ProPetro Holding Corp.PUMP
ProPetro Holding Corp. Fair Value Disclosure
FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the "exit price") in an orderly transaction between market participants at the measurement date.
In determining fair value, the Company uses various valuation approaches and establishes a hierarchy for inputs used in measuring fair value that maximizes the use of relevant observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used, when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions other market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on the observability of inputs as follows:
Level 1 — Valuations based on quoted prices in active markets for identical assets or liabilities that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these instruments does not entail a significant degree of judgment.
Level 2 — Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3 — Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
The fair values of cash and cash equivalents, accounts receivable, accounts payable, accrued and other current liabilities, and long-term debt are estimated to be approximately equivalent to carrying amounts as of December 31, 2025, and 2024 and have been excluded from the table below.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024 are set forth below:
| (in thousands) | |||||||||||||||||||||||||||||
| Estimated fair value measurements | |||||||||||||||||||||||||||||
Balance | Quoted prices in active market (Level 1) | Significant other observable inputs (Level 2) | Significant other unobservable inputs (Level 3) | Total gains (losses) | |||||||||||||||||||||||||
December 31, 2025: | |||||||||||||||||||||||||||||
| Business acquisition contingent consideration payable | $ | 3,400 | $ | — | $ | — | $ | 3,400 | $ | 4,900 | |||||||||||||||||||
December 31, 2024: | |||||||||||||||||||||||||||||
| Short-term investment | $ | 7,849 | $ | 7,849 | $ | — | $ | — | $ | 105 | |||||||||||||||||||
| Business acquisition contingent consideration payable | $ | 8,300 | $ | — | $ | — | $ | 8,300 | $ | 2,600 | |||||||||||||||||||
Short-term investment— On October 27, 2025, the Company sold its short-term investment in 2.6 million common shares of STEP Energy Services Ltd. (“STEP”), which it received in 2022 as part of the consideration for the sale of its coiled tubing assets to STEP. The Company received $9.4 million in proceeds and recognized a $0.8 million loss on sale of assets from the sale of this investment. Prior to the sale, the shares were accounted for as an investment in equity securities measured at fair value using Level 1 inputs based on observable prices on the Toronto Stock Exchange and were shown under current assets in our consolidated balance sheets. As of October 27, 2025 (the date of sale), the fair value of the short-term investment was estimated at $10.2 million. The fluctuation in stock price resulted in an unrealized gain of $2.4 million for the year ended December 31, 2025, an unrealized gain of $0.1 million for the year ended December 31, 2024, and an unrealized loss of $2.5 million for the year ended December 31, 2023. Included in the unrealized gain for the year ended December 31, 2025, was a gain of $0.2 million resulting from noncash foreign currency translation. Included in the unrealized gain for the year ended December 31, 2024, was a loss of $0.7 million resulting from noncash foreign currency translation. Included in the unrealized loss for the year ended December 31, 2023, was a gain of $0.1 million resulting from noncash foreign currency translation. The unrealized gains and losses resulting from stock price fluctuation and noncash foreign currency translation are included in other income (expense) in our consolidated statements of operations.
Business acquisition contingent consideration payable— On May 31, 2024, the Company completed the acquisition of all of the outstanding equity interests in AquaProp in exchange for $13.7 million of cash, $3.7 million of deferred cash consideration payable to AquaProp's seller by May 31, 2025, the payoff of $7.2 million of assumed debt, the payment of $0.3 million of certain transaction costs and estimated contingent consideration of $10.9 million. The contingent consideration payable was measured at fair value using Level 3 inputs based on the probability-weighted expected return method and is shown under other long-term liabilities in our consolidated balance sheets. The fair value of the contingent consideration payable is remeasured at the end of each reporting period. As of December 31, 2025, the estimated fair value of the contingent consideration payable was $3.4 million resulting in a $4.9 million decrease from December 31, 2024. The decrease in the estimated fair value of the contingent consideration payable was primarily driven by updated projections regarding the probability of different scenarios and the amount and timing of additional equipment to be delivered by the seller under those scenarios. Increases or decreases in any valuation inputs in isolation may result in a significantly lower or higher fair value measurement in the future.
The following table presents a reconciliation of the beginning and ending balances of the fair value measurements using significant unobservable inputs (Level 3):
| (in thousands) | |||||||||||
| Year Ended December 31, 2025 | Year Ended December 31, 2024 | ||||||||||
| Business acquisition contingent consideration payable - opening balance | $ | 8,300 | $ | — | |||||||
| Addition | — | 10,900 | |||||||||
| (4,900) | (2,600) | ||||||||||
| Business acquisition contingent consideration payable - closing balance | $ | 3,400 | $ | 8,300 | |||||||
(1) The decrease in the estimated fair value of the business acquisition contingent consideration payable is included in general and administrative expenses in our consolidated statement of operations.
Assets Measured at Fair Value on a Nonrecurring Basis
Assets measured at fair value on a nonrecurring basis are set forth below:
| (in thousands) | |||||||||||||||||||||||||||||
| Estimated fair value measurements | |||||||||||||||||||||||||||||
Balance | Quoted prices in active market (Level 1) | Significant other observable inputs (Level 2) | Significant other unobservable inputs (Level 3) | Total gains (losses) | |||||||||||||||||||||||||
December 31, 2024: | |||||||||||||||||||||||||||||
Implied fair value of wireline reporting unit goodwill (1) | $ | — | $ | — | $ | — | $ | — | $ | (23,624) | |||||||||||||||||||
November 1, 2024: | |||||||||||||||||||||||||||||
| Note receivable on sale of Vernal, Utah cementing business | $ | 13,000 | $ | — | $ | 13,000 | $ | — | $ | — | |||||||||||||||||||
September 30, 2024: | |||||||||||||||||||||||||||||
| Property and equipment, net | $ | 63,791 | $ | — | $ | — | $ | 63,791 | $ | (188,601) | |||||||||||||||||||
(1) The implied fair value of our wireline reporting unit was determined using Level 3 inputs and was $0 at December 31, 2024 (the measurement date) after full impairment.
Certain assets and liabilities are measured at fair value on a nonrecurring basis. These items are not measured at fair value on an ongoing basis but may be subject to fair value adjustments in certain circumstances. These assets and liabilities include those acquired through the business combinations, which are required to be measured at fair value on the acquisition date according to FASB ASC Topic 805, Business Combinations (see “Note 4. Business Acquisitions”).
The Company performed a fair value assessment of the $13.0 million promissory note obtained as consideration for the sale of its cementing business located in Vernal, Utah, to Big 4 on November 1, 2024 (the date of the transaction), and concluded that the fair value of the note receivable approximated its carrying value and no discount or premium adjustment was needed. The Company utilized market interest rates for business loans which represented inputs other than quoted prices within Level 1 that are observable for the asset, either directly or indirectly (Level 2) to determine the implied fair value of the note receivable. The note receivable was fully repaid with interest in December 2025.
Whenever events or circumstances indicate that the carrying value of long-lived assets may not be recoverable, the Company reviews the carrying values of long‑lived assets, such as property and equipment and other assets to determine if they are recoverable. If any long‑lived assets are determined to be unrecoverable, an impairment expense is recorded in the period. No impairment of property and equipment was recorded during the years ended December 31, 2025 and 2023. We recorded impairment expense of $188.6 million during the year ended December 31, 2024, in connection with a decline in the
marketability of our Tier II Units due to decreased customer demand and related pricing pressures. As of September 30, 2024 (the impairment measurement date), the estimated fair value of our Tier II Units was $63.8 million which was determined using the market and cost approaches, which represent Level 3 inputs in the fair value measurement hierarchy. Our fair value estimates required us to use significant unobservable inputs, including assumptions related to replacement cost, among others. The fair value of approximately 95% of our Tier II Units was estimated using the market approach and the remaining assets were valued using the cost approach. For assets valued using the market approach, we relied upon the direct match and comparable match methods of the market approach to value certain assets such as hydraulic fracturing pumps and their associated engines, transmissions, and power ends where significant market data was available and an active secondary market exists. Key assumptions include declining desirability for conventional diesel equipment due to emissions and fuel efficiency challenges based on research gathered from third party auctioneers. For assets valued using the cost approach, we estimated the current cost of reproducing a new replica of the asset being appraised using the same, or closely similar, materials for each asset or group of assets by using the indirect (trending) method of the cost approach. Allowances were made for physical deterioration as well as functional and economic obsolescence as appropriate. Key assumptions include forecasted use of Tier II Units. The carrying value of our Tier II Units as of September 30, 2024, prior to the impairment expense was approximately $252.4 million.
We generally apply fair value techniques to our reporting units on a nonrecurring basis associated with valuing potential impairment loss related to goodwill, if any. Our estimate of the reporting unit fair value is based on a combination of income and market approaches, Level 3 in the fair value hierarchy. The income approach involves the use of a discounted cash flow method, with the cash flow projections discounted at an appropriate discount rate. The market approach involves the use of comparable public companies’ market multiples in estimating the fair value. We used both the guideline public company method and the guideline transaction method under the market approach. Significant assumptions include projected revenue growth, capital expenditures, gross margins, discount rates, terminal growth rates, and weight allocation between income and market approaches. If the reporting unit’s carrying amount exceeds its fair value, we consider goodwill impaired, and the impairment loss is calculated and recorded in the period. During the year ended December 31, 2024, we recorded goodwill impairment expense of $23.6 million as full impairment of the goodwill in our Wireline operating segment and reporting unit. We applied weightings of 75%, 25%, and 0% to the fair values derived from the income approach, the guideline public company method and the guideline transaction method, respectively, to assess fair value. We used the Gordon Growth Model to determine the terminal value and applied a terminal growth rate of 3.0%, a 23.0% income tax rate and a 24.9% discount rate for the wireline reporting unit. See “Note 2. Significant Accounting Policies” for a summary of goodwill by operating segment.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Mar 13, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 5, 2021 | |
| 2019 | Jun 22, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 27, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.