Mammoth Energy Services Inc.
MAMMOTH ENERGY SERVICES, INC. (Form: 8-K, Received: 08/03/2017 09:09:11)




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 2, 2017
 
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)
______________________________

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 2, 2017 , Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the quarter ended June 30, 2017. A copy of that press release is furnished as Exhibit 99.1 to this report and is incorporated by reference into this Item 2.02.

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

Item 7.01 Regulation FD Disclosure
On  August 2, 2017 , 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. The content of the Company's website is not incorporated by reference into this filing. Further, the reference to the URL for the Company's website is intended to be an inactive text reference only.

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

Item 9.01 Financial Statements and Exhibits.

(d)    Exhibits.

99.1     Press release dated August 2, 2017 , entitled "Mammoth Energy Services, Inc. Announces Second Quarter 2017 Operational and Financial Results."






Signatures

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

 
 
 
 
 
MAMMOTH ENERGY SERVICES, INC.
Date:
August 3, 2017
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 






Item 6. Exhibits

99.1     Press release dated August 2, 2017 , entitled "Mammoth Energy Services, Inc. Announces Second Quarter 2017 Operational and Financial Results."




EXHIBIT 99.1

MAMMOTHA01.JPG

FOR IMMEDIATE RELEASE
August 2, 2017

Mammoth Energy Service, Inc. Announces
Second Quarter 2017 Operational and Financial Results


OKLAHOMA CITY, OKLAHOMA, August 2, 2017 - Mammoth Energy Service, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the three and six months ended June 30, 2017 . Key information related to Mammoth for the reporting periods is as follows:

Key Highlights for Second Quarter 2017:


Total revenue was $98.3 million for the three months ended June 30, 2017, up 42% from $69.2 million for the three months ended June 30, 2016 and up 31% sequentially from $74.9 million for the three months ended March 31, 2017.
Net loss for the three months ended June 30, 2017 was $1.2 million , an improvement of $7.2 million from a net loss of $8.4 million for the three months ended June 30, 2016. Mammoth reported Adjusted EBITDA (as defined and reconciled below) of $15.2 million and $13.5 million for the three months ended June 30, 2017 and 2016, respectively.
Expanded pressure pumping, sand deliveries and last-mile trucking into the SCOOP/STACK with the startup of our fourth pressure pumping fleet in June 2017 and anticipate the startup of our fifth fleet on August 8, 2017. Seeing continued sequential improvements to pricing across completions services.
Closed the acquisitions of Taylor Frac, LLC ("Taylor Frac") and the Chieftain Sand assets (renamed Piranha Proppants LLC) which furthered our vertical integration. Once the expansion of the Taylor Frac facility to 1.75 million tons per annum (Mmtpa) of capacity is completed later this year, Mammoth will be capable of processing approximately 4 Mmtpa of high quality frac sand, in direct support of our pressure pumping fleets, with estimated reserves of approximately 75 million tons.
Closed the acquisitions of Stingray Cementing LLC ("Stingray Cementing") and Stingray Energy Services LLC ("Stingray Energy Services") (together, the "Stingray Acquisition").
Signed a take-or-pay sand contract, with a third-party service company for 720 thousand tons per annum or half of Piranha’s capacity commencing on October 1, 2017. We believe the future cash flows from this contract will be approximately $90 to $100 million, assuming delivery of all contracted volumes, and will essentially pay for the cost of acquiring the Chieftain assets over the contract period while utilizing approximately one-half of the processing capacity.
Our liquidity at June 30, 2017 was approximately $114 million, comprised of cash on hand of $8.5 million and capacity under our revolver of $105 million. Borrowing base increased to $170 million (up from $144 million on March 31, 2017), reflecting the impact of assets from our recent acquisitions.










Arty Straehla, Mammoth's Chief Executive Officer, stated, “The second quarter of 2017 was exceptionally busy for the entire Mammoth team as we closed the acquisitions of five companies to further our vertical integration and expanded into the Mid-Continent with the startup of our fourth pressure pumping fleet. The startup of our fifth fleet is expected in the coming days and we remain on track to complete the expansion of our Taylor Frac facility in 4Q 2017. The demand for pressure pumping, sand and logistics remains strong with significant demand seen over the remainder of the year and pricing continuing to increase. The signing of a three year take-or-pay contract for 720 thousand tons of sand production per year at attractive pricing ensures steady cash flows for an additional 18% of our expected sand production. We continue to evaluate additional sand contracts for our spot market capacity. Our focus remains oriented to generating high returns on our capital and not adding equipment simply for growth. We continue to evaluate options within our portfolio to maximize our return on capital."

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenue of $49.9 million on 1,287 stages for the three months ended June 30, 2017 compared to $44.0 million on 963 stages for the three months ended June 30, 2016 , increases of 13% and 34%, respectively. Sequentially, the number of stages pumped during the quarter grew by 49% from 860 in three months ended March 31, 2017. We were nearly fully utilized during 2Q 2017 despite adding a partial spread during the period, similar to our full effective utilization during the prior year period.

Mammoth's pressure pumping division contributed revenue of $90.4 million on 2,147 stages for the six months ended June 30, 2017 compared to $56.3 million on 1,167 stages for the six months ended June 30, 2016 , increases of 61% and 84%, respectively.

During the three months ended June 30, 2017 , we expanded pressure pumping operations into the SCOOP/STACK. Demand remains strong with our frac calendar fully booked into the fourth quarter of 2017 in both the Utica and Mid-Continent. The startup of our fifth fleet is on track to pump its initial job on August 8, 2017, with our sixth fleet expected to commence operations in October 2017.

Well Services

Mammoth's well services division contributed revenue of $8.1 million for the three months ended June 30, 2017 compared to $2.2 million for the three months ended June 30, 2016 , an increase of 268%. The acquisitions of Stingray Cementing and Stingray Energy Services were completed on June 5, 2017. The inclusion of these businesses for 25 days of the quarter added $2.6 million in revenues during the three months ended June 30, 2017 . Our coil tubing services accounted for $3.1 million of our operating division increase, as a result of an increase in average day rates from approximately $17,100 for the three months ended June 30, 2016 to approximately $29,400 for the three months ended June 30, 2017

Mammoth's well services division contributed revenue of $11.5 million for the six months ended June 30, 2017 compared to $4.9 million for the six months ended June 30, 2016 , an increase of 135%. Our coil tubing services accounted for $3.8 million of our operating division increase, as a result of an increase in average day rates from approximately $18,500 for the six months ended June 30, 2016 to approximately $25,300 for the six months ended June 30, 2017 .

Natural Sand Proppant Production

Mammoth's natural sand proppant division contributed revenue of $24.0 million for the three months ended June 30, 2017 compared to $11.0 million for the three months ended June 30, 2016 , an increase of 118% . The Company sold 350,710 and 197,529 tons of sand for the three months ended June 30, 2017 and 2016 , respectively. Sequentially, sand volumes sold increased by approximately 43%.

Mammoth's natural sand proppant division contributed revenue of $38.9 million for the six months ended June 30, 2017 compared to $14.2 million for the six months ended June 30, 2016 , an increase of 174% . The Company sold 596,706 and 259,890 tons of sand for the six months ended June 30, 2017 and 2016 , respectively.

The average FOB mine gate price increased to $40.97 per ton in the three months ended June 30, 2017, up 16% sequentially, as industry activity increased and the demand for frac sand remained strong.

To protect our future cash flows, we recently entered into a take-or-pay sand contract with a third-party service company covering 720 thousand tons of sand across several grades (20/40, 30/50 and 40/70). The contract has a three year term commencing on October 1, 2017. In total, we believe the future cash flows from this contract will be approximately $90 to $100 million, assuming delivery of all contracted volumes, and will essentially pays for the cost of acquiring the Chieftain

2



assets over the contract period. Including our legacy sand contract with Gulfport, which runs through September 30, 2018, we now have approximately 1.0 million tons per annum (Mmtpa) of sand contracted at very competitive rates with approximately 2.1 Mmtpa expected to be used in direct support of our fracking operations.

The acquisitions of Taylor Frac and the Chieftain Sand assets (renamed Piranha Proppants) were both closed during the second quarter of 2017 with sand sales from the Piranha Proppant facility commencing in June 2017. The expansion of the Taylor Frac facility is underway with the expectation of increasing capacity to 1.75 Mmtpa (up from 0.7 Mmtpa) by year-end 2017. Once the Taylor Frac expansion is completed, our processing capacity will grow to approximately 4 Mmtpa.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling division contributed revenue of $12.6 million for the three months ended June 30, 2017 compared to $5.2 million for the three months ended June 30, 2016 , an increase of 142%. The increase in revenue resulted primarily from increased utilization and day rates for both land rigs and directional drilling services.

Mammoth's contract land and directional drilling division contributed revenue of $23.2 million for the six months ended June 30, 2017 compared to $11.6 million for the six months ended June 30, 2016 , an increase of 100% . The increase in revenue resulted primarily from increased utilization and day rates for both land rigs and directional drilling services.

We performed upgrades on two of our horizontal rigs in late 1Q and early 2Q 2017, including new high pressure fluid ends and electrical upgrades, to make them more marketable in today environment. Both of these rigs are expected to demand higher day rates as a result of the upgrades. Six horizontal rigs on average operated in 2Q 2017, with five horizontal rigs operating today. For the remainder of 2017, we expect between five and six of our horizontal rigs to operate in the Permian Basin.

Other Energy Services

Mammoth's other energy services division contributed revenue of $3.7 million and $6.7 million for the three months ended June 30, 2017 and 2016 , respectively. The decrease was primarily driven by decreased occupancy levels. The remote accommodations decrease was partially offset by the revenue generated from a new energy infrastructure operation that has been initiated, which accounted for $1.7 million of the revenue in the second quarter of 2017.

Mammoth's other energy services division contributed revenues of $9.2 million and $14.7 million for the six months ended June 30, 2017 and 2016 , respectively.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses increased by 48% to $7.7 million from $5.2 million for the three months ended June 30, 2017 and 2016 , respectively. The increase was primarily attributable to increased compensation and benefits along with increased professional service charges.
SG&A expenses increased by 64% to $14.4 million from $8.8 million for the six months ended June 30, 2017 and 2016 , respectively. The increase was primarily attributable to increased compensation and benefits along with increased professional service charges.
SG&A expenses, as a percentage of total revenue, came in at 7.8% in the second quarter of 2017 as compared to 7.5% during the second quarter of 2016. With the recent acquisitions and expansion into the Mid-Continent, our employee count has increased to 1,094 as of June 30, 2017, up from 684 on December 31, 2016.

Liquidity

As of June 30, 2017 , we had an aggregate of $65.0 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $104.7 million of available borrowing capacity under this facility and we had $8.5 million of cash on hand. With the recent acquisitions of Taylor Frac, Stingray Cementing, Stingray Energy Services and the Chieftain Sand assets and our fourth fleet now operating, our borrowing base has increased to $170 million (up from $144 million on March 31, 2017).

Capital Expenditures


3



The following table summarizes our capital expenditures by operating division for the periods indicated:
 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
 
2017
 
2016
 
2017
 
2016
Pressure pumping services (a)
$
24,736,600

 
$
896,847

 
$
53,401,909

 
$
927,542

Well services (b)
344,474

 
247,829

 
344,474

 
247,829

Natural sand proppant production (c)
2,795,370

 
65,184

 
2,969,883

 
157,726

Contract and directional drilling services (d)
3,631,540

 
158,924

 
5,900,817

 
423,095

Other energy services (e)
3,958,043

 
270,386

 
3,958,636

 
418,017

Net change in cash
$
35,466,027

 
$
1,639,170

 
$
66,575,719

 
$
2,174,209

(a).
Capital expenditures primarily for pressure pumping equipment for the six months ended June 30, 2017 and 2016 .
(b).
Capital expenditures primarily for equipment upgrades for the six months ended June 30, 2017 and 2016 .
(c).
Capital expenditures included a conveyor for the six months ended June 30, 2017 and plant additions for the six months ended June 30, 2016 .
(d).
Capital expenditures primarily for upgrades to our rig fleet for the six months ended June 30, 2017 and 2016 .
(e).
Capital expenditures primarily for an intersection upgrade for the six months ended June 30, 2016 . Capital expenditures for the six months ended June 30, 2017 represent property and equipment for energy infrastructure services.


Explanatory Note Regarding Financial Information

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

On October 13, 2016, Mammoth priced 7,750,000 shares of its common stock in its initial public offering (the "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. Unless the context otherwise requires, references in this release to Mammoth or the Company, when used in a historical context for periods prior to October 12, 2016 refer to the Partnership and its subsidiaries. References in this release to Mammoth or the Company, when used for periods beginning on or after October 12, 2016 refer to Mammoth and its subsidiaries.

The 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 24, 2017.

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 our 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 net income (loss) before income taxes prior to depreciation and amortization, impairment of long-lived assets, acquisition related costs, one-time compensation charges associated with the IPO, equity based compensation, interest income, interest expense and other (income) expense, net (which is comprised of the (gain) loss on disposal of long-lived assets) as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

Based on the CODM's assessment, effective December 31, 2016, the Company updated the reportable segments to align with its new CODM designated reporting structure and business activities. The Company now has five segments consisting of pressure pumping services, well services, natural sand proppant, contract land and directional drilling services and other energy services. Prior to this change, the reportable segments were comprised of four segments for financial reporting purposes: completion and production services, completion and production - natural sand proppant, land and directional drilling services and remote accommodation services. We have conformed our presentation for prior periods to reflect this new segment presentation.


4



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, August 3, 2017 at 10:00 a.m. CST (11:00 am EST) to discuss its second quarter 2017 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 56927469. 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 energy service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves. Mammoth’s suite of services includes pressure pumping services, well services, natural sand proppant services, contract land and directional drilling services and other energy services. Other energy services currently consists primarily of remote accommodation services and energy infrastructure 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. Information on our website is not part of this news release.

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 our Annual Report filed on Form 10-K filed with the SEC on February 24, 2017 our Quarterly Reports on Form 10-Q, and our subsequent filings we make with the SEC, including those relating to our acquisitions, 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

5



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.

Contact:
Mammoth Energy Services, Inc., Attention: Don Crist, 14201 Caliber Drive, Suite 300, Oklahoma City, Oklahoma 73134, tel: 405-608-6048


6

MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


ASSETS
 
June 30,
 
December 31,
CURRENT ASSETS
 
2017 (a)
 
2016 (b)
Cash and cash equivalents
 
$
8,549,290

 
$
29,238,618

Accounts receivable, net
 
30,414,421

 
21,169,579

Receivables from related parties
 
45,686,985

 
27,589,283

Inventories
 
10,316,700

 
6,124,201

Prepaid expenses
 
3,647,227

 
4,425,872

Other current assets
 
341,555

 
391,599

Total current assets
 
98,956,178

 
88,939,152

 
 
 
 
 
Property, plant and equipment, net
 
327,080,164

 
242,119,663

Sand reserves
 
75,892,824

 
55,367,295

Intangible assets, net - customer relationships
 
13,962,772

 
15,949,772

Intangible assets, net - trade names
 
6,641,557

 
5,617,057

Goodwill
 
99,562,761

 
88,726,875

Other non-current assets
 
4,821,319

 
5,642,661

Total assets
 
$
626,917,575

 
$
502,362,475

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
53,864,660

 
$
20,469,542

Payables to related parties
 
120,183

 
203,209

Accrued expenses and other current liabilities
 
10,190,094

 
8,546,198

Income taxes payable
 

 
28,156

Total current liabilities
 
64,174,937

 
29,247,105

 
 
 
 
 
Long-term debt
 
65,000,000

 

Deferred income taxes
 
52,307,148

 
47,670,789

Asset retirement obligation
 
2,006,294

 
259,804

Other liabilities
 
3,018,937

 
2,404,422

Total liabilities
 
186,507,316

 
79,582,120

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 14)
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,500,000 and
 
445,000

 
375,000

37,500,000 issued and outstanding at June 30, 2017 and December 31, 2016, respectively.
 
 
 
 
Additional paid in capital
 
505,245,742

 
400,205,921

Member's equity
 

 
81,738,675

Accumulated deficit
 
(62,473,672
)
 
(56,322,878
)
Accumulated other comprehensive loss
 
(2,806,811
)
 
(3,216,363
)
Total equity
 
440,410,259

 
422,780,355

Total liabilities and equity
 
$
626,917,575

 
$
502,362,475


(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented and Stingray Cementing and Stingray Energy Services from June 5, 2017 (the date of their acquisition).
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.



7

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



 
Three Months Ended
 
Six Months Ended
 
June 30,
 
June 30,
REVENUE
2017 (a)
 
2016 (b)
 
2017 (a)
 
2016 (b)
Services revenue
$
29,659,151

 
$
18,650,612

 
$
56,751,033

 
$
46,887,094

Services revenue - related parties
44,602,759

 
39,504,058

 
77,564,416

 
40,650,612

Product revenue
10,395,025

 
1,694,698

 
13,767,088

 
2,976,443

Product revenue - related parties
13,605,124

 
9,313,266

 
25,145,543

 
11,231,344

Total revenue
98,262,059

 
69,162,634

 
173,228,080

 
101,745,493

 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
Services cost of revenue (c)
57,103,703

 
40,171,539

 
102,564,507

 
66,264,915

Services cost of revenue - related parties (c)
262,192

 
80,491

 
692,109

 
197,537

Product cost of revenue (c)
19,974,059

 
10,251,613

 
32,581,324

 
16,432,367

Selling, general and administrative
7,393,076

 
4,989,040

 
13,805,620

 
8,494,669

Selling, general and administrative - related parties
306,630

 
217,098

 
630,884

 
325,343

Depreciation, depletion, accretion and amortization
19,893,399

 
18,810,615

 
37,130,650

 
36,561,687

Impairment of long-lived assets

 
1,870,885

 

 
1,870,885

Total cost and expenses
104,933,059

 
76,391,281

 
187,405,094

 
130,147,403

Operating loss
(6,671,000
)
 
(7,228,647
)
 
(14,177,014
)
 
(28,401,910
)
 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME
 
 
 
 
 
 
 
Interest expense
(1,111,608
)
 
(1,012,031
)
 
(1,508,792
)
 
(2,308,387
)
Bargain purchase gain, net of tax
4,011,512

 

 
4,011,512

 

Other, net
(202,496
)
 
626,716

 
(386,642
)
 
625,726

Total other income (expense)
2,697,408

 
(385,315
)
 
2,116,078

 
(1,682,661
)
Loss before income taxes
(3,973,592
)
 
(7,613,962
)
 
(12,060,936
)
 
(30,084,571
)
(Benefit) provision for income taxes
(2,804,077
)
 
789,375

 
(5,910,142
)
 
1,683,735

Net loss
$
(1,169,515
)
 
$
(8,403,337
)
 
$
(6,150,794
)
 
$
(31,768,306
)
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE LOSS
 
 
 
 
 
 
 
Foreign currency translation adjustment (1)
181,442

 
(5,493
)
 
409,552

 
1,969,858

Comprehensive loss
$
(988,073
)
 
$
(8,408,830
)
 
$
(5,741,242
)
 
$
(29,798,448
)
 
 
 
 
 
 
 
 
Net earnings (loss) per share (basic and diluted)
$
(0.03
)
 
$
(0.28
)
 
$
(0.16
)
 
$
(1.06
)
Weighted average number of shares outstanding
39,500,000

 
30,000,000

 
38,505,525

 
30,000,000

 
 
 
 
 
 
 
 
Pro Forma C Corporation Data:
 
 
 
 
 
 
 
Net loss, as reported
 
 
(7,613,962
)
 
 
 
(30,084,571
)
Pro forma benefit for income taxes
 
 
(2,342,467
)
 
 
 
(3,287,051
)
Pro forma net loss
 
 
(5,271,495
)
 
 
 
(26,797,520
)
Basic and Diluted (Note 9)
 
 
$
(0.14
)
 
 
 
$
(0.71
)
Weighted average pro forma shares outstanding—basic and diluted (Note 9)
 
 
37,500,000

 
 
 
37,500,000

 
 
 
 
 
 
 
 
(1) Net of tax
434,169

 

 
454,312

 

(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented and Stingray Cementing and Stingray Energy Services from June 5, 2017 (the date of their acquisition).
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.
(c) Exclusive of depreciation, depletion, accretion and amortization



8

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


 
Six Months Ended
 
June 30,
Cash flows from operating activities
2017 (a)
 
2016 (b)
Net loss
$
(6,150,794
)
 
$
(31,768,306
)
Adjustments to reconcile net loss to cash provided by operating activities:
 
 
 
Equity based compensation
1,619,893

 

Depreciation, depletion, accretion and amortization
37,130,650

 
36,561,687

Amortization of coil tubing strings
1,045,233

 
962,302

Amortization of debt origination costs
199,403

 
199,403

Bad debt expense
18,980

 
1,764,218

(Gain) loss on disposal of property and equipment
127,153

 
(710,046
)
Gain on bargain purchase
(4,011,512
)
 

Impairment of long-lived assets

 
1,870,885

Deferred income taxes
(6,529,406
)
 
41,292

Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(4,792,555
)
 
(2,562,425
)
Receivables from related parties
(12,995,194
)
 
(7,803,381
)
Inventories
(4,931,651
)
 
30,615

Prepaid expenses and other assets
1,528,346

 
(1,092,731
)
Accounts payable
20,557,001

 
8,008,632

Payables to related parties
(83,079
)
 
(199,694
)
Accrued expenses and other liabilities
1,300,687

 
5,659,053

Income taxes payable
(28,156
)
 
(15,387
)
Net cash provided by operating activities
24,004,999

 
10,946,117

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(66,575,719
)
 
(2,174,209
)
Business acquisitions, net
(39,570,187
)
 

Proceeds from disposal of property and equipment
780,932

 
3,165,519

Business combination cash acquired (Note 3)
2,671,558

 

Net cash (used in) provided by investing activities
(102,693,416
)
 
991,310

 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
79,150,000

 
11,150,000

Repayments of lines of credit
(14,150,000
)
 
(25,752,516
)
Repayment of Stingray acquisition long-term debt
(7,073,854
)
 

Net cash provided by (used in) financing activities
57,926,146

 
(14,602,516
)
Effect of foreign exchange rate on cash
72,943

 
54,163

Net decrease in cash and cash equivalents
(20,689,328
)
 
(2,610,926
)
Cash and cash equivalents at beginning of period
29,238,618

 
4,038,899

Cash and cash equivalents at end of period
$
8,549,290

 
$
1,427,973

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
1,085,851

 
$
2,056,581

Cash paid for income taxes
$
911,700

 
$
2,035,015

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in trade accounts payable
$
7,835,614

 
$
414,795


(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented and Stingray Cementing and Stingray Energy Services from June 5, 2017 (the date of their acquisition).
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.

9

MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED SEGMENT INCOME STATEMENTS (unaudited) (a), (b)


 
Completion and Production
 
 
 
 
Six Months Ended June 30, 2017
Pressure Pumping Services
Well Services
Sand
Drilling
Other Energy Services
Total
Revenue from external customers
$
17,508,098

$
8,796,654

$
13,767,088

$
21,215,222

$
9,231,059

$
70,518,121

Revenue from related parties
$
72,868,938

$
2,687,448

$
25,145,543

$
2,007,505

$
525

$
102,709,959

Cost of revenue
$
64,533,809

$
10,436,065

$
32,581,324

$
22,986,579

$
5,300,163

$
135,837,940

Selling, general and administrative expenses
$
4,179,665

$
1,698,503

$
4,473,436

$
2,728,778

$
1,356,122

$
14,436,504

Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization
$
21,663,562

$
(650,466
)
$
1,857,871

$
(2,492,630
)
$
2,575,299

$
22,953,636

Other expense (income)
$
6,389

$
(1,991
)
$
153,776

$
224,236

$
4,232

$
386,642

Bargain purchase gain
$

$

$
(4,011,512
)
$

$

$
(4,011,512
)
Interest expense
$
431,795

$
(108,376
)
$
485,239

$
657,058

$
43,076

$
1,508,792

Depreciation, depletion, accretion and amortization
$
18,784,446

$
3,428,162

$
3,568,659

$
9,942,310

$
1,407,073

$
37,130,650

Income tax (benefit) provision
$

$
(6,500,514
)
$
8,502

$

$
581,870

$
(5,910,142
)
Net income (loss)
$
2,440,932

$
2,532,253

$
1,653,207

$
(13,316,234
)
$
539,048

$
(6,150,794
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2017
 
 
 
 
 
 
Revenue from external customers
$
8,816,451

$
5,606,522

$
10,395,025

$
11,511,825

$
3,724,353

$
40,054,176

Revenue from related parties
$
41,108,032

$
2,534,553

$
13,605,124

$
959,913

$
261

$
58,207,883

Cost of revenue
$
35,826,369

$
6,636,289

$
19,974,059

$
12,033,156

$
2,870,081

$
77,339,954

Selling, general and administrative expenses
$
2,404,739

$
726,098

$
2,415,883

$
1,433,754

$
719,232

$
7,699,706

Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization
$
11,693,375

$
778,688

$
1,610,207

$
(995,172
)
$
135,301

$
13,222,399

Other expense (income)
$
3,758

$
(3,173
)
$
139,569

$
60,451

$
1,891

$
202,496

Bargain purchase gain
$

$

$
(4,011,512
)
$

$

$
(4,011,512
)
Interest expense
$
303,351

$
(2,474
)
$
352,600

$
439,876

$
18,255

$
1,111,608

Depreciation, depletion, accretion and amortization
$
9,626,553

$
2,219,921

$
2,205,694

$
4,973,682

$
867,549

$
19,893,399

Income tax (benefit) provision
$

$
(2,808,982
)
$
8,502

$

$
(3,597
)
$
(2,804,077
)
Net income (loss)
$
1,759,713

$
1,373,396

$
2,915,354

$
(6,469,181
)
$
(748,797
)
$
(1,169,515
)

10

MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED SEGMENT INCOME STATEMENTS (unaudited) (a), (b)


 
Completion and Production
 
 
 
 
Six Months Ended June 30, 2016
Pressure Pumping Services
Well Services
Sand
Drilling
Other Energy Services
Total
Revenue from external customers
$
18,157,113

$
4,360,611

$
2,976,443

$
9,715,833

$
14,653,537

$
49,863,537

Revenue from related parties
$
38,165,558

$
567,887

$
11,231,344

$
1,916,595

$
572

$
51,881,956

Cost of revenue
$
40,083,680

$
6,962,055

$
16,432,367

$
12,968,054

$
6,448,663

$
82,894,819

Selling, general and administrative expenses
$
2,065,542

$
1,013,478

$
2,109,803

$
2,567,237

$
1,063,952

$
8,820,012

Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization
$
14,173,449

$
(3,047,035
)
$
(4,334,383
)
$
(3,902,863
)
$
7,141,494

$
10,030,662

Other expense (income)
$
23,825

$
(673,145
)
$
72,985

$
(57,574
)
$
8,183

$
(625,726
)
Interest expense
$
368,764

$
149,095

$
211,111

$
1,554,207

$
25,210

$
2,308,387

Depreciation, depletion, accretion and amortization
$
18,913,487

$
2,670,222

$
2,949,851

$
10,945,932

$
1,082,195

$
36,561,687

Impairment of long-lived assets
$
138,587

$
1,384,751

$

$
347,547

$

$
1,870,885

Income tax (benefit) provision
$

$
(3,094
)
$

$

$
1,686,829

$
1,683,735

Net (loss) income
$
(5,271,214
)
$
(6,574,864
)
$
(7,568,330
)
$
(16,692,975
)
$
4,339,077

$
(31,768,306
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30, 2016
 
 
 
 
 
 
Revenue from external customers
$
5,862,584

$
1,662,019

$
1,694,698

$
4,458,095

$
6,667,914

$
20,345,310

Revenue from related parties
$
38,165,558

$
567,887

$
9,313,266

$
770,596

$
17

$
48,817,324

Cost of revenue
$
28,551,790

$
3,034,349

$
10,251,613

$
5,759,398

$
2,906,493

$
50,503,643

Selling, general and administrative expenses
$
1,539,371

$
440,182

$
1,508,533

$
1,264,763

$
453,289

$
5,206,138

Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization
$
13,936,981

$
(1,244,625
)
$
(752,182
)
$
(1,795,470
)
$
3,308,149

$
13,452,853

Other expense (income)
$
43,033

$
(682,545
)
$
53,803

$
(47,500
)
$
6,493

$
(626,716
)
Interest expense
$
131,709

$
50,776

$
106,650

$
701,633

$
21,263

$
1,012,031

Depreciation, depletion, accretion and amortization
$
9,958,270

$
1,272,715

$
1,581,334

$
5,438,551

$
559,745

$
18,810,615

Impairment of long-lived assets
$
138,587

$
1,384,751

$

$
347,547

$

$
1,870,885

Income tax (benefit) provision
$

$
(3,094
)
$

$

$
792,469

$
789,375

Net income (loss)
$
3,665,382

$
(3,267,228
)
$
(2,493,969
)
$
(8,235,701
)
$
1,928,179

$
(8,403,337
)

(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented and Stingray Cementing and Stingray Energy Services from June 5, 2017 (the date of their acquisition).
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.



11

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 depreciation and amortization, impairment of long-lived assets, acquisition related costs, equity based compensation, bargain purchase gain, interest expense, other expense (income), net (which is comprised of the (gain) or loss on disposal of long-lived assets) and (benefit) provision for income taxes. We exclude the items listed above from net income (loss) 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 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 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.


is widely used by investors in the energy services industry to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors;
is a financial measurement that is used by rating agencies, lenders and other parties to evaluate our creditworthiness; and
is used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting.

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.




12

MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


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 Ended
 
Six Months Ended
 
June 30,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net income (loss)
$
(1,169,515
)
 
$
(8,403,337
)
 
$
(6,150,794
)
 
$
(31,768,306
)
Depreciation and amortization expense
19,893,399

 
18,810,615

 
37,130,650

 
36,561,687

Impairment of long-lived assets

 
1,870,885

 

 
1,870,885

Acquisition related costs
961,237

 

 
2,190,749

 

Equity based compensation
1,050,062

 

 
1,619,893

 

Bargain purchase gain
(4,011,512
)
 

 
(4,011,512
)
 

Interest expense
1,111,608

 
1,012,031

 
1,508,792

 
2,308,387

Other expense (income), net
202,496

 
(626,716
)
 
386,642

 
(625,726
)
(Benefit) provision for income taxes
(2,804,077
)
 
789,375

 
(5,910,142
)
 
1,683,735

Adjusted EBITDA
$
15,233,698

 
$
13,452,853

 
$
26,764,278

 
$
10,030,662


Pressure Pumping Services
 
Three Months Ended
Six Months Ended
 
June 30,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net income (loss)
$
1,759,713

 
$
3,665,382

 
$
2,440,932

 
$
(5,271,214
)
Depreciation and amortization expense
9,626,553

 
9,958,270

 
18,784,446

 
18,913,487

Impairment of long-lived assets

 
138,587

 

 
138,587

Equity based compensation
502,901

 

 
774,289

 

Interest expense
303,351

 
131,709

 
431,795

 
368,764

Other (income) expense, net
3,758

 
43,033

 
6,389

 
23,825

Adjusted EBITDA
$
12,196,276

 
$
13,936,981

 
$
22,437,851

 
$
14,173,449


Other Well Services
 
Three Months Ended
Six Months Ended
 
June 30,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net income (loss)
$
1,373,396

 
$
(3,267,228
)
 
$
2,532,253

 
$
(6,574,864
)
Depreciation and amortization expense
2,219,921

 
1,272,715

 
3,428,162

 
2,670,222

Impairment of long-lived assets

 
1,384,751

 

 
1,384,751

Acquisition related costs

 

 
170,132

 

Equity based compensation
90,461

 

 
137,450

 

Interest expense
(2,474
)
 
50,776

 
(108,376
)
 
149,095

Other (income) expense, net
(3,173
)
 
(682,545
)
 
(1,991
)
 
(673,145
)
Provision (benefit) for income taxes
(2,808,982
)
 
(3,094
)
 
(6,500,514
)
 
(3,094
)
Adjusted EBITDA
$
869,149

 
$
(1,244,625
)
 
$
(342,884
)
 
$
(3,047,035
)





13

MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Natural Sand Proppant Services
 
Three Months Ended
Six Months Ended
 
June 30,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net income (loss)
$
2,915,354

 
$
(2,493,969
)
 
$
1,653,207

 
$
(7,568,330
)
Depreciation and amortization expense
2,205,694

 
1,581,334

 
3,568,659

 
2,949,851

Acquisition related costs
916,214

 

 
1,954,079

 

Equity based compensation
182,337

 

 
252,461

 

Bargain purchase gain
(4,011,512
)
 

 
(4,011,512
)
 

Interest expense
352,600

 
106,650

 
485,239

 
211,111

Other (income) expense, net
139,569

 
53,803

 
153,776

 
72,985

Provision for income taxes
8,502

 

 
8,502

 

Adjusted EBITDA
$
2,708,758

 
$
(752,182
)
 
$
4,064,411

 
$
(4,334,383
)

Contract Land and Directional Drilling Services
 
Three Months Ended
Six Months Ended
 
June 30,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net loss
$
(6,469,181
)
 
$
(8,235,701
)
 
$
(13,316,234
)
 
$
(16,692,975
)
Depreciation and amortization expense
4,973,682

 
5,438,551

 
9,942,310

 
10,945,932

Impairment of long-lived assets

 
347,547

 

 
347,547

Acquisition related costs
3,000

 

 
24,515

 

Equity based compensation
180,394

 

 
292,264

 

Interest expense
439,876

 
701,633

 
657,058

 
1,554,207

Other expense (income), net
60,451

 
(47,500
)
 
224,236

 
(57,574
)
Adjusted EBITDA
$
(811,778
)
 
$
(1,795,470
)
 
$
(2,175,851
)
 
$
(3,902,863
)

Other Energy Services
 
Three Months Ended
Six Months Ended
 
June 30,
 
June 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net (loss) income
$
(748,797
)
 
$
1,928,179

 
$
539,048

 
$
4,339,077

Depreciation and amortization expense
867,549

 
559,745

 
1,407,073

 
1,082,195

Impairment of long-lived assets

 

 

 

Acquisition related costs
42,023

 

 
42,023

 

Equity based compensation
93,969

 

 
163,429

 

Interest expense
18,255

 
21,263

 
43,076

 
25,210

Other expense (income), net
1,891

 
6,493

 
4,232

 
8,183

Provision (benefit) for income taxes
(3,597
)
 
792,469

 
581,870

 
1,686,829

Adjusted EBITDA
$
271,293

 
$
3,308,149

 
$
2,780,751

 
$
7,141,494





14