Q1 2021 Mammoth Energy Services Inc Earnings Call

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Good day, ladies and gentlemen, and welcome to the Mammoth Energy services first quarter, it's weighted to any one earnings conference call.

At this time all participants are announcing all of the Mt. Nature, We will conduct a question and answer session and instructions will follow at that time.

As a reminder, this conference call is being recorded and will be available for replay on mark.

And that's 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.

You may begin.

Thank you Anne and good afternoon, and welcome the Mammoth Energy services first quarter 2021 earnings Conference call. Joining me on today's call are already <unk>, 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 our comments today may include forward looking statements reflect and 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 10-Q current ripped.

<unk> 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 GAAP financial measures additional details and reconciliations to the most directly comparable GAAP financial measures are included in our first quarter 2021 press release, which can be found on our website along with an updated presentation now I'll turn the call over to arty.

You Don and good afternoon, everyone.

The first quarter of 2021 came in as expected as restoration work was completed on the Gulf Coast and infrastructure work moderated slightly since.

Since the start of the year, we have seen a significant ramp up and the bidding activity across the infrastructure space as the New administration said, its renewable agenda and announced an infrastructure bill for rebuild of broad array of the nation's infrastructure assets. The roughly 30, roughly two trillion dollars plan, which is making its way.

And through Congress includes several areas in which our teams have expertise, including the modernization of the electric grid and the shift of renewables.

In addition to the recent policy announcements the extension of the renewable and electric vehicle investment tax credits as a result of an increase in activity levels across the electrical infrastructure space.

These policy extensions for Ed added worked for our industry, which is undergoing a significant rebuilding and hardening effort.

To make the grid more reliable.

As it relates to Mammoth, we have signed two significant multiyear.

Contracts with major utilities over the past several months, which we expect will provide a base of business and in the case of our engineering company allow for an expansion of projects engineered.

As the industry activity has increased our bidding opportunities have increased and we believe that our backlog will grow over the coming quarters.

Our infrastructure management team has an impressive resume of construction.

And renewable projects and we believe that their background combined with our vertically integrated service offering positions us well to compete and win renewable projects.

Mark will walk our engineering business has been has.

<unk> has seen the ramp up and revenue and projects. Following the recent signing of a multiyear contract with the major utility. We currently anticipate off of work to grow over the coming months as additional jobs are assigned to them. In addition of oil continues to work closely with our infrastructure segment to jointly bid projects as we progress towards being and engineering.

Procurement and construction or EPC company.

The integration of our manufacturing operation into our infrastructure offering is progressing through the manufacturer and refurbishment of equipment and products used by our infrastructure teams and we are encouraged by what our infrastructure engineering and manufacturing teams of accomplish and what the future holds.

Turning to the oilfield, while oil prices have rebounded from recent lows activity levels remain depressed industry wide as the result of capital discipline amongst e&ps with current and currently believe E&ps will generally keep production flat with year end 2020 levels and that pricing and utilization for our oilfield service.

And are expected to remain constant for the foreseeable future.

During the first quarter of 2021, we pumped and 445 stages with approximately one fleet utilized throughout the quarter on average we've continued upgrade of additional pumps to dynamic gas blending or DGB to meet current and anticipated industry demand.

Our sand division sold approximately 171000 tons of sand during the first quarter of 2021 the.

Average sales price for the sand sold during the quarter first quarter of 2021 was approximately $16 83 per ton, while northern white sand pricing remains challenged we believe the significant reduction of supply has positioned our minds to benefit from and increasing completion activity levels.

While the events of the last the past year have caused significant impacts on both our daily and professional lives.

Mammoth has adapted quickly to the changing environment, our divorce, our diverse portfolio of businesses across several industries has performed as expected the infrastructure business has the solid foundation from which to grow and.

It looks to further integrate into other our other businesses and continued lower costs.

I turn the call over to Mark.

Take you through the numbers, let me give you an update on Puerto Rico.

While I can't get into all the details on April six 2021, Cobra filed a motion to lift the stay order on our administrative claim and the bankruptcy court.

Following this filing PREPA and initiated discussions which resulted in both the PREPA and Cobra filing a motion this motion of the germs all.

That lines relative to the April six 2021 motion until the June 16th 2021 omnibus hearing as a result of prep is understanding the female released a report and the near future relating to the emergency Master services agreement between PREPA and Cobra that was executed on October 19.

<unk>.

The 17.

We believe that this report will provide another affirmation that Cobra performed its work in Puerto Rico that of reasonable cost as a reminder, we have.

Public two memorandums from FEMA as well as the report from the Rand Corporation, all of which state that the contract was obtained properly and our costs were reasonable and all of these documents can be found on our website.

As of March 31, 2021, PREPA owes us $227 million for services performed and $83 million and interest for approximately $310 million.

Let me turn the call over to Mark to take you through the financial performance during the first quarter of 2021, after which we will take questions.

Thank you Aarti and good afternoon, everyone.

And 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.

Mammoths revenue during the first quarter of 2021 came in at $67 million as compared to $85 million during the fourth quarter of 2020.

The majority of the change quarter over quarter was due to a decrease and infrastructure revenue as a result of the completion of restoration work on the Gulf Coast.

The net loss for the first quarter of 2021 was $12 million as compared to a net loss of $12 million during the fourth quarter of 2020.

On a per share basis, the net loss for the first quarter came in at <unk> 27 per diluted share.

Adjusted EBITDA for the first quarter of 2021 was $6 million as compared to $8 million during the fourth quarter of 2020.

We saw positive operating cash flows of $14 million and the first quarter.

As a result net debt was reduced by approximately $14 million during the first quarter.

Capex during the first quarter of 2021 was approximately $1 million.

Full year, 2000, and 'twenty, one capex budget remains at $9 million.

As of March 31, 2021, we had cash on hand of approximately $14 million and debt of approximately $67 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.

Thank you to ask a question and you will need to press Star then the number one on your telephone keypad.

Net star and the number one our net Jonathan.

And with Lion question. Please press the pound key.

Again to ask a question you May press Star one our net Thompson Keybank.

Please standby, while we compile the Q&A roster.

We have and first question is from the line of Daniel Burke from Johnson Rice. Your line is now open.

Yeah, good afternoon guys.

Hi, Daniel.

Let's see a couple of different angles here.

Arty I guess, let me start with one on on the update on the prep of situation.

So to be clear this theme of report.

And you all are aware of this theme of report because PREPA has notified you its forthcoming and just to be I guess I'm just looking for that clarification and do you expect this to be a publicly disseminated reported.

Yes.

And Daniel So the weighted the story goes on April six we filed our motion.

The race day and a few days after that.

The PREPA PREPA, the attorneys reach out to our attorneys and.

And we talked and the desktop site.

And they asked us if we would withdraw.

We ended up coming to an agreement with a joint motion to withdraw and.

And the <unk>.

And that was hearing was held yesterday.

The one we withdrew from the next one occurs in June.

So it's not that much time less losses, but we were told that the.

The <unk> report was.

Imminent and.

And would be coming out and we expect to see that and the next.

Month month and a half.

So.

We believe that it will be another affirmation.

All the things that we've already released for tons that are rates were reasonable.

Our work was at the.

Very very tough.

And on the island it was an emergency situation and.

We believe that it will be of good report.

Okay.

Alright.

We'll watch the docket on the PREPA side and stay tuned.

Alright, so too.

The shift gears I guess.

And that's almost the housekeeping item, but all of <unk> second.

When we look at the segment results, where where is the the $10 million of bad debt expense embedded.

Primarily embedded inside of the well completion segment and <unk>.

<unk> of SG&A.

Right right. Okay. So can you talk about the.

If we don't.

We don't include Mark if we don't.

Or if we try to make allowance for that charge I mean, it would seem like you guys were highly profitable and and well completion and I'm missing anything.

No.

A little bit of flow through from Gulfport and sort of well completion.

You strip that activity out.

We're still EBITDA positive, but we are getting some pickup and side of the segment relative to gulfport flow through.

Okay. So alright that helps me understand some of you all are still feeling gulfport.

Under the terms of the contract.

There was some recognition relative.

And to the rejection of both the pressure pumping agreement and thought of the well completion segment as well as the sand supply agreement, which is in the Frac.

The reflected in the sand segment.

But we expect that Q1 should be the last of what we see relative.

Relative to financial impact on those contracts.

Okay got it.

And then I guess to pivot over to infrastructure just the final question I guess.

Mark I think we mark and how do we kind of go through this one each quarter, but you know.

Q1 was supposed to be kind of a tricky quarter I mean, the transitional quarter away from the hurricane work that helped.

Helped and the second half of last year, and and a quarter, where I'm sure you. Thanks weather disruption is just like.

About any use.

U S business active and the Central U S.

Yes, as we look ahead here to Q2, I mean theres been good news on the business development front with the contracts, but maybe just talk a little bit about what's what's a realistic.

Outlook for sort of revenue progression and then and again.

The EBITDA margin progression as we look at the next couple of quarters.

I think as we look at the next couple of quarters, we would expect an increase on top line and on margin, we still expect margin for that business.

Could be and the 12% to 18% range.

As already mentioned in his comments, we are seeing increased bidding opportunities and we expect that the increase throughout the remainder of the year.

Okay.

And then on the 12% to 18% EBITDA range maybe.

Again, just just a clarification is that excluding interest on AAR or is that inclusive of interest on <unk> and then.

Regardless of which of the two you pick Mark I mean is it does that does that margin.

All come into the frame here and the second half of this year or is it could take longer to get there.

We think that margin comes into frame and the back half of the year and that would exclude the.

And the interest related to Puerto Rico.

Okay.

Alright perfect guys. Thank you. Thank you for the for the time.

And Dan and I'll, just add one thing to your previous comments whenever we get the report from.

And from FEMA, and that's made public we will make it public as well and putting it on our website with the other.

Okay. Thank you.

Yes, Thanks, Dan.

Thank you again as a reminder, you asked the question you may need to press Star one our net Palestine.

Star one on a part of it.

Sure.

I am showing no further questions at this time I would now like to turn the conference back to arty.

Thank you 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 develop our services offerings to grow and deliver stockholder value and the years to come.

Thank you for our stockholders for your support and interest and the company while the current oilfield market conditions are challenging and the infrastructure side of the business is seeing opportunities. We are working hard to control costs and continue to pivot mammoth into a more industrial focused company and this concludes our first quarter 2021 conference call.

Good afternoon, everyone.

Ladies and gentlemen. This concludes today's conference call you may now disconnect.

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