ProPetro (PUMP) Q2 FY26 earnings call: guidance and Q&A

The completions business generated resilient free cash flow in Q2 FY26 despite operational headwinds including deployment costs for a new fleet, temporary deployment outside the Permian, and severe weather. The Permian Basin rig count is up nearly 10% from its Q1 low, indicating market strength. The company is activating a 13th fleet, which is expected to contribute by the end of Q3. Management believes the industry is structurally tighter than appreciated, with high barriers to adding new supply, leading to positive pricing momentum, especially for natural gas burning fleets.

ProPower significantly increased its contracted power generation capacity from 240 megawatts to 350 megawatts, including 110 megawatts across two new projects (integrated upstream operator and industrial customer). The business is engaged in advanced negotiations for an additional 100+ megawatts. ProPower assets are currently deployed and operating live on a data center project, meeting performance obligations and strengthening commercial position. The business generated positive EBITDA in the final two months of the quarter.

While ProPower expects the majority of future capacity to be deployed in the data center market, discussions with data center developers are taking longer than anticipated due to the size and duration of these long-term, capital-intensive agreements. Demand has not waned, but the contracting process is extended as ProPower focuses on matching available capacity with the right long-term customers. The company remains disciplined, prioritizing actionable opportunities that create long-term shareholder value.

ProPetro has raised approximately $1.5 billion over the past 18 months to fund ProPower's growth, including a $690 million convertible notes offering in May with a 0% coupon and no dilution until the stock reaches $29.49. The company maintains a healthy balance sheet with $784 million in cash and cash equivalents and $905 million in total liquidity as of June 30, 2026. Management plans to continue opportunistic capital decisions to support expansion.

The decision to activate a 13th fleet is driven by durable customer demand and attractive long-term returns. This fleet is going to a blue-chip, top-tier E&P customer for program high-grades, representing a new customer for ProPetro. This is the first net add above initial expectations for the year. The Permian market is considered largely 'spoken for' in terms of frac equipment, with very few hot or warm fleets available, reinforcing the view of a structurally tighter market.

ProPower is seeing meaningful opportunities across oil and gas industrial markets, with these contracts generally shorter in duration but offering highly attractive pricing and annual returns, accretive to the overall business. These oil and gas deals provide higher economics in the short term and help prepare for larger data center deployments. The company views a balance of both verticals as beneficial, allowing for execution experience and sturdiness in the business.

The cementing business is inflecting positively with the increased rig count, supported by new leadership and high-spec equipment additions. The wireline business (Silver Tip) has been a strong performer, maintaining almost full utilization, strong pricing, and good customer relationships, making it a bright spot across the OFS business lines.