ProPetro Holding Corp.

Good day and welcome to the ProPetro Holding Corp. second quarter of 2026 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 Pro Power, Travis Simmering. This morning, we released our earnings results for the second 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 ACRA results to differ materially from our current expectations. We advise listeners to review our earnings release and risk factors discussed in our filing with the SEC. Also during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures, 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. Our second quarter 2026 financial results once again demonstrated the strength of our business model. While our reported results were negatively impacted by a few items during the quarter, the underlying performance of the business remains strong, giving us confidence as we move through the third quarter. Our completion business generated resilient free cash flow again in the second quarter, which we believe is one of the clearest demonstrations that the industrialized model we've built is working. Our disciplined approach to capital deployment, operational efficiency, and cost management, paired with strategic actions we've taken over the past several years to optimize our asset base, continue to produce attractive cash flow in positions as well as the market conditions improve. We will continue leveraging the industrialized nature of our completions business to support the expansion of Pro Power while maintaining disciplined capital allocation across the enterprise. Now let me quickly touch on some of the headwinds that impacted the quarter. During the second quarter, we increased our active fleet count from 11 to 12. As we've discussed previously, standing up a new fleet requires upfront maintenance and deployment costs before the full earnings benefit is realized. We also temporarily deployed an existing fleet outside of the Permian to support a limited scope FRAC program for a longstanding customer. The program experienced significant unexpected downtime before the fleet recently returned That work, together with severe weather across the Permian in June, created unexpected operational disruptions across a portion of our fleet and impacted our quarterly financial results. As we look into the third quarter and beyond, we're encouraged by what we are seeing from both our customers and the broader market. This is reinforced by increased drilling activity, with the Permian Basin rig count up nearly 10% off of its first quarter low, according to Baker Hughes. a leading indicator that supports the strength we're seeing across the market. That confidence is also reflected in our decision to activate a 13th fleet, which we expect to begin contributing toward the end of the third quarter. We've remained disciplined throughout this cycle and our capital allocation philosophy hasn't changed. We will only deploy additional horsepower when we see durable customer demand in an economic environment in which we can generate attractive long-term returns on our investments. Turning to the broader market environment, we acknowledge the significant macroeconomic uncertainty given the ongoing conflict in the Middle East. That said, these recent events have emphasized something that was already taking place across the North American completions market even before the Iran war started. We talked for several quarters about how market cycles create opportunity for discipline operators. And after several years of depressed returns, Many smaller and less disciplined competitors were unable to sustain their operations through a prolonged downturn. As a result, the industry has consolidated through attrition, and much of the excess frack capacity that once weighed on the market has largely disappeared. As activity has stabilized, customers are increasingly recognizing just how many frack cleats have exited the market, and that's leading to increasingly constructive conversations around demand and pricing. While it's still too soon to know the full implications that the conflict in the Middle East ultimately have on the global energy markets, early observations appear positive for our business. The floor appears to have risen for commodity prices, and that's translating into a more constructive operating environment. As a result, we're beginning to see positive pricing momentum across our completions business, particularly for our next generation natural gas burning fleet. where demand remains exceptionally strong given today's diesel versus natural gas prices. Industry-wide, next-generation natural gas burning fleets are effectively sold out, while available Tier 2 diesel equipment has also become increasingly limited. Today, the majority of our active frac horsepower is contracted, with most of these contracts scheduled to renew over the next six to nine months. because a significant portion of that contracted horsepower consists of natural gas burning equipment, we're optimistic about the pricing and recontracting opportunities as the market fundamentals continue to move in our favor. We're also seeing improving economics for our diesel fleets as the overall market tightens. Finally, we still estimate that the Permian Basin is currently operating at roughly a mid-70s frac fleet count. Importantly, We believe it would be very challenging to see the active fleet count return above the mid-80s without meaningful reinvestment and growth rather than replacement capacity. At this time, we do not expect that growth reinvestment to materialize. In our view, the industry is structurally tighter than many appreciate. The barriers to adding meaningful new supply remain high, and we expect that environment to persist. Now moving to pro-power. We've continued to make meaningful progress across the business since our last update, both commercially and operationally. Most notably, we've increased our contract to power generation capacity since our last earnings call, growing from approximately 240 megawatts to 350 megawatts committed under contract today. We believe that's a significant milestone and further validates both the demand environment and the commercial momentum we're seeing across the business. Those incremental awards include approximately 110 megawatts of power generation capacity committed under contract across two separate projects, one supporting a leading integrated upstream operator in the Permian Basin and another supporting a separate industrial customer. We're also engaged in advanced contract negotiations for an additional over 100 megawatts to support other oil and gas operations. These awards validate that Demand for reliable lower emission power solution extends well beyond data centers. We're seeing meaningful opportunities across the oil and gas and industrial markets as well. Importantly, while contract terms on these agreements are generally a little shorter in duration than those Pro Power is pursuing in the data center arena, the pricing and expected annual returns are highly attractive and accretive to the overall return profile of the ProPower business as it continues to scale. That being said, we still continue to expect the majority of our future power capacity to be deployed within the data center market. As a reminder, a significant portion of our strategic framework agreement with Caterpillar includes highly efficient, stationary, large natural gas engines purpose-built for data center and similar high-density applications. a meaningful differentiator that supports our commercial and operational advantages in this market. Importantly, we have pro power assets currently deployed and operating live on a data center project and meeting all performance obligations, making us one of the few behind the meter power providers currently operating in this market, providing prime power to a data center at scale. That's a meaningful milestone that reinforces what we've been saying for several quarters. We're executing in the field, not just talking about opportunities. Having assets successfully operating in the field strengthens our commercial position and provides customers with tangible examples of our execution capabilities as we continue pursuing additional opportunities. This operational progress is already translating into financial results. ProPower generated positive EBITDA in each of the final two months of the quarter, a notable achievement this early in the company's life. This is an exciting milestone as we scale deployments across multiple sites through the end of the year and into next year. Accordingly, we've also continued to make meaningful progress across our data center commercial pipeline, which includes a subset of several hundred megawatts currently in advanced negotiations. We also want to acknowledge that some of our discussions with data center developers and operators are taking longer than we originally anticipated. and frankly, it's not surprising now knowing the given size and duration of these agreements. These are generally very long-term commitments involving significant capital on both sides. So both the customers and ProPetro are spending considerable time evaluating contract structures, project timing and risk allocation, but demand has not waned. Interestingly, the strong demand we're seeing for assets can actually lengthen the contracting process. because we're focused on matching available capacity with the right long-term customers rather than simply signing the next available agreement. As project timing evolves across multiple opportunities, available capacity then shifts as well, creating new opportunities in some cases while extending timelines in others. We will remain disciplined throughout this process, prioritizing real, actionable opportunities and agreements, whether they're shovel-ready or already have shovels in the ground. that create the most long-term value for our shareholders. That said, we continue to see near-term momentum across our pipeline, including the contracts announced this quarter, and expect that momentum to continue through 2026. As we deploy capital to grow at ProPower, we're proud of the work we've done to position ProPetro's capital structure to support that growth. From a financing perspective, we've now raised approximately $1.5 billion over the past 18 months to help fund Pro Power's growth, including our highly successful offering of $690 million aggregate principal amount of convertible notes completed in May, which resulted in 0% coupon notes with no dilution for shareholders until the stock price reaches $29.49 per share after taking the effect of the associated cap call transaction into account. Going forward, we'll approach future capital decisions opportunistically as we continue expanding our commercial footprint and executing against our strategy. Most importantly, we're excited to pair this capital with a well-defined plan to grow our asset base under our long-term Caterpillar Framework Agreement, giving us clear visibility into both costs and Timeline of our equipment deliveries and deployments. We're extremely excited about the direction of the Pro Power business. The progress we've made commercially, operationally, and strategically continues to validate our long-term vision, and we look forward to sharing additional milestones soon. I'll wrap up now with a quick summary and then hand it off to Caleb. First, in the completions market, we like what we're seeing across our active track fleets, and we're excited to activate our 13th fleet later this quarter. We have strong visibility through the remainder of 2026 for these fleets, and we're pleased with the improving fundamentals we're seeing across the market. On the other side of our business, ProPower continues to build meaningful momentum as we focus on discipline execution, successful deployments, and continued de-risking of our operations. We believe this approach is building a strong foundation to support sustainable, profitable, long-term growth. We continue to expect ProPower to begin generating increasingly meaningful earnings during the second half of 2026 and into 2027 as deployments accelerate. Stepping back, the strategy we've been executing over the past several years continues to gain traction. Our completions business generates strong free cash flow and provides the financial foundation to help fund ProPower's expansion. While ProPower represents a differentiated growth platform well-positioned to capitalize on rapidly growing demand for reliable low-emissions power solutions. Importantly, Propetro is executing from a position of strength, pursuing value-enhancing growth opportunities backed by a demonstrated business model. We maintain a healthy balance sheet capable of funding Propower's continued expansion while preserving financial flexibility. At the same time, tailwinds are materializing across our completions business as supply tightens and demand for our distributed power solution continues to accelerate. Despite the operational headwinds experienced in our completions business during the second quarter, we're encouraged by what we're seeing as we move into the back half of the year. With a first-class customer base, a first-class team, and a disciplined strategy that continues to deliver results, we believe ProPetro is exceptionally well-positioned to create meaningful long-term value for our shareholders. With that, I'll turn it over to Caleb.