Mammoth Energy Services Inc.
MAMMOTH ENERGY SERVICES, INC. (Form: 8-K, Received: 11/02/2017 06:22:55)




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): November 1, 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  November 1, 2017 , Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the quarter ended September 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  November 1, 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 November 1, 2017 , entitled "Mammoth Energy Services, Inc. Announces Third 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:
November 2, 2017
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 






Item 6. Exhibits

99.1     Press release dated November 1, 2017 , entitled "Mammoth Energy Services, Inc. Announces Third Quarter 2017 Operational and Financial Results."




EXHIBIT 99.1

MAMMOTHA04.JPG

FOR IMMEDIATE RELEASE
November 1, 2017

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


OKLAHOMA CITY, OKLAHOMA, November 1, 2017 - 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, 2017 .

Key Highlights for and subsequent to the Third Quarter 2017:


Total revenue was $149.3 million for the three months ended September 30, 2017 , up 136% from $63.3 million for the three months ended September 30, 2016 and up 52% sequentially from $98.3 million for the three months ended June 30, 2017.
Net loss for the three months ended September 30, 2017 was $0.8 million , an improvement of $2.2 million from a net loss of $3.0 million for the three months ended September 30, 2016 . Mammoth reported Adjusted EBITDA (as defined and reconciled below) of $28.0 million and $17.3 million for the three months ended September 30, 2017 and 2016 , respectively.
Expanded pressure pumping, sand deliveries and last-mile trucking into the SCOOP/STACK with the startup of our fifth pressure pumping fleet in August 2017 and the startup of our sixth fleet on October 20, 2017. Pricing is continuing to increase pricing across both pressure pumping and sand along with our other completions services.
Introduced our broadened energy services offering with the formation of Cobra, an electric utility infrastructure business active across 5 states and recently completed storm restoration work in Texas and Florida. Cobra signed a contract, worth up to $200 million in revenue, to aid in the restoration of the electric utility infrastructure in Puerto Rico.

Arty Straehla, Mammoth's Chief Executive Officer, stated, “The third quarter of 2017 was a very active one for the entire Mammoth team and a pivotal point in our portfolio’s development. We expanded our pressure pumping segment organically, integrated the two sand mines that were purchased in the prior quarter and rapidly expanded the development of our energy infrastructure business. Our team executed flawlessly and the fruits of their hard work are starting to show up in our financial results across the broader portfolio of services. With a majority of our growth capex for 2017 already spent, we expect to begin generating free cash flow later this year, while we continue to explore ways to grow and pay down debt in the interim."

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenue of $75.7 million on 1,617 stages for the three months ended September 30, 2017 compared to $35.5 million on 511 stages for the three months ended September 30, 2016 , increases of 113% and 216%, respectively. Sequentially, the number of stages pumped during the quarter grew by 26% from 1,287 in the three months ended June 30, 2017. We were nearly fully utilized during 3Q 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 $166.1 million on 3,764 stages for the nine months ended September 30, 2017 compared to $91.9 million on 1,678 stages for the nine months ended September 30, 2016 , increases of 81% and 124%, respectively.

During the three months ended September 30, 2017, we expanded pressure pumping operations into the SCOOP/STACK. Demand remains strong with our frac calendar fully booked into early 2018 in both the Utica and Mid-Continent. All six of our fleets are operating today for quality operators.

Well Services

Mammoth's well services division contributed revenue of $16.2 million for the three months ended September 30, 2017 compared to $2.3 million for the three months ended September 30, 2016 , an increase of 604%. The acquisitions of Stingray Cementing LLC and Stingray Energy Services LLC were completed on June 5, 2017. The inclusion of these businesses added $9.1 million in revenue during the three months ended September 30, 2017 . Our coil tubing services accounted for $4.1 million of our operating division increase as a result of an increase in utilization and an increase in average day rates from approximately $16,800 for the three months ended September 30, 2016 to approximately $30,200 for the three months ended September 30, 2017 . Our flowback services accounted for $0.7 million of our operating division increase as a result of an increase in utilization.

Mammoth's well services division contributed revenue of $27.6 million for the nine months ended September 30, 2017 compared to $7.2 million for the nine months ended September 30, 2016 , an increase of 283%. Stingray Cementing and Stingray Energy Services added $11.7 million in revenue. Our coil tubing services accounted for $7.9 million of our operating division increase as a result of an increase utilization and an increase in average day rates from approximately $17,933 for the nine months ended September 30, 2016 to approximately $26,933 for the nine months ended September 30, 2017 . Our flowback services accounted for $0.8 million of our operating division increase as a result of increased utilization.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenue of $29.3 million for the three months ended September 30, 2017 compared to $8.2 million for the three months ended September 30, 2016 , an increase of 257%. The Company sold 438,800 and 188,018 tons of sand for the three months ended September 30, 2017 and 2016 , respectively. Sequentially, sand volumes sold increased by approximately 25% in the third quarter of 2017 as compared to the second quarter of 2017.

Mammoth's natural sand proppant division contributed revenue of $68.2 million for the nine months ended September 30, 2017 compared to $22.4 million for the nine months ended September 30, 2016 , an increase of 204%. The Company sold 1,035,506 and 447,908 tons of sand for the nine months ended September 30, 2017 and 2016 , respectively.

The average FOB mine gate price increased to $41.14 per ton in the three months ended September 30, 2017, as industry activity increased and the demand for frac sand remained strong. Our sales of purchased sand, as a percentage of overall sales, fell to 25% in 3Q 2017 (from 49% in 2Q 2017) as the production from our mines increased.

Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling services division contributed revenue of $13.6 million for the three months ended September 30, 2017 compared to $8.7 million for the three months ended September 30, 2016 , an increase of 56%. 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 services division contributed revenue of $36.9 million for the nine months ended September 30, 2017 compared to $20.3 million for the nine months ended September 30, 2016 , an increase of 82%. The increase in revenue resulted primarily from increased utilization and day rates for both land rigs and directional drilling services.

Five horizontal rigs on average operated in 3Q 2017, at an average day rate of $14,800, 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.


2



Other Energy Services

Mammoth's other energy services division contributed revenue of $14.5 million and $8.6 million for the three months ended September 30, 2017 and 2016 , respectively. The increase was driven by our energy infrastructure operations that accounted for $13.5 million of the revenue in the third quarter of 2017. The increase from infrastructure services was partially offset by a decrease from our remote accommodations division driven by decreased occupancy levels.

Mammoth's other energy services division contributed revenues of $23.7 million and $23.3 million for the nine months ended September 30, 2017 and 2016 , respectively.

During 3Q 2017, we deployed capital to grow our electric utility infrastructure business, Cobra. This business currently has 58 crews working in two geographic areas of the U.S. and participated in the restoration of electric utility infrastructure in both Texas and Florida following Hurricanes Harvey and Irma. Cobra also recently signed a contract to aid in the rebuilding of electric utility infrastructure in Puerto Rico, which provides for revenues of up to $200 million.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses increased by 150% to $8.0 million from $3.2 million for the three months ended September 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 88% to $22.5 million from $12.0 million for the nine months ended September 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 5.4% in the third quarter of 2017 as compared to 5% during the third quarter of 2016.

Liquidity

As of September 30, 2017 , we had net debt of approximately $80 million reflecting $94.0 million in borrowings outstanding under our $170.0 million revolving credit facility and $14.3 million of cash on hand. We have approximately $75.2 million of available borrowing capacity.

3



Capital Expenditures

The following table summarizes our capital expenditures by operating division for the periods indicated:

 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2017
 
2016
 
2017
 
2016
Pressure pumping services (a)
$
19,580,804

 
$
335,312

 
$
72,982,713

 
$
1,262,854

Well services (b)
777,399

 
156,783

 
1,121,873

 
404,612

Natural sand proppant services (c)
4,927,935

 
359,656

 
7,897,818

 
522,267

Contract and directional drilling services (d)
2,356,885

 
1,069,381

 
8,257,702

 
1,492,476

Other energy services (e)
8,054,748

 
12,706

 
12,013,384

 
425,838

Net change in cash
$
35,697,771

 
$
1,933,838

 
$
102,273,490

 
$
4,108,047

(a).
Capital expenditures primarily for pressure pumping equipment for the three and nine months ended September 30, 2017 and 2016 .
(b).
Capital expenditures primarily for equipment upgrades for the three and nine months ended September 30, 2017 and 2016 .
(c).
Capital expenditures included a conveyor and plant additions for the three and nine months ended September 30, 2017 and 2016 .
(d).
Capital expenditures primarily for upgrades to our rig fleet for the three and nine months ended September 30, 2017 and 2016 .
(e).
Capital expenditures primarily for an intersection upgrade for the nine months ended September 30, 2016 . Capital expenditures for the nine months ended September 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. Subsequent 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 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, November 2, 2017 at 10:00 a.m. CST (11:00 am EST) to discuss its third 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 9587499. 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 and energy infrastructure. 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 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, Current Reports on Form 8-K and other filings we make with the Securities and Exchange Commission (the “SEC”), including those relating to our acquisitions and our contracts, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks relating to economic conditions; volatility of crude oil and natural gas commodity prices; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; solvency of counterparties to our contracts and their ability to timely pay for our services; oil and gas market conditions; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; operating risks; the adequacy of our capital resources and liquidity; weather; litigation; competition in the oil and natural gas industry; and costs and availability of resources.

5




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.

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

Media Contact:
Andrew Wilson
Andrew.wilson@edelman.com
212-704-4490


6

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


ASSETS
 
September 30,
 
December 31,
CURRENT ASSETS
 
2017
 
2016 (a)
Cash and cash equivalents
 
$
14,278,328

 
$
29,238,618

Accounts receivable, net
 
65,490,189

 
21,169,579

Receivables from related parties
 
44,772,661

 
27,589,283

Inventories
 
12,164,225

 
6,124,201

Prepaid expenses
 
2,753,800

 
4,425,872

Other current assets
 
335,513

 
391,599

Total current assets
 
139,794,716

 
88,939,152

 
 
 
 
 
Property, plant and equipment, net
 
347,317,716

 
242,119,663

Sand reserves
 
75,210,457

 
55,367,295

Intangible assets, net - customer relationships
 
11,770,375

 
15,949,772

Intangible assets, net - trade names
 
6,722,197

 
5,617,057

Goodwill
 
99,810,819

 
88,726,875

Other non-current assets
 
4,509,500

 
5,642,661

Total assets
 
$
685,135,780

 
$
502,362,475

LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
70,229,349

 
$
20,469,542

Payables to related parties
 
211,352

 
203,209

Accrued expenses and other current liabilities
 
21,556,542

 
8,546,198

Income taxes payable
 

 
28,156

Total current liabilities
 
91,997,243

 
29,247,105

 
 
 
 
 
Long-term debt
 
94,000,000

 

Deferred income taxes
 
51,086,739

 
47,670,789

Asset retirement obligation
 
2,031,119

 
259,804

Other liabilities
 
4,755,414

 
2,404,422

Total liabilities
 
243,870,515

 
79,582,120

 
 
 
 
 
COMMITMENTS AND CONTINGENCIES (Note 14)
 
 
 
 
 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,502,223 and
 
445,022

 
375,000

37,500,000 issued and outstanding at September 30, 2017 and December 31, 2016, respectively.
 
 
 
 
Additional paid in capital
 
506,274,038

 
400,205,921

Member's equity
 

 
81,738,675

Accumulated deficit
 
(63,274,499
)
 
(56,322,878
)
Accumulated other comprehensive loss
 
(2,179,296
)
 
(3,216,363
)
Total equity
 
441,265,265

 
422,780,355

Total liabilities and equity
 
$
685,135,780

 
$
502,362,475



(a) 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
 
Nine Months Ended
 
September 30,
 
September 30,
REVENUE
2017
 
2016 (b)
 
2017 (a)
 
2016 (b)
Services revenue
$
63,112,621

 
$
19,077,680

 
$
119,863,654

 
$
65,964,774

Services revenue - related parties
56,860,754

 
36,028,399

 
134,425,170

 
76,679,011

Product revenue
15,276,279

 
1,675,230

 
29,043,367

 
4,651,673

Product revenue - related parties
14,055,246

 
6,557,237

 
39,200,789

 
17,788,581

Total revenue
149,304,900

 
63,338,546

 
322,532,980

 
165,084,039

 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
Services cost of revenue
89,345,946

 
35,850,660

 
191,910,453

 
102,113,120

Services cost of revenue - related parties
8,899

 
587,087

 
701,008

 
787,079

Product cost of revenue
25,177,849

 
6,429,040

 
57,759,173

 
22,861,407

Selling, general and administrative
7,667,419

 
3,063,445

 
21,473,039

 
11,558,114

Selling, general and administrative - related parties
355,242

 
131,162

 
986,126

 
456,505

Depreciation, depletion, accretion and amortization
27,223,733

 
17,921,471

 
64,354,383

 
54,483,158

Impairment of long-lived assets

 

 

 
1,870,885

Total cost and expenses
149,779,088

 
63,982,865

 
337,184,182

 
194,130,268

Operating loss
(474,188
)
 
(644,319
)
 
(14,651,202
)
 
(29,046,229
)
 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME
 
 
 
 
 
 
 
Interest expense
(1,420,067
)
 
(1,024,514
)
 
(2,928,859
)
 
(3,332,901
)
Bargain purchase gain, net of tax

 

 
4,011,512

 

Other, net
(319,252
)
 
(253,832
)
 
(705,894
)
 
371,894

Total other (expense) income
(1,739,319
)
 
(1,278,346
)
 
376,759

 
(2,961,007
)
Loss before income taxes
(2,213,507
)
 
(1,922,665
)
 
(14,274,443
)
 
(32,007,236
)
(Benefit) provision for income taxes
(1,412,680
)
 
1,055,961

 
(7,322,822
)
 
2,739,696

Net loss
$
(800,827
)
 
$
(2,978,626
)
 
$
(6,951,621
)
 
$
(34,746,932
)
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE INCOME (LOSS)
 
 
 
 
 
 
 
Foreign currency translation adjustment (1)
627,515

 
(386,265
)
 
1,037,067

 
1,583,593

Comprehensive loss
$
(173,312
)
 
$
(3,364,891
)
 
$
(5,914,554
)
 
$
(33,163,339
)
 
 
 
 
 
 
 
 
Net loss per share (basic and diluted)
$
(0.02
)
 
$
(0.10
)
 
$
(0.17
)
 
$
(1.16
)
Weighted average number of shares outstanding
44,501,885

 
30,000,000

 
40,526,276

 
30,000,000

 
 
 
 
 
 
 
 
(1) Net of tax
357,594

 

 
811,906

 

(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented.
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.


8

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


 
Nine Months Ended
 
September 30,
Cash flows from operating activities
2017 (a)
 
2016 (b)
Net loss
$
(6,951,621
)
 
$
(34,746,932
)
Adjustments to reconcile net loss to cash provided by operating activities:
 
 
 
Equity based compensation
2,648,211

 
(18,683
)
Depreciation, depletion, accretion and amortization
64,354,383

 
54,483,158

Amortization of coil tubing strings
2,144,231

 
1,386,856

Amortization of debt origination costs
299,104

 
452,343

Bad debt expense
117,426

 
1,779,870

(Gain) loss on disposal of property and equipment
125,653

 
(426,917
)
Gain on bargain purchase
(4,011,512
)
 

Impairment of long-lived assets

 
1,870,885

Deferred income taxes
(8,151,410
)
 
(18,906
)
Changes in assets and liabilities, net of acquisitions of businesses:
 
 
 
Accounts receivable, net
(37,439,781
)
 
(2,139,172
)
Receivables from related parties
(12,080,870
)
 
167,964

Inventories
(7,878,174
)
 
(119,260
)
Prepaid expenses and other assets
2,643,797

 
59,940

Accounts payable
30,444,904

 
2,099,991

Payables to related parties
7,934

 
(394,292
)
Accrued expenses and other liabilities
14,392,715

 
(1,292,176
)
Income taxes payable
(28,156
)
 
(4,052
)
Net cash provided by operating activities
40,636,834

 
23,140,617

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(102,273,490
)
 
(4,108,047
)
Business acquisitions
(42,008,187
)
 

Proceeds from disposal of property and equipment
782,432

 
3,399,705

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

 

Net cash used in investing activities
(140,827,687
)
 
(708,342
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings from lines of credit
118,850,000

 
22,776,411

Repayments of lines of credit
(24,850,000
)
 
(45,776,411
)
Repayment of Stingray acquisition long-term debt
(8,851,063
)
 

Net cash provided by (used in) financing activities
85,148,937

 
(23,000,000
)
Effect of foreign exchange rate on cash
81,626

 
186,967

Net decrease in cash and cash equivalents
(14,960,290
)
 
(380,758
)
Cash and cash equivalents at beginning of period
29,238,618

 
4,038,899

Cash and cash equivalents at end of period
$
14,278,328

 
$
3,658,141

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
2,300,250

 
$
2,972,072

Cash paid for income taxes
$
840,421

 
$
2,755,562

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in trade accounts payable
$
13,647,557

 
$
1,832,892

Acquisition of Sturgeon, Stingray Cementing LLC and Stingray Energy Services LLC (Note 3)
$
23,090,580

 
$

(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented.
(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)

 
Completion and Production
 
 
 
 
Nine Months Ended September 30, 2017 (a)
Pressure Pumping Services
Well Services
Sand
Drilling
Other Energy Services
Total
Revenue from external customers
$
46,511,384

$
15,852,372

$
29,043,367

$
33,805,844

$
23,694,054

$
148,907,021

Revenue from related parties
$
119,570,520

$
11,793,299

$
39,200,789

$
3,060,826

$
525

$
173,625,959

Cost of revenue
$
117,494,570

$
24,288,693

$
57,759,173

$
34,584,336

$
16,243,862

$
250,370,634

Selling, general and administrative expenses
$
6,690,812

$
2,789,881

$
6,314,182

$
4,103,053

$
2,561,237

$
22,459,165

Earnings before interest, other expense, impairment, taxes and depreciation and amortization
$
41,896,522

$
567,097

$
4,170,801

$
(1,820,719
)
$
4,889,480

$
49,703,181

Other expense
$
126,650

$
36,195

$
251,520

$
262,560

$
28,969

$
705,894

Bargain purchase gain
$

$

$
(4,011,512
)
$

$

$
(4,011,512
)
Interest expense (income)
$
1,023,519

$
(14,019
)
$
572,096

$
1,227,422

$
119,841

$
2,928,859

Depreciation, depletion, accretion and amortization
$
31,823,408

$
7,939,784

$
6,603,001

$
14,978,300

$
3,009,890

$
64,354,383

Income tax (benefit) provision
$

$
(7,778,970
)
$
32,326

$

$
423,822

$
(7,322,822
)
Net income (loss)
$
8,922,945

$
384,107

$
723,370

$
(18,289,001
)
$
1,306,958

$
(6,951,621
)
Total expenditures for property, plant and equipment
$
72,982,713

$
1,121,873

$
7,897,818

$
8,257,702

$
12,013,384

$
102,273,490

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2017
 
 
 
 
 
 
Revenue from external customers
$
29,003,286

$
7,055,718

$
15,276,279

$
12,590,622

$
14,462,995

$
78,388,900

Revenue from related parties
$
46,701,582

$
9,105,851

$
14,055,246

$
1,053,321

$

$
70,916,000

Cost of revenue
$
52,960,761

$
13,852,628

$
25,177,849

$
11,597,757

$
10,943,699

$
114,532,694

Selling, general and administrative expenses
$
2,511,147

$
1,091,378

$
1,840,746

$
1,374,275

$
1,205,115

$
8,022,661

Earnings before interest, other expense, impairment, taxes and depreciation and amortization
$
20,232,960

$
1,217,563

$
2,312,930

$
671,911

$
2,314,181

$
26,749,545

Other expense
$
120,261

$
38,186

$
97,744

$
38,324

$
24,737

$
319,252

Interest expense
$
591,724

$
94,357

$
86,857

$
570,364

$
76,765

$
1,420,067

Depreciation, depletion, accretion and amortization
$
13,038,962

$
4,511,622

$
3,034,342

$
5,035,990

$
1,602,817

$
27,223,733

Income tax (benefit) provision
$

$
(1,278,456
)
$
23,824

$

$
(158,048
)
$
(1,412,680
)
Net income (loss)
$
6,482,013

$
(2,148,146
)
$
(929,837
)
$
(4,972,767
)
$
767,910

$
(800,827
)
Total expenditures for property, plant and equipment
$
19,580,804

$
777,399

$
4,927,935

$
2,356,885

$
8,054,748

$
35,697,771


10

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

 
Completion and Production
 
 
 
 
Nine Months Ended September 30, 2016 (b)
Pressure Pumping Services
Well Services
Sand
Drilling
Other Energy Services
Total
Revenue from external customers
$
18,294,739

$
6,470,485

$
4,651,673

$
17,946,458

$
23,253,092

$
70,616,447

Revenue from related parties
$
73,559,413

$
732,740

$
17,788,581

$
2,381,446

$
5,412

$
94,467,592

Cost of revenue
$
60,866,617

$
10,030,214

$
22,861,407

$
22,010,295

$
9,993,073

$
125,761,606

Selling, general and administrative expenses
$
2,981,718

$
1,512,824

$
2,525,310

$
3,353,243

$
1,641,524

$
12,014,619

Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization
$
28,005,817

$
(4,339,813
)
$
(2,946,463
)
$
(5,035,634
)
$
11,623,907

$
27,307,814

Other expense (income)
$
25,087

$
(671,986
)
$
82,422

$
179,639

$
12,944

$
(371,894
)
Interest expense
$
502,781

$
178,584

$
319,855

$
2,272,913

$
58,768

$
3,332,901

Depreciation, depletion, accretion and amortization
$
27,964,092

$
3,903,924

$
4,734,540

$
16,243,626

$
1,636,976

$
54,483,158

Impairment of long-lived assets
$
138,587

$
1,384,751

$

$
347,547

$

$
1,870,885

Income tax provision
$

$
2,835

$
3,716

$

$
2,733,145

$
2,739,696

Net (loss) income
$
(624,730
)
$
(9,137,921
)
$
(8,086,996
)
$
(24,079,359
)
$
7,182,074

$
(34,746,932
)
Total expenditures for property, plant and equipment
$
1,262,854

$
404,612

$
522,267

$
1,492,476

$
425,838

$
4,108,047

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30, 2016 (b)
 
 
 
 
 
 
Revenue from external customers
$
137,626

$
2,109,874

$
1,675,230

$
8,230,625

$
8,599,555

$
20,752,910

Revenue from related parties
$
35,393,855

$
164,854

$
6,557,237

$
464,850

$
4,840

$
42,585,636

Cost of revenue
$
20,782,936

$
3,068,159

$
6,429,040

$
9,042,242

$
3,544,410

$
42,866,787

Selling, general and administrative expenses
$
916,176

$
499,346

$
415,505

$
786,008

$
577,572

$
3,194,607

Earnings before interest, other expense, impairment, taxes and depreciation and amortization
$
13,832,369

$
(1,292,777
)
$
1,387,922

$
(1,132,775
)
$
4,482,413

$
17,277,152

Other expense
$
1,262

$
1,159

$
9,439

$
237,211

$
4,761

$
253,832

Interest expense
$
134,017

$
29,489

$
108,744

$
718,706

$
33,558

$
1,024,514

Depreciation, depletion, accretion and amortization
$
9,050,605

$
1,233,702

$
1,784,689

$
5,297,694

$
554,781

$
17,921,471

Impairment of long-lived assets
$

$

$

$

$

$

Income tax provision
$

$
5,929

$
3,716

$

$
1,046,316

$
1,055,961

Net income (loss)
$
4,646,485

$
(2,563,056
)
$
(518,666
)
$
(7,386,386
)
$
2,842,997

$
(2,978,626
)
Total expenditures for property, plant and equipment
$
335,312

$
156,783

$
359,656

$
1,069,381

$
12,706

$
1,933,838

(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented.
(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, depletion, accretion 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 used in this release may not be comparable to similarly titled measures of other companies or used in various agreements.




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
 
Nine Months Ended
 
September 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net loss
$
(800,827
)
 
$
(2,978,626
)
 
$
(6,951,621
)
 
$
(34,746,932
)
Depreciation, depletion, accretion and amortization expense
27,223,733

 
17,921,471

 
64,354,383

 
54,483,158

Impairment of long-lived assets

 

 

 
1,870,885

Acquisition related costs
264,091

 

 
2,454,840

 

Equity based compensation
1,028,317

 
(18,683
)
 
2,648,210

 
(18,683
)
Bargain purchase gain

 

 
(4,011,512
)
 

Interest expense
1,420,067

 
1,024,514

 
2,928,859

 
3,332,901

Other expense (income), net
319,252

 
253,832

 
705,894

 
(371,894
)
(Benefit) provision for income taxes
(1,412,680
)
 
1,055,961

 
(7,322,822
)
 
2,739,696

Adjusted EBITDA
$
28,041,953

 
$
17,258,469

 
$
54,806,231

 
$
27,289,131


Pressure Pumping Services
 
Three Months Ended
Nine Months Ended
 
September 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net income (loss)
$
6,482,013

 
$
4,646,485

 
$
8,922,945

 
$
(624,730
)
Depreciation and amortization expense
13,038,962

 
9,050,605

 
31,823,408

 
27,964,092

Impairment of long-lived assets

 

 

 
138,587

Acquisition related costs
500

 

 
500

 

Equity based compensation
428,398

 

 
1,202,687

 

Interest expense
591,724

 
134,017

 
1,023,519

 
502,781

Other expense, net
120,261

 
1,262

 
126,650

 
25,087

Adjusted EBITDA
$
20,661,858

 
$
13,832,369

 
$
43,099,709

 
$
28,005,817








13

MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


Other Well Services
 
Three Months Ended
Nine Months Ended
 
September 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net (loss) income
$
(2,148,146
)
 
$
(2,563,056
)
 
$
384,107

 
$
(9,137,921
)
Depreciation and amortization expense
4,511,622

 
1,233,702

 
7,939,784

 
3,903,924

Impairment of long-lived assets

 

 

 
1,384,751

Acquisition related costs
65,394

 

 
235,526

 

Equity based compensation
127,930

 
(18,683
)
 
265,380

 
(18,683
)
Interest expense, net
94,357

 
29,489

 
(14,019
)
 
178,584

Other expense (income), net
38,186

 
1,159

 
36,195

 
(671,986
)
(Benefit) provision for income taxes
(1,278,456
)
 
5,929

 
(7,778,970
)
 
2,835

Adjusted EBITDA
$
1,410,887

 
$
(1,311,460
)
 
$
1,068,003

 
$
(4,358,496
)

Natural Sand Proppant Services
 
Three Months Ended
Nine Months Ended
 
September 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net (loss) income
$
(929,837
)
 
$
(518,666
)
 
$
723,370

 
$
(8,086,996
)
Depreciation, depletion, accretion and amortization expense
3,034,342

 
1,784,689

 
6,603,001

 
4,734,540

Acquisition related costs
166,654

 

 
2,120,733

 

Equity based compensation
271,762

 

 
524,223

 

Bargain purchase gain

 

 
(4,011,512
)
 

Interest expense
86,857

 
108,744

 
572,096

 
319,855

Other expense, net
97,744

 
9,439

 
251,520

 
82,422

Provision for income taxes
23,824

 
3,716

 
32,326

 
3,716

Adjusted EBITDA
$
2,751,346

 
$
1,387,922

 
$
6,815,757

 
$
(2,946,463
)

Contract Land and Directional Drilling Services
 
Three Months Ended
Nine Months Ended
 
September 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net loss
$
(4,972,767
)
 
$
(7,386,386
)
 
$
(18,289,001
)
 
$
(24,079,359
)
Depreciation and amortization expense
5,035,990

 
5,297,694

 
14,978,300

 
16,243,626

Impairment of long-lived assets

 

 

 
347,547

Acquisition related costs
(16,328
)
 

 
8,187

 

Equity based compensation
137,637

 

 
429,901

 

Interest expense
570,364

 
718,706

 
1,227,422

 
2,272,913

Other expense, net
38,324

 
237,211

 
262,560

 
179,639

Adjusted EBITDA
$
793,220

 
$
(1,132,775
)
 
$
(1,382,631
)
 
$
(5,035,634
)








14

MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES



Other Energy Services
 
Three Months Ended
Nine Months Ended
 
September 30,
 
September 30,
Reconciliation of Adjusted EBITDA to net income (loss):
2017
 
2016
 
2017
 
2016
Net income
$
767,910

 
$
2,842,997

 
$
1,306,958

 
$
7,182,074

Depreciation and amortization expense
1,602,817

 
554,781

 
3,009,890

 
1,636,976

Impairment of long-lived assets

 

 

 

Acquisition related costs
47,871

 

 
89,894

 

Equity based compensation
62,590

 

 
226,019

 

Interest expense
76,765

 
33,558

 
119,841

 
58,768

Other expense, net
24,737

 
4,761

 
28,969

 
12,944

(Benefit) provision for income taxes
(158,048
)
 
1,046,316

 
423,822

 
2,733,145

Adjusted EBITDA
$
2,424,642

 
$
4,482,413

 
$
5,205,393

 
$
11,623,907




15