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Citi lowers ProPetro EBITDA guidance, reaffirms neutral stock rating

Published 21/06/2024, 17:30
PUMP
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On Friday, Citi maintained its Neutral rating on shares of ProPetro Holding (NYSE:PUMP), with a steady price target of $8.50. The firm adjusted its projections for the company, citing a combination of factors impacting the oilfield servic es provider.

The revised expectations include a lowered EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) forecast for the second quarter of 2024, now set at $74 million, a decrease from the previously estimated $84 million. This change was attributed to a mix of uneven demand in the U.S. fracturing sector, weaker pricing in the tier II diesel market, and the impact of spring storms in Texas.

The firm also provided insights into the expected performance for the third quarter of 2024, where some recovery in ProPetro's base business is anticipated, partly due to the launch of their fourth electric fracturing (efrac) fleet. Additionally, the recent acquisition of Aqua Prop was acknowledged as a factor in the company's future.

Nevertheless, the third-quarter EBITDA forecast was also reduced to $84 million from an initial $88 million, reflecting the adjustments made to the second quarter's starting point.

Looking ahead, Citi has updated its full-year forecasts for ProPetro. The firm now predicts an EBITDA of $322 million for 2024 and $334 million for 2025, marking a decrease of 2% and 3% respectively from previous estimates. These revisions are informed by the anticipation of less than $200 million in capital expenditures for the current year, which is expected to result in approximately $130 million in free cash flow (FCF).

The adjustments to ProPetro's financial outlook by Citi reflect the immediate challenges faced by the company, including market conditions and operational disruptions. Despite these near-term headwinds, the firm's rating indicates a stance of watchful neutrality on the stock's future performance.

In other recent news, ProPetro Holding Corp. reported robust Q1 earnings and significant advancements in strategic initiatives. The company has made substantial progress in transitioning to next-generation equipment, with over two-thirds of the fleet upgrade completed.

This includes the success of ProPetro's FORCE electric fleets, leading to a notable contract with ExxonMobil (NYSE:XOM). The company's increased revenues, net income, adjusted EBITDA, and free cash flow in Q1 2024 highlight a strong financial performance.

Furthermore, ProPetro has enhanced its share repurchase program, reflecting its confidence in future earnings and cash flow. The company expects lower capital expenditure in 2024, focusing on operational optimization.

In other developments, ProPetro appointed ExxonMobil executive Alex Volkov to its Board of Directors. Volkov, who brings substantial global energy experience, currently oversees the integration of Pioneer Natural Resources Company (NYSE:PXD) with ExxonMobil's Unconventional business. His appointment is part of an Investor Rights Agreement with Pioneer Natural Resources Pumping Services LLC, a subsidiary of ExxonMobil.

InvestingPro Insights

ProPetro Holding Corp (NYSE:PUMP) shows a mix of strengths and challenges as reflected in recent InvestingPro data and analysis. The company boasts a market capitalization of $903.41 million, indicating a significant presence in the oilfield services sector. With a P/E ratio adjusted for the last twelve months as of Q1 2024 at 7.06, the stock appears to be valued attractively compared to earnings. Additionally, the company's revenue has grown by 13.52% over the last twelve months as of Q1 2024, showcasing its ability to expand in a competitive market.

InvestingPro Tips highlight that ProPetro operates with a moderate level of debt and analysts predict profitability for the company this year, which could be a signal for potential investors. Moreover, the management's aggressive share buyback strategy could indicate a strong belief in the company's value. With a current share price below the InvestingPro Fair Value estimate of $11.43, there may be room for growth. However, investors should note that ProPetro does not pay a dividend, which could be a consideration for those seeking income-generating investments.

For a deeper analysis and additional InvestingPro Tips, interested investors can explore the full suite of metrics and expert insights on InvestingPro. To access these valuable resources, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 6 more InvestingPro Tips available that could help investors make a well-informed decision regarding ProPetro Holding Corp.

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

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