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): August 6, 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 August 6, 2018, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the quarter ended June 30, 2018. A copy of that press release is furnished as Exhibit 99.1 to this report.

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 August 6, 2018, the Company posted 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. Information on the Company's website does not constitute part of this Current Report on Form 8-K.

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 August 6, 2018, entitled "Mammoth Energy Services, Inc. Announces Second Quarter 2018 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:
August 6, 2018
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 



Exhibit

EXHIBIT 99.1

http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12392027&doc=3

FOR IMMEDIATE RELEASE
August 6, 2018

Mammoth Energy Services, Inc. Announces
Second Quarter 2018 Operational and Financial Results


Record revenues of $534 million, up 443% Y/Y
Fully repaid credit facility, resulting in zero long term debt outstanding
Initiated regular quarterly dividend
Signed a new one-year $900 million contract with the Puerto Rico Electric Power Authority ("PREPA")
Extended pressure pumping and sand contracts with Gulfport Energy through 2021
Closed two acquisitions

OKLAHOMA CITY, OKLAHOMA, August 6, 2018 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the three and six months ended June 30, 2018.

Financial Highlights for the Second Quarter 2018:

Total revenue was $533.6 million for the three months ended June 30, 2018, up 8% sequentially from $494.2 million for the three months ended March 31, 2018 and up 443% from $98.3 million for the three months ended June 30, 2017.

Net income for the three months ended June 30, 2018 was $42.7 million or $0.95 on a per share basis, a $12.8 million decrease from $55.5 million for the three months ended March 31, 2018 and an improvement of $43.9 million from a net loss of $1.2 million for the three months ended June 30, 2017.

Adjusted net income (as defined and reconciled below) for the three months ended June 30, 2018 was $60.2 million, or $1.34 on an adjusted diluted per share basis.

Adjusted EBITDA (as defined and reconciled below) was $148.6 million for the three months ended June 30, 2018, up 14% sequentially from $130.8 million for the three months ended March 31, 2018 and up 878% from $15.2 million for the three months ended June 30, 2017.

CEO Comment

Arty Straehla, Mammoth's Chief Executive Officer, stated, "The second quarter marked a milestone for Mammoth as we were able to completely repay our debt, further expand our services through two acquisitions and organically grow our current businesses all with internally generated cash flows. Most importantly, we initiated a regular quarterly dividend to return some cash to our stockholders. As we look to the future, we see significant growth potential in various areas of the industrial space to bring additional balance to our asset base and revenue stream."

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $101.4 million on 1,815 stages for the three months ended June 30, 2018, a slight increase from $101.1 million on 1,672 stages for the three months ended March 31, 2018 and a 102% increase from $50.2 million on 1,287 stages for the three months ended June 30, 2017.





Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $360.3 million for the three months ended June 30, 2018, an 11% increase from $325.5 million for the three months ended March 31, 2018 and a $358.6 million increase from $1.7 million the three months ended June 30, 2017.

On May 26, 2018, Mammoth’s wholly owned subsidiary Cobra Acquisitions LLC (“Cobra”), signed a one-year $900 million contract with PREPA to complete the restoration of the critical electrical transmission and distribution system components damaged as a result of Hurricane Maria as well as to support the initial phase of reconstruction of the electrical power system in Puerto Rico.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $52.8 million for the three months ended June 30, 2018, up 4% from $51.0 million for the three months ended March 31, 2018 and up 113% from $24.8 million for the three months ended June 30, 2017. The Company sold 777,850 tons of sand for the three months ended June 30, 2018, a 6% increase from 735,584 for the three months ended March 31, 2018 and a 117% increase from 359,053 for the three months ended June 30, 2017.

The Company is currently upgrading certain equipment at its Piranha facility, which is expected to increase Mammoth's total sand processing capacity to approximately 4.4 million tons per year.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling services division contributed revenues (inclusive of inter-segment revenues) of $17.2 million for the three months ended June 30, 2018, a 13% increase from $15.2 million for the three months ended March 31, 2018 and a 38% increase from $12.5 million for the three months ended June 30, 2017. The average drilling day rate was $17,229, $16,541 and $14,100, respectively, for the three months ended June 30, 2018, March 31, 2018 and June 30, 2017.

Mammoth anticipates that it will operate, on average, five to six rigs throughout 2018.

Other Services

Mammoth's other services, including coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $20.2 million for the three months ended June 30, 2018, a 12% decrease from $22.9 million for the three months ended March 31, 2018 and a 98% increase from $10.2 million for the three months ended June 30, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses increased to $65.1 million for the three months ended June 30, 2018 from $38.5 million for the three months ended March 31, 2018 and $7.7 million for the three months ended June 30, 2017. The increase from the second quarter of 2017 to the second quarter of 2018 is primarily attributable to $28.3 million in bad debt expense and $17.5 million in non-employee non-cash equity compensation expense. The increase from the first quarter of 2018 to the second quarter of 2018 is primarily attributable to $17.5 million in non-employee non-cash equity compensation expense and a $2.7 million increase in bad debt expense.
SG&A expenses, as a percentage of total revenue, were 12% for the three months ended June 30, 2018 compared to 8% for the three months ended March 31, 2018 and 8% for the three months ended June 30, 2017. Excluding bad debt and non-employee non-cash equity compensation expenses, SG&A expenses as a percentage of total revenue were 3.6% for the three months ended June 30 2018, compared to 2.6% for the three months ended March 31, 2018 and 7.8% for the three months ended June 30, 2017.

Acquisitions

During the second quarter of 2018, Mammoth acquired WTL Oil LLC ("WTL"), a company engaged in the hauling of crude oil in Oklahoma. Immediately following the closing of the transaction, WTL embarked on an expansion program to grow its fleet to 49 crude hauling trucks (from 20 at the time of acquisition) and entered the west Texas market.


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Additionally, during the second quarter of 2018, Mammoth acquired RTS Energy Services LLC ("RTS"), a company engaged in the cementing and acidizing of oil and gas wells in west Texas. Through the RTS transaction, Mammoth expanded its service offerings into the Permian Basin with top quality operators.

Initiation of Quarterly Cash Dividend

On July 16, 2018, Mammoth announced that its Board of Directors initiated a quarterly dividend policy and declared its first quarterly cash dividend of $0.125 per share of common stock, to be paid on August 14, 2018 to stockholders of record as of the close of business on August 7, 2018.

Strong financial results and a favorable outlook support some balanced return of capital to Mammoth's stockholders. The regular quarterly cash dividend provides benefit to Mammoth’s existing stockholders as well as broadening Mammoth’s exposure to additional income oriented investors.

Liquidity

As of June 30, 2018, Mammoth had cash on hand totaling $10.7 million and no borrowings outstanding under its revolving credit facility. As of June 30, 2018, the Company had approximately $162.7 million of available borrowing capacity under its revolving credit facility, after giving effect to $6.5 million of outstanding letters of credit, resulting in total liquidity of approximately $173.4 million.

Capital Expenditures

The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2018
 
2017
 
2018
 
2018
 
2017
Pressure pumping services(a)
$
8,233

 
$
24,737

 
$
7,866

 
$
16,099

 
$
53,402

Infrastructure services(b)
40,778

 
3,958

 
15,778

 
56,556

 
3,958

Natural sand proppant services(c)
6,958

 
2,795

 
5,700

 
12,658

 
2,970

Contract and directional drilling services(d)
7,083

 
3,632

 
3,618

 
10,701

 
5,901

Other(e)
9,959

 
344

 
2,812

 
12,771

 
344

Total capital expenditures
$
73,011

 
$
35,466

 
$
35,774

 
$
108,785

 
$
66,575

a.     Capital expenditures primarily for pressure pumping equipment for the periods presented.
b.     Capital expenditures primarily for trucks and other equipment for the periods presented.
c.    Capital expenditures primarily for plant upgrades for the periods presented.
d.
Capital expenditures primarily for upgrades to our rig fleet and real estate purchases for the periods presented.
e.    Capital expenditures primarily for equipment for our rental and crude oil hauling businesses for periods presented.


Explanatory Note Regarding Financial Information

The financial information contained in this release should be read in conjunction with the financial information contained in Mammoth’s Annual Report filed on Form 10-K with the Securities and Exchange Commission ("SEC") on February 28, 2018, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings.

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.

On June 5, 2017, the Company completed the acquisition of (1) Sturgeon Acquisitions, LLC and its wholly owned subsidiaries Taylor Frac LLC, Taylor RE, LLC and South River, LLC (collectively, "Sturgeon"), (2) Stingray Energy Services and (3) Stingray Cementing (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.

3




Prior to the acquisition, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the Unites States of America ("GAAP") 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 Tuesday, August 7, 2018 at 10:00 a.m. CDT (11:00 am EDT) to discuss its second quarter 2018 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 9885197. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.

About Mammoth Energy Services, Inc.

Mammoth is an integrated, growth-oriented company serving both the oil and gas and the electric utility industries in North America and US territories. Mammoth's subsidiaries provide a diversified set of drilling and completion services to the exploration and production industry including pressure pumping, coil tubing, natural sand and proppant services as well as trucking, drilling, cementing, water transfer among others. In addition, its infrastructure division provides transmission, distribution and logistics services to various public and private owned utilities throughout the US and Puerto Rico.

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 of Investor Relations
dcrist@mammothenergy.com
405-608-6048

Media Contact:
Peter Mirijanian
peter@pmpadc.com
(202) 464-8803

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 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

4



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.

Investors 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.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


ASSETS
 
June 30,
 
December 31,
 
 
2018
 
2017
CURRENT ASSETS
 
(in thousands)
Cash and cash equivalents
 
$
10,702

 
$
5,637

Accounts receivable, net
 
312,850

 
243,746

Receivables from related parties
 
30,674

 
33,788

Inventories
 
12,717

 
17,814

Prepaid expenses
 
13,811

 
12,552

Other current assets
 
816

 
886

Total current assets
 
381,570

 
314,423

 
 
 
 
 
Property, plant and equipment, net
 
423,315

 
351,017

Sand reserves
 
73,759

 
74,769

Intangible assets, net - customer relationships
 
6,204

 
9,623

Intangible assets, net - trade names
 
6,726

 
6,516

Goodwill
 
101,511

 
99,811

Deferred income tax asset
 
31,892

 
6,739

Other non-current assets
 
4,146

 
4,345

Total assets
 
$
1,029,123

 
$
867,243

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
177,353

 
$
141,306

Payables to related parties
 
1,916

 
1,378

Accrued expenses and other current liabilities
 
54,701

 
40,895

Income taxes payable
 
131,210

 
36,409

Total current liabilities
 
365,180

 
219,988

 
 
 
 
 
Long-term debt
 

 
99,900

Deferred income tax liabilities
 
31,036

 
34,147

Asset retirement obligation
 
3,138

 
2,123

Other liabilities
 
4,100

 
3,289

Total liabilities
 
403,454

 
359,447

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,752,765 and 44,589,306 issued and outstanding at June 30, 2018 and December 31, 2017, respectively
 
448

 
446

Additional paid in capital
 
528,421

 
508,010

Retained earnings
 
100,247

 
2,001

Accumulated other comprehensive loss
 
(3,447
)
 
(2,661
)
Total equity
 
625,669

 
507,796

Total liabilities and equity
 
$
1,029,123

 
$
867,243




6

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



 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
 
2018
 
2017
 
2018
 
2018
 
2017
 
(in thousands, except per share amounts)
REVENUE
 
Services revenue
$
455,545

 
$
29,659

 
$
408,659

 
$
864,204

 
$
56,751

Services revenue - related parties
40,611

 
44,603

 
49,088

 
89,699

 
77,565

Product revenue
27,708

 
10,395

 
25,040

 
52,748

 
13,767

Product revenue - related parties
9,730

 
13,605

 
11,462

 
21,192

 
25,145

Total revenue
533,594

 
98,262

 
494,249

 
1,027,843

 
173,228

 
 
 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
 
 
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $26,898, $51,473, $24,575, $17,651 and $33,489, respectively, for the three and six months ended June 30, 2018, three month ended March 31, 2018 and three and six months ended June 30, 2017)
302,283

 
57,104

 
290,979

 
593,262

 
102,565

Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0, $0 and $0, respectively, for the three and six months ended June 30, 2018, three months ended March 31, 2018 and three and six months ended June 30, 2017)
2,428

 
262

 
1,792

 
4,220

 
692

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $3,879, $6,193, $2,314, $2,204 and $3,566, respectively, for the three and six months ended June 30, 2018, three months ended March 31, 2018 and three and six months ended June 30, 2017)
35,117

 
19,974

 
33,330

 
68,447

 
32,581

Selling, general and administrative
64,595

 
7,393

 
38,082

 
102,677

 
13,806

Selling, general and administrative - related parties
532

 
307

 
429

 
961

 
631

Depreciation, depletion, amortization and accretion
30,795

 
19,893

 
26,908

 
57,703

 
37,130

Impairment of long-lived assets
187

 

 

 
187

 

Total cost and expenses
435,937

 
104,933

 
391,520

 
827,457

 
187,405

Operating income (loss)
97,657

 
(6,671
)
 
102,729

 
200,386

 
(14,177
)
 
 
 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME
 
 
 
 
 
 
 
 
 
Interest expense, net
(959
)
 
(1,112
)
 
(1,237
)
 
(2,196
)
 
(1,509
)
Bargain purchase gain, net of tax

 
4,012

 

 

 
4,012

Other, net
(486
)
 
(203
)
 
(28
)
 
(514
)
 
(387
)
Total other (expense) income
(1,445
)
 
2,697

 
(1,265
)
 
(2,710
)
 
2,116

Income (loss) before income taxes
96,212

 
(3,974
)
 
101,464

 
197,676

 
(12,061
)
Provision (benefit) for income taxes
53,512

 
(2,804
)
 
45,918

 
99,430

 
(5,910
)
Net income (loss)
$
42,700

 
$
(1,170
)
 
$
55,546

 
$
98,246

 
$
(6,151
)
 
 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax of $86, $272, $186, $434 and $454, respectively, for the three and six months ended June 30, 2018, three months ended March 31, 2018 and three and six months ended June 30, 2017
(325
)
 
181

 
(461
)
 
(786
)
 
409

Comprehensive income (loss)
$
42,375

 
$
(989
)
 
$
55,085

 
$
97,460

 
$
(5,742
)
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share (basic)
$
0.95

 
$
(0.03
)
 
$
1.24

 
$
2.20

 
$
(0.16
)
Net income (loss) per share (diluted)
$
0.95

 
$
(0.03
)
 
$
1.24

 
$
2.18

 
$
(0.16
)
Weighted average number of shares outstanding (basic)
44,737

 
39,500

 
44,650

 
44,700

 
38,506

Weighted average number of shares outstanding (diluted)
45,059

 
39,500

 
44,884

 
44,977

 
38,506



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MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)


 
Six Months Ended
 
June 30,
 
2018
 
2017
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
98,246

 
$
(6,151
)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
 
 
 
Equity based compensation
17,487

 

Stock based compensation
2,916

 
1,620

Depreciation, depletion, accretion and amortization
57,703

 
37,130

Amortization of coil tubing strings
1,120

 
1,046

Amortization of debt origination costs
199

 
199

Bad debt expense
53,790

 
19

(Gain) loss on disposal of property and equipment
(128
)
 
127

Gain on bargain purchase

 
(4,012
)
Impairment of long-lived assets
187

 

Deferred income taxes
(27,906
)
 
(6,529
)
Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(122,908
)
 
(4,793
)
Receivables from related parties
3,114

 
(12,995
)
Inventories
4,156

 
(4,932
)
Prepaid expenses and other assets
(1,195
)
 
1,528

Accounts payable
34,186

 
20,557

Payables to related parties
538

 
(83
)
Accrued expenses and other liabilities
10,193

 
1,301

Income taxes payable
94,753

 
(28
)
Net cash provided by operating activities
226,451

 
24,004

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(105,349
)
 
(66,575
)
Purchases of property and equipment from related parties
(3,436
)
 

Business acquisitions
(13,356
)
 
(39,570
)
Proceeds from disposal of property and equipment
898

 
781

Business combination cash acquired

 
2,671

Net cash used in investing activities
(121,243
)
 
(102,693
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
52,000

 
79,150

Repayments of lines of credit
(151,900
)
 
(14,150
)
Repayments of equipment financing note
(145
)
 

Repayment of Stingray acquisition long-term debt

 
(7,074
)
Net cash (used in) provided by financing activities
(100,045
)
 
57,926

Effect of foreign exchange rate on cash
(98
)
 
73

Net change in cash and cash equivalents
5,065

 
(20,690
)
Cash and cash equivalents at beginning of period
5,637

 
29,239

Cash and cash equivalents at end of period
$
10,702

 
$
8,549

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
2,543

 
$
1,086

Cash paid for income taxes
$
32,584

 
$
912

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in accounts payable and accrued expenses
$
20,897

 
$
7,836

Acquisition of Sturgeon, Stingray Cementing LLC and Stingray Energy Services LLC
$

 
$
23,091


8

MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS (unaudited)
(in thousands)

Three months ended June 30, 2018
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
100,333

$
360,250

$
37,439

$
17,126

$
18,446

$

$
533,594

Intersegment revenues
1,073


15,406

84

1,721

(18,284
)

Total revenue
101,406

360,250

52,845

17,210

20,167

(18,284
)
533,594

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
61,593

210,189

35,117

15,280

17,649


339,828

Intersegment cost of revenues
16,174

754

1,019

(40
)
129

(18,036
)

Total cost of revenue
77,767

210,943

36,136

15,240

17,778

(18,036
)
339,828

Selling, general and administrative
20,822

39,786

1,787

1,591

1,141


65,127

Depreciation, depletion, amortization and accretion
13,829

4,094

3,881

5,349

3,642


30,795

Impairment of long-lived assets



187



187

Operating income (loss)
(11,012
)
105,427

11,041

(5,157
)
(2,394
)
(248
)
97,657

Interest expense, net
341

106

76

265

171


959

Other expense
80

330

36

32

8


486

Income (loss) before income taxes
$
(11,433
)
$
104,991

$
10,929

$
(5,454
)
$
(2,573
)
$
(248
)
$
96,212

Three months ended June 30, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
49,924

$
1,709

$
24,000

$
12,472

$
10,157

$

$
98,262

Intersegment revenues
272


762


85

(1,119
)

Total revenue
50,196

1,709

24,762

12,472

10,242

(1,119
)
98,262

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
35,826

1,626

19,974

12,033

7,881


77,340

Intersegment cost of revenues
847


267


5

(1,119
)

Total cost of revenue
36,673

1,626

20,241

12,033

7,886

(1,119
)
77,340

Selling, general and administrative
2,403

307

2,416

1,435

1,139


7,700

Depreciation, depletion, amortization and accretion
9,626

340

2,206

4,974

2,747


19,893

Operating income (loss)
1,494

(564
)
(101
)
(5,970
)
(1,530
)

(6,671
)
Interest expense, net
303

4

353

440

12


1,112

Bargain purchase gain


(4,012
)



(4,012
)
Other expense
4


140

60

(1
)

203

Income (loss) before income taxes
$
1,187

$
(568
)
$
3,418

$
(6,470
)
$
(1,541
)
$

$
(3,974
)
Three months ended March 31, 2018
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
96,579

$
325,459

$
36,503

$
15,228

$
20,480

$

$
494,249

Intersegment revenues
4,559


14,512

2

2,415

(21,488
)

Total revenue
101,138

325,459

51,015

15,230

22,895

(21,488
)
494,249

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
66,612

194,076

33,330

14,475

17,608


326,101

Intersegment cost of revenues
15,402

1,791

4,286

162

105

(21,746
)

Total cost of revenue
82,014

195,867

37,616

14,637

17,713

(21,746
)
326,101

Selling, general and administrative
2,663

31,851

1,644

1,253

1,100


38,511

Depreciation, depletion, amortization and accretion
13,986

2,407

2,316

4,355

3,844


26,908

Operating income (loss)
2,475

95,334

9,439

(5,015
)
238

258

102,729

Interest expense, net
504

76

80

395

182


1,237

Other expense
12

2

(13
)
40

(13
)

28

Income (loss) before income taxes
$
1,959

$
95,256

$
9,372

$
(5,450
)
$
69

$
258

$
101,464


9

MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS (unaudited)
(in thousands)

Six months ended June 30, 2018
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
196,912

$
685,709

$
73,942

$
32,354

$
38,926

$

$
1,027,843

Intersegment revenues
5,632


29,918

86

4,136

(39,772
)

Total revenue
202,544

685,709

103,860

32,440

43,062

(39,772
)
1,027,843

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
128,205

404,265

68,447

29,755

35,257


665,929

Intersegment cost of revenues
31,576

2,545

5,305

122

234

(39,782
)

Total cost of revenue
159,781

406,810

73,752

29,877

35,491

(39,782
)
665,929

Selling, general and administrative
23,485

71,637

3,431

2,844

2,241


103,638

Depreciation, depletion, amortization and accretion
27,815

6,501

6,197

9,704

7,486


57,703

Impairment of long-lived assets



187



187

Operating income (loss)
(8,537
)
200,761

20,480

(10,172
)
(2,156
)
10

200,386

Interest expense, net
845

182

156

660

353


2,196

Other expense
92

332

23

72

(5
)

514

Income (loss) before income taxes
$
(9,474
)
$
200,247

$
20,301

$
(10,904
)
$
(2,504
)
$
10

$
197,676

Six months ended June 30, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
90,377

$
1,709

$
38,912

$
23,223

$
19,007

$

$
173,228

Intersegment revenues
459


1,447


85

(1,991
)

Total revenue
90,836

1,709

40,359

23,223

19,092

(1,991
)
173,228

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
64,533

1,712

32,582

22,986

14,025


135,838

Intersegment cost of revenues
1,532


454


5

(1,991
)

Total cost of revenue
66,065

1,712

33,036

22,986

14,030

(1,991
)
135,838

Selling, general and administrative
4,180

355

4,474

2,728

2,700


14,437

Depreciation, depletion, amortization and accretion
18,784

340

3,569

9,942

4,495


37,130

Operating income (loss)
1,807

(698
)
(720
)
(12,433
)
(2,133
)

(14,177
)
Interest expense, net
431

4

486

657

(69
)

1,509

Bargain purchase gain


(4,012
)



(4,012
)
Other expense
7


154

224

2


387

Income (loss) before income taxes
$
1,369

$
(702
)
$
2,652

$
(13,314
)
$
(2,066
)
$

$
(12,061
)


10

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, public offering costs, equity based compensation, stock based compensation, bargain purchase gain, interest expense, net, 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 (in thousands):

Consolidated
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income (loss)
$
42,700

 
$
(1,170
)
 
$
55,546

 
$
98,246

 
$
(6,151
)
Depreciation, depletion, accretion and amortization expense
30,795

 
19,893

 
26,908

 
57,703

 
37,130

Impairment of long-lived assets
187

 

 

 
187

 

Acquisition related costs
77

 
961

 
(46
)
 
31

 
2,208

Public offering costs
731

 

 

 
731

 

Equity based compensation
17,487

 

 

 
17,487

 

Stock based compensation
1,660

 
1,050

 
1,256

 
2,916

 
1,620

Bargain purchase gain

 
(4,012
)
 

 

 
(4,012
)
Interest expense, net
959

 
1,112

 
1,237

 
2,196

 
1,509

Other expense, net
486

 
203

 
28

 
514

 
387

Provision (benefit) for income taxes
53,512

 
(2,804
)
 
45,918

 
99,430

 
(5,910
)
Adjusted EBITDA
$
148,594

 
$
15,233

 
$
130,847

 
$
279,441

 
$
26,781



11

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


Pressure Pumping Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income
$
(11,433
)
 
$
1,187

 
$
1,959

 
$
(9,474
)
 
$
1,369

Depreciation and amortization expense
13,829

 
9,626

 
13,986

 
27,815

 
18,784

Acquisition related costs
33

 

 

 
33

 

Public offering costs
202

 

 

 
202

 

Equity based compensation
17,487

 

 

 
17,487

 

Stock based compensation
453

 
503

 
418

 
871

 
774

Interest expense
341

 
303

 
504

 
845

 
431

Other expense, net
80

 
4

 
12

 
92

 
7

Adjusted EBITDA
$
20,992

 
$
11,623

 
$
16,879

 
$
37,871

 
$
21,365


Infrastructure Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income (loss)
$
52,359

 
$
(568
)
 
$
47,299

 
$
99,658

 
$
(702
)
Depreciation and amortization expense
4,094

 
340

 
2,407

 
6,501

 
340

Acquisition related costs
4

 
42

 
(8
)
 
(4
)
 
42

Public offering costs
360

 

 

 
360

 

Stock based compensation
606

 

 
457

 
1,063

 

Interest expense
106

 
4

 
76

 
182

 
4

Other expense, net
330

 

 
2

 
332

 

Provision for income taxes
52,632

 

 
47,957

 
100,589

 

Adjusted EBITDA
$
110,491

 
$
(182
)
 
$
98,190

 
$
208,681

 
$
(316
)

Natural Sand Proppant Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income
$
10,929

 
$
3,409

 
$
9,372

 
$
20,301

 
$
2,643

Depreciation, depletion, accretion and amortization expense
3,881

 
2,206

 
2,316

 
6,197

 
3,569

Acquisition related costs

 
916

 
(38
)
 
(38
)
 
1,954

Public offering costs
95

 

 

 
95

 

Stock based compensation
205

 
182

 
186

 
391

 
252

Bargain purchase gain

 
(4,012
)
 

 

 
(4,012
)
Interest expense
76

 
353

 
80

 
156

 
486

Other expense, net
36

 
140

 
(13
)
 
23

 
154

Provision for income taxes

 
9

 

 

 
9

Adjusted EBITDA
$
15,222

 
$
3,203

 
$
11,903

 
$
27,125

 
$
5,055



12

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


Contract Land and Directional Drilling Services
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net loss
$
(5,454
)
 
$
(6,470
)
 
$
(5,450
)
 
$
(10,904
)
 
$
(13,314
)
Depreciation and amortization expense
5,349

 
4,974

 
4,355

 
9,704

 
9,942

Impairment of long-lived assets
187

 

 

 
187

 

Acquisition related costs

 
3

 

 

 
25

Public offering costs
34

 

 

 
34

 

Stock based compensation
301

 
180

 
107

 
408

 
292

Interest expense, net
265

 
440

 
395

 
660

 
657

Other expense, net
32

 
60

 
40

 
72

 
224

Adjusted EBITDA
$
714

 
$
(813
)
 
$
(553
)
 
$
161

 
$
(2,174
)

Other Services(a) 
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
March 31,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net (loss) income
$
(3,453
)
 
$
1,272

 
$
2,107

 
$
(1,346
)
 
$
3,853

Depreciation and amortization expense
3,642

 
2,747

 
3,844

 
7,486

 
4,495

Acquisition related costs
40

 

 

 
40

 
187

Public offering costs
40

 

 

 
40

 

Stock based compensation
94

 
184

 
89

 
183

 
301

Interest expense, net
171

 
12

 
182

 
353

 
(69
)
Other expense, net
8

 
(1
)
 
(13
)
 
(5
)
 
2

Provision (benefit) for income taxes
880

 
(2,813
)
 
(2,038
)
 
(1,158
)
 
(5,919
)
Adjusted EBITDA
$
1,422

 
$
1,401

 
$
4,171

 
$
5,593

 
$
2,850


(a) Includes results for our coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations services and corporate related activities. Our corporate related activities do not generate revenue.


13

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


Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income and adjusted earnings per share are supplemental non-GAAP financial measures that are used by management to evaluate the Company's operating and financial performance. Management believes these measures provide meaningful information about the Company's performance by excluding certain non-cash charges that may not be indicative of the Company's ongoing operating results. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for net income and earnings per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income and adjusted earnings per share to the GAAP financial measures of net income and earnings per share for the periods specified.

 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per share amounts)
Net income, as reported
$
42,700

 
$
(1,170
)
 
$
98,246

 
$
(6,151
)
Equity based compensation
17,487

 

 
17,487

 

Adjusted net income
$
60,187

 
$
(1,170
)
 
$
115,733

 
$
(6,151
)
 
 
 
 
 
 
 
 
Basic earnings per share, as reported
$
0.95

 
$
(0.03
)
 
$
2.20

 
$
(0.16
)
Equity based compensation
0.40

 

 
0.40

 

Adjusted basic earnings per share
$
1.35

 
$
(0.03
)
 
$
2.60

 
$
(0.16
)
 
 
 
 
 
 
 
 
Diluted earnings per share, as reported
$
0.95

 
$
(0.03
)
 
$
2.18

 
$
(0.16
)
Equity based compensation
0.39

 

 
0.39

 

Adjusted diluted earnings per share
$
1.34

 
$
(0.03
)
 
$
2.57

 
$
(0.16
)





14