-$6.11
$0.30
bear -$6.11
base -$4.30
bull $0.30
margin of safety $0.10
market price* $4.03
Business condition attached to the margin of safety
The business has shown, for several consecutive quarters, that its cash generation before interest (after maintenance spending, stock compensation and working-capital swings) runs at or above roughly $40 million a quarter, comfortably covering its interest bill, and the September 2027 revolving credit facility maturity has been refinanced on acceptable terms.
ProFrac is a U.S. hydraulic fracturing company. It runs about 22 active frac fleets (16 of them modern Tier IV dual-fuel units) for oil and gas producers, and it owns sand mines (Kermit, Lamesa, San Antonio) that supply proppant, plus a majority stake in Flotek, a chemicals business, and Alpine, its proppant subsidiary. It became this size through acquisitions in 2022 to 2024 and was financed largely with debt from Beal Bank and the Wilks family, who also control about 82% of the votes. What the business earns. We measure cash the business generates after maintenance spending, stock compensation and working-capital swings, before interest. On that basis it produced roughly $287 million in 2023, $154 million in 2024 and $99 million in 2025. Revenue fell from $2.63 billion (2023) to $2.19 billion (2024) and $1.94 billion (2025) as active fleets and pricing declined. In the first half of 2026 revenue was $948 million versus $1,102 million a year earlier, and the same measure ran only about $35 to $40 million for the half, with the second quarter (revenue $498 million, up about 11% from the first quarter) better than the first. Over the last twelve months the business has generated roughly $55 million. We treat the strong 2023 boom pricing as a condition that has reversed and do not use it as a normal level; the 2024 to 2025 window puts the level at about $127 million, and the trend since then, three or more consecutive weaker periods, points lower. In 2025 the year-on-year change was about minus 36%, so the base case starts no higher than that decline and settles at $65 million a year, between the last-twelve-month run rate and that ceiling. Accounting note: capital spending of $170 million in 2025 was far below depreciation of $416 million; we deduct actual spending, so if fleets need heavier replacement than recent spending, true earnings would be lower. What it owes. Debt was about $1.10 billion at June 30, 2026: about $556 million of senior secured 2029 notes (SOFR plus 7.25%, effective rate about 12.4%, due December 2029, amortizing about $19.6 million a quarter), about $305 million Alpine term loan (about 12.6%, due January 2029), an asset-based revolver of roughly $175 million (due September 2027, margin stepping up), and Flotek and other borrowings. Because most of it costs about twice our 6% rate, we add about $129 million for the excess interest through maturity. We also deduct $69 million of Series A preferred stock held by Wilks entities, which ranks ahead of the common, and about $94 million for Flotek's outside owners. Total claims are about $1.39 billion, or about $7.66 per share on about 182 million diluted shares. Cash of $19 million is treated as needed for operations. A tax receivable agreement liability of about $87 million is not deducted because payments depend on tax savings the company is not currently generating. Bear case (about $(6.11) per share). Cash generation stays near the weakest recent run rate, $30 million a year, as fleet count and pricing keep falling. The business is worth about $282 million against claims of about $1.39 billion, so the company appears to owe roughly $1.1 billion more than it is worth. Named risks: the revolver must be refinanced by September 2027 with tighter pricing; the Alpine loan's leverage test begins in March 2028 and management says it is closely monitoring compliance; the 2029 notes carry a loan-to-value covenant; and interest of roughly $125 million a year already exceeds cash generated before interest. Base case (about $(4.30) per share). Cash generation of $65 million a year for ten years, then fading to zero over the following ten (the sand mines and modern fleets continue, but nothing named and evidenced supports growth). The business is worth about $611 million against about $1.39 billion owed, so the company appears to owe roughly $780 million more than it is worth. We credited no growth: nothing is contracted or backlogged, and pricing recovery or market share gains are not something we can evidence. The 36% growth in proppant sales in 2025 is not credited, because it has not offset weaker pricing in the larger stimulation segment. Bull case (about $0.30 per share). The business regains the $154 million it generated in 2024, a level demonstrated in the last two years, helped by its modern Tier IV fleet and growing sand sales, and sustains it for ten years before fading. The business is worth about $1.45 billion against claims of about $1.39 billion, leaving only about $54 million for the shares. Even here, interest largely absorbs the cash flow. What would make this wrong. The shares are highly sensitive to frac pricing: a return to 2023-level cash generation ($287 million) would be worth about $7 per share on this method, but we cannot credit a recovery we cannot name a cause for. The Wilks-related lenders have repeatedly extended support (lower amortization, $85 million of new notes in 2025 and January 2026, revolver extension), which helps refinancing but also means creditors and controlling holders are the same group, and their interests may differ from other shareholders. We could not reconcile the 2026 interim cash-flow detail beyond the reported totals, and first-half 2026 interest paid was estimated from debt balances.