Permian Basin pressure pumper ProPetro Holding Corp. has upended its management team to strengthen internal controls following an internal review.
The “substantially completed” review, which previously was disclosed, is underway by the board’s audit committee and management, which “have not identified to date any items that would require restatement of the company’s previously reported balance sheets, statements of operations, statements of shareholders’ equity or statements of cash flows.”
The Midland, TX-based operator now plans to submit as soon as possible required Securities and Exchange Commission (SEC) filings to become current in its obligations.
In related news, ProPetro said its effectively utilized fleet count during 3Q2019 was 25.1, which is relatively flat compared to the 2Q2019 count of 25.6. However, a reduced fleet is forecast for the final three months. The company recently has been installing electric fleets in the Permian, where its fleet is centered.
“Due to customer budget exhaustion, seasonality and overall softening industry demand, ProPetro currently estimates effective utilization in the fourth quarter will be 18-20 fleets,” management said.
In connection with the ongoing audit, ProPetro said Chairman Phillip A. Gobe has been appointed executive chairman and is to serve as “principal executive officer” to oversee the annual and quarterly SEC reports. He also would “share responsibility for overseeing the remediation of control deficiencies that were identified in the internal review.”
CEO Dale Redman is continuing to helm the company and managing day-to-day operations and business development initiatives. CFO Jeffrey Smith was named chief administrative officer to oversee information technology, human resources, procurement and risk management functions.
Meanwhile, the former CFO of Permian exploration pure-play Concho Resources Inc., Darin G. Holderness, has come aboard as interim CFO while a search for a permanent financial chief is conducted.
In addition, Newton W. “Trey” Wilson III, former CEO at Westex/WLP Well Services LP, has joined ProPetro as general counsel and corporate secretary. ProPetro’s Elo Omavuezi, who has been with the company since 2017, was promoted to chief accounting officer, replacing Ian Denholm, who has resigned.
“The changes we are announcing will strengthen ProPetro and position the company to continue to capitalize on its position as a leading provider of pressure pumping services in the Permian Basin,” said Gobe.
Redman said the new structure “will allow me to pursue the activities that I enjoy most, including working closely with our customers, supply chain partners and operational leaders, as we continue our focus on operational excellence in the Permian, participate in technological advancements and create value for all of our stakeholders.”
The revamped executive team plans to continue to evaluate “certain internal control deficiencies identified as a result of the internal review,” management said. “The company expects management’s review of internal control deficiencies to result in one or more material weaknesses that may relate to past periods.”
ProPetro did not predict when the evaluation would be completed but it said it would “take appropriate corrective actions and make necessary filings” as needed.
Raymond James & Associates Inc.’s Praveen Narra said Friday the internal review related in part to real estate transactions was “already well known and previously disclosed and thus we see these as less of an issue. Given that more issues were not discovered and restatements are unlikely, we view the internal review as better than most investors feared.”
Redman remaining as the “customer-facing CEO will likely be a significant relief for investors. More importantly with management largely intact, the company's commercial model should be largely unchanged as well.”