ProPetro Holding Corp. - Annual Report: 2019 (Form 10-K)

---

---

•

approximately $370,000 of expenses reimbursed to members of senior management, including the former chief executive officer (approximately $346,000) and former chief financial officer (approximately $18,000), were incorrectly recorded as expenses of the Company and should have been the responsibility of the officers individually; each of these officers has reimbursed the Company in full for the identified amounts. These improper reimbursements were attributable to inadequate documentation stemming from the lack of a more robust employee expense review and approval procedure;

•	the Company’s former chief accounting officer entered into a related party transaction that was not properly disclosed in the Company’s filings with the Securities and Exchange Commission (the “SEC”);

•	a number of internal and disclosure control deficiencies and material weaknesses were identified, as described in more detail in Part II - Item 9A. “Controls and Procedures,” including, but not limited to, the following:

◦	the Company’s former executive management team did not establish and promote a control environment with an appropriate tone of compliance and control consciousness throughout the entire Company;

◦	the Company did not appropriately identify and monitor conflicts of interest;

◦	certain whistleblower allegations were not properly investigated and elevated to the Committee;

◦	instances were identified of non-compliance with the Company’s internal policies, including its Insider Trading Compliance Policy and Code of Conduct and Ethics; and

◦	management did not appropriately communicate information internally and externally, including communication between management and the Board.

---

---

•	the severity and duration of world health events, including the recent outbreak of the novel coronavirus (“COVID-19”) pandemic, related economic repercussions and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business;

•

the current significant surplus in the supply of oil and actions by the members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia (together with OPEC and other allied producing countries, “OPEC+”) with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations;

•	uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for our services;

•	the level of production and resulting market prices for crude oil, natural gas and other hydrocarbons;

•	changes in general economic and geopolitical conditions;

•	competitive conditions in our industry;

•	changes in the long-term supply of, and demand for, oil and natural gas;

•	actions taken by our customers, suppliers, competitors and third-party operators;

•	changes in the availability and cost of capital;

•	our ability to successfully implement our business plan;

•	large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;

•	the price and availability of debt and equity financing (including changes in interest rates);

•	our ability to complete growth projects on time and on budget;

•	operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions;

•	changes in our tax status;

•	technological changes;

•	our ability to successfully implement technological developments and enhancements, including the new DuraStim® fleets and associated power solutions;

•	operating hazards, natural disasters, weather-related delays, casualty losses and other matters beyond our control;

•	acts of terrorism, war or political or civil unrest in the United States or elsewhere;

---

•	the effects of existing and future laws and governmental regulations (or the interpretation thereof);

•	the effects of current and future litigation, including the Logan Lawsuit, the Boca Raton Lawsuit and the Chang Lawsuit (each defined herein);

•	the timing and outcome of, including potential expense associated with, the SEC pending investigation;

•	the potential impact on our business and stock price of any announcements regarding the SEC's pending investigation, the Logan Lawsuit, the Boca Raton Lawsuit or the Chang Lawsuit;

•	the material weaknesses in our internal controls over financial reporting and disclosure controls and procedures described under Part I, Item 9, “Controls and Procedures” in this Annual Report;

•	matters related to the Expanded Audit Committee Review and related findings, as well as the implementation and effectiveness of the Company's remediation plan; and

•	our ability to successfully execute on our plans and objectives.

---

---

---

---

•

Strong market position in the Permian Basin. We believe we are one of the largest hydraulic fracturing providers by HHP in the Permian Basin, which is one of the most prolific oil producing areas in the United States. Our longstanding customer relationships and substantial Permian Basin market presence uniquely position us to maintain our market position and grow as the basin is developed in the future. The Permian Basin is a mature, liquids‑rich basin with well-known geology and a large, exploitable resource base that delivers attractive E&P producer economics. As a result of its significant size, coupled with the presence of multiple prospective geologic benches and other favorable characteristics, the Permian Basin has become widely recognized as one of the most attractive and economic oil resources in North America.

•

Deep relationships and operational alignment with high‑quality, Permian Basin‑focused customers. Our deep local roots, operational expertise and commitment to safe and reliable service have allowed us to cultivate longstanding customer relationships with the most active and well‑capitalized Permian Basin operators. Many of our current customers have worked with us since our inception and have integrated our fleet scheduling with their well development programs. We have a long-term partnership agreement with one customer, an E&P company focused in the Permian Basin, to continue to provide pressure pumping and other complementary services for up to 10 years. This relationship differentiates us from our peers. This high degree of operational alignment and partnership with our customers has allowed us to maintain relatively high utilization rates over time compared to our peers. If our customers increase activity levels, we expect to continue to leverage our strong relationships to keep our fleets utilized.

•

Proven cross‑cycle financial performance. Over the past several years, we have maintained high cross‑cycle fleet utilization rates. From late 2017 through 2018 our fleets were consistently fully utilized. In 2019, following a decline in certain of our customers’ operations in the last quarter of 2019, our fleets utilization decreased slightly, and our utilization has decreased dramatically in 2020 as a result of COVID-19 and related matters. Historically, our consistent track record of steady growth, coupled with our ability to quickly deploy new HHP on a dedicated and fully utilized basis, has resulted in revenue growth across the industry’s cycles. We believe that we will be able to continue to operate more efficiently than our competitors while preserving attractive profitability and cash flows as a result of our differentiated service offerings and wellsite efficiencies. Furthermore, we believe that our philosophy of maintaining modest financial leverage and a healthy balance sheet has left us more conservatively capitalized than most of our peers. We expect that improving market fundamentals, our superior execution and our customer‑focused approach should continue to result in strong financial performance.

•

Seasoned management and operating team. We have a seasoned executive management team, with our senior members contributing more than 100 years of collective industry and financial experience. We believe their deep roots and relationships throughout the West Texas community, provide a meaningful competitive advantage for our business. In addition, our management team has assembled a loyal group of highly‑motivated and talented managers and field personnel, and we have had minimal manager‑level turnover in our core service divisions

---

•

Capture an increasing share of demand for hydraulic fracturing services in the Permian Basin. We intend to continue to position ourselves as a Permian Basin‑focused hydraulic fracturing business, as we believe the Permian Basin hydraulic fracturing market offers supportive long‑term growth fundamentals. These fundamentals are characterized by increased demand for our HHP and well completion intensity levels. We have historically operated at a high utilization relative to our peers, and we believe we are strategically positioned to deploy our idle horse-power if overall market condition and demand for pressure pumping services increases.

•	Capitalize on improving efficiency gains. We intend to continue to work with our customers and vendors to improve our operational efficiencies and enhance our profitability. We believe that improving our efficiencies will result in greater revenue and enhanced profitability as fixed costs are spread over a broader revenue base.

•

Cross‑sell our complementary services. In addition to our hydraulic fracturing services, we offer a broad range of complementary services in support of our customers’ development activities, including cementing and coiled tubing. These complementary services create operational efficiencies for our customers, and allow us to capture a greater percentage of their capital spending across the lifecycle of an unconventional well. We believe that, if our customers increase spending levels, we are well positioned to continue cross‑selling and growing our complementary service offerings.

•

Maintain financial stability and flexibility to pursue growth opportunities. Consistent with our historical practices, we plan to continue to maintain a conservative balance sheet, which will allow us to better react to potential changes in industry and market conditions and opportunistically grow our business. In the near term, we intend to continue our past practice of aligning our growth capital expenditures with visible customer demand by strategically deploying new equipment on a dedicated basis in response to inbound customer requests. We will also selectively evaluate potential strategic acquisitions that increase our scale and capabilities or diversify our operations.

---

---

---

---

---

---

•	the severity and duration of world health events, including the recent COVID-19 pandemic, related economic repercussions and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business;

•	the current significant surplus in the supply of oil and actions by the members of OPEC+ with respect to oil production levels and announcements of potential changes in such levels, including the ability of the OPEC+ countries to agree on and comply with supply limitations;

•	uncertainty regarding the timing, pace and extent of an economic recovery in the United States and elsewhere, which in turn will likely affect demand for crude oil and natural gas and therefore the demand for our services;

•	the domestic and foreign supply of, and demand for, oil and natural gas;

•	the level of prices, and expectations about future prices, of oil and natural gas;

•	the level of global oil and natural gas exploration and production;

•	the cost of exploring for, developing, producing and delivering oil and natural gas;

•	the supply of and demand for drilling and hydraulic fracturing equipment;

•	the expected decline rates of current production;

---

•	the price and quantity of foreign imports;

•	political and economic conditions in oil and natural gas producing countries and regions, including the United States, the Middle East, Africa, South America and Russia;

•	operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions;

•	speculative trading in crude oil and natural gas derivative contracts;

•	the level of consumer product demand;

•	the discovery rates of new oil and natural gas reserves;

•	contractions in the credit market;

•	the strength or weakness of the U.S. dollar;

•	available pipeline and other transportation capacity;

•	the levels of oil and natural gas storage;

•	weather conditions and other natural disasters;

•	domestic and foreign tax policy;

•	domestic and foreign governmental approvals and regulatory requirements and conditions;

•	the continued threat of terrorism and the impact of military and other action, including military action in the Middle East;

•	political or civil unrest in the United States or elsewhere;

•	technical advances affecting energy consumption;

•	the proximity and capacity of oil and natural gas pipelines and other transportation facilities;

•	the price and availability of alternative fuels;

•	the ability of oil and natural gas producers to raise equity capital and debt financing;

•	merger and divestiture activity among oil and natural gas producers; and

•	overall domestic and global economic conditions.

---

---

---

---

---

•	increasing our vulnerability to general adverse economic and industry conditions;

•	the covenants that are contained in the agreements governing our indebtedness could limit our ability to borrow funds, dispose of assets, pay dividends and make certain investments;

•	our debt covenants could also affect our flexibility in planning for, and reacting to, changes in the economy and in our industry;

---

•	any failure to comply with the financial or other debt covenants, including covenants that impose requirements to maintain certain financial ratios, could result in an event of default, which could result in some or all of our indebtedness becoming immediately due and payable;

•	our level of debt could impair our ability to obtain additional financing, or obtain additional financing on favorable terms, in the future for working capital, capital expenditures, acquisitions or other general corporate purposes; and

•	our business may not generate sufficient cash flow from operations to enable us to meet our obligations under our indebtedness.

•	grant liens;

•	incur additional indebtedness;

•	engage in a merger, consolidation or dissolution;

•	enter into transactions with affiliates;

•	sell or otherwise dispose of assets, businesses and operations;

•	materially alter the character of our business as currently conducted; and

•	make acquisitions, investments and capital expenditures.

•	requiring us to dedicate a substantial portion of our cash flow from operating activities to payments on our indebtedness, thereby reducing the availability of cash flow to fund working capital, capital expenditures, research and development efforts, potential strategic acquisitions and other general corporate purposes;

---

•	limiting our ability to obtain additional financing to fund growth, working capital or capital expenditures, or to fulfill debt service requirements or other cash requirements;

•	increasing our vulnerability to economic downturns and changing market conditions; and

•	placing us at a competitive disadvantage relative to competitors that have less debt.

•	goodwill impairment of approximately $9.4 million;

•	drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and

•	write-off of $6.1 million of deposits related to options to purchase additional DuraStim® equipment for which options expire at various times through the end of April 2021 as it is not probable we would exercise our options due to the events described above.

---

---

---

---

---

---

---

---

•	limitations on the removal of directors;

•	limitations on the ability of our shareholders to call special meetings;

•	advance notice provisions for shareholder proposals and nominations for elections to the Board to be acted upon at meetings of shareholders;

•	providing that the Board is expressly authorized to adopt, or to alter or repeal our bylaws; and

•	establishing advance notice and certain information requirements for nominations for election to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings.

---

---

---

---

---

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

---

---

---

(1)	Exclusive of depreciation and amortization.

(2)	Inclusive of stock‑based compensation.

---

---

•	Placed in service, at the beginning of 2019, pressure pumping and related assets (510,000 HHP) acquired in connection with the Pioneer Pressure Pumping Acquisition, which resulted in an increase to our revenue and profitability in 2019;

•	Purchased 108,000 HHP of DuraStim® hydraulic fracturing pumps with the first DuraStim® pumps of 54,000 HHP delivered in December 2019, while the remaining hydraulic fracturing pumps or 54,000 HHP expected to be delivered in 2020;

•	Entered into a purchase option agreement with our equipment supplier to purchase additional DuraStim® hydraulic fracturing pumps of 108,000 HHP;

•	Maintained a high fleet utilization for the year 2019; and

•	Improved operational and financial processes by making changes to senior management in 2019.

---

•	Revenue increased $347.8 million, or 20.4%, to $2,052.3 million, as compared to $1,704.6 million for the year ended December 31, 2018, primarily a result of the increase in our fleet size in connection with the Pioneer Pressure Pumping Acquisition placed in service at the beginning of 2019;

•

Cost of services (exclusive of depreciation and amortization) increased $199.8 million or 15.7% to $1,470.4 million, as compared to $1,270.6 million for the year ended December 31, 2018, primarily a result of the increase in head count and higher activity levels resulting from the increase in fleet size. Cost of services as a percentage of revenue decreased to 71.6% in 2019 compared to 74.5% for the year ended December 31, 2018;

•

General and administrative expenses, inclusive of stock-based compensation (“G&A”), increased $51.1 million, or 94.7% to $105.1 million, as compared to $54.0 million for the December 31, 2018. G&A as a percentage of revenue increased to 5.1% in 2019 from 3.2% for the year ended December 31, 2018. The increase was driven by increase in legal and professional fees, payroll related expense and net increase in other G&A expenses resulting partly from the expansion of our business with the Pioneer Pressure Pumping Acquisition. Included in G&A was approximately $24.2 million related to legal and professional fees incurred in connection with the Audit Committee internal review;

•

Net income was $163.0 million, compared to $173.9 million for the December 31, 2018. Diluted net income per common share was $1.57, compared to $2.00 for the year ended December 31, 2018. Adjusted EBIDTA was approximately $519.1 million, compared to $388.5 million for the year ended December 31, 2018 (see reconciliation of Adjusted EBITDA to net income in the subsequent section “How We Evaluate Our Operations”); and

•	Maintained a conservative balance sheet and sufficient liquidity.

◦	Growth Capital. We cancelled substantially all our planned growth capital expenditures for the remainder of 2020.

◦	Other Expenditures. We significantly reduced our maintenance expenditures and field level consumable costs due to our reduced activity levels. We have been seeking lower pricing for our expendable items, materials used in day-to-day operations and large component replacement parts. Also, we have been internalizing certain support services that were outsourced.

◦	Labor Force Reductions. We have reduced our workforce by over 60% due to the changing activity levels for our services. We will continue to make appropriate adjustments to our workforce to reflect outlook related to activity levels.

◦	Compensation Related Costs. The directors and officers have voluntarily reduced compensation at different levels up to 20%. We have taken efforts to manage work schedules, primarily related to hourly employees, to minimize overtime costs.

◦	Working Capital. We have negotiated more favorable payment terms with certain of our larger vendors and are continuing to increase our diligence in collecting and managing our portfolio of accounts receivables.

---

---

---

---

(1)	Other general and administrative expense primarily relates to nonrecurring professional fees paid to external consultants in connection with the Expanded Audit Committee Review and advisory services in 2019, and legal settlements in 2018 and 2017.

---

(1)	Exclusive of depreciation and amortization.

(2)	Inclusive of stock‑based compensation of $7.8 million and $5.5 million for 2019 and 2018, respectively.

(3)	For definitions of the non‑GAAP financial measures of Adjusted EBITDA and Adjusted EBITDA margin and reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to our most directly comparable financial measures calculated in accordance with GAAP, please read “How We Evaluate Our Operations”.

(4)	The non‑GAAP financial measure of Adjusted EBITDA margin for the pressure pumping segment is calculated by taking Adjusted EBITDA for the pressure pumping segment as a percentage of our revenues for the pressure pumping segment.

---

---

---

---

(1)

Exclusive of future commitment fees, amortization of deferred financing costs, interest expense or other fees on our revolving credit facility because obligations thereunder are floating rate instruments and we cannot determine with accuracy the timing of future loan advances, repayments or future interest rates to be charged. However, assuming a weighted average interest rate of 4.4%, and that our ABL Credit Facility debt balance remains the same, our estimated annual interest payment will be $5.8 million.

(2)	Finance and Operating leases include agreements for various office and yard locations, excluding short-term leases (see Note 17. Leases and Note 18. Commitments and Contingencies in the financial statements for additional disclosures, including estimated interest).

---

---

•	drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and

•	write-off of $6.1 million of deposits related to options to purchase additional DuraStim® equipment for which options expire at various times through the end of April 2021 as it is not probable we would exercise our options due to the events described above.

---

---

---

---

•	We evaluated the completeness of related-party transactions by obtaining the Company’s list of related-party relationships and transactions and performing the following:

–	Comparing it to public filings, external news, third-party information or research reports, selected vendor and customer websites, questionnaires completed by the Company’s directors and officers, and other sources.

–	Searching for potential related-party transactions within the accounts receivable, accounts payable, and vendor listings master files and journal entries by searching for the name, vendor identification numbers, and customer identification numbers of the related parties.

–	Inspecting the Company’s minutes from meetings of the Board of Directors and related committees.

–	Making inquiries of executive officers, key members of management, and the Audit Committee of the Board of Directors regarding related party transactions.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

---

(1)	Other general and administrative expense primarily relates to nonrecurring professional fees paid to external consultants in connection with the Company’s expanded audit committee review and advisory services in 2019, and legal settlements in 2018 and 2017.

---

---

---

---

---

---

---

---

---

---

---

---

---

---

•	goodwill impairment of approximately $9.4 million;

•	drilling asset group impairment of approximately $1.1 million as a result of our recoverability tests; and

•	write-off of $6.1 million of deposits related to options to purchase additional DuraStim® equipment for which options expire at various times through the end of April 2021 as it is not probable we would exercise our options due to the events described above.

---

---

---

---

•	Appointed new executive officers with extensive public company experience to improve the tone at the top, communication with the Board and compliance with policies within the Company.

•	Enhanced certain of the Company’s policies, including the Code of Ethics and Conduct, Expense Reimbursement, Travel and Entertainment, and Delegation of Responsibilities and Authority. Additionally, the Company enhanced or implemented control activities to monitor compliance with such policies.

•	Designed and implemented control activities related to the identification of, approval of, and disclosure of related party transactions.

•	Designed and implemented control activities related to the identification and approval of potential conflicts of interest.

•	Designed and implemented control activities related to the evaluation of whistleblower allegations.

•	Formed a disclosure committee and appointed a Chief Disclosure Officer to provide improved corporate governance related to disclosures the Company provides to the public and other external parties.

---

---

(1)	Mr. Gobe was appointed to the Board as a director and Chairman of the Board on July 11, 2019 and was subsequently appointed to the role of Executive Chairman and principal executive officer on October 3, 2019. On March 13, 2020, Mr. Gobe assumed role of Chief Executive Officer and Chairman of the Board.

(2)	On March 13, 2020, Mr. S. Sledge and Mr. Muñoz were promoted to the positions of Chief Strategy and Administrative Officer and Senior Vice President of Operations, respectively.

(3)	Mr. Armour resigned as Chairman of the Board effective July 11, 2019, but remains a member of the Board.

(4)	Member of the Audit Committee.

(5)	Member of the Compensation Committee.

(6)	Member of the Nominating and Corporate Governance Committee.

(7)	Lead Independent Director of the Board, effective October 3, 2019.

(8)	Chairman of the Audit Committee.

(9)	Chairman of the Compensation Committee.

(10)	Chairman of the Nominating and Corporate Governance Committee.

---

---

---

---

•	Preside over all meetings of the Board at which the Chairman of the Board is not present, including any executive sessions of the independent directors.

•	Approve Board meeting schedules and agendas.

•	Act as the liaison between the independent directors and the Chief Executive Officer and Chairman of the Board.

---

---

---

---

---

(1)

Reflects annual cash retainer payments made pursuant to the Amended Director Compensation Policy. With respect to Mr. Armour, this amount includes pro-rated payments associated with his service as Chairman of the Board during 2019. With respect to Messrs. Best and Beal, this amount includes pro-rated payments associated with each director’s service as Chairman of the Audit Committee during 2019. Mr. Best’s payment also includes a pro-rated payment made to him in 2020 for his service as Lead Independent Director of the Board during the fourth quarter of 2019. The amount for Mr. Mitchell is similarly pro-rated for his service during the first through third quarters of 2019.

(2)	Reflects the grant date fair value of RSU awards on the date of grant computed in accordance with FASB ASC Topic 718. For information regarding assumptions underlying the valuation of equity awards, see Note 14 to the Consolidated Financial Statements included in this Form 10-K.

(a)	Messrs. Beal and Mitchell forfeited all outstanding and unvested equity awards (7,878 RSUs each) upon their resignations from the Board on July 11, 2019 and July 28, 2019, respectively.

(3)	Mr. Berg has elected not to be compensated for his service as a director.

---

---

(1)	Mr. Gobe was appointed as Executive Chairman and principal executive officer, effective as of October 3, 2019. He served in that position until his appointment as Chief Executive Officer, effective as of March 13, 2020.

(2)	Mr. Redman ceased to serve as principal executive officer on October 3, 2019 and resigned as Chief Executive Officer and a member of the Board on March 13, 2020.

(3)	Mr. Holderness was appointed to serve as Interim Chief Financial Officer as of October 3, 2019. The interim title was removed and he was appointed Chief Financial Officer effective April 10, 2020.

(4)	Mr. Smith served as Chief Financial Officer in 2019 until his appointment as Chief Administrative Officer on October 3, 2019. Mr. Smith was appointed as a Special Advisor to the Chief Executive Officer on March 13, 2020 and ceased serving as Chief Administrative Officer as of that date.

(5)	Mr. Wilson was appointed as General Counsel and Corporate Secretary, effective as of September 30, 2019.

(6)	Mr. Howell resigned as General Counsel and Corporate Secretary, effective as of September 29, 2019.

(7)	Mr. Denholm resigned as Chief Accounting Officer, effective as of October 3, 2019.

---

---

(1)	On October 31, 2019, Keane Group, Inc. merged with C&J Energy Services, Inc. and changed its name to Nextier Oilfield Solutions Inc.

---

---

(1)	These amounts have been rounded to the nearest whole number.

(2)

We define EBITDA as earnings before (i) interest expense, (ii) income taxes and (iii) depreciation and amortization. We define Adjusted EBITDA as EBITDA, plus (i) loss/(gain) on disposal of assets, (ii) loss/(gain) on extinguishment of debt, (iii) stock based compensation, and (iv) other unusual or non‑recurring (income)/expenses, such as impairment charges, severance, costs related to our IPO and costs related asset acquisition or one-time professional fees.

(3)	We define Net Debt as our total debt less our cash and cash equivalents.

(4)	Varies by executive. See the narrative immediately below for additional information.

---

(1)	On October 31, 2019, Keane Group, Inc. merged with C&J Energy Services, Inc. and changed its name to Nextier Oilfield Solutions Inc.

---

(1)	Does not include 12,182 RSUs that Mr. Gobe received while he was a non-employee director.

---

•	We pay a mix of compensation which includes short-term cash and long-term equity-based compensation.

---

•	We base the vesting and payment of our incentive compensation awards on several different performance metrics, which discourages our employees from placing undue emphasis on any one metric or aspect of our business at the expense of others.

•	We believe that our performance metrics are reasonably challenging, yet should not require inappropriate risk-taking to achieve.

•	The performance metrics for awards under our Annual Bonus Plan include quantitative financial and operational metrics as well as qualitative metrics related to our operations, strategy and other aspects of our business and our Compensation Committee retains discretion to modify payout amounts under the Annual Bonus Plan as appropriate.

•	The performance periods under our PSUs overlap, and our time-vested restricted stock units generally vest over a three-year period. This mitigates the motivation to maximize performance in any one period at the expense of others.

•	Our Named Executive Officers are required to own our common stock at levels provided in our Executive Stock Ownership Guidelines.

•	We have instituted a clawback policy, which allows us to clawback compensation in the event of a financial restatement or certain misconduct.

•	We believe that we have an effective management process for developing and executing our short- and long-term business plans.

•	Our compensation policies and programs are overseen by the Compensation Committee.

•	The Compensation Committee retains an independent compensation consultant.

•

an extension of the exercise period applicable to the stock options granted under the Stock Option Plan that are vested and outstanding as of the date of Mr. Smith’s “Termination of Employment” (as defined in the Stock Option Plan) (the “Smith Extended Options”) such that the Smith Extended Options remain exercisable until the one-year anniversary of the date of Mr. Smith’s Termination of Employment; and

•

“cashless exercise” of the stock options granted under the both the Stock Option Plan and Incentive Plan that are outstanding as of March 13, 2020 (the “Smith Vested Options”) within the exercise periods described in the applicable award agreements and plans (as modified by the 2020 Smith Letter Agreement for the Smith Extended Options) such that Mr. Smith does not have to deliver any cash to exercise the Smith Vested Options but the number of shares of Stock delivered by the Company upon the exercise of the Smith Vested Options shall be reduced by the number of shares of Stock equal in value to the applicable exercise price and the associated tax withholding.

---

---

•	20% salary reduction for Mr. Gobe;

•	15% salary reduction for Messrs. Holderness, Sledge and Wilson; and

•	10% salary reduction for Mr. Smith.

---

---

(1)

Amounts in this column for Messrs. Gobe and Holderness represent a discretionary increase to the short-term cash incentive awards paid to such Named Executive Officers pursuant to the Company’s Senior Executive Incentive Bonus Plan (the “Bonus Plan”), in each case, based upon such Named Executive Officer’s performance during 2019. See Note 3 below and “Elements of Compensation for the 2019 Fiscal Year—Annual Cash Incentive Awards” above for additional

---

(2)

Amounts in these columns reflect the aggregate grant date fair value of the RSU and PSU awards granted in 2019 under the Incentive Plan, calculated in accordance with FASB ASC Topic 718. For Mr. Denholm, the amount also reflects the incremental fair value of the modified awards of RSUs, PSUs and stock options as described below in “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement.” The FASB ASC Topic 718 value for the RSUs was calculated using the closing price per share of our common stock on the date of grant applied to the total number of RSUs granted. The FASB ASC Topic 718 grant date fair value of the PSUs was determined using a Monte Carlo simulation. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements included in this Form 10-K. If the grant date value of the 2019 PSU awards was calculated based on the maximum possible payout, the grant date fair value for such awards for Messrs. Gobe, Redman, Holderness, Smith, Sledge, Wilson, Howell and Denholm would have been equal to $205,393, $6,144,685, $322,181, $2,048,252, and $1,843,440, $322,181, $1,300,597 and $358,437, respectively. The actual amount realized upon settlement of PSU and RSU awards will depend upon the market price of the Company’s stock on the settlement date.

(3)

Amounts in this column represent the short-term cash incentive awards for performance during the 2019 fiscal year pursuant to the Bonus Plan, determined based on achievement of the applicable performance metrics. Based upon performance during 2019, the Board exercised its discretion under the Bonus Plan not to pay an annual bonus to either Mr. Redman or Mr. Smith. See “Elements of Compensation for the 2019 Fiscal Year—Annual Cash Incentive Awards” above for additional informational regarding these awards.

(4)

As shown in the table below, amounts in this column for 2019 include the cost of the Company’s vehicle allowance program for Messrs. Redman, Smith, and Sledge, and for Mr. Holderness, the amount in this column includes the value of the Company vehicle provided to him for his use while in Midland, Texas, which was determined by multiplying the number of miles Mr. Holderness drove the vehicle in 2019 by $0.58, which is the Internal Revenue Service’s mileage reimbursement rate for business travel in 2019. For Mr. Redman, the amount reported for 2019 also includes the cost of certain other perquisites, including club dues and membership fees, charitable donations made on behalf of Mr. Redman and the cost of certain sporting event tickets purchased by the Company for Mr. Redman’s use. For Mr. Holderness, the amount reported for 2019 also includes reimbursements for travel to and from Midland, Texas (excluding any travel expenses incurred while serving as a consultant to the Company) and payment of his housing expenses in Midland, Texas. Many of the Named Executive Officers had spouses accompany them on business trips at no additional incremental cost to the Company. For Mr. Howell, the amount in this column reported for 2019 includes (i) 401(k) contributions made by ProPetro Services, Inc. (ii) cash severance and (iii) the cost of continued health coverage following his termination of employment pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), in each case of clauses (ii) and (iii), paid pursuant to the Howell Separation Agreement (as defined and described below in “Potential Payments upon Termination or Change in Control—Howell Separation Agreement”). Finally, for Mr. Denholm, the amount in this column reported for 2019 includes payment of his accrued but unused paid time off upon the Denholm Separation Date (as defined below) and cash severance paid pursuant to the Denholm Separation Agreement (as defined and described below in “Potential Payments upon Termination or Change in Control—Denholm Separation Agreement”).

•

Mr. Redman’s 2017 perquisites have been increased to include $31,606 in plane maintenance expenses associated with personal use of his plane (which was frequently used for business travel), as well as the cost of personal travel and associated expenses, charitable donations made on behalf of Mr. Redman, medical costs and insurance, retail expenditures, sporting, movie and event tickets, subscription services, dry cleaning, meals, groceries and other supplies, which equal $38,160 in total.

•

Mr. Redman’s 2018 perquisites have been increased to include $97,269 in personal travel and associated expenses, $60,273 in plane maintenance expenses associated with personal use of his plane (which was frequently used for business travel), as well as the cost of charitable donations made on behalf of Mr. Redman, medical costs, retail expenditures, sporting, movie and event tickets, subscription services, dry cleaning, meals, groceries and other supplies, which equal $60,188 in total.

•	Mr. Smith’s 2017 and 2018 perquisite amounts have been increased to reflect the cost of his personal travel and associated expenses, retail expenditures and meals totaling $9,301 and $5,845 respectively.

•	Mr. Redman’s 2017 perquisites have been increased to include the value of sporting and event ticket purchases, charitable donations made on behalf of Mr. Redman, and $52,665, which reflects the cost of the pilots provided by the Company for Mr. Redman’s personal use of his plane.

---

•	Mr. Redman’s 2018 perquisites have been increased to include the value of ticket purchases, $26,680 in charitable donations made on behalf of Mr. Redman, and $40,433, which reflects the cost of the pilots provided by the Company for Mr. Redman’s personal use of his plane.

•	Mr. Sledge’s 2018 perquisites have been increased to include the cost of charitable donations made on behalf of Mr. Sledge.

(5)

On October 3, 2019, the Board appointed Messrs. Gobe, Holderness and Smith to the positions of Executive Chairman, Interim Chief Financial Officer and Chief Administrative Officer, respectively. Effective as of such date, Mr. Smith ceased to serve as the Chief Financial Officer . On April 10, 2020, Mr. Holderness was appointed Chief Financial Officer, removing the previous interim title. In addition, effective October 3, 2019, Mr. Denholm resigned from his role as Chief Accounting Officer and served as an employee of the Company until December 8, 2019.

(6)	Mr. Redman resigned from his position as Chief Executive Officer on March 13, 2020, and Mr. Gobe was appointed Chief Executive Officer as of such date. Effective as of the same date, Mr. Smith was appointed Senior Advisor to the Chief Executive Officer and ceased to serve as Chief Administrative Officer.

(7)	On August 30, 2019, Mr. Howell gave the Board notice of his intent to resign from his position as General Counsel and Corporate Secretary, effective September 29, 2019, and on September 30, 2019, the Board appointed Mr. Wilson to the office of General Counsel and Corporate Secretary.

(8)

This amount includes (i) $98,654 that Mr. Gobe received for his service as an executive officer and (ii) $43,424 that Mr. Gobe received for his service as Chairman of the Board prior to appointment as an executive officer . Mr. Gobe stopped receiving compensation for his service as a member of the Board upon his appointment to Executive Chairman and principal executive officer, effective October 3, 2019.

(9)	This amount includes the value of (i) 12,182 RSUs that Mr. Gobe received for his service on the Board in 2019, (ii) 9,277 RSUs that Mr. Gobe received for his service as an executive officer of the Company and (iii) 9,277 target PSUs that Mr. Gobe received for his service as an executive officer of the Company. For additional information, see “Grants of Plan-Based Awards” below.

(10)	This amount includes (i) $109,615 that Mr. Holderness received in 2019 for his service as Interim Chief Financial Officer and (ii) $49,420 that Mr. Holderness received for consulting services provided to the Company from July 2019 until his appointment as Interim Chief Financial Officer on October 3, 2019.

---

(1)

Amounts in these columns represent the estimated payouts for annual cash incentive awards for 2019 assuming threshold, target and maximum performance achievement. For Messrs. Gobe, Holderness and Wilson, these columns represent the pro-rata portion of their annual cash incentive awards for the portion of 2019 following their respective appointments. For Mr. Smith, these columns have been adjusted to take into account the value of his potential annual cash incentive calculated based on the portion of the year he served as each of Chief Financial Officer and Chief Administrative Officer. Mr. Howell and Mr. Denholm each forfeited their annual cash incentive awards in connection with their respective terminations of employment. The actual amounts paid to our Named Executive Officers for 2019 can be found in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table above. See “Elements of Compensation for the 2019 Fiscal Year—Annual Cash Incentive Awards” above for additional information regarding these awards.

(2)

These amounts represent the threshold, target and maximum number of PSUs granted to the Named Executive Officers during 2019. The number of PSUs which ultimately vest is based on the performance of the Company’s TSR relative to the TSR of the companies in our performance peer group during the three-year performance period ending on December 31, 2021, subject to the Named Executive Officer’s continued employment through such date. The PSUs granted in 2019 were subsequently cancelled and regranted on June 4, 2020 in order to ensure the availability of an exemption from liability under Section 16(b) of Exchange Act with respect to these awards. No changes were made to the terms of the awards in connection with the cancellation and regranting of such awards other than the date of grant.

(3)	Other than as described in Note 5 below, amounts in this column reflect RSUs granted to the Named Executive Officers during 2019, which vest as to one-third on each of the first three anniversaries of the applicable date of grant, subject to the Named Executive Officer’s continued employment through each such date.

(4)

These amounts represent the aggregate grant date fair value of RSUs and PSUs granted in 2019 to the Named Executive Officers, computed in accordance with FASB ASC Topic 718, disregarding estimated forfeitures. The grant date fair value of the PSUs is based on probable outcome with regard to the applicable performance metrics. For information regarding assumptions underlying the valuation of equity awards, see Note 14 of the Consolidated Financial Statements in this Form 10-K.

(5)

Mr. Gobe’s award of 12,182 RSUs on July 11, 2019 was granted to Mr. Gobe pursuant to the Amended Director Compensation Policy in connection with his appointment as a member of the Board and as Chairman of the Board and will vest in full on the earliest to occur of (i) July 11, 2020, (ii) the day immediately preceding our 2020 annual meeting of stockholders and (iii) the occurrence of a Change in Control (as defined in the Incentive Plan and described below under

---

(6)	Pursuant to the terms of the Incentive Plan, Mr. Howell forfeited all of his unvested RSUs and PSUs in connection with his September 29, 2019 separation, as described below in “Outstanding Equity Awards for Fiscal Year Ended December 31, 2019” and “Potential Payments Upon Termination or Change in Control—Howell Separation Agreement.”

(7)

Pursuant to the terms of the Denholm Separation Agreement (as defined and described in “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement), Mr. Denholm forfeited all of the unvested RSUs and PSUs that did not become vested in connection with his December 8, 2019 separation, as describe below in “Outstanding Equity Awards for Fiscal Year Ended December 31, 2019.”

---

---

(1)

On June 14, 2013, Messrs. Redman, Smith and Sledge were each granted 699,852 options to purchase our common stock that vested in equal annual installments on June 14, 2014, June 14, 2015, June 14, 2016 and June 14, 2017. Mr. Sledge exercised a portion of such options on March 16, 2017 via “cashless exercise” such that Mr. Sledge did not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options was reduced by the number of shares equal to the value of the exercise price and the applicable tax withholding.

---

(2)

On July 19, 2016, Messrs. Redman, Smith and Sledge were granted 501,540, 310,971 and 231,019 options to purchase our common stock, respectively, that were originally scheduled to vest in equal installments December 31, 2016, June 30, 2017, December 31, 2017, June 30, 2018, and December 30, 2018. However, in connection with our IPO, we fully accelerated the vesting of the unvested portions of these options.

(3)

These amounts reflect option awards granted under the Incentive Plan in connection with our IPO on March 16, 2017. Such awards vest in four substantially equal annual installments commencing on the first anniversary of the grant date. In connection with Mr. Denholm’s separation and pursuant to the terms of the Denholm Separation Agreement (as defined and described below in “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement”), a pro-rata portion of the stock options granted under the Incentive Plan to Mr. Denholm vested on December 8, 2019, based on months of service during the applicable vesting period, and the exercise period for the vested stock options granted to Mr. Denholm under the Incentive Plan was extended until October 3, 2020. The remainder of Mr. Denholm’s unvested stock options were forfeited upon his separation, pursuant to the terms of the Incentive Plan and the applicable award agreement thereunder.

(4)	The amounts in this column represent RSU awards held by each Named Executive Officer which, other than as described for Mr. Gobe, vest pro-rata over the applicable remaining vesting dates as follows, subject to the Named Executive Officer’s continued employment:

(a)	For Mr. Gobe, these amounts include a grant of RSUs made pursuant to the Amended Director Compensation Policy in connection with his appointment as a member of the Board and as Chairman of the Board on July 11, 2019. See “Director Compensation” for more information.

(5)	The amounts in this column were calculated by multiplying $11.25, the closing price of our common stock on December 31, 2019, by the number of awards reported.

(6)

Pursuant to the applicable SEC rules, the amounts in this column and in the table below reflect the maximum number of PSUs held by each Named Executive Officer which may vest, if at all, based on the performance of the Company’s stock relative to a peer group during the applicable three-year performance period as shown in the below table. The actual number of PSUs earned based on actual performance over the full performance period may range from 0% to 100% of the amount below. All outstanding PSUs, including PSUs granted in 2018 and 2019, were subsequently cancelled and regranted on June 4, 2020 in order to ensure the availability of an exemption from liability under Section 16(b) of the Exchange Act with respect to these awards. No changes were made to the terms of the awards in connection with the cancellation and regranting of such awards other than the date of grant.

---

(a)

Any unvested PSUs held by Mr. Howell were forfeited and cancelled in accordance with the terms of such award agreements in connection with his September 29, 2019 separation, as described below in “Potential Payments Upon Termination or Change in Control—Howell Separation Agreement.” In connection with Mr. Denholm’s separation and pursuant to the terms of the Denholm Separation Agreement (described below under “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement”), a pro-rata portion of the PSUs granted to Mr. Denholm during the 2019 calendar year were vested on December 8, 2019, based on target performance and months of service during the applicable performance period.

(1)

This column reflects the RSUs and PSUs held by each Named Executive Officer that vested during 2019, except as noted below for Mr. Denholm. The target number of PSUs granted to the Named Executive Officers in 2017 vested. For Messrs. Howell and Denholm, this column reflects the RSUs held each Named Executive Officer that vested in accordance with their applicable vesting schedules prior to their respective separations. For Mr. Denholm, this amount also includes the accelerated vesting of certain of his outstanding RSUs and PSUs, based up target performance, as provided for in the Denholm Separation Agreement and as described below under “Potential Payments Upon Termination or Change in Control—Denholm Separation Agreement.”

(2)	This column reflects the aggregate market value realized by each Named Executive Officer upon vesting, calculated by multiplying the number of RSUs and PSUs that vested (including shares withheld for tax withholding purposes) by the closing price of our common stock on the applicable vesting date.

---

•	Lump sum payment equal to the amount of earned but unpaid base salary, reimbursement for all incurred but unreimbursed expenses and the value of all accrued but unused vacation (the “Standard Accrued Amounts”);

•	One times the sum of (i) the Named Executive Officer’s current annualized base salary and (ii) the amount of the Named Executive Officer’s annual bonus paid for the year prior to the year of termination, payable in equal installments in accordance with normal payroll practices for the 12 months following the termination date;

•	Payment of any earned but unpaid annual bonus for the year prior to the year of the termination, payable at the time such bonuses are paid to other executives; and

•	Reimbursement for the excess of the premiums for continued health coverage for the Named Executive Officer, his spouse and his eligible dependents under the Company’s group health plans in accordance with COBRA over the current employee rates for up to 12 months, or if earlier, the date that the Named Executive Officer becomes covered under another employer’s group health plans.

•

“Cause” generally means the Named Executive Officer’s (i) willful failure or refusal (other than due to Disability) to perform obligations or any lawful directive from the Board, subject to a 30-day cure period, (ii) commission, conviction, plea of no contest, plea of nolo contendere or imposition of unadjudicated probation for any felony or crime involving moral turpitude, (iii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (iv) fraud, embezzlement, misappropriation, misconduct, conversion of assets of the Company or breach of fiduciary duty or (v) material breach of the employment agreement or any agreement with the Company or its affiliates, subject to a 30-day cure period.

•

“Good Reason” generally means (i) the material diminution in the Named Executive Officer’s base salary, authority, duties, or responsibilities or (ii) the material breach by the Company of any of its obligations under the employment agreement, in each case, subject to a 90-day notice period, 30-day cure period and the Named Executive Officer’s resignation within six months of the end of the cure period.

---

•	“Disability” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or last for at least 12 continuous months.

•	Lump sum payment equal to the amount of earned but unpaid base salary (the “Wilson Accrued Amounts”); and

•

One times (or, if such termination or resignation, as applicable, occurs within 12 months following a “Change in Control” (as defined in the Incentive Plan and as described below), one and one half times) the sum of (i) the Mr. Wilson’s then-current annualized base salary and (ii) the target amount of Mr. Wilson’s annual bonus for the year of the termination, payable in equal installments in accordance with normal payroll practices for the 12 months following the termination date.

•

“Cause” generally means Mr. Wilson’s (i) material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, (ii) material breach of the Company’s or its affiliates’ policies or code of conduct applicable to Mr. Wilson, subject to a 30-day notice and 15-day cure period, (iii) material breach of any law applicable to the workplace or employment relationship, subject to a 30-day notice and 15-day cure period, (iv) gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft or embezzlement, (v) conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, (vi) material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or the Company’s principal executive officer, subject to a 30-day notice and 15-day cure period, (vii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (viii) failure to exercise the degree of care, skill and diligence as lawyers of ordinary skill and knowledge commonly possess and exercise or failure to act with undivided loyalty to the Company and its affiliates, subject to a 30-day notice and 15-day cure period, or (ix) failure to maintain a license to practice law in the state of Texas or failure to maintain good standing with the State Bar of Texas.

•

“Good Reason” generally means (i) the material diminution in Mr. Wilson’s base salary, authority, duties, or responsibilities (provided that his removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), (ii) the material breach by the Company of any of its obligations under the employment agreement or (iii) Mr. Wilson’s relocation by more than 50 miles from his current place of business, in each case, subject to a 30-day notice period, 15-day cure period and Mr. Wilson’s resignation within 75 days of the end of the cure period.

•	“Disability” generally means Mr. Wilson’s inability to perform the essential functions of his job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board.

---

•	Accelerated vesting of a pro-rata number of RSUs, calculated based on the number of days Mr. Holderness was employed by the Company during the applicable vesting period; and

•	Deemed satisfaction of the applicable service requirement with respect to a pro-rata number of PSUs, calculated based on the number of days employed by the Company during the applicable performance period, which remain outstanding and eligible to vest subject to satisfaction of the applicable performance metrics through the end of the applicable performance period.

•	“Cause” generally means the Named Executive Officer’s (i) willful failure to substantially perform his duties, (ii) willful failure to carry out, or comply with, in any material respect any lawful directive of our board of directors, (iii) commission at

---

•

“Change of Control” generally means (i) any transaction or series of transactions whereby any person, other than the Company, any of its subsidiaries or any Company benefit plan, acquires beneficial ownership of 30% or more of the total combined voting power of the Company’s securities, (ii) the current members of the Board cease to constitute a majority of the Board for any reason, (iii) the consummation by the Company of a merger, consolidation, reorganization or business combination or a sale of all or substantially all of the Company’s assets, unless (a) the Company controls the successor entity, (b) no person owns 50% or more of the combined voting power of the successor entity or (c) the current members of the Board represent the majority of the successor entity’s board or (iv) the tenth day following the complete dissolution of the Company.

•	“Disability” generally means the Named Executive Officer’s inability to engage in substantial gainful activity by reason of any medically determinable physical or mental impairment.

•	“Retirement” generally means the termination of the Named Executive Officer’s employment following his attainment of both (i) age 60 and (ii) ten years of service with the Company or one of its affiliates.

---

(1)

Amounts in this column reflect payments made upon termination by the Company without “Cause” or by the Named Executive Officer for “Good Reason.” For Mr. Gobe, such quoted terms are as defined in the applicable award agreement, and for Messrs. Redman, Smith, Sledge and Wilson, such quoted terms are as defined in his employment agreement, in each case, as described above. For purposes of this table, we are equating a termination without “Cause” or resignation for “Good Reason” with Mr. Holderness’s “good leaver” resignation and have included payments he would receive upon his separation as a “good leaver” in this column only.

(2)

Amounts in this column reflect payments made upon termination as a result of the Named Executive Officer’s death, “Disability” or “Retirement.” For Messrs. Gobe and Holderness, such quoted terms are as defined in the applicable award agreement, and for Messrs. Redman, Smith, Sledge and Wilson, “Disability” is as defined in his employment agreement and “Retirement” is defined in the applicable award agreement, in each case, as described above. Currently, only Messrs. Smith and Sledge are Retirement eligible.

(3)

Amounts in this column reflect payments made upon termination by the Company without Cause or by the Named Executive Officer for Good Reason, in each case, within 12 months following a “Change in Control.” As described above under “—Incentive Plan Awards,” RSUs, stock options and PSUs granted under the Incentive Plan are accelerated in connection with a Named Executive Officer’s termination without Cause within 12 months following a Change in Control but are not accelerated in connection with a Named Executive Officer’s resignation for Good Reason, whether or not such resignation follows a Change in Control. For purposes of this table, we are including the value of the 12,182 RSUs Mr. Gobe was granted as a director in these columns. However,

---

(4)

Pursuant to the employment agreements, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, each Named Executive Officer with an employment agreement will receive the sum of his then current annual base salary and the amount of his annual bonus paid to him for the immediately preceding calendar year (or, for Mr. Wilson, the target amount of his annual bonus for the current calendar year), payable in 12 equal installments over the year following termination. Messrs. Gobe and Holderness are not party to an employment agreement and are not entitled to any cash severance.

(5)

Pursuant to the terms of the Holderness Letter Agreement, Mr. Holderness is the only Named Executive Officer eligible to receive a pro-rata bonus, based upon the number of days Mr. Holderness was employed by the Company during the applicable calendar year, upon his separation as a “good leaver,” as described above under “—Holderness Agreements.” The full bonus paid to Mr. Holderness for performance during 2019 is included in the table because it was prorated based upon his service from October 3, 2019 to December 31, 2019 prior to payment. See “Narrative Disclosure to Summary Compensation Table and Grants of Plan-Based Awards Table—Letter Agreements with Messrs. Gobe and Holderness.”

(6)

Pursuant to the employment agreements with Messrs. Redman, Smith and Sledge, upon termination of employment by the Company without Cause or by the Named Executive Officer for Good Reason, whether or not within 12 months following a Change in Control, the Company will reimburse the Named Executive Officer for the difference between the cost of the COBRA premiums and the cost for similarly-situated employees to effect such coverage under the Company’s group health plans for up to 12 months following such termination. The COBRA reimbursement amount is based on the premiums in effect on December 31, 2019 and each applicable Named Executive Officer’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the period for which the COBRA reimbursement would be available. Messrs. Gobe and Holderness are not party to an employment agreement and are not entitled to such benefit, and Mr. Wilson’s employment agreement does not provide for this benefit.

(7)

For the RSUs, these amounts are calculated by multiplying the number of RSUs that would have become vested upon the applicable event by $11.25, the closing price of our common stock on December 31, 2019. The unvested stock options have an exercise price of $14.00, which is $2.75 more than the market value of our common stock on December 31, 2019, so the value of any accelerated stock options has not been included in this table. These amounts are calculated for the PSUs by multiplying the number of PSUs that would become vested upon the applicable event by $11.25, the closing price of our common stock on December 31, 2019. The number of PSUs used in such calculation reflects actual performance as of December 31, 2019, which was at target for all outstanding PSUs. However, PSUs that vest as a result of (i) a Named Executive Officer’s death, Disability or Retirement and (ii) Mr. Holderness’ separation from service as a “good leaver” will vest based on actual performance as of the end of the applicable performance period, and, as a result, the amounts included reflect estimated payouts of such PSUs.

•	Lump-sum cash payment equal to $725,000, payable shortly following the Howell Separation Date;

•	Cash severance equal to $725,000, payable in equal installments during the one-year period following the Howell Separation Date; and

•	Partially subsidized continuation coverage for Mr. Howell, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months following the Howell Separation Date, or if earlier, the date Mr. Howell becomes covered under the group health plan of another employer.

(1)	The COBRA reimbursement amount is based on the premium in effect on the Howell Separation Date and Mr. Howell’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 12-month period for which the COBRA reimbursement would be available.

---

•	Cash severance equal to $490,000, payable in equal installments during the one-year period following the Howell Separation Date;

•	Partially subsidized continuation coverage for Mr. Denholm, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months following the Denholm Separation Date, or if earlier, the date Mr. Denholm becomes covered under the group health plan of another employer;

•	Accelerated vesting of 2,995 stock options granted under the Incentive Plan;

•	Accelerated vesting of 2,151 RSUs granted under the Incentive Plan;

•	Deemed satisfaction of the applicable service requirement with respect to and accelerated vesting of 4,257 PSUs, based on target performance; and

•	Extension of the exercise period of Mr. Denholm’s stock options granted under the Incentive Plan that have become vested and are outstanding as of the Denholm Separation Date such that they shall not be forfeited on the 91st day following the Denholm Separation Date pursuant to the terms of the Incentive Plan but instead shall remain outstanding and eligible to vest until October 3, 2020.

(1)	The COBRA reimbursement amount is based on the premium in effect on the Denholm Separation Date and Mr. Denholm’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 12-month period for which the COBRA reimbursement would be available.

(2)

For the RSUs and PSUs, these amounts are calculated by multiplying the number of RSUs and PSUs that were vested on the Denholm Separation Date by $9.44, the closing price of our common stock on the last trading day prior to the Denholm Separation Date. The unvested stock options have an exercise price of $14.00, which is $4.56 more than the market value of our common stock on the Denholm Separation Date, so the value of any accelerated stock options has not been included in this table.

---

•	Lump-sum cash payment equal to $38,217 for his accrued but unused vacation days;

•

Extension of the exercise period of Mr. Redman’s stock options granted under the Stock Option Plan and the Incentive Plan that have become vested and are outstanding as of the Redman Separation Date such that they shall not be forfeited on the 91st day following the Redman Separation Date pursuant to the terms of the applicable plans but instead shall remain outstanding and eligible to vest until the one-year anniversary of the Redman Separation Date;

•

The ability to exercise his vested and unexercised stock options using a “cashless exercise” during the extended exercise period such that Mr. Redman does not have to deliver any cash to exercise such stock options but the number of shares of common stock delivered by the Company upon the exercise of such stock options shall be reduced by the number of shares equal to the value of the exercise price and the applicable tax withholding; and

•	Full reimbursement of the cost of continuation coverage for Mr. Redman, his spouse and his eligible dependents under the Company’s group health plans pursuant to COBRA for 18 months following the Redman Separation Date, or if earlier, the date Mr. Redman becomes covered under the group health plan of another employer.

(1)	The value of the stock option extension is equal to the incremental fair value of the modification of such awards, calculated in accordance with FASB ASC Topic 718.

(2)	The COBRA reimbursement amount is based on the premium in effect on the Redman Separation Date and Mr. Redman’s elections in place on such date, which are assumed for purposes of this table to remain the same throughout the 18-month period for which the COBRA reimbursement would be available.

---

•	A lump sum cash payment equal to 2.0 (for Tier 1 Executives), 1.5 (for Tier 2 Executives) or 1.0 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus for the year in which the termination occurred;

•	Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and

•	Reimbursement for a portion of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to COBRA for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Amended Executive Severance Plan.

•	A lump sum cash payment equal to 3.0 (for Tier 1 Executives), 2.0 (for Tier 2 Executives) or 1.5 (for Tier 3 Executives) times the sum of the participant’s (i) annualized base salary then in effect and (ii) target annual bonus as in effect immediately prior to the Change in Control;

•	Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives;

•	A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year; and

•	Full reimbursement of the cost of continuation coverage for the participant and his or her spouse and eligible dependents under the Company’s group health plans pursuant to the COBRA, for 12 months (or 18 months for Tier 1 Executives), unless such coverage is earlier terminated in accordance with the terms of the Amended Executive Severance Plan.

•	Any earned but unpaid bonus for the year preceding the year of termination based on the Company’s actual performance, paid at the time such bonuses are paid to all other executives; and

•	A lump sum cash payment equal to a prorated target bonus for the year of termination based on days of service during the applicable calendar year.

---

•

“Cause” generally means the Named Executive Officer’s (i) material breach of the employment agreement or any other agreement with the Company or its affiliates, subject to a 30-day notice and 15-day cure period, (ii) material breach of the Company’s or its affiliates’ policies or code of conduct applicable to the Named Executive Officer, (iii) violation of any law applicable to the workplace or employment relationship, (iv) gross negligence, material misconduct reflecting negatively on the Company, breach of fiduciary duty, fraud, theft or embezzlement, (v) conviction of or plea of nolo contendere to any felony (or state law equivalent) or any crime involving moral turpitude, (vi) material failure or refusal (other than due to Disability) to perform obligations or any lawful director from the Board or an officer of the Company, subject to a 30-day notice and 15-day cure period, (vii) unlawful use or possession of illegal drugs on the Company’s premises or while performing duties, (viii) failure to exercise the degree of care, skill and diligence as employees of ordinary skill and knowledge commonly possess and exercise, subject to a 30-day notice and 15-day cure period, or (ix) failure to act with undivided loyalty to the Company and its affiliates.

•	“Change in Control” has the meaning given to it under the Incentive Plan.

•

“Good Reason” generally means (i) the material diminution in the Named Executive Officer’s base salary, unless in connection with a general reduction in base salaries that affects all similarly situated employees, (ii) material diminution in the Named Executive Officer’s authority, duties, or responsibilities unless in connection with an internal investigation by the Company (provided that his removal from the board of directors or as an officer of any of the Company’s affiliates shall not constitute Good Reason), (iii) the material breach by the Company of any of its obligations under the agreement or (iv) the Named Executive Officer’s relocation by more than 50 miles from his current place of business, in each case, subject to a 30-day notice period, 15-day cure period and the Named Executive Officer’s resignation within 75 days of the end of the cure period.

•	“Disability” generally means the Named Executive Officer’s inability to perform the essential functions of his job due to physical or mental impairment for a period that exceeds 120 consecutive days or 180 total days in any 12-month period, as determined by the Board.

---

---

•	each stockholder known by us to be the beneficial owner of more than five percent of our outstanding shares of common stock,

(1)	Unless otherwise indicated, the address for each beneficial owners in this table is c/o ProPetro Holding Corp., 1706 S. Midkiff, Midland, Texas 79701.

(2)

Based on a Schedule 13D filed on January 7, 2019. Represents shares of our common stock beneficially owned by Pioneer. The shares of our common stock are directly owned by Pioneer Natural Resources Pumping Services LLC, a wholly owned subsidiary of Pioneer Natural Resources USA, Inc., which is a wholly owned subsidiary of Pioneer. The address of Pioneer and its subsidiaries is 5205 N. O’Connor Blvd., Suite 200, Irving, Texas 75039‑3746.

(3)	Based on a Schedule 13G filed on February 4, 2020. Represents shares of our common stock held by BlackRock, Inc. and certain of its affiliates, referred to collectively as BlackRock. BlackRock has sole voting power over 12,819,233 shares and sole dispositive power over 13,105,996 shares. The address for BlackRock is 55 East 52nd Street, New York, New York 10055.

---

(4)	Based on a Schedule 13G Filed on April 3, 2020. Represents (i) 10,000,000 shares over which THRC Holdings, LP has shared voting power, and has shared dispositive power over 10,000,000 shares. The address for THRC Holdings, LP is 17018 IH 20, Cisco, Texas 76437.

(5)

Based on a Schedule 13G Filed on February 12, 2020. Represents (i) 132,418 shares over which The Vanguard Group has sole voting power (ii) 12,081 shares over which The Vanguard Group has shared voting power, (iii) 8,742,895 over which The Vanguard Group has sole dispositive power, and (iv) 132,092 over which The Vanguard Group has shared dispositive power. Vanguard Fiduciary Trust Company, a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 120,011 shares as a result of its serving as investment manager of collective trust accounts. Vanguard Investments Australia, Ltd., a wholly owned subsidiary of The Vanguard Group, Inc., is the beneficial owner of 24,488 shares as a result of its serving as investment manager of Australian investment offerings. The address for these entities is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.

(6)	For each officer and director, includes shares of common stock that are issuable pursuant to options that are currently exercisable or exercisable within 60 days, and RSUs that are eligible to vest within 60 days.

(7)

Mr. Redman resigned from his position as Chief Executive Officer on March 13, 2020. On January 18, 2017, Mr. Redman signed a pledge agreement for 371,200 shares (538,240 shares after the March 2017 stock split) of the Company’s common stock to secure a personal loan. On March 28, 2017, Mr. Redman sold 370,370 shares of the Company’s common stock, as part of the overallotment option exercised by the underwriters in the Company’s initial public offering in March 2017, which brought Mr. Redman’s stock ownership, at that time, to 167,870 shares of the Company’s common stock covered by the pledge agreement, which we believe remains in effect.

(8)	Mr. Smith ceased serving as an executive officer on March 13, 2020, but serves as a Special Advisor to the Chief Executive Officer.

(9)	Mr Denholm resigned from his position as Chief Accounting Officer on October 3, 2019. Based on information set forth in a Form 4 filed with the SEC on June 11, 2019.

(10)	Mr Howell resigned from his position as General Counsel and Corporate Secretary on August 30, 2019. Based on information set forth in a Form 4 filed with the SEC on June 11, 2019.

(1)

Includes 3,622,763 option awards under the Stock Option Plan, and 677,325 option awards, 613,217 restricted share unit awards and 522,621 performance stock unit awards (assuming achievement of target payout of 100%) that have been granted under the 2017 Incentive Award Plan. The weighted average exercise price in column (b) does not take the restricted share unit awards or performance stock unit awards into account.

---

---

---

---

(1)

Audit Fees include fees billed for professional services rendered for the audit of our annual consolidated financial statements, the audit of our system of internal control over financial reporting, the review of interim consolidated financial statements included in our quarterly reports, consents and comfort letters provided in connection with the filing of registration statements, other related services that are normally provided in connection with statutory and regulatory filings, and related out‑of‑pocket expenses.

(2)	Audit-Related Fees include fees billed for professional services rendered in connection with the Expanded Audit Committee Review, and related out‑of‑pocket expenses.

(3)	All Other fees consisted principally of fees for tax compliance and tax advice.

---

---

---

---

---

---

---