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Item 9A. Controls and Procedures

2025-02-20 compared with 2024-03-13 · 49 added, 49 removed, 115 unchanged (46% of the section changed)

1 unchanged sentence

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of its Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2023.

The term "disclosure controls and procedures," as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC.

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our Principal Executive Officer and Principal Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2023, and have concluded that our disclosure controls and procedures were not effective due to the material weakness described below in “Management’s Report on Internal Control Over Financial Reporting.”

Notwithstanding the conclusion by our Principal Executive Officer and Principal Financial Officer that our disclosure controls and procedures as of December 31, 2023, were not effective, and notwithstanding the material weakness in our internal control over financial reporting described below, our management believes that our financial statements included in this Annual Report on Form 10-K present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in accordance with accounting principles generally accepted in the United States of America (“U.S.

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that the information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(b) under the Exchange Act, we have evaluated, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Form 10-K.

Based upon that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of December 31, 2024.

As noted in Management’s Report on Internal Control over Financial Reporting, management’s evaluation of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of AquaProp , which was acquired on May 31, 2024.

Under guidelines established by the SEC, companies are permitted to exclude acquisitions from their assessment of internal control over financial reporting during the first year of an acquisition while integrating the acquired company.

We are in the process of integrating AquaProp’s internal controls with our internal controls over financial reporting.

As a result of these integration activities, certain controls will be evaluated and may be changed.

Management’s Report on Internal Control over Financial Reporting

The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is defined in Rule 13a-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Company’s Principal Executive Officer and Principal Financial Officer and effected by the Company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

Management conducted the assessment of the effectiveness of the Company’s internal control over financial reporting based on criteria in the SEC guidance on conducting such assessments as of the end of the period covered by this report.

Management conducted the assessment based on certain criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

As a result of this assessment, management concluded that, as of December 31, 2023, our internal control over financial reporting was not effective due to the material weakness described below.

Segregation of Duties and Management Review Control

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

The material weakness is related to the Company’s information technology environment whereby the Company did not maintain adequate segregation of duties or sufficient compensating management review controls to effectively mitigate an inadequate system access control configuration in its accounting system in which manual journal entry approvers can modify the entries before posting.

This deficiency is solely related to manual journal entries and has no impact on system-generated journal entries flowing through our accounting system and other feeder systems.

Due to this control deficiency, other manual-dependent controls were deemed ineffective.

Subsequent to the identification of this material weakness, the Company conducted additional procedures and determined that there was no material misstatement in its consolidated financial statements for the year ended December 31, 2023.

T he independent registered public accounting firm, RSM US LLP , Houston, Texas, United States , Auditor Firm ID # 49 , has audited the consolidated financial statements as of and for the year ended December 31, 2023, and has also issued their report

on the effectiveness of the Company’s internal control over financial reporting, included in this Annual Report under Part II, Item 8 above.

Remediation Plan and Status

The Company has taken, among other items, the following measures to address the material weakness identified:

• Evaluated the potential impact of the identified material weakness and accordingly, performed additional testing of certain transactions and journal entries in 2023 to ensure completeness and accuracy of its financial statements, and no material exception was identified.

• Tested whether this access resulted in any inappropriate journal entries being recorded or revised and concluded that no such instances occurred.

• Implemented a segregation of duties conflict process by limiting the access of certain employees of the Company who are owners of management review controls.

• Implemented a technical solution to ensure that access to our system of records adequately limits incompatible duties and strengthened our monitoring and review controls over journal entry processing.

• Implemented control activities related to additional independent reviews of manual entries posted in the accounting system and are currently evaluating additional procedures to further strengthen the Company’s overall segregation of duties.

Although we have taken preliminary actions to eliminate the identified material weakness, we will continue to evaluate, test, and implement further actions that will further strengthen the Company’s overall internal controls over financial reporting.

Remediation generally requires making changes to how controls are designed and implemented and then adhering to those changes for a sufficient period of time such that the effectiveness of those changes is demonstrated with an appropriate amount of consistency.

The measures we are implementing are subject to continued management review supported by confirmation and testing, as well as audit committee oversight.

Management remains committed to the implementation of remediation efforts to address the material weakness.

We will continue to implement measures to remedy our internal control deficiencies, though there can be no assurance that our efforts will ultimately have the intended effects.

The management of ProPetro Holding Corp.

is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

ProPetro Holding Corp.

maintains a system of internal accounting controls designed to provide reasonable assurance, at a reasonable cost, that assets are safeguarded against loss or unauthorized use and that the financial records are adequate and can be relied upon to produce financial statements in accordance with GAAP.

The internal control system is augmented by written policies and procedures, an internal audit program and the selection and training of qualified personnel.

This system includes policies that require adherence to ethical business standards and compliance with all applicable laws and regulations.

There are inherent limitations to the effectiveness of any control system.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Also, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company will be detected.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

The Company intends to continually improve and refine its internal controls.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our internal control over financial reporting as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management believes that ProPetro Holding Corp.

maintained effective internal control over financial reporting as of December 31, 2024.

Management’s evaluation of, and conclusion on, the effectiveness of internal control over financial reporting did not include the internal controls of AquaProp, which was acquired on May 31, 2024, and whose financial statements constitute 4.9% and 3.1% of total assets and revenue, respectively of the consolidated financial statement amounts as of and for the year ended December 31, 2024.

The inde pendent registered public accounting firm, RSM US LLP, Houston, Texas, United States, has audited the consolidated financial statements as of and for the year ended December 31, 2024, and has also issued their report on the effectiveness of the Company’s internal control over financial reporting, included in this Annual Report under Part II, Item 8 above.

Changes in Internal Control over Financial Reporting

Except as described above, there were no changes in our system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2023 , that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our system of internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2024 , that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Other Information

35 unchanged sentences

4.4 Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934 (incorporated by reference herein to Exhibit 4.4 to ProPetro Holding Corp.'s Annual Report on Form 10-K for the year ended December 31, 2019).

4.5 Registration Rights and Lock-Up Agreement, dated as of November 1, 2022 by and between ProPetro Holding Corp.

and New Silvertip Holdco, LLC (incorporated by reference herein to Exhibit 4.1 to ProPetro Holding Corp.’s Current Report on Form 8-K, dated October 31, 2022).

10.1# Form of ProPetro Holding Corp.

34 unchanged sentences

Non-Employee Director Compensation Policy (incorporated by reference herein to Exhibit 10.1 of ProPetro Holding Corp.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023).

10.18# Sub - agreement for Hy dra u lic Fracturing Services effective as of April 22, 2024, between XTO Energy Inc.

(a wholly owned subsidiary of Exxon Mobil Corporation) and ProPetro Services, Inc.

(incorporated by reference herein to Exhibit 10.1 of ProPetro Holding Corp’s Qua r terly Report on Form 10-Q for the quarter ended June 30, 2024).

10.19 Amendment No.

2 to Amended and Restated Credit Agreement, dated as of June 26, 2024, by and among ProPetro Holding Corp., and ProPetro Services Inc.

the Incremental Lenders and each existing Lender party thereto as a Consenting Lender and Barclays Bank PLC, as Agent (incorporated by referenced herein to Exhibi t 10.2 to ProPetro Holdin g Corp.

’ s Quarterly Financial Report on Form 10-Q for the quarter ended June 30, 2024 ).

16.1 Letter of Deloitte & Touche LLP dated March 1, 2023 (incorporated by reference herein to Exhibit 16.1 to ProPetro Holding Corp.’s Current Report on Form 8-K, dated March 1, 2023).

19.1(a) Insider Trading Policy

21.1(a) List of Subsidiaries of ProPetro Holding Corp.

23.1(a) Consent of RSM US LLP, an Independent Registered Public Accounting Firm.

23.2(a) Consent of Deloitte & Touche LLP, an I ndependent Registered Public Accounting Firm.

23.2(a) Consent of Deloitte & Touche LLP, an Independent Registered Public Accounting Firm.

31.1(a) Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act Rules, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

4 unchanged sentences

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

97.1(a)# ProPetro Holding Corp.

Incentive-Based Compensation Recovery (Clawback) Policy.

97.1# ProPetro Holding Corp.

Incentive-Based Compensation Recovery (Clawback) Policy (incorporated by reference herein to Exhibit 9 7.1 to ProPetro Holding Corp.

’ s Annual Report on Form 10-K for the year ended December 31, 2023) .

101.INS(a) XBRL Instance Document

9 unchanged sentences

Form 10-K Summary

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on March 13, 2024.

ProPetro Holding Corp.

4 unchanged sentences

Chief Executive Officer and Director (Principal Executive Officer)

March 13, 2024

February 20, 2025

Chief Financial Officer (Principal Financial Officer)

March 13, 2024

February 20, 2025

/s/ Celina A.

Chief Accounting Officer (Principal Accounting Officer) March 13, 2024

Chief Accounting Officer (Principal Accounting Officer) February 20, 2025

/s/ Phillip A.

Chairman of the Board March 13, 2024

Chairman of the Board February 20, 2025

/s/ Spencer D.

March 13, 2024

February 20, 2025

/s/ Mark Berg

March 13, 2024

February 20, 2025

/s/ Anthony Best

March 13, 2024

February 20, 2025

Larry Lawrence

March 13, 2024

February 20, 2025

Larry Lawrence

/s/ Michele Vion

March 13, 2024

February 20, 2025

/s/ Jack Moore

March 13, 2024

February 20, 2025

/s/ Mary Ricciardello

March 13, 2024

February 20, 2025

Mary Ricciardello

February 20, 2025

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures