Q4 2020 Mammoth Energy Services Inc Earnings Call

Good day, ladies and gentlemen, and welcome to the Mammoth Energy services fourth quarter and full year 2020 earnings conference call. At this time all participants are in a listen only mode. Later, and we will conduct a question and answer session and instructions will follow at that time as a reminder.

This conference is being recorded and will be available for replay and Mammoth energy services website I would now like to introduce your host for today's conference Mr. Don Crist Mammoth Energy services director of Investor Relations, Sir you may begin.

Thank you Julian and good afternoon, and welcome to Mammoth Energy services fourth quarter and full year 2020 earnings Conference call. Joining me on today's call are already stellar Chief Executive Officer, and Mark Layton Chief Financial Officer, before I turn the call over to them I'd like to read our safe Harbor statement.

Some of the comments today may include forward looking statements, reflecting mammoth energy services views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward looking statements. These risks are discussed and mammoth energy services form 10-K forms.

Thank you.

Current reports on form 8-K, and other Securities and Exchange Commission filings, we undertake no obligation to revise or update publicly any forward looking statements for any reason.

Our comments today May also include non-GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures are included in our fourth quarter and full year 2020 press release, which can be found on our website along with an updated presentation now I will turn the call over to arty.

Thank you Don and good afternoon, everyone.

2020 was a very active year for our team as they adapt to the ongoing COVID-19 pandemic and the effects and it is having on business today.

Since the outbreak of the pandemic nearly every aspect of our daily lives has been impacted but our first priority is and has always been the safety and health of our team and we continue to take steps to protect our team members from the virus now that the vaccine is being administered infection rates appear to be trending down.

The turnaround and our infrastructure business throughout 2020 was significant as the management team, which was hired in November of 2019 evaluated the business.

Eliminated costs streamlined operations and began the transition of our job mix and the actions taken throughout 2020 can be seen in our financials as the U S business reverse losses and turn positive throughout the year day.

And for our infrastructure business increased throughout the back half of the year. In addition to our normal operations. Our teams continue to work on the Gulf coast to restore damage caused by multiple Hurricanes. A majority of this work was completed during the fourth quarter with some storm cleanup continuing into the first quarter of 2021, our diversification strategy and.

<unk> is working.

The gross margin of the infrastructure Division came in at 26% during the fourth quarter of 2020 with EBITDA growing marginally quarter over quarter, when excluding interest on the PREPA receivable.

And the infrastructure management team is leveraging current operations to introduce our capabilities to potential customers, we believe industry demand and bidding opportunities will remain robust and years to come as the shift.

Towards more renewable energy sources as realized our management team has an impressive resume of renewables and we believe that their background combined with our vertically integrated service offering positions us well to compete and win renewable projects with.

With the work our team has done on their cost structure and our core base of operations. We have built a solid foundation and believe we are positioned to grow both our customer base and geographic footprint over the coming years.

Our infrastructure operating subsidiaries higher power and five star well respected by the utilities and they work for.

And our expanding their customer base.

And these businesses have grown significantly since we acquired them and are currently comprised of approximately 500 experienced field personnel spread across 115 crews.

All our engineering business is expected to expand both the number of engineers and breath from work performed following the recent signing of a multiyear contract with a major utility while we are limited in what we can disclose about the agreement. This three year contract is expected to generate up to $40 million and revenue over the contract term.

This is a significant award and brings us one step closer to being and engineering procurement and construction or EPC company.

In addition, and the integration of our manufacturing operations into our infrastructure offering is progressing through.

The manufacturing and refurbishment of equipment and products used by our infrastructure teams. We are encouraged by what our infrastructure engineering and manufacturing teams have accomplished and what the future holds.

Turning to the oilfield, while oil prices have rebounded from recent lows activity levels remain depressed industry wide as a result of capital discipline amongst e&ps.

We currently expect and increase in activity as we progress through 2021, but we believe E&ps will generally keep production flat with year end 2020 levels.

During the fourth quarter of 2020, we pumped 291 stages with approximately <unk> six fleets utilized throughout the quarter on average we have continued to upgrade additional pumps to dynamic gas blending or DGB to meet current and anticipated and anticipated industry demand.

Our sand division sold approximately 100000 tons of sand during the fourth quarter of 2020.

The average sales price for the sand sold during the fourth quarter of 2020 was approximately $15 59 per ton, while northern white sand pricing remains challenged we believe a significant reduction and supply has positioned our minds well to benefit from an increase and completion activity levels.

While the events of the past year have caused significant impacts to both our daily and professional lives Mammoth has adapted quickly to the changing environment, our divorce our diverse portfolio of companies across several industries has performed as expected the infrastructure business has a solid foundation from which to grow as it.

Two ways to further integrate into our other businesses and continue to lower costs let.

Let me now turn the call over to Mark to take you through the financial performance during the fourth quarter and full year of 2020, after which we will take questions.

Thank you Aarti and good afternoon, everyone.

I hope that all of you have had a chance to read our press release, So I will keep my financial comments brief and focus on certain highlights.

Mammoth revenue during the fourth quarter of 2020 came in at $85 million as compared to $71 million during the third quarter of 2020.

A majority of the change quarter over quarter was due to an increase and infrastructure revenue.

Revenue for the full year of 2020 came in at $313 million as compared to $625 million and 2019.

The majority of the reduction in revenue year over year was due to the completion of our restoration work and Puerto Rico, which contributed $96 million and 2019 and a reduction of revenue and the oilfield side of the business due to the pandemic related impacts.

As a result of the November announcement that Gulfport energy and certain of its subsidiaries filed petitions for voluntary relief under chapter 11 of the United States bankruptcy code.

We reserve a portion of our pre petition accounts receivable based on Gulfport disclosure statement and.

The reserve was approximately $20 million and negatively impacted our fourth quarter and full year 2020 results.

As of December 31, 2020, our net pre petition receivable from Gulfport was $24 million and our post petition receivable was $4 million for a total of $28 million.

The net loss for the fourth quarter of 2020 was $12 million as compared to net income of $3 million during the third quarter of 2020.

The majority of the reduction in net income quarter over quarter was related to the provision for bad debt associated with the Gulfport bankruptcy petitions.

On a per share basis, the net loss for the fourth quarter came in at 26 cents per diluted share.

Net loss for the full year of 2020 came in at $108 million as compared to a net loss of $79 million and 2019.

On a per share basis net loss for the full year 2020 came in at $2 36 per diluted share.

Adjusted EBITDA for the fourth quarter of 2020 was $8 million as compared to $22 million during the third quarter of 2020.

When excluding the bad debt reserve related to Gulfport, and our adjusted EBITDA for the fourth quarter would have been $27 million.

For the full year of 2020 EBITDA came in at $50 million as compared to 77.002 million 19.

We saw a positive operating cash flows of $5 million and the fourth quarter and $7 million for the full year.

In addition, we executed a sale leaseback of certain of our infrastructure assets with total proceeds of $5 million and entered into a $5 million loan secured by our helicopters.

As a result net debt was reduced by approximately $7 million during the fourth quarter.

Capex during the fourth quarter of 2020 was approximately $1 million with.

And with a total of approximately 7 million spent in 2020.

Our full year 2021, Capex budget has been set at $9 million.

We ended 2020 with cash on hand of approximately $15 million and.

And debt of approximately $83 million.

We thank our stockholders for their support this concludes our prepared remarks and we thank you for your time and attention.

We will now open the call for questions.

At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one and your telephone keypad.

And Thats Star then the number one and the telephone keypad low pause for just a moment to compile the two and the roster.

Our first question.

And then comes from the line of Mr. Daniel Burke. Please go ahead.

Hey, guys good afternoon.

Hey, Daniel how are you.

All right.

And let's see.

I guess I wanted to talk about the infrastructure segment.

Already I think you alluded to and maybe with your Mark.

Fact that the hurricane related work.

And the wound down.

I guess I was just kind of looking for a view into Q1, 'twenty, one and I mean, we've had some winter weather disruptions, which probably stretch at least some of your workflows for a bit of time, but maybe created more work on the backend. So just kind of curious about how to think about Q1.

And both maybe on the topline and all the margin side since I guess, the Q4 margin was a touch below what we were thinking it would be.

As we look at Q1 as you touched on we have some storm work that continued into Q1 I think historically, what <unk> seen in Q1 is there is some seasonal impact.

So we would look more towards full year 2021 and.

And then as we look at 2021.

And we're excited about our sales pipeline and what we see currently and regards to projects. We think that sales pipeline will continue to increase throughout the year.

And the team has done an excellent job of executing on those projects and winning a number of projects and regards to full year margin.

Looking at the 15% to 18% range at the EBITDA level for 2021 out of the infrastructure segment, excluding interest, yes, Daniel I'd add a little bit more to what mark.

Talk about all on the financials.

A year ago as we went into this call. We were talking about that we have new management in place and that they had to fill out and they have certainly done that we brought additional new management and new relationships and.

And new customers with us, but really the big the big takeaway I think is the vertical integration you saw us announce last.

Couple of weeks ago.

And <unk> contract with a major utility.

What that allows us to do is to bring on and cover our costs for additional breadth. We've gone from 18 engineers at the end of the year to 2000, and we have a team of 26 individuals now and we're still growing it but it is also allowing us to go into different areas, we had transmission and distribution.

<unk> covered with our engineering team and now we're expanding it to fiber and were expanded substation and to other areas. So it's really the vertical integration model and if you couple that with the manufacturing that we <unk>.

Really.

Pivoted to win and our 75000 square foot facility.

It's really a good plan because I mean from a vertical integration standpoint, we've got helicopters that are part of that that we can take and when we get debt.

And that type of business that we need them I'm really pleased with way the team has progressed and going.

It's never linear but it is.

Very much improving and we continue to grow that business.

Pivoted and working.

Thanks for that already I mean, I guess to follow up on that did you guys had a previous relationship with this utility and what were the what are the competencies you were able to bring to bear.

To capture this reward or ward it does seem like it's a bit of a step out in terms of scale for you guys as a win it certainly is and we did have.

We had done some subcontract and contracting work and that type of thing.

But when they came out with their their three year RFP, we were able to.

Bid and we were.

We're very fortunate to win what we have and.

The wording on our press release that or be up to 40.

And $40 million.

Could very well go beyond that.

As we go forward.

Okay. That's helpful.

And I guess then to pick.

Two.

And the oilfield service side of the business could you maybe just give us around the horn update on what Youre seeing out there in the market and.

What's your deployments look like across I guess, the most prominently the pumping market.

But maybe touching on some of the other mostly idled.

Segments as well.

Well I can tell you we've always viewed sand.

Sand.

As a leading.

Economic indicators for the pumping and.

And because it's one of the first things you start to procure as you go through and pressure pumping and we've seen.

Very good uptake uptick in the last few weeks.

To the point that we're adding.

Team members back to our sand.

Sand months, because we think it's it's.

B.

They're going to be pretty much full on production.

As we as we go for to the limit.

You've got a limited to number of railcars you got limited.

Different factors and things like that but we're seeing some very good increased activity and we're seeing some increased pricing.

In the area as well we've seen pricing go up a few now.

Now on the pressure pumping.

Aspect.

We are getting a lot more bidding opportunities and those are coming through.

We still expect E&ps to stay disciplined.

The year I think.

If you listen to them and I know you do listen to all the calls as I do everybody talks.

A lot of people are talking variable dividends and theyre talking about.

And staying within cash flow and that type of thing. So we do expect them to stay pretty disciplined and it doesn't look like it's.

The 2017, 18 time period or the 2010 through 2014 time period, all over again, but we do expect to continue to build the business.

Got it maybe maybe just one last one and then.

Not not to focus.

Great.

Amount of time on pressure pumping but.

You guys had a contract that was pretty supportive of reported <unk>.

Over the last couple of years, I guess I'm not clear what's going to happen here in 2021 do you expect to be.

Positive EBITDA and pressure pumping and the first half this year.

Yes, we do.

Okay.

Alright.

That's helpful All right.

And already Mark I appreciate the time.

Have a good afternoon guys.

Thank you Daniel.

Again, it goes back to ask a question. Please press Star then the number one on your telephone keypad for dose who'd like to ask a question. Please press Star then the number one and the identical and keep them.

Okay excuse me per centers. We currently have no question and so on the queue. Please go ahead.

We want to thank everyone for dialing in today I want to personally. Thank our team. We believe the future is bright for mammoth and our team members.

As we intend to strategically and develop our service offerings to grow and deliver stockholder value and years to come. Thank you for our stockholders for your support and interest and our company. While the current oilfield market conditions are still challenging and infrastructure side of the business is seeing growth. We are working hard to control cost and continue to pivot mammoth into.

A more industrial focused company.

This concludes our fourth quarter and full year 2020 conference call.

Thank you very much goodbye.

This concludes today's conference you may now disconnect.

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