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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 September 30, 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 November 3, 2021, there were 46,684,065 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, or OPEC+, affecting commodity price and production levels;
the severity and duration of the COVID-19 pandemic, the related global and national health concerns and economic repercussions and the resulting negative impact on demand for Mammoth’s services;
operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, remote work arrangements and protecting the health, safety and well-being of Mammoth’s employees;
the performance of contracts and supply chain disruptions during the COVID-19 pandemic;
general economic, business or industry conditions;
conditions in the capital, financial and credit markets;
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 obtain capital or financing needed for our operations on favorable terms or at all;
our ability to regain compliance with certain financial covenants and comply with other terms and conditions under our recently amended revolving credit facility;
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 or settlement of our litigation matters discussed in this report, including the adverse impact of the recent settlements with Gulfport Energy Corporation and MasTec Renewables Puerto Rico, LLC, on our financial condition and results of operations;
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 severe winter storms in February 2021 in the Permian Basin where we provide well 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 due to increased use of remote connectivity in the workplace;
competition within the energy services industry;
availability of equipment, materials or skilled personnel or other labor resources;
payment of any future dividends;
future operating results; and
iv


capital expenditures and other plans, objectives, expectations and intentions.

    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)
ASSETSSeptember 30,December 31,
20212020
CURRENT ASSETS(in thousands)
Cash and cash equivalents$7,953 $14,822 
Short-term investment1,760 1,750 
Accounts receivable, net402,035 393,112 
Receivables from related parties, net238 28,461 
Inventories9,438 12,020 
Prepaid expenses3,859 13,825 
Other current assets754 758 
Total current assets426,037 464,748 
Property, plant and equipment, net194,478 251,262 
Sand reserves64,806 65,876 
Operating lease right-of-use assets14,766 20,179 
Intangible assets, net - customer relationships277 408 
Intangible assets, net - trade names3,194 4,366 
Goodwill12,608 12,608 
Deferred income tax asset8,094  
Other non-current assets4,247 5,115 
Total assets$728,507 $824,562 
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable$43,628 $40,316 
Payables to related parties5 3 
Accrued expenses and other current liabilities54,724 44,408 
Current operating lease liability6,996 8,618 
Current portion of long-term debt1,449 1,165 
Income taxes payable39,283 34,088 
Total current liabilities146,085 128,598 
Long-term debt, net of current portion79,195 81,338 
Deferred income tax liabilities687 24,741 
Long-term operating lease liability7,591 11,377 
Asset retirement obligations3,682 4,746 
Other liabilities15,003 10,435 
Total liabilities252,243 261,235 
COMMITMENTS AND CONTINGENCIES (Note 18)
EQUITY
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 46,684,065 and 45,769,283 issued and outstanding at September 30, 2021 and December 31, 2020
467 458 
Additional paid in capital537,980 537,039 
Retained (deficit) earnings(59,236)28,895 
Accumulated other comprehensive loss(2,947)(3,065)
Total equity476,264 563,327 
Total liabilities and equity$728,507 $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 September 30,Nine Months Ended September 30,
2021202020212020
REVENUE(in thousands, except per share amounts)
Services revenue$52,417 $55,279 $135,975 $169,002 
Services revenue - related parties601 8,565 15,678 35,228 
Product revenue4,467 4,815 17,932 18,171 
Product revenue - related parties 1,875 2,145 5,625 
Total revenue57,485 70,534 171,730 228,026 
COST AND EXPENSES
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $35,587, $53,448, $20,424 and $65,728, respectively, for the three months and nine months ended September 30, 2021 and three and nine months ended September 30, 2020)
43,538 41,445 128,703 154,397 
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0 and $0, respectively, for the three and nine months ended September 30, 2021 and three and nine months ended September 30, 2020)
181 131 397 329 
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,667, $7,051, $2,689 and $7,344, respectively, for the three and nine months ended September 30, 2021 and three and nine months ended September 30, 2020)
9,865 4,353 22,939 21,862 
Selling, general and administrative (Note 11)41,866 11,979 74,312 36,063 
Selling, general and administrative - related parties (Note 11) 201 385 614 
Depreciation, depletion, amortization and accretion19,148 23,132 60,559 73,130 
Impairment of goodwill   54,973 
Impairment of other long-lived assets547  547 12,897 
Total cost and expenses115,145 81,241 287,842 354,265 
Operating loss(57,660)(10,707)(116,112)(126,239)
OTHER INCOME (EXPENSE)
Interest expense, net(1,484)(1,098)(3,878)(4,207)
Other income (expense), net11,056 7,943 6,004 23,489 
Other income (expense), net - related parties 1,099 (515)2,232 
Total other income (expense)9,572 7,944 1,611 21,514 
Loss before income taxes(48,088)(2,763)(114,501)(104,725)
Benefit for income taxes(7,187)(6,193)(26,370)(8,979)
Net (loss) income$(40,901)$3,430 $(88,131)$(95,746)
OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net of tax of ($69), ($749), ($95) and $116, respectively, for the three and nine months ended September 30, 2021 and three and nine months ended September 30, 2020
(289)324 118 (422)
Comprehensive (loss) income$(41,190)$3,754 $(88,013)$(96,168)
Net (loss) income per share (basic) (Note 14)$(0.88)$0.07 $(1.90)$(2.10)
Net (loss) income per share (diluted) (Note 14)$(0.88)$0.07 $(1.90)$(2.10)
Weighted average number of shares outstanding (basic) (Note 14)46,683 45,764 46,342 45,603 
Weighted average number of shares outstanding (diluted) (Note 14)46,683 46,571 46,342 45,603 







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 September 30, 2021
Accumulated
RetainedAdditionalOther
Common Stock(Deficit)Paid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at June 30, 202146,681 $467 $(18,335)$537,728 $(2,658)$517,202 
Stock based compensation3  — 252 — 252 
Net loss— — (40,901)— — (40,901)
Other comprehensive loss— — — — (289)(289)
Balance at September 30, 202146,684 $467 $(59,236)$537,980 $(2,947)$476,264 
Three Months Ended September 30, 2020
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at June 30, 202045,762 $458 $37,326 $536,333 $(4,052)$570,065 
Stock based compensation3  — 352 — 352 
Net income— — 3,430 — — 3,430 
Other comprehensive income— — — — 324 324 
Balance at September 30, 202045,765 $458 $40,756 $536,685 $(3,728)$574,171 
Nine Months Ended September 30, 2021
Accumulated
RetainedAdditionalOther
Common Stock(Deficit)Paid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at December 31, 202045,769 $458 $28,895 $537,039 $(3,065)$563,327 
Stock based compensation915 9 — 941 — 950 
Net loss— — (88,131)— — (88,131)
Other comprehensive income— — — — 118 118 
Balance at September 30, 202146,684 $467 $(59,236)$537,980 $(2,947)$476,264 
Nine Months Ended September 30, 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 compensation656 7 — 1,591 — 1,598 
Net loss— — (95,746)— — (95,746)
Other comprehensive loss— — — — (422)(422)
Balance at September 30, 202045,765 $458 $40,756 $536,685 $(3,728)$574,171 








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)

Nine Months Ended September 30,
20212020
(in thousands)
Cash flows from operating activities:
Net loss$(88,131)$(95,746)
Adjustments to reconcile net loss to cash (used in) provided by operating activities:
Stock based compensation950 1,598 
Depreciation, depletion, accretion and amortization60,559 73,130 
Amortization of coil tubing strings 359 
Amortization of debt origination costs469 703 
Bad debt expense41,650 2,306 
Gain on disposal of property and equipment(4,632)(927)
Impairment of goodwill 54,973 
Impairment of other long-lived assets547 12,897 
Deferred income taxes(32,183)(7,334)
Other502 581 
Changes in assets and liabilities:
Accounts receivable, net(50,666)(11,707)
Receivables from related parties28,224 (31,152)
Inventories2,582 3,827 
Prepaid expenses and other assets9,947 8,803 
Accounts payable2,597 (5,211)
Payables to related parties2 (508)
Accrued expenses and other liabilities6,627 (3,166)
Income taxes payable5,192 (1,644)
Net cash (used in) provided by operating activities(15,764)1,782 
Cash flows from investing activities:
Purchases of property and equipment(4,474)(5,873)
Purchases of property and equipment from related parties (76)
Proceeds from disposal of property and equipment9,581 4,859 
Net cash provided by (used in) investing activities5,107 (1,090)
Cash flows from financing activities:
Borrowings on long-term debt31,700 30,800 
Repayments of long-term debt(33,571)(21,000)
Proceeds from sale leaseback transaction9,473  
Payments on sale leaseback transaction(2,106) 
Principal payments on financing leases and equipment financing notes(1,716)(1,423)
Debt issuance costs (1,000)
Net cash provided by financing activities3,780 7,377 
Effect of foreign exchange rate on cash8 (57)
Net change in cash and cash equivalents(6,869)8,012 
Cash and cash equivalents at beginning of period14,822 5,872 
Cash and cash equivalents at end of period$7,953 $13,884 
Supplemental disclosure of cash flow information:
Cash paid for interest$3,236 $3,637 
Cash paid for income taxes, net of refunds received$978 $13 
Supplemental disclosure of non-cash transactions:
Purchases of property and equipment included in accounts payable and accrued expenses$2,028 $2,032 



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, equipment rentals, crude oil hauling, remote accommodation services, equipment manufacturing and infrastructure engineering and design services. 

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, equipment rentals, crude oil hauling, 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.

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
5

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 and nine months ended September 30, 2021 and three and nine months ended September 30, 2020, the Company charged interest on delinquent accounts receivable pursuant to the terms of its agreements with PREPA totaling $9.3 million and $27.0 million, respectively, and $8.2 million and $23.8 million, respectively. These amounts are included in “other income (expense), net” on the unaudited condensed consolidated statement of comprehensive loss. Included in “accounts receivable, net” on the unaudited condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020 were interest charges of $101.2 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 collectability.

Following is a roll forward of the allowance for doubtful accounts for the year ended December 31, 2020 and the nine months ended September 30, 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 (expense) income, 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 expense41,799 
Additions charged to revenue27,071 
Additions charged to other selling, general and administrative expense273 
Additions charged to other income (expense), net - related parties515 
Additions charged to other income (expense), net1,394 
Recoveries of receivables previously charged to bad debt expense(149)
Deductions for uncollectible receivables written off(82,426)
Balance, September 30, 2021$18,616 

6

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company’s subsidiaries Stingray Pressure Pumping LLC (“Stingray Pressure Pumping”) and Muskie Proppant LLC (“Muskie”) were party to a pressure pumping contract and a sand supply contract, respectively, with Gulfport Energy Corporation (“Gulfport”). On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. On May 17, 2021, Gulfport emerged from bankruptcy. 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. During the first quarter of 2021, the Company recognized unliquidated damages of approximately $46.4 million and recorded reserves on these unliquidated damages as a reduction to revenue of $27.1 million and to bad debt expense of $3.8 million. Also during the first quarter of 2021, the Company recorded additional reserves on its pre-petition products and services and interest receivables of $6.1 million and $0.5 million, respectively. On September 21, 2021, the Company and Gulfport reached a settlement under which all litigation relating to the Stingray Pressure Pumping contract and the Muskie contract will be terminated, Stingray Pressure Pumping will release all claims against Gulfport and its subsidiaries with respect to Gulfport’s bankruptcy proceedings, each of the parties will release all claims they had against the others with respect to the litigation matters discussed in Note 18, and Muskie will have an allowed general unsecured claim against Gulfport of $3.1 million. The settlement remains subject to the final approval by the bankruptcy court overseeing Gulfport’s bankruptcy. As a result of the settlement, during the three months ended September 30, 2021, the Company wrote off its remaining receivable related to the Stingray Pressure Pumping claim resulting in bad debt expense and other expense of $31.0 million and $1.3 million, respectively, and recorded additional bad debt expense related to the Muskie claim totaling $0.2 million. The Company had net accounts receivable due from Gulfport totaling $0.1 million as of September 30, 2021, which is included in “accounts receivable, net” on the unaudited condensed consolidated balance sheets. See Note 3.

Additionally, the Company has made specific reserves consistent with Company policy which resulted in additions to allowance for doubtful accounts totaling $0.6 million and $3.3 million, respectively, for the nine months ended September 30, 2021 and year ended December 31, 2020. These additions were charged to bad debt expense based on the factors described above. Also, during the nine months ended September 30, 2021 and year ended December 31, 2020, the Company recorded additions to allowance for doubtful accounts of $0.3 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 September 30, 2021, PREPA owed Cobra approximately $227.0 million for services performed, excluding $101.2 million of interest charged on these delinquent balances as of September 30, 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 with Cobra, 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 would 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. On May 26, 2021, FEMA issued a Determination Memorandum related to the first contract between Cobra and PREPA in which, among other things, FEMA raised two contract compliance issues and, as a result, concluded that approximately $47 million in costs were not authorized costs under the contract. On June 14, 2021, the Court issued an order adjourning Cobra’s motion to lift the stay order to a hearing on August 4, 2021 and directing Cobra and PREPA to meet and confer in good faith concerning, among other things, (i) the May 26, 2021 Determination Memorandum issued by FEMA and (ii) whether and when a second determination memorandum is expected. The parties were further directed to file an additional status report, which was filed on July 20, 2021. On July 23, 2021, with the aid of Mammoth, PREPA filed an appeal of the entire $47 million that FEMA de-obligated in the May 26, 2021 Determination Memorandum. On August 4, 2021, the Court denied Cobra’s April 6, 2021 motion to lift the stay order, extended the stay of Cobra’s motion
7

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
seeking recovery of amounts owed to Cobra and directed the parties to file a joint status report by January 19, 2022. 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 September 30, 2021 and December 31, 2020 and percentages of total revenues derived for the three and nine months ended September 30, 2021 and 2020:
REVENUESACCOUNTS RECEIVABLE
Three Months Ended September 30,Nine Months Ended September 30,At September 30,At December 31,
202120202021202020212020
Customer A(a)
 % % % %82 %71 %
Customer B(b)
 %15 %10 %18 % %9 %
Customer C(c)
24 % %8 % %3 % %
Customer D(d)
7 %8 %9 %10 %1 %2 %
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 was a related-party customer until June 29, 2021. Revenues earned from this customer prior to June 29, 2021 are included in services revenue - related parties and product revenue - related parties on the unaudited condensed consolidated statements of comprehensive loss. The related accounts receivable are included in accounts receivable, net on the unaudited condensed consolidated balance sheet at September 30, 2021 and receivables due from related parties, net at December 31, 2020. 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.
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.

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, 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 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.

8

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 were satisfied as services were rendered based on the passage of time rather than the completion of each segment of work. Stingray Pressure Pumping had 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. On September 21, 2021, the Company and Gulfport reached a settlement under which all litigation relating to the Stingray Pressure Pumping contract will be terminated. Stingray Pressure Pumping will release all claims against Gulfport and its subsidiaries with respect to Gulfport’s bankruptcy proceedings and each of the parties will release all claims they had against the others with respect to the litigation matters discussed in Note 18. The settlement remains subject to the final approval by the bankruptcy court overseeing Gulfport’s bankruptcy. As a result of this settlement agreement, during the three months ended September 30, 2021, the Company wrote off its remaining receivable related to the Stingray Pressure Pumping claim resulting in bad debt expense and other expense of $31.0 million and $1.3 million, respectively. Gulfport was a related party until June 29, 2021. On June 29, 2021, pursuant to the terms of its plan of reorganization, all of the Company’s shares that Gulfport owned were transferred to a trust for the benefit of certain of Gulfport’s creditors. The revenue recognized related to this agreement is included in “services revenue - related parties” in the accompanying unaudited condensed consolidated statement of comprehensive loss and the related accounts receivable is included in “receivables due from related parties” as of December 31, 2020. See Notes 11 and 18 below.

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.

9

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Certain of the Company’s sand supply agreements 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 September 30, 2021, the Company had deferred revenue totaling $7.3 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 $6.0 million during the nine months ended September 30, 2021, respectively, and $4.9 million and $14.7 million during the three and nine months ended September 30, 2020, respectively, related to shortfall payments. The Company did not recognize any shortfall revenue during the three months ended September 30, 2021.

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. On September 21, 2021, the Company and Gulfport reached a settlement under which all litigation relating to the Muskie contract will be terminated, each of the parties will release all claims they had against the others with respect to the litigation matters discussed in Note 18 and Muskie’s contract claim against Gulfport will be allowed under Gulfport’s plan of reorganization in the amount of $3.1 million. The settlement remains subject to the final approval by the bankruptcy court overseeing Gulfport’s bankruptcy. As a result of this settlement agreement, Muskie recognized bad debt expense of $0.2 million during the three months ended September 30, 2021. As of September 30, 2021, Muskie had net accounts receivable due from Gulfport totaling $0.1 million, which includes a nominal amount of interest on delinquent accounts receivable. Gulfport was a related party until June 29, 2021. The revenue recognized related to this agreement is included in “product revenue - related parties” in the accompanying unaudited condensed consolidated statement of comprehensive loss and the related accounts receivable is included in “accounts receivable, net” in the unaudited condensed consolidated balance sheets as of September 30, 2021 and “receivables due from related parties” as of December 31, 2020. 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.

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
10

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
has temporarily shut down its coil tubing and full service transportation operations beginning in July 2020 and its crude oil hauling operations beginning in July 2021. 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(5,308)
Increase for deferral of shortfall payments4,338 
Increase for deferral of customer prepayments187 
Balance, September 30, 2021$7,498 

The Company did not have any contract assets as of September 30, 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 nine months ended September 30, 2021 and 2020. As of September 30, 2021, the Company had unsatisfied performance obligations totaling $3.8 million, which will be recognized over the next six 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):
September 30,December 31,
20212020
Supplies$5,165 $6,312 
Raw materials731 613 
Work in process2,900 3,478 
Finished goods642 1,617 
Total inventories$9,438 $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):
September 30,December 31,
Useful Life20212020
Pressure pumping equipment
3-5 years
$220,023 $217,945 
Drilling rigs and related equipment
3-15 years
112,223 113,146 
Machinery and equipment
7-20 years
168,631 172,272 
Buildings(a)
15-39 years
45,937 48,776 
Vehicles, trucks and trailers
5-10 years
104,717 111,911 
Coil tubing equipment
4-10 years
7,591 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
18,253 18,640 
714,718 728,574 
Deposits on equipment and equipment in process of assembly(c)
3,857 3,191 
718,575 731,765 
Less: accumulated depreciation(d)
524,097 480,503 
Total property, plant and equipment, net$194,478 $251,262 
a.    Included in Buildings at each of September 30, 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 September 30, 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 $6.3 million and $5.0 million at September 30, 2021 and December 31, 2020, respectively, related to assets under operatin