4839-3309-0503.v2 

UNITED STATES DISTRICT COURT 

WESTERN DISTRICT OF TEXAS 

MIDLAND/ODESSA DIVISION 

In re PROPETRO HOLDING CORP. 

SHAREHOLDER DERIVATIVE 

LITIGATION 

This Document Relates To: 

ALL ACTIONS. 

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Civil Action No. 7:20-cv-00030-DC 

(Consolidated Derivative Action) 

Judge David Counts 

DEMAND FOR JURY TRIAL 

VERIFIED CONSOLIDATED SHAREHOLDER DERIVATIVE COMPLAINT 

FOR BREACH OF FIDUCIARY DUTY, UNJUST ENRICHMENT AND 

VIOLATIONS OF THE FEDERAL SECURITIES LAWS 
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INTRODUCTION 

1. This is shareholder derivative action on behalf of nominal defendant ProPetro 

Holding Corp. (“ProPetro” or the “Company”) against its Board of Directors (the “Board”) and 

certain of its current and former directors and officers for breach of fiduciary duty, unjust 

enrichment, and violations of the federal securities laws.1

2. Based in Midland, Texas, ProPetro is an oilfield services company. According to its 

public filings, the Company provides “hydraulic fracturing and other complementary services to 

leading upstream oil and gas companies engaged in the exploration and production . . . of North 

American unconventional oil and natural gas resources.”

3. In March 2017, ProPetro sold 25 million shares of its common stock at $14.00 per 

share in an initial public offering (“IPO”), raising approximately $175 million in net proceeds. In 

the Company’s offering documents, defendants represented that ProPetro’s Board was prepared to 

“adopt a code of business conduct and ethics in connection with the completion of this offering” and 

assured investors that ProPetro would conduct quarterly reviews of its related-party transactions to 

ensure proper compliance.

4. After the IPO and as 2017-2019 unfolded, defendants, through their public 

statements, strove to carefully curate a public image of ProPetro as a successful oil fracking services 

company with strong financial performance and solid prospects for future growth. Towards this end, 

defendants represented that ProPetro enjoyed rapid revenue growth, improving profitability, and 

 

1

 Defendants are ProPetro’s directors – Spencer D. Armour III, Mark S. Berg, Anthony Best, Alan 

E. Douglas, Phillip A. Gobe, Jack B. Moore and Dale Redman; ProPetro’s former directors – Pryor 

Blackwell, Steven Beal, Schuyler E. Coppedge, Stephen Herman, Matthew H. Himler, Royce W. 

Mitchell and Peter Labbat; and ProPetro’s former Chief Financial Officer (and now Chief 

Administrative Officer) and former Chief Accounting Officer – Jeffrey Smith and Ian Denholm, 

respectively (together, “defendants”). 
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strong earnings per share and earnings per share growth in 2017, 2018 and 2019, stating, among 

other things, that:

 “‘We are pleased to report our first quarterly results following our recent IPO. Our 

business performed very well during the quarter and our fleet remained fully 

utilized.’” 

 “‘Our business in the second quarter of 2017 continued to improve on the back of 

strong Permian Basin rig count growth and an undersupplied frac market, resulting in 

increased demand for our services.’” 

 “‘I am pleased to report that continued strength in activity in the Permian Basin and 

solid demand for our fully utilized frac fleet resulted in another quarter of solid 

growth and financial performance for ProPetro.’” 

 “‘2017 was clearly the most transformational year in the Company’s history from 

both an operational and financial perspective. . . . I am pleased to report we are off to 

a strong start for 2018 and anticipate another outstanding year for ProPetro.’” 

 “‘I am pleased to report that our business is off to a great start in 2018. . . . We are 

especially encouraged by the continued strength in activity in the Permian Basin and 

strong demand for our fully utilized frac fleet.’” 

 “‘Our success during the second quarter was a direct result of our continued 

collaboration with a blue-chip customer base that remains focused on driving 

efficiencies in their completion techniques coupled with the outstanding execution of 

our operations team. . . . [W]e believe ProPetro is solidly positioned for continued 

success in this environment.’” 

 “‘ProPetro’s success in the third quarter is a direct result of our differentiated, 

customer-centric business model. . . . [W]e will remain closely focused on their 

needs as we finish 2018 strong and prepare for an exciting 2019.’” 

 “‘We are extremely proud of our results for 2018, and appreciate the outstanding 

efforts of our best-in-class team as they competed at the highest-level in what proved 

to be another pivotal year for the Permian Basin.’” 

5. Driven by the Company’s purportedly strong financial results, the trading price of 

ProPetro common stock advanced to as high as $24.66 per share on April 22, 2019 from $14.00 per 

share on March 22, 2017. But in August 2019, defendants’ stately portrait of ProPetro as a fracking 

success dissolved. 
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6. On August 8, 2019, ProPetro filed a Form 8-K with the U.S. Securities and Exchange 

Commission (“SEC”) announcing that the Company needed to delay its second quarter report and 

earnings call due to an ongoing review by its Audit Committee concerning expense reimbursements, 

including $370,000 that was improperly reimbursed to senior management, and other transactions 

involving related parties or conflicts of interest. The Company further revealed that the review 

concerned, among other things, expense reimbursements and certain transactions involving related 

parties or potential conflicts of interest, and that ProPetro expected to report a material weakness in 

its internal control over disclosures. 

7. Thereafter, on October 9, 2019, the Company filed a Form 8-K with the SEC stating 

that the “Company is continuing to review one or more related party transactions [that] . . . involve 

real estate transactions and do not involve any of the Company’s current or former customers or 

vendors.” Moreover, the Company revealed that “the Audit Committee’s internal review has 

identified a number of internal control deficiencies” and that, “[a]s a result of these internal control 

deficiencies, the Company’s management is likely to conclude that there were one or more material 

weaknesses that resulted in the Company’s internal control over financial reporting and disclosure 

controls and procedures not being effective as of a prior date.” More specifically, as to the internal 

control and disclosure deficiencies identified by the Company, the October 9, 2019 Form 8-K stated, 

in relevant part, as follows: 

Internal Controls and Disclosure Controls Deficiencies; Future Filings 

Although significant work has been completed and a number of control 

deficiencies are in the process of being remediated, management has not yet 

completed its evaluation of certain internal control deficiencies identified as a result 

of the internal review, but it is likely to conclude that there were one or more 

material weaknesses that resulted in the Company’s disclosure controls and 

procedures not being effective. The Company expects to include additional 

information with respect to any identified material weaknesses in future filings with 

the SEC. 
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. . . Management will also require additional time to evaluate the impact of 

any identified material weaknesses on the Company’s prior filings. The Company’s 

conclusions regarding any material weaknesses could result in a requirement to 

amend prior SEC filings. In addition, the Company’s independent registered 

public accounting firm will require additional time in order to evaluate the internal 

review and associated findings, as well as the Company’s proposed remediation plan 

and the impact that any identified material weaknesses may have on its prior 

opinions. 

8. After the early October disclosure, on October 24, 2019, the SEC informed the 

Company that it was under investigation and sought certain documents from the Company, including 

documents related to the Company’s internal investigation. 

9. Then, a few weeks later, on November 13, 2019, the Company filed a Form 8-K with 

the SEC revealing that “the Audit Committee has identified one related party transaction that was not 

previously disclosed” and “at least two material weaknesses that resulted in the Company’s internal 

control over financial reporting and disclosure controls and procedures not being effective as of a 

prior date.” The previously undisclosed related-party transaction with ProPetro’s now former Chief 

Accounting Officer, defendant Denholm (defined herein), involved a business owned in part by 

defendant Denholm that had sold or leased a facility to ProPetro. More specifically, the Company 

stated in the November 13, 2019 Form 8-K, in relevant part, as follows:

Audit Committee Internal Review 

. . . Since October 9, 2019, the Audit Committee has identified one related 

party transaction that was not previously disclosed and is described in greater detail 

below. 

. . . [T]he Audit Committee’s internal review has identified a number of 

internal control deficiencies. As a result of these internal control deficiencies, the 

Company’s management has concluded that there were at least two material 

weaknesses that resulted in the Company’s internal control over financial 

reporting and disclosure controls and procedures not being effective as of a prior 

date. While management continues to evaluate the impacts of the identified control 

deficiencies, management has concluded that at least one of these material 

weaknesses existed as of December 31, 2018. 

These determinations affect the conclusions regarding effectiveness 

previously expressed by the Company’s management in Part II, Item 9A, “Controls 
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and Procedures” in the Company’s Annual Report on Form 10-K for the year ended 

December 31, 2018 (the “2018 Annual Report”) and Part I, Item 4, “Controls and 

Procedures” in the Company’s Quarterly Report on Form 10-Q for the quarter ended 

March 31, 2019 (the “First Quarter 10-Q”). Accordingly, investors should no longer 

rely on management’s report on internal control over financial reporting or the 

internal control over financial reporting opinion of the Company’s independent 

registered public accounting firm included in the 2018 Annual Report. The 

Company expects to amend the 2018 Annual Report and the First Quarter 10-Q in 

the future to reflect these conclusions. 

* * * 

The Company cannot currently predict when this evaluation and review 

process will be completed, but it does not currently expect to be in a position to file 

amended, delinquent or future SEC filings prior to the end of 2019. The Company 

will continue to seek to complete the evaluation and review process, take appropriate 

corrective actions and make necessary filings with the SEC with a view to becoming 

current in its filing obligations under the Securities Exchange Act of 1934, as 

amended, as soon as reasonably practicable. 

The Audit Committee identified one related party transaction that was not 

previously disclosed. During 2018, (i) an entity (“Entity A”) that is 50% owned by 

the Company’s former Chief Accounting Officer (the “Former CAO”) and 50% by 

the Former CAO’s business partner (who is not affiliated with the Company) loaned 

approximately $770,000, and (ii) an entity that is owned 100% by the Former CAO 

(“Entity B”) loaned approximately $57,000, to another entity that is owned 100% by 

the Former CAO’s business partner (“Entity C”). The loaned funds were used by 

Entity C during 2018 to pay for a portion of the acquisition, development, and 

construction costs associated with an iron testing facility and a portion of the 

acquisition and development costs associated with a maintenance facility that were 

sold or leased to the Company. The approximately $827,000 of funds loaned by 

Entity A and Entity B to Entity C were repaid in full by Entity C, without interest. 

Similarly, during 2019, Entity A provided approximately $500,000 of funds 

to Entity C, which funds the Company understands were used during 2019 to pay for 

a portion of the development and construction costs associated with the iron testing 

facility. 

The Company purchased the iron testing facility from Entity C, reimbursed 

Entity C for certain development costs associated with the maintenance facility, and 

leased a property adjacent to the iron testing facility and the maintenance facility 

property from Entity C. In total, the Company has paid approximately $3,600,000 to 

Entity C, which includes $2,300,000 associated with the iron testing facility 

discussed above. 
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10. On this news, the trading price of ProPetro stock collapsed $10 per share, falling to 

$7.34 per share on November 13, 2019 from $17.34 per share on August 8, 2019, wiping out more 

than $950 million in once valuable shareholder equity. 

11. The Company filed its delayed annual report for the year ended December 31, 2019 

with the SEC via a Form 10-K on June 22, 2020 (the “2019 Annual Report”) describing the 

conclusions of the Company’s Expanded Audit Committee Review. The 2019 Annual Report 

detailed how the Company had not maintained effective internal control over its financial reporting 

as of December 31, 2019 and revealed a failure to implement internal controls on a systemic basis 

throughout the Company’s operations. The internal control violations related to, among other things, 

related party transactions, financial controls and disclosures, insider trading, whistleblower 

allegations, conflicts of interest, and a lack of appropriate communication between management and 

the Board. The Company also admitted that its “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.” 

12. Moreover, bad news continued to be revealed even after the Expanded Audit 

Committee Review was completed. As part of the Company’s effort to enact procedures that would 

allow the Company’s then current principal executive and principal financial officer to certify the 

Company’s future SEC filings, the Company discovered that its Chief Executive Officer violated the 

shareholders agreement in place in January 2017, prior to the Company’s initial public offering, and 

the Company’s Insider Trading Compliance Policy, adopted in March 2017, as part of the 

Company’s initial public offering. Specifically, the Company admitted: 

[T]he Company determined that its former chief executive officer entered into a 

pledge agreement covering all of the Company’s common stock owned by him at 

that time as collateral for a personal loan in January 2017, in violation of the 

shareholders agreement then in place through the pledging of shares. The Company 

formally adopted its Insider Trading Compliance Policy in March 2017 (in 
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connection with its initial public offering), which prohibits pledging the Company’s 

securities as collateral to secure loans. The Company also believes that, in 2018 in 

connection with another personal loan, its former chief executive officer executed a 

share pledge agreement that was subsequently replaced with a negative pledge with 

respect to all of the Company’s common stock owned by him at that time or acquired 

thereafter and engaged in other inappropriate conduct in connection with these 

personal loans. The Company did not appropriately disclose such pledges in the 

Company’s prior SEC filings that included management share ownership. Also in 

connection with performing additional procedures, the Company determined that it 

had previously failed to appropriately disclose in its annual proxy statements certain 

perquisites as compensation paid to some of the Company’s named executive 

officers in 2017 and 2018, including, among other later reimbursed perquisites, ticket 

purchases, charitable donations, and costs associated with pilots provided by the 

Company for its former chief executive officer’s personal use of his plane. 

13. Defendants’ faithless actions have caused the Company to be named as a primary 

defendant in a costly and expensive-to-defend class action lawsuit brought by ProPetro shareholders 

for alleged violations of the federal securities laws. See Logan v. ProPetro Holding Corp., No. 19-

cv-00217 (W.D. Tex.) (“Securities Class Action”). Worse yet, defendants’ wrongdoing has 

subjected ProPetro to a costly and expensive SEC investigation into the Company’s financial 

disclosures and reporting.

14. Nevertheless, the ProPetro Board (defined herein) has not taken any legal action 

against the directors and officers responsible for this debacle. Nor will they, because each of the 

defendants is interested in the outcome of any such legal action. Accordingly, by this action, 

plaintiffs seek to vindicate ProPetro’s interests against its wayward fiduciaries. A pre-suit demand 

upon the ProPetro Board is excused in this case because at least a majority of the members of the 

ProPetro Board are disabled from fairly, independently and/or objectively considering such a 

demand.

JURISDICTION AND VENUE 

15. This Court has jurisdiction under 28 U.S.C. §1331 because certain of the claims 

asserted herein arise under §§10(b) and 21D of the Securities Exchange Act of 1934 (the “Exchange 
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Act”) (15 U.S.C. §§78j(b) and 78u-4). This Court also has supplemental jurisdiction over the state 

law claims under 28 U.S.C. §1367.

16. This action is not a collusive action designed to confer jurisdiction on a court of the 

United States that it would not otherwise have.

17. This Court has jurisdiction over each defendant because each defendant is either a 

corporation that conducts business in and maintains operations in this District or is an individual 

who has sufficient minimum contacts with this District so as to render the exercise of jurisdiction by 

the District courts permissible under traditional notions of fair play and substantial justice.

PARTIES 

18. Lead Plaintiff City of Boca Raton Police and Firefighters’ Retirement System (“Lead 

Plaintiff”) is and continuously has been a shareholder of ProPetro since January 2018. Lead Plaintiff 

will adequately represent ProPetro’s interests in the derivative claims asserted against defendants 

herein.

19. Plaintiff Jye-Chun Chang is and continuously has been a shareholder of ProPetro 

since August 2019. 

20. Nominal defendant ProPetro Holding Corp. is a Delaware corporation with its 

principal executive offices located at 1706 S. Midkiff, Building B, Midland, Texas 79701. ProPetro 

common stock trades on the New York Stock Exchange under the ticker symbol “PUMP.”

21. Defendant Spencer D. Armour III (“Armour”) has served as a director of ProPetro 

since 2013. Armour received at least $1,009,714 in fees and other incentive-based compensation not 

justified by the Company’s performance while under his stewardship. Armour also sold 306,106 

shares of ProPetro stock for insider trading proceeds of $5,359,738. Armour is a named defendant in 

the Securities Class Action.
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22. Defendant Mark S. Berg (“Berg”) has served as a director of ProPetro since February 

2019. 

23. Defendant Anthony Best (“Best”) has served as a director of ProPetro since 2018. 

He also has served on the Audit and Compensation Committees of the ProPetro Board. Best 

received at least $392,202 in fees and other incentive-based compensation not justified by the 

Company’s performance while under his stewardship. 

24. Defendant Alan E. Douglas (“Douglas”) has served as a director of ProPetro since 

2017. He also has served on the Audit and Nominating and Corporate Governance Committees of 

the ProPetro Board. Douglas received at least $501,893 in fees and other incentive-based 

compensation not justified by the Company’s performance while under his stewardship. 

25. Defendant Phillip A. Gobe (“Gobe”) has served as a director of ProPetro since July 

2019 and was Executive Chairman of ProPetro from October 2019 until March 13, 2020. Gobe was 

named Chief Executive Officer on March 13, 2020 and has been Chairman of the Board since July 

2019. 

26. Defendant Jack B. Moore (“Moore”) has served as a director of ProPetro since 2017. 

He also has served on the Audit and Nominating and Corporate Governance Committees of the 

ProPetro Board. Moore received at least $530,437 in fees and other incentive-based compensation 

not justified by the Company’s performance while under his stewardship. 

27. Defendant Pryor Blackwell (“Blackwell”) served as a director of ProPetro from 2017 

until July 6, 2020. He was a member of the Compensation and Nominating and Corporate 

Governance Committees of the ProPetro Board. Blackwell received at least $490,124 in fees and 

other incentive-based compensation not justified by the Company’s performance while under his 

stewardship. 
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28. Defendant Dale Redman (“Redman”) served as a director of ProPetro from 2005 until 

March 13, 2020. He was also Chief Executive Officer of ProPetro from 2008 until March 13, 2020. 

Redman received at least $19,855,305 in cash, bonuses, stock awards, and other incentive-based 

compensation not justified by the Company’s performance while under his stewardship. Redman 

also sold 370,370 shares of ProPetro stock for insider trading proceeds of $5,185,180. Redman is a 

named defendant in the Securities Class Action. 

29. Defendant Steven Beal (“Beal”) served as a director of ProPetro from April 2017 

until July 11, 2019. He also served on the Audit and Compensation Committees of the ProPetro 

Board. Beal received at least $500,150 in fees and other incentive-based compensation not justified 

by the Company’s performance while under his stewardship. 

30. Defendant Schuyler E. Coppedge (“Coppedge”) served as a director of ProPetro from 

2013 to May 2018. Coppedge is a named defendant in the Securities Class Action. 

31. Defendant Stephen Herman (“Herman”) served as a director of ProPetro from March 

2013 to December 2017. Herman is a named defendant in the Securities Class Action. 

32. Defendant Matthew H. Himler (“Himler”) served as a director of ProPetro from 

October 2016 to January 2018. Himler is a named defendant in the Securities Class Action. 

33. Defendant Royce W. Mitchell (“Mitchell”) served as a director of ProPetro from 

February 2019 to July 28, 2019. He also has served on the Audit Committee of the ProPetro Board. 

34. Defendant Peter Labbat (“Labbat”) served as a director of ProPetro from 2013 to May 

2018. Labbat is a named defendant in the Securities Class Action. 

35. Defendant Jeffrey Smith (“Smith”) served as Chief Financial Officer of ProPetro 

from 2005 to October 2019. He was Chief Administrative Officer of ProPetro from October 2019 

until March 13, 2020. Smith is currently acting as a Special Advisor to the Chief Executive Officer 

and is no longer an executive officer of the Company. Smith received at least $9,727,263 in cash, 
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bonuses, stock awards, and other incentive-based compensation not justified by the Company’s 

performance while under his stewardship. Smith also sold 222,221 shares of ProPetro stock for 

insider trading proceeds of $3,111,094. Smith is a named defendant in the Securities Class Action. 

36. Defendant Ian Denholm (“Denholm”) served as Chief Accounting Officer of ProPetro 

from August 2017 until October 3, 2019. Denholm received at least $2,126,209 in cash, bonuses, 

stock awards, and other incentive-based compensation not justified by the Company’s performance 

while under his stewardship. Denholm is a named defendant in the Securities Class Action. 

THE FIDUCIARY DUTIES OF PROPETRO’S DIRECTORS AND OFFICERS 

37. By reason of their positions as ProPetro directors and/or officers and because of their 

ability to direct and control the Company’s business and corporate affairs, defendants owed ProPetro 

and its shareholders a fiduciary duty to use their utmost ability to control and manage ProPetro in an 

honest and lawful manner. Toward that end, ProPetro’s directors and officers owed the Company 

and its shareholders fiduciary duties to exercise candor, loyalty, good faith, and reasonable 

supervision over the Company’s management, policies, practices, and internal controls.

38. More specifically, as ProPetro’s directors and officers, defendants’ fiduciary duties 

required them to, among other things: (i) ensure that the Company complied with its legal 

obligations and requirements, including legal compliance with the corporations and federal securities 

laws, as well as acting only within the scope of legal authority and disseminating truthful and 

accurate statements to ProPetro shareholders; (ii) conduct the Company’s affairs in an efficient, 

business-like manner so as to make it possible to provide the highest quality performance of the 

Company’s business, to avoid wasting the Company’s assets, and to lawfully maximize the value of 

the Company’s shares; (iii) properly and accurately guide investors and analysts as to the true 

financial condition of the Company at any given time, including making accurate statements about 

the Company’s financial results and internal controls; (iv) remain fully informed as to how ProPetro 
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conducts its operations and, upon receipt of notice or information of imprudent or unsound 

conditions or practices, make reasonable inquiry in connection therewith and take steps to correct 

such conditions or practices and make such disclosures as are necessary to comply with the securities 

laws; (v) ensure that ProPetro was operated in a diligent, honest, and prudent manner in compliance 

with all applicable laws, rules, and regulations, including the corporations and securities laws; and 

(vi) refrain from breaching their fiduciary duties to the Company by adopting practices, procedures, 

and controls inconsistent with their fiduciary duties of care, candor, loyalty, and good faith.

39. Further still, under the Charter of the Audit Committee of the ProPetro Board, the 

members of the Audit Committee are responsible for the Company’s financial reporting processes 

and oversight of related-party transactions. This includes, among other things, reviewing and 

approving ProPetro’s annual and quarterly financial reports filed on SEC Forms 10-K and 10-Q and 

earnings press releases filed on SEC Form 8-K in conjunction with their release to ProPetro 

shareholders. The Audit Committee Charter states, in part:

I. Purpose 

The purpose of the Audit Committee (the “Committee”) is to assist the Board 

of Directors (the “Board”) of ProPetro Holding Corp. (the “Company”) in its 

oversight of: (i) the integrity of the Company’s financial statements; (ii) the 

Company’s compliance with legal and regulatory requirements; (iii) the independent 

auditor’s qualifications and independence; (iv) the performance of the Company’s 

independent auditor; and (v) the design and implementation of the Company’s 

internal audit function, and the performance of the internal audit function after it has 

been established. 

* * * 

III. Meetings, Procedures and Authority 

The Committee must meet at least once during each fiscal quarter. The 

Committee must periodically meet separately with management, with the 

independent auditor, with the Company personnel primarily responsible for the 

design and implementation of the internal audit function, and with the internal 

auditor (or other personnel responsible for the internal audit function) after the 

internal audit function has been established. 
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* * * 

IV. Duties and Responsibilities 

* * * 

Annual Financial Statements and Annual Audit 

3. Audit Problems. The Committee must discuss with the independent 

auditor any audit problems or difficulties and management’s response. 

4. Form 10-K Review. The Committee must review and discuss the 

annual audited financial statements with management and the independent auditor, 

including the Company’s disclosures under “Management’s Discussion and Analysis 

of Financial Condition and Results of Operations.” 

5. Audit Committee Report. The Committee must provide the Company 

with the report of the Committee with respect to the audited financial statements for 

inclusion in each of the Company’s annual proxy statements. 

Quarterly Financial Statements 

6. Form 10-Q Review. The Committee must review and discuss the 

quarterly financial statements with management and the independent auditor, 

including the Company’s disclosures under “Management’s Discussion and Analysis 

of Financial Condition and Results of Operations.” 

Other Duties and Responsibilities 

7. Review of Earnings Releases. The Committee must discuss the 

Company’s earnings press releases, as well as financial information and earnings 

guidance provided to analysts and rating agencies. 

8. Risk Assessment and Risk Management. The Committee must discuss 

the Company’s policies with respect to risk assessment and risk management. 

* * * 

11. Reports to the Board of Directors. The Committee must report 

regularly to the Board regarding the activities of the Committee. 

* * * 

14. Review of Related Person Transactions. The Committee must discuss 

with management and the independent auditor any related person transactions 

brought to the Committee’s attention that could reasonably be expected to have a 

material impact on the Company’s financial statements. 
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15. Review of Code of Ethics and Conduct. The Committee must, at least 

annually, consider and discuss with management and the independent auditor the 

Company’s Code of Ethics and Conduct and the procedures in place to enforce the 

Code of Ethics and Conduct. The Committee must also consider and discuss and, as 

appropriate, grant requested waivers from the Code of Ethics and Conduct brought to 

the attention of the Committee, though the Committee may defer any decision with 

respect to any waiver to the Board. 

CONSPIRACY, AIDING AND ABETTING, AND CONCERTED ACTION 

40. In committing the wrongful acts complained of herein, defendants pursued or joined 

in the pursuit of a common course of conduct and acted in concert with one another in furtherance of 

a common plan or design. In addition to the wrongful conduct complained of herein giving rise to 

primary liability, defendants further aided and abetted and/or assisted each other in breach of their 

fiduciary duties.

41. Each of the defendants aided and abetted and rendered substantial assistance in the 

wrongs complained of herein. In taking such action to substantially assist the commission of the 

wrongdoing complained of herein, each defendant acted with knowledge of the primary wrongdoing, 

substantially assisted the accomplishment of that wrongdoing, and was aware of his overall 

contribution to and furtherance of the wrongdoing.

DEFENDANTS’ UNLAWFUL SCHEME 

42. ProPetro is an oilfield services company that provides “hydraulic fracturing and other 

complementary services to leading upstream oil and gas companies engaged in the exploration and 

production . . . of North American unconventional oil and natural gas resources.”

43. On March 22, 2017, ProPetro completed the IPO of 25 million shares of its common 

stock, 13.250 million shares of which were sold by the Company and 11.750 million shares of which 

were sold by certain selling stockholders, including defendants Redman and Smith, at a price of 

$14.00 per share pursuant to a Registration Statement on Form S-1 initially filed by ProPetro with 

the SEC on February 8, 2017. In total, ProPetro raised approximately $175 million in net proceeds 
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from the IPO to be used for, among other things, the purchase of additional hydraulic fracturing units 

and general corporate purposes.2

44. In the Registration Statement for the IPO, ProPetro represented that its Board was 

prepared to “adopt a code of business conduct and ethics in connection with the completion of th[e 

IPO]” and represented that ProPetro would conduct quarterly reviews of its related-party transactions 

to ensure proper compliance. Regarding the Company’s policy governing the review of relatedparty transactions, the Registration Statement represented, in relevant part, as follows:

Our board of directors will adopt a code of business conduct and ethics in 

connection with the completion of this offering that will provide that the board of 

directors or its authorized committee will review on at least a quarterly basis all 

transactions with related persons that are required to be disclosed under SEC rules 

and, when appropriate, initially authorize or ratify all such transactions. In 

connection with this offering, we will establish an audit committee consisting solely 

of independent directors whose functions will be set forth in the audit committee 

charter. We anticipate that one of the audit committee’s functions will be to review 

and approve all relationships and transactions in which we and our directors, director 

nominees and executive officers and their immediate family members, as well as 

holders of more than 5% of any class of our voting securities and their immediate 

family members, have a direct or indirect material interest. We anticipate that such 

policy will be a written policy included as part [of] the audit committee charter that 

will be implemented by the audit committee and in the Code of Business Conduct 

and Ethics that our board of directors will adopt prior to the completion of this 

offering. 

The code of business conduct and ethics will provide that, in determining 

whether or not to recommend the initial approval or ratification of a transaction with 

a related person, the board of directors or its authorized committee should consider 

all of the relevant facts and circumstances available, including (if applicable) but not 

limited to: (i) whether there is an appropriate business justification for the 

transaction; (ii) the benefits that accrue to us as a result of the transaction; (iii) the 

terms available to unrelated third parties entering into similar transactions; (iv) the 

impact of the transaction on a director’s independence (in the event the related 

person is a director, an immediate family member of a director or an entity in which 

a director or an immediate family member of a director is a partner, shareholder, 

member or executive officer); (v) the availability of other sources for comparable 

services; (vi) whether it is a single transaction or a series of ongoing, related 

transactions; and (vii) whether entering into the transaction would be consistent with 

the code of business conduct and ethics. 

 

2

 The Company currently has over 100 million shares outstanding.
- 17 - 

4839-3309-0503.v2 

45. After the IPO, on May 10, 2017, defendants caused ProPetro to issue a press release 

announcing its financial results for the first quarter of 2017 (“1Q17”), ended March 31, 2017. The 

press release, filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, stated, in 

relevant part, as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the first quarter of 2017. 

First Quarter 2017 Highlights 

 Total revenue for the quarter increased 96% to $171.9 million, 

compared to $87.9 million for the first quarter 2016. 

 Net loss for the quarter was $24.4 million, or $0.43 loss per diluted 

share including special items, as compared to a net loss of $12.9 

million, or $0.37 loss per diluted share, for the first quarter 2016. 

 Adjusted EBITDA for the quarter was $16.2 million, up 

approximately 700% from $2.0 million for the first quarter 2016. 

 Completed the Company’s Initial Public Offering (IPO), which 

generated net proceeds to ProPetro of $170.1 million. 

* * * 

According to data published by Baker Hughes Inc., the Permian Basin rig 

count, a significant driver of the Company’s business, increased 21% from 264 at 

December 30, 2016 to 319 as of March 31, 2017. This was a key factor in ProPetro 

maintaining 100% utilization of its fleet in the first quarter of 2017. The Permian 

Basin rig count as of May 5, 2017 was 349, a 9% increase from the end of the first 

quarter. 

Dale Redman, Chief Executive Officer, commented, “We are pleased to 

report our first quarterly results following our recent IPO. Our business performed 

very well during the quarter and our fleet remained fully utilized. Our deep 

relationships and operational alignment with customers allowed us to further 

capitalize on the rapidly expanding rig count and strong demand for pressure 

pumping services in the Permian Basin. Moreover, as a result of our IPO in March, 

we have secured the funding for four new-build pressure pumping fleets and ended 

the period with increased financial flexibility that will enable us to execute on our 

announced expansion initiatives and other opportunities to grow the business.” 

46. On May 12, 2017, ProPetro filed its 1Q17 Quarterly Report on Form 10-Q with the 

SEC for the period ended March 31, 2017. In the 1Q17 Form 10-Q, defendants reported that 
- 18 - 

4839-3309-0503.v2 

ProPetro enjoyed quarterly revenues of $171.9 million, a net loss of $24.3 million, and diluted 

earnings per share of ($0.43) per share.

47. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 1Q17 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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 Quarterly Report. 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 March 31, 2017. 

Changes in Internal Controls over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended March 31, 2017 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 

48. On August 8, 2017, defendants caused ProPetro to issue a press release announcing 

its financial results for the second quarter of 2017 (“2Q17”), ended June 30, 2017. The press release, 

filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, stated, in relevant part, 

as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the second quarter of 2017. 

Second Quarter 2017 Highlights 
- 19 - 

4839-3309-0503.v2 

 Total revenue for the quarter increased 24% to $213.5 million, 

compared to $171.9 million for the first quarter of 2017. 

 Net income for the quarter was $4.9 million, or $0.06 per diluted 

share, as compared to a net loss of $24.4 million, or $0.43 loss per 

diluted share, for the first quarter of 2017. 

 Adjusted EBITDA for the quarter was $30.7 million, up 

approximately 89% from $16.2 million for the first quarter of 2017. 

 Frac fleet remained fully utilized, including deployment of two new 

build fleets, ending the period with total capacity of 510,000 

hydraulic horsepower (“HHP”) – more than a 20% increase as 

compared to the end of the first quarter of 2017. 

 Recently took delivery and immediately commenced operations of an 

additional frac fleet bringing total deployed capacity to 555,000 HHP, 

with plans to build and deploy three incremental fleets by year end, 

bringing total frac fleet capacity to 690,000 HHP. 

* * * 

Dale Redman, Chief Executive Officer, commented, “Our business in the 

second quarter of 2017 continued to improve on the back of strong Permian Basin rig 

count growth and an undersupplied frac market, resulting in increased demand for 

our services. The successful deployment of new equipment allowed us to further 

strengthen our relationships with customers who recognize our proven track record 

of unsurpassed operational execution. This unique industry position supports our 

view that we will continue to see strong demand for pressure pumping, and we are 

responding to the long-term needs of our customers through further expansion of our 

frac fleet capacity.” 

49. On August 11, 2017, ProPetro filed its 2Q17 Quarterly Report on Form 10-Q with the 

SEC for the period ended June 30, 2017. In the 2Q17 Form 10-Q, defendants reported that ProPetro 

enjoyed quarterly revenues of $213.4 million, net income of $4.9 million, and diluted earnings per 

share of $0.06 per share.

50. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 2Q17 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

We maintain disclosure controls and procedures that are designed to provide 

reasonable assurance that the information required to be disclosed by us in our 
- 20 - 

4839-3309-0503.v2 

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 Quarterly Report. 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 June 30, 2017. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended June 30, 2017 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 

51. On November 1, 2017, defendants caused ProPetro to issue a press release 

announcing its financial results for the third quarter of 2017 (“3Q17”), ended September 30, 2017. 

The press release, filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, 

stated, in relevant part, as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the third quarter of 2017. 

Third Quarter 2017 Highlights 

 Total revenue for the quarter increased 32% to $282.7 million, 

compared to $213.5 million for the second quarter of 2017. 

 Net income for the quarter was $22.0 million, or $0.25 per diluted 

share, as compared to $4.9 million, or $0.06 per diluted share, for the 

second quarter of 2017. 

 Adjusted EBITDA for the quarter was $47.8 million, up 56% from 

$30.7 million for the second quarter of 2017. Adjusted EBITDA 

margin for the third quarter was 16.9% – a substantial increase from 

14.4% in the preceding quarter. 
- 21 - 

4839-3309-0503.v2 

 Frac fleet remained fully utilized, including deployment of three newbuild fleets, ending the period with total capacity of 645,000 

hydraulic horsepower (“HHP”) – more than a 26% increase as 

compared to the end of the second quarter of 2017. 

 Recently took delivery and immediately commenced operations of an 

additional frac fleet bringing total deployed capacity to 690,000 HHP. 

The Company plans to build and deploy one additional fleet in the 

first quarter of 2018, which will increase total frac fleet capacity to 

735,000 HHP, or 17 fleets. 

* * * 

Dale Redman, Chief Executive Officer, commented, “I am pleased to report 

that continued strength in activity in the Permian Basin and solid demand for our 

fully utilized frac fleet resulted in another quarter of solid growth and financial 

performance for ProPetro. Our operations team did an excellent job of working 

closely with and serving the specific needs of our customers, who remain very 

efficient and collaborative. We will continue to focus on providing unparalleled 

performance and customer service as we prudently and methodically expand our 

unique platform in the Permian Basin.” 

52. On November 2, 2017, ProPetro filed its 3Q17 Quarterly Report on Form 10-Q with 

the SEC for the period ended September 30, 2017. In the 3Q17 Form 10-Q, defendants reported that 

ProPetro enjoyed quarterly revenues of $282.7 million, net income of $21.9 million, and diluted 

earnings per share of $0.26 per share.

53. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 3Q17 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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, principal financial officer and principal accounting 

officer, the effectiveness of the design and operation of our disclosure controls and 
- 22 - 

4839-3309-0503.v2 

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 Quarterly Report. Based upon that 

evaluation, our principal executive officer, principal financial officer and principal 

accounting officer concluded that our disclosure controls and procedures were 

effective at the reasonable assurance level as of September 30, 2017. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended September 30, 2017 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 

54. On March 26, 2018, defendants caused ProPetro to issue a press release announcing 

its financial results for the fourth quarter of 2017 (“4Q17”) and fiscal year 2017, ended December 

31, 2017. The press release, filed with the SEC on Form 8-K and disseminated to ProPetro 

shareholders, stated, in relevant part, as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the full year and fourth quarter of 

2017, and additional expansion of its fleet. 

Full Year 2017 Operational Highlights 

 Grew year-end fleet capacity by 64% to 690,000 hydraulic 

horsepower (“HHP”), or 16 fleets, from 420,000 HHP, or ten fleets, 

at the end of 2016; 

 Maintained 100% fleet utilization throughout the year; 

 Purchased 86 Tier 2 engines estimated to yield approximately $30 

million in savings; 

 Implemented and completed transition from carbon steel to stainless 

steel fluid ends; 

 Expanded operations to the Delaware Basin, and 

 Maintained safety and performance metrics while growing employee 

head count nearly 100%. 

Full Year 2017 Financial Highlights 

 Successfully completed initial public offering to fund growth 

initiatives and strengthen balance sheet; 
- 23 - 

4839-3309-0503.v2 

 Increased total revenue by 125% to $981.9 million from $436.9 

million in 2016; 

 Reported net income of $12.6 million as compared to a net loss of 

$53.1 million in 2016; and 

 Grew adjusted EBITDA to $137.4 million from $7.8 million in 2016 

– more than a 1,600% increase. 

Fourth Quarter 2017 Highlights 

 Increased total revenue by 11% to $313.7 million from $282.7 

million in the third quarter of 2017; 

 Posted net income of $10.1 million and adjusted EBITDA of $42.8

million; and 

 Deployed one new-build fleet (45,000 HHP). 

* * * 

Dale Redman, Chief Executive Officer, commented, “2017 was clearly the 

most transformational year in the Company’s history from both an operational and 

financial perspective. Driving our results was a continued unwavering focus on 

exceeding the needs of our customers and working closely with our supply chain 

partners as we grew our best-in-class fleet without sacrificing safety or performance. 

I am incredibly proud of our team’s accomplishments during the past year, which is a 

direct testament to the tireless efforts of our workforce. While our fourth quarter 

results were affected by a higher than originally anticipated amount of holiday time 

off, more vertical completion work than expected, and inclement weather, I am 

pleased to report we are off to a strong start for 2018 and anticipate another 

outstanding year for ProPetro.” 

(Footnote omitted.) 

55. On March 27, 2018, ProPetro filed its 2017 Annual Report on Form 10-K with the 

SEC for the period ended December 31, 2017. In the 2017 Form 10-K, defendants reported that 

ProPetro enjoyed annual revenues of $981.8 million, net income of $12.6 million, and diluted 

earnings per share of $0.17 per share.

56. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 2017 Form 10-K continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 
- 24 - 

4839-3309-0503.v2 

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, principal financial officer and principal accounting 

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 report. Based upon that evaluation, our 

principal executive officer, principal financial officer and principal accounting 

officer concluded that our disclosure controls and procedures were effective at the 

reasonable assurance level as of December 31, 2017. 

Management’s Report on Internal Control over Financial Reporting 

We are required to comply with the SEC’s rules implementing Section 302 of 

the Sarbanes‐Oxley Act of 2002, which requires our management to certify financial 

and other information in our quarterly and annual reports and provide an annual 

management report on the effectiveness of our internal control over financial 

reporting. We will not be required to make our first assessment of our internal 

control over financial reporting until the year of our second annual report required to 

be filed with the SEC. 

Our independent registered public accounting firm is not yet required to 

formally attest to the effectiveness of our internal controls over financial reporting, 

and will not be required to do so for as long as we are an “emerging growth 

company” pursuant to the provisions of the JOBS Act. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarter ended December 31, 2017 that have materially affected, or are reasonably 

likely to materially affect, our internal control over financial reporting. 

57. On May 8, 2018, defendants caused ProPetro to issue a press release announcing its 

financial results for the first quarter of 2018 (“1Q18”), ended March 31, 2018. The press release, 

filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, stated, in relevant part, 

as follows:
- 25 - 

4839-3309-0503.v2 

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the first quarter of 2018. 

First Quarter 2018 and Recent Highlights 

 Total revenue for the quarter increased approximately 23% to $385.2 

million, compared to $313.7 million for the fourth quarter of 2017. 

 Net income for the quarter was $36.7 million, or $0.42 per diluted 

share, as compared to $10.1 million, or $0.12 per diluted share, for 

the fourth quarter of 2017. 

 Adjusted EBITDA for the quarter was $76.7 million, up 79% from 

$42.8 million for the fourth quarter of 2017. 

 Frac fleet remained fully utilized, including deployment of two newbuild fleets, and an additional 35,000 hydraulic horsepower (“HHP”) 

into the legacy fleet. Period ending capacity was 815,000 HHP, or 18 

fleets – more than a 18% [sic] increase as compared to 690,000 HHP 

at the end of the fourth quarter of 2017. 

 In April took delivery and immediately commenced operations of an 

additional new-build frac fleet bringing total deployed capacity to 

860,000 HHP, or 19 fleets. 

 As previously announced, the Company plans to deploy one 

additional new-build fleet in the fourth quarter of 2018. This addition 

will increase total frac fleet capacity to 905,000 HHP, or 20 fleets. 

* * * 

Dale Redman, Chief Executive Officer, commented, “I am pleased to report 

that our business is off to a great start in 2018. Through our best in class operations 

team and close collaboration with our customers, we avoided many of the headwinds 

that our sector faced in the first quarter. We are especially encouraged by the 

continued strength in activity in the Permian Basin and strong demand for our fully 

utilized frac fleet. We will continue to focus on executing at the wellsite to provide 

our customers with unmatched service as we help them harvest their respective 

resources in the most active onshore basin in the U.S.” 

58. On May 9, 2018, ProPetro filed its 1Q18 Quarterly Report on Form 10-Q with the 

SEC for the period ended March 31, 2018. In the 1Q18 Form 10-Q, defendants reported that 

ProPetro enjoyed quarterly revenues of $385.2 million, net income of $36.7 million, and diluted 

earnings per share of $0.42 per share.
- 26 - 

4839-3309-0503.v2 

59. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 1Q18 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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, principal financial officer and 

principal accounting 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, principal financial officer and principal accounting 

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 Quarterly Report. Based upon that 

evaluation, our principal executive officer, principal financial officer and principal 

accounting officer concluded that our disclosure controls and procedures were 

effective at the reasonable assurance level as of March 31, 2018. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended March 31, 2018 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 

60. On August 7, 2018, defendants caused ProPetro to issue a press release announcing 

its financial results for the second quarter of 2018 (“2Q18”), ended June 30, 2018. The press release, 

filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, stated, in relevant part, 

as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced record financial and operational results for the second quarter of 2018. 

Second Quarter 2018 and Recent Highlights 

 Total revenue for the quarter increased approximately 19% to $459.9 

million, compared to $385.2 million for the first quarter of 2018. 
- 27 - 

4839-3309-0503.v2 

 Net income for the quarter was $39.1 million, or $0.45 per diluted 

share, as compared to $36.7 million, or $0.42 per diluted share, for 

the first quarter of 2018. 

 Adjusted EBITDA for the quarter was $96.0 million, up 25% from 

$76.7 million for the first quarter of 2018. 

 Frac fleet remained fully utilized, including deployment of one newbuild fleet during the quarter. Period ending capacity was 860,000 

HHP, or 19 fleets – more than a 5% increase as compared to 815,000 

HHP at the end of the first quarter of 2018. 

 As previously announced, the Company plans to take delivery of and 

deploy one additional fleet in the fourth quarter of 2018. This 

addition will increase total frac fleet capacity to 905,000 HHP, or 20 

fleets. 

* * * 

Dale Redman, Chief Executive Officer, commented, “Our success during the 

second quarter was a direct result of our continued collaboration with a blue-chip 

customer base that remains focused on driving efficiencies in their completion 

techniques coupled with the outstanding execution of our operations team. As we 

have discussed previously, we anticipate Permian completions to further evolve into 

a manufacturing approach for the foreseeable future. Through leveraging our proven 

business model and fully-utilized fleet, we believe ProPetro is solidly positioned for 

continued success in this environment.” 

61. On August 9, 2018, ProPetro filed its 2Q18 Quarterly Report on Form 10-Q with the 

SEC for the period ended June 30, 2018. In the 2Q18 Form 10-Q, defendants reported that ProPetro 

enjoyed quarterly revenues of $459.9 million, net income of $39.1 million, and diluted earnings per 

share of $0.45 per share.

62. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 2Q18 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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 
- 28 - 

4839-3309-0503.v2 

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 Quarterly Report. 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 June 30, 2018. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended June 30, 2018 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 

63. On November 6, 2018, defendants caused ProPetro to issue a press release 

announcing its financial results for the third quarter of 2018 (“3Q18”), ended September 30, 2018. 

The press release, filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, 

stated, in relevant part, as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the third quarter of 2018. 

Third Quarter 2018 and Recent Highlights 

 Total revenue for the quarter was $434.0 million, as compared to 

$459.9 million for the second quarter of 2018. 

 Net income was $46.3 million, or $0.53 per diluted share, an increase 

of 18% from $39.1 million, or $0.45 per diluted share, for the second 

quarter of 2018. 

 Adjusted EBITDA for the quarter was $103.4 million, an increase of 

8% from $96.0 million for the second quarter of 2018. 

 Active hydraulic horsepower (“HHP”) deployed during the quarter

and at quarter end was 860,000, or 19 fleets. 

 The Company deployed one additional fleet in early October, 

increasing current total frac fleet capacity to 905,000 HHP, or 20 

fleets. 
- 29 - 

4839-3309-0503.v2 

* * * 

Dale Redman, Chief Executive Officer, commented, “ProPetro’s success in 

the third quarter is a direct result of our differentiated, customer-centric business 

model. We remain extremely proud of our best-in-class team and the consistent 

results they produce. Our team supports some of the most effective and efficient 

operators in the upstream space, and we will remain closely focused on their needs as 

we finish 2018 strong and prepare for an exciting 2019.” 

64. On November 8, 2018, ProPetro filed its 3Q18 Quarterly Report on Form 10-Q with 

the SEC for the period ended September 30, 2018. In the 3Q18 Form 10-Q, defendants reported that 

ProPetro enjoyed quarterly revenues of $434 million, net income of $46.3 million, and diluted 

earnings per share of $0.53 per share.

65. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 3Q18 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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 Quarterly Report. 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 September 30, 2018. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended September 30, 2018 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 
- 30 - 

4839-3309-0503.v2 

66. On February 26, 2019, defendants caused ProPetro to issue a press release 

announcing its financial results for the fourth quarter of 2018 (“4Q18”) and fiscal year 2018, ended 

December 31, 2018. The press release, filed with the SEC on Form 8-K and disseminated to 

ProPetro shareholders, stated, in relevant part, as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the full year and fourth quarter of 

2018. 

Full Year 2018 Operational Highlights 

 Organically grew legacy business year-end fleet capacity by 215,000 

to 905,000 hydraulic horsepower (“HHP”), or 20 fleets, from 690,000 

HHP, or 16 fleets, at the end of 2017. 

 Maintained industry-leading fleet utilization throughout the year. 

 Enhanced industry-leading safety and performance metrics while 

growing employee headcount over 50% 

 Entered into a strategic transaction for the acquisition of 510,000 

HHP, or 8 fleets, from Pioneer Natural Resources (“Pioneer” or 

“PXD”) and related 10-year dedicated service agreement . . . . 

Full Year 2018 Financial Highlights 

 Grew total revenue by 74% to $1.7 billion from $981.9 million in 

2017. 

 Expanded net income by almost 14 times to $173.9 million, or $2.00 

per diluted share, for 2018, from $12.6 million, or $0.16 per diluted 

share, in 2017. 

 Increased adjusted EBITDA to $388.5 million from $137.4 million in 

2017 – more than 180% higher. 

Fourth Quarter 2018 Highlights 

 Total revenue was $425.4 million as compared to the $434.0 million 

in the third quarter 2018. 

 Grew net income to $51.8 million, a 12% increase from $46.3 million 

in the previous quarter. 
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 Adjusted EBITDA increased 9% to $112.4 million from $103.3 

million in the third quarter. 

 Deployed one new-build frac fleet 45,000 HHP, bringing total yearend HHP to 905,000. 

 Closed transaction with Pioneer on December 31, 2018, bringing 

company-wide/total HHP to 1,415,000 HHP. 

* * * 

Dale Redman, Chief Executive Officer, commented, “We are extremely 

proud of our results for 2018, and appreciate the outstanding efforts of our best-inclass team as they competed at the highest-level in what proved to be another pivotal 

year for the Permian Basin. As important, I want to thank our customers, supply 

chain partners, and other key stakeholders for their important contributions to our 

success. Underpinning our outperformance in 2018 was a resilient long-term model 

of providing unrivaled execution at the wellsite for the benefit of our customers, and 

we look forward to continued close collaboration in their ongoing efforts. Finally, we 

are very excited to have announced and closed on our strategic transaction and 

service agreement with Pioneer and would like to once again welcome all of our new 

teammates to the ProPetro team.” 

(Footnote omitted.) 

67. On March 1, 2019, ProPetro filed its 2018 Annual Report on Form 10-K with the 

SEC for the period ended December 31, 2018. In the 2018 Form 10-K, defendants reported that 

ProPetro enjoyed annual revenues of $1.7 billion, net income of $173.8 million, and diluted earnings 

per share of $2.08 per share.

68. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 2018 Form 10-K continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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. 
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4839-3309-0503.v2 

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, principal financial officer and principal accounting 

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 report. Based upon that evaluation, our 

principal executive officer, principal financial officer and principal accounting 

officer concluded that our disclosure controls and procedures were effective at the 

reasonable assurance level as of December 31, 2018. 

Management’s Report on Internal Control over Financial Reporting 

Our management is responsible for establishing and maintaining adequate 

internal control over financial reporting, as such term is defined in Exchange Act 

Rule 13a-15(f). See page 48 for Management’s Report on Internal Control Over 

Financial Reporting. Deloitte & Touche LLP, an independent registered public 

accounting firm, has audited the effectiveness of our internal control over financial 

reporting as of December 31, 2018, as stated in their report, which is included herein. 

See page 50 for Report of Independent Registered Public Accounting Firm on its 

assessment of our internal control over financial reporting. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarter ended December 31, 2018 that have materially affected, or are reasonably 

likely to materially affect, our internal control over financial reporting. 

69. On May 7, 2019, defendants caused ProPetro to issue a press release announcing its 

financial results for the first quarter of 2019 (“1Q19”), ended March 31, 2019. The press release, 

filed with the SEC on Form 8-K and disseminated to ProPetro shareholders, stated, in relevant part, 

as follows:

ProPetro Holding Corp. (“ProPetro” or “the Company”) (NYSE: PUMP) today 

announced financial and operational results for the first quarter of 2019. 

First Quarter 2019 Highlights 

 Total revenue for the quarter was $546.2 million, as compared to 

$425.4 million for the fourth quarter of 2018. 

 Net income was $69.8 million, or $0.67 per diluted share, an increase 

of 35% from $51.8 million, or $0.59 per diluted share, for the fourth 

quarter of 2018. 
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4839-3309-0503.v2 

 Adjusted EBITDA for the quarter was $150.3 million, an increase of 

34% from $112.4 million for the fourth quarter of 2018. 

 Effective utilization for the first quarter was 27.0 fleets. 

 Plans to deploy two new-build electrically powered DuraStim® fleets 

in late 2019. 

* * * 

Dale Redman, Chief Executive Officer, commented, “ProPetro’s success in 

the first quarter is yet another example of our differentiated, customer-centric and 

performance driven business model. We remain extremely proud of our best-in-class 

team and the consistent results they produce. I’m also proud to report that we’ve 

integrated approximately 500 employees from our Pioneer transaction and that they 

are already adding significant value as members of the ProPetro team. Our team 

continues to support some of the most effective and efficient operators in the 

upstream space, and we will remain closely focused on their needs as we execute 

plans for an exciting 2019.” 

(Footnotes omitted.) 

70. On May 8, 2019, ProPetro filed its 1Q19 Quarterly Report on Form 10-Q with the 

SEC for the period ended March 31, 2019. In the 1Q19 Form 10-Q, defendants reported that 

ProPetro enjoyed quarterly revenues of $546.2 million, net income of $69.8 million, and diluted 

earnings per share of $0.67 per share.

71. As to the effectiveness and status of the Company’s internal controls over disclosures 

and financial reporting, the 1Q19 Form 10-Q continued, in relevant part, as follows:

Evaluation of Disclosure Controls and Procedures 

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 
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4839-3309-0503.v2 

13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered 

by this Quarterly Report. 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 March 31, 2019. 

Changes in Internal Control over Financial Reporting 

No changes in our system of internal control over financial reporting (as 

defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during 

the quarterly period ended March 31, 2019 that have materially affected, or are 

reasonably likely to materially affect, our internal control over financial reporting. 

72. Driven by the Company’s purportedly strong financial results, the trading price of 

ProPetro common stock advanced to as high as $24.66 per share on April 22, 2019 from $14.00 per 

share on March 22, 2017. However, in early August 2019, defendants’ scheme began to collapse.

73. On August 8, 2019, ProPetro filed a Form 8-K with the SEC revealing that the 

Company needed to delay its second quarter report and earnings call due to an ongoing review by its 

Audit Committee concerning expense reimbursements, including $370,000 that was improperly 

reimbursed to senior management, and other transactions involving related parties or conflicts of 

interest. More specifically, the Company revealed, in relevant part, as follows:

The Audit Committee (the “Committee”) of the Company’s board of directors 

(the “Board”), with assistance of independent outside counsel and accounting 

advisors, is in the process of conducting an internal review which initially focused on 

the Company’s disclosure of agreements previously entered into by the Company 

with AFGlobal Corporation (“AFGlobal”) for the purchase of Durastim® hydraulic 

fracturing fleets and effective communications related thereto. The review was later 

expanded to, among other items, review expense reimbursements and certain 

transactions involving related parties or potential conflicts of interest. Substantial 

work related to the review has been completed to date, and the Committee expects to 

complete its review within the next 30 days. The Company is also in the process of 

implementing improvements to address certain findings identified to date in the 

review. 

Preliminary Committee Findings 

As previously announced by the Company on June 28, 2019, the Company 

entered into revised agreements with AFGlobal pursuant to which it agreed to 

purchase one additional Durastim® hydraulic fracturing fleet, in addition to its 

agreements to purchase two Durastim® hydraulic fracturing fleets that were entered 

into during the quarter ended March 31, 2019. The Company also secured an option 
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4839-3309-0503.v2 

to purchase up to three additional fleets exercisable through the end of 2020. These 

revised agreements amended and/or replaced previous contracts to purchase a total of 

six DuraStim® fleets, including four DuraStim® fleets that the Company committed 

to purchase in April 2019. 

As part of its review of internal controls, the Committee identified, due to 

inadequate documentation associated with the Company’s expense reimbursement 

practices, certain expenses reimbursed to members of senior management, including 

the chief executive officer and chief financial officer, that were incorrectly recorded 

as expenses of the Company and appropriately allocable to the officers individually. 

Each of these officers has reimbursed the Company in full for the identified amounts. 

The reimbursed amounts totaled approximately $370,000 since the Company’s initial 

public offering in 2017. Of the total amounts, approximately $346,000 were 

attributable to the chief executive officer and approximately $18,000 were 

attributable to the chief financial officer. 

Based on the review conducted to date, the Committee and management has 

not identified any failure to appropriately disclose related party transactions. The 

Committee and management have also not identified to date any items that would 

require revision or restatement of the Company’s historical financial statements. 

However, the review is continuing and there is no assurance that additional items will 

not be identified. The Company does not intend to provide additional updates on the 

results of the review until it is concluded or the Company determines that further 

disclosure is appropriate or necessary. 

Preliminary Internal Controls and Disclosure Controls Findings 

The Company’s management is evaluating certain internal control

deficiencies identified to date as a result of the review. Management has not yet 

completed this process but is likely to conclude that certain internal control 

deficiencies, rising to a level of a material weakness, resulted in the Company’s 

disclosure controls and procedures not being effective. In the course of the 

continuing review, management may identify additional deficiencies that rise to a 

level of a material weakness. The Company expects to include additional information 

regarding any definitive conclusion regarding a material weakness determination in 

its quarterly report on Form 10-Q for the quarter ended June 30, 2019 (the “Form 10-

Q”). 

74. On October 9, 2019, the Company filed a Form 8-K with the SEC stating that the 

“Company is continuing to review one or more related party transactions [that] . . . involve real 

estate transactions and do not involve any of the Company’s current or former customers or 

vendors.” According to the Form 8-K, ProPetro’s “management has not yet completed its evaluation 

of certain internal control deficiencies identified as a result of the internal review, but it is likely to 
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4839-3309-0503.v2 

conclude that there were one or more material weaknesses that resulted in the Company’s disclosure 

controls and procedures not being effective” and that the “Company expects to include additional 

information with respect to any identified material weaknesses in future filings with the SEC.” More 

specifically, the Company stated, in relevant part, as follows:

Audit Committee Internal Review 

The Board’s Audit Committee, with assistance of independent outside 

counsel and accounting advisors, has substantially completed fact finding associated 

with its internal review that was previously announced in a Current Report on Form 

8-K filed with the Securities and Exchange Commission (“SEC”) on August 8, 2019 

(the “Original Form 8-K”). The Company is continuing to review one or more related 

party transactions. The related party transactions currently under review involve real 

estate transactions and do not involve any of the Company’s current or former 

customers or vendors. 

The Audit Committee and management have not identified to date any items 

that would require restatement of the Company’s previously reported balance sheets, 

statements of operations, statements of shareholders’ equity or statements of cash 

flows. However, the Audit Committee’s internal review has identified a number of 

internal control deficiencies. As a result of these internal control deficiencies, the 

Company’s management is likely to conclude that there were one or more material 

weaknesses that resulted in the Company’s internal control over financial reporting 

and disclosure controls and procedures not being effective as of a prior date. These 

matters are discussed in greater detail below. 

* * * 

Internal Controls and Disclosure Controls Deficiencies; Future Filings 

Although significant work has been completed and a number of control 

deficiencies are in the process of being remediated, management has not yet 

completed its evaluation of certain internal control deficiencies identified as a result 

of the internal review, but it is likely to conclude that there were one or more 

material weaknesses that resulted in the Company’s disclosure controls and 

procedures not being effective. The Company expects to include additional 

information with respect to any identified material weaknesses in future filings with 

the SEC. 

As previously disclosed, due to the Audit Committee’s review, the Company 

has not filed its quarterly report on Form 10-Q for the quarter ended June 30, 2019 

(the “Form 10-Q”) with the SEC. Although fact finding associated with the Audit 

Committee’s review has been substantially completed, additional time will be 

required for new members of the Company’s management team who are responsible 

for certifying the accuracy of the Company’s financial information and the 
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4839-3309-0503.v2 

effectiveness of the Company’s disclosure controls and procedures to be in a position 

to so certify. Management will also require additional time to evaluate the impact of 

any identified material weaknesses on the Company’s prior filings. The Company’s 

conclusions regarding any material weaknesses could result in a requirement to 

amend prior SEC filings. In addition, the Company’s independent registered public 

accounting firm will require additional time in order to evaluate the internal review 

and associated findings, as well as the Company’s proposed remediation plan and the 

impact that any identified material weaknesses may have on its prior opinions. 

The Company cannot currently predict when this evaluation process will be 

completed but will seek to complete the evaluation process, take appropriate 

corrective actions and make necessary filings with the SEC with a view to becoming 

current in its filing obligations under the Exchange Act as soon as reasonably 

practicable. 

75. On October 24, 2019, the SEC informed the Company that it was under investigation 

and sought certain documents from the Company, including documents related to the Company’s 

internal investigation. The SEC investigation is ongoing. 

76. On November 13, 2019, ProPetro announced that it had uncovered material 

weaknesses in the Company’s financial controls and an undisclosed related-party transaction with 

defendant Denholm, the Company’s former Chief Accounting Officer. Reportedly, the Board had 

identified weaknesses in the Company’s internal controls over financial disclosure and reporting, 

two of which were material weaknesses and at least one weakness that had existed since December 

31, 2018. The previously undisclosed related-party transaction with defendant Denholm reportedly 

involved a business owned in part by defendant Denholm that had sold or leased a facility to 

ProPetro. More specifically, the Company stated, in relevant part, as follows:

Audit Committee Internal Review 

The Audit Committee of the board of directors of the Company, with 

assistance of independent outside counsel and accounting advisors, has continued to 

review the matters previously disclosed in the Company’s Current Reports on Form 

8-K filed with the Securities and Exchange Commission (“SEC”) on August 8, 2019 

and October 9, 2019. Since October 9, 2019, the Audit Committee has identified one 

related party transaction that was not previously disclosed and is described in greater 

detail below. 
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4839-3309-0503.v2 

The Audit Committee and management have not identified to date any items 

that would require restatement of the Company’s previously reported balance sheets, 

statements of operations, statements of shareholders’ equity or statements of cash 

flows. However, the Audit Committee’s internal review has identified a number of 

internal control deficiencies. As a result of these internal control deficiencies, the 

Company’s management has concluded that there were at least two material 

weaknesses that resulted in the Company’s internal control over financial reporting 

and disclosure controls and procedures not being effective as of a prior date. While 

management continues to evaluate the impacts of the identified control deficiencies, 

management has concluded that at least one of these material weaknesses existed as 

of December 31, 2018. 

These determinations affect the conclusions regarding effectiveness 

previously expressed by the Company’s management in Part II, Item 9A, “Controls 

and Procedures” in the Company’s Annual Report on Form 10-K for the year ended 

December 31, 2018 (the “2018 Annual Report”) and Part I, Item 4, “Controls and 

Procedures” in the Company’s Quarterly Report on Form 10-Q for the quarter ended 

March 31, 2019 (the “First Quarter 10-Q”). Accordingly, investors should no longer 

rely on management’s report on internal control over financial reporting or the 

internal control over financial reporting opinion of the Company’s independent 

registered public accounting firm included in the 2018 Annual Report. The 

Company expects to amend the 2018 Annual Report and the First Quarter 10-Q in 

the future to reflect these conclusions. 

The Company also continues to require additional time in order to permit the 

new members of the Company’s management team who are responsible for 

certifying the accuracy of the Company’s financial information and the effectiveness 

of the Company’s disclosure controls and procedures to be in a position to so certify 

amended, delinquent and future SEC filings. 

In addition, the Company’s management continues to provide information to 

its independent registered public accounting firm in order to allow it to evaluate the 

internal review and associated findings, as well as the Company’s proposed 

remediation plan and the impact that any identified material weaknesses may have on 

its prior opinions. The Company also expects that management and its independent 

registered public accounting firm may need to perform additional procedures with 

respect to historical periods prior to the Company making any amended, delinquent 

or future SEC filings. 

The Company cannot currently predict when this evaluation and review 

process will be completed, but it does not currently expect to be in a position to file 

amended, delinquent or future SEC filings prior to the end of 2019. The Company 

will continue to seek to complete the evaluation and review process, take appropriate 

corrective actions and make necessary filings with the SEC with a view to becoming 

current in its filing obligations under the Securities Exchange Act of 1934, as 

amended, as soon as reasonably practicable. 
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4839-3309-0503.v2 

The Audit Committee identified one related party transaction that was not 

previously disclosed. During 2018, (i) an entity (“Entity A”) that is 50% owned by 

the Company’s former Chief Accounting Officer (the “Former CAO”) and 50% by 

the Former CAO’s business partner (who is not affiliated with the Company) loaned 

approximately $770,000, and (ii) an entity that is owned 100% by the Former CAO 

(“Entity B”) loaned approximately $57,000, to another entity that is owned 100% by 

the Former CAO’s business partner (“Entity C”). The loaned funds were used by 

Entity C during 2018 to pay for a portion of the acquisition, development, and 

construction costs associated with an iron testing facility and a portion of the 

acquisition and development costs associated with a maintenance facility that were 

sold or leased to the Company. The approximately $827,000 of funds loaned by 

Entity A and Entity B to Entity C were repaid in full by Entity C, without interest. 

Similarly, during 2019, Entity A provided approximately $500,000 of funds 

to Entity C, which funds the Company understands were used during 2019 to pay for 

a portion of the development and construction costs associated with the iron testing 

facility. 

The Company purchased the iron testing facility from Entity C, reimbursed 

Entity C for certain development costs associated with the maintenance facility, and 

leased a property adjacent to the iron testing facility and the maintenance facility 

property from Entity C. In total, the Company has paid approximately $3,600,000 to 

Entity C, which includes $2,300,000 associated with the iron testing facility 

discussed above. 

77. In the wake of these adverse revelations, the trading price of ProPetro stock collapsed 

$10 per share, falling to $7.34 per share on November 13, 2019 from $17.34 per share on August 8, 

2019, wiping out more than $950 million in once valuable shareholder equity.

78. In June 2020, the Company began filing updated and corrected financial reports with 

the SEC for 2019 and the first three quarters of 2020. On June 22, 2020, the Company filed its 2019 

Annual Report for the year ended December 31, 2019 with the SEC via a Form 10-K. The 2019 

Annual Report revealed the final conclusion of the Company’s Expanded Audit Committee Review 

as well as the conclusions of the Company’s external auditor, Deloitte & Touche LLP, regarding the 

Company’s internal control failures and certain of its former executive’s wrongdoing. 

79. According to the Report of Independent Registered Public Accounting Firm included 

with the 2019 Annual Report, “because of the effect of the material weaknesses identified below on 

the achievement of the objectives of the control criteria [established in Internal Control – Integrated 
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4839-3309-0503.v2 

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway 

Commission (COSO)], the Company has not maintained effective internal control over financial 

reporting as of December 31, 2019.” The Report went on to state, in relevant part: 

Control Environment – The Company identified deficiencies in the principles 

associated with the control environment component of the COSO framework. 

Specifically, these control deficiencies constitute material weaknesses, either 

individually or in the aggregate, relating to the following COSO principles: (i) the 

organization demonstrates a commitment to integrity and ethical values, (ii) the 

board of directors demonstrates independence from management and exercises 

oversight of the development and performance of internal control, (iii) management 

establishes, with board oversight, structures, reporting lines, and appropriate 

authorities and responsibilities in pursuit of objectives, (iv) the organization 

demonstrates a commitment to attract, develop, and retain competent individuals in 

alignment with objectives, and (v) the organization holds individuals accountable for 

their internal control related responsibilities in the pursuit of objectives. 

The Company did not establish and promote a control environment with an 

appropriate tone of compliance and control consciousness throughout the entire 

Company, nor sufficiently promote, monitor, or enforce adherence to its Code of 

Conduct and Ethics. Additionally, there was a general lack of focus on promoting a 

culture of compliance within the Company. Results of poor tone at the top included: 

(i) certain whistleblower allegations were not properly investigated and elevated to 

the audit committee, (ii) the lack of an employee expense review and approval 

policy, (iii) two instances of non-compliance with the Company’s Insider Trading 

Policy, and (iv) instances of non-compliance with the Code of Conduct and Ethics 

policies. 

This material weakness in the control environment contributed to material 

weaknesses in the following components of the COSO framework. 

Information and Communication – The Company identified deficiencies in 

the principles associated with the information and communication component of the 

COSO framework. Specifically, these control deficiencies constitute material 

weaknesses, either individually or in the aggregate, relating to the following COSO 

principles: (i) the organization internally communicates information, including 

objectives and responsibilities for internal control, necessary to support the 

functioning of internal control and (ii) the organization communicates with external 

parties regarding matters affecting the functioning of internal control. 

Factors contributing to the material weakness included miscommunication 

between management and the Board of Directors regarding the conditionality of 

certain contracts that resulted in the non-disclosure of such contract commitments 

and the impact of such commitments on the Company’s future liquidity. 
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4839-3309-0503.v2 

Control Activities – The Company identified deficiencies in the principles 

associated with the control activities component of the COSO framework. 

Specifically, these control deficiencies constitute material weaknesses, either 

individually or in the aggregate, relating to the following COSO principles: (i) the 

organization selects and develops control activities that contribute to the mitigation 

of risks to the achievement of objectives to acceptable levels and (ii) the organization 

deploys control activities through policies that establish what is expected and 

procedures that put policies into action. 

The Company’s failure to maintain an appropriate tone at the top had a 

pervasive impact, resulting in a risk that could have impacted virtually all financial 

statement account balances and disclosures. 

The COSO component material weaknesses described above contributed to 

the following material weakness within the Company’s system of internal control 

over financial reporting at the control activity level. 

Related Parties – The Company did not maintain controls designed to 

sufficiently identify, evaluate, and disclose related party transactions. As a result, 

two related party transactions were entered into that were not identified by the 

Company’s controls and given consideration of appropriate disclosure. 

80. The Expanded Audit Committee Review revealed a failure to implement internal 

controls on a systemic basis throughout the Company. The violations revealed by the Expanded 

Audit Committee Review were pervasive throughout the Company’s operations. Indeed, there was a 

lack of internal controls related to, among other things, related party transactions, financial controls 

and disclosures, insider trading, whistleblower allegations, conflicts of interest, a lack of appropriate 

communication between management and the Board, and a failure to “promote a control 

environment with an appropriate tone of compliance and control consciousness throughout the entire 

Company.” Ultimately, the Expanded Audit Committee laid out its factual findings and detailed the 

pervasive fiduciary failures at the Company as follows: 

Findings of the Expanded Audit Committee 

Based on the information collected and reviewed by the Committee’s 

independent outside counsel and accounting advisors, the Expanded Audit 

Committee Review resulted in numerous factual findings, including but not limited 

to, the following significant findings: 
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4839-3309-0503.v2 

 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. 

81. However, even after the Expanded Audit Committee Review was completed, the bad 

news continued. As part of the Company’s effort to enact procedures that would allow the 

Company’s then current principal executive and principal financial officer to certify the Company’s 

future SEC filings, the Company discovered that its Chief Executive Officer violated the 

shareholders agreement in place in January 2017, prior to the Company’s initial public offering, and 
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4839-3309-0503.v2 

the Company’s Insider Trading Compliance Policy, adopted in March 2017, as part of the 

Company’s initial public offering. Specifically, the Company admitted: 

Following completion of the Expanded Audit Committee Review and in 

connection with performing additional procedures to position the Company’s current 

principal executive and principal financial officers to be in a position to certify the 

Company’s future filings with the SEC, the Company determined that its former 

chief executive officer entered into a pledge agreement covering all of the 

Company’s common stock owned by him at that time as collateral for a personal loan 

in January 2017, in violation of the shareholders agreement then in place through the 

pledging of shares. The Company formally adopted its Insider Trading Compliance 

Policy in March 2017 (in connection with its initial public offering), which prohibits 

pledging the Company’s securities as collateral to secure loans. The Company also 

believes that, in 2018 in connection with another personal loan, its former chief 

executive officer executed a share pledge agreement that was subsequently replaced 

with a negative pledge with respect to all of the Company’s common stock owned by 

him at that time or acquired thereafter and engaged in other inappropriate conduct in 

connection with these personal loans. The Company did not appropriately disclose 

such pledges in the Company’s prior SEC filings that included management share 

ownership. Also in connection with performing additional procedures, the Company 

determined that it had previously failed to appropriately disclose in its annual proxy 

statements certain perquisites as compensation paid to some of the Company’s 

named executive officers in 2017 and 2018, including, among other later reimbursed 

perquisites, ticket purchases, charitable donations, and costs associated with pilots 

provided by the Company for its former chief executive officer’s personal use of his 

plane.

DAMAGES TO THE COMPANY 

82. As a result of defendants’ fiduciary failures, ProPetro has suffered, and will continue 

to suffer, substantial damages, injuries, and losses. For example, the Company has been named as a 

primary defendant in a costly and expensive-to-defend class action lawsuit for violations of the 

federal securities laws pending before the U.S. District Court for the Western District of Texas. See 

Logan v. ProPetro Holding Corp., No. 19-cv-00217 (W.D. Tex.). The Company has thus far 

incurred $25 million in professional fees in connection with the Expanded Audit Committee Review. 

Further, ProPetro’s reputation as a good corporate citizen and its goodwill have been irreparably 

tarnished. Further still, ProPetro is the subject of a costly and expensive SEC investigation into the 

Company’s financial disclosures and reporting.
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83. Defendants, however, have not fared nearly so badly. On the contrary, they have 

pocketed over $35 million in director and executive compensation not justified by ProPetro’s 

performance while under their stewardship.

84. This notwithstanding, the ProPetro Board has not – and will not – bring legal action 

against the directors and officers responsible for this debacle. Therefore, by this action plaintiffs 

seeks to vindicate ProPetro’s rights against its wayward fiduciaries.

DERIVATIVE ALLEGATIONS 

85. Plaintiffs incorporate ¶¶1-84.

86. Plaintiffs bring this action for the benefit of ProPetro to redress injuries suffered, and 

to be suffered, by ProPetro due to defendants’ violations of law. Lead Plaintiff will adequately and 

fairly represent the interests of ProPetro in enforcing and prosecuting these derivative claims. 

ProPetro is named as a nominal defendant in this action.

87. At the time this Action was initiated, the ProPetro Board had eight members: 

defendants Armour, Berg, Best, Blackwell, Douglas, Gobe, Moore and Redman (together, the 

“ProPetro Board”). A pre-suit demand on the ProPetro Board to commence this action is excused as 

a futile and useless act for several reasons.

88. First, defendants Armour, Berg, Best, Blackwell, Douglas, Gobe, Moore and Redman 

served on the ProPetro Board during and throughout the course of the misconduct described herein. 

As the “ultimate decision-making body” of the Company, the ProPetro Board caused the Company 

to adopt ineffective internal controls over disclosure and financial reporting, including over the 

myriad of related-party transactions recently revealed by the Company. Defendants’ acts and/or 

omissions are not legally protected business decisions and their misconduct can in no way be 

considered a valid exercise of business judgment.
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4839-3309-0503.v2 

89. Second, defendants Best, Douglas, Moore, and Mitchell served as members of the 

Audit Committee. The Company’s Audit Committee Charter states that the members of the Audit 

Committee were and are responsible for, among other things, reviewing the Company’s annual and 

quarterly financial reports, reviewing the integrity of the Company’s internal controls, and ensuring 

that the Company is in compliance with applicable laws and regulations. Defendants Best, Douglas, 

Moore, and Mitchell and the Audit Committee, among other things, caused and/or permitted the 

Company to adopt ineffective internal controls over disclosure and financial reporting, including 

over related-party transactions, which have rendered certain of the Company’s previously 

disseminated financial statements false and misleading such that they should no longer be relied 

upon. These actions were a breach of defendants Best, Douglas, Moore, and Mitchell’s fiduciary 

duties and subjects each of them to a substantial likelihood of liability.

90. Third, the acts complained of herein constitute violations of fiduciary duties owed by 

defendants, and these acts are incapable of ratification.

91. Fourth, ProPetro has been and will continue to be exposed to significant losses due to 

the wrongdoing complained of herein, yet defendants Armour, Berg, Best, Blackwell, Douglas, 

Gobe, Moore and Redman have not filed any lawsuits against themselves or others who were 

responsible for that wrongful conduct to attempt to recover for ProPetro any part of the damages 

ProPetro suffered and will continue to suffer. Thus, any demand upon these defendants would be 

futile.

92. Fifth, defendants Armour, Berg, Best, Blackwell, Douglas, Gobe, Moore and 

Redman’s alleged misconduct was not the product of legitimate business judgment, as it was based 

on bad faith and intentional, reckless, or disloyal misconduct. Thus, Armour, Berg, Best, Blackwell, 

Douglas, Gobe, Moore and Redman cannot claim exculpation from their violations of duty pursuant 

to the Company’s charter. Defendants Armour, Berg, Best, Blackwell, Douglas, Gobe, Moore and 
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4839-3309-0503.v2 

Redman, and each of them, face a substantial likelihood of liability, they are self-interested in the 

transactions challenged herein, and cannot be presumed to be capable of exercising independent and 

disinterested judgment about whether to pursue this action on behalf of the stockholders of the 

Company. Accordingly, demand on the ProPetro Board is excused as futile.

93. Sixth, defendant Redman was at the center of the materially false and misleading 

financial statements issued by the Company as the Company’s then CEO. Moreover, the results of 

the Expanded Audit Committee Review demonstrate that defendant Redman improperly charged 

perquisites to the Company that he should have paid for himself, violated the Company’s pre-IPO 

shareholders agreement, and violated the Company’s post-IPO Insider Trading Compliance Policy. 

As a result, defendant Redman is incapable of impartially considering a demand to commence and 

prosecute this action, because to do so would have subjected him to a substantial likelihood of 

liability.

94. Seventh, defendants Armour, Berg, Best, Blackwell, Douglas, Gobe, Moore and 

Redman are protected against personal liability for their acts of mismanagement and breaches of 

fiduciary duty alleged herein by directors’ and officers’ liability insurance they caused the Company 

to purchase for their protection with corporate funds, i.e., monies belonging to the shareholders of 

ProPetro. However, most directors’ and officers’ liability insurance policies contain provisions that 

eliminate coverage for any action brought directly by a company against the directors and officers, 

known as the “insured-versus-insured exclusion.” As a result, if the defendants were to sue 

themselves or certain officers of ProPetro, there would be no directors’ and officers’ insurance 

protection. Accordingly, defendants Armour, Berg, Best, Blackwell, Douglas, Gobe, Moore and 

Redman will not sue themselves. On the other hand, if the suit is brought derivatively, as this action 

is brought, such insurance coverage, if such an insurance policy exists, will provide a basis for the 
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4839-3309-0503.v2 

Company to effectuate a recovery. Thus, demand on the ProPetro Board is futile and, therefore, 

excused.

95. Plaintiffs have not made any demand on ProPetro shareholders to institute this action 

since such demand would be a futile and useless act for the several reasons. First, ProPetro is a 

publicly traded company with over 100 million shares outstanding held by thousands of individuals 

and entities spread throughout the country. Second, making demand on such a number of 

shareholders spread throughout the country would be impossible for plaintiffs who have no way of 

finding out the names, addresses, or phone numbers of shareholders. Third, making demand on all 

shareholders would force plaintiffs to incur significant expenses, assuming all shareholders could be 

individually identified.

COUNT I 

Against All Defendants for Breach of Fiduciary Duty 

for Disseminating False and Misleading Information 

96. Plaintiffs incorporate ¶¶1-95.

97. Each of the defendants had a duty to ensure that ProPetro disseminated accurate, 

truthful, and complete information to its shareholders.

98. Defendants did not act in good faith or exercise prudent business judgment by causing 

or allowing the Company to disseminate to ProPetro shareholders materially misleading and 

inaccurate information through, among other things, SEC filings and other public statements and 

disclosures as detailed herein. These actions violated the defendants’ duties of care, loyalty, and 

good faith.

99. The Company has suffered significant damages as a direct and proximate result of 

defendants’ breaches of fiduciary duties.
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4839-3309-0503.v2 

COUNT II 

Against All Defendants for Breach of Fiduciary Duty 

for Failing to Maintain Internal Controls 

100. Plaintiffs incorporate ¶¶1-99.

101. As alleged herein, each of the defendants had a fiduciary duty to, among other things, 

exercise good faith to ensure that the Company’s financial statements were prepared in accordance 

with Generally Accepted Accounting Principles and take appropriate action to correct any 

misconduct and prevent its recurrence when put on notice of problems with the Company’s business 

practices and operations.

102. The Company has sustained damages as a direct and proximate result of defendants’ 

foregoing breaches of fiduciary duties.

COUNT III 

Against All Defendants for Unjust Enrichment 

103. Plaintiffs incorporate ¶¶1-102.

104. Defendants were unjustly enriched at the expense and to the detriment of ProPetro by 

their wrongful acts and omissions.

105. As shareholders and representatives of ProPetro, plaintiffs seek restitution from each 

of these defendants, and seek an order of this Court disgorging all profits, benefits, and other 

compensation obtained by defendants from their wrongful conduct and breach of fiduciary duties.

COUNT IV 

Derivatively for Contribution Under §§10(b) and 21D of 

the Exchange Act Against defendants Armour, Coppedge, Denholm, 

Herman, Himler, Labbat, Redman and Smith 

106. Plaintiffs incorporate ¶¶1-105.

107. This claim is brought derivatively on behalf of the Company for contribution and 

indemnification against defendants Armour, Coppedge, Denholm, Herman, Himler, Labbat, Redman 
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4839-3309-0503.v2 

and Smith, each of whom are named as defendants in the Securities Class Action (the “Securities 

Class Action Defendants”).

108. ProPetro is named as a defendant in the Securities Class Action, which asserts claims 

under the federal securities laws for, among other things, violation of §10(b) of the Exchange Act. If 

ProPetro is ultimately found liable for violating the federal securities laws, the Company’s liability 

will arise, in whole or in part, from the intentional, knowing, or reckless acts or omissions of some or 

all of the Securities Class Action Defendants as alleged herein. The Company is entitled to receive 

contribution from those defendants in connection with the Securities Class Action against the 

Company.

109. As directors and/or officers of ProPetro, the Securities Class Action Defendants had 

the power and/or ability to, and did, directly or indirectly control or influence the Company’s 

business operations and financial affairs, including the content of public statements about ProPetro, 

and had the power and/or ability directly or indirectly to control or influence the specific corporate 

statements and conduct that violated §10(b) of the Exchange Act and SEC Rule 10b-5 as alleged 

above.

110. The Securities Class Action Defendants are also liable under §10(b) of the Exchange 

Act, 15 U.S.C. §78j(b), pursuant to which there is a private right of action for contribution, and §21D 

of the Exchange Act, 15 U.S.C. §78u-4, which governs the application of any private right of action 

for contribution asserted pursuant to the Exchange Act.

111. Accordingly, ProPetro is entitled to all appropriate contribution or indemnification 

from the Securities Class Action Defendants, who are responsible for exposing ProPetro to liability 

under the federal securities laws.

PRAYER FOR RELIEF 

WHEREFORE, plaintiffs pray for relief and judgment as follows: 
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4839-3309-0503.v2 

A. Awarding money damages against all defendants, jointly and severally, for all 

damages, injuries, and losses suffered, and to be suffered, as a result of the acts and transactions 

complained of herein, together with pre-judgment interest, to ensure that defendants do not 

participate therein or benefit thereby;

B. Directing all defendants to account for all damages caused by them and all profits, 

special benefits, and unjust enrichment they have obtained as a result of their unlawful conduct, 

including all salaries, bonuses, fees, and insider sales proceeds, and imposing a constructive trust 

thereon;

C. Directing ProPetro to take all necessary actions to reform and improve its corporate 

governance and internal procedures to comply with applicable laws and to protect the Company and 

its shareholders from a repeat of the damaging events described herein, including, but not limited to, 

putting forward for shareholder vote the following resolutions for amendments to the Company’s 

Bylaws or Articles of Incorporation and the following actions as may be necessary to ensure proper 

corporate governance policies:

(a) a proposal to strengthen the Board’s supervision of operations and develop 

and implement procedures for greater shareholder input into the policies and guidelines of the Board; 

(b) a provision to permit the shareholders of ProPetro to nominate at least two 

candidates for election to the Board; and 

(c) a proposal to ensure the establishment of effective oversight of compliance 

with applicable laws, rules, and regulations; 

D. Awarding punitive damages;

E. Awarding costs and disbursements of this action, including reasonable attorneys’, 

accountants’, and experts’ fees; and

F. Granting such other and further relief as this Court may deem just and proper.
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4839-3309-0503.v2 

JURY DEMAND 

Plaintiffs hereby demand a trial by jury. 

DATED: August 17, 2020 KENDALL LAW GROUP, PLLC 

JOE KENDALL (Texas Bar No. 11260700) 

s/ Joe Kendall 

 JOE KENDALL 

3811 Turtle Creek Blvd., Suite 1450 

Dallas, TX 75219 

Telephone: 214/744-3000 

214/744-3015 (fax) 

jkendall@kendalllawgroup.com 

Local Counsel 

ROBBINS GELLER RUDMAN 

 & DOWD LLP 

BENNY C. GOODMAN III (admitted pro hac vice) 

ERIK W. LUEDEKE (admitted pro hac vice) 

655 West Broadway, Suite 1900 

San Diego, CA 92101-3301 

Telephone: 619/231-1058 

619/231-7423 (fax) 

bennyg@rgrdlaw.com 

eluedeke@rgrdlaw.com 

Lead Counsel for Plaintiffs 

THE BROWN LAW FIRM, P.C. 

TIMOTHY BROWN 

240 Townsend Square 

Oyster Bay, NY 11771 

Telephone: 516/922-5427 

516/344-6204 (fax) 

tbrown@thebrownlawfirm.net 

Additional Counsel for Plaintiffs 

4844-5849-5175.v1

VERIFICATION

I, Jye-Chun Chang, hereby verify that I am familiar with the allegations in the Verified 

Consolidated Shareholder Derivative Complaint for Breach of Fiduciary Duty, Unjust Enrichment 

and Violations of the Federal Securities Laws and that the foregoing is true and correct to the best of 

my knowledge, information and belief.

I declare under penalty of perjury that the foregoing is true and correct.

DATED: ____________________ _________________________________________

Jye-Chun Chang

DocuSign Envelope ID: 7426A6F0-1E02-40DC-B40E-045D9B9199FB

8/15/2020
4839-3309-0503.v2 

CERTIFICATE OF SERVICE 

I hereby certify under penalty of perjury that on August 17, 2020, I authorized the electronic 

filing of the foregoing with the Clerk of the Court using the CM/ECF system which will send 

notification of such filing to the e-mail addresses on the Electronic Mail Notice List. 

 s/ Joe Kendall 

 JOE KENDALL