DEF 14A: ProPetro Holding Corp. Files Proxy Statement for 2024 Annual Meeting, Highlighting Financial Growth and Sustainability Initiatives

Sentiment:

Proxy Statement 21 March 2024 4:15 PM

ProPetro Holding Corp.'s proxy statement details the agenda for the 2024 annual meeting, showcasing a year of revenue growth, strategic acquisitions, and advancements in sustainable operations.

Worse than expectedThe company's performance under the 2023 Annual Bonus Plan with respect to Adjusted EBITDA was below target.The company's performance under the 2023 Annual Bonus Plan with respect to Free Cash Flow was below threshold.

Summary

ProPetro Holding Corp. has filed its proxy statement for the 2024 annual meeting of stockholders.
The company saw a 27% increase in revenues to $1.63 billion and a rise in net income to $86 million in 2023.
Approximately 5.8 million shares, representing about 5% of outstanding common stock, were repurchased and retired as part of a capital allocation plan.
The company deployed its first two FORCE SM electric fleets and expects two more in the first half of 2024.
FORCE SM electric and Tier IV DGB Dual-fuel fleets will represent approximately 65% of the company's hydraulic fracturing capacity.
ProPetro published its inaugural ProEnergy ProPeople Sustainability Report.
An accretive acquisition expanded cementing services into the Delaware Basin.
The annual meeting of stockholders is scheduled for April 23, 2024.
Nine director nominees are up for election, and stockholders will vote on executive compensation and the ratification of the independent accounting firm.
The company's sustainability efforts include transitioning to lower emissions equipment, with approximately 60% of fleets utilizing next-generation electric or Tier IV DGB equipment.
Tier IV DGB equipment displaced almost 20 million gallons of diesel in the last three quarters of 2023, resulting in an 8.1% reduction in CO2e emissions for operations with this equipment.

Sentiment

Score: 7

Explanation: The document presents a balanced view, highlighting both achievements and challenges. While financial performance improved, some key metrics fell short of targets. The focus on sustainability and strategic initiatives suggests a positive long-term outlook.

Positives

Significant improvement in financial performance with increased revenues and net income.
Successful execution of fleet transition strategy with deployment of electric fleets.
Proactive capital allocation plan with share repurchase program.
Commitment to sustainability and reduced emissions through fleet upgrades.
Expansion of service offerings through accretive acquisition.
Strong safety culture reflected in the Total Recordable Incident Rate of 0.68.
Continued investment in community and commitment to strong governance.

Risks

The service sector is expected to remain bifurcated.
The customer base is disciplined and consolidating.
The market is expected to have low-to-no-growth.

Future Outlook

The company expects the service sector to remain bifurcated in 2024, with strong demand for top-tier service providers like ProPetro. They believe they are uniquely positioned to deliver high-quality service at competitive rates through their next-generation equipment and operational density in the Permian Basin.

Management Comments

Samuel D. Sledge, Chief Executive Officer, stated that 2023 was a year of challenges and opportunities, and the company improved profitability, executed a disciplined approach to asset deployment, successfully pursued accretive growth, and implemented a sustainable capital allocation plan.
Mr. Sledge expressed confidence that ProPetro is well-positioned to execute on value-enhancing opportunities in 2024 and beyond.
Management believes that demand for their service offerings has remained strong despite a disciplined and consolidating customer base and a low-to-no-growth market.

Industry Context

The announcement highlights ProPetro's strategic focus on the Permian Basin, a key region for North American oil and gas production. The company's investments in electric and dual-fuel fleets align with the industry's increasing emphasis on sustainability and reduced emissions. The comments on market bifurcation and customer consolidation reflect broader trends in the oilfield services sector.

Comparison to Industry Standards

The document mentions several companies in its peer group, including Archrock, ChampionX, Helmerich & Payne, Liberty Oilfield Services, Nabors Industries, NexTier Oilfield Solutions, Nine Energy Services, Oil States International, Patterson-UTI Energy, Precision Drilling Corporation, RPC, Select Energy Services, and U.S. Silica Holdings.
These companies are used for benchmarking executive compensation and TSR performance.
ProPetro's focus on electric and dual-fuel fleets is comparable to initiatives by companies like Liberty Oilfield Services and NexTier Oilfield Solutions, which are also investing in lower-emission technologies.
The company's TRIR of 0.68 is a key metric for comparing safety performance against industry averages and competitors.

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Director Independence	The Board has determined that Messrs. Armour, Best, Lawrence, and Moore and Mss. Ricciardello and Vion are independent, as defined by the NYSE rules.	N/A	Ensures compliance with NYSE rules and enhances board oversight.
Board Leadership Structure	The Board has chosen to separate the positions of Chairman and Chief Executive Officer.	N/A	Enhances corporate governance and allows each of our Chairman and Chief Executive Officer to remain focused on their distinct roles.
Board Leadership Structure	The Board updated our Corporate Governance Guidelines to limit the number of public company boards on which a director may sit in accordance with best governance practices.	February 2024	Helps ensure that our directors can give appropriate time and attention to the affairs of the Company.
Director Nominations Process	Our updated corporate governance guidelines, effective as of February 2024, reflect the Nominating and Corporate Governance Committee and the Board are committed to considering diversity when identifying candidates for nomination to the Board.	February 2024	Promotes diversity and inclusion on the Board.
Non-Employee Director Stock Ownership Guidelines	We maintain a non-employee director stock ownership policy that is applicable to all our eligible non-employee directors.	N/A	Aligns the interests of non-employee directors with those of our stockholders.
Employee Compensation Claw-Back Policy	Effective October 11, 2023, we adopted the ProPetro Holding Corp. Incentive-Based Compensation Recovery (Clawback) Policy (the Clawback Policy).	October 11, 2023	Allows us to claw-back compensation in the event of a financial restatement or certain misconduct.

Related Party Transactions

The Company rents three yards from South Midkiff Partners, LLC, an entity partially owned by Spencer D. Armour III, a director, and David Sledge, the father of Sam Sledge, our Chief Executive Officer.
Adam Muoz, our President and Chief Operating Officer, has a family relationship with an employee of J&M Burns Transportation, an entity that provides transportation services to the Company.
Oscar M. Dominguez is our Vice President of Hydraulic Fracturing Operations and the brother-in-law of Adam Muoz.
Roger Dominguez is our Supply Chain Logistics Manager and the brother-in-law of Adam Muoz.
Revenue from services provided to Pioneer (including reservation fees) accounted for approximately $125.1 million during the year ended December 31, 2023.

Stakeholder Impact

Shareholders: The company's financial performance, share repurchase program, and commitment to sustainability are all factors that could impact shareholder value.
Employees: The company's focus on safety, training, and employee engagement initiatives could impact employee morale and productivity.
Customers: The company's investments in next-generation equipment and service offerings could impact customer satisfaction and competitiveness.
Community: The company's community investment initiatives could impact the well-being of the communities in which it operates.

Next Steps

Stockholders are invited to attend the annual meeting on April 23, 2024.
Stockholders are encouraged to review the proxy statement and submit their votes.
The company expects to continue publishing sustainability reports annually.
The company plans to continue engaging in ongoing stockholder outreach regarding corporate governance generally, including executive compensation programs.

Key Dates

Date	Description
2005	The Company was founded.
2010	Management strategically focused the Company's efforts on establishing a best-in-class hydraulic fracturing platform targeting the Permian Basin.
2013	Spencer D. Armour III has served as a member of our Board since February 2013.
2017	We consummated the initial public offering of shares of our common stock.
January 2018	Anthony J. Best has served as a member of our Board since January 2018.
February 2019	Mark S. Berg has served as a member of our Board since February 2019.
July 2019	Phillip A. Gobe began serving as our Chairman of the Board in July of 2019.
October 2019	Phillip A. Gobe began serving as Executive Chairman in October 2019.
October 2019	Anthony J. Best was elected to serve as Lead Independent Director in October 2019.
December 2020	G. Larry Lawrence was appointed to our Board in December 2020.
March 13, 2020	Phillip A. Gobe was appointed as our Chief Executive Officer on March 13, 2020.
March 2020	Adam Muoz served as Senior Vice President of Operations since March 2020.
March 2020	Samuel D. Sledge served as Chief Strategy and Administrative Officer beginning in March 2020.
October 12, 2020	David S. Schorlemer began serving as a Special Advisor to the Chief Financial Officer on October 12, 2020.
October 23, 2020	David S. Schorlemer was appointed as Chief Financial Officer on October 23, 2020.
December 2020	G. Larry Lawrence was appointed to our Board in December 2020.
April 2021	Samuel D. Sledge previously served as the Company's President from April 2021 to August 2021.
April 2021	Jody Mitchell served as the Company's Vice President and Deputy General Counsel since April 2021.
January 2021	Adam Muoz served as Chief Operating Officer since January 2021.
August 31, 2021	Samuel D. Sledge has served as our Chief Executive Officer and as a member of our Board since August 31, 2021.
August 2021	Adam Muoz has served as our President and Chief Operating Officer since August 2021.
March 31, 2022	Mr. Gobe stepped down as Executive Chairman on March 31, 2022, and continues serving the Company as Chairman of the Board.
March 2022	We amended and restated our agreement to provide pressure pumping and related services to Pioneer, which reduced the number of contracted fleets to six fleets from eight fleets, modified the pressure pumping scope of work and pricing mechanism for contracted fleets, replaced the idle fees arrangement with equipment reservation fees and provided for an initial term from January 1, 2022 through December 31, 2022, subject to extension and termination as described therein.
October 31, 2022	On October 31, 2022, we entered into (i) a certain Pressure Pumping Services AgreementFleet One Simulfrac (the Fleet One Pressure Pumping Agreement) and (ii) a certain Pressure Pumping Services AgreementFleet Two (the Fleet Two Pressure Pumping Agreement), which replaced all previous agreements with Pioneer and reduced the number of contracted fleets to two fleets.
January 1, 2023	The Fleet One Pressure Pumping Agreement was effective as of January 1, 2023 and terminated in August 2023.
January 1, 2023	The Fleet Two Pressure Pumping Agreement was effective as of January 1, 2023.
January 1, 2023	Jody Mitchell has served as our General Counsel and Corporate Secretary of the Company since January 2023.
January 2023	Ms. Ricciardello has served as a member of our Board since January 2023.
February 2023	In February 2023, we mutually agreed with Pioneer to terminate the Fleet Two Pressure Pumping Agreement, effective on or about May 12, 2023.
February 24, 2023	On February 24, 2023, the Audit Committee dismissed Deloitte & Touche LLP as our independent registered public accounting firm.
February 24, 2023	On February 24, 2023, the Audit Committee approved the engagement and appointment of RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2023.
May 2023	As part of our disciplined and sustainable capital allocation plan, we initiated a share repurchase program, and repurchased and retired approximately 5.8 million shares, representing approximately 5% of our outstanding common stock at the time the plan commenced in May 2023.
May 2023	Mr. Best retired as the Chairman of the board of Newpark Resources in May 2023.
June 2023	Mr. Gobe previously served as Chairman of the Board for Pantheon Resources plc until his June 2023 retirement.
July 1, 2023	Our Amended and Restated ProPetro Holding Corp. Non-Employee Director Compensation Policy (the Director Compensation Policy) provides that each eligible non-employee director receives the following, effective as of July 1, 2023.
August 2023	The Fleet One Pressure Pumping Agreement was effective as of January 1, 2023 and terminated in August 2023.
August 2023	Celina Davila has served as our Chief Accounting Officer since November 2023. Prior to her appointment as Chief Accounting Officer, Ms. Davila served as the Company's Director of Accounting and Corporate Controller since August 2022 and as Corporate Controller since October 2019.
October 2023	In October 2023, ProPetro published its inaugural ProPetro ProEnergy ProPeople Sustainability Report , advancing our goals of increased disclosure and transparency regarding our operations.
October 11, 2023	Effective October 11, 2023, we adopted the ProPetro Holding Corp. Incentive-Based Compensation Recovery (Clawback) Policy (the Clawback Policy).
November 2023	Shelby Fietz has served as our Chief Commercial Officer of the Company since November 2023.
November 26, 2023	The amount included herein for Mr. Fietz reflects the prorated base salary Mr. Fietz received during 2023 based on his promotion to Chief Commercial Officer of the Company effective November 26, 2023.
December 31, 2023	The Audit Committee has selected RSM US LLP, independent registered public accounting firm, to audit our consolidated financial statements for the fiscal year ending December 31, 2024.
December 31, 2023	During our two most recent fiscal years ended December 31, 2022 and December 31, 2021 and during the subsequent interim period from January 1, 2023 through February 24, 2023, (i) there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures that, if not resolved to Deloitte & Touche LLP’s satisfaction, would have caused Deloitte & Touche LLP to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no reportable events as defined in Item 304(a)(1)(v) of Regulation S-K.
December 31, 2023	During our two most recent fiscal years ended December 31, 2022 and December 31, 2021, and for the subsequent interim period through February 24, 2023, neither the Company nor anyone on its behalf consulted RSM US LLP regarding (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the consolidated financial statements of the Company, in connection with which either a written report or oral advice was provided to the Company that RSM US LLP concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.
February 26, 2024	The Board set February 26, 2024 as the record date for the meeting.
February 2024	Our updated corporate governance guidelines, effective as of February 2024, reflect the Nominating and Corporate Governance Committee and the Board are committed to considering diversity when identifying candidates for nomination to the Board.
March 21, 2024	This proxy statement and our 2023 Annual Report on Form 10-K will be mailed on or about March 21, 2024
April 23, 2024	The annual meeting of stockholders is scheduled for April 23, 2024.
April 22, 2024	To attend the annual meeting in person, you must call our Director of Corporate Development and Investor Relations at (432) 848-0871 no later than 5:00 p.m. Central Time on April 22, 2024 to have your name placed on the attendance list.
January 23, 2025	If you want to present a proposal of business or nominate persons for election to the Board at the 2025 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on January 23, 2025 and no earlier than the opening of business on December 23, 2025, and follow the procedures outlined in our Bylaws.
December 23, 2025	If you want to present a proposal of business or nominate persons for election to the Board at the 2025 annual meeting of stockholders or nominate a person for election to the Board at such meeting, you must give us written notice no later than the close of business on January 23, 2025 and no earlier than the opening of business on December 23, 2025, and follow the procedures outlined in our Bylaws.
November 11, 2024	If you wish to submit a proposal to be considered for inclusion in next years proxy statement pursuant to Rule 14a-8 of the Exchange Act, you must submit the proposal so that it is received by November 11, 2024.

Keywords

ProPetro, hydraulic fracturing, completion services, Permian Basin, electric fleets, sustainability, ESG, share repurchase, annual meeting, proxy statement, governance, executive compensation, RSM US LLP, Tier IV DGB, FORCE SM

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