(Reuters) - Analysts slashed their fourth quarter earnings and share price outlooks for ProPetro Holding Corp (PUMP.N) on Thursday after the U.S. oilfield services firm said its business had weakened amid an ongoing internal audit that led to a management shakeup.
ProPetro said on Wednesday that it expected to idle up to 28% of its hydraulic fracturing fleets in the current quarter compared to last quarter, citing customer spending cuts and softening industry demand. The company provides equipment and crews used to frack wells to release trapped shale oil and gas.
Analysts cut their earnings estimates and issued lower price targets for ProPetro following the report. Raymond James lowered its price target to $14 per share from a previous target of $20, while others also cut their targets.
ProPetro shares were trading at $9.76 at midday on Thursday. They were up 24% on the day, with analysts saying there was some relief in the market that ProPetro had indicated it would not restate prior financial results following its review of accounting deficiencies. However, they are still down some 60 percent from their April peak.
Cowen & Co in a note on Thursday said the weaker frack fleet utilization implied pre-tax earnings for the quarter of about $75 million, below Wall Street’s $102 million consensus estimate.
Waqar Syed, managing director of North America Energy Services for financial advisers AltaCorp Capital, said “we were expecting more like a 10% reduction” in fleet utilization.
ProPetro did not respond to a request for comment.
Investors were encouraged that co-founder Dale Redman would remain with the company, albeit turning over some duties to a newly-named principal executive. Director Phillip Gobe was appointed principal executive officer to oversee changes to the Midland, Texas-based company’s internal controls, ProPetro said.
“The investors wanted Dale Redman to stay. He brings a lot of value to the company because of his relationships. He runs a good operation and customers like that,” Syed added.
Jeffrey Smith, who co-founded ProPetro along with Redman and had served as its finance chief, was re-assigned to chief administrative officer. Ian Denholm, chief accounting officer, left the company this month and was replaced by Elo Omavuezi.
James West, a senior managing director for investment firm Evercore ISI, this week said the audit results were “a better outcome than many had feared.”
Although the internal review’s fact-finding is mostly complete, an investigation into related-party real estate transactions is ongoing, the company said on Wednesday.
Reporting by Liz Hampton, Editing by Rosalba O'Brien