EXHIBIT 99.1
FOR IMMEDIATE RELEASE
November 1, 2017
Mammoth Energy Service, Inc. Announces
Third Quarter 2017 Operational and Financial Results
OKLAHOMA CITY, OKLAHOMA, November 1, 2017 - Mammoth Energy Service, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the three and nine months ended September 30, 2017.
Key Highlights for and subsequent to the Third Quarter 2017:
• | Total revenue was $149.3 million for the three months ended September 30, 2017, up 136% from $63.3 million for the three months ended September 30, 2016 and up 52% sequentially from $98.3 million for the three months ended June 30, 2017. |
• | Net loss for the three months ended September 30, 2017 was $0.8 million, an improvement of $2.2 million from a net loss of $3.0 million for the three months ended September 30, 2016. Mammoth reported Adjusted EBITDA (as defined and reconciled below) of $28.0 million and $17.3 million for the three months ended September 30, 2017 and 2016, respectively. |
• | Expanded pressure pumping, sand deliveries and last-mile trucking into the SCOOP/STACK with the startup of our fifth pressure pumping fleet in August 2017 and the startup of our sixth fleet on October 20, 2017. Pricing is continuing to increase pricing across both pressure pumping and sand along with our other completions services. |
• | Introduced our broadened energy services offering with the formation of Cobra, an electric utility infrastructure business active across 5 states and recently completed storm restoration work in Texas and Florida. Cobra signed a contract, worth up to $200 million in revenue, to aid in the restoration of the electric utility infrastructure in Puerto Rico. |
Arty Straehla, Mammoth's Chief Executive Officer, stated, “The third quarter of 2017 was a very active one for the entire Mammoth team and a pivotal point in our portfolio’s development. We expanded our pressure pumping segment organically, integrated the two sand mines that were purchased in the prior quarter and rapidly expanded the development of our energy infrastructure business. Our team executed flawlessly and the fruits of their hard work are starting to show up in our financial results across the broader portfolio of services. With a majority of our growth capex for 2017 already spent, we expect to begin generating free cash flow later this year, while we continue to explore ways to grow and pay down debt in the interim."
Pressure Pumping Services
Mammoth's pressure pumping division contributed revenue of $75.7 million on 1,617 stages for the three months ended September 30, 2017 compared to $35.5 million on 511 stages for the three months ended September 30, 2016, increases of 113% and 216%, respectively. Sequentially, the number of stages pumped during the quarter grew by 26% from 1,287 in the three months ended June 30, 2017. We were nearly fully utilized during 3Q 2017 despite adding a partial spread during the period, similar to our full effective utilization during the prior year period.
Mammoth's pressure pumping division contributed revenue of $166.1 million on 3,764 stages for the nine months ended September 30, 2017 compared to $91.9 million on 1,678 stages for the nine months ended September 30, 2016, increases of 81% and 124%, respectively.
During the three months ended September 30, 2017, we expanded pressure pumping operations into the SCOOP/STACK. Demand remains strong with our frac calendar fully booked into early 2018 in both the Utica and Mid-Continent. All six of our fleets are operating today for quality operators.
Well Services
Mammoth's well services division contributed revenue of $16.2 million for the three months ended September 30, 2017 compared to $2.3 million for the three months ended September 30, 2016, an increase of 604%. The acquisitions of Stingray Cementing LLC and Stingray Energy Services LLC were completed on June 5, 2017. The inclusion of these businesses added $9.1 million in revenue during the three months ended September 30, 2017. Our coil tubing services accounted for $4.1 million of our operating division increase as a result of an increase in utilization and an increase in average day rates from approximately $16,800 for the three months ended September 30, 2016 to approximately $30,200 for the three months ended September 30, 2017. Our flowback services accounted for $0.7 million of our operating division increase as a result of an increase in utilization.
Mammoth's well services division contributed revenue of $27.6 million for the nine months ended September 30, 2017 compared to $7.2 million for the nine months ended September 30, 2016, an increase of 283%. Stingray Cementing and Stingray Energy Services added $11.7 million in revenue. Our coil tubing services accounted for $7.9 million of our operating division increase as a result of an increase utilization and an increase in average day rates from approximately $17,933 for the nine months ended September 30, 2016 to approximately $26,933 for the nine months ended September 30, 2017. Our flowback services accounted for $0.8 million of our operating division increase as a result of increased utilization.
Natural Sand Proppant Services
Mammoth's natural sand proppant division contributed revenue of $29.3 million for the three months ended September 30, 2017 compared to $8.2 million for the three months ended September 30, 2016, an increase of 257%. The Company sold 438,800 and 188,018 tons of sand for the three months ended September 30, 2017 and 2016, respectively. Sequentially, sand volumes sold increased by approximately 25% in the third quarter of 2017 as compared to the second quarter of 2017.
Mammoth's natural sand proppant division contributed revenue of $68.2 million for the nine months ended September 30, 2017 compared to $22.4 million for the nine months ended September 30, 2016, an increase of 204%. The Company sold 1,035,506 and 447,908 tons of sand for the nine months ended September 30, 2017 and 2016, respectively.
The average FOB mine gate price increased to $41.14 per ton in the three months ended September 30, 2017, as industry activity increased and the demand for frac sand remained strong. Our sales of purchased sand, as a percentage of overall sales, fell to 25% in 3Q 2017 (from 49% in 2Q 2017) as the production from our mines increased.
Contract Land and Directional Drilling Services
Mammoth's contract land and directional drilling services division contributed revenue of $13.6 million for the three months ended September 30, 2017 compared to $8.7 million for the three months ended September 30, 2016, an increase of 56%. The increase in revenue resulted primarily from increased utilization and day rates for both land rigs and directional drilling services.
Mammoth's contract land and directional drilling services division contributed revenue of $36.9 million for the nine months ended September 30, 2017 compared to $20.3 million for the nine months ended September 30, 2016, an increase of 82%. The increase in revenue resulted primarily from increased utilization and day rates for both land rigs and directional drilling services.
Five horizontal rigs on average operated in 3Q 2017, at an average day rate of $14,800, with five horizontal rigs operating today. For the remainder of 2017, we expect between five and six of our horizontal rigs to operate in the Permian Basin.
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Other Energy Services
Mammoth's other energy services division contributed revenue of $14.5 million and $8.6 million for the three months ended September 30, 2017 and 2016, respectively. The increase was driven by our energy infrastructure operations that accounted for $13.5 million of the revenue in the third quarter of 2017. The increase from infrastructure services was partially offset by a decrease from our remote accommodations division driven by decreased occupancy levels.
Mammoth's other energy services division contributed revenues of $23.7 million and $23.3 million for the nine months ended September 30, 2017 and 2016, respectively.
During 3Q 2017, we deployed capital to grow our electric utility infrastructure business, Cobra. This business currently has 58 crews working in two geographic areas of the U.S. and participated in the restoration of electric utility infrastructure in both Texas and Florida following Hurricanes Harvey and Irma. Cobra also recently signed a contract to aid in the rebuilding of electric utility infrastructure in Puerto Rico, which provides for revenues of up to $200 million.
Selling, General and Administrative Expenses
Selling, general and administrative ("SG&A") expenses increased by 150% to $8.0 million from $3.2 million for the three months ended September 30, 2017 and 2016, respectively. The increase was primarily attributable to increased compensation and benefits along with increased professional service charges.
SG&A expenses increased by 88% to $22.5 million from $12.0 million for the nine months ended September 30, 2017 and 2016, respectively. The increase was primarily attributable to increased compensation and benefits along with increased professional service charges.
SG&A expenses, as a percentage of total revenue, came in at 5.4% in the third quarter of 2017 as compared to 5% during the third quarter of 2016.
Liquidity
As of September 30, 2017, we had net debt of approximately $80 million reflecting $94.0 million in borrowings outstanding under our $170.0 million revolving credit facility and $14.3 million of cash on hand. We have approximately $75.2 million of available borrowing capacity.
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Capital Expenditures
The following table summarizes our capital expenditures by operating division for the periods indicated:
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||
Pressure pumping services (a) | $ | 19,580,804 | $ | 335,312 | $ | 72,982,713 | $ | 1,262,854 | |||||||
Well services (b) | 777,399 | 156,783 | 1,121,873 | 404,612 | |||||||||||
Natural sand proppant services (c) | 4,927,935 | 359,656 | 7,897,818 | 522,267 | |||||||||||
Contract and directional drilling services (d) | 2,356,885 | 1,069,381 | 8,257,702 | 1,492,476 | |||||||||||
Other energy services (e) | 8,054,748 | 12,706 | 12,013,384 | 425,838 | |||||||||||
Net change in cash | $ | 35,697,771 | $ | 1,933,838 | $ | 102,273,490 | $ | 4,108,047 | |||||||
(a). | Capital expenditures primarily for pressure pumping equipment for the three and nine months ended September 30, 2017 and 2016. |
(b). | Capital expenditures primarily for equipment upgrades for the three and nine months ended September 30, 2017 and 2016. |
(c). | Capital expenditures included a conveyor and plant additions for the three and nine months ended September 30, 2017 and 2016. |
(d). | Capital expenditures primarily for upgrades to our rig fleet for the three and nine months ended September 30, 2017 and 2016. |
(e). | Capital expenditures primarily for an intersection upgrade for the nine months ended September 30, 2016. Capital expenditures for the nine months ended September 30, 2017 represent property and equipment for energy infrastructure services. |
Explanatory Note Regarding Financial Information
The historical financial information for periods prior to October 12, 2016, contained in this release relates to Mammoth Energy Partners LP, a Delaware limited partnership (the "Partnership"). On October 12, 2016, the Partnership was converted into a Delaware limited liability company named Mammoth Energy Partners LLC ("Mammoth LLC"), and then each member of Mammoth LLC contributed all of its membership interests in Mammoth LLC to the Company. Prior to the conversion and the contribution, the Company was a wholly-owned subsidiary of the Partnership. Following the conversion and the contribution, Mammoth LLC (as the converted successor to the Partnership) became a wholly-owned subsidiary of the Company.
On October 13, 2016, Mammoth priced 7,750,000 shares of its common stock in its initial public offering (the "IPO") at a price to the public of $15.00 per share and, on October 14, 2016, Mammoth’s common stock began trading on The Nasdaq Global Select Market under the symbol “TUSK.” On October 19, 2016, Mammoth closed its IPO. Unless the context otherwise requires, references in this release to Mammoth or the Company, when used in a historical context for periods prior to October 12, 2016 refer to the Partnership and its subsidiaries. References in this release to Mammoth or the Company, when used for periods beginning on or after October 12, 2016 refer to Mammoth and its subsidiaries.
The financial information contained in this release should be read in conjunction with the financial information contained in Mammoth’s Annual Report filed on Form 10-K with the Securities and Exchange Commission ("SEC") on February 24, 2017. Subsequent Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings.
The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function ("CODM"). Segment information is prepared on the same basis that our CODM manages the segments, evaluates the segment financial statements, and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of net income (loss) before income taxes prior to depreciation and amortization, impairment of long-lived assets, acquisition related costs, one-time compensation charges associated with the IPO, equity based compensation, interest income, interest expense and other (income) expense, net (which is comprised of the (gain) loss on disposal of long-lived assets) as well as a qualitative basis, such as nature of the product and service offerings and types of customers.
Based on the CODM's assessment, effective December 31, 2016, the Company updated the reportable segments to align with its new CODM designated reporting structure and business activities. The Company now has five segments consisting of pressure pumping services, well services, natural sand proppant, contract land and directional drilling services and other energy services. Prior to this change, the reportable segments were comprised of four segments for financial reporting purposes: completion and production services, completion and production - natural sand proppant, land and directional drilling services and remote accommodation services. We have conformed our presentation for prior periods to reflect this new segment presentation.
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On June 5, 2017, the Company completed the acquisition of (1) Sturgeon Acquisitions, LLC and its wholly owned subsidiaries Taylor Frac LLC, Taylor RE, LLC and South River, LLC (collectively, "Sturgeon"); (2) Stingray Energy Services and (3) Stingray Cementing (together with Stingray Energy Services, the “Stingray Acquisition”) in exchange for the issuance by Mammoth of an aggregate of 7,000,000 shares of its common stock.
Prior to the acquisition, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the Unites States of America ("GAAP") to account for this common control acquisition in a manner similar to the pooling of interest method of accounting. Therefore, the Company's historical financial information has been recast to combine Sturgeon with the Company as if the acquisition had been completed at commencement of Sturgeon's operations on September 13, 2014.
Conference Call Information
Mammoth will host a conference call on Thursday, November 2, 2017 at 10:00 a.m. CST (11:00 am EST) to discuss its third quarter 2017 financial and operational results. The telephone number to access the conference call is 844-265-1561 in the U.S. and the international dial in is 216-562-0385. The conference ID for the call is 9587499. The conference call will also be webcast live on www.mammothenergy.com in the “Investors” section.
About Mammoth Energy Services, Inc.
Mammoth is an integrated, growth-oriented energy service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves and energy infrastructure. Mammoth’s suite of services includes pressure pumping services, well services, natural sand proppant services, contract land and directional drilling services and other energy services. Other energy services currently consists of remote accommodation services and energy infrastructure services. For additional information about Mammoth, please visit our website at www.mammothenergy.com, where we routinely post announcements, updates, events, investor information and presentations and recent news releases. Information on our website is not part of this news release.
Forward-Looking Statements and Cautionary Statements
This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements. The words “anticipate,” “believe,” “ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,” “forecasts,” “predict,” “outlook,” “aim,” “will,” “could,” “should,” “potential,” “would,” “may,” “probable,” “likely,” and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this press release specifically include statements, estimates and projections regarding our business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management’s current expectations and beliefs, forecasts for our existing operations, experience, and perception of historical trends, current conditions, anticipated future developments and their effect on us, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, our forward-looking statements are subject to significant risks and uncertainties, including those described in our Annual Report filed on Form 10-K filed with the SEC on February 24, 2017, our Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we make with the Securities and Exchange Commission (the “SEC”), including those relating to our acquisitions and our contracts, many of which are beyond our control, which may cause actual results to differ materially from our historical experience and our present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, risks relating to economic conditions; volatility of crude oil and natural gas commodity prices; delays in or failure of delivery of current or future orders of specialized equipment; the loss of or interruption in operations of one or more key suppliers or customers; solvency of counterparties to our contracts and their ability to timely pay for our services; oil and gas market conditions; the effects of government regulation, permitting and other legal requirements, including new legislation or regulation of hydraulic fracturing; operating risks; the adequacy of our capital resources and liquidity; weather; litigation; competition in the oil and natural gas industry; and costs and availability of resources.
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Readers are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law.
Investor Contact:
Don Crist
Director Investor Relations
dcrist@mammothenergy.com
405-608-6048
Media Contact:
Andrew Wilson
Andrew.wilson@edelman.com
212-704-4490
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MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
ASSETS | September 30, | December 31, | ||||||
CURRENT ASSETS | 2017 | 2016 (a) | ||||||
Cash and cash equivalents | $ | 14,278,328 | $ | 29,238,618 | ||||
Accounts receivable, net | 65,490,189 | 21,169,579 | ||||||
Receivables from related parties | 44,772,661 | 27,589,283 | ||||||
Inventories | 12,164,225 | 6,124,201 | ||||||
Prepaid expenses | 2,753,800 | 4,425,872 | ||||||
Other current assets | 335,513 | 391,599 | ||||||
Total current assets | 139,794,716 | 88,939,152 | ||||||
Property, plant and equipment, net | 347,317,716 | 242,119,663 | ||||||
Sand reserves | 75,210,457 | 55,367,295 | ||||||
Intangible assets, net - customer relationships | 11,770,375 | 15,949,772 | ||||||
Intangible assets, net - trade names | 6,722,197 | 5,617,057 | ||||||
Goodwill | 99,810,819 | 88,726,875 | ||||||
Other non-current assets | 4,509,500 | 5,642,661 | ||||||
Total assets | $ | 685,135,780 | $ | 502,362,475 | ||||
LIABILITIES AND EQUITY | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payable | $ | 70,229,349 | $ | 20,469,542 | ||||
Payables to related parties | 211,352 | 203,209 | ||||||
Accrued expenses and other current liabilities | 21,556,542 | 8,546,198 | ||||||
Income taxes payable | — | 28,156 | ||||||
Total current liabilities | 91,997,243 | 29,247,105 | ||||||
Long-term debt | 94,000,000 | — | ||||||
Deferred income taxes | 51,086,739 | 47,670,789 | ||||||
Asset retirement obligation | 2,031,119 | 259,804 | ||||||
Other liabilities | 4,755,414 | 2,404,422 | ||||||
Total liabilities | 243,870,515 | 79,582,120 | ||||||
COMMITMENTS AND CONTINGENCIES (Note 14) | ||||||||
EQUITY | ||||||||
Equity: | ||||||||
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,502,223 and | 445,022 | 375,000 | ||||||
37,500,000 issued and outstanding at September 30, 2017 and December 31, 2016, respectively. | ||||||||
Additional paid in capital | 506,274,038 | 400,205,921 | ||||||
Member's equity | — | 81,738,675 | ||||||
Accumulated deficit | (63,274,499 | ) | (56,322,878 | ) | ||||
Accumulated other comprehensive loss | (2,179,296 | ) | (3,216,363 | ) | ||||
Total equity | 441,265,265 | 422,780,355 | ||||||
Total liabilities and equity | $ | 685,135,780 | $ | 502,362,475 | ||||
(a) Financial information has been recast to include the financial position and results attributable to Sturgeon.
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MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (unaudited)
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
REVENUE | 2017 | 2016 (b) | 2017 (a) | 2016 (b) | |||||||||||
Services revenue | $ | 63,112,621 | $ | 19,077,680 | $ | 119,863,654 | $ | 65,964,774 | |||||||
Services revenue - related parties | 56,860,754 | 36,028,399 | 134,425,170 | 76,679,011 | |||||||||||
Product revenue | 15,276,279 | 1,675,230 | 29,043,367 | 4,651,673 | |||||||||||
Product revenue - related parties | 14,055,246 | 6,557,237 | 39,200,789 | 17,788,581 | |||||||||||
Total revenue | 149,304,900 | 63,338,546 | 322,532,980 | 165,084,039 | |||||||||||
COST AND EXPENSES | |||||||||||||||
Services cost of revenue | 89,345,946 | 35,850,660 | 191,910,453 | 102,113,120 | |||||||||||
Services cost of revenue - related parties | 8,899 | 587,087 | 701,008 | 787,079 | |||||||||||
Product cost of revenue | 25,177,849 | 6,429,040 | 57,759,173 | 22,861,407 | |||||||||||
Selling, general and administrative | 7,667,419 | 3,063,445 | 21,473,039 | 11,558,114 | |||||||||||
Selling, general and administrative - related parties | 355,242 | 131,162 | 986,126 | 456,505 | |||||||||||
Depreciation, depletion, accretion and amortization | 27,223,733 | 17,921,471 | 64,354,383 | 54,483,158 | |||||||||||
Impairment of long-lived assets | — | — | — | 1,870,885 | |||||||||||
Total cost and expenses | 149,779,088 | 63,982,865 | 337,184,182 | 194,130,268 | |||||||||||
Operating loss | (474,188 | ) | (644,319 | ) | (14,651,202 | ) | (29,046,229 | ) | |||||||
OTHER (EXPENSE) INCOME | |||||||||||||||
Interest expense | (1,420,067 | ) | (1,024,514 | ) | (2,928,859 | ) | (3,332,901 | ) | |||||||
Bargain purchase gain, net of tax | — | — | 4,011,512 | — | |||||||||||
Other, net | (319,252 | ) | (253,832 | ) | (705,894 | ) | 371,894 | ||||||||
Total other (expense) income | (1,739,319 | ) | (1,278,346 | ) | 376,759 | (2,961,007 | ) | ||||||||
Loss before income taxes | (2,213,507 | ) | (1,922,665 | ) | (14,274,443 | ) | (32,007,236 | ) | |||||||
(Benefit) provision for income taxes | (1,412,680 | ) | 1,055,961 | (7,322,822 | ) | 2,739,696 | |||||||||
Net loss | $ | (800,827 | ) | $ | (2,978,626 | ) | $ | (6,951,621 | ) | $ | (34,746,932 | ) | |||
OTHER COMPREHENSIVE INCOME (LOSS) | |||||||||||||||
Foreign currency translation adjustment (1) | 627,515 | (386,265 | ) | 1,037,067 | 1,583,593 | ||||||||||
Comprehensive loss | $ | (173,312 | ) | $ | (3,364,891 | ) | $ | (5,914,554 | ) | $ | (33,163,339 | ) | |||
Net loss per share (basic and diluted) | $ | (0.02 | ) | $ | (0.10 | ) | $ | (0.17 | ) | $ | (1.16 | ) | |||
Weighted average number of shares outstanding | 44,501,885 | 30,000,000 | 40,526,276 | 30,000,000 | |||||||||||
(1) Net of tax | 357,594 | — | 811,906 | — | |||||||||||
(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented.
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.
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MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Nine Months Ended | |||||||
September 30, | |||||||
Cash flows from operating activities | 2017 (a) | 2016 (b) | |||||
Net loss | $ | (6,951,621 | ) | $ | (34,746,932 | ) | |
Adjustments to reconcile net loss to cash provided by operating activities: | |||||||
Equity based compensation | 2,648,211 | (18,683 | ) | ||||
Depreciation, depletion, accretion and amortization | 64,354,383 | 54,483,158 | |||||
Amortization of coil tubing strings | 2,144,231 | 1,386,856 | |||||
Amortization of debt origination costs | 299,104 | 452,343 | |||||
Bad debt expense | 117,426 | 1,779,870 | |||||
(Gain) loss on disposal of property and equipment | 125,653 | (426,917 | ) | ||||
Gain on bargain purchase | (4,011,512 | ) | — | ||||
Impairment of long-lived assets | — | 1,870,885 | |||||
Deferred income taxes | (8,151,410 | ) | (18,906 | ) | |||
Changes in assets and liabilities, net of acquisitions of businesses: | |||||||
Accounts receivable, net | (37,439,781 | ) | (2,139,172 | ) | |||
Receivables from related parties | (12,080,870 | ) | 167,964 | ||||
Inventories | (7,878,174 | ) | (119,260 | ) | |||
Prepaid expenses and other assets | 2,643,797 | 59,940 | |||||
Accounts payable | 30,444,904 | 2,099,991 | |||||
Payables to related parties | 7,934 | (394,292 | ) | ||||
Accrued expenses and other liabilities | 14,392,715 | (1,292,176 | ) | ||||
Income taxes payable | (28,156 | ) | (4,052 | ) | |||
Net cash provided by operating activities | 40,636,834 | 23,140,617 | |||||
Cash flows from investing activities: | |||||||
Purchases of property and equipment | (102,273,490 | ) | (4,108,047 | ) | |||
Business acquisitions | (42,008,187 | ) | — | ||||
Proceeds from disposal of property and equipment | 782,432 | 3,399,705 | |||||
Business combination cash acquired (Note 3) | 2,671,558 | — | |||||
Net cash used in investing activities | (140,827,687 | ) | (708,342 | ) | |||
Cash flows from financing activities: | |||||||
Borrowings from lines of credit | 118,850,000 | 22,776,411 | |||||
Repayments of lines of credit | (24,850,000 | ) | (45,776,411 | ) | |||
Repayment of Stingray acquisition long-term debt | (8,851,063 | ) | — | ||||
Net cash provided by (used in) financing activities | 85,148,937 | (23,000,000 | ) | ||||
Effect of foreign exchange rate on cash | 81,626 | 186,967 | |||||
Net decrease in cash and cash equivalents | (14,960,290 | ) | (380,758 | ) | |||
Cash and cash equivalents at beginning of period | 29,238,618 | 4,038,899 | |||||
Cash and cash equivalents at end of period | $ | 14,278,328 | $ | 3,658,141 | |||
Supplemental disclosure of cash flow information: | |||||||
Cash paid for interest | $ | 2,300,250 | $ | 2,972,072 | |||
Cash paid for income taxes | $ | 840,421 | $ | 2,755,562 | |||
Supplemental disclosure of non-cash transactions: | |||||||
Purchases of property and equipment included in trade accounts payable | $ | 13,647,557 | $ | 1,832,892 | |||
Acquisition of Sturgeon, Stingray Cementing LLC and Stingray Energy Services LLC (Note 3) | $ | 23,090,580 | $ | — | |||
(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented.
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.
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MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED SEGMENT INCOME STATEMENTS (unaudited)
Completion and Production | ||||||||||||||||||
Nine Months Ended September 30, 2017 (a) | Pressure Pumping Services | Well Services | Sand | Drilling | Other Energy Services | Total | ||||||||||||
Revenue from external customers | $ | 46,511,384 | $ | 15,852,372 | $ | 29,043,367 | $ | 33,805,844 | $ | 23,694,054 | $ | 148,907,021 | ||||||
Revenue from related parties | $ | 119,570,520 | $ | 11,793,299 | $ | 39,200,789 | $ | 3,060,826 | $ | 525 | $ | 173,625,959 | ||||||
Cost of revenue | $ | 117,494,570 | $ | 24,288,693 | $ | 57,759,173 | $ | 34,584,336 | $ | 16,243,862 | $ | 250,370,634 | ||||||
Selling, general and administrative expenses | $ | 6,690,812 | $ | 2,789,881 | $ | 6,314,182 | $ | 4,103,053 | $ | 2,561,237 | $ | 22,459,165 | ||||||
Earnings before interest, other expense, impairment, taxes and depreciation and amortization | $ | 41,896,522 | $ | 567,097 | $ | 4,170,801 | $ | (1,820,719 | ) | $ | 4,889,480 | $ | 49,703,181 | |||||
Other expense | $ | 126,650 | $ | 36,195 | $ | 251,520 | $ | 262,560 | $ | 28,969 | $ | 705,894 | ||||||
Bargain purchase gain | $ | — | $ | — | $ | (4,011,512 | ) | $ | — | $ | — | $ | (4,011,512 | ) | ||||
Interest expense (income) | $ | 1,023,519 | $ | (14,019 | ) | $ | 572,096 | $ | 1,227,422 | $ | 119,841 | $ | 2,928,859 | |||||
Depreciation, depletion, accretion and amortization | $ | 31,823,408 | $ | 7,939,784 | $ | 6,603,001 | $ | 14,978,300 | $ | 3,009,890 | $ | 64,354,383 | ||||||
Income tax (benefit) provision | $ | — | $ | (7,778,970 | ) | $ | 32,326 | $ | — | $ | 423,822 | $ | (7,322,822 | ) | ||||
Net income (loss) | $ | 8,922,945 | $ | 384,107 | $ | 723,370 | $ | (18,289,001 | ) | $ | 1,306,958 | $ | (6,951,621 | ) | ||||
Total expenditures for property, plant and equipment | $ | 72,982,713 | $ | 1,121,873 | $ | 7,897,818 | $ | 8,257,702 | $ | 12,013,384 | $ | 102,273,490 | ||||||
Three Months Ended September 30, 2017 | ||||||||||||||||||
Revenue from external customers | $ | 29,003,286 | $ | 7,055,718 | $ | 15,276,279 | $ | 12,590,622 | $ | 14,462,995 | $ | 78,388,900 | ||||||
Revenue from related parties | $ | 46,701,582 | $ | 9,105,851 | $ | 14,055,246 | $ | 1,053,321 | $ | — | $ | 70,916,000 | ||||||
Cost of revenue | $ | 52,960,761 | $ | 13,852,628 | $ | 25,177,849 | $ | 11,597,757 | $ | 10,943,699 | $ | 114,532,694 | ||||||
Selling, general and administrative expenses | $ | 2,511,147 | $ | 1,091,378 | $ | 1,840,746 | $ | 1,374,275 | $ | 1,205,115 | $ | 8,022,661 | ||||||
Earnings before interest, other expense, impairment, taxes and depreciation and amortization | $ | 20,232,960 | $ | 1,217,563 | $ | 2,312,930 | $ | 671,911 | $ | 2,314,181 | $ | 26,749,545 | ||||||
Other expense | $ | 120,261 | $ | 38,186 | $ | 97,744 | $ | 38,324 | $ | 24,737 | $ | 319,252 | ||||||
Interest expense | $ | 591,724 | $ | 94,357 | $ | 86,857 | $ | 570,364 | $ | 76,765 | $ | 1,420,067 | ||||||
Depreciation, depletion, accretion and amortization | $ | 13,038,962 | $ | 4,511,622 | $ | 3,034,342 | $ | 5,035,990 | $ | 1,602,817 | $ | 27,223,733 | ||||||
Income tax (benefit) provision | $ | — | $ | (1,278,456 | ) | $ | 23,824 | $ | — | $ | (158,048 | ) | $ | (1,412,680 | ) | |||
Net income (loss) | $ | 6,482,013 | $ | (2,148,146 | ) | $ | (929,837 | ) | $ | (4,972,767 | ) | $ | 767,910 | $ | (800,827 | ) | ||
Total expenditures for property, plant and equipment | $ | 19,580,804 | $ | 777,399 | $ | 4,927,935 | $ | 2,356,885 | $ | 8,054,748 | $ | 35,697,771 | ||||||
10
MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED SEGMENT INCOME STATEMENTS (unaudited)
Completion and Production | ||||||||||||||||||
Nine Months Ended September 30, 2016 (b) | Pressure Pumping Services | Well Services | Sand | Drilling | Other Energy Services | Total | ||||||||||||
Revenue from external customers | $ | 18,294,739 | $ | 6,470,485 | $ | 4,651,673 | $ | 17,946,458 | $ | 23,253,092 | $ | 70,616,447 | ||||||
Revenue from related parties | $ | 73,559,413 | $ | 732,740 | $ | 17,788,581 | $ | 2,381,446 | $ | 5,412 | $ | 94,467,592 | ||||||
Cost of revenue | $ | 60,866,617 | $ | 10,030,214 | $ | 22,861,407 | $ | 22,010,295 | $ | 9,993,073 | $ | 125,761,606 | ||||||
Selling, general and administrative expenses | $ | 2,981,718 | $ | 1,512,824 | $ | 2,525,310 | $ | 3,353,243 | $ | 1,641,524 | $ | 12,014,619 | ||||||
Earnings before interest, other expense (income), impairment, taxes and depreciation and amortization | $ | 28,005,817 | $ | (4,339,813 | ) | $ | (2,946,463 | ) | $ | (5,035,634 | ) | $ | 11,623,907 | $ | 27,307,814 | |||
Other expense (income) | $ | 25,087 | $ | (671,986 | ) | $ | 82,422 | $ | 179,639 | $ | 12,944 | $ | (371,894 | ) | ||||
Interest expense | $ | 502,781 | $ | 178,584 | $ | 319,855 | $ | 2,272,913 | $ | 58,768 | $ | 3,332,901 | ||||||
Depreciation, depletion, accretion and amortization | $ | 27,964,092 | $ | 3,903,924 | $ | 4,734,540 | $ | 16,243,626 | $ | 1,636,976 | $ | 54,483,158 | ||||||
Impairment of long-lived assets | $ | 138,587 | $ | 1,384,751 | $ | — | $ | 347,547 | $ | — | $ | 1,870,885 | ||||||
Income tax provision | $ | — | $ | 2,835 | $ | 3,716 | $ | — | $ | 2,733,145 | $ | 2,739,696 | ||||||
Net (loss) income | $ | (624,730 | ) | $ | (9,137,921 | ) | $ | (8,086,996 | ) | $ | (24,079,359 | ) | $ | 7,182,074 | $ | (34,746,932 | ) | |
Total expenditures for property, plant and equipment | $ | 1,262,854 | $ | 404,612 | $ | 522,267 | $ | 1,492,476 | $ | 425,838 | $ | 4,108,047 | ||||||
Three Months Ended September 30, 2016 (b) | ||||||||||||||||||
Revenue from external customers | $ | 137,626 | $ | 2,109,874 | $ | 1,675,230 | $ | 8,230,625 | $ | 8,599,555 | $ | 20,752,910 | ||||||
Revenue from related parties | $ | 35,393,855 | $ | 164,854 | $ | 6,557,237 | $ | 464,850 | $ | 4,840 | $ | 42,585,636 | ||||||
Cost of revenue | $ | 20,782,936 | $ | 3,068,159 | $ | 6,429,040 | $ | 9,042,242 | $ | 3,544,410 | $ | 42,866,787 | ||||||
Selling, general and administrative expenses | $ | 916,176 | $ | 499,346 | $ | 415,505 | $ | 786,008 | $ | 577,572 | $ | 3,194,607 | ||||||
Earnings before interest, other expense, impairment, taxes and depreciation and amortization | $ | 13,832,369 | $ | (1,292,777 | ) | $ | 1,387,922 | $ | (1,132,775 | ) | $ | 4,482,413 | $ | 17,277,152 | ||||
Other expense | $ | 1,262 | $ | 1,159 | $ | 9,439 | $ | 237,211 | $ | 4,761 | $ | 253,832 | ||||||
Interest expense | $ | 134,017 | $ | 29,489 | $ | 108,744 | $ | 718,706 | $ | 33,558 | $ | 1,024,514 | ||||||
Depreciation, depletion, accretion and amortization | $ | 9,050,605 | $ | 1,233,702 | $ | 1,784,689 | $ | 5,297,694 | $ | 554,781 | $ | 17,921,471 | ||||||
Impairment of long-lived assets | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||
Income tax provision | $ | — | $ | 5,929 | $ | 3,716 | $ | — | $ | 1,046,316 | $ | 1,055,961 | ||||||
Net income (loss) | $ | 4,646,485 | $ | (2,563,056 | ) | $ | (518,666 | ) | $ | (7,386,386 | ) | $ | 2,842,997 | $ | (2,978,626 | ) | ||
Total expenditures for property, plant and equipment | $ | 335,312 | $ | 156,783 | $ | 359,656 | $ | 1,069,381 | $ | 12,706 | $ | 1,933,838 | ||||||
(a) Financial information includes the financial position and results attributable to Sturgeon for the entire period presented.
(b) Financial information has been recast to include the financial position and results attributable to Sturgeon.
11
MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Adjusted EBITDA
Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDA as net income (loss) before depreciation, depletion, accretion and amortization, impairment of long-lived assets, acquisition related costs, equity based compensation, bargain purchase gain, interest expense, other expense (income), net (which is comprised of the (gain) or loss on disposal of long-lived assets) and (benefit) provision for income taxes. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measure of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.
• | is widely used by investors in the energy services industry to measure a company’s operating performance without regard to items excluded from the calculation of such measure, which can vary substantially from company to company depending upon accounting methods, book value of assets, capital structure and the method by which assets were acquired, among other factors; |
• | is a financial measurement that is used by rating agencies, lenders and other parties to evaluate our creditworthiness; and |
• | is used by our management for various purposes, including as a measure of performance of our operating entities and as a basis for strategic planning and forecasting. |
There are significant limitations to using Adjusted EBITDA as a measure of performance, including the inability to analyze the effect of certain recurring and non-recurring items that materially affect our net income or loss. Additionally, because Adjusted EBITDA excludes some, but not all, items that affect net income and is defined differently by different companies in our industry, our definition of Adjusted EBITDA used in this release may not be comparable to similarly titled measures of other companies or used in various agreements.
12
MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
The following tables also provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income or loss for each of our operating segments.
Consolidated
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Reconciliation of Adjusted EBITDA to net income (loss): | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net loss | $ | (800,827 | ) | $ | (2,978,626 | ) | $ | (6,951,621 | ) | $ | (34,746,932 | ) | |||
Depreciation, depletion, accretion and amortization expense | 27,223,733 | 17,921,471 | 64,354,383 | 54,483,158 | |||||||||||
Impairment of long-lived assets | — | — | — | 1,870,885 | |||||||||||
Acquisition related costs | 264,091 | — | 2,454,840 | — | |||||||||||
Equity based compensation | 1,028,317 | (18,683 | ) | 2,648,210 | (18,683 | ) | |||||||||
Bargain purchase gain | — | — | (4,011,512 | ) | — | ||||||||||
Interest expense | 1,420,067 | 1,024,514 | 2,928,859 | 3,332,901 | |||||||||||
Other expense (income), net | 319,252 | 253,832 | 705,894 | (371,894 | ) | ||||||||||
(Benefit) provision for income taxes | (1,412,680 | ) | 1,055,961 | (7,322,822 | ) | 2,739,696 | |||||||||
Adjusted EBITDA | $ | 28,041,953 | $ | 17,258,469 | $ | 54,806,231 | $ | 27,289,131 | |||||||
Pressure Pumping Services
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Reconciliation of Adjusted EBITDA to net income (loss): | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net income (loss) | $ | 6,482,013 | $ | 4,646,485 | $ | 8,922,945 | $ | (624,730 | ) | ||||||
Depreciation and amortization expense | 13,038,962 | 9,050,605 | 31,823,408 | 27,964,092 | |||||||||||
Impairment of long-lived assets | — | — | — | 138,587 | |||||||||||
Acquisition related costs | 500 | — | 500 | — | |||||||||||
Equity based compensation | 428,398 | — | 1,202,687 | — | |||||||||||
Interest expense | 591,724 | 134,017 | 1,023,519 | 502,781 | |||||||||||
Other expense, net | 120,261 | 1,262 | 126,650 | 25,087 | |||||||||||
Adjusted EBITDA | $ | 20,661,858 | $ | 13,832,369 | $ | 43,099,709 | $ | 28,005,817 | |||||||
13
MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Other Well Services
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Reconciliation of Adjusted EBITDA to net income (loss): | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net (loss) income | $ | (2,148,146 | ) | $ | (2,563,056 | ) | $ | 384,107 | $ | (9,137,921 | ) | ||||
Depreciation and amortization expense | 4,511,622 | 1,233,702 | 7,939,784 | 3,903,924 | |||||||||||
Impairment of long-lived assets | — | — | — | 1,384,751 | |||||||||||
Acquisition related costs | 65,394 | — | 235,526 | — | |||||||||||
Equity based compensation | 127,930 | (18,683 | ) | 265,380 | (18,683 | ) | |||||||||
Interest expense, net | 94,357 | 29,489 | (14,019 | ) | 178,584 | ||||||||||
Other expense (income), net | 38,186 | 1,159 | 36,195 | (671,986 | ) | ||||||||||
(Benefit) provision for income taxes | (1,278,456 | ) | 5,929 | (7,778,970 | ) | 2,835 | |||||||||
Adjusted EBITDA | $ | 1,410,887 | $ | (1,311,460 | ) | $ | 1,068,003 | $ | (4,358,496 | ) | |||||
Natural Sand Proppant Services
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Reconciliation of Adjusted EBITDA to net income (loss): | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net (loss) income | $ | (929,837 | ) | $ | (518,666 | ) | $ | 723,370 | $ | (8,086,996 | ) | ||||
Depreciation, depletion, accretion and amortization expense | 3,034,342 | 1,784,689 | 6,603,001 | 4,734,540 | |||||||||||
Acquisition related costs | 166,654 | — | 2,120,733 | — | |||||||||||
Equity based compensation | 271,762 | — | 524,223 | — | |||||||||||
Bargain purchase gain | — | — | (4,011,512 | ) | — | ||||||||||
Interest expense | 86,857 | 108,744 | 572,096 | 319,855 | |||||||||||
Other expense, net | 97,744 | 9,439 | 251,520 | 82,422 | |||||||||||
Provision for income taxes | 23,824 | 3,716 | 32,326 | 3,716 | |||||||||||
Adjusted EBITDA | $ | 2,751,346 | $ | 1,387,922 | $ | 6,815,757 | $ | (2,946,463 | ) | ||||||
Contract Land and Directional Drilling Services
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Reconciliation of Adjusted EBITDA to net income (loss): | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net loss | $ | (4,972,767 | ) | $ | (7,386,386 | ) | $ | (18,289,001 | ) | $ | (24,079,359 | ) | |||
Depreciation and amortization expense | 5,035,990 | 5,297,694 | 14,978,300 | 16,243,626 | |||||||||||
Impairment of long-lived assets | — | — | — | 347,547 | |||||||||||
Acquisition related costs | (16,328 | ) | — | 8,187 | — | ||||||||||
Equity based compensation | 137,637 | — | 429,901 | — | |||||||||||
Interest expense | 570,364 | 718,706 | 1,227,422 | 2,272,913 | |||||||||||
Other expense, net | 38,324 | 237,211 | 262,560 | 179,639 | |||||||||||
Adjusted EBITDA | $ | 793,220 | $ | (1,132,775 | ) | $ | (1,382,631 | ) | $ | (5,035,634 | ) | ||||
14
MAMMOTH ENERGY PARTNERS LP
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
Other Energy Services
Three Months Ended | Nine Months Ended | ||||||||||||||
September 30, | September 30, | ||||||||||||||
Reconciliation of Adjusted EBITDA to net income (loss): | 2017 | 2016 | 2017 | 2016 | |||||||||||
Net income | $ | 767,910 | $ | 2,842,997 | $ | 1,306,958 | $ | 7,182,074 | |||||||
Depreciation and amortization expense | 1,602,817 | 554,781 | 3,009,890 | 1,636,976 | |||||||||||
Impairment of long-lived assets | — | — | — | — | |||||||||||
Acquisition related costs | 47,871 | — | 89,894 | — | |||||||||||
Equity based compensation | 62,590 | — | 226,019 | — | |||||||||||
Interest expense | 76,765 | 33,558 | 119,841 | 58,768 | |||||||||||
Other expense, net | 24,737 | 4,761 | 28,969 | 12,944 | |||||||||||
(Benefit) provision for income taxes | (158,048 | ) | 1,046,316 | 423,822 | 2,733,145 | ||||||||||
Adjusted EBITDA | $ | 2,424,642 | $ | 4,482,413 | $ | 5,205,393 | $ | 11,623,907 | |||||||
15