Mammoth Energy Services Inc.
Nov 8, 2016

Mammoth Energy Service, Inc. Announces Third Quarter 2016 Operational and Financial Results

OKLAHOMA CITY, Nov. 08, 2016 (GLOBE NEWSWIRE) -- Mammoth Energy Service, Inc. ("Mammoth" or the "Company") (NASDAQ:TUSK) today reported financial and operational results for the three and nine months ended September 30, 2016. Key information related to Mammoth for the reporting periods is as follows:

Key Highlights for Third Quarter 2016:

Adjusted EBITDA is a non-GAAP financial measures. Reconciliations of this measure to comparable financial measures calculated in accordance with generally accepted accounting principles ("GAAP") are provided below.

Arty Straehla, Mammoth's Chief Executive Officer, stated, "I am very pleased to report on an outstanding financial performance for the quarter despite considerable industry-wide headwinds.  This reflects strong performance from our teams operating within our diversified portfolio exposed to some of the most prolific basins.  Having recently completed our initial public offering, we are excited about our ability to grow both organically and via acquisition. We have a strong balance sheet and see ourselves as a platform for growth.  Our core assets are strategically situated and we expect to steadily add to the portfolio.  We remain focused on executional excellence and safely getting the job done in a quality manner at every level of the organization."

"This has been a difficult few years, but we are encouraged with what we believe we see ahead. We are strategically positioned in the right basins with ample opportunity to expand both organically and via acquisitions.  We are in active dialogue with customers who are also optimistic about expansion.  We believe this expansion will provide additional underpinning to pricing, especially in the completion side.  Our service quality remains very strong and our vertical integration helps set us apart, especially in the Northeast.  We've been pleased by the recognition from current and prospective customers of the strong financial position of Mammoth."

Completion and Production Services

Mammoth's completion and production services segment contributed revenues of $37.9 million and $99.2 million for the three and nine months ended September 30, 2016, respectively, compared to revenues of $48.1 million and $169.6 million for the three and nine months ended September 30, 2015, respectively. The year over year decrease in revenue in our pressure pumping, pressure control, flowback and equipment rental services resulted primarily from decreased activity caused by the continuation of depressed commodity prices.

Cost of revenue decreased by 45% to $23.9 million for the three months ended September 30, 2016, from $43.2 million for the same period in the prior year, and by 45% to $75.3 million for the nine months ended September 30, 2016, from $137.0 million for the same period in the prior year.

Natural Sand Proppant Production

Mammoth's natural sand proppant production segment contributed revenues of $7.5 million and $23.4 million for the three and nine months ended September 30, 2016, respectively, compared to revenues of $10.5 million and $45.5 million for the three and nine months ended September 30, 2015, respectively. The decrease in revenues was primarily due to decreased activity caused by the continuation of depressed commodity prices. The company sold 137,800 and 380,000 tons of sand for the three and nine months ended September 30, 2016, respectively, compared to 85,800 and 429,200 for the three and nine months ended September 30, 2015, respectively.

Cost of revenue decreased by 26% to $6.2 million for the three months ended September 30, 2016, from $8.4 million for the same period in the prior year, and by 50% to $19.7 million for the nine months ended September 30, 2016, from $39.2 million for the same period in the prior year.

Contract Land and Directional Drilling

Mammoth's contract land and directional drilling segment contributed revenues of $8.7 million and $20.3 million for the three and nine months ended September 30, 2016, respectively, compared to revenues of $18.5 million and $63.1 million for the three and nine months ended September 30, 2015, respectively. The decrease in revenues resulted primarily from decrease utilization and day rates for both land rigs and directional kits. The Company had operated five and four rigs for the three and nine months ended September 30, 2016, respectively, compared to nine and ten rigs for the three and nine months ended September 30, 2015, respectively.

Cost of revenue decreased by 40% to $9.0 million for the three months ended September 30, 2016, from $15.0 million for the same period in the prior year, and by 54% to $22.0 million for the nine months ended September 30, 2016, from $48.3 million for the same period in the prior year.

Remote Accommodation Services

Mammoth's remote accommodate services segment contributed revenues of $8.6 million and $23.3 million for the three and nine months ended September 30, 2016, respectively, compared to revenues of $9.1 million and $28.0 million for the three and nine months ended September 30, 2015, respectively. The decrease was primarily driven by lower occupancy levels.

Cost of revenue decreased by 6% to $3.5 million for the three months ended September 30, 2016, from $3.8 million for the same period in the prior year, and by 15% to $10.0 million for the nine months ended September 30, 2016, from $11.7 million for the same period in the prior year.

General and Administrative Expenses

General and administrative expenses decreased by 28% to $3.0 million for the three months ended September 30, 2016, from $4.2 million for the same period in the prior year, and by 21% to $11.1 million for the nine months ended September 30, 2016, from $14.0 million for the same period in the prior year. The decrease was primarily attributable to decreased compensation and benefits along with decreased bad debt expense charges.

Liquidity

As of September 30, 2016, Mammoth had borrowings outstanding of $72.0 million under its revolving credit facility. Upon completion of its initial public offering, the Company used a portion of the net proceeds from its initial public offering to repay all borrowings outstanding under our revolving credit facility. As of November 7, 2016, the Company had liquidity of $174.6 million comprised of its credit facility with $141.2 million available borrowing capacity and cash on-hand of $33.4 million.

Capital Expenditures

Capital expenditures totaled $1.6 million and $3.7 million for the three and nine months ended September 30, 2016, respectively. Mammoth currently expects its total capital expenditures to be approximately $5.2 million for 2016.

Explanatory Note Regarding Financial Information

The historical financial information contained in this release relates to Mammoth Energy Partners LP, a Delaware limited partnership (the "Partnership"). On October 12, 2016, subsequent to the periods discussed in this release, 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) was a wholly-owned subsidiary of Mammoth Inc.

On October 13, 2016, the Company priced 7,750,000 shares of its common stock in its initial public offering ("IPO") at a price to the public of $15.00 per share and, on October 14, 2016, Mammoth's common stock began trading on The Nasdaq Global Select Market under the symbol "TUSK."  On October 19, 2016, Mammoth closed its IPO.

The information contained in this release should be read in conjunction with the information contained in Mammoth's final prospectus dated October 13, 2016 and filed with the U.S. Securities and Exchange Commission pursuant to Rule 424(b) under the Securities Act of 1933 on October 17, 2016 (the "Final Prospectus").

The unaudited pro forma financial data presents the impact of the conversion of the Partnership into a limited liability company treated as a C corporation and the contribution of that entity to Mammoth in connection with the IPO. The unaudited pro forma condensed consolidated financial data have been prepared as if the conversion and contribution occurred as a beginning balance adjustment of the respective period under review. The unaudited pro forma data have been prepared based on the assumption that the Partnership will be treated as a C corporation for U.S. federal and state income tax purposes. The unaudited pro forma data have also been prepared based on certain pro forma adjustments to the income tax provision.

Conference Call Information

Mammoth will host a conference call on Wednesday, November 9, 2016 at 10:00 a.m. CST to discuss its third quarter 2016 financial and operational results. The telephone number to access the conference call is 216-562-0385 or toll-free 844-265-1561. The conference ID for the call is  10378923. 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.

About Mammoth Energy Service, Inc.

Mammoth Energy is an integrated, growth-oriented oilfield service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves. Mammoth Energy's suite of services includes completion and production services, natural sand proppant services, contract land and directional drilling services and remote accommodation services. For additional information about Mammoth, please visit our website at www.mammothenergy.com, where we routinely post announcements, updates, events, investor information and presentations and recent news releases.

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. 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 the Final Prospectus, 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; 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 industry; 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.

 
MAMMOTH ENERGY PARTNERS LP
 
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
     
ASSETS September 30, December 31,
  2016 2015
CURRENT ASSETS    
Cash and cash equivalents $2,821,281  $3,074,072 
Accounts receivable, net 17,886,657   17,797,852 
Receivables from related parties 25,841,363  25,643,781 
Inventories 4,056,726  4,755,661 
Prepaid Expenses 1,579,298  4,447,253 
Other current assets 2,659,768  422,219 
Total current assets 54,845,093  56,140,838 
     
Property, plant and equipment, net 228,383,220  273,026,665 
Intangible assets, net - customer relationships 18,041,689  24,309,772 
Intangible assets, net - trade names 5,794,807  6,328,057 
Goodwill 86,043,148  86,043,148 
Other non-current assets 5,528,752  5,137,090 
Total assets $398,636,709  $450,985,570 
     
LIABILITIES AND UNITHOLDERS' EQUITY     
CURRENT LIABILITIES    
Accounts payable $16,899,902  $16,046,378 
Payables to related parties 8,293,568  6,997,929 
Accrued expenses and other current liabilities 6,807,206  7,718,956 
Income taxes payable 2,642  26,912 
Total current liabilities 32,003,318  30,790,175  
     
Long-term debt 72,000,000  95,000,000 
Deferred income taxes 1,535,362  1,460,959 
Other liabilities 233,576  571,174 
Total liabilities 105,772,256  127,822,308 
     
UNITHOLDERS' EQUITY    
Unitholders' Equity:    
General partner    
Common units, 30,000,000 units issued and outstanding    
 at September 30, 2016 and December 31, 2015 297,207,828  329,090,230 
Accumulated other comprehensive loss (4,343,375) (5,926,968)
Total unitholders' equity 292,864,453  323,163,262  
Total liabilities and unitholders' equity $398,636,709  $450,985,570 
         


 
MAMMOTH ENERGY PARTNERS LP
 
CONDENSED CONSOLDIATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (unaudited)
 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2016 2015 2016 2015
REVENUE       
Services revenue$19,077,679  $43,440,144  $65,964,773  $155,112,369 
Services revenue - related parties36,152,253  32,256,679  76,867,123  105,561,842 
Product revenue931,408  710,978  3,087,215  14,084,823 
Product revenue - related parties6,604,879  9,788,692  20,292,899  31,373,247 
Total Revenue62,766,219  86,196,493  166,212,010   306,132,281 
        
COST AND EXPENSES       
Services cost of revenue (1)35,848,314  61,371,896  102,113,121  193,457,544 
Services cost of revenue - related parties652,513  550,668  5,204,231  3,593,599 
Product cost of revenue (2)965,718  3,725,405  4,905,484  22,357,465 
Product cost of revenue - related parties5,267,431  4,712,259  14,783,738  16,814,982 
Selling, general and administrative2,844,802  3,871,104  10,506,095  13,273,994 
Selling, general and administrative - related parties157,007  320,814  546,507  768,505 
Depreciation and amortization17,148,430  17,959,432  52,815,813  53,696,264 
Impairment of long-lived assets  908,456  1,870,885  5,379,237 
Total cost and expenses62,884,215  93,420,034  192,745,874  309,341,590 
Operating loss(117,996) (7,223,541) (26,533,864) (3,209,309)
        
OTHER (EXPENSE) INCOME       
Interest income  281    98,523 
Interest expense(932,749) (1,376,455) (3,041,954) (4,182,785)
Other, net(242,893) (142,029) 451,795  (2,234,514)
Total other expense(1,175,642) (1,518,203) (2,590,159) (6,318,776)
Loss before income taxes(1,293,638) (8,741,744) (29,124,023) (9,528,085)
Provision (benefit) for income taxes1,055,961  (4,250,643) 2,739,696  (2,677,507)
Net loss$(2,349,599) $(4,491,101) $(31,863,719) $(6,850,578)
        
OTHER COMPREHENSIVE (LOSS) INCOME       
Foreign currency translation adjustment (3)(386,265) (2,595,151) 1,583,593  (4,212,592)
Comprehensive loss$(2,735,864) $(7,086,252) $(30,280,126) $(11,063,170)
        
Net loss attributable to limited partners per unit$(0.08)  $(0.15) $(1.06) $(0.23)
Weighted average number of limited partner units outstanding30,000,000  30,000,000  30,000,000  30,000,000 
        
Pro Forma C Corporation Data (4):       
Historical loss before income taxes(1,293,638) (8,741,744) (29,124,023) (9,528,085)
Pro forma (benefit) provision for income taxes(2,615,440) (965,017) (5,902,491) (4,396,232)
Pro forma net income (loss)1,321,802  (7,776,727) (23,221,532) (5,131,853)
Pro forma income (loss) per common share - basic and diluted$ 0.04  $(0.26) $(0.62) $(0.17)
Weighted average pro forma shares outstanding - basic and diluted37,500,000  30,000,000  37,500,000  30,000,000 
        
(1) Exclusive of depreciation and amortization16,116,375  16,885,339  49,658,528  50,440,011 
(2) Exclusive of depreciation and amortization1,010,398  1,039,115  3,062,275  3,145,771 
(3) Net of tax       
(4) See explanatory note        


 
MAMMOTH ENERGY PARTNERS LP
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
 Nine Months Ended
 September 30,
 2016 2015
Cash flows from operating activities   
Net loss$(31,863,719) $(6,850,578)
Adjustments to reconcile net loss to cash provided by operating activities:   
Equity based compensation(18,683)  
Depreciation and amortization 52,815,813  53,696,264 
Amortization of coil tubing strings1,386,856  1,527,148 
Amortization of debt origination costs299,104  299,104 
Bad debt expense1,779,870  925,284 
(Gain) loss on disposal of property and equipment(472,908) 1,132,324 
Impairment of long-lived assets1,870,885  5,379,237 
Deferred income taxes(18,906) (6,026,372)
Changes in assets and liabilities:   
Accounts receivable, net(1,622,812) 5,732,098 
Receivables from related parties(197,538) 16,910,443 
Inventories(687,921) (2,104,342)
Prepaid expenses and other assets(53,517) 6,541,650 
Accounts payable(374,921) (20,471,581)
Payables to related parties1,279,925  (164,581)
Accrued expenses and other liabilities 1,492,897  (2,798,543)
Income taxes payable(4,052) 27,966 
Net cash provided by operating activities25,610,373  53,755,521 
    
Cash flows from investing activities:   
Purchases of property and equipment(3,692,032) (24,474,906)
Proceeds from disposal of property and equipment3,399,705  1,140,724 
Net cash used in investing activities(292,327) (23,334,182)
    
Cash flows from financing activities:   
Borrowings from lines of credit22,650,000  10,000,000 
Repayments of lines of credit(48,407,804) (49,905,675 )
Capital distributions  (711)
Net cash used in financing activities(25,757,804) (39,906,386)
Effect of foreign exchange rate on cash186,967  (174,195)
Net decrease in cash and cash equivalents(252,791) (9,659,242)
Cash and cash equivalents at beginning of period3,074,072  15,674,492 
Cash and cash equivalents at end of period$2,821,281  $6,015,250 
    
Supplemental disclosure of cash flow information:   
Cash paid for interest$2,832,660  $4,069,792 
Cash paid for income taxes$2,755,562  $3,114,206 
Supplemental disclosure of non-cash transactions:   
Purchases of property and equipment included in trade accounts payable$1,832,892  $689,983 
        


MAMMOTH ENERGY PARTNERS LP

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 our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDA as net income (loss) before interest expense, provision for income taxes, depreciation and amortization expense, impairment of long-lived assets, equity based compensation and other non-operating income or expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets, as well as charges associated with Mammoth Partner's proposed public offering in 2014). We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our 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 and 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 our 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. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measure of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements because this measure:

There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss. Additionally, because Adjusted EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in our industry, our definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

The following tables also provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income or loss for each of our operating segments.

Consolidated

 Three Months EndedNine Months Ended
 September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss):2016 2015 2016 2015
Net loss$(2,349,599) $(4,491,101) $(31,863,719) $(6,850,578)
Depreciation and amortization expense17,148,430  17,959,432  52,815,813  53,696,264 
Impairment of long-lived assets  908,456  1,870,885   5,379,237 
Equity based compensation(18,683)   (18,683)  
Interest income  (281)   (98,523)
Interest expense932,749  1,376,455  3,041,954  4,182,785 
Other (income) expense, net242,893  142,029  (451,795) 2,234,514 
Provision (benefit) for income taxes1,055,961  (4,250,643) 2,739,696  (2,677,507)
Adjusted EBITDA$17,011,751  $11,644,347  $28,134,151  $55,866,192 

Completion and Production Services

 Three Months EndedNine Months Ended
 September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss):2016 2015  2016 2015
Net income (loss)$2,144,202  $(8,491,398) $(13,991,693) $(6,359,899)
Depreciation and amortization expense10,284,307   10,271,765  31,868,016  30,401,488 
Impairment of long-lived assets  908,456  1,523,338  908,456 
Equity based compensation(18,683)   (18,683)  
Interest income       
Interest expense163,506  500,960  681,365  1,853,385 
Other (income) expense, net2,421  101,082  (646,899) 372,227 
Provision (benefit) for income taxes5,929    2,835   
Adjusted EBITDA$12,581,682  $3,290,865  $19,418,279  $ 27,175,657 

Contract Land and Directional Drilling Services

 Three Months EndedNine Months Ended
 September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss):2016 2015 2016 2015
Net loss$(7,386,386) $(4,583,706) $(24,079,359) $(14,314,736)
Depreciation and amortization expense5,297,694   6,122,697  16,243,626  18,520,703 
Impairment of long-lived assets    347,547  2,565,800 
Equity based compensation       
Interest income       
Interest expense718,706  874,936  2,272,913  2,217,494 
Other (income) expense, net237,211  1,424  179,639  1,180,881 
Provision (benefit) for income taxes  (210,495)   (184,523)
Adjusted EBITDA$(1,132,775) $2,204,856  $(5,035,634) $9,985,619 

Natural Sand Proppant Production

 Three Months Ended Nine Months Ended
 September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss):2016  2015 2016 2015
Net income (loss)$49,588  $583,719  $(974,741) $(842,743)
Depreciation and amortization expense1,011,648  1,041,058  3,067,195  3,151,619 
Impairment of long-lived assets      1,904,981 
Equity based compensation       
Interest income  (290)   (98,055)
Interest expense16,979  1,769  28,908  50,887 
Other (income) expense, net (1,500) (19,784) 2,521  136,353 
Provision for income taxes3,716    3,716   
Adjusted EBITDA$1,080,431  $1,606,472  $2,127,599  $4,303,042 

Remote Accommodation Services

 Three Months EndedNine Months Ended
 September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss):2016 2015  2016 2015
Net income$2,842,997  $8,000,284  $7,182,074  $14,666,800 
Depreciation and amortization expense554,781  523,912  1,636,976  1,622,454 
Impairment of long-lived assets       
Equity based compensation       
Interest income  9    (468)
Interest expense33,558  (1,210) 58,768  61,019 
Other (income) expense, net4,761  59,307  12,944  545,053 
Provision (benefit) for income taxes1,046,316  (4,040,148) 2,733,145  (2,492,984)
Adjusted EBITDA$ 4,482,413  $4,542,154  $11,623,907  $14,401,874 
                
Contact:

Mammoth Energy Services, Inc., Attention: Mark Layton, 4727 Gaillardia Parkway, Suite 200, Oklahoma City, Oklahoma 73142, tel: 405-608-6007

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Source: Mammoth Energy Services, Inc.

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