Document




UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 22, 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.)
 
 
 
4727 Gaillardia Parkway, Suite 200
Oklahoma City, Oklahoma
 
73142
(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 February 22, 2017, Mammoth Energy Services, Inc. (the “Company”) issued a press release announcing its financial and operational results for the quarter and year ended December 31, 2016. 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 February 22, 2017, the Company also plans to post 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 February 22, 2017, entitled "Mammoth Energy Services, Inc. Announces Fourth Quarter and Full
Year 2016 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:
February 23, 2017
 
By:
 
/s/ Mark Layton
 
 
 
 
 
Mark Layton
 
 
 
 
 
Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 






Item 9.01 Exhibits

99.1    Press release dated February 22, 2017, entitled "Mammoth Energy Services, Inc. Announces Fourth Quarter and Full
Year 2016 Operational and Financial Results."



Exhibit

EXHIBIT 99.1
https://cdn.kscope.io/27f9a6b5476fb0d329960b4f90ff78ab-mammotha01.jpg

FOR IMMEDIATE RELEASE
February 22, 2017


Mammoth Energy Services, Inc. Announces
Fourth Quarter and Full Year 2016 Operational and Financial Results


OKLAHOMA CITY, OKLAHOMA, February 22, 2017 - Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the fourth quarter and full year ended December 31, 2016. Key information related to Mammoth for the reporting periods is as follows:

Key Highlights for Fourth Quarter 2016:

Total revenue for the three months ended December 31, 2016 and 2015 was $64.8 million and $53.8 million, respectively. Total revenue for the years ended December 31, 2016 and 2015 was $231.0 million and $359.9 million, respectively.

Net loss for the three months ended December 31, 2016 and 2015 was $56.5 million and $20.4 million, respectively. Net loss for the years ended December 31, 2016 and 2015 was $88.4 million and $27.2 million, respectively. Mammoth reported Adjusted EBITDA of $14.3 million and $7.2 million for the three months ended December 31, 2016 and 2015, respectively. Adjusted EBITDA for the years ended December 31, 2016 and 2015 was $42.4 million and $63.0 million, respectively.

Organically expanding Pressure Pumping fleet to nearly 300,000 hydraulic horsepower ("Hhp") through the ordering of 132,500 Hhp and related equipment, which is expected to be delivered during the first half of 2017, at a cost of under $500/Hhp.

Announced 2017 capital expenditure budget of $120.0 million primarily for the acquisition of 132,500 Hhp, the upgrading of two horizontal rigs, and expansion of last-mile logistics.

Restarted Muskie processing facility due to increased customer demand and recent increase in pricing.

Our liquidity at year-end 2016, comprised of cash on hand of $28.7 million and an undrawn revolving credit facility with a borrowing base of $146.2 million, was approximately $175 million.

Adjusted EBITDA is a non-GAAP financial measure. Reconciliations of this measure to a financial measure calculated in accordance with generally accepted accounting principles ("GAAP") are provided on pages 8 - 10 of this release.

Arty Straehla, Chief Executive Officer, commented, “I am very proud of the way the Mammoth team responded to an adverse environment in 2016. We executed at a high level as a team which allowed us to outperform analyst expectations. The plan outlined during our IPO process to grow organically, while evaluating accretive acquisitions, is on track and should position us to capitalize on an improving market. Once the 132,500 Hhp and related equipment on order is delivered, our six high pressure fleets will give us further scale in both the Utica and the SCOOP/STACK. We intend to grow further in the service areas experiencing increasing customer demand, including pressure pumping, sand and last-mile logistics to further integrate our product offering.”





Pressure Pumping Services

Mammoth's pressure pumping segment contributed revenues and stages completed of $32.3 million on 764 stages and $25.7 million on 497 stages for the three months ended December 31, 2016 and 2015, respectively. The pressure pumping segment contributed revenues of $124.3 million on 2,442 stages and $170.0 million on 2,963 stages for the years ended December 31, 2016 and 2015, respectively. Utilization was 63% and 50% for the three and twelve months ended December 31, 2016, on two active spreads, as compared to 26% and 63% for the three and twelve months ended December 31, 2015, on three active spreads.

Cost of revenue increased by 19% to $21.5 million from $18.1 million for the three months ended December 31, 2016 and 2015, respectively. Cost of revenue decreased by 34% to $86.8 million from $131.7 million for the years ended December 31, 2016 and 2015, respectively.
Well Services

Mammoth's well services segment contributed revenues of $2.8 million and $3.6 million for the three months ended December 31, 2016 and 2015, respectively. The well services segment contributed revenues of $10.0 million and $28.9 million for the years ended December 31, 2016 and 2015, respectively. Our coil tubing division revenue declined as a result of decreases in average day rates and our flowback services declined as a result of discontinuing our flowback operations in the Appalachian Basin in December 2015 combined with a decline in both pricing and utilization of such services in our other basins.

Cost of revenue decreased by 26% to $3.5 million from $4.7 million for the three months ended December 31, 2016 and 2015, respectively. Cost of revenue decreased by 52% to $13.5 million from $28.1 million for the years ended December 31, 2016 and 2015, respectively.
Natural Sand Proppant Production

Mammoth's natural sand proppant ("sand") segment contributed revenues of $10.4 million and $7.3 million for the three months ended December 31, 2016 and 2015, respectively. The sand segment contributed revenues of $33.8 million and $52.8 million for the years ended December 31, 2016 and 2015, respectively. The Company sold 195,400 and 83,500 tons of sand for the three months ended December 31, 2016 and 2015, respectively, and 575,400 and 512,700 for the years ended December 31, 2016 and 2015, respectively. At December 31, 2016, the Company was not using its Muskie processing plant to produce sand as a result of the decline in commodity pricing and the resulting decrease in completion activity. However, based on recent increases in demand for sand and rising prices, Mammoth recently returned this plant to operation and the first shipments from this plant began in February 2017. The Company expects this plant to reach full utilization of approximately 58,300 tons per month by April 2017.

Cost of revenue increased by 80% to $8.5 million from $4.7 million for the three months ended December 31, 2016 and 2015, respectively. Cost of revenue decreased by 36% to $28.2 million from $43.9 million for the years ended December 31, 2016 and 2015, respectively.
Contract Land and Directional Drilling Services

Mammoth's contract land and directional drilling ("drilling") segment contributed revenues of $11.7 million and $9.9 million for the three months ended December 31, 2016 and 2015, respectively. The drilling segment contributed revenues of $32.0 million and $73.0 million for the years ended December 31, 2016 and 2015, respectively. The changes in revenues resulted primarily from changes in utilization and day rates for both land rigs and directional drilling services.

Cost of revenue increased by 8% to $9.8 million from $9.1 million for the three months ended December 31, 2016 and 2015, respectively. Cost of revenue decreased by 45% to $31.8 million from $57.5 million for the years ended December 31, 2016 and 2015, respectively.
Other Energy Services

Mammoth's other energy services segment contributed revenues of $7.6 million and $7.3 million for the three months ended December 31, 2016 and 2015, respectively. The other energy services segment contributed revenues of $30.9 million and $35.3 million for the years ended December 31, 2016 and 2015, respectively. The changes were primarily driven by occupancy levels for the respective periods.

2




Cost of revenue decreased by 6% to $3.2 million from $3.4 million for the three months ended December 31, 2016 and 2015, respectively. Cost of revenue decreased by 13% to $13.2 million from $15.1 million for the years ended December 31, 2016 and 2015, respectively.
General and Administrative Expenses

General and administrative expenses decreased by 13% to $5.7 million from $6.5 million for the three months ended December 31, 2016 and 2015, respectively. General and administrative expenses decreased by 19% to $16.7 million and $20.5 million for the years ended December 31, 2016 and 2015, respectively. The decrease was primarily attributable to decreased compensation and benefits along with decreased bad debt expense charges.
Liquidity

As of December 31, 2016, our revolving credit facility was undrawn, leaving an aggregate of $146.2 million of available borrowing capacity under this facility and $28.7 million of cash on hand.

Capital Expenditures

Capital expenditures totaled $7.6 million and $1.8 million for the three months ended December 31, 2016 and 2015, respectively. Capital expenditures totaled $11.3 million and $26.3 million for the years ended December 31, 2016 and 2015, respectively. Mammoth currently expects its total capital expenditures to be approximately $120.0 million for 2017.

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

The 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, 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.
 

3



Additionally, given that the Company is a C Corporation that will file a consolidated income tax returns for periods following the contribution that occurred in October 2016, the Company deems income (loss) before income taxes to be a more meaningful representation of operational performance.

Conference Call Information

Mammoth will host a conference call on Thursday, February 23, 2017 at 10:00 a.m. CST to discuss its fourth quarter 2016 financial and operational results. The telephone number to access the conference call is 844-265-1561 or international dial in 216-562-0385. The conference ID for the call is 72891861. Mammoth encourages those who would like to participate in the call to place calls between 9:50 a.m. and 10:00 a.m. CST.

The conference call will also be webcast live on www.mammothenergy.com in the “investors” section.

About Mammoth Energy Services, Inc.

Mammoth is an integrated, growth-oriented oilfield service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves. Mammoth’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. For additional information about Mammoth, please visit our website at www.mammothenergy.com, where we routinely post announcements, updates, events, investor information and presentations and recent news releases.

Forward-Looking Statements and Cautionary Statements

This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding our business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, our forward-looking statements are subject to significant risks and uncertainties, including those described in the Final Prospectus, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks relating to economic conditions; volatility of crude oil and natural gas commodity prices; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; oil and gas market conditions; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; operating risks; the adequacy of our capital resources and liquidity; weather; litigation; competition in the oil and natural gas industry; and costs and availability of resources.

Readers are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law.


4

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS

ASSETS
 
At December 31,
 
 
2016
 
2015
CURRENT ASSETS
 
 
 
 
Cash and cash equivalents
 
$
28,693,985

 
$
3,074,072

Accounts receivable, net
 
20,602,962

 
17,797,852

Receivables from related parties
 
28,059,565

 
25,643,781

Inventories
 
4,355,088

 
4,755,661

Prepaid Expenses
 
4,254,148

 
4,447,253

Other current assets
 
391,599

 
422,219

Total current assets
 
86,357,347

 
56,140,838

 
 
 
 
 
Property, plant and equipment, net
 
221,247,228

 
273,026,665

Intangible assets, net - customer relationships
 
15,949,772

 
24,309,772

Intangible assets, net - trade names
 
5,617,057

 
6,328,057

Goodwill
 
86,043,148

 
86,043,148

Other non-current assets
 
5,339,283

 
5,137,090

Total assets
 
$
420,553,835

 
$
450,985,570

 
 
 
 
 
LIABILITIES AND EQUITY
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
Accounts payable
 
$
18,480,325

 
$
16,046,378

Payables to related parties
 
2,434,031

 
6,997,929

Accrued expenses and other current liabilities
 
8,396,968

 
7,718,956

Income taxes payable
 
28,156

 
26,912

Total current liabilities
 
29,339,480

 
30,790,175

 
 
 
 
 
Long-term debt
 

 
95,000,000

Deferred income taxes
 
47,670,789

 
1,460,959

Other liabilities
 
2,501,886

 
571,174

Total liabilities
 
$
79,512,155

 
$
127,822,308

 
 
 
 
 
EQUITY
 
 
 
 
Equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized,
 
$
375,000

 
$

37,500,000 issued and outstanding at December 31, 2016; zero issued
 
 
 
 
and outstanding at December 31, 2015
 
 
 
 
Additional paid in capital
 
400,205,921

 

Accumulated Deficit
 
(56,322,878
)
 

Common units, 30,000,000 units issued and outstanding
 
 
 
 
at December 31, 2015; zero issued and outstanding at December 31, 2016
 

 
329,090,230

Accumulated other comprehensive loss
 
(3,216,363
)
 
(5,926,968
)
Total equity
 
341,041,680

 
323,163,262

Total liabilities and equity
 
$
420,553,835

 
$
450,985,570



5

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS


 
Three Months Ended December 31,
 
Years Ended December 31,
 
2016
 
2015
 
2016
 
2015
REVENUE
 
 
 
 
 
 
 
Services revenue
$
23,678,126

 
$
16,900,036

 
$
89,642,899

 
$
172,012,405

Services revenue - related parties
30,732,255

 
27,113,147

 
107,599,378

 
132,674,989

Product revenue
2,345,926

 
2,647,254

 
5,433,141

 
16,732,077

Product revenue - related parties
8,030,404

 
7,143,975

 
28,323,303

 
38,517,222

Total Revenue
64,786,711

 
53,804,412

 
230,998,721

 
359,936,693

 
 
 
 
 
 
 
 
COST AND EXPENSES
 
 
 
 
 
 
 
Services cost of revenue (1)
37,694,866

 
32,362,906

 
139,807,987

 
225,820,450

Services cost of revenue - related parties
370,861

 
583,736

 
5,575,092

 
4,177,335

Product cost of revenue (2)
2,672,176

 
3,481,090

 
7,577,660

 
25,838,555

Product cost of revenue - related parties
5,805,432

 
3,695,995

 
20,589,170

 
20,510,977

Selling, general and administrative
5,330,070

 
6,029,563

 
15,836,165

 
19,303,557

Selling, general and administrative - related parties
348,303

 
469,486

 
894,810

 
1,237,991

Depreciation and amortization
17,095,045

 
18,697,618

 
69,910,858

 
72,393,882

Impairment of long-lived assets

 
6,745,116

 
1,870,885

 
12,124,353

Total cost and expenses
69,316,753

 
72,065,510

 
262,062,627

 
381,407,100

Operating loss
(4,530,042
)
 
(18,261,098
)
 
(31,063,906
)
 
(21,470,407
)
 
 
 
 
 
 
 
 
OTHER (EXPENSE) INCOME
 
 
 
 
 
 
 
Interest income

 

 

 
98,492

Interest expense
(669,503
)
 
(1,108,067
)
 
(3,711,457
)
 
(5,290,821
)
Other, net
(199,556
)
 
76,750

 
252,239

 
(2,157,764
)
Total other expense
(869,059
)
 
(1,031,317
)
 
(3,459,218
)
 
(7,350,093
)
Loss before income taxes
(5,399,101
)
 
(19,292,415
)
 
(34,523,124
)
 
(28,820,500
)
Provision (benefit) for income taxes (3)
51,145,175

 
1,088,421

 
53,884,871

 
(1,589,086
)
Net loss
$
(56,544,276
)
 
$
(20,380,836
)
 
$
(88,407,995
)
 
$
(27,231,414
)
 
 
 
 
 
 
 
 
OTHER COMPREHENSIVE (LOSS) INCOME
 
 
 
 
 
 
 
Foreign currency translation adjustment (4)
(604,875
)
 
(602,227
)
 
2,710,605

 
(4,814,819
)
Comprehensive loss
$
(57,149,151
)
 
$
(20,983,063
)
 
$
(85,697,390
)
 
$
(32,046,233
)
 
 
 
 
 
 
 
 
Net loss per share (basic and diluted)
$
(1.57
)
 
$
(0.68
)
 
$
(2.81
)
 
$
(0.91
)
Weighted average number of shares outstanding
35,951,087

 
30,000,000

 
31,500,000

 
30,000,000

 
 
 
 
 
 
 
 
(1) Exclusive of depreciation and amortization
16,046,845

 
17,613,570

 
65,705,373

 
68,053,581

(2) Exclusive of depreciation and amortization
1,010,399

 
1,047,335

 
4,072,674

 
4,193,106

(3) Inclusive of tax conversion effect
53,088,861

 

 
53,088,861

 

(4) Net of tax
1,731,887

 

 
1,731,887

 



6

MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


 
Years Ended December 31,
 
2016
 
2015
Cash flows from operating activities
 
 
 
Net Income (loss)
$
(88,407,995
)
 
$
(27,231,414
)
Adjustments to reconcile net loss to cash flow provided by operating activities:
 
 
 
Non cash compensation
501,147

 

Depreciation and amortization
69,910,858

 
72,393,882

Amortization of Coil Tubing Strings
2,027,752

 
2,075,787

Amortization of Debt Origination Costs
398,806

 
398,805

Bad debt expense
1,968,001

 
3,682,218

Loss (gain) on disposal of property and equipment
(747,896
)
 
1,429,087

Impairments of long-lived assets
1,870,885

 
12,124,353

Deferred Taxes
47,898,688

 
(5,717,451
)
Changes in assets and liabilities:
 
 
 
Accounts receivable, net
(4,636,428
)
 
27,522,839

Receivables from related parties
(2,415,741
)
 
9,499,181

Inventories
(1,627,179
)
 
(2,611,047
)
Prepaid expenses and other assets
(372,308
)
 
4,086,044

Accounts payable
295,550

 
(27,633,817
)
Payables to related parties
(4,578,623
)
 
2,420,581

Accrued expenses and other current liabilities
6,015,365

 
(4,054,709
)
Income taxes payable
770

 
8,277

Net cash provided by operating activities
28,101,652

 
68,392,616

 
 
 
 
Cash flows from investing activities:
 
 
 
Purchases of property and equipment
(11,317,909
)
 
(26,251,675
)
Proceeds from disposal of property and equipment
4,022,092

 
1,416,766

Net cash used in investing activities
(7,295,817
)
 
(24,834,909
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Borrowings on long-term debt
28,560,000

 
14,500,000

Repayments of long-term debt
(126,974,820
)
 
(70,430,761
)
Proceeds from initial public offering
105,838,750

 

Initial public offering costs
(2,764,089
)
 

Capital distributions

 
(711
)
Net cash (used in) provided by financing activities
4,659,841

 
(55,931,472
)
Effect of foreign exchange rate on cash
154,237

 
(226,655
)
Net increase (decrease) in cash and cash equivalents
25,619,913

 
(12,600,420
)
Cash and cash equivalents at beginning of period
3,074,072

 
15,674,492

Cash and cash equivalents at end of period
$
28,693,985

 
$
3,074,072

 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
Cash paid for interest
$
3,518,623

 
$
5,120,482

Cash paid for income taxes
$
3,587,871

 
$
3,888,470

Supplemental disclosure of non-cash transactions:
 
 
 
Purchases of property and equipment included in trade accounts payable
$
2,788,602

 
$
740,555


7

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


Adjusted EBITDA

"Adjusted EBITDA" is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDA as net (loss) income before depreciation and amortization, impairment of long-lived assets, one-time compensation charges associated with the IPO, equity based compensation, interest income, interest expense, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets) and 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 because this measure:

is widely used by investors in the oilfield 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.



8

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


The following tables also provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of (loss) income on a consolidated basis and for each of our operating segments.

Consolidated
 
Three Months Ended December 31,
 
Years Ended December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2016
 
2015
 
2016
 
2015
Net loss
$
(56,544,276
)
 
$
(20,380,836
)
 
$
(88,407,995
)
 
$
(27,231,414
)
Depreciation and amortization
17,095,045

 
18,697,618

 
69,910,858

 
72,393,882

Impairment of long-lived assets

 
6,745,116

 
1,870,885

 
12,124,353

One-time IPO compensation charges
1,200,770

 

 
1,200,770

 

Equity based compensation
519,830

 

 
501,147

 

Interest income

 

 

 
(98,492
)
Interest expense
669,503

 
1,108,067

 
3,711,457

 
5,290,821

Other (income) expense, net
199,556

 
(76,750
)
 
(252,239
)
 
2,157,764

Provision (benefit) for income taxes
51,145,175

 
1,088,421

 
53,884,871

 
(1,589,086
)
Adjusted EBITDA
$
14,285,603

 
$
7,181,636

 
$
42,419,754

 
$
63,047,828


Pressure Pumping Services
 
Three Months Ended December 31,
 
Years Ended December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2016
 
2015
 
2016
 
2015
Net income (loss)
$
248,279

 
$
(3,891,655
)
 
$
(4,605,494
)
 
$
(5,579,236
)
Depreciation and amortization
9,048,810

 
9,564,380

 
37,012,902

 
35,728,715

Impairment of long-lived assets

 
305,429

 
138,587

 
1,213,885

One-time IPO compensation charges
101,760

 

 
101,760

 

Equity based compensation
176,326

 

 
176,326

 

Interest expense
96,366

 
312,504

 
599,147

 
1,859,195

Other expense, net
1,656

 
(33,222
)
 
26,743

 
66,889

Provision for income taxes

 
72,435

 

 
72,435

Adjusted EBITDA
$
9,673,197

 
$
6,329,871

 
$
33,449,971

 
$
33,361,883


Well Services
 
Three Months Ended December 31,
 
Years Ended December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2016
 
2015
 
2016
 
2015
Net loss
$
(53,059,453
)
 
$
(3,811,382
)
 
$
(62,197,372
)
 
$
(8,483,700
)
Depreciation and amortization
1,223,955

 
1,459,394

 
5,127,879

 
5,696,547

Impairment of long-lived assets

 
88,247

 
1,384,751

 
88,247

One-time IPO compensation charges
35,640

 

 
35,640

 

Equity based compensation
61,756

 

 
43,073

 

Interest expense
(44,577
)
 
122,367

 
134,007

 
429,061

Other (income) expense, net
106,020

 
414,501

 
(565,966
)
 
686,617

Provision for income taxes
50,262,368

 
4,454

 
50,265,203

 
4,454

Adjusted EBITDA
$
(1,414,291
)
 
$
(1,722,419
)
 
$
(5,772,785
)
 
$
(1,578,774
)






9

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


Natural Sand Proppant Production
 
Three Months Ended December 31,
 
Years Ended December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2016
 
2015
 
2016
 
2015
Net income (loss)
$
410,317

 
$
1,366,924

 
$
(564,425
)
 
$
524,182

Depreciation and amortization
1,011,649

 
1,049,190

 
4,078,844

 
4,200,809

Impairment of long-lived assets

 

 

 
1,904,981

One-time IPO compensation charges
33,150

 

 
33,150

 

Equity based compensation
57,441

 

 
57,441

 

Interest income

 

 

 
(98,056
)
Interest expense
20,610

 
589

 
49,518

 
51,476

Other (income) expense, net
(200
)
 
(225,329
)
 
2,321

 
(88,976
)
Provision for income taxes

 

 
3,716

 

Adjusted EBITDA
$
1,532,967

 
$
2,191,374

 
$
3,660,565

 
$
6,494,416


Contract Land and Directional Drilling Services
 
Three Months Ended December 31,
 
Years Ended December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2016
 
2015
 
2016
 
2015
Net loss
$
(6,286,843
)
 
$
(16,086,602
)
 
$
(30,366,202
)
 
$
(30,401,338
)
Depreciation and amortization
5,268,491

 
6,106,002

 
21,512,117

 
24,626,705

Impairment of long-lived assets

 
6,351,440

 
347,547

 
8,917,240

One-time IPO compensation charges
963,660

 

 
963,660

 

Equity based compensation
110,307

 

 
110,307

 

Interest expense
555,840

 
672,636

 
2,828,753

 
2,890,130

Other expense, net
67,981

 
(59,788
)
 
247,620

 
1,121,093

Provision (benefit) for income taxes

 

 

 
(184,523
)
Adjusted EBITDA
$
679,436

 
$
(3,016,312
)
 
$
(4,356,198
)
 
$
6,969,307


Other Energy Services
 
Three Months Ended December 31,
 
Years Ended December 31,
Reconciliation of Adjusted EBITDA to net income (loss):
2016
 
2015
 
2016
 
2015
Net income
$
2,143,424

 
$
2,041,879

 
$
9,325,498

 
$
16,708,678

Depreciation and amortization
542,140

 
518,652

 
2,179,116

 
2,141,106

One-time IPO compensation charges
66,560

 

 
66,560

 

Equity based compensation
114,000

 

 
114,000

 

Interest income

 

 

 
(436
)
Interest expense
41,264

 
(29
)
 
100,032

 
60,959

Other expense, net
24,099

 
(172,912
)
 
37,043

 
372,141

Provision (benefit) for income taxes
882,807

 
1,011,532

 
3,615,952

 
(1,481,452
)
Adjusted EBITDA
$
3,814,294

 
$
3,399,122

 
$
15,438,201

 
$
17,800,996




10

MAMMOTH ENERGY SERVICES, INC.
HISTORICAL SEGMENT DATA RECAST



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, 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, types of customers.

Based on the CODM's assessment, effective December 31, 2016, the Company reorganized the reportable segments to align with its new management reporting structure and business activities. Prior to this reorganization, the existing 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. As a result of this update, there are five reportable segments for financial reporting purposes as described above. We have conformed our presentation for prior periods to reflect this new segment presentation.

The Company has recast the data from prior periods to reflect these change to conform to the current year presentation. For the presentation below, we have shown the quarterly financial results for the pressure pumping and well services segments and aggregation of the two segments to reflect the completion and production services ("Predecessor").

11

MAMMOTH ENERGY SERVICES, INC.
HISTORICAL SEGMENT DATA RECAST


Year Ended December 31, 2016 (unaudited)
 
Pressure Pumping
 
 
Three Months Ended
 
 
March 31,
June 30,
September 30,
December 31,
Total
 
2016
2016
2016
2016
 
Revenue from external customers...
$
12,294,529

$
5,862,584

$
137,626

$
3,152,064

$
21,446,803

Revenue from related parties..........
$
10,261

$
38,219,555

$
35,517,708

$
29,113,899

$
102,861,423

Cost of revenue..............................
$
14,260,507

$
30,177,248

$
20,846,016

$
21,524,971

$
86,808,742

Selling, general and administrative expenses...............................................
$
526,171

$
1,539,371

$
916,176

$
1,345,881

$
4,327,599

Earnings before other expense (income), interest, depreciation and amortization, impairment and taxes (1) ............
$
(2,481,888
)
$
12,365,520

$
13,893,142

$
9,395,111

$
33,171,885

Other expense (income) .......................
$
(19,208
)
$
43,033

$
1,262

$
1,656

$
26,743

Interest expense..............................
$
237,055

$
131,709

$
134,017

$
96,366

$
599,147

Depreciation and amortization.......
$
8,955,217

$
9,958,270

$
9,050,605

$
9,048,810

$
37,012,902

Impairment of long-lived assets.....
$

$
138,587

$

$

$
138,587

Loss (income) before income taxes.....
$
(11,654,952
)
$
2,093,921

$
4,707,258

$
248,279

$
(4,605,494
)
(1) Includes $101,760 and $176,326 for one-time IPO compensation charges and equity and share-based compensation, respectively.
 
Well Services
 
 
Three Months Ended
 
 
March 31,
June 30,
September 30,
December 31,
Total
 
2016
2016
2016
2016
 
Revenue from external customers...
$
2,698,592

$
1,662,019

$
2,109,873

$
2,686,558

$
9,157,042

Revenue from related parties..........
$

$
567,887

$
164,855

$
135,029

$
867,771

Cost of revenue..............................
$
3,927,709

$
3,034,345

$
3,068,159

$
3,510,096

$
13,540,309

Selling, general and administrative expenses...............................................
$
573,296

$
440,182

$
499,346

$
823,178

$
2,336,002

Earnings before other expense (income), interest, depreciation and amortization, impairment and taxes (2) ............
$
(1,802,413
)
$
(1,244,621
)
$
(1,292,777
)
$
(1,511,687
)
$
(5,851,498
)
Other expense (income) .......................
$
9,400

$
(682,545
)
$
1,159

$
106,020

$
(565,966
)
Interest expense..............................
$
98,319

$
50,776

$
29,489

$
(44,577
)
$
134,007

Depreciation and amortization.......
$
1,397,507

$
1,272,715

$
1,233,702

$
1,223,955

$
5,127,879

Impairment of long-lived assets.....
$

$
1,384,751

$

$

$
1,384,751

Loss before income taxes.....
$
(3,307,639
)
$
(3,270,318
)
$
(2,557,127
)
$
(2,797,085
)
$
(11,932,169
)
(2) Includes $35,640 and $43,073 for one-time IPO compensation charges and equity and share-based compensation, respectively.
 
Well Services
Pressure Pumping
Predecessor
 
Year Ended December 31, 2016
Revenue from external customers..................................
$
9,157,042

$
21,446,803

$
30,603,845

Revenue from related parties.........................................
$
867,771

$
102,861,423

$
103,729,194

Cost of revenue..............................................................
$
13,540,309

$
86,808,742

$
100,349,051

Selling, general and administrative expenses................
$
2,336,002

$
4,327,599

$
6,663,601

Earnings before other expense (income), interest, depreciation and amortization, impairment and taxes ............
$
(5,851,498
)
$
33,171,885

$
27,320,387

Other expense (income) ...............................................
$
(565,966
)
$
26,743

$
(539,223
)
Interest expense.............................................................
$
134,007

$
599,147

$
733,154

Depreciation and amortization......................................
$
5,127,879

$
37,012,902

$
42,140,781

Impairment of long-lived assets....................................
$
1,384,751

$
138,587

$
1,523,338

Loss before income taxes..............................................
$
(11,932,169
)
$
(4,605,494
)
$
(16,537,663
)

12

MAMMOTH ENERGY SERVICES, INC.
HISTORICAL SEGMENT DATA RECAST


Year Ended December 31, 2015 (unaudited)
 
Pressure Pumping
 
 
Three Months Ended
 
 
March 31,
June 30,
September 30,
December 31,
Total
 
2015
2015
2015
2015
 
Revenue from external customers...
$
17,596,477

$
18,716,413

$
9,192,158

$
33,345

$
45,538,393

Revenue from related parties..........
$
30,569,072

$
37,706,526

$
30,547,821

$
25,618,874

$
124,442,293

Cost of revenue..............................
$
36,024,702

$
43,175,451

$
34,391,032

$
18,126,159

$
131,717,344

Selling, general and administrative expenses...............................................
$
1,324,066

$
1,271,108

$
1,110,096

$
1,196,189

$
4,901,459

Earnings before other expense (income), interest, depreciation and amortization, impairment and taxes ............
$
10,816,781

$
11,976,380

$
4,238,851

$
6,329,871

$
33,361,883

Other expense (income) .......................
$
57,666

$
5,345

$
37,100

$
(33,222
)
$
66,889

Interest expense..............................
$
690,440

$
443,681

$
412,570

$
312,504

$
1,859,195

Depreciation and amortization.......
$
8,571,964

$
8,719,860

$
8,872,511

$
9,564,380

$
35,728,715

Impairment of long-lived assets.....
$

$

$
908,456

$
305,429

$
1,213,885

Loss (income) before income taxes.....
$
1,496,711

$
2,807,494

$
(5,991,786
)
$
(3,819,220
)
$
(5,506,801
)
 
Well Services
 
 
Three Months Ended
 
 
March 31,
June 30,
September 30,
December 31,
Total
 
2015
2015
2015
2015
 
Revenue from external customers...
$
9,405,364

$
5,852,653

$
7,921,372

$
2,955,179

$
26,134,568

Revenue from related parties..........
$
812,666

$
841,974

$
405,734

$
656,399

$
2,716,773

Cost of revenue..............................
$
7,689,145

$
6,952,233

$
8,769,464

$
4,733,589

$
28,144,431

Selling, general and administrative expenses...............................................
$
644,170

$
535,478

$
505,628

$
600,408

$
2,285,684

Earnings before other expense (income), interest, depreciation and amortization, impairment and taxes ............
$
1,884,715

$
(793,084
)
$
(947,986
)
$
(1,722,419
)
$
(1,578,774
)
Other expense (income) .......................
$
50,538

$
157,596

$
63,982

$
414,501

$
686,617

Interest expense..............................
$
121,254

$
97,050

$
88,390

$
122,367

$
429,061

Depreciation and amortization.......
$
1,444,052

$
1,393,847

$
1,399,254

$
1,459,394

$
5,696,547

Impairment of long-lived assets.....
$

$

$

$
88,247

$
88,247

Loss (income) before income taxes.....
$
268,871

$
(2,441,577
)
$
(2,499,612
)
$
(3,806,928
)
$
(8,479,246
)
 
Well Services
Pressure Pumping
Predecessor
 
Year Ended December 31, 2015
Revenue from external customers..................................
$
26,134,568

$
45,538,393

$
71,672,961

Revenue from related parties.........................................
$
2,716,773

$
124,442,293

$
127,159,066

Cost of revenue..............................................................
$
28,144,431

$
131,717,344

$
159,861,775

Selling, general and administrative expenses................
$
2,285,684

$
4,901,459

$
7,187,143

Earnings before other expense (income), interest, depreciation and amortization, impairment and taxes ............
$
(1,578,774
)
$
33,361,883

$
31,783,109

Other expense (income) ...............................................
$
686,617

$
66,889

$
753,506

Interest expense.............................................................
$
429,061

$
1,859,195

$
2,288,256

Depreciation and amortization......................................
$
5,696,547

$
35,728,715

$
41,425,262

Impairment of long-lived assets....................................
$
88,247

$
1,213,885

$
1,302,132

Loss before income taxes..............................................
$
(8,479,246
)
$
(5,506,801
)
$
(13,986,047
)


13