Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): February 21, 2018
Mammoth Energy Services, Inc.

(Exact name of registrant as specified in its charter)

001-37917
(Commission File No.)
 
 
 
Delaware
 
32-0498321
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
14201 Caliber Drive, Suite 300
Oklahoma City, Oklahoma
 
73134
(Address of principal executive offices)
 
(Zip Code)
(405) 608-6007
(Registrant’s telephone number, including area code)
______________________________

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§232.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging Growth Company ý

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(s) of the Exchange Act.  ý

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act(17 CFR 240.13e-4(c))




















Item 2.02 Results of Operations and Financial Condition

On February 21, 2018, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the quarter and year ended December 31, 2017. A copy of that press release is furnished as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02.

The information in this Item 2.02, including Exhibit 99.1, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.

Item 7.01 Regulation FD Disclosure
On February 21, 2018, the Company also plans to post an investor presentation to the “investors” section of its website (www.mammothenergy.com), where the Company routinely posts announcements, updates, events, investor information and presentations and recent news releases. The content of the Company's website is not incorporated by reference into this filing. Further, the reference to the URL for the Company's website is intended to be an inactive text reference only.

The information in this Item 7.01 shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and will not be incorporated by reference into any registration statement filed under the Securities Act of 1933, as amended, unless specifically identified as being incorporated by reference in the registration statement.

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.

99.1    Press release dated February 21, 2018, entitled "Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2017 Operational and Financial Results."






Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 
 
 
 
 
MAMMOTH ENERGY SERVICES, INC.
Date:
February 21, 2018
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 



Exhibit

EXHIBIT 99.1
https://cdn.kscope.io/11299ddbc1a4dce75084f2ef19b58bec-mammotha05.jpg

FOR IMMEDIATE RELEASE
February 21, 2018


Mammoth Energy Services, Inc. Announces
Fourth Quarter and Full Year 2017 Operational and Financial Results


OKLAHOMA CITY, OKLAHOMA, February 21, 2018 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the fourth quarter and full year ended December 31, 2017.

Key Highlights for and subsequent to the Fourth Quarter 2017:

Total revenue was $369.0 million for the three months ended December 31, 2017, up 147% sequentially from $149.3 million for the three months ended September 30, 2017 and up 463% from $65.6 million for the three months ended December 31, 2016. Total revenue was $691.5 million for the year ended December 31, 2017, up 200% from $230.6 million for the year ended December 31, 2016.

Net income for the three months ended December 31, 2017 was $65.9 million, an improvement of $66.7 million from a net loss of $0.8 million for the three months ended September 30, 2017 and an improvement of $123.6 million from a net loss of $57.7 million for the three months ended December 31, 2016. Net income was $59.0 million for the year ended December 31, 2017, a $151.4 million improvement from a net loss of $92.5 million for the year ended December 31, 2016.

Adjusted EBITDA (as defined and reconciled below) was $110.5 million for the three months ended December 31, 2017, up 294% sequentially from $28.0 million for the three months ended September 30, 2017 and up 691% from $14.0 million for the three months ended December 31, 2016. Adjusted EBITDA was $165.3 million for the year ended December 31, 2017, up 301% from $41.3 million for the year ended December 31, 2016.

Executed an amendment to Mammoth subsidiary Cobra Acquisitions LLC's contract with the Puerto Rico Electric Power Authority, or PREPA, to aid in the restoration of the electric utility infrastructure in Puerto Rico, increasing the total contract value to approximately $445 million, up from $200 million originally.

2018 capital expenditures expected to be approximately $125.0 million for expanding infrastructure operations, upgrading and expanding sand facilities, expanding the rental fleet into the mid-continent and adding selective equipment.

Arty Straehla, Mammoth's Chief Executive Officer, stated, "The expansion that Mammoth undertook in 2017 has built a base in three core areas - infrastructure, pressure pumping and sand - that will serve as a platform on which to grow going forward. With the core businesses now in place, we intend to strategically build upon these business segments throughout 2018 and we expect to begin generating significant free cash flows that will be used to bolster our balance sheet, while providing flexibility to expand into the areas where we see the best opportunities."






Pressure Pumping Services

Mammoth's pressure pumping segment contributed revenues (inclusive of intersegment revenues) of $111.9 million on 1,375 stages for the three months ended December 31, 2017, a 46% increase from $76.7 million on 1,617 stages for the three months ended September 30, 2017 and a 247% increase from $32.3 million on 764 stages for the three months ended December 31, 2016. Utilization during the three months ended December 31, 2017 remained strong.

The pressure pumping segment contributed revenues (inclusive of intersegment revenues) of $279.4 million on 5,139 stages and $124.4 million on 2,442 stages, respectively, for the years ended December 31, 2017 and 2016.

During 2017, the Company expanded its pressure pumping services into the SCOOP/STACK and the Permian Basin with the startup of its fourth, fifth and sixth pressure pumping fleets in June, August and October, respectively.

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $209.2 million for the three months ended December 31, 2017, a $195.7 million increase from $13.5 million for the three months ended September 30, 2017. The infrastructure segment contributed revenues of $224.4 million for the year ended December 31, 2017. During 2016, Mammoth did not provide infrastructure services. As of 2/20/2018, we had a total infrastructure backlog in excess of $500 million.

During 2017, Mammoth broadened its service offerings by expanding into the utility infrastructure business with the formation of Cobra Acquisitions LLC ("Cobra") and the acquisitions of Higher Power Electrical, LLC in April 2017 and 5 Star Electric, LLC in July 2017. Effective October 19, 2017, Cobra entered into an emergency master services agreement with PREPA for repairs to PREPA’s electrical grid as a result of Hurricane Maria. The initial PREPA contract has a one-year term and provided for up to $200.0 million of revenue. The initial PREPA contract was fully applied to services performed by Cobra as of January 3, 2018. On January 28, 2018, Cobra and PREPA amended the initial PREPA contract to increase the total contract amount by an additional $245.4 million of revenue up to a total of $445.4 million in revenue.

Natural Sand Proppant Production

Mammoth's natural sand proppant segment contributed revenues (inclusive of intersegment revenues) of $43.9 million for the three months ended December 31, 2017, a 34% increase from $32.7 million for the three months ended September 30, 2017 and a 285% increase from $11.4 million for the three months ended December 31, 2016. Tons of sand sold for the three months ended December 31, 2017 totaled 600,182 compared to 474,933 for the three months ended September 30, 2017 and 235,860 for the three months ended December 31, 2016.

Mammoth's natural sand proppant segment contributed revenues (inclusive of intersegment revenues) of $117.0 million for the year ended December 31, 2017, up 207% from $38.1 million for the year ended December 31, 2016. Tons of sand sold increased 147% from 683,768 for the year ended December 31, 2016 to 1,690,032 for the year ended December 31, 2017.

The Company completed the acquisitions of Taylor Frac and the Chieftain Sand assets (renamed Piranha Proppant) during the second quarter of 2017 with sand sales from the Piranha Proppant facility commencing in June 2017. The expansion of the Taylor Frac facility is underway with the expectation of increasing capacity to 1.75 Mmtpa (up from 0.7 Mmtpa) by the end of the first quarter of 2018. Once the Taylor Frac expansion is completed, Mammoth's processing capacity will grow to approximately 4 Mmtpa. The Company intends to upgrade certain equipment at its Piranha facility, which is expected to further increase its total sand processing capacity to 4.4 Mmtpa by mid-year 2018.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling segment contributed revenues (inclusive of intersegment revenues) of $13.7 million for the three months ended December 31, 2017 compared to $13.6 million for the three months ended September 30, 2017 and $11.7 million for the three months ended December 31, 2016. Five horizontal rigs on average operated during the three months ended December 31, 2017 and September 30, 2017 compared to four during the three months ended December 31, 2016. The average drilling day rate was $15,964, $14,800 and $13,590, respectively, for the three months ended December 31, 2017, September 30, 2017 and December 31, 2016.

The drilling segment contributed revenues (inclusive of intersegment revenues) of $50.5 million for the year ended December 31, 2017, up 58% from $32.0 million for the year ended December 31, 2016. Five horizontal rigs on average operated during the year ended December 31, 2017, at an average day rate of $14,800 compared to four rigs at an average day

2



rate of $12,900 during the year ended December 31, 2016. During 2018, Mammoth anticipates five to six rigs will operate on average throughout the year.

Other Services

Mammoth's other services, including coil tubing, pressure control, flowback, cementing, equipment rentals and remote accommodations, contributed revenues (inclusive of intersegment revenues) of $15.2 million for the three months ended December 31, 2017 compared to $17.4 million for the three months ended September 30, 2017 and $10.4 million for the three months ended December 31, 2016.

Revenues for other services (inclusive of intersegment revenues) were $51.7 million and $41.0 million, respectively, for the years ended December 31, 2017 and 2016. The increase is primarily due to revenues derived from Stingray Cementing and Stingray Energy Services, which were acquired in June 2017.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses increased to $27.4 million for the three months ended December 31, 2017 from $8.0 million for the three months ended September 30, 2017 and $6.0 million for the three months ended December 31, 2016. The sequential increase is primarily attributable to increased bad debt expense and increased compensation and benefits. SG&A expenses, as a percentage of total revenue, were 7% for the three months ended December 31, 2017 compared to 5% for the three months ended September 30, 2017 and 9% for the three months ended December 31, 2016.

SG&A expenses increased to $49.9 million for the year ended December 31, 2017 from $18.0 million for the year ended December 31, 2016. The increase was primarily attributable to increased compensation and benefits, bad debt expense and professional service charges. SG&A expenses, as a percentage of total revenue, were 7% for the year ended December 31, 2017 compared to 8% for the year ended December 31, 2016.

Liquidity

As of December 31, 2017, we had net debt of approximately $94.3 million reflecting $99.9 million in borrowings outstanding under our $170.0 million revolving credit facility and $5.6 million of cash on hand. As of December 31, 2017, we had approximately $62.8 million of available borrowing capacity under our revolving credit facility, after giving effect to $6.5 million of outstanding letters of credit.

Capital Expenditures

The following table summarizes our capital expenditures by segment for the periods indicated (in thousands):
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Pressure pumping services(a)
$
12,870

 
$
6,410

 
$
19,581

 
$
85,853

 
$
7,673

Infrastructure services(b)
8,131

 

 
8,055

 
20,144

 

Natural sand proppant services(c)
8,478

 
6

 
4,928

 
16,376

 
528

Contract and directional drilling services(d)
669

 
1,216

 
2,357

 
8,927

 
2,710

Other(e)
1,431

 

 
777

 
2,553

 
829

Total capital expenditures
$
31,579

 
$
7,632

 
$
35,698

 
$
133,853

 
$
11,740

(a) Capital expenditures include three new pressure pumping fleets during the year ended December 31, 2017 and various other pressure pumping equipment.
(b) Capital expenditures primarily for truck and equipment purchases for the year ended December 31, 2017.
(c) Capital expenditures include a conveyor and plant additions for the years ended December 31, 2017 and 2016.
(d) Capital expenditures primarily for upgrades to the rig fleet for the years ended December 31, 2017 and 2016.
(e) Capital expenditures primarily for equipment upgrades for the years ended December 31, 2017 and 2016.


3



Explanatory Note Regarding Financial Information

The historical financial information for periods prior to October 12, 2016, contained in this release relates to Mammoth Energy Partners LP, a Delaware limited partnership (the "Partnership"). On October 12, 2016, the Partnership was converted into a Delaware limited liability company named Mammoth Energy Partners LLC ("Mammoth LLC"), and then each member of Mammoth LLC contributed all of its membership interests in Mammoth LLC to the Company. Prior to the conversion and the contribution, the Company was a wholly-owned subsidiary of the Partnership. Following the conversion and the contribution, Mammoth LLC (as the converted successor to the Partnership) became a wholly-owned subsidiary of the Company.

In October 2016, Mammoth completed its initial public offering (the "IPO") and its common stock began trading on The NASDAQ Global Select Market under the symbol “TUSK.” Unless the context otherwise requires, references in this release to Mammoth or the Company, when used in a historical context for periods prior to October 12, 2016 refer to the Partnership and its subsidiaries. References in this release to Mammoth or the Company, when used for periods beginning on or after October 12, 2016 refer to Mammoth and its subsidiaries.

The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function ("CODM"). Segment information is prepared on the same basis that the CODM manages the segments, evaluates the segment financial statements, and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of operating income (loss) as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

Based on the CODM's assessment, effective December 31, 2017, the Company identified four reportable segments: pressure pumping services; infrastructure services; natural sand proppant services; and contract land and directional drilling services. For the year ended December 31, 2016, the Company identified five reportable segments consisting of pressure pumping services, well services, natural sand proppant services, contract land and directional drilling services and other energy services. The Company changed its reportable segment presentation in 2017, as it no longer considers well services activities, which included Redback Energy Services, Redback Coil Tubing and Mammoth Energy Partners, and its other energy services activities, which included Sand Tiger, to be significant to the understanding of the Company's results. The Company now presents the results of its well service and other energy service activities as "Other." Additionally, during 2017, the Company added a new reportable segment for its infrastructure service activities. The financial results by segment below for the three months ended September 30, 2017 and the three months and years ended December 31, 2017 and 2016 reflect this change in reportable segments.

Prior to 2017, information used by the CODM in measuring segment profits or losses did not include intersegment revenues and costs as they were deemed immaterial for decision-making purposes. In 2017, the Company's CODM changed the way segment profits and losses are measured to include intersegment revenues and expenses. The financial results by segment below for the three months ended September 30, 2017 and the three months and years ended December 31, 2017 and 2016 reflect this change in measurement method.

On June 5, 2017, the Company completed the acquisition of (1) Sturgeon Acquisitions, LLC and its wholly owned subsidiaries Taylor Frac LLC, Taylor Real Estate Investments, LLC and South River Road, LLC (collectively, "Sturgeon"); (2) Stingray Energy Services, LLC and (3) Stingray Cementing, LLC (together with Stingray Energy Services, the “Stingray Acquisition”) in exchange for the issuance by Mammoth of an aggregate of 7,000,000 shares of its common stock.

Prior to the acquisition, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the United States of America to account for this common control acquisition in a manner similar to the pooling of interest method of accounting. Therefore, the Company's historical financial information has been recast to combine Sturgeon with the Company as if the acquisition had been completed at commencement of Sturgeon's operations on September 13, 2014.

Conference Call Information

Mammoth will host a conference call on Thursday, February 22, 2018 at 10:00 a.m. CST to discuss its fourth quarter 2017 financial and operational results. The telephone number to access the conference call is 844-265-1561 or international dial in 216-562-0385. The conference ID for the call is 1276679. Mammoth encourages those who would like to participate in the call to place calls between 9:50 a.m. and 10:00 a.m. CST.

The conference call will also be webcast live on www.mammothenergy.com in the “investors” section.


4



About Mammoth Energy Services, Inc.

Mammoth is an integrated, growth-oriented energy service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves and government-funded utilities, private utilities, public investor-owned utilities and corporate utilities through its infrastructure services. Mammoth’s suite of services includes pressure pumping services, infrastructure services, natural sand proppant services, contract land and directional drilling services and other services. Other services consists of coil tubing, pressure control, flowback, cementing, equipment rentals and remote accommodation services. For additional information about Mammoth, please visit its website at www.mammothenergy.com, where Mammoth routinely posts announcements, updates, events, investor information and presentations and recent news releases.

Investor Contact:
Don Crist - Director, Investor Relations
dcrist@mammothenergy.com
(405) 608-6048

Media Contact:
Andy Wilson
Andrew.wilson@edelman.com
(917) 607-6601

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding our business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, our forward-looking statements are subject to significant risks and uncertainties, including those described in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we make with the Securities and Exchange Commission (the “SEC”), including those relating to our acquisitions and our contracts, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks relating to economic conditions; volatility of crude oil and natural gas commodity prices; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; solvency of counterparties to our contracts and their ability to timely pay for our services; oil and gas market conditions; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; operating risks; the adequacy of our capital resources and liquidity; weather; litigation; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

Readers are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law.



5

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS


ASSETS
 
December 31,
 
 
2017
 
2016
CURRENT ASSETS
 
(in thousands)
Cash and cash equivalents
 
$
5,637

 
$
29,239

Accounts receivable, net
 
243,746

 
21,169

Receivables from related parties
 
33,788

 
27,589

Inventories
 
17,814

 
6,124

Prepaid Expenses
 
12,552

 
4,426

Other current assets
 
886

 
392

Total current assets
 
314,423

 
88,939

 
 
 
 
 
Property, plant and equipment, net
 
351,017

 
242,120

Sand reserves
 
74,769

 
55,367

Intangible assets, net - customer relationships
 
9,623

 
15,950

Intangible assets, net - trade names
 
6,516

 
5,617

Goodwill
 
99,811

 
88,727

Deferred income tax asset
 
6,739

 

Other non-current assets
 
4,345

 
5,642

Total assets
 
$
867,243

 
$
502,362

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
141,306

 
$
20,469

Payables to related parties
 
1,378

 
203

Accrued expenses and other current liabilities
 
40,895

 
8,546

Income taxes payable
 
36,409

 
28

Total current liabilities
 
219,988

 
29,246

 
 
 
 
 
Long-term debt
 
99,900

 

Deferred income taxes
 
34,147

 
47,671

Asset retirement obligation
 
2,123

 
260

Other liabilities
 
3,289

 
2,404

Total liabilities
 
359,447

 
79,581

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,589,306 and
 
446

 
375

37,500,000 issued and outstanding at December 31, 2017 and 2016
 
 
 
 
Additional paid in capital
 
508,010

 
400,206

Accumulated Deficit
 
2,001

 
(56,323
)
Members' equity
 

 
81,739

Accumulated other comprehensive loss
 
(2,661
)
 
(3,216
)
Total equity
 
507,796

 
422,781

Total liabilities and equity
 
$
867,243

 
$
502,362



6

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)


 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
REVENUE
(in thousands, except per share amounts)
Services revenue
$
315,545

 
$
23,678

 
$
63,113

 
$
435,409

 
$
89,643

Services revenue - related parties
31,639

 
30,480

 
56,861

 
166,064

 
107,147

Product revenue
18,024

 
3,401

 
15,276

 
47,067

 
8,052

Product revenue - related parties
3,755

 
7,994

 
14,055

 
42,956

 
25,783

Total Revenue
368,963

 
65,553

 
149,305

 
691,496

 
230,625

 
 
 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
 
 
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $25,044, $16,046 and $24,153, respectively, for the three months ended December 31, 2017, December 31, 2016 and September 30, 2016 and $82,686 and $65,705, respectively, for the years ended December 31, 2017 and 2016)
198,201

 
37,947

 
89,346

 
390,112

 
140,063

Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0 and $0, respectively, for the three months ended December 31, 2017, December 31, 2016 and September 30, 2016 and $0 and $0, respectively, for the years ended December 31, 2017 and 2016)
707

 
279

 
9

 
1,408

 
1,063

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $2,790, $1,747 and $3,033, respectively, for the three months ended December 31, 2017, December 31, 2016 and September 30, 2016 and $9,389 and $6,477, respectively, for the years ended December 31, 2017 and 2016)
33,290

 
9,043

 
25,178

 
91,049

 
31,892

Product cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0 and $0, respectively, for the three months ended December 31, 2017, December 31, 2016 and September 30, 2016 and $0 and $0, respectively, for the years ended December 31, 2017 and 2016)

 
2

 

 

 
3

Selling, general and administrative
26,931

 
5,732

 
7,668

 
48,405

 
17,290

Selling, general and administrative - related parties
495

 
301

 
355

 
1,481

 
758

Depreciation, depletion, amortization and accretion
27,770

 
17,832

 
27,224

 
92,124

 
72,315

Impairment of long-lived assets
4,146

 

 

 
4,146

 
1,871

Total cost and expenses
291,540

 
71,136

 
149,780

 
628,725

 
265,255

Operating income (loss)
77,423

 
(5,583
)
 
(475
)
 
62,771

 
(34,630
)
 
 
 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME
 
 
 
 
 
 
 
 
 
Interest expense
(1,381
)
 
(763
)
 
(1,420
)
 
(4,310
)
 
(4,096
)
Bargain purchase gain

 

 

 
4,012

 

Other, net
28

 
(214
)
 
(319
)
 
(677
)
 
158

Total other expense
(1,353
)
 
(977
)
 
(1,739
)
 
(975
)
 
(3,938
)
Income (loss) before income taxes
76,070

 
(6,560
)
 
(2,214
)
 
61,796

 
(38,568
)
Provision (benefit) for income taxes
10,155

 
51,146

 
(1,413
)
 
2,832

 
53,885

Net income (loss)
$
65,915

 
$
(57,706
)
 
$
(801
)
 
$
58,964

 
$
(92,453
)
 
 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax of ($167), $1,732 and $358, respectively, for the three months ended December 31, 2017, December 31, 2016 and September 30, 2016 and $645 and $1,732, respectively, for 2017 and 2016
(482
)
 
(605
)
 
628

 
555

 
2,711

Comprehensive income (loss)
$
65,433

 
$
(58,311
)
 
$
(173
)
 
$
59,519

 
$
(89,742
)
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share (basic)
$
1.48

 
$
(1.61
)
 
$
(0.02
)
 
$
1.42

 
$
(2.94
)
Net income (loss) per share (diluted)
1.48

 
(1.61
)
 
(0.02
)
 
1.42

 
(2.94
)
Weighted average number of shares outstanding
44,579

 
35,951

 
44,502

 
41,548

 
31,500

Weighted average number of shares outstanding, including dilutive effect
44,683

 
35,951

 
44,502

 
41,639

 
31,500


7

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Years Ended December 31,
 
2017
 
2016
Cash flows from operating activities
(in thousands)
Net income (loss)
$
58,964

 
$
(92,453
)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
 
 
 
Equity based compensation
3,741

 
501

Depreciation, depletion, amortization and accretion
92,124

 
72,315

Amortization of coil tubing strings
2,855

 
2,028

Amortization of debt origination costs
399

 
603

Bad debt expense
16,206

 
1,968

Loss (gain) on disposal of property and equipment
69

 
(702
)
Gain on bargain purchase
(4,012
)
 

Impairment of long-lived assets
4,146

 
1,871

Deferred income taxes
(25,379
)
 
47,899

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(231,751
)
 
(4,641
)
Receivables from related parties
(1,096
)
 
(2,462
)
Inventories
(14,238
)
 
(624
)
Prepaid expenses and other assets
(14,368
)
 
(198
)
Accounts payable
101,725

 
1,412

Payables to related parties
1,174

 
(249
)
Accrued expenses and other liabilities
30,662

 
2,420

Income taxes payable
36,395

 
1

Net cash provided by operating activities
57,616

 
29,689

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(132,295
)
 
(11,740
)
Purchases of property and equipment from related parties
(1,558
)
 

Business acquisitions, net
(42,008
)
 

Proceeds from disposal of property and equipment
907

 
4,022

Business combination cash acquired
2,671

 

Net cash used in investing activities
(172,283
)
 
(7,718
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings on long-term debt
156,850

 
28,734

Repayments of long-term debt
(56,950
)
 
(123,734
)
Proceeds from initial public offering

 
105,839

Initial public offering costs

 
(2,764
)
Debt issuance costs

 

Repayment of acquisition-related long-term debt
(8,851
)
 

Capital distributions

 
(5,000
)
Net cash provided by financing activities
91,049

 
3,075

Effect of foreign exchange rate on cash
16

 
154

Net (decrease) increase in cash and cash equivalents
(23,602
)
 
25,200

Cash and cash equivalents at beginning of period
29,239

 
4,039

Cash and cash equivalents at end of period
$
5,637

 
$
29,239

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
3,656

 
$
3,707

Cash paid for income taxes
$
840

 
$
3,588

Supplemental disclosure of non-cash transactions:
 
 
 
Acquisition of Sturgeon, Stingray Cementing LLC and Stingray Energy Services LLC
$
23,091

 
$

Purchases of property and equipment included in trade accounts payable
$
15,038

 
$
2,789


8

MAMMOTH ENERGY SERVICES, INC.
HISTORICAL SEGMENT DATA
(in thousands)


Three Months Ended December 31, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other(a)
Eliminations
Total
Revenue from external customers
$
111,244

$
209,229

$
21,779

$
13,208

$
13,503

$

$
368,963

Intersegment revenues
617


22,167

446

1,708

(24,938
)

Total revenue
111,861

209,229

43,946

13,654

15,211

(24,938
)
368,963

Cost of revenues, exclusive of depreciation, depletion, amortization and accretion
65,594

108,289

33,289

12,117

12,909


232,198

Intersegment cost of revenues
22,928

1,443

373

101

58

(24,903
)

Total cost of revenue
88,522

109,732

33,662

12,218

12,967

(24,903
)
232,198

Selling, general and administrative
2,810

20,365

1,875

1,406

970


27,426

Depreciation, depletion, amortization and accretion
13,590

1,805

2,791

4,657

4,927


27,770

Impairment of long-lived assets


324

3,822



4,146

Operating income (loss)
6,939

77,327

5,294

(8,449
)
(3,653
)
(35
)
77,423

Interest expense
599

168

107

467

40


1,381

Other, net
2

(4
)
(40
)
(6
)
20


(28
)
Income (loss) before income taxes
$
6,338

$
77,163

$
5,227

$
(8,910
)
$
(3,713
)
$
(35
)
$
76,070

Total expenditures for property, plant and equipment
$
12,870

$
8,131

$
8,478

$
669

$
1,431

$

31,579


Three Months Ended December 31, 2016
Pressure Pumping
Infrastructure
Sand
Drilling
All Other(a)
Eliminations
Total
Revenue from external customers
$
32,002

$

$
11,408

$
11,714

$
10,429

$

$
65,553

Intersegment revenues
264


4



(268
)

Total revenue
32,266


11,412

11,714

10,429

(268
)
65,553

Cost of revenues, exclusive of depreciation, depletion, amortization and accretion
21,521


9,210

9,838

6,702


47,271

Intersegment cost of revenues
4


264



(268
)

Total cost of revenue
21,525


9,474

9,838

6,702

(268
)
47,271

Selling, general and administrative
1,346


812

2,271

1,604


6,033

Depreciation, depletion, amortization and accretion
9,049


1,749

5,268

1,766


17,832

Operating income (loss)
346


(623
)
(5,663
)
357


(5,583
)
Interest expense
96


114

556

(3
)

763

Other, net
2


14

68

130


214

Income (loss) before income taxes
$
248

$

$
(751
)
$
(6,287
)
$
230

$

$
(6,560
)
Total expenditures for property, plant and equipment
$
6,410

$

$
6

$
1,216

$

$

7,632



















9

MAMMOTH ENERGY SERVICES, INC.
HISTORICAL SEGMENT DATA
(in thousands)

Three Months Ended September 30, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other(a)
Eliminations
Total
Revenue from external customers
$
75,705

$
13,486

$
29,332

$
13,644

$
17,138

$

$
149,305

Intersegment revenues
950


3,401


287

(4,638
)

Total revenue
76,655

13,486

32,733

13,644

17,425

(4,638
)
149,305

Cost of revenues, exclusive of depreciation, depletion, amortization and accretion
52,961

10,117

25,178

11,598

14,679


114,533

Intersegment cost of revenues
3,688


905

45


(4,638
)

Total cost of revenue
56,649

10,117

26,083

11,643

14,679

(4,638
)
114,533

Selling, general and administrative
2,511

886

1,842

1,374

1,410


8,023

Depreciation, depletion, amortization and accretion
13,039

1,039

3,034

5,036

5,076


27,224

Operating income (loss)
4,456

1,444

1,774

(4,409
)
(3,740
)

(475
)
Interest expense
592

68

87

570

103


1,420

Other, net
120

10

98

38

53


319

Income (loss) before income taxes
$
3,744

$
1,366

$
1,589

$
(5,017
)
$
(3,896
)
$

$
(2,214
)
Total expenditures for property, plant and equipment
$
19,581

$
8,055

$
4,928

$
2,357

$
777

$

35,698


Year Ended December 31, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other(a)
Eliminations
Total
Revenue from external customers
$
277,326

$
224,425

$
90,023

$
50,075

$
49,647

$

$
691,496

Intersegment revenues
2,026


27,014

446

2,081

(31,567
)

Total revenue
279,352

224,425

117,037

50,521

51,728

(31,567
)
691,496

Cost of revenues, exclusive of depreciation, depletion, amortization and accretion
183,089

120,117

91,049

46,701

41,613


482,569

Intersegment cost of revenues
28,147

1,443

1,731

146

65

(31,532
)

Total cost of revenue
211,236

121,560

92,780

46,847

41,678

(31,532
)
482,569

Selling, general and administrative
9,501

21,606

8,190

5,510

5,079


49,886

Depreciation, depletion, amortization and accretion
45,413

3,185

9,394

19,635

14,497


92,124

Impairment of long-lived assets


324

3,822



4,146

Operating income (loss)
13,202

78,074

6,349

(25,293
)
(9,526
)
(35
)
62,771

Interest expense
1,622

241

679

1,695

73


4,310

Bargain purchase gain, net of taxes


(4,012
)



(4,012
)
Other, net
129

6

211

256

75


677

Income (loss) before income taxes
$
11,451

$
77,827

$
9,471

$
(27,244
)
$
(9,674
)
$
(35
)
$
61,796

Total expenditures for property, plant and equipment
$
85,853

$
20,144

$
16,376

$
8,927

$
2,553

$

$
133,853


















10

MAMMOTH ENERGY SERVICES, INC.
HISTORICAL SEGMENT DATA
(in thousands)

Year Ended December 31, 2016
Pressure Pumping
Infrastructure
Sand
Drilling
All Other(a)
Eliminations
Total
Revenue from external customers
$
123,856

$

$
33,835

$
32,043

$
40,891

$

$
230,625

Intersegment revenues
569


4,267


79

(4,915
)

Total revenue
124,425


38,102

32,043

40,970

(4,915
)
230,625

Cost of revenues, exclusive of depreciation, depletion, amortization and accretion
82,552


31,895

31,848

26,726


173,021

Intersegment cost of revenues
4,336


561

(8
)
26

(4,915
)

Total cost of revenue
86,888


32,456

31,840

26,752

(4,915
)
173,021

Selling, general and administrative
4,327


3,337

5,625

4,759


18,048

Depreciation, depletion, amortization and accretion
37,013


6,483

21,512

7,307


72,315

Impairment of long-lived assets
139



347

1,385


1,871

Operating income (loss)
(3,942
)

(4,174
)
(27,281
)
767


(34,630
)
Interest expense
599


434

2,829

234


4,096

Other, net
27


96

248

(529
)

(158
)
Income (loss) before income taxes
$
(4,568
)
$

$
(4,704
)
$
(30,358
)
$
1,062

$

$
(38,568
)
Total expenditures for property, plant and equipment
$
7,673

$

$
528

$
2,709

$
830

$

11,740


a.
Includes results for operations for our coil tubing, pressure control, flowback, cementing, equipment rental and remote accommodations businesses.


11

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. Mammoth defines Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion expense, impairment of long-lived assets, acquisition related costs, one-time compensation charges associated with the IPO, equity based compensation, interest expense, bargain purchase gain, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets) and provision (benefit) for income taxes. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of Mammoth's operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Mammoth's computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure its ability to meet debt service requirements.

The following tables provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income (loss) on a consolidated basis and for each of the Company's segments.

Consolidated
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Reconciliation of Adjusted EBITDA to net income (loss):
(in thousands)
Net income (loss)
$
65,915

 
$
(57,706
)
 
$
(801
)
 
$
58,964

 
$
(92,453
)
Depreciation, depletion, amortization and accretion
27,770

 
17,832

 
27,224

 
92,124

 
72,315

Impairment of long-lived assets
4,146

 

 

 
4,146

 
1,871

Acquisition related costs
51

 

 
264

 
2,506

 

One-time IPO compensation charges

 
1,201

 

 

 
1,201

Equity based compensation
1,093

 
520

 
1,028

 
3,741

 
501

Interest expense
1,381

 
763

 
1,420

 
4,310

 
4,096

Bargain purchase gain

 

 

 
(4,012
)
 

Other (income) expense, net
(28
)
 
214

 
319

 
677

 
(158
)
Provision (benefit) for income taxes
10,155

 
51,146

 
(1,413
)
 
2,832

 
53,885

Adjusted EBITDA
$
110,483

 
$
13,970

 
$
28,041

 
$
165,288

 
$
41,258



12

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Pressure Pumping Services
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Reconciliation of Adjusted EBITDA to net income (loss):
(in thousands)
Net income (loss)
$
6,338

 
$
248

 
$
3,744

 
$
11,451

 
$
(4,568
)
Depreciation, depletion, amortization and accretion
13,590

 
9,049

 
13,039

 
45,413

 
37,013

Impairment of long-lived assets

 

 

 

 
139

Acquisition related costs

 

 
1

 
1

 

One-time IPO compensation charges

 
102

 

 

 
102

Equity based compensation
438

 
176

 
428

 
1,641

 
176

Interest expense
599

 
96

 
592

 
1,622

 
599

Other expense, net
2

 
2

 
120

 
129

 
27

Adjusted EBITDA
$
20,967

 
$
9,673

 
$
17,924

 
$
60,257

 
$
33,488


Infrastructure Services
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Reconciliation of Adjusted EBITDA to net income (loss):
(in thousands)
Net income (loss)
$
47,873

 
$

 
$
1,366

 
$
48,537

 
$

Depreciation, depletion, amortization and accretion
1,805

 

 
1,039

 
3,185

 

Acquisition related costs
8

 

 
48

 
98

 

Equity based compensation
316

 

 
29

 
345

 

Interest expense
168

 

 
68

 
241

 

Other expense, net
(4
)
 

 
10

 
6

 

Provision for income taxes
29,290

 

 

 
29,290

 

Adjusted EBITDA
$
79,456

 
$

 
$
2,560

 
$
81,702

 
$



13

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Natural Sand Proppant Services
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Reconciliation of Adjusted EBITDA to net income (loss):
(in thousands)
Net income (loss)
$
5,263

 
$
(751
)
 
$
1,565

 
$
9,474

 
$
(4,709
)
Depreciation, depletion, amortization and accretion
2,791

 
1,749

 
3,034

 
9,394

 
6,483

Impairment of long-lived assets
324

 

 

 
324

 

Acquisition related costs
42

 

 
167

 
2,163

 

One-time IPO compensation charges

 
33

 

 

 
33

Equity based compensation
184

 
57

 
272

 
708

 
57

Interest expense
107

 
114

 
87

 
679

 
434

Bargain purchase gain

 

 

 
(4,012
)
 

Other (income) expense, net
(40
)
 
14

 
98

 
211

 
96

(Benefit) provision for income taxes
(36
)
 

 
24

 
(4
)
 
4

Adjusted EBITDA
$
8,635

 
$
1,216

 
$
5,247

 
$
18,937

 
$
2,398


Contract Land and Directional Drilling Services
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Reconciliation of Adjusted EBITDA to net loss:
(in thousands)
Net loss
$
(8,910
)
 
$
(6,287
)
 
$
(5,017
)
 
$
(27,244
)
 
$
(30,358
)
Depreciation, depletion, amortization and accretion
4,657

 
5,268

 
5,036

 
19,635

 
21,512

Impairment of long-lived assets
3,822

 

 

 
3,822

 
347

Acquisition related costs

 

 
(16
)
 
8

 

One-time IPO compensation charges

 
964

 

 

 
964

Equity based compensation
77

 
110

 
138

 
507

 
110

Interest expense
467

 
556

 
570

 
1,695

 
2,829

Other (income) expense, net
(6
)
 
68

 
38

 
256

 
248

Adjusted EBITDA
$
107

 
$
679

 
$
749

 
$
(1,321
)
 
$
(4,348
)


14

MAMMOTH ENERGY SERVICES, INC.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Other
 
Three Months Ended
 
Years Ended
 
December 31,
 
September 30,
 
December 31,
 
2017
 
2016
 
2017
 
2017
 
2016
Reconciliation of Adjusted EBITDA to net income (loss):
(in thousands)
Net income (loss)
$
15,386

 
$
(50,916
)
 
$
(2,459
)
 
$
16,780

 
$
(52,820
)
Depreciation, depletion, amortization and accretion
4,927

 
1,766

 
5,076

 
14,497

 
7,307

Impairment of long-lived assets

 

 

 

 
1,385

Acquisition related costs
2

 

 
65

 
237

 

One-time IPO compensation charges

 
102

 

 

 
102

Equity based compensation
77

 
176

 
162

 
539

 
157

Interest expense
40

 
(3
)
 
103

 
73

 
234

Other expense (income), net
20

 
130

 
53

 
75

 
(529
)
(Benefit) provision for income taxes
(19,099
)
 
51,145

 
(1,437
)
 
(26,454
)
 
53,881

Adjusted EBITDA
$
1,353

 
$
2,400

 
$
1,563

 
$
5,747

 
$
9,717








15