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CST: 18/09/2019 21:48:54   

Mammoth Energy Services, Inc. Announces Fourth Quarter and Full Year 2018 Operational and Financial Results

188 Days ago

  • Fourth Quarter net income of $68 million, or $1.51 per diluted share, and full year 2018 net income of $236 million, or $5.24 per diluted share
  • 2018 adjusted EBITDA of $547 million, a three-fold increase from 2017
  • After tax return on invested capital (ROIC) of 35% in 2018
  • Returned $11 million of cash to stockholders through dividends

OKLAHOMA CITY, March 14, 2019 (GLOBE NEWSWIRE) -- Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK) today reported financial and operational results for the fourth quarter and full year ended December 31, 2018.

Financial Highlights for the Fourth Quarter and Full Year 2018:

Total revenue was $278.2 million for the three months ended December 31, 2018, down 28% sequentially from $384.0 million for the three months ended September 30, 2018 and down 25% from $369.0 million for the three months ended December 31, 2017. Total revenue was $1.7 billion for the year ended December 31, 2018, a 144% increase from $691.5 million for the year ended December 31, 2017.

Net income for the three months ended December 31, 2018 was $68.2 million, or $1.51 per fully diluted share, a $1.2 million decrease from $69.5 million, or $1.54 per fully diluted share, for the three months ended September 30, 2018 and an increase of $2.3 million from $65.9 million, or $1.48 per fully diluted share, for the three months ended December 31, 2017. Net income was $236.0 million, or $5.24 per fully diluted share, for the year ended December 31, 2018, a 300% increase from $59.0 million, or $1.42 per fully diluted share, for the year ended December 31, 2017.

Adjusted EBITDA (as defined and reconciled below) was $84.3 million for the three months ended December 31, 2018, a $99.3 million decrease from $183.6 million for the three months ended September 30, 2018 and a $26.2 million decline from $110.5 million for the three months ended December 31, 2017. Adjusted EBITDA was $547.3 million for the year ended December 31, 2018, a 231% increase from $165.3 million for the year ended December 31, 2017.

Arty Straehla, Mammoth's Chief Executive Officer, stated, "2018 was another strong year for Mammoth as we posted record levels of total revenue, net income and adjusted EBITDA. In addition, we strategically invested in high margin businesses, returned $11 million to stockholders through dividends and positioned ourselves to take advantage of M&A opportunities. Since going public in late 2016, adjusted EBITDA has grown more than 12 times to $547 million in 2018 from $41 million in 2016. Despite continuing volatility in commodity prices and reductions in capital expenditure budgets at many of our customers, oilfield activity levels have been improving so far in 2019 from the levels experienced in the fourth quarter of 2018.  Our six frac fleets have experienced full utilization since late January and demand and pricing for our sand is getting stronger."

Infrastructure Services

Mammoth's infrastructure services segment contributed revenues of $159.6 million for the three months ended December 31, 2018, a 33% decrease from $237.1 million for the three months ended September 30, 2018 and a 24% decrease from $209.2 million the three months ended December 31, 2017. During the fourth quarter of 2018, our staffing levels in Puerto Rico generally ranged from 475 to 550, dropping to approximately 130 at year end for a period of three days due to the holidays.

The infrastructure segment contributed revenues of $1.1 billion for the year ended December 31, 2018, a 382% increase from $224.4 million for the year ended December 31, 2017.

Pressure Pumping Services

Mammoth's pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $72.8 million on 1,164 stages for the three months ended December 31, 2018, a 23% decrease from $94.2 million on 1,594 stages for the three months ended September 30, 2018 and a 35% decrease from $111.9 million on 1,375 stages for the three months ended December 31, 2017.

The pressure pumping division contributed revenues (inclusive of inter-segment revenues) of $369.5 million for the year ended December 31, 2018, a 32% increase from $279.4 million for the year ended December 31, 2017. During 2018, Mammoth’s pressure pumping division completed a total of 6,245 stages, an increase of 22% from 2017.

An average of 3.7 fleets remained active throughout the fourth quarter of 2018.

Natural Sand Proppant Services

Mammoth's natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $27.4 million for the three months ended December 31, 2018, a 26% decrease from $37.0 million for the three months ended September 30, 2018 and a 38% decrease from $43.9 million for the three months ended December 31, 2017. The Company sold 569,195 tons of sand during the three months ended December 31, 2018, a 5% decrease from 598,438 during the three months ended September 30, 2018 and a 5% decrease from 600,182 during the three months ended December 31, 2017.

The natural sand proppant division contributed revenues (inclusive of inter-segment revenues) of $168.3 million for the year ended December 31, 2018, a 44% increase from $117.0 million for the year ended December 31, 2017. The Company sold 2.7 million tons of sand during the year ended December 31, 2018, a 59% increase from 1.7 million during the year ended December 31, 2017.

During 2018, Mammoth's total sand processing capacity increased to approximately 4.4 million tons per year. Due to market conditions, our Muskie facility was temporarily idled during the third quarter of 2018 and continues to be idled. The Company's average production costs were approximately $12 per ton during the fourth quarter of 2018.

Other Services

Mammoth's other services, including contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations, contributed revenues (inclusive of inter-segment revenues) of $38.8 million for the three months ended December 31, 2018, a 9% increase from $35.7 million for the three months ended September 30, 2018 and a 34% increase from $28.9 million for the three months ended December 31, 2017.

The Company's other services contributed revenues (inclusive of inter-segment revenues) of $149.9 million for the year ended December 31, 2018, a 47% increase from $102.2 million for the year ended December 31, 2017.

Selling, General and Administrative Expenses

Selling, general and administrative ("SG&A") expenses were $14.8 million for the three months ended December 31, 2018, compared to a credit of $45.3 million for the three months ended September 30, 2018 and $27.4 million for the three months ended December 31, 2017.

Following is a breakout of SG&A expense (in thousands):

       
  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2018   2017   2018   2018   2017
Cash expenses:                  
Compensation and benefits $ 9,409     $ 6,364     $ 14,864     $ 42,950     $ 15,322  
Professional services 3,018     2,690     3,267     11,854     7,765  
Other(a) 1,475     1,802     3,701     10,718     7,503  
Total cash SG&A expense 13,902     10,856     21,832     65,522     30,590  
Non-cash expenses:                  
Bad debt provision(b) (34 )   16,020     (68,333 )   (14,578 )   16,098  
Equity based compensation(c)             17,487      
Stock based compensation 915     550     1,177     4,666     3,198  
Total non-cash SG&A expense 881     16,570     (67,156 )   7,575     19,296  
Total SG&A expense $ 14,783     $ 27,426     $ (45,324 )   $ 73,097     $ 49,886  


a.  Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.  During the three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result, during the three months ended September 30, 2018, the Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half of 2018. The Company expects to receive payment for the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.
c.  Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).
   

SG&A expenses, as a percentage of total revenue, were 5% for the three months ended December 31, 2018 compared to (12%) for the three months ended September 30, 2018 and 7% for the three months ended December 31, 2017. Excluding bad debt expenses, SG&A expenses as a percentage of total revenue were 5% for the three months ended December 31, 2018, compared to 6% for the three months ended September 30, 2018 and 3% for the three months ended December 31, 2017.

Income Tax Expense

During the fourth quarter of 2018, the Company recognized a tax benefit of $21.0 million related to a change in the mix of earnings between our United States and Puerto Rico operations as compared to the three months ended September 30, 2018. For the full year of 2018, the Company’s effective tax rate was 39%.

Liquidity

On October 19, 2018, Mammoth entered into an amended and restated five-year asset backed revolving credit facility led by PNC Capital Markets with a maximum revolving advance amount at closing of $185 million and the potential to increase the facility by up to an additional $165 million.

As of December 31, 2018, Mammoth had cash on hand totaling $67.6 million and no borrowings outstanding under its revolving credit facility. As of December 31, 2018, the Company had approximately $175.8 of available borrowing capacity under its revolving credit facility, after giving effect to $8.4 million of outstanding letters of credit, resulting in total liquidity of approximately $243.4 million. On March 13, 2019, the Company borrowed $82.0 million under its revolving credit facility for 2018 Puerto Rico income taxes to be paid on March 15, 2019. Pursuant to the terms of its original contract with the Puerto Rico Electric Power Authority, or PREPA, once the Company's 2018 Puerto Rico income taxes are paid and the applicable returns are filed the Company is entitled to receive payment from PREPA of $44.8 million related to a contractual income tax provision.

Capital Expenditures

The following table summarizes Mammoth's capital expenditures by operating division for the periods indicated (in thousands):

 
  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2018   2017   2018   2018   2017
Infrastructure services(a) $ 22,409     $ 8,131     $ 21,737     $ 100,701     $ 20,144  
Pressure pumping services(b) 9,632     12,870     8,042     33,774     85,853  
Natural sand proppant services(c) 2,132     8,478     3,145     17,935     16,376  
Other(d) 8,240     2,100     7,821     39,533     11,480  
Total capital expenditures $ 42,413     $ 31,579     $ 40,745     $ 191,943     $ 133,853  


a.  Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for periods presented.
b. Capital expenditures primarily for pressure pumping equipment, including three new fleets, for 2017 and various pressure pumping and water transfer equipment for 2018.
c. Capital expenditures primarily for the upgrade and expansion of our plants for 2018 and plant upgrades for 2017.
d.  Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for 2018 and upgrades to our rig fleet and purchase of other equipment for 2017.
   

Explanatory Note Regarding Financial Information

The financial information contained in this release should be read in conjunction with the financial information contained in Mammoth’s Annual Report to be filed on Form 10-K with the Securities and Exchange Commission ("SEC"), 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 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) as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

Based on its assessment of Financial Accounting Standards Board guidance at December 31, 2018, the Company identified three reportable segments: infrastructure services, pressure pumping services and natural sand proppant services. For the year ended December 31, 2017, the Company identified four reportable segments consisting of infrastructure services, pressure pumping services, natural sand proppant services and contract land and directional drilling services. The Company changed its reportable segment presentation in 2018, as it determined based upon both a quantitative and qualitative basis that the contract land and directional drilling services segment, which previously included Bison Drilling and Field Services LLC, Bison Trucking LLC, Panther Drilling Systems LLC, Mako Acquisitions LLC and White Wing Tubular LLC, is not of continuing significance. The Company now includes the results of the entities previously included in the contract land and directional drilling services segment in its reconciling column titled "All Other" in the tables below. The financial results by segment below for the three months ended September 30, 2018 and the three months and year ended December 31, 2017 have been retroactively adjusted to reflect this change in reportable segments.

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 Friday, March 15, 2019 at 10:00 a.m. CDT (11:00 am EDT) to discuss its fourth quarter and full year 2018 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 1357129. 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 company serving both the oil and gas and the electric utility industries in North America and US territories.  Mammoth's subsidiaries provide a diversified set of drilling and completion services to the exploration and production industry including pressure pumping, coil tubing, natural sand and proppant services as well as trucking, drilling, cementing, water transfer among others. In addition, its infrastructure division provides transmission, distribution and logistics services to various public and private owned utilities throughout the US and Puerto Rico.

For additional information about Mammoth, please visit its website at www.mammothenergy.com, where Mammoth routinely posts announcements, updates, events, investor information and presentations and recent news releases.

Investor Contact:
Don Crist
Director of Investor Relations
dcrist@mammothenergy.com
405-608-6048

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, and the Private Securities Litigation Reform Act of 1995. 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 Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings we make with 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: the failure to receive or delays in receiving governmental authorizations, approvals and/or payments; risks relating to economic conditions; 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; the effects of government regulation, permitting and other legal requirements; operating risks; the adequacy of capital resources and liquidity; weather; natural disasters; litigation; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

Investors 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.

 
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
 
ASSETS   December 31,   December 31,
    2018   2017
     
CURRENT ASSETS   (in thousands)
Cash and cash equivalents   $ 67,625     $ 5,637  
Accounts receivable, net   337,460     243,746  
Receivables from related parties   11,164     33,788  
Inventories   21,302     17,814  
Prepaid expenses   11,317     12,552  
Other current assets   688     886  
Total current assets   449,556     314,423  
         
Property, plant and equipment, net   436,699     351,017  
Sand reserves   71,708     74,769  
Intangible assets, net - customer relationships   1,711     9,623  
Intangible assets, net - trade names   6,045     6,516  
Goodwill   101,245     99,811  
Deferred income tax asset       6,739  
Other non-current assets   6,127     4,345  
Total assets   $ 1,073,091     $ 867,243  
LIABILITIES AND EQUITY        
CURRENT LIABILITIES        
Accounts payable   $ 68,843     $ 141,306  
Payables to related parties   370     1,378  
Accrued expenses and other current liabilities   59,652     40,895  
Income taxes payable   104,958     36,409  
Total current liabilities   233,823     219,988  
         
Long-term debt       99,900  
Deferred income tax liabilities   79,309     34,147  
Asset retirement obligation   3,164     2,123  
Other liabilities   2,743     3,289  
Total liabilities   319,039     359,447  
         
COMMITMENTS AND CONTINGENCIES        
         
EQUITY        
Equity:        
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,876,649 and 44,589,306 issued and outstanding at December 31, 2018 and 2017   449     446  
Additional paid in capital   530,919     508,010  
Retained earnings   226,765     2,001  
Accumulated other comprehensive loss   (4,081 )   (2,661 )
Total equity   754,052     507,796  
Total liabilities and equity   $ 1,073,091     $ 867,243  


 
MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 
  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2018   2017   2018   2018   2017
   
  (in thousands, except per share amounts)
REVENUE  
Services revenue $ 260,513     $ 315,545     $ 346,368     $ 1,471,085     $ 435,409  
Services revenue - related parties 9,551     31,639     18,933     118,183     166,064  
Product revenue 8,063     18,024     14,955     75,766     47,067  
Product revenue - related parties 71     3,755     3,787     25,050     42,956  
Total revenue 278,198     368,963     384,043     1,690,084     691,496  
                   
COST AND EXPENSES                  
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $26,999, $25,044 and $27,810, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $106,282 and $82,686, respectively, for the years ended December 31, 2018 and 2017) 151,273     198,201     216,670     961,205     390,112  
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0 and $0, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $0 and $0, respectively, for the years ended December 31, 2018 and 2017) 240     707     1,425     5,885     1,408  
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $3,136, $2,790 and $4,183, respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $13,512 and $9,389, respectively, for the years ended December 31, 2018 and 2017) 28,797     33,290     29,470     126,714     91,049  
Selling, general and administrative 14,283     26,931     (45,761 )   71,199     48,405  
Selling, general and administrative - related parties 500     495     437     1,898     1,481  
Depreciation, depletion, amortization and accretion 30,159     27,770     32,015     119,877     92,124  
Impairment of long-lived assets 4,086     4,146     4,582     8,855     4,146  
Total cost and expenses 229,338     291,540     238,838     1,295,633     628,725  
Operating income 48,860     77,423     145,205     394,451     62,771  
                   
OTHER (EXPENSE) INCOME                  
Interest expense, net (533 )   (1,381 )   (458 )   (3,187 )   (4,310 )
Bargain purchase gain, net of tax                 4,012  
Other, net (1,122 )   28     (400 )   (2,036 )   (677 )
Total other expense (1,655 )   (1,353 )   (858 )   (5,223 )   (975 )
Income before income taxes 47,205     76,070     144,347     389,228     61,796  
(Benefit) provision for income taxes (21,002 )   10,155     74,835     153,263     2,832  
Net income $ 68,207     $ 65,915     $ 69,512     $ 235,965     $ 58,964  
                   
OTHER COMPREHENSIVE INCOME                  
Foreign currency translation adjustment, net of tax of $212, ($167) and ($87), respectively, for the three months ended December 31, 2018, December 31, 2017 and September 30, 2018 and $397 and $645, respectively, for the years ended December 31, 2018 and 2017 (961 )   (482 )   327     (1,420 )   555  
Comprehensive income $ 67,246     $ 65,433     $ 69,839     $ 234,545     $ 59,519  
                   
Net income per share (basic) $ 1.52     $ 1.48     $ 1.55     $ 5.27     $ 1.42  
Net income per share (diluted) $ 1.51     $ 1.48     $ 1.54     $ 5.24     $ 1.42  
Weighted average number of shares outstanding (basic) 44,845     44,579     44,756     44,750     41,548  
Weighted average number of shares outstanding (diluted) 45,048     44,683     45,082     45,021     41,639  
Dividends declared per share $ 0.125         $ 0.125     $ 0.25      


 
 MAMMOTH ENERGY SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
  Twelve Months Ended
  December 31,
  2018   2017
   
  (in thousands)
Cash flows from operating activities:      
Net income $ 235,965     $ 58,964  
Adjustments to reconcile net income to cash provided by operating activities:      
Equity based compensation 17,487      
Stock based compensation 5,425     3,741  
Depreciation, depletion, accretion and amortization 119,877     92,124  
Amortization of coil tubing strings 2,193     2,855  
Amortization of debt origination costs 387     399  
Bad debt expense (14,578 )   16,206  
Loss on disposal of property and equipment 947     69  
Gain on bargain purchase     (4,012 )
Impairment of long-lived assets 8,855     4,146  
Deferred income taxes 52,226     (34,425 )
Loss from equity investee 16      
Changes in assets and liabilities, net of acquisitions of businesses:      
Accounts receivable, net (78,840 )   (231,751 )
Receivables from related parties 22,624     (1,096 )
Inventories (5,502 )   (14,238 )
Prepaid expenses and other assets 1,423     (7,628 )
Accounts payable (64,966 )   101,725  
Payables to related parties (1,008 )   1,174  
Accrued expenses and other liabilities 15,445     32,968  
Income taxes payable 68,692     36,395  
Net cash provided by operating activities 386,668     57,616  
       
Cash flows from investing activities:      
Purchases of property and equipment (187,285 )   (132,295 )
Purchases of property and equipment from related parties (4,658 )   (1,558 )
Business acquisitions (20,824 )   (42,008 )
Contributions to equity investee (702 )    
Proceeds from disposal of property and equipment 1,514     907  
Business combination cash acquired     2,671  
Net cash used in investing activities (211,955 )   (172,283 )
       
Cash flows from financing activities:      
Borrowings from lines of credit 77,000     156,850  
Repayments of lines of credit (176,900 )   (56,950 )
Dividends paid (11,201 )    
Repayments of equipment financing note (292 )    
Debt issuance costs (1,199 )    
Repayment of acquisition long-term debt     (8,851 )
Net cash (used in) provided by financing activities (112,592 )   91,049  
Effect of foreign exchange rate on cash (133 )   16  
Net change in cash and cash equivalents 61,988     (23,602 )
Cash and cash equivalents at beginning of period 5,637     29,239  
Cash and cash equivalents at end of period $ 67,625     $ 5,637  


Supplemental disclosure of cash flow information:  
Cash paid for interest $ 3,212     $ 3,656  
Cash paid for income taxes $ 32,757     $ 840  
Supplemental disclosure of non-cash transactions:      
Acquisition of Stingray Cementing LLC and Stingray Energy Services LLC $     $ 23,091  
Purchases of property and equipment included in accounts payable $ 11,908     $ 15,038  


 
MAMMOTH ENERGY SERVICES, INC.
SEGMENT INCOME STATEMENTS
(in thousands)
 
Three months ended December 31, 2018 Infrastructure Pressure
Pumping
Sand All Other Eliminations Total
Revenue from external customers $ 159,610   $ 72,219   $ 8,133   $ 38,236   $   $ 278,198  
Intersegment revenues   560   19,273   542   (20,375 )  
Total revenue 159,610   72,779   27,406   38,778   (20,375 ) 278,198  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 75,486   39,601   28,796   36,427     180,310  
Intersegment cost of revenues   19,787   253   308   (20,348 )  
Total cost of revenue 75,486   59,388   29,049   36,735   (20,348 ) 180,310  
Selling, general and administrative 9,689   1,768   1,170   2,156     14,783  
Depreciation, depletion, amortization and accretion 7,425   10,952   3,138   8,644     30,159  
Impairment of long-lived assets 308       3,778     4,086  
Operating income (loss) 66,702   671   (5,951 ) (12,535 ) (27 ) 48,860  
Interest expense, net 82   177   40   234     533  
Other expense, net 60   340   304   418     1,122  
Income (loss) before income taxes $ 66,560   $ 154   $ (6,295 ) $ (13,187 ) $ (27 ) $ 47,205  
                                     


Three months ended December 31, 2017 Infrastructure Pressure
Pumping
Sand All Other Eliminations Total
Revenue from external customers $ 209,229   $ 111,244   $ 21,779   $ 26,711   $   $ 368,963  
Intersegment revenues   617   22,167   2,154   (24,938 )  
Total revenue 209,229   111,861   43,946   28,865   (24,938 ) 368,963  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 108,289   65,594   33,289   25,026     232,198  
Intersegment cost of revenues 1,443   22,928   373   159   (24,903 )  
Total cost of revenue 109,732   88,522   33,662   25,185   (24,903 ) 232,198  
Selling, general and administrative 20,365   2,810   1,875   2,376     27,426  
Depreciation, depletion, amortization and accretion 1,805   13,590   2,791   9,584     27,770  
Impairment of long-lived assets     324   3,822     4,146  
Operating income (loss) 77,327   6,939   5,294   (12,102 ) (35 ) 77,423  
Interest expense, net 168   599   107   507     1,381  
Other (income) expense, net (4 ) 2   (40 ) 14     (28 )
Income (loss) before income taxes $ 77,163   $ 6,338   $ 5,227   $ (12,623 ) $ (35 ) $ 76,070  
                                     


Three months ended September 30, 2018 Infrastructure Pressure
Pumping
Sand All Other Eliminations Total
Revenue from external customers $ 237,052   $ 93,360   $ 18,742   $ 34,889   $   $ 384,043  
Intersegment revenues   809   18,268   781   (19,858 )  
Total revenue 237,052   94,169   37,010   35,670   (19,858 ) 384,043  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 128,267   55,490   29,470   34,338     247,565  
Intersegment cost of revenues 37   19,002   546   263   (19,848 )  
Total cost of revenue 128,304   74,492   30,016   34,601   (19,848 ) 247,565  
Selling, general and administrative (54,200 ) 4,508   1,618   2,750     (45,324 )
Depreciation, depletion, amortization and accretion 6,591   12,720   4,184   8,520     32,015  
Impairment of long-lived assets   143     4,439     4,582  
Operating income (loss) 156,357   2,306   1,192   (14,640 ) (10 ) 145,205  
Interest expense, net 159   150   37   112     458  
Other expense, net 181   2   199   18     400  
Income (loss) before income taxes $ 156,017   $ 2,154   $ 956   $ (14,770 ) $ (10 ) $ 144,347  
                                     


Year ended December 31, 2018 Infrastructure Pressure
Pumping
Sand All Other Eliminations Total
Revenue from external customers $ 1,082,371   $ 362,491   $ 100,816   $ 144,406   $   $ 1,690,084  
Intersegment revenues   7,001   67,459   5,516   (79,976 )  
Total revenue 1,082,371   369,492   168,275   149,922   (79,976 ) 1,690,084  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 608,017   223,296   126,714   135,777     1,093,804  
Intersegment cost of revenues 2,583   70,365   6,103   898   (79,949 )  
Total cost of revenue 610,600   293,661   132,817   136,675   (79,949 ) 1,093,804  
Selling, general and administrative 27,126   29,761   6,218   9,992     73,097  
Depreciation, depletion, amortization and accretion 20,516   51,487   13,519   34,355     119,877  
Impairment of long-lived assets 308   143     8,404     8,855  
Operating income (loss) 423,821   (5,560 ) 15,721   (39,504 ) (27 ) 394,451  
Interest expense, net 423   1,171   234   1,359     3,187  
Other expense, net 573   434   525   504     2,036  
Income (loss) before income taxes $ 422,825   $ (7,165 ) $ 14,962   $ (41,367 ) $ (27 ) $ 389,228  
                                     


Year ended December 31, 2017 Infrastructure Pressure
Pumping
Sand All Other Eliminations Total
Revenue from external customers $ 224,425   $ 277,326   $ 90,023   $ 99,722   $   $ 691,496  
Intersegment revenues   2,026   27,014   2,527   (31,567 )  
Total revenue 224,425   279,352   117,037   102,249   (31,567 ) 691,496  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 120,117   183,089   91,049   88,314     482,569  
Intersegment cost of revenues 1,443   28,147   1,731   211   (31,532 )  
Total cost of revenue 121,560   211,236   92,780   88,525   (31,532 ) 482,569  
Selling, general and administrative 21,606   9,501   8,190   10,589     49,886  
Depreciation, depletion, amortization and accretion 3,185   45,413   9,394   34,132     92,124  
Impairment of long-lived assets     324   3,822     4,146  
Operating income (loss) 78,074   13,202   6,349   (34,819 ) (35 ) 62,771  
Interest expense, net 241   1,622   679   1,768     4,310  
Bargain purchase gain     (4,012 )     (4,012 )
Other expense, net 6   129   211   331     677  
Income (loss) before income taxes $ 77,827   $ 11,451   $ 9,471   $ (36,918 ) $ (35 ) $ 61,796  
                                     

Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of the Company's financial statements, such as industry analysts, investors, lenders and rating agencies. Mammoth defines Adjusted EBITDA as net income (loss) before depreciation, depletion, amortization and accretion expense, impairment of long-lived assets, acquisition related costs, public offering costs, equity based compensation, stock based compensation, bargain purchase gain, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets) and provision (benefit) for income taxes. The Company excludes the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within the energy service 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 Mammoth's 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. Mammoth's computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. The Company believes that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure its ability to meet debt service requirements.

The following tables provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income (loss) on a consolidated basis and for each of the Company's segments (in thousands):

Consolidated

  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
Reconciliation of Adjusted EBITDA to net income: 2018   2017   2018   2018   2017
Net income $ 68,207     $ 65,915     $ 69,512     $ 235,965     $ 58,964  
Depreciation, depletion, accretion and amortization expense 30,159     27,770     32,015     119,877     92,124  
Impairment of long-lived assets 4,086     4,146     4,582     8,855     4,146  
Acquisition related costs 61     51     99     191     2,506  
Public offering costs (10 )       260     982      
Equity based compensation             17,487      
Stock based compensation 1,094     1,093     1,415     5,425     3,741  
Bargain purchase gain                 (4,012 )
Interest expense, net 533     1,381     458     3,187     4,310  
Other expense (income), net 1,122     (28 )   400     2,036     677  
(Benefit) provision for income taxes (21,002 )   10,155     74,835     153,263     2,832  
Adjusted EBITDA $ 84,250     $ 110,483     $ 183,576     $ 547,268     $ 165,288  
                                       

Infrastructure Services

  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
Reconciliation of Adjusted EBITDA to net income: 2018   2017   2018   2018   2017
Net income $ 141,875     $ 47,873     $ 78,405     $ 319,940     $ 48,537  
Depreciation and amortization expense 7,425     1,805     6,591     20,516     3,185  
Impairment of long-lived assets 308             308      
Acquisition related costs 61     8         58     98  
Public offering costs (10 )       123     473      
Stock based compensation 470     316     555     2,089     345  
Interest expense 82     168     159     423     241  
Other expense (income), net 60     (4 )   181     573     6  
(Benefit) provision for income taxes (75,315 )   29,290     77,612     102,885     29,290  
Adjusted EBITDA $ 74,956     $ 79,456     $ 163,626     $ 447,265     $ 81,702  
                                       

Pressure Pumping Services

  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net income (loss) $ 154     $ 6,338     $ 2,154     $ (7,165 )   $ 11,451  
Depreciation and amortization expense 10,952     13,590     12,720     51,487     45,413  
Impairment of long-lived assets         143     143      
Acquisition related costs         6     39     1  
Public offering costs         62     264      
Equity based compensation             17,487      
Stock based compensation 318     438     423     1,612     1,641  
Interest expense 177     599     150     1,171     1,622  
Other expense, net 340     2     2     434     129  
Adjusted EBITDA $ 11,941     $ 20,967     $ 15,660     $ 65,472     $ 60,257  
                                       

Natural Sand Proppant Services

  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net (loss) income $ (6,295 )   $ 5,263     $ 956     $ 14,962     $ 9,474  
Depreciation, depletion, accretion and amortization expense 3,138     2,791     4,184     13,519     9,394  
Impairment of long-lived assets     324             324  
Acquisition related costs     42         (38 )   2,163  
Public offering costs         49     144      
Stock based compensation 181     184     211     783     708  
Bargain purchase gain                 (4,012 )
Interest expense 40     107     37     234     679  
Other expense (income), net 304     (40 )   199     525     211  
Benefit for income taxes     (36 )           (4 )
Adjusted EBITDA $ (2,632 )   $ 8,635     $ 5,636     $ 30,129     $ 18,937  
                                       

Other Services(a)

  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
Reconciliation of Adjusted EBITDA to net income (loss): 2018   2017   2018   2018   2017
Net (loss) income $ (67,500 )   $ 6,476     $ (11,993 )   $ (91,745 )   $ (10,464 )
Depreciation and amortization expense 8,644     9,584     8,520     34,355     34,132  
Impairment of long-lived assets 3,778     3,822     4,439     8,404     3,822  
Acquisition related costs     1     93     132     244  
Public offering costs         26     101      
Stock based compensation 125     155     226     941     1,047  
Interest expense, net 234     507     112     1,359     1,768  
Other expense, net 418     14     18     504     331  
Provision (benefit) for income taxes 54,313     (19,099 )   (2,777 )   50,378     (26,454 )
Adjusted EBITDA $ 12     $ 1,460     $ (1,336 )   $ 4,429     $ 4,426  
                                       


a. Includes results for Mammoth's contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling and remote accommodations services and corporate related activities. The Company's corporate related activities do not generate revenue.
   

Adjusted Net Income and Adjusted Earnings per Share

Adjusted net income and adjusted earnings per share are supplemental non-GAAP financial measures that are used by management to evaluate the Company's operating and financial performance. Management believes these measures provide meaningful information about the Company's performance by excluding certain non-cash charges that may not be indicative of the Company's ongoing operating results, such as equity based compensation, that may not be indicative of the Company's ongoing operating results. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for net income and earnings per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income and adjusted earnings per share to the GAAP financial measures of net income and earnings per share for the periods specified.

 
  Three Months Ended   Twelve Months Ended
  December 31,   September 30,   December 31,
  2018   2017   2018   2018   2017
   
  (in thousands, except per share amounts)
Net income, as reported $ 68,207     $ 65,915     $ 69,512     $ 235,965     $ 58,964  
Equity based compensation             17,487      
Adjusted net income $ 68,207     $ 65,915     $ 69,512     $ 253,452     $ 58,964  
                   
Basic earnings per share, as reported $ 1.52     $ 1.48     $ 1.55     $ 5.27     $ 1.42  
Equity based compensation             0.39      
Adjusted basic earnings per share $ 1.52     $ 1.48     $ 1.55     $ 5.66     $ 1.42  
                   
Diluted earnings per share, as reported $ 1.51     $ 1.48     $ 1.54     $ 5.24     $ 1.42  
Equity based compensation             0.39      
Adjusted diluted earnings per share $ 1.51     $ 1.48     $ 1.54     $ 5.63     $ 1.42  
                                       

After Tax Return on Invested Capital

After tax return on invested capital is a supplemental non-GAAP measure that is used by management to evaluate the Company's performance. Mammoth defines after tax return on invested capital as net income divided by total capital employed, which is the average of ending debt and equity for the last two years. Management believes after tax return on invested capital is a useful measure of how effectively the Company uses capital to generate profits and it provides additional insight for analysts and investors in evaluating the Company's financial and operating performance. After tax return on invested capital should not be considered in isolation or as a substitute for financial measures reported in accordance with GAAP. The following table provides the calculation of after tax return on invested capital using the GAAP financial measures of net income, total debt and total equity.

 
  Twelve Months Ended
  December 31,
  2018   2017   2016
   
  (in thousands)
Net income $ 235,965     $ 58,964      
Capital Employed          
Total debt $     $ 99,900     $  
Total equity 754,052     507,796     422,781  
Total capital employed $ 754,052     $ 607,696     $ 422,781  
           
Average capital employed(a) $ 680,874     $ 515,239      
After tax return on invested capital(b) 35 %   11 %    


a. Average capital employed is the average of total capital employed as of end of the period and end of the prior period.
b. After tax return on invested capital is the ratio of net income for the period to average capital employed.
   

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