Mammoth Energy Services, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Reporting Segments and Geographic Areas

Reporting Segments and Geographic Areas

12 Months Ended

Dec. 31, 2019

Reporting Segments

As of December 31, 2019, our revenues, income before income taxes and identifiable assets are primarily attributable to four reportable segments. The Company principally provides electric infrastructure services to private utilities, public investor-owned utilities and co-operative utilities and services in connection with on-shore drilling of oil and natural gas wells for small to large domestic independent oil and natural gas producers.

The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function (“CODM”). Segment information is prepared on the same basis that the CODM manages the segments, evaluates the segment financial statements, and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of operating income (loss) less impairment expense, as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

In 2018, the Company had three reportable segments, including pressure pumping services, infrastructure services and natural sand proppant services. Based on its assessment of FASB ASC 280, Segment Reporting, guidance at December 31, 2019, the Company changed its reportable segment presentation in 2019 to include its drilling services, which includes Bison Drilling, Bison Trucking, Panther Drilling, Mako Acquisitions and White Wing Tubular, as its own reportable segment. The results of the entities were previously included in the reconciling column titled “All Other” in the tables below for the years ended December 31, 2018 and 2017. As of December 31, 2019, the Company’s four reportable segments include infrastructure services (“Infrastructure”), pressure pumping services (“Pressure Pumping”), natural sand proppant services (“Sand”) and drilling services (“Drilling”). The results for the years ended December 31, 2018 and 2017 have been retroactively adjusted to reflect his change in reportable segments.

During the periods presented, the infrastructure services segment provided electric utility infrastructure services to government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities in Puerto Rico and the northeast, southwest and midwest portions of the United States. The pressure pumping services segment provides hydraulic fracturing services primarily in the Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania, Eagle Ford and Permian Basins in Texas and the mid-continent region. The sand segment mines, processes and sells sand for use in hydraulic fracturing. The sand segment primarily services the Utica Shale, Permian Basin, SCOOP, STACK and Montney Shale in British Columbia and Alberta, Canada.

During the periods presented, the Company also provided coil tubing services, flowback services, cementing services, acidizing services, equipment rental services, crude oil hauling services, full service transportation and remote accommodation services. The businesses that provide these services are distinct operating segments, which the CODM reviews independently when making key operating and resource utilization decisions. None of these operating segments met the quantitative thresholds of a reporting segment and did not meet the aggregation criteria set forth in ASC 280 Segment Reporting for the year ended December 31, 2019. Therefore, results for these operating segments are included in the column labeled “All Other” in the tables below. Additionally, assets for corporate activities, which primarily include cash and cash equivalents, inter-segment accounts receivable, prepaid insurance and certain property and equipment, are included in the All Other column. Although Mammoth LLC, which holds these corporate assets, meets one of the quantitative thresholds of a reporting segment, it does not engage in business activities from which it may earn revenues and its results are not regularly reviewed by the Company's CODM when making key operating and resource utilization decisions. Therefore, the Company does not include it as a reportable segment.

Sales from one segment to another are generally priced at estimated equivalent commercial selling prices. Total revenue and total cost of revenue amounts included in the Eliminations column in the following tables include inter-segment transactions conducted between segments. Receivables due for sales from one segment to another and for corporate allocations to each segment are included in the Eliminations column for total assets in the following tables. All transactions conducted between segments are eliminated in consolidation. Transactions conducted by companies within the same reporting segment are eliminated within each reporting segment. The following tables set forth certain financial information with respect to the Company’s reportable segments (in thousands):



Year Ended December 31, 2019	Infrastructure			Pressure Pumping			Sand			Drilling			All Other			Eliminations			Total
Revenue from external customers	$	214,449		$	241,972		$	69,794		$	31,728		$	67,069		$	—		$	625,012
Intersegment revenues	—			4,378			29,796			498			2,231			(36,903		)	—
Total revenue	214,449			246,350			99,590			32,226			69,300			(36,903		)	625,012
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	171,756			177,997			87,637			35,963			70,435			—			543,788
Intersegment cost of revenues	—			31,727			2,542			846			1,848			(36,963		)	—
Total cost of revenue	171,756			209,724			90,179			36,809			72,283			(36,963		)	543,788
Selling, general and administrative	25,390			10,993			5,006			4,160			6,003			—			51,552
Depreciation, depletion, amortization and accretion	31,451			40,240			14,050			13,255			18,037			—			117,033
Impairment of goodwill	434			23,423			2,684			—			7,123			—			33,664
Impairment of other long-lived assets	—			—			—			2,955			4,403			—			7,358
Operating income (loss)	(14,582		)	(38,030		)	(12,329		)	(24,953		)	(38,549		)	60			(128,383		)
Interest expense	1,689			1,283			193			907			886			—			4,958
Other expense	(42,787		)	580			67			(109		)	33			—			(42,216		)
Income (loss) before income taxes	$	26,516		$	(39,893	)	$	(12,589	)	$	(25,751	)	$	(39,468	)	$	60		$	(91,125	)
Total expenditures for property, plant and equipment	$	5,643		$	14,703		$	2,877		$	3,156		$	9,382		$	—		$	35,761
As of December 31, 2019:
Intangible assets, net	$	1,410		$	3,371		$	—		$	—		$	1,007		$	—		$	5,788
Total assets	$	420,285		$	175,259		$	190,382		$	61,545		$	142,731		$	(37,817	)	$	952,385



Year Ended December 31, 2018	Infrastructure		Pressure Pumping			Sand		Drilling			All Other			Eliminations			Total
Revenue from external customers	$	1,082,371	$	362,491		$	100,816	$	66,237		$	78,169		$	—		$	1,690,084
Intersegment revenue	—		7,001			67,459		416			5,541			(80,417		)	—
Total revenue	1,082,371		369,492			168,275		66,653			83,710			(80,417		)	1,690,084
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	608,017		223,296			126,714		60,248			75,529			—			1,093,804
Intersegment cost of revenues	2,583		70,365			6,103		554			785			(80,390		)	—
Total cost of revenue	610,600		293,661			132,817		60,802			76,314			(80,390		)	1,093,804
Selling, general and administrative^(a)	27,126		29,761			6,218		5,343			4,649			—			73,097
Depreciation and amortization	20,516		51,487			13,519		18,233			16,122			—			119,877
Impairment of goodwill	—		—			—		—			3,203			—			3,203
Impairment of other long-lived assets	308		143			—		3,966			1,235			—			5,652
Operating income (loss)	423,821		(5,560		)	15,721		(21,691		)	(17,813		)	(27		)	394,451
Interest expense	423		1,171			234		835			524			—			3,187
Other expense	573		434			525		461			43			—			2,036
Income (loss) before income taxes	$	422,825	$	(7,165	)	$	14,962	$	(22,987	)	$	(18,380	)	$	(27	)	$	389,228
Total expenditures for property, plant and equipment	$	100,701	$	33,774		$	17,935	$	13,398		$	26,135		$	—		$	191,943
As of December 31, 2018:
Intangible assets, net	$	1,650	$	4,059		$	—	$	—		$	2,047		$	—		$	7,756
Total assets	$	366,457	$	254,278		$	177,870	$	83,714		$	132,309		$	58,463		$	1,073,091

a. Included in Pressure Pumping selling, general and administrative expense is non-cash equity based compensation of $17.5 million.



Year Ended December 31, 2017	Infrastructure		Pressure Pumping		Sand			Drilling			All Other			Eliminations			Total
Revenue from external customers	$	224,425	$	277,326	$	90,023		$	50,075		$	49,647		$	—		$	691,496
Intersegment revenues	—		2,026		27,014			446			2,081			(31,567		)	—
Total revenue	224,425		279,352		117,037			50,521			51,728			(31,567		)	691,496
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	120,117		183,089		91,049			46,701			41,613			—			482,569
Intersegment cost of revenues	1,443		28,147		1,731			146			65			(31,532		)	—
Total cost of revenue	121,560		211,236		92,780			46,847			41,678			(31,532		)	482,569
Selling, general and administrative	21,606		9,501		8,190			5,510			5,079			—			49,886
Depreciation, depletion, amortization and accretion	3,185		45,413		9,394			19,635			14,497			—			92,124
Impairment of long-lived assets	—		—		324			3,822			—			—			4,146
Operating loss	78,074		13,202		6,349			(25,293		)	(9,526		)	(35		)	62,771
Interest expense	241		1,622		679			1,695			73			—			4,310
Bargain purchase gain	—		—		(4,012		)	—			—			—			(4,012		)
Other expense (income)	6		129		211			256			75			—			677
(Loss) income before income taxes	$	77,827	$	11,451	$	9,471		$	(27,244	)	$	(9,674	)	$	(35	)	$	61,796
Total expenditures for property, plant and equipment	20,144		85,853		16,376			8,927			2,553			—			133,853
As of December 31, 2017:
Intangible assets, net	$	1,770	$	12,392	$	—		$	—		$	1,977		$	—		$	16,139
Total assets	$	205,275	$	297,140	$	190,859		$	88,527		$	243,767		$	(158,325	)	$	867,243

Geographic Areas

The following table presents consolidated revenues by country based on sales destination of the products or services (in thousands):



	Year Ended December 31,
	2019		2018		2017
United States	$	516,276	$	654,506	$	471,745
Puerto Rico	96,630		1,022,558		203,087
Canada	11,946		13,020		16,664
Other	160		—		—
Total	$	625,012	$	1,690,084	$	691,496

The following table presents long-lived assets, excluding deferred income tax assets, by country (in thousands):



	Year Ended December 31,
	2019		2018		2017
United States	$	526,584	$	571,555	$	515,904
Puerto Rico	—		32,604		6,923
Canada	18,821		19,376		23,254
Total	$	545,405	$	623,535	$	546,081