After a wave of consolidation in 2023—and assorted fourth-quarter challenges—ProPetro sees itself well positioned in the post-M&A landscape of the Permian Basin.

For now, the company is holding steady. The Permian-focused oilfield service company sees a “low-to-no-growth environment” ahead as customers hold fast to capital discipline, CFO David Schorlemer said during a Feb. 21 earnings call.

The company, which endured a rough fourth quarter to end 2023, said more industry consolidation will ultimately benefit the company. Larger Permian E&Ps should turn to ProPetro’s FORCE fleet, which furthers electrification goals and reduces completion costs and emissions, company executives said.

The company posted a sizeable EBITDA miss in the quarter—$64 million compared to Wall Street consensus of $78 million—due to a “greater-than-expected decline in utilization ([customer] budget exhaustion/seasonality related) and the decision to retain crews for 2024,” said Jeff LeBlanc, a Tudor, Pickering, Holt & Co. analyst, in a Feb. 21 commentary. ProPetro also missed free cash flow expectations.

PrePetro CEO Sam Sledge said the company warned about those challenges in the third quarter, but acknowledged that the impact on activity in the fourth quarter “was more than we had expected.”

“We think it's just something that hit us from an external circumstances standpoint that was unexpected and obviously unfavorable,” he said. “But where we are here in January and February this year and what our outlook is for 2024, we're pretty pleased with how we're positioned.”

Sledge said ProPetro, a pure-play Permian service company, “is uniquely positioned” to capitalize off recent transactions by E&Ps.

In addition to its service quality and equipment, the company’s “operational density in the Permian … insulates us from the uncertainties outside the Permian and in the spot market.”

Sledge also addressed service pricing in 2024, expressing optimism going forward.

“It’s definitely not peak pricing, like what maybe we saw in the first half of 2023,” he said. But ProPetro sees itself in a bifurcated market in which the company’s natural-gas burning and dual-fuel electric fleets can outcompete with peers, or at least not “get picked out on the fringes by a spot diesel market.”

Sledge said that after working in the sector for 13 years and surviving multiple mini-cycles, “this is the most discipline I've ever seen in my career. And that gives us a lot of confidence to go forward with our strategy and a lot of the things that we value today. So, think pricing is pretty important and how the whole market is behaving is really healthy.”

Fourth quarter and beyond

For the quarter, ProPetro reported revenue of $348 million, down from $424 million in third-quarter 2023. The company posted a net loss of $17 million compared to a net income of $35 million in the previous quarter.

The company posted adjusted EBITDA of $64 million in the quarter, also down sequentially.

Piper Sandler analysts said that after deferred activity to end the year, its first-quarter fleet count is expected to snap back.

ProPetro “now has two FORCE fleets deployed under contract, and the other two should be rolled out under contract in the coming months. 6% of shares have been repurchased since last May, and '24 CAPEX guidance is a touch lower than the Street estimate,” analysts said in a Feb. 21 report.

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