ProPetro Holding Corp.

Good day. Welcome to the ProPetro Forwarding Corps Third Quarter 2022 Conference Call. All members, all participants will be in listening mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw a question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Mr. Matt Augustine, Investor Relations. Please go ahead.

Thank you and good morning. We appreciate your participation in today's call. With me today is Chief Executive Officer Sam Sledge, Chief Financial Officer David Shorlimer, and President and Chief Operating Officer Adam Munoz. Yesterday afternoon, we released our earnings results for the third quarter of 2022. 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. First and foremost, I'd like to express thanks for the continued hard work and high level of execution from our ProPetro team. We are excited to report that in the third quarter of 2022, we continued our track record of operational excellence along with strong strategic execution and financial performance. I'll let David speak more to this in a moment, but at a high level, we are very pleased to produce sequential top line and bottom line increases in the quarter. Some of our key highlights include the highest adjusted EBITDA margin in the history of our hydraulic fracturing business with the exclusion of a COVID-related anomaly in the second quarter of 2020. We had nearly 80% incremental adjusted EBITDA margins for the total company on flat effective fleet utilization, reflecting our discipline returns-based strategy. Additionally, our submitting business had their highest revenue quarter ever while achieving 100% sequential adjusted EBITDA growth. Also, this was the third consecutive quarter of positive operating income for the company, excluding impairments. And finally, we completed the acquisition of Silver Tip Completion Services, a leading Permian Basin wireline and pump down company. There's a lot to talk about today and we're excited to share more on our strategy and recent actions mentioned above. We remain committed to executing on our discipline and focus strategy and it shows. In the third quarter, we took meaningful steps in our efforts to advance our strategy of pursuing accretive growth opportunities that expand our margins and increase free cash flow generation to create a stronger, more resilient, and more diversified company. Chief among those transactions is the one we announced yesterday, our acquisition of Silver Tip Completion Services. Also based in Midland, Texas, Silver Tip is a leading Permian Basin provider of wireline perforating and pump-down services. When coupled with our number one customer rated hydraulic fracturing and cementing businesses in the Permian, we now have a leading completions focused oilfield services company, and we are excited to have closed this value enhancing transaction and add this to our potent portfolio of services for our customers. However, before we speak in depth about Silvertip and the other important transactions that we have executed during the quarter, I want to take a step back and reflect on the macro environment in which we are operating and how we are looking at it from our vantage point. Just as it was when we spoke last quarter, the crude oil market continues to be structurally undersupplied, which is a trend we foresee continuing for the next few years, so as long as global investment in new production continues to lag. the overhang of a potential global recession has resulted in limited visibility into future near-term fuel demand levels. Given this limited visibility and E&Ps maintaining a disciplined capital spending posture when it comes to growth, we are anticipating steady to flat activity through the end of this year and into the first part of 2023. Additionally, for the E&Ps that are currently operating, equipment attrition continued delays in supply chain deliveries, and a tight labor market are further contributing to stagnated activity. Given these factors, we are seeing a number of EMPs elect to dedicate their resources and efforts towards high grading their service providers, with a clear delineation in the pressure pumping sector between those that are high grading to natural gas burning equipment like electric and Tier IV DGB and those that are not. This bifurcation is being even further exaggerated among those that are performing safely and efficiently at the well site and those that are not. As we look ahead, while at a slower pace, pricing momentum in the top half of this bifurcated market continues to be strong. The sense of urgency among our upstream partners remains intense, and opportunities continue to surface to expand margins through increased pricing. With a first-of-its-kind contracting window now open for frac services, we are optimistic that this momentum will continue. Additionally, we recently executed a new contract with Pioneer Natural Resources to start 2023 with two simulfrac fleets. We have already reserved the fleets not continuing with Pioneer with other Blue Chip customers, and our 2023 order book is full and effectively sold out with current market-based pricing effective in January. Next, I'd like to take a moment to highlight our expansion strategy and the actions we are taking to best position ProPetro for the long term. First, we are focused on optimizing our operations and industrializing our business, the result of which we expect to add resiliency to our ability to create meaningful incremental free cash flow in the future. Second, we are continuing to transition our assets to next-generation equipment in a more capital-like manner. And third, we are opportunistically pursuing strategic transactions that increase our competitiveness and accelerate value for our shareholders. To the first goal of optimizing our operations, we have initiated an internal optimization program for our maintenance and reliability operations. We expect this initiative will yield opportunities to improve our cost effectiveness and extend the life of our equipment, therefore reducing downtime and optimizing the utilization of our fleets. Second is our fleet transition. We are continuing to deploy Tier IV DGB conversions and look forward to beginning 2023 with six Tier IV DGB fleets in operation and at least seven in operation by the middle of 2023. This will give us one of the youngest dual fuel fleets of size in the region. As we've previously discussed, we have executed orders for two electric frac fleets from a leading manufacturer of electric equipment with expected delivery in the third quarter of 2023. Additionally, we are in advanced stages of contract negotiations with two large EMP operators to utilize these electric fleets in 2023 and beyond. Demand for electric-powered solutions is continuing to gain momentum, and we are excited to help our valued customers make their mark in the electrification of the Permian Basin oil field. We expect to have both of these fleets contracted by the end of 2022 with hopes of additional electric frac fleet orders in the future. As mentioned before, we believe in the upcoming electrification and industrialization of the Permian Basin. This technology coupled with the efficiencies that ProPetro is most known for, will support customers in their respective transitions to electrification. Given our view on the state of the global energy industry and the associated severe undersupply of crude oil and natural gas, we at ProPetro are convinced we are in the early stages of a sustained, multi-year-long upcycle and accordingly are confident in our plan to continue transitioning and electrifying our fleet. Finally, the third leg of our strategy, our pursuit of value enhancing, free cash flow, and earnings accretive transactions, particularly in more capital life businesses. This takes us to our recent acquisition of Silver Tip. Also based in Midland, Texas, Silver Tip is a provider of wireline perforating and pump down services, and together with our existing services profile, creates a leading completions focused oil field service company. Through its culture of data-driven decision-making and established track record of safety, Silvertip provides operators with efficient, high-quality wireline and pump-down services. Simply put, we are enthusiastic to have made this acquisition, which adds highly complementary, dedicated assets with substantial cross-selling opportunities to drive growth, strong free cash flow, and superior value creation. This combination also gives us more exposure to the completions well site and allows ProPetro to offer a more integrated and diverse service to our customers. Acquiring Silvertip represents another important step for ProPetro as we advance our strategy of pursuing accretive growth opportunities that expand our margins and free cash flow generation. In doing so, we are creating a combined organization that is even better positioned to serve our EMP customers with greater scale, efficiency, diversification, and integration. Going forward, Silver Tip's co-founder and president, Mike Wood, and his team of professionals will continue to manage Silver Tip within ProPetro, and we can't wait to begin sharing best practices while working alongside each other as we bring our companies together. And with the Silver Tip team receiving a large portion of their consideration for this transaction in ProPetro equity, we are fully aligned in our commitment to enhancing shareholder value. Indeed, both ProPetro and SilverTip share a like-minded and steadfast focus on leading the Permian in completion services execution, and we are excited to welcome the SilverTip team as we work to deliver best-in-class services for our customers, capture the significant growth opportunities inherent in this transaction, and unlock meaningful value for our shareholders of both companies. We expect this acquisition to increase 2023 adjusted EBITDA by approximately $65 to $75 million while converting approximately 80% of that EBITDA into free cash flow. Given this conversion rate, which is double our current conversion rate, the addition of Silver Tip will significantly enhance our free cash flow. And due to these attributes, we expect the transaction to be immediately accretive across all metrics. Moving forward, as we look to continue executing on our strategy, we will prudently deploy capital to fund value-enhancing growth opportunities along with investments in our frac fleet conversion. In parallel, we intend to reduce capital spending through enhanced operational efficiencies, deploy innovative technologies, and continue maintenance and operating process improvements. With that, I'd like to turn the call over to David to discuss our third quarter financial performance capital resources. David?