Fracking And Outlook
Our short article discussed our initial thoughts about ProFrac Holding's (ACDC) Q2 2025 performance a couple of weeks ago. This article will dive deeper into the industry and its current outlook. The company expects hydraulic fracturing market conditions to tighten in 2026 if drilling and completions accelerate with stronger commodity prices. Its vertically integrated manufacturing and advanced asset management platform provide strategic agility and cost advantages. Fleet efficiency reached record levels in Q1, supported by dynamic redeployment, optimized maintenance, and strong personnel performance. In-house manufacturing lowers costs and upgrades equipment to next-gen specs.
ACDC’s Stimulation Services segment faced increased calendar gaps and lower activity after early Q2 oil price declines. The company used flexible fleet deployment and began cost reductions in mid-May, though operational inefficiencies delayed savings. Fracking activity stabilized by late Q2, with modest improvement into early Q3. Management is selectively deploying frac spreads, focusing on integrated solutions and disciplined capital allocation while keeping flexibility for a potential activity rebound.
Partnership with Flotek
In April, Flotek acquired mobile power generation assets from ProFrac for $105 million, entering the high-growth mobile power generation sector. The deal includes a $160 million revenue backlog. Flotek is projected to earn approximately $14 million in high-margin rental revenue in 2025, with annual revenue rising to about $27.4 million from 2026 onward.
ProFrac’s partnership with Flotek converted a former cost center into a scalable third-party business, forming the foundation of Flotek’s new PWRtek division. The deal provided immediate financial gains, including over 60% equity ownership in Flotek, giving ProFrac exposure to a $3 billion–$6 billion global gas quality management market. This move transforms internally used assets into a broader market opportunity while showcasing ProFrac’s creative approach to capital allocation and value creation.
New Technology
In Q2, ACDC starts to upgrade ProPilot, which is an auto-frac platform, to ProPilot 2.0. ProPilot 2.0 boosts productivity by keeping pumps at peak performance while reducing equipment wear. It optimizes fuel economy and uses automated load balancing to monitor pump health, detect issues, and maintain steady performance. Together, these features enable fully automated frac operations and remove the guesswork from diagnosing equipment or well feedback problems.
Relative Valuation
ACDC is currently trading at an EV/EBITDA multiple of 5.4x. Based on sell-side analysts' EBITDA estimates, the forward EV/EBITDA multiple is 5.9x.
ACDC's forward EV/EBITDA multiple expansion versus the current EV/EBITDA is less sharp than its peers because its EBITDA is expected to decrease less steeply than its peers in the next year. This typically results in a higher EV/EBITDA multiple than its peers. The stock's EV/EBITDA multiple is higher than its peers' (LBRT, PUMP, and HAL) average (3.8x). So, the stock is reasonably valued compared to its peers.
Final Commentary
After Q2, ProFrac sees potential for market tightening in 2026 if commodity-driven drilling and completions accelerate, with its vertical integration and asset management platform providing cost and efficiency advantages. Stimulation Services activity has stabilized after Q2 weakness, with selective fleet deployment and disciplined capital allocation preserving flexibility for a rebound.
The Flotek partnership monetized a non-core asset, created equity exposure to a multi-billion-dollar market, and unlocked scalable third-party revenue potential. Upgrading to ProPilot 2.0 enhances automation, fuel efficiency, and equipment reliability, reinforcing ProFrac’s competitive edge in hydraulic fracturing. The stock is reasonably valued compared to its peers.
