ProPetro at East Coast IDEAS: Strategic Shift to Pro Power

On Wednesday, 11 June 2025, ProPetro Holding Corp (NYSE:PUMP) presented at the 15th Annual East Coast IDEAS Conference. The company highlighted its robust free cash flow and strategic investments in new technology, particularly Pro Power. While emphasizing its discounted valuation relative to peers, ProPetro discussed both opportunities and challenges as it shifts towards an industrialized model with a focus on sustainability and innovation.

Key Takeaways

• ProPetro reported Q1 2024 revenue of $359 million and EBITDA of $73 million.
• Over 50% of equipment operates under long-term agreements, ensuring revenue stability.
• Pro Power aims to capitalize on growing power demand in the Permian Basin, with a significant contract for 80 megawatts over ten years.
• The company is transitioning to gas-burning and electric fleets to reduce emissions and improve efficiency.
• Strategic M&A activity focuses on capital-light acquisitions to enhance hydraulic fracturing operations.

Financial Results

ProPetro reported strong financial performance in Q1 2024:

• Revenue: $359 million
• EBITDA: $73 million
• Free cash flow: $22 million, potentially over $50 million without Pro Power investments
• The company experienced a Q4 impairment, resulting in negative net income, but underlying earnings remained robust.

Capital allocation is shifting towards the Pro Power business, with a share repurchase program initiated in May 2023. ProPetro has bought back 111 million shares, but the focus is now on investing free cash flow into Pro Power to facilitate growth.

Operational Updates

ProPetro maintains a strong focus on the Permian Basin:

• 100% of revenue is derived from Permian Basin operations.
• The company is open to expanding into other basins if opportunities arise.
• Transition to gas-burning and electric equipment is underway, with 50% of equipment under long-term agreements.

Pro Power is set to address the demand for power in the Permian Basin:

• The first contract is for 80 megawatts over ten years.
• Deployments are scheduled from Q3 to the middle of next year.
• Partnerships with Caterpillar and Solar Turbines secure equipment supply.

Future Outlook

ProPetro expects Pro Power to significantly contribute to revenue:

• In one year, Pro Power could account for nearly 30% of revenue.
• In two to three years, it may equal hydraulic fracturing contributions.

The company is optimizing operations and transitioning to more gas-burning equipment while continuing to develop Pro Power and expand partnerships with oil and gas producers. The demand for power in the Permian Basin is anticipated to grow, with opportunities in data centers also being explored.

Q&A Highlights

Pro Power contracts focus on long-term stability:

• Initial power contract is for 80 megawatts over a ten-year term.
• Competitive pricing with utility rates offers stable, long-term pricing for customers.

The electric transition is driven by lower costs and efficiency:

• Gas availability on location reduces costs.
• Electric motors on frac pumps are reliable and efficient with fewer parts.

Capital allocation considers potential cash dividends, but the near-term focus remains on sustainable earnings growth and potential debt for Pro Power expansion.

Pro Power’s supply chain is secured with a 12 to 14-month lead time for turbines from Solar Caterpillar.

Conclusion

For more detailed insights, readers are encouraged to refer to the full transcript below.

Full transcript - The 15th Annual East Coast IDEAS Conference:

Unidentified speaker: We’re gonna go through these these slides fairly quick, make sure we leave plenty of time for q and a at the end because I know there’s probably a lot of questions of the market and then ProPetro in general. So our our current thesis of ProPetro is is pretty simple. We have strong free cash flow. Currently, going forward, we’ve invested over a billion dollars since ’22 to refresh our current assets. We purchased some new technology, and we’ve diversified our offering just a little bit with other service lines that work well into our current portfolio.

Right now, Propetro’s discounted valuation multiple, which is to relative to our peers, which is probably the reason why you’re here, and it’s a great time to invest in what we’re doing. We’re a pure play Permian Basin service company. That’s frac, cement, wireline, and our most recent organic startup of Pro Power, which is power generation. We have superior field of E and P customers that have backed our work with contracts. Over 50% of our current fleets are out with with long term agreements, and our current organic start up for pro power is gonna be starting day one with long term contracts.

Most recent one was a ten year agreement that was announced a couple weeks ago. And right now, we are currently innovating to meet the growing demand of the transition of oil oil and gas with lower emission, more gas burning equipment with our electric fleets and with the power generation company that we started. Our most recent earnings that we reported in q one, three hundred fifty nine million dollars in revenue, 73,000,000 in EBITDA, and the number I wanna focus on is our free cash flow of $22,000,000. That that number is is a strong number for one quarter. If you take away the capital that we invested with our new organic startup with Pro Power, that is over $50,000,000 in free cash flow for one quarter.

Right now, our current portfolio is built of these service lines, frac wire line and cementing. Hydraulic fracturing has been, the monster that’s, kept the company growing, for years to come. But as we go forward, what you’re gonna see on this is Pro Power is gonna be start gaining some percentages on on hydraulic fracturing. I think a year from now, we could be closer 30%. Two years from now, I think two, three years from now, I think they’re gonna be even with hydraulic fracturing.

That’s how much upside and excitement the industry, our our current investors, and the company has in pro power. Strategy and execution is pretty simple. We optimize. We’ve been industrializing our equipment and on location. We’ve been transitioning our fleet to more gas burning equipment, which is newer technology.

It’s been more reliable, more efficient, working capital, maintenance capital is less with this equipment that we’ve deployed in the last two years. Pro Power power generation opportunity that I’ve mentioned several times. Excited to get to those slides and talk more about that. Our strategic transactions that we’ve made through some m and a and with our current customer base contracts that we’ve structured and our strong financial foundation. And then what we’ve been able to do is generate twelve, fifteen months of very strong free cash flow in the company.

Unidentified speaker: Yeah. I I would just add to that. That that last block down there, durable earnings and free cash flow, that’s really what we mean by industrializing the business as well. And the investments we’ve made in pro power and then also our electric fleet is just going to accelerate that like we haven’t really seen in the oilfield service space. And we’re not the only ones doing this, but the oilfield service space is so much healthier than previous cycles.

And yes, there are some near term headwinds, but we’re navigating them. And you can see that we’re navigating them quite well with our financial performance there in the first quarter and what consensus estimates show us here for the remainder of the year. But through Pro Power and through our electric fleet offerings, we’re going be growing earnings in a slow to no growth environment. And I think that’s really, really exciting.

Unidentified speaker: So ProPetro, we’re headquartered in in in Midland Midland, Texas, and we operate only in the Permian Basin today. We get asked a lot if we’d look in other basins. We’ll absolutely look in other basins. But right now, when you have over 40% of The US oil production in the Permian Basin, it’s as much as we can handle today. We have conversations in the past and currently of other current customers asking if we’d wanna go to another basin with them for a long term agreement.

Always entertain that. We look at m and a deals to get us in other basins, but right now, we have a very strong foundation foundation and presence in the Permian Basin, and that’s where our current 100% of revenue is coming from.

Unidentified speaker: I’ll take this slide real quick. This is just some financial numbers that we’ve been able to generate over the last few quarters, And it’s quite strong, especially in the first quarter, to see those types of numbers in an environment where rig counts have been declining. And that’s just indicative of our market presence and operational excellence. We’ve been able to grow market share in an environment where rig counts and front counts have been declining. The fourth quarter, we did have some you see negative net income and net loss there, but that was really impairment driven.

And when you strip out the impairment, it was strong earnings as well, both in 2024 and should continue to be in 2025 as well. Yeah, on this one, we’ve mentioned M and A. This is just some of our recent M and A wins. And, again, trying to industrialize our business. These are capital light acquisitions.

Silvertip being the Wireline one, part five, bolt on cementing, then Aqua Prop is is really how do we industrialize our business by increasing our commercial and operational leverage. And these were tools that have enabled us to do that and really have strong free cash flow generation. It’s very accretive and they’ve been big wins for the company.

Unidentified speaker: Yeah. They complement that 75% of revenue of hydraulic fracturing very well. Silvertip and Aqua Prop were already on a lot of our locations before we acquired them. So that was able to, from day one to be a free cash flow machine for us and to start generating wins of us continue to expand other base or other customers. In the par five, we did not have a presence in the New Mexico Delaware Basin in cementing.

We only had Permian Midland Basin. So it was hard for us to compete logistics with with everybody in the Delaware Basin, our competitors. We found par five, fantastic operation, people, facilities, and it fit well to transition that into our company. And now we’re very active and have a strong presence in the Delaware Basin and Midland Basins for cementing.

Unidentified speaker: On this slide, we just like to highlight that we do have a share repurchase program. Our capital allocation philosophy is being very dynamic. We have since largely pivoted away from capital or the share repurchase into investing into our pro power business because we believe that’s a prudent strategy right now, but we have bought back a 111,000,000 shares since the initiation of this program back in May of twenty twenty three. It’s still open. We will remain opportunistic, but right now most of our free cash flow is going into our pro power business to try to grow that quickly.

This slide is somewhat counterintuitive to show that we’re the lowest value here, but we’d just like to point out that there is a lot of value at ProPetro, especially with what we’ve built and what’s coming. The whole space continues to be at a discounted valuation versus the intrinsic value of most of these companies, but ProPetro stands out within those companies. I think this one we’ve already hit on, but we are transforming to an industrialized model. And you can see this slide is pretty cool to show where the OIH, Oil Service Index, versus the Industrial Sector Index, IXI, has traded over the last ten years. There’s been some massive dislocations, right?

And the reason for that is down there on the left. It’s undisciplined capital. That’s been the root cause of most of the dislocation and bankruptcies and unhealthy balance sheets. And so we believe the reason for multiple re rate is going to be for exactly what we’re doing, investing in the right technology that’s going to be capital light and generate strong free cash flow. And just really having both improved capital discipline, not only from ourselves and our peers, but also from our customers.

And we’ve seen that over the last five years. The stock has not represented that, but the companies are generating and proving out those investment thesis today.

Unidentified speaker: Through the last four or five years, we’ve talked about this, our transition of our equipment. The black bars, you’re just straight diesel tier two equipment that we had on location. As the industry started to use more gas burn equipment, we started to purchase tier four DGB dual fuel equipment. Within the past three years, then you start seeing the forced electric equipment hit our portfolio, and we’ve continued to evaluate situations to expand that. Out of the red bar and the gray bars, like we said earlier, 50% of that equipment is under long term agreements today.

Unidentified speaker: One thing to point out is over the last three years, if you looked at this compared to a lot of our peers as well, the capacity is not really expanding. And so this is replacement. So we are not wanting to expand capacity in this market. And that’s very key to enable returns to be thoughtful and reliable moving forward.

Unidentified speaker: Our tier four DGB performance is, I would say, best in class in the Permian Basin today. We started three years ago, and you can see how much of we trans transitioned and grew in that development efficiency, where today that all seven of the fleets that are on location are substituting well above 65, around 70% every single day on location. So there’s a lot of incentives. There’s a lot of upsides for E and Ps to pick ProPetro as a partner going forward because then we can save them not only efficiency, more pumping hours per day safe, but we’re gonna keep save money because if they can utilize using their own gas instead of just burning it off or trying to figure out how to get it taken away, we’re utilizing to fuel our equipment on location. Alright.

Force we’ve mentioned this several times. This is our electric equipment to we’re our fleet was deployed September of twenty three. We’re coming on two years of that contract. We have five fleets deployed of equipment today. Three of them are zipper operations.

One’s a simul operation, which equates to probably two zippers. So you’ve got five fleets of equipment contracted deployed today. We’ve we we’re seeing exactly what we expected with this equipment. The maintenance CapEx is low. Efficiency is high.

Less people on location, and there’s a lot of upside for operators to utilize a 100% of their gas and save lots of money for them. We’re evaluating other current opportunities and contracts right now to continue to expand this portfolio to contract and purchase more electric fleets going forward.

Unidentified speaker: Yeah. I would just add, with our force fleet and then two of our dual fuel fleets that we showed on the previous slide, over 50% of our active horsepower today is under long term take or pay contracts. And then you’re gonna couple that with Pro Power, which is garnering ten year type contracts that are also taking payer nature. This business is radically changing from previous cycles.

Travis, ProPetro: So Pro Power, our thesis here was to partner with ProPetro, start an organic startup under the ProPetro organization really to, as you see here, align to the demand. So in the Permian Basin alone, we’re seeing about four gigawatts of load growth in the next five to seven years. Most of that is only related to oil and gas. If you start sprinkling in some of these new data center opportunities, the number gets quite a bit larger. But as far as the overall growth in The US, you’ve seen numbers like 35 gigawatts for US data centers in the next five to seven years as well.

So the demand side of this is just only continuing to grow and the supply side in terms of the type of equipment that can actually work in these is pretty tight. So what we thought was that or what we believe is showing to be true is that a lot of what we’re doing on the power side is really complementary to what the electric transition has looked like for ProPetro. So ProPetro has the personnel, facilities, and really the background in this electric type of equipment, which is easily translatable over to the power side So, although it may look like a kind of side business within ProPetro today, it’s actually really well integrated with a lot of the service capabilities that we already had in ProPetro. And then finally, clearly that business was to diversify outside of just completions.

So the contract we announced is in production application. So it’s going to be with a similar customer that ProPetro would work with. However, a different part of their value cycle in oil and gas. So we’re now expanding with current customers to be able to really have more market share and share one with these big customers. This is just a good slide to show kind of what these growth numbers look like in terms of the demand side.

There’s all sorts of numbers you can put on the board here. We had 28 gigawatts addressable by 02/1938. That’s growth within just the Permian Basin. That does include a lot of these data center opportunities that are starting to move into the Permian Basin because of the accessibility of gas, So, what’s the commercial rationale? I talked a little bit about this earlier.

ProPetro and ProPower, clearly, we want to stay in the Permian. We want to leverage the relationships that we already have in oil and gas. We can leverage a lot of the field service, the equipment maintenance that I mentioned, and really just take this electric frac example that has grown so significantly in the last two years and apply the same types of concepts to the power business to be able to grow that under the same maintenance program, safety, and really just leverage what we’ve already built out. So, if you see in the bottom there, these are really the different types of industries that we’re looking at today or market segments. Primarily production midstream are the biggest opportunities in the Permian Basin from oil and gas perspective.

As you see, production continue to come online, gas processing and gas midstream opportunities, they’re all electrified nowadays, which means that they need a lot of power and there is not a lot of grid power in both the Permian and Delaware Basin.

Unidentified speaker: So I think this just kinda recaps exactly who we are. We’re a customer face, team driven company out of Midland Midland, Texas. Pure Permian Basin play currently. We’ve been transitioned to more efficient gas burning capital light equipment. The results are proven.

We’ve shown it through quarter after quarter of what we’ve transitioned this company to be. That’s one of them is being capital discipline and returning free cash flow to the company. We are reducing emissions through our transition of our electric equipment and driving to next generation sustained solutions with pro power. All management team on the team all live in Midland, Texas offices there and board of directors have a long history of oil and gas executives with very well known names and companies that they’ve been a part of. We’re real proud of having them part of ProPetro.

I think, yeah, we’re trying to get through that as quick as possible because we’re hoping that you guys have some questions for the next ten, fifteen minutes. We’ll open it up there for any q and a. Yes, sir?

Travis, ProPetro: Can you give us a little more detail on the recent power contract that you signed? Yeah. So the contract that we signed now is 80 megawatts over a ten year contract. That will deploy starting in the third quarter through the middle of next year. Obviously, we have two twenty megawatts coming, so we have more power to place.

But there’s a lot negotiations happening right now that we’ll look, I would say, on the low end, three years would be probably the shortest we would even look at in terms of a contract. More so five to ten years is what we’re seeing just based on the fact that this market we’re going after in West Texas and actually New Mexico, most of these customers don’t have line of sight to power. And so what we’re doing is setting up agreements that allow them to create long term flexibility within their entire power field.

Unidentified speaker: How do price the power based on the market rate?

Travis, ProPetro: We didn’t really share how we were pricing the power in the contract, but they can compare it to their utility rate pretty easily and see that there’s some upside for them on a ten year contract. The utility will tell them they can get it in a certain amount of time. So maybe it’s three years, five years. And so what we’re doing is pricing these to where we are likely more competitive now than the utility would be. But if you look at forward curves on the pricing from a utility, we’re gonna keep it relatively stable for them over a ten year period.

Unidentified speaker: And we’ve publicly disclosed that these assets are paying themselves back in roughly four years. So these ten year contracts on assets that last fifteen to twenty years, it’s a very healthy return.

Unidentified speaker: Yes, sir.

Unidentified speaker: What’s your strategy for getting into that? It seems like

Unidentified speaker: a very

Unidentified speaker: different business. It is it is a different business, and I’ll get I’ll start this and let Travis clean it up and finish it. But it’s that’s the new sexy thing to say is AI and data centers for power. Everybody is focusing on that, and that’s great because it’s there’s a lot of demand, and there’s gonna be a lot of demand there. But when everybody’s focusing on that, there’s a lot of low hanging fruit for pro power in the oil and gas of a customer base that we already know, and we have a well established company to go and line all these contracts to set us a base for this company, this organic startup of pro power, to get that strong base to start transitioning to these large data centers, utility, AI situations that that is gonna be there.

Travis, ProPetro: Yeah. I think that’s well said. What we’d like to do is get get our feet under us on these type of production microgrid applications so that we have the ability to transition into a data center opportunity if we want to down the road. There’s tons of those out there right now. They definitely look different.

I completely agree than what we’re doing in the oil field. They’re a lot larger, a lot different types of loads on some of these AI. I think there’s a lot to be figured out there from the technology side still, and we don’t want to rush into that and stub our toes. So we’re looking at data center opportunities that are probably not the ones that hit all the news articles. More in the 50 to 150 megawatt range is probably our sweet spot for a single installation on a data center opportunity.

I don’t see us playing in, like, the one gigawatt range that you see some of these large announcements.

Unidentified speaker: On the pro power side, what kind of generation are you

Travis, ProPetro: Good question. So we don’t have any exposure on the fuel. The customer provides the fuel. That’s one of the benefits of being in oil and gas is they know the fuel side better than anybody does. So that’s a cost that they just handle themselves.

As far as the equipment, these are larger engines and turbines. So I think we’ve said publicly that we’re using Caterpillar for nearly all of this equipment. So we have a really strong relationship on the engine side as well as the turbines. So solar turbines is their turbine manufacturer. We have had really good success with them so far.

They have a great name in the market. They’ve been a good partner in helping us get stood up from a technology standpoint and are continuing to allow us to get capacity out into next year.

Unidentified speaker: I think that’s a great question.

Travis, ProPetro: Yeah. I think the challenge is there’s only so much of this type of equipment that’s out there and there’s not enough to meet the demand today. Most of the large OEMs are not gonna oversupply the market because they’ve done that in the past and they’ve come out publicly said, if you listen to GE or Siemens or Caterpillar, I don’t think there’s going to be enough equipment in the market to really commoditize what we’re doing. I think in the smaller power ranges, so sub-five megawatts, I think there’s a lot of opportunity there to be commoditized on those opportunities. But when you’re providing north of five megawatts in an application that needs to be permitted, so it has to meet emissions requirements, it has to have significant uptime.

It’s a pretty hard business to get into. It’s capital intense. The people are a big part of it. So we’ve spent a lot of time figuring out how to source the right individuals for this. So we feel like we’ve got a pretty good competitive advantage there.

And then I guess on the IRR side, don’t know if you

Unidentified speaker: want to talk that. Yeah, we haven’t talked about that publicly, but we chase returns that are in excess of our cost of capital and trying

Unidentified speaker: to create

Unidentified speaker: spread is basically the key fundamental theme that drives our returns there. And I would just add to Travis’s point, demand is going to keep growing in this power business. And we showed that slide and we’re basically just dropping the bucket of what’s coming to the Permian Basin. So yeah, there’s gonna be new entrants and there’s gonna be some capacity that’s brought online, but the growth is far outstripping that supply today.

Unidentified speaker: If you went to SolarCaterpillar today and wanted to purchase five plus megawatt turbines, you’re they’re gonna tell you twelve to fourteen months. Because from today till twelve to fourteen months is all pro power in their supply chain. There’s nobody in between, and that’s for only the 220 megawatts that we’ve purchased and secured. So anything that we stack on top of that, that’s gonna extend that time of delivery even further. So we’ve tied up their supply chain.

We’ve kinda have ongoing conversations to be able to put in more orders if we wanted to to drag that out any further. So if anybody wanted to start a business, you’re looking twelve to fourteen months before they’ve received their asset.

Unidentified speaker: That’s been a huge competitive advantage for ProPetro, just given the fact that we’ve spent a lot of money with Caterpillar over the last ten years. And we’re a good vendor or client of theirs. They’ve been a great vendor for us. And having that relationship that Travis had mentioned to be able to leverage our frac business both from a customer standpoint but also from an OEM vendor standpoint has been huge.

Unidentified speaker: Yes, sir?

Travis, ProPetro: Looking to the future, do you have any thoughts about the cash dividend?

Unidentified speaker: Yeah. I mean I think that’s one of our capital allocation. Will certainly within the capital allocation matrix. I think right now we want to continue to prove reliable earnings and very sustainable earnings. And then as that comes along and we start to see multiple re rate through that, I think a cash dividend absolutely is part of the equation.

Travis, ProPetro: Sir?

Unidentified speaker: What’s driving the push to electric and how much risk is there if under current administration environmental regulations kind of disappeared?

Unidentified speaker: Yeah. So even if any regulations disappear, what we’re seeing with the electric equipment and what our customer base is seeing with the electric equipment is we’re able to operate for a lower cost for them. Now, it doesn’t necessarily mean a cheaper pumping price, but if they’ve got gas already on their locations throughout their acreage that they’re trying to figure out what to do with besides just flare and burn, they’re

Unidentified speaker: able

Unidentified speaker: to fuel this entire equipment. So instead of purchasing 30,000 gallons of diesel per day at $22 50¢ per gallon, they’ve got free fuel for this entire fleet that is more efficient on location than any diesel or dual fuel equipment that’s out there. So if you’d have a large diesel engine that’s twice the size of this table and a transmission on the back of it, how many moving parts, how many oil changes, filters, everything that you’re gonna have to constantly do to keep that engine going high performing day in, day out. You remove all of that and you put an electric motor there that’s just like a light switch when you turn on your ceiling fan. When you flip it, you expect it to turn on and start working.

Right? It’s the exact same thing on electric motor on a frac pump. It’s reliable. It’s more efficient. Less cost for us and lower cost for the operator because they’re able to utilize the gas that they have already on location.

Travis, ProPetro: No. It’s either on wheels or skid based. So it’ll be either mobile or modular. Most of what we’re gonna do is probably gonna end up being modular because it doesn’t need to have wheels, but we’ll have some equipment that has wheels just to be able to rotate for maintenance purposes.

Unidentified speaker: Yes, sir?

Unidentified speaker: I guess my question is why not sort of do both?

Unidentified speaker: Great question.

Unidentified speaker: Yes. I think our perspective on that is certainly pro power requires a lot of capital today. And we’ve increased the orders since six months ago when we even initially announced the business for an initial 110 megawatts. We’ve since increased that to two twenty. So that’s going to require excess capital.

We’ve said that we expect to fund that largely through cash flow. And then we did announce our initial 110 megawatts was going be financed, 104,000,000 of financing. But I think right now, given some of the near term headwinds, it’s really prudent to protect our balance sheet and make sure we have cash on hand. And so we look at it every day. And I think at these prices, yeah, it’s certainly attractive.

But right now, the returns that we think we can get through Pro Power, that’s where our money’s going.

Unidentified speaker: And what would it cost you? Why not just fund Pro Power with debt? You’ve got fifteen or twenty year assets. Presumably, you’re going to pay back in four years. Why not

Unidentified speaker: Sure. Well, we’re looking at that, absolutely. Historically, oil field service companies are not viewed favorably when they have a bunch of debt. But this is

Unidentified speaker: I didn’t say by humping. Sure.

Unidentified speaker: Yeah, Into a different asset base. I know exactly what you’re talking about. We evaluate that, and I there could be a balance of that going forward a little bit, but I think we still wanna have a strong balance sheet even if we added some more debt for power. We still wanna have a strong balance sheet with cash and still have that opportunity to continue to repurchase shares as well. So I think it’s gonna be a mix, but we we think there’s a not think we know there’s a large opportunity for pro power, and we’re trying to be responsible to the shareholders as much as possible to fund that machine and be able to run our business, you know, without showing that you’re stacking up, being irresponsible for lots of debt going forward.

Yes, sir. Anyone else?

Unidentified speaker: We got a couple minutes, so it could

Unidentified speaker: be good. Yeah. Thank you guys very much. We’ll be around the rest of the day. Look forward to meeting every one of y’all.

And like they said, stock tickers, p u m p, pump. Look forward to you guys following it and watching pro power grow. Thank you all. Appreciate it.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.