Good morning. Thank you for attending the Ideas Conference. I'm Sandy Martin. Next up, we've got ProPetro Holding, New York Stock Exchange-traded company with a ticker of PUMP, which is a pretty powerful ticker symbol. We've got Matt Augustine, who is the VP of Finance and Investor Relations, and Shelby Fietz, who is the president of the power segment. A lot of excitement going on in this name. I'll turn it over.
Good morning. Shelby's actually our Chief Commercial Officer. No, you're fine. I think he'd like to be the president of the power business, but he likes to also sell frac, too.
I'll stick with the Chief Commercial Officer.
Welcome. Thanks for joining us today. We've got a lot to cover. We're going to go through this presentation fairly quick. That way, we can get to the Q&A. We're excited about what's going on with our company and excited to share that information and talk with you guys. Our investment thesis is built on four pillars: sustainable free cash flow from industry completion business and exposure to the prolific Permian Basin tech, tech-enabling fleet innovation, a strong balance sheet. We believe we are uniquely positioned to thrive through cycles by shifting away from traditional capital-intensive models with more than $1 billion invested since 2022 to refresh our assets and technology while we're executing on that vision.
I would just point you down to the bottom right-hand portion of that screen on the ProPower offering, the investment into these new technologies, certainly on our electric fleet, but now with our ProPower offering, build sustainable free cash flow in our business through long-term take-or-pay contracts. In a growth market that we haven't seen for a long time in the completion space, we're now getting access to on the power side.
In our Q3, we reported revenue of $294 million, with Adjusted EBITDA of $35 million. Free cash flow from our completion business was $25 million. While we've faced some softness, obviously, as you know, in the industry, compared to the previous quarters, our free cash flow generation remains resilient. We've continued to execute with a challenging environment. What we continue to see and what we've told investor community for a while now, that this business can continue to produce a large amount of free cash flow through ups and downs. We're proving that as we go through quarter to quarter to the market. Our revenue mix is three different service lines currently. 71% of it's through hydraulic fracturing, 18% with wireline, and 11% with cement. Obviously, completions work underscores the core competency.
While the incremental services, wireline, and cement reflect our diversification and enhanced customer offerings, what you're going to start seeing is, as you continue to see our investor presentation, that ProPower, our business, is starting to generate revenue. That is a newer business line at ProPetro that we did not that just started last December. With eight months, we've secured 220 megawatts, have contracted, and it's already producing revenue. We are extremely excited about that, and we are excited for it to start showing up on our presentation. Our strategy and execution centers around optimization and industrializing operation, executing transactions, transitioning our fleet of dual-fuel and electric technologies, and capitalizing on power generation opportunities. We aim not just to grow, but to build durable earnings and free cash flow.
It is proven through these last few quarters that the free cash flow is continuing to generate a lot of money that is funding the growth of our power business. We are located and headquartered in Midland, Texas. One hundred percent of our completion business and revenue comes from the Permian Basin, one of the world's largest hydrocarbon production regions. The geography focus gives us a scale logistics advantage and deep customer relations in the Permian Basin.
I would say, just to add, we did our inaugural data center contract that we announced right prior to earnings. That was in the Midwest region of the United States, so outside of the Permian Basin. Moving forward, I think you'll continue to see our completions business very much be focused in the Permian. With the power, those things have wheels, and we can move it across the Lower 48. We're proving that.
Yeah, I think this slide is we like to keep this in. You see a lot of numbers here that are decreasing sequentially. The story on this slide is the free cash flow from our completions business, and it was flat. Whereas revenue and OPEX, revenue comes down quick. OPEX takes a little bit longer to come down. Costs do not come out of the system as quick as revenue do. Maintenance CAPEX does. Building our business on an industrialized platform that we have in the completion side, where we have long-lasting, low-maintenance technology now with our electric fleets and even our dual-fuel fleets, we have been able to, when activity falls, revenue falls, we are able to lower maintenance CAPEX in lockstep and ensure free cash flow. I think that is a really big testament to the business we have built here.
ProPower, this is certainly the exciting piece of our story right now. This is growth earnings for us. The demand on the power side of the business is very, very high. As I think most people would know in here, the supply chains are tight. We are in the supply chains, which gives us a great advantage. We are building all of our equipment right now with Caterpillar, our natural gas recip engines that we have purchased. We are about a 50/50 split between recip engines and turbines, but all of it is through Caterpillar. We have a great history and a great relationship with them. That is going to allow us to continue to grow where others may not be able to enter the market because we have those relationships with CAT. Also, I would speak to the diversification opportunities. I think that is where we are somewhat unique in our power story.
We're not just chasing data centers. The power need in the Permian Basin is very, very strong. To support oil and gas operations, specifically production, completion, midstream operations in the Permian, and building out microgrids. We announced our inaugural contract in May of this past year, which was 80 megawatts for 10 years take-or-pay agreement, long-term contract to build out a distributed microgrid for a large E&P operator in the Permian Basin. We're really excited to not just continue to grow in those arenas, but then also to grow into the data center arenas. We like that diversification. We think that's a good risk mitigation as well. Some of just the recent ProPower milestones, we did deploy our first assets in the field. Shelby has talked, we launched this business basically a year ago.
To go in 12 months to be generating revenue, to have 150 megawatts now contracted with 220 by the end of this year under contract, that's a big rate of change. We are very proud of the success we have been able to generate this past year with a lot more to come. We do have financing to help support the growth in the near term. I think our priorities over the long term are certainly free cash flow generation. We are generating strong free cash flow in our completions business, which we are then able to dump into our power business. Eventually, our power business is going to be generating a lot of free cash, which can be compounded and then fuel our growth into the future. We have secured our long-term data center contract for 60 megawatts. We think this is still just the beginning in that arena.
It's with a leading hyperscaler. We've increased our equipment orders to 360 megawatts on current order, with all units to be delivered by early 2027. We anticipate 750 megawatts delivered by year-end 2028. We are in active discussions with the suppliers for those megawatts. Certainly, additional contracts are coming, and we're actively negotiating contracts well beyond what we've got ordered and announced today. We're targeting installed capacity of at least a gigawatt or greater by 2030. I think this kind of paints a story from a growth perspective of how we anticipate to continue growing this business. You can see the first three years in 2026, 2027, and 2028, those are megawatts that we currently have under order or under active discussion with those suppliers.
Just given where we stand with our relationships with not just Caterpillar, but other OEMs in the space, we fully anticipate to continue to grow in a similar manner in 2029 and 2030 to reach that gigawatt or greater target that's deployed by 2030. Super excited about this business. It's going to be able to grow the free cash flow because, as you can see, those numbers get pretty material. Whereas by 2030, we're anticipating $265 million-$280 million of EBITDA from this business, that's predominantly free cash flow because the free cash flow from EBITDA is so, so high. Some of the commercial rationale, and Shelby can certainly add to this, but there's a lot of synergies that come between ProPower and ProPetro.
The foundation that we have built in the Permian Basin, our massive maintenance department, the testing facility, those are facilities that enable ProPower to succeed in a very quick and timely manner. Also, just the expertise that we have internally on moving heavy machinery. This isn't a business that anyone can jump into and expect to just get rocking and rolling. Because of the foundation that we have with ProPetro, it makes a lot of sense and enables ProPower in a material way. Also, the relationships that we have commercially, I think Shelby can speak to that a little bit.
With existing relationships, logistics, maintenance capabilities, fleet mobilization, it was a no-brainer for us. Having conversations day in, day out with our current customers or potential customers of the needs that they need for power generation throughout their acreage gave us a great opportunity to enter the space without having to bring a whole lot of overhead on to continue to operate and maintenance this equipment.
Right here, back to our completions business, and this is our frac fleet configuration. As you can see by year in 2025, how it has transitioned from early 2021, where it was largely and predominantly a tier two diesel fleet, we have made the investments into the next generation equipment. The red bars are our tier IV dual-fuel fleets, which can burn natural gas at a substitution rate of 60-70% on average. We have now introduced our FORCE electric over the last three years, which is a big game changer, garnering take-or-pay contracts. Today, we have approximately 70% of our active horsepower on long-term contracts. We are super proud of that. It provides a lot of resiliency into our business. It provides predictability for investors as well. The big difference on these FORCE electric fleets, going to the next slide, is lower emissions, quiet operations, smaller footprint.
The big thing is the extended equipment lifespan and reduced operating expenses for both us and our customers. We are super excited to continue to leverage this technology moving forward. We have four FORCE fleets under contract today operating in the field, but it is five fleets worth of equipment. One of those fleets is a very large simul frac fleet. We have seen a lot of success here. We want to continue to grow into that operation as well. I would say from a capital allocation resource, we have been very forthcoming on this on our earnings call. ProPower is at the very top. The FORCE electric offering, as we continue to get drawn into that by our customers wanting some of the fuel savings and reduced operating expenses that we talk about, we will continue to grow in that as well.
We have a very capital-efficient way in which we can grow that with our lease program. We are currently leasing all of our FORCE electric equipment, which allows us to pay for that equipment over time and as we go, and still have accretive earnings because of the reduced operating expenses. That allows us to continue to grow our FORCE electric offering, but also put a ton of capital into the ProPower business. We do have a share repurchase program. We like to highlight that. Because of the capital needs of our ProPower business, especially in the early stages before it is generating a lot of free cash flow, we are putting a lot of our excess free cash flow from our completions business into our ProPower business. We do have a history of successful M&A.
We've bolstered our completions business over the last three years through very high-quality free cash flowing businesses, Silvertip Wireline, one of the preeminent best wireline companies in the Permian Basin. We brought that in-house. There's been a ton of synergies with our completions business on those working together. We bolstered our cementing business with Par 5. We also acquired an industrialized technology in AquaProp to help gain access to some of the sand market in the Permian as well. We like to show this slide again. We've thrown a word industrialized out quite a bit. I think this is a testament to the business and the resiliency that we've built. That red line is the average Permian Basin rig count over the last three years. Obviously, the gray bars are the free cash flow from our completions business.
In 2023, we were heavily investing in our FORCE electric and our dual-fuel equipment. We have made those investments now, and those are going to pay off for the foreseeable future. 2024 generated strong free cash flow in a down market where you can see the rig count continuing to decline. As I mentioned before, in 2025, year to date, so through three quarters, we have generated almost the same amount as we generated in 2024. We want to continue to see that grow. This is, I think, a real testament to the business we have been able to build here at ProPetro. This slide was done before our recent earnings announcement. We have since re-rated a little bit on some of the ProPower news.
I think what we want to show here was just ProPetro, as well as some of our other energy service companies, continue to be at a pretty big discount. We think the value that we're bringing to the table now from a free cash flow standpoint, specifically in our completions business, deserves a re-rate. We got that in our ProPower business, and we want to continue to build on that. Again, here's the industrialized model word. You can see back in 2015, there was a massive dislocation between the oil field service index, which is the red bar, and the industrial sector index. There's a lot of reasons for that: excess and undisciplined capital availability, bias against hydrocarbons, the amplitude of industry cycles. We had a resulting flight of capital from investors.
I think what we've talked about recently, and then you layer in the ProPower element, we do believe there's a re-rate coming. We've seen a partial re-rate because of the ProPower angle. The capital discipline that not only we have, but our customers have provides more predictability for our business. We've deployed industrial technologies such as our dual-fuel equipment and our next generation E-fleets. We've got the significant power generation demand that is not going to go away any time or over the next several years. We've got, obviously, an improved focus on free cash flow. We think the business is in a pretty healthy spot from a supply and demand perspective as well, certainly on the completion side and obviously on the ProPower side. I think lastly, we've got a very strong board of directors with lots of industry experience.
They come from all different walks of the industry and have a young management team, but it's very experienced as well, focused in Midland, Texas, which gives us a competitive advantage, especially with our customers who obviously have a big footprint out there. That's about it. Now we'll open it up to questions. Appreciate it. Go ahead.
How are generation? Do you get some gas turbines for that? Is it still primarily natural gas or the overall?
Yeah. That's a great question. He's asking about the power generation equipment that we have acquired, as well as what's the fuel source. We have acquired about 50% to date of natural gas recip engines and turbines, both from Caterpillar, the Solar turbines, and the Cat recip engines. Yes, natural gas is a fuel source, which is obviously a massive competitive advantage for us in the Permian Basin because of the abundant gas and the lack of takeaway capacity. That incentivizes our oil and gas customers certainly to use that as almost a free fuel source for that power equipment. It also incentivizes data centers and other utility-like projects to move to the Permian Basin because of the abundant gas out there.
What about the macroeconomic factors such as the past 20 years, oil prices pretty much below $60? The gears, whatever the politics are, whether it's gears, steel prices or something, the price is hanging around $60 because the current regulation doesn't want the gas price more than $1 to $3. How it is going to impact the down the line in your business?
Yeah. I mean, I think that's a great question. I wish we had that crystal ball around kind of where the price of oil is going to go and how that affects our business. I would say we've seen a massive reduction in activity in the Permian Basin, both on the drilling side, as I showed, but also if you layered in where the frac count has gone over those same three years, it would look very similar in terms of decline. Since Liberation Day, we've seen a lot of noise in the market present itself, as well as some of the OPEC barrels coming back or supposedly coming back to the market. I think there's a fear of an unknown right now.
Whereas the price of oil may be in and around $60 today, the activity that is currently in the Permian Basin, our feeling is that it represents a much lower price. That is because of the unknown that the customers are seeing out there. I think once you have some of these leading indicators, the OPEC Plus barrels come to the market, how does inflation react over the next few quarters? When does production in the United States start to decline at these current activity levels, which we think will happen? I think that is going to start driving the decisions for our customers. The price of oil obviously matters a lot, but it has become somewhat disaggregated from activity levels today just because of that unknown and where it may go into the future. That is a great question.
We also believe that our business has been stable, as this slide shows, through the years that you just mentioned of the WTI, around $60 a barrel. If we're able to generate this type of returns at that level, if it does turn, if production does roll over, we're extremely excited, very optimistic of what type of cash we can produce with that. Like Matt said, production will roll. We're running 230 rigs in the Permian Basin today. It's been stable, but very flat. Pricing's been stable, but flat, and the fleet count has as well. It's a matter of time. If you've read any news, people are talking now the acreage, tier one acreage is depleted, and you're going to tier two, and the rock is not as good.
Production is eventually going to roll over, and activity will increase, and the price will increase with that. If we're able at this type of point in the market and the macro to generate free cash flow, we're very excited what could come. We don't have a crystal ball when that's going to happen.
Yeah. I would just add, we've talked about this a lot publicly on our calls. The rate of attrition in the space is very, very high on both the drilling side, but really on the frac side. There is a bunch of subscale type players in the market, maybe mom and pops that are struggling to keep their doors open. They're having to run their fleets at sub-economic levels in order just to keep the lights on and make payroll. We're not going to play in that arena. We're going to shut our fleets down as we did in the second quarter. We self-selected those three fleets out of the system because we weren't going to run the fleets at the pricing that our customers wanted. That allowed us to preserve our asset life for a better day.
The rate of attrition on the consolidation that's happened among the frac space has been pretty high. Today, five or six of the players make up 80% or more of the market, especially out in the Permian Basin. That other 20% stub, it's attriting rapidly every single day and struggling, as I mentioned, to keep the lights on. That is going to go away, especially in this market dynamic. The market, even if there's not a call on frac incremental horsepower, is going to get tighter. We are going to be there to answer the call when it does. In the meantime, we'll sit our equipment down and still generate durable free cash flow and be very disciplined with our equipment.
I'm sorry. I mean, it was full of hard facts. I've been interested in the field. I've seen a lot of stuff out there. Anytime it's going to slow down, things happen. Big fish in this market. Are you a big fish or a small fish?
In the Permian Basin, we're a big fish. We're the second leading horsepower in the Permian Basin as of today. Like Matt said, there's only six companies that make up 80% of the pressure pumping in the Permian Basin. If you have either any attrition or any consolidation, the market changes really quick. If you have the price of oil actually goes up, it will. Like you said, you've seen this several times. We have as well. The attrition or consolidation happens before then, market swings pretty quick towards the surface. Yes, ma'am.
What does the sales team look like on the power side? What kind of industries are you trying to get first?
Yeah. It's a great question. She asked, what does the sales team look like on the power side? I have a long-standing relationship with our President and Vice President of ProPower. They were actually vendors of ours for a while. They built and ran a power company before ProPower as well. With their knowledge, expertise, great relationships in the supply chain business, and then with experience in the Permian Basin, we thought it was a perfect team to put together. We added some team with that, but also we currently had a team in the Permian Basin with our completion businesses that have the same customer base that they need to face as well. We can make introductions. Their technological experience can come in and help clean up any of the misinformation that the completion sales team has. It was a perfect match for us to be together.
I do not remember the second part of your question, but I think that with their strong ties to supply chain and ProPetro's strong ties to Caterpillar as well gave us a huge advantage to enter the market and be able to secure that power quicker than anybody else.
Outside of energy and data centers, which everybody was talking about, is there other big ticket places where you're targeting or?
For sure. Yeah. I think we were focused on oil and gas in the Permian Basin first. We knew that when we started gaining ground and our message would get out there and people would start recognizing ProPower, that we were going to be receiving other calls of interest outside of oil and gas. With our most recent announcement, it shows that we were moving to the Midwest region for a data center to power that. First focus was to build a business, start generating revenue, right in our backyard in the Permian Basin. Now we're venturing out and receiving calls and signing contracts for data centers. We believe we will be in both sectors. We do not know which one's going to take the lead on the majority of the focus, but we feel like diversifying that business is the best thing.
We're going to put our assets where the highest return opportunities are, period. I think as you've seen over the last year since we announced this business, the rate of change has been very, very fast and high. I think that rate of change is going to continue to evolve and move forward in a very dynamic and cool way. We've just got a lot of opportunity. As you've looked at the supply chains on the power side and you couple that with where the demand forecast is going, supply chains can't keep up. It's going to be a long time for the OEMs who are making this power equipment to be able to match the demand. The grid's not coming anytime soon to save it. That's where we step in.
Our power is not just particular to the Permian Basin and oil and gas. We are proving that. I think you are going to continue to see that rate of change evolve. It is a great question. Yes, sir.
Regarding data centers, it takes a while to build one of those things. To compound and add more, what is your vision for data center growth? Is it going to stay well ahead of your capability to keep up and/or others that might want to compete with you in that business, in the ProPower business?
Yeah. It's a great question. I think from what we see out there today, the data centers and some of the hyperscalers, whereas six months ago, they may not have had a fear of not having power. Today, I think there's a bunch of realizations on that. Where AI is going, where the need for additional data centers across the United States and in the Permian region, also in the Midwest region of the United States, I think you're going to continue to see that growth happen in a very material way. The power needs are going to continue to grow and compound on top of that. That's where we got pulled into that data center opportunity. We weren't hunting for them necessarily. I mean, we always had our line open. We got pulled into that opportunity because we had the megawatts available.
That was a big key differentiator for us is we're going to be starting deploying those assets with this data center in the second quarter of 2026. Our speed to market has certainly helped us get a foothold there. It was a great question.
It's kind of likely that the data centers will come to you.
I think.
That's where the power source is naturally.
Yeah. I think this first contract that we've announced is kind of our biggest billboard. We can do this. We are doing it. We've got the megawatts to support it. We've obviously got a sales and commercials team that's going to be reaching out and hitting the pavement hard. Yes, because of the lack of power, not just in the data center arena, but also in the Permian Basin for utility-like power needs, for power plant-type needs, they're coming to us and our phones are ringing off the hook because we have power available. Go ahead, Bill.
It's easy to look at the power business and say we're short or we'll be short. People want volume.
Sure.
What's the biggest challenge that you have to close a transaction? What are the objections that you get when you're interacting with a prospective customer, whether it's for a fleet or a oil service in Permian or a data center somewhere else?
Yeah. I think first and foremost, we have to educate. This market, as I have talked about, is changing so rapidly. People are having to get caught up. I think that education on what we can provide and who we are given our newness into the market, but not just ours, all the other of our peers who are doing this, which are not many. They are still relatively new into the market as well. I think educating our customers, certainly in the oil and gas space, because they have had solutions that have been able to power their equipment. It is just our view is it is very inefficient.
We have to go prove that to them and execute and show the cost savings that our power equipment can generate for them versus some of the smaller, more modular generators, diesel generators that have been out in the Permian Basin for decades. We have got a solution now that is much more efficient and can result in material cost savings. You couple that with just an education, like I mentioned earlier, with data centers and others realizing, "Oh, crap, we need power. We have got to have power to power and build this in the way that we want to." I think that has been a big piece of it. Predominantly, we have got to go prove our concept out. We have to go have high reliability in the field. We are proving that today with the megawatts that we have deployed.
As that continues to build and compound, that's just even a better sales pitch for us.
One other thing I want to add to that is educating them, opening their eyes of what is the cost of their production to be down for a day or two. If you're chasing 200-300 diesel generators spread throughout your acreage and you're not getting the uptime or the efficiency that you would get from one or two microgrids that we can build out and have reliable, sustainable, efficient energy day in and day out, what does that cost for that production to go down? It's quite a bit. When you open their eyes to that, you have a couple of guys that are managing their fields, their acreage, chasing all these different diesel generators, keeping them fueled, running PMs, performing maintenance.
If you have a field that goes down, acreage go down, and you lose several thousand barrels a day, that costs the company quite a bit. Sometimes they do not realize that what the uptime and the efficiency can bring them in revenue and value with what we can provide.
Yeah. I think the competitive advantage and what we're going to start seeing in earnings results from some of our customers, that's a big sales pitch for us as well because they're going to be talking about it. We're talking about it, but they're certainly going to be talking about it because it is material savings for their production. Others will start similar to how the E-fleet growth exploded once one or two customers started to pick up on that and see, "Dang, they're saving 30-40% of some of their fuel costs on their drilling and completions." That quickly exploded that market. I think we'll see the same, at least as it pertains to the oil and gas market on the power side. The data center, that's a whole different arena. It's a good question, though. Any other?
Got about a minute and a half.
Revenue recognition? Is it deployment? Is it?
That's right. Has deployed. Yep. I appreciate your time and appreciate your interest in the story.
Thank you very much.