thankful for that. Another part of this is especially on the -- almost exclusively on the -- like the Tier 2 diesel portion of our fleet, which is a shrinking and smaller part of our fleet than it ever has been. We referenced that 75% of our fleet is gas burning next generation today.

And so, we're able to kind of harvest that diesel equipment and look at economics and operations in a little bit of a different way to make sure that we're both staying in the market being competitive, servicing what we think are top category customers and at the same time, bolster the economics of those operations.

I've got two more. They're both quick, I promise. This one is for Caleb. If activity levels stay where they are, 10 to call it maybe 12 fleets, what is your preliminary guess on CapEx for the OFS businesses in '26? Are you willing to give some sort of a range?

Yes. So, we're not providing official 2026 guidance at this time, but I'll make the high-level comment that we're in maintenance mode in the completions business. And we've worked to industrialize our business. We mentioned several times over the past year that we're not expecting massive growth CapEx cycles in the frac business as we've just worked to create steadiness and consistency in that business. So high-level, I'd just say maintenance mode, but I don't want to get too much beyond that.

Fair enough. Final question. And hopefully, one day becomes a trend. But according to my always write stock quote app on my phone, it shows in the first 13 minutes of trading, you guys are up about 28%, 29%, which I'm guessing. So, congratulations, if that's right. But I'm guessing that's a function of your comments on power. So, when you see this type of reaction, and the price. How will that impact your views on maybe tactical consolidation in OFS if the market go to sticker power? What does that make you think about for strategy on the OFS side? That's it for me.

Yes. I'll just say high-level and to reiterate some things we've said over the last couple of years. M&A is a part of our overall strategy. We've done that mostly via what I'd call horizontal integration with things like wireline, wet sand, a little bit of growth with the cementing acquisition over the last few years here. We've been very pleased with all of those. We've used a mix of equity and cash to do those deals.

So yes, I mean, I think a higher stock price is better than a lower stock price. That said, I think we're most interested in just doing the next right thing. Kind of to tie that back to the comment I made earlier about.

What are the competitive pressures and the size of the business and the margins in our business. And at any given point in time, what's the opportunity set in the circumstances. We know what those things are today.

What are those things a month or 6 months or 5 years from now is a little bit harder to say. But I think we kind of stay true to our main strategy of trying to be a high-quality, cost-effective service company in all the service lines that we're in and to add to that in a disciplined manner that allows us to remain as competitive as possible with the top-tier customers here in the Permian Basin and possibly in other places.

So, if our equity strengthens and some of those opportunities present themselves, and that's helps us do things to increase the competitiveness of our business, then we're open-minded, but we don't have anything on the table right now that we're depending on an equity price to help us with. I think we've got a solid, sturdy business that we're just trying to make the next right decision with.

Fair enough. And I was thinking more just from the standpoint that more -- I mean, what you're doing and what Caleb said, most of your CapEx for next year is going to be maintenance on the OFS side based on what you would know today, right? And it just seems like the market is paying is interested in power, as you can see from all the questions you and others have had this earnings season. So anyway, congratulations, and thank you very much.

Yes, John, just one last thing before we go to the next question on the line. And you know this well, John, but attrition continues, especially in the completions business and the pressure pumping business, where it is, in fact, the most equipment-intensive service line in oilfield services. So, there's consolidation happening via attrition every day. So, I think staying power, high-quality services, high-quality customers and kind of the structure of the business as we have it today on the completion side is, in fact, playing in consolidation without even playing in M&A. So that, I think is tailwinds long-term. You've written about that. We've talked about that, but I just want to make sure everybody understands that consolidation via attrition on the bottom end of the market is significant and will play a part in the supply and demand balance moving forward.

Our next question comes from the line of Jeff LeBlanc with TPH.

I just had two. On the first one, I was just curious if you talk about the equipment mix moving forward, given that you've been more technology-agnostic than your peers. As you continue to move in the data center market, do you anticipate moving to larger turbines? Or are you comfortable with the current fleet mix or equipment mix you have right now?

Jeff, this is Travis. So, we're comfortable with where we're at right now. We're likely going to do more of the same but are always looking at new technologies. The door is always open to look at larger power blocks, more efficient power blocks. And as we enter into different sectors within the data center space, we are certainly excited to use the team that we have to evaluate these technologies and come up with what we think is the lowest cost, most efficient solution for those types of projects.

And then on the data center opportunity specifically, do you see a greater opportunity in prime power applications? Or do you also see applications for bridge and backup?

Yes. We're only participating in prime power type applications. We've built our team and our operational structure to support prime power, and that's really difficult to make work economically as a backup provider. So those are really the only opportunities we're looking at. That's what we do in the oilfield. That's what we're going to do in the data center space. So, we're really a prime power player.

[Operator Instructions] We have no further questions in queue. I will now turn the call back over to Sam Sledge, Chief Executive Officer, for closing remarks.

Thanks, everyone, for joining us on today's call. Before we finish the call, I'd like to just reiterate a couple of simple things. As it pertains to our power business, I think we're super proud to show the progress we've made in really less than a year since launching the business. Last December, we hired a team, announced the launch of the business.

We quickly then started to acquire assets and obtain contracts. And as noted in our materials, we're already in the field generating revenue. It's been just a top to bottom across the board win, all of which has been supported by an existing platform and completions business that's providing operational support and free cash flow to fund that business.

So, a huge team effort, but real wins, not just blue sky. So, all of that, I think has been supported and founded by the entrepreneurial spirit that exists inside the company today. It's been a little bit tough to show that entrepreneurial spirit the last few years, but with the opportunities that we see today and moving forward, we think that that's going to shine through here at ProPetro. Thanks again for joining us on today's call, and we look forward to talking to you soon.

Thank you again for joining us today. This does conclude today's conference call. You may now disconnect.

Good day, and welcome to the ProPetro Holding Corp. Second Quarter 2025 Conference Call. Please note, this event is being recorded. [Operator Instructions] I would now like to turn the conference back over to Matt Augustine, Vice President of Finance and Investor Relations for ProPetro Holding Corp. Please go ahead.

Thank you, and good morning. We appreciate your participation in today's call. With me are Chief Executive Officer, Sam Sledge; President and Chief Operating Officer, Adam Munoz; Chief Accounting Officer and Principal Financial Officer, Celina Davila; and our new Chief Financial Officer, Caleb Weatherl. Caleb will introduce himself later in the call. But given he's new to the company and wasn't with us for the second quarter, he will not be participating in the question-and-answer session today.

This morning, we released our earnings results for the second quarter of 2025. Please note that any comments we make on today's call regarding projections or our expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to several risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filings with the SEC. Also during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. Finally, after our prepared remarks, we will hold a question-and-answer session. With that, I would like to turn the call over to Sam.

Thanks, Matt, and good morning, everyone. Thanks for joining us today. Before I discuss our results this quarter, I'd like to take a moment and introduce you to Caleb Weatherl, our new Chief Financial Officer. We're excited to have him on board as his wealth of experience in the energy and financial sectors is a perfect match for us here at ProPetro. We are confident that he will be instrumental in helping us drive long-term shareholder value, and I look forward to having him as part of the team. Caleb, would you like to say a few words?

Thanks, Sam, for the warm welcome. I am truly thrilled to join the incredible team at ProPetro. Having grown up and built my career in Midland, I've long admired ProPetro's reputation for excellence and its deep roots in the community. It's an honor to join such a respected first-class organization. While I just joined the company a few weeks ago, I've hit the ground running and I'm enjoying working closely with Sam and the rest of the leadership team.

With a clear focus on capital discipline and efficiency, I'm excited to help advance ProPetro's next chapter of success as we build on its strong financial and operational foundation. I want to assure you that the company's disciplined approach to capital allocation and commitment to maintaining a strong balance sheet while investing for growth will not change. I'm looking forward to getting to know you all better in the coming quarters. And with that, I'll turn it back to Sam.

Thanks, Caleb. Now I'd like to share some thoughts on the environment we're operating in and provide an overview of our performance in the second quarter. Despite recent macroeconomic uncertainty, ProPetro delivered a resilient quarter, both operationally and financially. Our strategy is proving effective, driven by our emphasis on capital-light assets and disciplined investments as well as our continued implementation of our industrialized business model. Our legacy completions business continues to generate sustainable free cash flow, supported by ongoing cost optimization and targeted capital programs. These efforts are fueling our growth trajectory, including new initiatives like PROPWR, which I'll discuss further in a moment. With regard to the current operating environment, both the broader energy markets and more specifically, the completions market in the Permian Basin continue to face challenges.

We believe the Permian frac fleet counts are likely approaching 70 compared to approximately 90 to 100 fleets operating at the start of this year. Increased market uncertainty driven by tariffs and rising OPEC+ production has resulted in more idle capacity than anticipated. Furthermore, price discipline has weakened at the lower end of the market, particularly among subscale frac providers. While we've had the opportunity to keep virtually all of our fleets active, we have proactively chosen to idle certain fleets rather than run our fleets at subeconomic levels, therefore, preserving them for more favorable market conditions in the future. That said, we are prepared to navigate this market by controlling what we can control, our everyday behaviors inside of ProPetro. Our strategic investments, including past M&A activity, PROPWR growth and FORCE electric fleet transition have strengthened the company's foundation so that we can withstand market turbulence.

ProPetro is a strong business, led and operated by an experienced team with low debt and first-class customers in one of the world's leading regions for hydrocarbon production, the Permian Basin. Regardless of market conditions, we are confident that these strengths and our resilient capital-light cash flow generative business model will enable us to continue delivering shareholder value. Market cycles like this create opportunity as changes in the environment can offer up new ways for companies like ProPetro to profitably grow and better serve our clients, allowing us to emerge on the other side of the cycle healthier than before and well positioned to operate in a market that has improved with respect to both supply and demand. In contrast, many of our smaller peers, often the less disciplined competitors in the market and those who have not invested in next-generation technology may struggle to withstand a downturn for as long, given their limited ability to earn returns on their deployed assets.

With that, I'd now like to discuss our capital-light investments. I'm pleased to report that demand for our next-generation services, particularly our FORCE electric fleet remains very strong. Approximately 75% of our fleet is next generation between the Tier IV DGB dual-fuel and FORCE electric fleets. Moreover, as we reported last quarter, over 50% of ProPetro's active hydraulic horsepower is now under long-term contracts. This is inclusive of 2 Tier IV DGB dual fuel fleets and 4 electric fleets. Notably, one of the FORCE fleets is a very large simul-frac fleet utilizing equipment equivalent to 2 standard zipper fleets. As a result, we currently have 5 fleets worth of FORCE equipment supporting 4 deployed fleets. Importantly, we plan to continue and potentially accelerate the transition from our Tier 2 diesel equipment to our FORCE electric equipment, given its high demand, successful contracts and commercial leverage, which we expect to offer lower risk for future earnings.

On the PROPWR side, we currently have approximately 220 megawatts on order with deliveries that began recently and are expected to be completed by midyear 2026. We are especially proud to announce our inaugural contract during the quarter, which was executed in collaboration with a Permian-focused E&P operator and commits 80 megawatts of power generation capacity to deliver turnkey power to a distributed microgrid installation. Asset deployment is scheduled to begin in the third quarter of this year and continue throughout 2026. This 10-year midstream-like agreement marks a major milestone for our PROPWR and serves as a future blueprint and a testament to our commitment to innovation and long-term growth. Furthermore, over the coming weeks and months, we anticipate announcing multiple long-term contracts with oil and gas customers to meet their infield power requirements.

Based on our ongoing discussions, we are confident that we will secure long-term agreements for all 220 megawatts of currently ordered equipment by the end of 2025. Additionally, we are actively engaging with our power generation suppliers regarding our next equipment orders. While these developments are exciting, we believe this is still just the beginning for this business. We will continue to align our actions with PROPWR's mission to rethink the grid, therefore, unlocking more exciting opportunities to serve our existing and prospective clients, both in oil and gas and other industries to create long-term value for ProPetro shareholders.

Now turning to capital allocation, which is more important than ever in an environment like this. Our dynamic capital allocation strategy allows us to continue to grow PROPWR and our FORCE electric fleets while also pursuing disciplined M&A and focusing on shareholder returns. We have been taking and will continue to take a balanced approach to executing this strategy to maximize value. In fact, our financial improvements and the value we have created over the past 2 years are a direct result of this very approach. Celina will share more details about our financial results in a moment, but I wanted to highlight that in the second quarter, we generated resilient free cash flow in our Completions business. Utilization across all segments was down due to larger macro impacts, including lower commodity prices, heightened uncertainty and weather downtime. However, our pricing remained largely stable and our operational excellence and cost controls remain strong, particularly as it relates to maintenance capital expenses.

Looking ahead, our visibility into our activity outlook remains somewhat limited. As I touched on earlier, the impacts of tariffs and OPEC+ production increases have caused ongoing uncertainty in the back half of this year, and we expect that to persist into 2026, even with the recent stability of oil prices. Accordingly, in the third quarter, we expect to see a reduction in activity, particularly with our more conventional equipment, and we anticipate normal seasonal patterns in the fourth quarter. As a result, we expect to operate an average of 10 to 11 fleets in the third quarter with the possibility of running fewer fleets in the fourth quarter. That said, as we navigate a fluid and uncertain environment, ProPetro remains in a solid position supported by our strong balance sheet, first-class customers, refreshed next-generation asset base, growth through PROPWR, sustainable cash generation and long-term contractual stability. Most importantly, these results and strengths are made possible by and due to our outstanding team. On that note, Celina, I'll turn it over to you.

Thanks, Sam, and good morning, all. In terms of the numbers, ProPetro generated total revenue of $326 million, a decrease of 9% as compared to the prior quarter. Net loss totaled $7 million or $0.07 loss per diluted share compared to net income of $10 million or $0.09 income per diluted share for the first quarter of 2025. Adjusted EBITDA totaled $50 million was 15% of revenue and decreased 32% compared to the prior quarter. This includes the lease expense related to our electric fleets of $14 million. Importantly, one attributable factor for lower financial performance this quarter was and is our strategic decision to maintain our idle fleets in optimal working conditions. This ensures preparation for rapid deployment once market conditions improve and that we are best positioned to capitalize on future opportunities as they arise.

Net cash provided by operating activities and net cash used in investing activities, as shown on the statement of cash flows were $54 million and $36 million, respectively. Free cash flow for our Completions business was $26 million. As Sam mentioned, our legacy Completions business continues to generate sustainable free cash flow. Even in today's challenging market environment, we are operating with the consistency and reliability of a mature industrialized enterprise. Capital expenditures paid were $37 million and capital expenditures incurred were $73 million, including $30 million primarily supporting maintenance in our completions business and $43 million supporting our PROPWR orders. The difference between incurred and paid capital expenditures is primarily comprised of PROPWR-related capital expenditures that have been financed and paid directly by our financing partner and unpaid capital expenditures included in accounts payable and accrued liabilities.

In terms of CapEx incurred guidance, we will continue to evaluate the market and scale CapEx with activity realizations. But as we sit here today, given what Sam shared around our activity outlook, we now anticipate our 2025 CapEx for our Completions business to be between $100 million and $140 million. We do still expect to spend approximately $170 million for our PROPWR business, inclusive of finance CapEx. So our total range will be between $270 million and $310 million, down from $295 million to $345 million on last quarter's call. Importantly, cash and liquidity remains strong, which is very important in today's uncertain market. As of June 30, 2025, total cash was $75 million and total liquidity at the end of the second quarter of 2025 was $178 million, including cash and $103 million of available capacity under the ABL credit facility.

As for our share repurchase program in May of 2025, the company extended its $200 million share repurchase program to December of 2026. Since the program's inception in May of 2023, the company has repurchased 13 million shares, representing approximately 11% of outstanding common stock. In the second quarter of 2025, the company did not repurchase any shares as it prioritized the launch and scaling of the PROPWR business. In terms of approach, our capital allocation strategy continues to be and will continue to be centered on remaining flexible and dynamic so we can pivot as needed between FORCE electric fleet conversions, PROPWR growth, disciplined M&A investments and share repurchases, while also maintaining a strong balance sheet and commitment to capital discipline. With that, Sam, back over to you.

Thanks, Celina. I'm proud of how our company and team have navigated recent market volatility and position ProPetro to thrive in any environment. Our resilience is a direct result of several things, namely a legacy completions business that is profitable through various cycles and will continue to fuel our growth in PROPWR, as well as our investments, including FORCE electric fleets, PROPWR and a thoughtful M&A approach that together provide us with a rock-solid foundation to withstand market turbulence.

And lastly, our core strengths of our strong balance sheet with low debt, first-class customers and a first-class team, a team that's proactive and quick on its feet, for which I'm immensely thankful. At the end of the day, we're well prepared for what lies ahead and remain confident in both our strategy and the future of our company. We've built significant momentum and a strong foundation, and I'm certain we will continue to build on this progress. None of our achievements would be possible without the dedication and hard work of our ProPetro teammates. Your commitment to operating safely, efficiently and responsibly inspires confidence in our ability to navigate this dynamic environment. Thanks for everything you do. With that, operator, we'd now like to open the line to questions.

[Operator Instructions] The first question comes from Derek Podhaizer, Piper Sandler.

I just wanted to start off with more of a bigger picture question on the Permian Basin. So we talked about approaching 70 fleets from the 90 to 100 at the start of the year. This means 20 to 30 idle fleets, and you talked about potential for persistent uncertainty moving into 2026. just how much of an overhang do you think this will be on the Permian Basin? How can we think about the industry working through this big oversupply with the frac equipment and how it will impact ProPetro going forward?

It's a great question, Derek. I think it's -- I mean, it kind of boils down to traditional supply and demand. And you've heard us talk a lot about the kind of tiering or stacking of frac supply with electric and all gas offerings at the top and all diesel offerings at the bottom. It's very obvious that the most disrupted part of that supply stack is the diesel equipment. That's been exactly what's happened to us as well. We think because of the looseness in the market and some of the lack of disciplined pricing we've seen at that lower end of the market, it likely is a long-term tailwind via attrition. So we're just choosing not to play in that loose part of the market right now.

All the meanwhile, the top end of our stack, several of our dual fuel fleets as well as all of our electric fleets are humming along nicely with absolutely no disruptions to pricing or activity. So I'd hate to be a player in the market that hasn't invested in some of this next-generation equipment and it's just sitting on the lower end of that stack. How long does the looseness last? Hard to see. But as you could see by our guidance and kind of our outlook in the back half of the year, we think that, that kind of looseness in the market is here to stay for at least 2025, possibly into the first part of 2026. Beyond that, if and when the market does turn up a little bit, we're -- I don't know if there's going to be anybody better positioned in the Permian Basin than us to play into a recovering market sometime next year.

Got it. That makes sense. I guess turning over to PROPWR, excited to see the inaugural contract there. You mentioned you're kind of honing in on your next equipment orders. I'm just curious if you'll -- any thoughts around continue to go with the recips or the smaller turbines or maybe you step into the larger turbines? And also, are you still going to be focused in on the oil and gas industry? Or do you think we'll see any potential to expand in more industrial applications and potentially even data centers?

Yes. Look, I mean, we're really happy with the flexibility of the gas recips and the smaller turbines that we have on order right now. It's giving us a lot of optionality in the market from a contracting standpoint and the type of work. So beyond the 220 megawatts that we've ordered, you'll likely see some of the same. But beyond that, we're probably going to hold kind of our cards pretty tight to the best in terms of any other types of power sources that we're getting into, given that that's pretty competitive from a supply chain standpoint. Remind me of the second part of your question?

Just the end markets staying in oil and gas or potentially looking into industrial, yes.

Really strong demand pull in oil and gas right now, mainly production and midstream. We -- in our scripted remarks in our press release, hinted at more announcements coming in the near future, things that we have in the pipeline that are very close to the finish line. Those deals are likely very similar, maybe varying in size, but very similar in structure to what you saw with the first contract that we recently announced.

And demand is really good in oil and gas. So here initially, we're really going to stick to and hammer what we know right here in our backyard. Beyond that, look, we're having some really interesting exploratory conversations about non-oil and gas opportunities. Remains to be seen how quickly some of those can materialize. But look, if you're in the power supply chain and you're an operator of megawatts of scale, which we are, your opportunities, frankly, just show up at your doorstep. So we're sifting through a lot of different things from a long-term strategic standpoint that leave us really, really excited about the future prospects of PROPWR.

The next question comes from Eddie Kim, Barclays.

Thanks for all the commentary about the market conditions. Just wanted to ask about how we should think about the trajectory for 4Q. You mentioned in prepared remarks kind of normal seasonal patterns. But looking at the past 2 years, your revenue in 4Q had a double-digit sequential decline. Is that the level of decline sort of consistent with how you typically think about normal 4Q seasonality? And just -- I mean, in particular, this year, should we potentially expect maybe some incremental softness on top of normal seasonality, just given the market conditions currently? Any thoughts there would be great.

Yes. Look, I mean, to be honest, it's a little bit hard to see into 4Q right now. We're very confident about our 3Q guide that we gave, 10 to 11 fleet. That said, I mean, look, there's -- your numbers are correct on the last year or 2 from like a 3Q to 4Q, but we've also seen quarters that have gone the opposite direction as well. So I think it kind of all depends on what the commodity price does and what the forward look looks like for the E&P space if they can gain more certainty around their plans going into 2026 and do they want to secure some of that work earlier rather than later.

Also, when we talk about seasonality, just to clarify, it's usually off of that 3Q mark. So our 10 to 11 fleet guide -- so would there be regular holiday white space on top of the 10 to 11 fleets, which we expect to be active through the end of the year. I think we just right now are being conservative with some holiday white space. But look, we're also -- here we sit with a pretty pessimistic near-term market view. But at the same time, we continue to have conversations with our customers and prospective customers about projects that could change that outlook pretty drastically and pretty quickly. We just don't have any certainty of that right now. So we're going to be pretty conservative and realistic as we look into the back half of the year.

Got it. Great. That's helpful. Just shifting to PROPWR. It's great to hear your confidence in securing long-term contracts for that entire 220 megawatts by year-end. I'm a little surprised just given the challenging market conditions in oil and gas currently. But I mean, does that just suggest that power demand even for microgrids is almost independent of, I guess, drilling and completions activity and I guess it's more tied to midstream and production. Or are operators kind of looking past kind of near-term weakness maybe in anticipation of market conditions kind of rebounding next year? Any thoughts there would be great.

Yes. These first few steps from a power standpoint for us as it pertains to our entrance into the market are noncompletions related. So production in midstream, like you mentioned and like we've mentioned in the last couple of calls here. So that is -- that's quite bifurcated or maybe disconnected from some of the volatility that we see in the drilling and completions market. And it's really aimed at, at the end of the day, cost savings for our customers. So even if they cycle down, overall, the space cycles down on the drilling and completion side, it doesn't mean that they quit producing their wells and that they're not continuing to look for ways to lift that production and move it in a less expensive manner. And that's right what we're aimed at right now. So as the Permian continues to have power demand needs, then on the -- mainly on the production side, we think we're really well positioned to create quite a bit of stability in our business long term by being a bit separated from the completions and drilling space with our power offering.

The next question comes from Grant Hynes, JPMorgan.

So you guys messaged 10 to 11 fleets kind of in 3Q, down about 20% from the 13, 14 in the second quarter. But in your prepared remarks, highlighted some of the simul-frac work, particularly on the FORCE fleet side. Could you maybe give us some color, I guess, on how much more simul-frac might be working kind of in the second half versus the first half and perhaps utilization on a horsepower basis when we just think about sequential change kind of versus the 20% reduction in fleet count?

Yes. I don't know how much we want to detail we want to give there. I'd say proportionally, it's pretty similar. Simul-frac continues to be a big part of our business, especially on the electric side. We don't think there's any better safety, cost efficiency way to approach completing your wells other than with an electric simul-frac setup. So more of that probably going into next year as we continue to expand our FORCE offering. But kind of quarter-over-quarter, it's pretty proportional from a simul zipper standpoint.

Got you. And then maybe transitioning to power. You mentioned sort of the initial deployment for that 80-megawatt contract starting in 3Q of '25 and into 2026. How should we think about sort of the lead time on the asset deployment and anything in terms of sort of start-up costs and the deployment there?

Yes. I mean you'll see a little bit of start-up costs that are being beared in our numbers that we disclosed in our press release information. So there will be a little bit of that. It's really not much. I mean this business is much more personnel light than our legacy completions businesses. And that equipment will deploy in a pretty linear manner from 3Q through midyear next year. As I -- as we mentioned in our remarks, we mentioned earlier, we're also in very developed discussions with our suppliers on our next orders that likely we could take delivery of in 2026 -- inside of 2026 as well if those orders are placed fairly soon.

So that could even be a tailwind to estimates and expectations as it pertains to our power business in 2026. I'll also say as it pertains to whatever that next order may look like, we'll be pretty quiet on what type of equipment that's going to be. But in terms of size, we think each one of our orders in the power space will likely be very meaningful. We don't have any interest in kind of trickling out the size of PROPWR. We have every interest in multiplying the size of this business as quickly as possible given the pipeline of opportunities that we're seeing. So we're quite serious and focused about scaling that business as quickly as possible into the opportunity set that we're seeing.

[Operator Instructions] The next question comes from Waqar Syed, ATB Capital Markets.

Sam, a big picture question. We're all trying to figure out like how this decline in completion activity in the Permian, how it's going to impact the production in the basin. But from your perspective, as this activity declines in the number of crews decline, it is likely -- a lot of that is being offset by the simul-fracs. So do you have a sense that if activity -- your completion crews is down like by 25%, then in terms of the total footage that is fracked, how much lower that is?

Yes. Hard to say, Waqar, I can tell you just -- and this is my personal opinion, viewpoint on this. It's been quite surprising to me that we haven't seen production, at least in the Permian Basin, but domestically in the U.S. roll more than it has. I think it's starting to plateau and show signs of potentially developing an early downward trend. But I -- as we sit here boots on the ground, counting every crew that we know of working and counting up the simul-frac crews that we know of here in the Permian Basin across the whole space, it's really, really hard for me to believe that we are at an activity level that's going to sustain Permian production today.

There has -- as you mentioned, there's been several efficiency developments over the last few years, things like simul-frac that have increased maybe completed footage per crew. I do not think at all that we are outrunning that right now. So I would expect sometime in the future Permian production to roll just from our point of view, kind of in the completion services space.

Great. And then by my calculations, you've got like 7 Tier IV DGB fleets, let's say, 4 FORCE fleets. So should we assume that everything that's working is for you, those 11 fleets, all of them are the next-generation fleets? Or do you have any one of the Tier IV DGB fleets being down and a Tier 2 working?

There's a little bit of diesel still in the system right now. But as I mentioned earlier, when I kind of described the supply stack, the dual fuel and electric have been far more resilient.

So you do have a Tier IV DGB fleet down?

We have some Tier IV DGB equipment down right now. We'll not say much more than that.

Okay. And like if I look at your quarter-over-quarter EBITDA progression for the different business lines, it seems like wireline is tracking the fracking business relatively closely. So as we look into Q3, again, does it track -- wireline track has the same trajectory as fracking?

Yes. it's going to track pretty closely with everything else as is cementing has tracked kind of rig count -- kind of the changes in rig count fairly closely as well.

No, I noticed that in cementing, EBITDA quarter-over-quarter was down about almost 42%, 43% versus 24%, 25% declines for wireline and cementing. It's just -- is there anything in particular going on with cementing? Or it's just the scale thing small -- so a small change makes a bigger difference?

That and a full quarter effect of drilling rigs, parking, that always happens ahead of frac fleets and wireline units. So we started to see cementing deteriorate in really towards the end of the first quarter. So you're seeing a full quarter effect of some of that.

The next question comes from Jeff Leblanc, TPH.

Regarding your contracting capacity long term, should we be aware of any price reopeners? Or I guess, more broadly, how should we think about the stability of the pricing given that historically, you've expressed a willingness to work with your long-term customers?

Yes. The contracts are pretty set on the contracts that we've talked about that we have on the dual fuel and electric side. There's -- on average, there's some semiannual adjustments to those prices, but they're pretty formulaic and passive, usually resulting in low single-digit changes that are pretty hard to see probably from the outside point of view. So pretty stable.

The next question comes from Don Crist, Johnson Rice.

Most of my questions have been answered, but I did want to ask one kind of more macro question, and it relates to just the broader equipment out in the space today. You've seen some of your smaller competitors sell their equipment and that equipment is going overseas. And then NOV talked about 5 or 6 different countries around the world that are exporting unconventional technology to go frac their wells. And just a broader question as to are you seeing demands for the sale of your kind of diesel stuff to go overseas? And do you think that can more balance the market as we kind of look out a year or 2 as more of this equipment moves overseas?

Look, I think the demand is there. And I think there's a lot of different places globally that are taking notice of how we do what we do over here as an industry. No surprise, but America innovates and works harder to figure out how to do more with less than any other country of the world, and that is maybe more evident in the energy space than any other place. And we have fielded inquiries from other countries about not only equipment, but expertise and services as well.

It's hard to say if that's like a meaningful variable in what happens domestically to supply and demand, but I think it definitely helps. So we'll watch that closely. And we've been a pure Permian pressure pumping frac provider for the history of our company. But it doesn't mean that we don't answer some of those phone calls and entertain some of those ideas because there are some instances where that could make a lot of economic sense because of some of these other areas across the globe being so interested in what we do and how we do what we do. So I think it could be a help, Don. I think it will likely improve the supply and demand equation a little bit. Hard to say how much.

I appreciate that color. And if I could sneak in one more. If you were going to order some new solar turbines today, what would the lead time on that be? We're hearing it's extended out pretty far.

It's not getting any shorter. And I'll probably stop quoting an exact number, but we've got a great relationship in that part of the supply chain, and we're pretty confident that we'll be utilizing those relationships to continue to scale our power business in a meaningful way.

[Operator Instructions] The next question comes from John Daniel, Daniel Energy Partners.

Sam, sort of a big picture question. Your -- on the release, you note the market in the Permian has gone from, call it, 90 to 100 and maybe down to the 70 range. I'm just curious like -- if no one had reduced pricing 6 to 9 months ago, would the frac fleet be 60? Or would it still be 70? What do you think it would be?

I don't know. I mean, I don't -- 6 to 9 months ago, I don't know if there was a ton of pricing change in the market. I think the activity disruptions we at ProPetro have seen most recently have been due to pricing movements in the last 30 to 60 days.

And that's fine. call it, 90 days ago. I just -- my question is, what's the right level of demand you follow me? And is service pricing really having an influence on whether they keep or release the fleet? I guess that's what I'm getting at.

I don't know. There's probably 10 to 20 fleets in the market that are doing what I just frankly call stupid stuff right now. So could it be lower? And look, I have to commonly remind ourselves and remind others discipline in the frac space is either saying no to work that doesn't make a return or saying no to building the next piece of equipment in a way, we're doing both right now.

It would encourage others at the bottom end of the market to do the same because it doesn't turn out well when you're making decisions that don't cover your cash cost to operate your fleets. Another thing, I think, in this that maybe has lost a little bit that we've recently talked about is if fleets have moved from, say, 90 to 70, and we've moved from 15 fleets to 10.5 fleets at the midpoint of our guidance, we've not lost any market share at all. And that's the same market share of the activity that exists in the Permian right now. And we're prioritizing protecting our margins and protecting our equipment because we think that, that's the rational right business decision for us.

Fair enough. And then, Sam, I guess another one, if you'll entertain this one, but like the guys that -- when you go from, say, 15 down to 10.5%, the customers that are using those 4 fleets, do you have any indication from them whether this is budget related, just pure price competition? Do they come back next year? Just some thoughts on maybe where the Permian frac market might be normalized if there's ever a word in this business, but for next year.

Yes. This is an interesting question, John. I'm glad you asked that. It's -- to be candid with you, this is mainly one customer of ours that we're talking about that's had a fairly frantic response to changes in commodity prices and outlook. So we then -- back to my kind of description of what discipline looks like, we then have to make our own voluntary decisions. Do we want to help them with that issue? Or do we want to save our equipment and our margins for a better day? We've chosen the latter.

The next question comes from Stephen Gengaro, Stifel.

I joined late, so I apologize, Sam, if you answered this. But when we think about the efficiency gains across the drilling and completion life cycle of a well. Is there a way -- or have you guys thought about how do we get the fair value we're extracting, right? So to the extent you're more efficient than you were a year or 2 ago, like is it just not possible? Or is there a way to drive value for you or the high-end pressure pumpers for the efficiencies you bring to the table?

I can tell you this much pretty plainly. When you have next-generation equipment, you're able to contract that equipment. We're doing that inside of those contracts. I don't want to say too much more about kind of our commercial model and architecture because we're pretty proud of how creative and innovative we've been on that end. But there is light at the end of that tunnel, Stephen, and we are doing that in some instances. It's mainly around our electric equipment. That's another reason why given kind of our bullish long-term outlook and our confidence in things like our electric equipment, we start to discuss should we accelerate investment and deployment of more equipment like that. We really like that idea, and we're kind of working through how we can do that going into next year so that we can capitalize on those efficiency gains and the other benefits that things like electric equipment bring to bear.

Ladies and gentlemen, this was our last question, and this concludes our Q&A session. I would now like to turn the conference back over to CEO, Sam Sledge, for closing remarks.

Thanks, everyone, for joining us today. Thanks for your interest in ProPetro. We look forward to talking to you again soon. Have a great day.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Goodbye.