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): October 31, 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 October 31, 2018, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the quarter ended September 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 October 31, 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 October 31, 2018, entitled "Mammoth Energy Services, Inc. Announces Third 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:
October 31, 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=12522738&doc=3

FOR IMMEDIATE RELEASE
October 31, 2018

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


Record net income of $69.5 million, or $1.54 per diluted share
Deployed infrastructure crews in support of Hurricanes Florence and Michael
Entered into an amended and restated 5-year credit facility increasing borrowing base to $185 million - Remains undrawn
Declared quarterly dividend of $0.125 per share

OKLAHOMA CITY, OKLAHOMA, October 31, 2018 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the three and nine months ended September 30, 2018.

Financial Highlights for the Third Quarter 2018:

Total revenue was $384.0 million for the three months ended September 30, 2018, down 28% sequentially from $533.6 for the three months ended June 30, 2018 and up 157% from $149.3 million for the three months ended September 30, 2017.

Net income for the three months ended September 30, 2018 was $69.5 million, or $1.54 on a fully diluted per share basis, a $26.8 million increase from $42.7 million for the three months ended June 30, 2018 and an improvement of $70.3 million from a net loss of $0.8 million for the three months ended September 30, 2017.

Adjusted EBITDA (as defined and reconciled below) was $183.6 million for the three months ended September 30, 2018, an increase from $148.6 million for the three months ended June 30, 2018 and from $28.0 million for the three months ended September 30, 2017. Excluding the reversal of bad debt provisions of $69.6 million, adjusted EBITDA was $114.0 million for the three months ended September 30, 2018.

Arty Straehla, Mammoth's Chief Executive Officer, stated, "The third quarter marked two full years as a public company and was a record quarter on a net income basis. Over the past two years, we have more than doubled the size of our oil field services business and we have also created a large infrastructure organization that has a bright future that should complement our diversified growth for years to come. While the third quarter was challenging for oil field services, we were pleased with the execution in our infrastructure business. In addition, we finalized our amended and restated $185 million five-year credit facility, which both increases our liquidity and gives us the flexibility to react quickly to identified opportunities. We continue our commitment to a balanced stockholder return through the approval of a regular quarterly dividend to be paid on November 15, 2018."

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $92.4 million on 1,594 stages for the three months ended September 30, 2018, a 9% decrease from $101.4 million on 1,815 stages for the three months ended June 30, 2018 and a 21% increase from $76.7 million on 1,617 stages for the three months ended September 30, 2017.





Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $237.1 million for the three months ended September 30, 2018, a 34% decrease from $360.3 million for the three months ended June 30, 2018 and a $223.6 million increase from $13.5 million the three months ended September 30, 2017.

Transmission and distribution crews answered the call for mutual aid following Hurricanes Florence and Michael and were deployed to both the eastern seaboard and the gulf coast. Our crews remain on the gulf coast in support of the destruction caused by Hurricane Michael.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $37.0 million for the three months ended September 30, 2018, a 30% decrease from $52.8 million for the three months ended June 30, 2018 and up 13% from $32.7 million for the three months ended September 30, 2017. The Company sold 598,438 tons of sand during the three months ended September 30, 2018, a 23% decrease from 777,850 during the three months ended June 30, 2018 and a 26% increase from 474,933 during the three months ended September 30, 2017.

During the third quarter of 2018, the Company completed the upgrade of certain equipment at its Piranha facility, which increased Mammoth's total sand processing capacity to approximately 4.4 million tons per year. Due to market conditions, our Muskie facility was temporarily idled during the third quarter of 2018 and we expect this to lower our blended production costs.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling services division contributed revenues (inclusive of inter-segment revenues) of $15.9 million for the three months ended September 30, 2018, a 7% decrease from $17.2 million for the three months ended June 30, 2018 and a 17% increase from $13.6 million for the three months ended September 30, 2017. The average drilling day rate was $17,170, $17,229 and $14,800, respectively, for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017.

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

Other Services

Mammoth's other services, including coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, water transfer and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $21.5 million for the three months ended September 30, 2018, a 7% increase from $20.2 million for the three months ended June 30, 2018 and a 24% increase from $17.4 million for the three months ended September 30, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were a credit of $45.3 million for the three months ended September 30, 2018, compared to $65.1 million for the three months ended June 30, 2018 and $8.0 million for the three months ended September 30, 2017.

2



Following is a breakout of SG&A expense (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
Cash expenses:
 
 
 
 
 
 
 
 
 
Compensation and benefits
$
14,864

 
$
3,577

 
$
10,978

 
$
33,541

 
$
8,958

Professional services
3,267

 
1,494

 
2,981

 
8,835

 
5,075

Other(a)
3,701

 
1,820

 
3,935

 
9,243

 
5,700

Total cash SG&A expense
21,832

 
6,891

 
17,894

 
51,619

 
19,733

Non-cash expenses:
 
 
 
 
 
 
 
 
 
Bad debt provision(b)
(68,333
)
 
103

 
28,263

 
(14,543
)
 
78

Equity based compensation(c)

 

 
17,487

 
17,487

 

Stock based compensation
1,177

 
1,028

 
1,483

 
3,751

 
2,648

Total non-cash SG&A expense
(67,156
)
 
1,131

 
47,233

 
6,695

 
2,726

Total SG&A expense
$
(45,324
)
 
$
8,022

 
$
65,127

 
$
58,314

 
$
22,459

a.
Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.
During the three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result, during the three months ended September 30, 2018, the Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half of 2018. The Company expects to receive payment for the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.
c.
Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).

SG&A expenses, as a percentage of total revenue, were (12%) for the three months ended September 30, 2018 compared to 12% for the three months ended June 30, 2018 and 5% for the three months ended September 30, 2017. Excluding bad debt and non-employee non-cash equity compensation expenses, SG&A expenses as a percentage of total revenue were 6% for the three months ended September 30, 2018, compared to 4% for the three months ended June 30, 2018 and 5% for the three months ended September 30, 2017.

Liquidity

As of September 30, 2018, Mammoth had cash on hand totaling $19.7 million and no borrowings outstanding under its revolving credit facility. As of September 30, 2018, the Company had approximately $162.5 million of available borrowing capacity under its revolving credit facility, after giving effect to $6.7 million of outstanding letters of credit, resulting in total liquidity of approximately $182.2 million.

On October 19, 2018, Mammoth entered into an amended and restated five-year asset backed revolving credit facility led by PNC Capital Markets with a maximum revolving advance amount at closing of $185 million and the potential to increase the facility by up to an additional $165 million.


3



Capital Expenditures

The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
Pressure pumping services(a)
$
5,630

 
$
19,581

 
$
8,233

 
$
21,729

 
$
72,983

Infrastructure services(b)
21,737

 
8,055

 
40,778

 
78,293

 
12,013

Natural sand proppant services(c)
3,145

 
4,928

 
6,958

 
15,803

 
7,898

Contract and directional drilling services(d)
1,570

 
2,356

 
7,083

 
12,271

 
8,257

Other(e)
8,663

 
777

 
9,959

 
21,434

 
1,122

Total capital expenditures
$
40,745

 
$
35,697

 
$
73,011

 
$
149,530

 
$
102,273

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.

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 Thursday, November 1, 2018 at 10:00 a.m. CDT (11:00 am EDT) to discuss its third 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 6888202. 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.


4



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 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
 
September 30,
 
December 31,
 
 
2018
 
2017
CURRENT ASSETS
 
(in thousands)
Cash and cash equivalents
 
$
19,692

 
$
5,637

Accounts receivable, net
 
390,824

 
243,746

Receivables from related parties
 
25,335

 
33,788

Inventories
 
19,185

 
17,814

Prepaid expenses
 
10,969

 
12,552

Other current assets
 
652

 
886

Total current assets
 
466,657

 
314,423

 
 
 
 
 
Property, plant and equipment, net
 
434,785

 
351,017

Sand reserves
 
72,207

 
74,769

Intangible assets, net - customer relationships
 
3,021

 
9,623

Intangible assets, net - trade names
 
6,134

 
6,516

Goodwill
 
98,308

 
99,811

Deferred income tax asset
 

 
6,739

Other non-current assets
 
4,046

 
4,345

Total assets
 
$
1,085,158

 
$
867,243

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
139,374

 
$
141,306

Payables to related parties
 
1,402

 
1,378

Accrued expenses and other current liabilities
 
42,605

 
40,895

Income taxes payable
 
172,000

 
36,409

Total current liabilities
 
355,381

 
219,988

 
 
 
 
 
Long-term debt
 

 
99,900

Deferred income tax liabilities
 
33,601

 
34,147

Asset retirement obligation
 
3,155

 
2,123

Other liabilities
 
1,703

 
3,289

Total liabilities
 
393,840

 
359,447

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,755,678 and 44,589,306 issued and outstanding at September 30, 2018 and December 31, 2017, respectively
 
448

 
446

Additional paid in capital
 
529,825

 
508,010

Retained earnings
 
164,165

 
2,001

Accumulated other comprehensive loss
 
(3,120
)
 
(2,661
)
Total equity
 
691,318

 
507,796

Total liabilities and equity
 
$
1,085,158

 
$
867,243




6

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



 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
 
(in thousands, except per share amounts)
REVENUE
 
Services revenue
$
346,368

 
$
63,113

 
$
455,545

 
$
1,210,572

 
$
119,864

Services revenue - related parties
18,933

 
56,861

 
40,611

 
108,632

 
134,426

Product revenue
14,955

 
15,276

 
27,708

 
67,703

 
29,043

Product revenue - related parties
3,787

 
14,055

 
9,730

 
24,979

 
39,200

Total revenue
384,043

 
149,305

 
533,594

 
1,411,886

 
322,533

 
 
 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
 
 
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $27,810, $79,283, $26,898, $24,153 and $57,642, respectively, for the three and nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017)
216,670

 
89,346

 
302,283

 
809,932

 
191,911

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 nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017)
1,425

 
9

 
2,428

 
5,645

 
701

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,183, $10,376, $3,879, $3,033 and $6,599, respectively, for the three and nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017)
29,470

 
25,178

 
35,117

 
97,917

 
57,759

Selling, general and administrative
(45,761
)
 
7,667

 
64,595

 
56,916

 
21,473

Selling, general and administrative - related parties
437

 
355

 
532

 
1,398

 
986

Depreciation, depletion, amortization and accretion
32,015

 
27,224

 
30,795

 
89,718

 
64,354

Impairment of long-lived assets
4,582

 

 
187

 
4,769

 

Total cost and expenses
238,838

 
149,779

 
435,937

 
1,066,295

 
337,184

Operating income (loss)
145,205

 
(474
)
 
97,657

 
345,591

 
(14,651
)
 
 
 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME
 
 
 
 
 
 
 
 
 
Interest expense, net
(458
)
 
(1,420
)
 
(959
)
 
(2,654
)
 
(2,929
)
Bargain purchase gain, net of tax

 

 

 

 
4,012

Other, net
(400
)
 
(320
)
 
(486
)
 
(914
)
 
(707
)
Total other (expense) income
(858
)
 
(1,740
)
 
(1,445
)
 
(3,568
)
 
376

Income (loss) before income taxes
144,347

 
(2,214
)
 
96,212

 
342,023

 
(14,275
)
Provision (benefit) for income taxes
74,835

 
(1,413
)
 
53,512

 
174,265

 
(7,323
)
Net income (loss)
$
69,512

 
$
(801
)
 
$
42,700

 
$
167,758

 
$
(6,952
)
 
 
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustment, net of tax of ($87), $185, $86, $358 and $812, respectively, for the three and nine months ended September 30, 2018, three month ended June 30, 2018 and three and nine months ended September 30, 2017)
327

 
628

 
(325
)
 
(459
)
 
1,037

Comprehensive income (loss)
$
69,839

 
$
(173
)
 
$
42,375

 
$
167,299

 
$
(5,915
)
 
 
 
 
 
 
 
 
 
 
Net income (loss) per share (basic)
$
1.55

 
$
(0.02
)
 
$
0.95

 
$
3.75

 
$
(0.17
)
Net income (loss) per share (diluted)
$
1.54

 
$
(0.02
)
 
$
0.95

 
$
3.73

 
$
(0.17
)
Weighted average number of shares outstanding (basic)
44,756

 
44,502

 
44,737

 
44,718

 
40,526

Weighted average number of shares outstanding (diluted)
45,082

 
44,502

 
45,059

 
45,012

 
40,526

Dividends declared per share
$
0.125

 

 
$

 
$
0.125

 



7

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


 
Nine Months Ended
 
September 30,
 
2018
 
2017
 
(in thousands)
Cash flows from operating activities:
 
 
 
Net income (loss)
$
167,758

 
$
(6,952
)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
 
 
 
Equity based compensation
17,487

 

Stock based compensation
4,331

 
2,648

Depreciation, depletion, accretion and amortization
89,718

 
64,354

Amortization of coil tubing strings
1,473

 
2,144

Amortization of debt origination costs
299

 
299

Bad debt expense
(14,543
)
 
117

(Gain) loss on disposal of property and equipment
(185
)
 
126

Gain on bargain purchase

 
(4,012
)
Impairment of long-lived assets
4,769

 

Deferred income taxes
6,418

 
(8,151
)
Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(132,553
)
 
(37,440
)
Receivables from related parties
8,453

 
(12,081
)
Inventories
(2,665
)
 
(7,878
)
Prepaid expenses and other assets
1,814

 
2,644

Accounts payable
(5,179
)
 
30,445

Payables to related parties
24

 
8

Accrued expenses and other liabilities
(405
)
 
14,393

Income taxes payable
135,578

 
(28
)
Net cash provided by operating activities
282,592

 
40,636

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(144,898
)
 
(102,273
)
Purchases of property and equipment from related parties
(4,632
)
 

Business acquisitions
(14,456
)
 
(42,008
)
Proceeds from disposal of property and equipment
1,213

 
782

Business combination cash acquired

 
2,671

Net cash used in investing activities
(162,773
)
 
(140,828
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
77,000

 
118,850

Repayments of lines of credit
(176,900
)
 
(24,850
)
Repayments of equipment financing note
(219
)
 

Dividends paid
(5,594
)
 

Repayment of acquisition long-term debt

 
(8,851
)
Net cash (used in) provided by financing activities
(105,713
)
 
85,149

Effect of foreign exchange rate on cash
(51
)
 
82

Net change in cash and cash equivalents
14,055

 
(14,961
)
Cash and cash equivalents at beginning of period
5,637

 
29,239

Cash and cash equivalents at end of period
$
19,692

 
$
14,278

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
2,726

 
$
2,300

Cash paid for income taxes
$
32,269

 
$
840

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in accounts payable and accrued expenses
$
21,124

 
$
13,648

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 September 30, 2018
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
91,595

$
237,052

$
18,742

$
15,800

$
20,854

$

$
384,043

Intersegment revenues
815


18,268

139

671

(19,893
)

Total revenue
92,410

237,052

37,010

15,939

21,525

(19,893
)
384,043

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
54,023

128,267

29,470

14,104

21,701


247,565

Intersegment cost of revenues
18,897

37

546

158

245

(19,883
)

Total cost of revenue
72,920

128,304

30,016

14,262

21,946

(19,883
)
247,565

Selling, general and administrative
4,335

(54,200
)
1,618

1,362

1,561


(45,324
)
Depreciation, depletion, amortization and accretion
12,665

6,591

4,184

4,327

4,248


32,015

Impairment of long-lived assets
143




4,439


4,582

Operating income (loss)
2,347

156,357

1,192

(4,012
)
(10,669
)
(10
)
145,205

Interest expense, net
150

159

37

53

59


458

Other expense
2

181

199

(5
)
23


400

Income (loss) before income taxes
$
2,195

$
156,017

$
956

$
(4,060
)
$
(10,751
)
$
(10
)
$
144,347

Three months ended September 30, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
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 revenue, 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

1,841

1,374

1,410


8,022

Depreciation, depletion, amortization and accretion
13,039

1,039

3,034

5,036

5,076


27,224

Operating income (loss)
4,456

1,444

1,775

(4,409
)
(3,740
)

(474
)
Interest expense, net
592

68

87

570

103


1,420

Other expense
120

10

98

39

53


320

Income (loss) before income taxes
$
3,744

$
1,366

$
1,590

$
(5,018
)
$
(3,896
)
$

$
(2,214
)
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


9

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

Nine months ended September 30, 2018
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
288,507

$
922,761

$
92,684

$
48,154

$
59,780

$

$
1,411,886

Intersegment revenues
6,447


48,186

225

4,807

(59,665
)

Total revenue
294,954

922,761

140,870

48,379

64,587

(59,665
)
1,411,886

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
182,228

532,532

97,917

43,859

56,958


913,494

Intersegment cost of revenues
50,473

2,582

5,851

280

479

(59,665
)

Total cost of revenue
232,701

535,114

103,768

44,139

57,437

(59,665
)
913,494

Selling, general and administrative
27,820

17,437

5,049

4,206

3,802


58,314

Depreciation, depletion, amortization and accretion
40,480

13,092

10,381

14,031

11,734


89,718

Impairment of long-lived assets
143



187

4,439


4,769

Operating income (loss)
(6,190
)
357,118

21,672

(14,184
)
(12,825
)

345,591

Interest expense, net
995

341

193

713

412


2,654

Other expense
94

513

222

67

18


914

Income (loss) before income taxes
$
(7,279
)
$
356,264

$
21,257

$
(14,964
)
$
(13,255
)
$

$
342,023

Nine months ended September 30, 2017
Pressure Pumping
Infrastructure
Sand
Drilling
All Other
Eliminations
Total
Revenue from external customers
$
166,082

$
15,195

$
68,244

$
36,867

$
36,145

$

$
322,533

Intersegment revenues
1,409


4,848


372

(6,629
)

Total revenue
167,491

15,195

73,092

36,867

36,517

(6,629
)
322,533

Cost of revenue, exclusive of depreciation, depletion, amortization and accretion
117,494

11,829

57,760

34,584

28,704


250,371

Intersegment cost of revenues
5,220


1,359

45

5

(6,629
)

Total cost of revenue
122,714

11,829

59,119

34,629

28,709

(6,629
)
250,371

Selling, general and administrative
6,691

1,241

6,315

4,102

4,110


22,459

Depreciation, depletion, amortization and accretion
31,823

1,379

6,603

14,978

9,571


64,354

Operating income (loss)
6,263

746

1,055

(16,842
)
(5,873
)

(14,651
)
Interest expense, net
1,023

72

573

1,227

34


2,929

Bargain purchase gain


(4,012
)



(4,012
)
Other expense
127

10

252

263

55


707

Income (loss) before income taxes
$
5,113

$
664

$
4,242

$
(18,332
)
$
(5,962
)
$

$
(14,275
)


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
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income (loss)
$
69,512

 
$
(801
)
 
$
42,700

 
$
167,758

 
$
(6,952
)
Depreciation, depletion, accretion and amortization expense
32,015

 
27,224

 
30,795

 
89,718

 
64,354

Impairment of long-lived assets
4,582

 

 
187

 
4,769

 

Acquisition related costs
99

 
264

 
77

 
130

 
2,455

Public offering costs
260

 

 
731

 
991

 

Equity based compensation

 

 
17,487

 
17,487

 

Stock based compensation
1,415

 
1,028

 
1,660

 
4,331

 
2,648

Bargain purchase gain

 

 

 

 
(4,012
)
Interest expense, net
458

 
1,420

 
959

 
2,654

 
2,929

Other expense, net
400

 
320

 
486

 
914

 
707

Provision (benefit) for income taxes
74,835

 
(1,413
)
 
53,512

 
174,265

 
(7,323
)
Adjusted EBITDA
$
183,576

 
$
28,042

 
$
148,594

 
$
463,017

 
$
54,806



11

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


Pressure Pumping Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income
$
2,195

 
$
3,744

 
$
(11,433
)
 
$
(7,279
)
 
$
5,113

Depreciation and amortization expense
12,665

 
13,039

 
13,829

 
40,480

 
31,823

Impairment of long-lived assets
143

 

 

 
143

 

Acquisition related costs
6

 
1

 
33

 
39

 
1

Public offering costs
61

 

 
202

 
263

 

Equity based compensation

 

 
17,487

 
17,487

 

Stock based compensation
400

 
428

 
453

 
1,271

 
1,202

Interest expense
150

 
592

 
341

 
995

 
1,023

Other expense, net
2

 
120

 
80

 
94

 
127

Adjusted EBITDA
$
15,622

 
$
17,924

 
$
20,992

 
$
53,493

 
$
39,289


Infrastructure Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income (loss)
$
78,405

 
$
1,366

 
$
52,359

 
$
178,064

 
$
664

Depreciation and amortization expense
6,591

 
1,039

 
4,094

 
13,092

 
1,379

Acquisition related costs

 
48

 
4

 
(4
)
 
90

Public offering costs
123

 

 
360

 
483

 

Stock based compensation
555

 
29

 
606

 
1,618

 
29

Interest expense
159

 
68

 
106

 
341

 
72

Other expense, net
181

 
10

 
330

 
513

 
10

Provision for income taxes
77,612

 

 
52,632

 
178,200

 

Adjusted EBITDA
$
163,626

 
$
2,560

 
$
110,491

 
$
372,307

 
$
2,244


Natural Sand Proppant Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net income
$
956

 
$
1,566

 
$
10,929

 
$
21,257

 
$
4,209

Depreciation, depletion, accretion and amortization expense
4,184

 
3,034

 
3,881

 
10,381

 
6,603

Acquisition related costs

 
167

 

 
(38
)
 
2,121

Public offering costs
49

 

 
95

 
144

 

Stock based compensation
211

 
272

 
205

 
602

 
524

Bargain purchase gain

 

 

 

 
(4,012
)
Interest expense
37

 
87

 
76

 
193

 
573

Other expense, net
199

 
98

 
36

 
222

 
252

Provision for income taxes

 
24

 

 

 
33

Adjusted EBITDA
$
5,636

 
$
5,248

 
$
15,222

 
$
32,761

 
$
10,303



12

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


Contract Land and Directional Drilling Services
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net loss
$
(4,060
)
 
$
(5,018
)
 
$
(5,454
)
 
$
(14,964
)
 
$
(18,332
)
Depreciation and amortization expense
4,327

 
5,036

 
5,349

 
14,031

 
14,978

Impairment of long-lived assets

 

 
187

 
187

 

Acquisition related costs

 
(16
)
 

 

 
9

Public offering costs
10

 

 
34

 
44

 

Stock based compensation
132

 
138

 
301

 
540

 
430

Interest expense, net
53

 
570

 
265

 
713

 
1,227

Other expense, net
(5
)
 
39

 
32

 
67

 
263

Adjusted EBITDA
$
457

 
$
749

 
$
714

 
$
618

 
$
(1,425
)

Other Services(a) 
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2018
 
2017
 
2018
 
2018
 
2017
Net (loss) income
$
(7,974
)
 
$
(2,459
)
 
$
(3,453
)
 
$
(9,320
)
 
$
1,394

Depreciation and amortization expense
4,248

 
5,076

 
3,642

 
11,734

 
9,571

Impairment of long-lived assets
4,439

 

 

 
4,439

 

Acquisition related costs
93

 
65

 
40

 
133

 
236

Public offering costs
17

 

 
40

 
57

 

Stock based compensation
117

 
162

 
94

 
300

 
463

Interest expense, net
59

 
103

 
171

 
412

 
34

Other expense, net
23

 
53

 
8

 
18

 
55

Provision (benefit) for income taxes
(2,777
)
 
(1,437
)
 
880

 
(3,935
)
 
(7,356
)
Adjusted EBITDA
$
(1,755
)
 
$
1,563

 
$
1,422

 
$
3,838

 
$
4,397


(a) Includes results for our coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, water transfer 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, such as equity based compensation, 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2018
 
2017
 
2018
 
2017
 
(in thousands, except per share amounts)
Net income, as reported
$
69,512

 
$
(801
)
 
$
167,758

 
$
(6,952
)
Equity based compensation

 

 
17,487

 

Adjusted net income
$
69,512

 
$
(801
)
 
$
185,245

 
$
(6,952
)
 
 
 
 
 
 
 
 
Basic earnings per share, as reported
$
1.55

 
$
(0.02
)
 
$
3.75

 
$
(0.17
)
Equity based compensation

 

 
0.39

 

Adjusted basic earnings per share
$
1.55

 
$
(0.02
)
 
$
4.14

 
$
(0.17
)
 
 
 
 
 
 
 
 
Diluted earnings per share, as reported
$
1.54

 
$
(0.02
)
 
$
3.73

 
$
(0.17
)
Equity based compensation

 

 
0.39

 

Adjusted diluted earnings per share
$
1.54

 
$
(0.02
)
 
$
4.12

 
$
(0.17
)





14