ProPetro (PUMP) Q3 2026 earnings review
ProPetro's power unit turns a profit, but frac costs climb
ProPetro's new power generation unit turned its first quarterly profit while high repair bills held back its oilfield pumping business. Total sales rose 16% from last quarter to $355 million, and the Permian Basin oilfield services provider swung from a net loss to a $13 million profit. Chief executive Sam Sledge announced a 230-megawatt power deal with Targa Resources, lifting total contracted power capacity to 510 megawatts.
| Revenue | $355.4M +16% from last quarter, +21% from a year ago |
|---|---|
| PROPWR cash profit (Adjusted EBITDA) | $7.6M -$0.7M last quarter |
| PROPWR contracted capacity | 510 MW 350 MW last quarter |
| 2026 total capital spending outlook | Trimmed $10M middle of the range: $550M |
⚖️ Verdict: 🟢 Bullish
The story got better because the power division proved it can make money in the field and win large contracts outside data centers. Generating $8 million of cash profit and signing Targa removes the doubt that ProPetro's generators would sit idle while data center talks drag on. One caution: reactivating frac fleets cost more than planned, cutting the pumping unit's free cash flow to $5 million from $51 million last quarter.
The question now is whether ProPetro can sign large data center contracts before its 10-megawatt Caterpillar engines start arriving in 2028, and whether early 2027 frac renewals will lift oilfield margins. Either the company locks in ten-year data center deals and higher pumping rates, or it faces rising equipment bills in 2027 with a weak oilfield cash engine. Contract announcements and first-quarter 2027 frac margins will settle both debates.
🐂 Bull Case
The Power Business Just Turned a Profit
ProPetro's main growth bet is PROPWR, a division that builds and runs natural gas power plants for data centers and oilfields. For six quarters the unit lost money while management bought generators and hired crews. In the third quarter it turned its first quarterly profit, driven by "deployment execution and reliability that continue to exceed expectations", the company said.
- PROPWR revenue: $22.3 million, up 139% from $9.3 million last quarter
- PROPWR Adjusted EBITDA (operating cash profit before one-offs): $7.6 million, up from a $0.7 million loss last quarter
- Segment Adjusted EBITDA margin: 34.0% of revenue by our math
This profit matters because it proves the unit's economics in reported numbers rather than slide decks. A 60-megawatt site for a Midwest data center and several Permian Basin oilfield grids ran for a full quarter, generating a 34% cash margin even while the division carried overhead for future sites. That performance supports management's target of paying back equipment costs in four to six years.
What to watch: PROPWR revenue and cash margin in the first half of 2027. Chief executive Sam Sledge warned that hiring and site preparation for large projects will build ahead of revenue next year, so holding a positive margin during that ramp would confirm the unit's cost control.
Targa Deal Lifts Power Contracts Past 500 Megawatts
Critics have worried that ProPetro ordered 1.1 gigawatts of power equipment with only 350 megawatts locked into customer contracts. In September the oilfield services group closed a deal with pipeline operator Targa Resources for about 230 megawatts of power in the Permian Basin. That agreement lifted total contracted capacity to about 510 megawatts, adding 160 megawatts net of portfolio adjustments since July.
The Targa win shows that ProPetro does not need to wait on slow data center negotiations to put its generators to work. PROPWR president Travis Simmering said oil and gas contracts pay back their capital in about four years, faster than the four-to-six-year average for data centers. The company now expects to have 250 to 275 megawatts running by December and more than 500 megawatts by early 2028.
What to watch: total contracted megawatts announced by the fourth-quarter report. Because Targa already covers the 500-megawatt deployment target for early 2028, any new contract will lift that deployment floor and shrink the uncontracted equipment gap.
Gas Frac Fleets Are Sold Out Before 2027 Renewals
In the core completions business, which pumps water and sand down oil wells, ProPetro reactivated its thirteenth hydraulic fracturing fleet "earlier than we originally anticipated", Sledge said. hydraulic fracturing revenue rose 13.5% from last quarter to $235.2 million. More than two-thirds of the company's pumping horsepower is under contract, and most of those deals come up for renewal in the first half of 2027.
That timing works in ProPetro's favor because decades of worn-out pumps have left only the mid-70s active fleets in the Permian Basin, Sledge said. Because diesel fuel is expensive and Permian natural gas is cheap, operators want electric and dual-fuel fleets that burn gas. Sledge said the company is turning away spot work and will reprice about half of its FORCE electric fleets into higher rates next year.
What to watch: Hydraulic Fracturing revenue per active fleet in the first quarter of 2027. A rise above this quarter's $18.1 million per fleet would prove that contract renewals captured higher prices.
🐻 Bear Case
Data Center Deals Take Longer While Equipment Orders Sit Open
"We believe the market is waiting on a transformational data center agreement, and we recognize this has become a "show me" story," Sledge said. ProPetro has secured 2.6 gigawatts of generator supply through 2031, including more than 1 gigawatt of large 10-megawatt Caterpillar engines built for permanent power plants. Yet the company has not announced a new data center contract since October 2025.
Sledge said the company remains in advanced talks on two projects covering several hundred megawatts, but "timelines have extended as we work through diligence with counterparties". Simmering noted that negotiating liability damages on ten-year power plants takes longer than oilfield deals. Meanwhile, ProPetro expects its 2027 power capital spending to rise above 2026's $400 million to $430 million plan to fund Caterpillar down payments.
What to watch: a signed data center contract before the 10-megawatt Caterpillar engines begin arriving in the second half of 2028. Without one, ProPetro will pay milestone bills on large engines that have no customer.
Rebuilding Costs Cut Frac Margins and Drained Cash
"In completions, the setup is straightforward: a sold-out fleet, a tightening market, and early pricing momentum," Sledge said. The third-quarter numbers tell a tougher story for the pumping unit. While Hydraulic Fracturing revenue rose $27.9 million from last quarter, its Adjusted EBITDA edged up just $1.2 million to $45.4 million, so the segment's cash margin fell 2.0 percentage points to 19.3%.
- Cost of services (the direct cost of running field crews and equipment): $269.7 million, up 15.3% from last quarter
- Hydraulic Fracturing capital spending incurred: $39.1 million, more than double last quarter's $16.3 million
- Free Cash Flow for Completions Business: $5.0 million, down 90.2% from $51.1 million last quarter
Sledge admitted that the cost of rehiring crews, buying spare parts and repairing pumps was "higher than we originally anticipated". Worse, management said those rebuilding costs will continue to pressure margins in the fourth quarter alongside holiday slowdowns. When the core oilfield business generates only $5 million of free cash flow, it cannot self-fund the power build-out.
What to watch: Hydraulic Fracturing Adjusted EBITDA margin in the first quarter of 2027. After fourth-quarter holidays pass, the margin must rebound above 21% to show that rebuilding expenses were temporary.
Convertible Notes Pushed Diluted Shares Up 26% in One Quarter
To pay for its power generators, ProPetro sold 17.3 million shares of stock in January and issued $690 million of convertible notes in May. Because the company reported a net loss in the second quarter, accounting rules excluded the convertible notes from the share count. Returning to a $13.0 million net profit in the third quarter triggered the accounting inclusion of those notes.
As a result, the diluted share count jumped 26.0% from last quarter and 48.7% from a year ago, to 154.7 million shares. Finance chief Caleb Weatherl previously noted that capped call options prevent actual economic dilution until the stock price reaches $29.49, but for GAAP earnings per share ($0.09 this quarter), every future profitable quarter will spread net income across roughly 32 million extra shares.
What to watch: whether management lets its $89.2 million share buyback authorization expire unused on December 31, 2026. Letting it lapse would confirm that all cash goes to equipment orders rather than retiring shares.
Risks this quarter didn't answer
Three standing concerns from prior filings received no update in the third-quarter release or call.
- ExxonMobil contract roll-off: prior filings showed a contract for two FORCE electric fleets expiring in late 2026 without renewal; Sledge said half the electric fleet will recontract in 2027, but the third-quarter filing is needed to check ExxonMobil revenue.
- Power profit per megawatt: management again gave a four-to-six-year payback target rather than restating the $275,000 to $400,000 per-megawatt cash profit figure it stopped quoting last year.
- Upfront customer cash: Weatherl disclosed that some power contracts collect upfront reservation fees before recognizing revenue, and the quarterly filing will show how much cash came from those prepayments.
👓 Other Themes
Iran Conflict Keeps Diesel Expensive and Gas Fleets in Demand
Sledge said the ongoing war in the Middle East and global refining bottlenecks have kept diesel fuel expensive while Permian natural gas stays cheap. That fuel price gap drives oil producers to rent natural gas-burning frac fleets, where ProPetro has most of its horsepower. Even if the conflict eases, Sledge expects tight refining supply to preserve the cost advantage of gas engines into 2027.
💲 Other KPIs
Uncollected customer bills rose 24.6% from last quarter and 38.6% from a year ago, outpacing the 16.2% quarterly rise in sales. That buildup tied up about $15 million of working capital cash, which cut operating cash flow from $66.0 million in the second quarter to $46.3 million in the third.
Combined sales in the two smaller oilfield units — wireline (lowering tools into wellbores) and cementing (sealing well casings) — grew 9.5% from last quarter and 17.0% from a year ago by our math. Adjusted EBITDA across the two segments rose to $20.3 million from $16.9 million in the second quarter.
Cash plus available credit lines rose from $905.0 million last quarter. Cash stood at $728.9 million, down from $784.0 million in June as equipment bills came due, while borrowing room on the revolving credit line rose to $185.0 million alongside $20.0 million on the Caterpillar loan.
🔮 Guidance
Trimmed at the top end. The middle of the range moved down $10 million to $550 million, nearly double last year's $281.2 million. By our math, that leaves about $222.9 million of equipment spending for the fourth quarter, up from $171.5 million in the third. It is the second small trim since the company raised the plan by $162.5 million in the first quarter.
Trimmed at the top end. Weatherl narrowed the power spending plan by $20 million at the top end, bringing the middle of the range to $415 million as year-end delivery dates firmed up. By our math, the plan leaves $168.5 million for the fourth quarter, a 31.7% step-up from the third quarter's $128.0 million.
Unchanged. The oilfield spending plan stays at a $135 million middle, after management cut it by $15 million last quarter. With $80.7 million incurred across the first nine months, the plan leaves $54.3 million for the fourth quarter by our math, up from $43.5 million in the third.
Unchanged. ProPetro still expects to buy one leased electric frac fleet before year-end for $15 million to $20 million, and at least three more in 2027. Buying the fleets removes roughly $16 million per quarter of lease expense that currently sits inside operating costs.
Unchanged. The total cost to build one megawatt of power, including site transformers and switchgear, holds at $1.4 million to $1.5 million for a third straight quarter. Sledge said the figure includes expected inflation over the life of the Caterpillar agreement.
New. Management plans to keep all 13 active frac fleets running in the fourth quarter, matching the third-quarter count. However, the company warned that holiday breaks and ongoing pump rebuilding costs will weigh on fourth-quarter utilization and profit.
New. ProPetro gave its first specific year-end deployment target of 250 to 275 megawatts running in the field by December 2026. From there, the company plans to pass 500 megawatts deployed by early 2028 as the Targa project and new data center work come online.
❓ Key Questions
Where will the two expiring ExxonMobil electric fleets go?
Prior filings showed a contract for two FORCE electric fleets with ExxonMobil's XTO unit expiring in late 2026 without renewal. Management said half of its electric capacity will recontract in 2027, but did not say whether those two fleets have signed new customers or at what price.
What is the cash profit per megawatt on Targa?
Management stopped quoting its $275,000 to $400,000 per-megawatt annual EBITDA target last year when equipment costs rose 30%. Disclosing the expected EBITDA per megawatt on the 230-megawatt Targa deal would let investors test the four-year payback claim.
How much cash came from upfront customer reservation fees?
Weatherl noted that some power contracts collect upfront cash reservation fees before assets are deployed and before revenue is recorded. Investors need the dollar amount of those prepayments in the third quarter to separate operating cash flow from customer deposits.
What will the 2027 Caterpillar milestone payments cost?
ProPetro said 2027 power capital spending will exceed 2026's $400 million to $430 million because of new deliveries and Caterpillar down payments. Sizing the 2027 bill is essential to see how fast the company will spend its $729 million cash pile.