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

Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     

Commission File No. 001-37917

 Mammoth Energy Services, Inc.

(Exact name of registrant as specified in its charter)
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(405)608-600773134
(Address of principal executive offices) (Registrant’s telephone number, including area code)(Zip Code)
Securities registered pursuant to Section 12(b) of The Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockTUSKThe Nasdaq Stock Market LLC
NASDAQ Global Select Market
______________________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer  Accelerated filer 
       
Non-accelerated filer  Smaller reporting company 
Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 27, 2021, there were 46,272,617 shares of common stock, $0.01 par value, outstanding.                            




MAMMOTH ENERGY SERVICES, INC.


TABLE OF CONTENTS
 
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GLOSSARY OF OIL AND NATURAL GAS AND ELECTRICAL INFRASTRUCTURE TERMS
The following is a glossary of certain oil and natural gas industry terms used in this Quarterly Report on Form 10-Q (this “report” or “Quarterly Report”):
AcidizingTo pump acid into a wellbore to improve a well's productivity or injectivity.
BlowoutAn uncontrolled flow of reservoir fluids into the wellbore, and sometimes catastrophically to the surface. A blowout may consist of salt water, oil, natural gas or a mixture of these. Blowouts can occur in all types of exploration and production operations, not just during drilling operations. If reservoir fluids flow into another formation and do not flow to the surface, the result is called an underground blowout. If the well experiencing a blowout has significant open-hole intervals, it is possible that the well will bridge over (or seal itself with rock fragments from collapsing formations) down-hole and intervention efforts will be averted.
Bottomhole assemblyThe lower portion of the drillstring, consisting of (from the bottom up in a vertical well) the bit, bit sub, a mud motor (in certain cases), stabilizers, drill collar, heavy-weight drillpipe, jarring devices (“jars”) and crossovers for various threadforms. The bottomhole assembly must provide force for the bit to break the rock (weight on bit), survive a hostile mechanical environment and provide the driller with directional control of the well. Oftentimes the assembly includes a mud motor, directional drilling and measuring equipment, measurements-while-drilling tools, logging-while-drilling tools and other specialized devices.
CementingTo prepare and pump cement into place in a wellbore.
Coiled tubingA long, continuous length of pipe wound on a spool. The pipe is straightened prior to pushing into a wellbore and rewound to coil the pipe back onto the transport and storage spool. Depending on the pipe diameter (1 in. to 4 1/2 in.) and the spool size, coiled tubing can range from 2,000 ft. to 23,000 ft. (610 m to 6,096 m) or greater length.
CompletionA generic term used to describe the assembly of down-hole tubulars and equipment required to enable safe and efficient production from an oil or gas well. The point at which the completion process begins may depend on the type and design of the well.
Directional drillingThe intentional deviation of a wellbore from the path it would naturally take. This is accomplished through the use of whipstocks, bottomhole assembly (BHA) configurations, instruments to measure the path of the wellbore in three-dimensional space, data links to communicate measurements taken down-hole to the surface, mud motors and special BHA components and drill bits, including rotary steerable systems, and drill bits. The directional driller also exploits drilling parameters such as weight on bit and rotary speed to deflect the bit away from the axis of the existing wellbore. In some cases, such as drilling steeply dipping formations or unpredictable deviation in conventional drilling operations, directional-drilling techniques may be employed to ensure that the hole is drilled vertically. While many techniques can accomplish this, the general concept is simple: point the bit in the direction that one wants to drill. The most common way is through the use of a bend near the bit in a down-hole steerable mud motor. The bend points the bit in a direction different from the axis of the wellbore when the entire drillstring is not rotating. By pumping mud through the mud motor, the bit turns while the drillstring does not rotate, allowing the bit to drill in the direction it points. When a particular wellbore direction is achieved, that direction may be maintained by rotating the entire drillstring (including the bent section) so that the bit does not drill in a single direction off the wellbore axis, but instead sweeps around and its net direction coincides with the existing wellbore. Rotary steerable tools allow steering while rotating, usually with higher rates of penetration and ultimately smoother boreholes.
Down-holePertaining to or in the wellbore (as opposed to being on the surface).
Down-hole motorA drilling motor located in the drill string above the drilling bit powered by the flow of drilling mud. Down-hole motors are used to increase the speed and efficiency of the drill bit or can be used to steer the bit in directional drilling operations. Drilling motors have become very popular because of horizontal and directional drilling applications and the day rates for drilling rigs.
Drilling rigThe machine used to drill a wellbore.
Drillpipe or Drill pipeTubular steel conduit fitted with special threaded ends called tool joints. The drillpipe connects the rig surface equipment with the bottomhole assembly and the bit, both to pump drilling fluid to the bit and to be able to raise, lower and rotate the bottomhole assembly and bit.
Drillstring or Drill stringThe combination of the drillpipe, the bottomhole assembly and any other tools used to make the drill bit turn at the bottom of the wellbore.
FlowbackThe process of allowing fluids to flow from the well following a treatment, either in preparation for a subsequent phase of treatment or in preparation for cleanup and returning the well to production.
Horizontal drillingA subset of the more general term “directional drilling,” used where the departure of the wellbore from vertical exceeds about 80 degrees. Note that some horizontal wells are designed such that after reaching true 90-degree horizontal, the wellbore may actually start drilling upward. In such cases, the angle past 90 degrees is continued, as in 95 degrees, rather than reporting it as deviation from vertical, which would then be 85 degrees. Because a horizontal well typically penetrates a greater length of the reservoir, it can offer significant production improvement over a vertical well.
Hydraulic fracturingA stimulation treatment routinely performed on oil and gas wells in low permeability reservoirs. Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing a vertical fracture to open. The wings of the fracture extend away from the wellbore in opposing directions according to the natural stresses within the formation. Proppant, such as grains of sand of a particular size, is mixed with the treatment fluid to keep the fracture open when the treatment is complete. Hydraulic fracturing creates high-conductivity communication with a large area of formation and bypasses any damage that may exist in the near-wellbore area.
i


HydrocarbonA naturally occurring organic compound comprising hydrogen and carbon. Hydrocarbons can be as simple as methane, but many are highly complex molecules, and can occur as gases, liquids or solids. Petroleum is a complex mixture of hydrocarbons. The most common hydrocarbons are natural gas, oil and coal.
Mesh sizeThe size of the proppant that is determined by sieving the proppant through screens with uniform openings corresponding to the desired size of the proppant. Each type of proppant comes in various sizes, categorized as mesh sizes, and the various mesh sizes are used in different applications in the oil and natural gas industry. The mesh number system is a measure of the number of equally sized openings per square inch of screen through which the proppant is sieved.
Mud motorsA positive displacement drilling motor that uses hydraulic horsepower of the drilling fluid to drive the drill bit. Mud motors are used extensively in directional drilling operations.
Natural gas liquidsComponents of natural gas that are liquid at surface in field facilities or in gas processing plants. Natural gas liquids can be classified according to their vapor pressures as low (condensate), intermediate (natural gasoline) and high (liquefied petroleum gas) vapor pressure.
Nitrogen pumping unitA high-pressure pump or compressor unit capable of delivering high-purity nitrogen gas for use in oil or gas wells. Two basic types of units are commonly available: a nitrogen converter unit that pumps liquid nitrogen at high pressure through a heat exchanger or converter to deliver high-pressure gas at ambient temperature, and a nitrogen generator unit that compresses and separates air to provide a supply of high pressure nitrogen gas.
PluggingThe process of permanently closing oil and gas wells no longer capable of producing in economic quantities. Plugging work can be performed with a well servicing rig along with wireline and cementing equipment; however, this service is typically provided by companies that specialize in plugging work.
PlugA down-hole packer assembly used in a well to seal off or isolate a particular formation for testing, acidizing, cementing, etc.; also a type of plug used to seal off a well temporarily while the wellhead is removed.
Pounds per square inchA unit of pressure. It is the pressure resulting from a one pound force applied to an area of one square inch.
Pressure pumpingServices that include the pumping of liquids under pressure.
Producing formationAn underground rock formation from which oil, natural gas or water is produced. Any porous rock will contain fluids of some sort, and all rocks at considerable distance below the Earth’s surface will initially be under pressure, often related to the hydrostatic column of ground waters above the reservoir. To produce, rocks must also have permeability, or the capacity to permit fluids to flow through them.
ProppantSized particles mixed with fracturing fluid to hold fractures open after a hydraulic fracturing treatment. In addition to naturally occurring sand grains, man-made or specially engineered proppants, such as resin-coated sand or high-strength ceramic materials like sintered bauxite, may also be used. Proppant materials are carefully sorted for size and sphericity to provide an efficient conduit for production of fluid from the reservoir to the wellbore.
Resource playAccumulation of hydrocarbons known to exist over a large area.
ShaleA fine-grained, fissile, sedimentary rock formed by consolidation of clay- and silt-sized particles into thin, relatively impermeable layers.
Tight oilConventional oil that is found within reservoirs with very low permeability. The oil contained within these reservoir rocks typically will not flow to the wellbore at economic rates without assistance from technologically advanced drilling and completion processes. Commonly, horizontal drilling coupled with multistage fracturing is used to access these difficult to produce reservoirs.
Tight sandsA type of unconventional tight reservoir. Tight reservoirs are those which have low permeability, often quantified as less than 0.1 millidarcies.
TubularsA generic term pertaining to any type of oilfield pipe, such as drill pipe, drill collars, pup joints, casing, production tubing and pipeline.
Unconventional resourceA term for the different manner by which resources are exploited as compared to the extraction of conventional resources. In unconventional drilling, the wellbore is generally drilled to specific objectives within narrow parameters, often across long, lateral intervals within narrow horizontal formations offering greater contact area with the producing formation. Typically, the well is then hydraulically fractured at multiple stages to optimize production.
WellboreThe physical conduit from surface into the hydrocarbon reservoir.
Well stimulationA treatment performed to restore or enhance the productivity of a well. Stimulation treatments fall into two main groups, hydraulic fracturing treatments and matrix treatments. Fracturing treatments are performed above the fracture pressure of the reservoir formation and create a highly conductive flow path between the reservoir and the wellbore. Matrix treatments are performed below the reservoir fracture pressure and generally are designed to restore the natural permeability of the reservoir following damage to the near wellbore area. Stimulation in shale gas reservoirs typically takes the form of hydraulic fracturing treatments.
WirelineA general term used to describe well-intervention operations conducted using single-strand or multi-strand wire or cable for intervention in oil or gas wells. Although applied inconsistently, the term commonly is used in association with electric logging and cables incorporating electrical conductors.
WorkoverThe process of performing major maintenance or remedial treatments on an oil or gas well. In many cases, workover implies the removal and replacement of the production tubing string after the well has been killed and a workover rig has been placed on location. Through-tubing workover operations, using coiled tubing, snubbing or slickline equipment, are routinely conducted to complete treatments or well service activities that avoid a full workover where the tubing is removed. This operation saves considerable time and expense.

ii


The following is a glossary of certain electrical infrastructure industry terms used in this report:
DistributionThe distribution of electricity from the transmission system to individual customers.
SubstationA part of an electrical transmission and distribution system that transforms voltage from high to low, or the reverse.
TransmissionThe movement of electrical energy from a generating site, such as a power plant, to an electric substation.

iii


CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this report that express a belief, expectation, or intention, or that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. In particular, the factors discussed in this report and detailed under Part II, Item 1A. Risk Factors in this report and our Annual Report on Form 10–K for the year ended December 31, 2020 could affect our actual results and cause our actual results to differ materially from expectations, estimates or assumptions expressed, forecasted or implied in such forward-looking statements.

Forward-looking statements may include statements about:

the levels of capital expenditures by our customers and the impact of reduced drilling and completions activity on utilization and pricing for our oilfield services;
the volatility of oil and natural gas prices and actions by OPEC members and other oil exporting nations affecting commodity price and production levels;
the threat, occurrence, potential duration or other implications of epidemic or pandemic diseases, including the ongoing COVID-19 pandemic and its severity, or any government response to such threat, occurrence or pandemic;
our ability to protect the health and well-being of our employees during the ongoing COVID-19 pandemic;
logistical challenges and remote working arrangements;
the performance of contracts and supply chain disruptions during the ongoing COVID-19 pandemic;
general economic, business or industry conditions;
conditions in the capital, financial and credit markets;
our ability to obtain capital or financing needed for our operations on favorable terms or at all or continue to comply with financial maintenance covenants in our existing revolving credit facility;
conditions of U.S. oil and natural gas industry and the effect of U.S. energy, monetary and trade policies;
U.S. and global economic conditions and political and economic developments, including the effects of the recent U.S. presidential and congressional elections on energy and environmental policies;
our ability to execute our business and financial strategies;
our ability to continue to grow our infrastructure services segment, recommence certain of our suspended oilfield services or return our natural sand proppant services segment to profitability;
any loss of one or more of our significant customers and its impact on our revenue, financial condition and results of operations;
asset impairments;
our ability to identify, complete and integrate acquisitions of assets or businesses;
our ability to receive, or delays in receiving, permits and governmental approvals and/or payments, and to comply with applicable governmental laws and regulations;
the outcome of a government investigation relating to the contracts awarded to one of our subsidiaries by the Puerto Rico Electric Power Authority and any resulting litigation;
the outcome of Gulfport Energy Corporation's chapter 11 bankruptcy filing, the treatment of our contracts and claims under it and the ultimate recoveries awarded to us;
the outcome of pending litigation discussed in this report;
any future litigation, indemnity or other claims;
regional supply and demand factors, delays or interruptions of production, and any governmental order, rule or regulation that may impose production limits on our customers;
the availability of transportation, pipeline and storage facilities and any increase in related costs;
extreme weather conditions, such as the recent severe winter storms in the Permian Basin where we provide completion and drilling services;
access to and restrictions on use of water;
technology;
civil unrest or terrorist attacks;
cybersecurity issues as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current environment of remote connectivity;
competition within the energy services industry;
availability of equipment, materials or skilled personnel or other labor resources;
our ability to maintain compliance with financial covenants under our revolving credit facility;
payment of any future dividends;
future operating results; and
capital expenditures and other plans, objectives, expectations and intentions.
iv



    All of these types of statements, other than statements of historical fact included in this quarterly report, are forward-looking statements. These forward-looking statements may be found in the “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other sections of this quarterly report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “plan,” “project,” “budget,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “seek,” “objective,” “continue,” “will be,” “will benefit,” or “will continue,” the negative of such terms or other comparable terminology.

    The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors, which are difficult to predict and many of which are beyond our control. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, our management’s assumptions about future events may prove to be inaccurate. Our management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to many factors including those described in our Annual Report on Form 10–K for the year ended December 31, 2020 and Item 2. “Management's Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

v

MAMMOTH ENERGY SERVICES, INC.


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
ASSETSMarch 31,December 31,
20212020
CURRENT ASSETS(in thousands)
Cash and cash equivalents$14,366 $14,822 
Short-term investment1,753 1,750 
Accounts receivable, net369,434 393,112 
Receivables from related parties, net33,115 28,461 
Inventories11,356 12,020 
Prepaid expenses10,740 13,825 
Other current assets718 758 
Other current assets - related parties2,228  
Total current assets443,710 464,748 
Property, plant and equipment, net231,321 251,262 
Sand reserves65,876 65,876 
Operating lease right-of-use assets17,958 20,179 
Intangible assets, net - customer relationships365 408 
Intangible assets, net - trade names4,156 4,366 
Goodwill12,608 12,608 
Other non-current assets4,450 5,115 
Total assets$780,444 $824,562 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable$36,690 $40,316 
Payables to related parties2 3 
Accrued expenses and other current liabilities36,823 44,408 
Current operating lease liability8,122 8,618 
Current portion of long-term debt1,412 1,165 
Income taxes payable36,558 34,088 
Total current liabilities119,607 128,598 
Long-term debt, net of current portion66,977 81,338 
Deferred income tax liabilities19,722 24,741 
Long-term operating lease liability9,626 11,377 
Asset retirement obligations3,617 4,746 
Other liabilities9,496 10,435 
Total liabilities229,045 261,235 
COMMITMENTS AND CONTINGENCIES (Note 18)
EQUITY
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 46,272,617 and 45,769,283 issued and outstanding at March 31, 2021 and December 31, 2020
463 458 
Additional paid in capital537,378 537,039 
Retained earnings16,455 28,895 
Accumulated other comprehensive loss(2,897)(3,065)
Total equity551,399 563,327 
Total liabilities and equity$780,444 $824,562 


The accompanying notes are an integral part of these condensed consolidated financial statements.
1

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


Three Months Ended March 31,
20212020
REVENUE(in thousands, except per share amounts)
Services revenue$42,691 $68,845 
Services revenue - related parties14,986 18,013 
Product revenue6,982 8,650 
Product revenue - related parties2,145 1,875 
Total revenue66,804 97,383 
COST AND EXPENSES
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $18,989 and $23,554, respectively, for the three months ended March 31, 2021 and 2020)
42,062 70,697 
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0 and $0, respectively, for the three months ended March 31, 2021 and 2020)
109 101 
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $2,137 and $2,309, respectively, for the three months ended March 31, 2021 and 2020)
5,909 11,108 
Selling, general and administrative (Note 11)20,655 10,556 
Selling, general and administrative - related parties (Note 11)193 215 
Depreciation, depletion, amortization and accretion21,146 25,882 
Impairment of goodwill 54,973 
Impairment of other long-lived assets 12,897 
Total cost and expenses90,074 186,429 
Operating loss(23,270)(89,046)
OTHER INCOME (EXPENSE)
Interest expense, net(1,225)(1,638)
Other, net9,947 7,409 
Other, net - related parties(515) 
Total other income8,207 5,771 
Loss before income taxes(15,063)(83,275)
(Benefit) provision for income taxes(2,623)696 
Net loss$(12,440)$(83,971)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net of tax of ($42) and $361, respectively, for the three months ended March 31, 2021 and 2020
168 (1,414)
Comprehensive loss$(12,272)$(85,385)
Net loss per share (basic) (Note 14)$(0.27)$(1.85)
Net loss per share (diluted) (Note 14)$(0.27)$(1.85)
Weighted average number of shares outstanding (basic) (Note 14)45,932 45,314 
Weighted average number of shares outstanding (diluted) (Note 14)45,932 45,314 














The accompanying notes are an integral part of these condensed consolidated financial statements.
2

MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

Three Months Ended March 31, 2021
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at December 31, 202045,769 $458 $28,895 $537,039 $(3,065)$563,327 
Stock based compensation503 5 — 339 — 344 
Net loss— — (12,440)— — (12,440)
Other comprehensive income— — — — 168 168 
Balance at March 31, 202146,272 $463 $16,455 $537,378 $(2,897)$551,399 
Three Months Ended March 31, 2020
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at December 31, 201945,109 $451 $136,502 $535,094 $(3,306)$668,741 
Stock based compensation605 6 — 1,046 — 1,052 
Net loss— — (83,971)— — (83,971)
Other comprehensive loss— — — — (1,414)(1,414)
Balance at March 31, 202045,714 $457 $52,531 $536,140 $(4,720)$584,408 





























The accompanying notes are an integral part of these condensed consolidated financial statements.
3

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


Three Months Ended March 31,
20212020
(in thousands)
Cash flows from operating activities:
Net loss$(12,440)$(83,971)
Adjustments to reconcile net loss to cash provided by (used in) operating activities:
Stock based compensation344 1,049 
Depreciation, depletion, accretion and amortization21,146 25,882 
Amortization of coil tubing strings 237 
Amortization of debt origination costs142 452 
Bad debt expense10,125 55 
Gain on disposal of property and equipment(615)(673)
Impairment of goodwill 54,973 
Impairment of other long-lived assets 12,897 
Deferred income taxes(5,061)5,361 
Other558 432 
Changes in assets and liabilities:
Accounts receivable, net23,437 (8,569)
Receivables from related parties(14,611)(10,267)
Inventories664 4,053 
Prepaid expenses and other assets3,105 3,929 
Other current assets - related parties(2,228) 
Accounts payable(4,283)2,078 
Payables to related parties(2)(444)
Accrued expenses and other liabilities(8,516)(1,220)
Income taxes payable2,469 (4,713)
Net cash provided by operating activities14,234 1,541 
Cash flows from investing activities:
Purchases of property and equipment(1,148)(1,424)
Purchases of property and equipment from related parties (76)
Proceeds from disposal of property and equipment1,457 558 
Net cash provided by (used in) investing activities309 (942)
Cash flows from financing activities:
Borrowings on long-term debt1,500 17,300 
Repayments of long-term debt(15,617)(8,950)
Payments on sale leaseback transaction(330) 
Principal payments on financing leases and equipment financing notes(577)(452)
Debt issuance costs (1,000)
Net cash (used in) provided by financing activities(15,024)6,898 
Effect of foreign exchange rate on cash25 (189)
Net change in cash and cash equivalents(456)7,308 
Cash and cash equivalents at beginning of period14,822 5,872 
Cash and cash equivalents at end of period$14,366 $13,180 
Supplemental disclosure of cash flow information:
Cash paid for interest$1,093 $1,285 
Cash (recovered) paid for income taxes$(32)$62 
Supplemental disclosure of non-cash transactions:
Purchases of property and equipment included in accounts payable and accrued expenses$1,964 $4,347 


The accompanying notes are an integral part of these condensed consolidated financial statements.
4

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    Organization and Nature of Business
Mammoth Energy Services, Inc. (“Mammoth Inc.” or the “Company”), together with its subsidiaries, is an integrated, growth-oriented company serving both the oil and gas and the electric utility industries in North America and US territories. Mammoth Inc.'s infrastructure division provides construction, upgrade, maintenance and repair services to various public and private owned utilities. Its oilfield services division provides a diversified set of services to the exploration and production industry including well completion, natural sand and proppant services and drilling services. Additionally, the Company provides aviation services, coil tubing services, equipment rentals, crude oil hauling, full service transportation, remote accommodation services, equipment manufacturing and infrastructure engineering and design services. 

At March 31, 2021 and December 31, 2020, Wexford Capital LP (“Wexford”), through its affiliate MEH Sub LLC (“MEH Sub”), and Gulfport Energy Corporation (“Gulfport”) beneficially owned the following shares of outstanding common stock of Mammoth Inc.:
At March 31, 2021At December 31, 2020
Share Count% OwnershipShare Count% Ownership
Wexford22,055,766 47.7 %22,055,766 48.2 %
Gulfport9,829,548 21.2 %9,829,548 21.5 %
Outstanding shares owned by related parties31,885,314 68.9 %31,885,314 69.7 %
Total outstanding46,272,617 100.0 %45,769,283 100.0 %

Operations

The Company's infrastructure services include construction, upgrade, maintenance and repair services to the electrical infrastructure industry as well as repair and restoration services in response to storms and other disasters. The Company's well completion services include equipment and personnel used in connection with the completion and early production of oil and natural gas wells. The Company's natural sand proppant services include the distribution and production of natural sand proppant that is used primarily for hydraulic fracturing in the oil and gas industry. The Company's drilling services provide drilling rigs and directional tools for both vertical and horizontal drilling of oil and natural gas wells. The Company also provides other services, including aviation, coil tubing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

All of the Company’s operations are in North America. During the periods presented in this report, the Company provided its infrastructure services primarily in the northeastern, southwestern, midwestern and western portions of the United States. The Company’s infrastructure business depends on infrastructure spending on maintenance, upgrade, expansion and repair and restoration. Any prolonged decrease in spending by electric utility companies, delays or reductions in government appropriations or the failure of customers to pay their receivables could have a material adverse effect on the Company’s results of operations and financial condition. During the periods presented, the Company has operated its oil and natural gas businesses in the Permian Basin, the Utica Shale, the Eagle Ford Shale, the Marcellus Shale, the Granite Wash, the SCOOP, the STACK, the Cana-Woodford Shale, the Cleveland Sand and the oil sands located in Northern Alberta, Canada. The Company's oil and natural gas business depends in large part on the conditions in the oil and natural gas industry and, specifically, on the amount of capital spending by its customers. Any prolonged increase or decrease in oil and natural gas prices affects the levels of exploration, development and production activity, as well as the entire health of the oil and natural gas industry. Continuation of or further decreases in the commodity prices for oil and natural gas would have a material adverse effect on the Company’s results of operations and financial condition.

2.    Basis of Presentation and Significant Accounting Policies

Basis of Presentation
The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries and the variable interest entities (“VIE”) for which the Company is the primary beneficiary. All material intercompany accounts and transactions have been eliminated.

5

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
This report has been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, and reflects all adjustments, which in the opinion of management are necessary for the fair presentation of the results for the interim periods, on a basis consistent with the annual audited consolidated financial statements. All such adjustments are of a normal, recurring nature. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the summary of significant accounting policies and notes thereto included in the Company’s most recent annual report on Form 10-K.
Accounts Receivable
Accounts receivable include amounts due from customers for services performed or goods sold. The Company grants credit to customers in the ordinary course of business and generally does not require collateral. Prior to granting credit to customers, the Company analyzes the potential customer's risk profile by utilizing a credit report, analyzing macroeconomic factors and using its knowledge of the industry, among other factors. Most areas in the continental United States in which the Company operates provide for a mechanic’s lien against the property on which the service is performed if the lien is filed within the statutorily specified time frame. Customer balances are generally considered delinquent if unpaid by the 30th day following the invoice date and credit privileges may be revoked if balances remain unpaid. Interest on delinquent accounts receivable is recognized in other income when chargeable and collectability is reasonably assured.

During the period October 2017 through March 2019, the Company provided infrastructure services in Puerto Rico under master services agreements entered into by Cobra Acquisitions LLC (“Cobra”), one of the Company's subsidiaries, with the Puerto Rico Electric Power Authority (“PREPA”) to perform repairs to PREPA’s electrical grid as a result of Hurricane Maria. During the three months ended March 31, 2021 and 2020, the Company charged interest on delinquent accounts receivable pursuant to the terms of its agreements with PREPA totaling $8.7 million and $7.7 million, respectively. These amounts are included in “other, net” on the unaudited condensed consolidated statement of comprehensive loss. Included in “accounts receivable, net” on the unaudited condensed consolidated balance sheets as of March 31, 2021 and December 31, 2020 were interest charges of $82.9 million and $74.3 million, respectively.

The Company regularly reviews receivables and provides for expected losses through an allowance for doubtful accounts. In evaluating the level of established reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of customers changes, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. In the event the Company expects that a customer may not be able to make required payments, the Company would increase the allowance through a charge to income in the period in which that determination is made. If it is determined that previously reserved amounts are collectible, the Company would decrease the allowance through a credit to income in the period in which that determination is made. Uncollectible accounts receivable are periodically charged against the allowance for doubtful accounts once a final determination is made regarding their uncollectability.

6

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Following is a roll forward of the allowance for doubtful accounts for the year ended December 31, 2020 and the three months ended March 31, 2021 (in thousands):

Balance, January 1, 2020$5,154 
Additions charged to bad debt expense22,705 
Additions charged to other selling, general and administrative expense3,950 
Additions charged to other, net - related parties1,427 
Recoveries of receivables previously charged to bad debt expense(747)
Deductions for uncollectible receivables written off(2,350)
Balance, December 31, 202030,139 
Additions charged to bad debt expense10,263 
Additions charged to revenue27,071 
Additions charged to other selling, general and administrative expense186 
Additions charged to other, net - related parties515 
Recoveries of receivables previously charged to bad debt expense(138)
Deductions for uncollectible receivables written off(90)
Balance, March 31, 2021$67,946 

The Company's subsidiaries Stingray Pressure Pumping LLC (“Stingray Pressure Pumping”) and Muskie Proppant LLC (“Muskie”) are party to a pressure pumping contract and a sand supply contract, respectively, with Gulfport. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. As of November 13, 2020, Gulfport owed the Company approximately $46.9 million, which included interest charges of $3.3 million and attorneys’ fees of $1.8 million. FASB ASC 326, Financial Instruments-Credit Losses, requires a company to reflect its current estimate of all expected credit losses. As a result, the Company recorded reserves on its pre-petition receivables due from Gulfport for products and services, interest and attorneys’ fees of $19.4 million, $1.4 million and $1.8 million, respectively, during the year ended December 31, 2020. On March 22, 2021, Gulfport listed the Stingray Pressure Pumping and Muskie contracts on its master rejection schedule filed with the bankruptcy court. As a result of the rejection of these contracts, the Company recognized unliquidated damages of approximately $46.4 million. During the three months ended March 31, 2021, the Company recorded reserves on these unliquidated damages as a reduction to revenue of $27.1 million and to bad debt expense of $3.8 million. Additionally, the Company recorded additional reserves on its pre-petition products and services and interest receivables of $6.1 million and $0.5 million, respectively, during the three months ended March 31, 2021. The Company had net accounts receivable due from Gulfport totaling $33.0 million as of March 31, 2021, which is included in “receivables from related parties, net” on the unaudited condensed consolidated balance sheets. See Note 3.

A hearing on the Stingray Pressure Pumping proof of claim against Gulfport subsidiary Gulfport Appalachia, LLC (“Gulfport Appalachia”) was held on April 7, 2021. The Court issued an interim order on April 22, 2021 that Gulfport Appalachia is not liable to Stingray Pressure Pumping, except with respect for services provided to Gulfport Appalachia from August 31, 2015 to September 30, 2018 under the Master Services Agreement for Pressure Pumping Services (“MSA”). On April 22, 2021, the Court issued an interim order documenting its finding at the April 7, 2021 hearing related to Gulfport Appalachia. The Court's order stated that Gulfport was the debtor entity that Stingray Pressure Pumping could pursue a claim against for all other unpaid amounts for services provided under Stingray Pressure Pumping's MSA with Gulfport and Gulfport Appalachia. However, the Court's order made no determination as to Gulfport’s liability to Stingray Pressure Pumping pursuant to or arising from the MSA, which remains subject to further proceedings before the Court. The net accounts receivable due from Gulfport totaling $33.0 million as of March 31, 2021, includes $32.7 million that the Company believes Gulfport and Gulfport Appalachia are jointly liable for under the MSA and subsequent amendments in 2016 and 2018. See Note 18.

7

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Additionally, the Company has made specific reserves consistent with Company policy which resulted in additions to allowance for doubtful accounts totaling $0.3 million and $3.3 million, respectively, for the three months ended March 31, 2021 and year ended December 31, 2020. These additions were charged to bad debt expense based on the factors described above. Also, during the three months ended March 31, 2021 and year ended December 31, 2020, the Company recorded additions to allowance for doubtful accounts of $0.2 million and $2.2 million, respectively, related to insurance claim receivables for its directors and officers liability policy. The Company will continue to pursue collection until such time as final determination is made consistent with Company policy.

As of March 31, 2021, PREPA owed Cobra approximately $227.0 million for services performed, excluding $82.9 million of interest charged on these delinquent balances as of March 31, 2021. The Company believes these receivables are collectible. PREPA, however, is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA's ability to meet its payment obligations is largely dependent upon funding from the Federal Emergency Management Agency (“FEMA”) or other sources. On September 30, 2019, Cobra filed a motion with the U.S. District Court for the District of Puerto Rico seeking recovery of the amounts owed to Cobra by PREPA, which motion was stayed by the court. On March 25, 2020, Cobra filed an urgent motion to modify the stay order and allow the recovery of approximately $61.7 million in claims related to a tax gross-up provision contained in the emergency master service agreement, as amended, that was entered into with PREPA on October 19, 2017. This emergency motion was denied on June 3, 2020 and the court extended the stay of our motion. On December 9, 2020, the Court again extended the stay of our motion and directed PREPA to file a status motion by June 7, 2021. On April 6, 2021, Cobra filed a motion to lift the stay order. Following this filing, PREPA initiated discussion, which resulted in PREPA and Cobra filing a joint motion to adjourn all deadlines relative to the April 6, 2021 motion until the June 16, 2021 omnibus hearing as a result of PREPA’s understanding that FEMA will release a report in the near future relating to the emergency master service agreement between PREPA and Cobra that was executed on October 19, 2017. The joint motion was granted by the court on April 14, 2021. In the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to the Company or (iii) otherwise does not pay amounts owed to the Company for services performed, the receivable may not be collectible.

Concentrations of Credit Risk and Significant Customers
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents in excess of federally insured limits and trade receivables. Following is a summary of our significant customers based on percentages of total accounts receivable balances at March 31, 2021 and December 31, 2020 and percentages of total revenues derived for the three months ended March 31, 2021 and 2020:

REVENUESACCOUNTS RECEIVABLE
Three Months Ended March 31,At March 31,At December 31,
2021202020212020
Customer A(a)
 % %77 %71 %
Customer B(b)
25 %20 %8 %7 %
Customer C(c)
10 %14 %1 %1 %
Customer D(d)
11 %10 %2 %1 %
a.Customer A is a third-party customer. The accounts receivable balances from Customer A were derived from the Company's infrastructure services segment. Accounts receivable for Customer A also includes receivables due for interest charged on delinquent accounts receivable.
b.Customer B is a related party customer. Revenues and the related accounts receivable balances earned from Customer B were derived from the Company's well completion services segment, natural sand proppant services segment and other businesses. Accounts receivable for Customer B also includes receivables due for interest charged on delinquent accounts receivable.
c.Customer C is a third-party customer. Revenues and the related accounts receivable balances earned from Customer C were derived from the Company's well completion services segment and equipment rental business.
d.Customer D is a third-party customer. Revenues and the related accounts receivable balances earned from Customer D were derived from the Company's infrastructure services segment.

Fair Value of Financial Instruments
The Company's financial instruments consist of cash and cash equivalents, trade receivables, trade payables, amounts receivable or payable to related parties and long-term debt. The carrying amount of cash and cash equivalents, trade receivables, receivables from related parties and trade payables approximates fair value because of the short-term nature of the instruments. The fair value of long-term debt approximates its carrying value because the cost of borrowing fluctuates based upon market conditions.

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MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3.     Revenue
The Company's primary revenue streams include infrastructure services, well completion services, natural sand proppant services, drilling services and other services, which includes coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, full service transportation, crude oil hauling, remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services. See Note 19 for the Company's revenue disaggregated by type.

Certain of the Company’s customer contracts, including its pressure pumping and sand contracts with Gulfport, include provisions entitling the Company to a termination penalty when the customer invokes its contractual right to terminate prior to the contract’s nominal end date. The termination penalties in the customer contracts vary, but are generally considered substantive for accounting purposes and create enforceable rights and obligations throughout the stated duration of the contract. The Company accounts for a contract cancellation as a contract modification in the period in which the customer invokes the termination provision. The determination of the contract termination penalty is based on the terms stated in the related customer agreement. As of the modification date, the Company updates its estimate of the transaction price using the expected value method, subject to constraints, and recognizes the amount over the remaining performance period.

Infrastructure Services
Infrastructure services are typically provided pursuant to master service agreements, repair and maintenance contracts or fixed price and non-fixed price installation contracts. Pricing under these contracts may be unit priced, cost-plus/hourly (or time and materials basis) or fixed price (or lump sum basis). Generally, the Company accounts for infrastructure services as a single performance obligation satisfied over time. In certain circumstances, the Company supplies materials that are utilized during the jobs as part of the agreement with the customer. The Company accounts for these infrastructure agreements as multiple performance obligations satisfied over time. Revenue is recognized over time as work progresses based on the days completed or as the contract is completed. Under certain customer contracts in our infrastructure services segment, the Company warranties equipment and labor performed for a specified period following substantial completion of the work. 

Well Completion Services
Well completion services are typically provided based upon a purchase order, contract or on a spot market basis. Services are provided on a day rate, contracted or hourly basis. Generally, the Company accounts for well completion services as a single performance obligation satisfied over time. In certain circumstances, the Company supplies proppant that is utilized for pressure pumping as part of the agreement with the customer. The Company accounts for these pressure pumping agreements as multiple performance obligations satisfied over time. Jobs for these services are typically short-term in nature and range from a few hours to multiple days. Generally, revenue is recognized over time upon the completion of each segment of work based upon a completed field ticket, which includes the charges for the services performed, mobilization of the equipment to the location, consumable supplies and personnel.

Pursuant to a contract with Gulfport, Stingray Pressure Pumping agreed to provide Gulfport with use of up to two pressure pumping fleets for the period covered by the contract. Under this agreement, performance obligations are satisfied as services are rendered based on the passage of time rather than the completion of each segment of work. Stingray Pressure Pumping has the right to receive consideration from this customer even if circumstances prevent us from performing work. All consideration owed to Stingray Pressure Pumping for services performed during the contractual period is fixed and the right to receive it is unconditional. Gulfport has filed a legal action in Delaware state court seeking the termination of this contract and monetary damages. Further, on November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. On March 22, 2021, Gulfport listed the Stingray Pressure Pumping contract on its master rejection schedule filed with the bankruptcy court. The Company determined that these factors changed the scope of the contract, accelerated the duration of, and otherwise changed the rights and obligations of each party to the contract. As a result, the Company accounted for this as a contract modification during the three months ended March 31, 2021. Stingray Pressure Pumping used the expected value method to estimate unliquidated damages totaling $37.9 million, which resulted in the recognition of net revenue totaling $14.8 million and bad debt expense of $2.9 million on previously recognized revenue during the three months ended March 31, 2021. As of March 31, 2021, Stingray Pressure Pumping had net accounts receivable due from Gulfport totaling $32.7 million, which includes $1.3 million in interest on delinquent accounts receivable. The revenue recognized and related accounts receivable balance owed to the Company are reflected in “services revenue—related parties” and “receivables from related parties, net” on the accompanying unaudited condensed consolidated statement of comprehensive loss and unaudited condensed consolidated balance sheets. See Notes 11 and 18 below.
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MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Additional revenue is generated through labor charges and the sale of consumable supplies that are incidental to the service being performed. Such amounts are recognized ratably over the period during which the corresponding goods and services are consumed.

Natural Sand Proppant Services
The Company sells natural sand proppant through sand supply agreements with its customers. Under these agreements, sand is typically sold at a flat rate per ton or a flat rate per ton with an index-based adjustment. The Company recognizes revenue at the point in time when the customer obtains legal title to the product, which may occur at the production facility, rail origin or at the destination terminal.

Certain of the Company's sand supply agreements, including its agreement with Gulfport, contain a minimum volume commitment related to sand purchases whereby the Company charges a shortfall payment if the customer fails to meet the required minimum volume commitment. These agreements may also contain make-up provisions whereby shortfall payments can be applied in future periods against purchased volumes exceeding the minimum volume commitment. If a make-up right exists, the Company has future performance obligations to deliver excess volumes of product in subsequent months. In accordance with ASC 606, if the customer fails to meet the minimum volume commitment, the Company will assess whether it expects the customer to fulfill its unmet commitment during the contractually specified make-up period based on discussions with the customer and management's knowledge of the business. If the Company expects the customer will make-up deficient volumes in future periods, revenue related to shortfall payments will be deferred and recognized on the earlier of the date on which the customer utilizes make-up volumes or the likelihood that the customer will exercise its right to make-up deficient volumes becomes remote. As of March 31, 2021, the Company had deferred revenue totaling $4.8 million related to shortfall payments. This amount is included in “accrued expenses and other current liabilities” on the unaudited condensed consolidated balance sheet. If the Company does not expect the customer will make-up deficient volumes in future periods, the breakage model will be applied and revenue related to shortfall payments will be recognized when the model indicates the customer's inability to take delivery of excess volumes. The Company recognized revenue totaling $4.9 million during each of the three months ended March 31, 2021 and 2020, respectively.

In certain of the Company's sand supply agreements, the customer obtains control of the product when it is loaded into rail cars and the customer reimburses the Company for all freight charges incurred. The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the sand. If revenue is recognized for the related product before the shipping and handling activities occur, the Company accrues the related costs of those shipping and handling activities.

Pursuant to its contract with Gulfport, Muskie agreed to sell and deliver specified amounts of sand to Gulfport. In September 2020, Muskie filed a lawsuit against Gulfport to recover delinquent payments due under this agreement. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. On March 22, 2021, Gulfport listed the Muskie contract on its master rejection schedule filed with the bankruptcy court. The Company determined that these factors changed the scope of the contract, accelerated the duration of, and otherwise changed the rights and obligations of each party to the contract. As a result, the Company accounted for this as a contract modification during the three months ended March 31, 2021. Muskie used the expected value method to estimate unliquidated damages totaling $8.5 million, which resulted in the recognition of net revenue totaling $2.1 million and bad debt expense of $1.0 million on previously recognized revenue during the three months ended March 31, 2021. As of March 31, 2021, Muskie had net accounts receivable due from Gulfport totaling $0.3 million, which includes a nominal amount of interest on delinquent accounts receivable. The revenue recognized and related accounts receivable balance owed to the Company are reflected in “services revenue—related parties” and “receivables from related parties, net” on the accompanying unaudited condensed consolidated statement of comprehensive loss and unaudited condensed consolidated balance sheets. See Notes 11 and 18 below.

Drilling Services
Contract drilling services were provided under daywork contracts. Directional drilling services, including motor rentals, are provided on a day rate or hourly basis, and revenue is recognized as work progresses. Performance obligations are satisfied over time as the work progresses based on the measure of output. Mobilization revenue and costs were recognized over the days of actual drilling. As a result of market conditions, the Company temporarily shut down its contract land drilling operations beginning in December 2019 and rig hauling operations beginning in April 2020.

10

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Other Services
During the periods presented, the Company also provided aviation, coil tubing, pressure control, equipment rentals, full service transportation, crude oil hauling, remote accommodations, equipment manufacturing and infrastructure engineering and design services, which are reported under other services. As a result of market conditions, the Company has temporarily shut down its coil tubing and full service transportation operations beginning in July 2020. The Company's other services are typically provided based upon a purchase order, contract or on a spot market basis. Services are provided on a day rate, contracted or hourly basis. Performance obligations for these services are satisfied over time and revenue is recognized as the work progresses based on the measure of output. Jobs for these services are typically short-term in nature and range from a few hours to multiple days.

Practical Expedients
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts in which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied distinct good or service that forms part of a single performance obligation.

Contract Balances
Following is a rollforward of the Company's contract liabilities (in thousands):
Balance, December 31, 2019$7,244 
Deduction for recognition of revenue(25,047)
Increase for deferral of shortfall payments25,436 
Increase for deferral of customer prepayments648 
Balance, December 31, 20208,281 
Deduction for recognition of revenue(5,287)
Increase for deferral of shortfall payments1,851 
Increase for deferral of customer prepayments186 
Balance, March 31, 2021$5,031 

The Company did not have any contract assets as of March 31, 2021, December 31, 2020 or December 31, 2019.

Performance Obligations
Revenue recognized in the current period from performance obligations satisfied in previous periods was a nominal amount for the three months ended March 31, 2021 and 2020. As of March 31, 2021, the Company had unsatisfied performance obligations totaling $7.9 million, which will be recognized over the next 12 months.

4.    Inventories
Inventories consist of raw sand and processed sand available for sale, chemicals and other products sold as a bi-product of completion and production operations and supplies used in performing services. Inventory is stated at the lower of cost or net realizable value on an average cost basis. The Company assesses the valuation of its inventories based upon specific usage, future utility, obsolescence and other factors. A summary of the Company's inventories is shown below (in thousands):
March 31,December 31,
20212020
Supplies$6,508 $6,312 
Raw materials637 613 
Work in process2,734 3,478 
Finished goods1,477 1,617 
Total inventories$11,356 $12,020 

11

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5.    Property, Plant and Equipment     
Property, plant and equipment include the following (in thousands):
March 31,December 31,
Useful Life20212020
Pressure pumping equipment
3-5 years
$218,776 $217,945 
Drilling rigs and related equipment
3-15 years
113,146 113,146 
Machinery and equipment
7-20 years
170,962 172,272 
Buildings(a)
15-39 years
49,152 48,776 
Vehicles, trucks and trailers
5-10 years
107,681 111,911 
Coil tubing equipment
4-10 years
8,541 8,541 
LandN/A13,417 13,417 
Land improvements
15 years or life of lease
10,133 10,133 
Rail improvements
10-20 years
13,793 13,793 
Other property and equipment(b)
3-12 years
18,275 18,640 
723,876 728,574 
Deposits on equipment and equipment in process of assembly(c)
3,923 3,191 
727,799 731,765 
Less: accumulated depreciation(d)
496,478 480,503 
Total property, plant and equipment, net$231,321 $251,262 
a.    Included in Buildings at each of March 31, 2021 and December 31, 2020 are costs of $7.6 million related to assets under operating leases.
b.    Included in Other property and equipment at each of March 31, 2021 and December 31, 2020 are costs of $6.0 million related to assets under operating leases.
c.    Deposits on equipment and equipment in process of assembly represents deposits placed with vendors for equipment that is in the process of assembly and purchased equipment that is being outfitted for its intended use. The equipment is not yet placed in service.
d.    Includes accumulated depreciation of $5.5 million and $5.0 million at March 31, 2021 and December 31, 2020, respectively, related to assets under operating leases.

Impairment
Oil prices declined significantly in March 2020 as a result of geopolitical events that increased the supply of oil in the market as well as effects of the COVID-19 pandemic. As a result, the Company determined that it was more likely than not that the fair value of certain of its oilfield services assets were less than their carrying value. Therefore, the Company performed an interim impairment test. As a result of the test, the Company recorded the following impairments to its fixed assets during the first quarter of 2020 (in thousands):

Water transfer equipment$4,203 
Crude oil hauling equipment3,275 
Coil tubing equipment2,160 
Flowback equipment1,514 
Rental equipment1,308 
Other equipment437 
Total impairment of other long-lived assets$12,897 

The Company measured the fair values of these assets using significant unobservable inputs (Level 3) based on an income approach. The Company did not record any impairment of other long-lived assets during the three months ended March 31, 2021.

Disposals
Proceeds from customers for horizontal and directional drilling services equipment damaged or lost down-hole are reflected in revenue with the carrying value of the related equipment charged to cost of service revenues and are reported as cash inflows from investing activities in the unaudited condensed consolidated statement of cash flows. For the three months ended March 31, 2020, proceeds and gains from the sale of equipment damaged or lost down-hole were
12

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
each $0.4 million. The Company did not have any proceeds or gains from the sale of equipment damaged or lost down-hole during the three months ended March 31, 2021.

Proceeds from assets sold or disposed of as well as the carrying value of the related equipment are reflected in “other, net” on the unaudited condensed consolidated statement of comprehensive loss. For the three months ended March 31, 2021 and 2020, proceeds from the sale of equipment were $1.5 million and $0.6 million, respectively, and gains from the sale or disposal of equipment were $0.6 million and $0.3 million, respectively.

Depreciation, depletion, amortization and accretion
A summary of depreciation, depletion, amortization and accretion expense is below (in thousands):

Three Months Ended March 31,
20212020
Depreciation expense$20,856 $25,600 
Amortization expense253 253 
Accretion expense37 29 
Depreciation, depletion, amortization and accretion$21,146 $25,882 

6.    Goodwill and Intangible Assets
Goodwill
Changes in the net carrying amount of goodwill by reporting segment (see Note 19) for the three months ended March 31, 2021 and year ended December 31, 2020 are presented below (in thousands):


InfrastructureWell CompletionSandOtherTotal
Balance as of January 1, 2020
Goodwill$891 $86,043 $2,684 $14,830 $104,448 
Accumulated impairment losses (23,423)(2,684)(10,760)(36,867)
891 62,620  4,070 67,581 
Acquisitions     
Impairment losses (53,406) (1,567)(54,973)
Balance as of December 31, 2020
Goodwill891 86,043 2,684 14,830 104,448 
Accumulated impairment losses (76,829)(2,684)(12,327)(91,840)
891 9,214  2,503 12,608 
Acquisitions     
Impairment losses     
Balance as of March 31, 2021
Goodwill891 86,043 2,684 14,830 104,448 
Accumulated impairment losses (76,829)(2,684)(12,327)(91,840)
$891 $9,214 $ $2,503 $12,608 

Oil prices declined significantly in March 2020 as a result of geopolitical events that increased the supply of oil in the market as well as effects of the COVID-19 pandemic. As a result, the Company determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, the Company performed an interim goodwill impairment test. The Company impaired goodwill associated with Stingray Pressure Pumping, Silverback Energy and WTL Oil LLC, resulting in a $55.0 million impairment charge during the first quarter of 2020. To determine fair value, the Company used a combination of the income and market approaches. The income approach estimates the fair value based on anticipated cash flows that are discounted using a weighted average cost of
13

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
capital. The market approach estimates the fair value using comparative multiples, which involves significant judgment in the selection of the appropriate peer group companies and valuation multiples.
Intangible Assets

The Company had the following definite lived intangible assets recorded (in thousands):

March 31,December 31,
20212020
Customer relationships$1,050 $1,050 
Trade names9,063 9,063 
Less: accumulated amortization - customer relationships(685)(642)
Less: accumulated amortization - trade names(4,907)(4,697)
Intangible assets, net$4,521 $4,774 

Amortization expense for intangible assets was $0.3 million for each of the three months ended March 31, 2021 and 2020, respectively. The original life of customer relationships is 6 years as of March 31, 2021 with a remaining average useful life of 2.1 years. The original life of trade names ranges from 10 to 20 years as of March 31, 2021 with a remaining average useful life of 7.5 years.

Aggregated expected amortization expense for the future periods is expected to be as follows (in thousands):
Remainder of 2021$761 
20221,015 
2023898 
2024771 
2025152 
Thereafter924 
$4,521 

7.    Equity Method Investment
On December 21, 2018, Cobra Aviation Services LLC (“Cobra Aviation”) and Wexford Partners Investment Co. LLC (“Wexford Investment”), a related party, formed a joint venture under the name of Brim Acquisitions LLC (“Brim Acquisitions”) to acquire all outstanding equity interest in Brim Equipment Leasing, Inc. (“Brim Equipment”) for a total purchase price of approximately $2.0 million. Cobra Aviation owns a 49% economic interest and Wexford Investment owns a 51% economic interest in Brim Acquisitions, and each member contributed its pro rata portion of Brim Acquisitions' initial capital of $2.0 million. Brim Acquisitions, through Brim Equipment, owns four commercial helicopters and leases five commercial helicopters for operations, which it uses to provide a variety of services, including short haul, aerial ignition, hoist operations, aerial photography, fire suppression, construction services, animal/capture/survey, search and rescue, airborne law enforcement, power line construction, precision long line operations, pipeline construction and survey, mineral and seismic exploration, and aerial seeding and fertilization.

The Company uses the equity method of accounting to account for its investment in Brim Acquisitions, which had a carrying value of approximately $3.1 million and $3.7 million at March 31, 2021 and December 31, 2020, respectively. The investment is included in “other non-current assets” on the unaudited condensed consolidated balance sheets. The Company recorded equity method adjustments to its investment of ($0.6) million and $0.4 million for its share of Brim Acquisitions' (loss) income for the three months ended March 31, 2021 and 2020, respectively, which is included in “other, net” on the unaudited condensed consolidated statements of comprehensive loss.

14

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
8.    Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities
    Accrued expenses and other current liabilities and other long-term liabilities included the following (in thousands):
March 31,December 31,
20212020
State and local taxes payable$13,666 $13,838 
Financed insurance premiums(a)
7,325 10,394 
Deferred revenue5,031 8,281 
Accrued compensation and benefits2,630 3,710 
Insurance reserves1,799 1,941 
Payroll tax liability1,897 1,816 
Financing leases1,467 1,499 
Sale leaseback liability(b)
1,279 1,290