Q2 2022 Mammoth Energy Services Inc Earnings Call
Greetings and welcome to Mammoth Energy Services' second quarter earnings Conference call.
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A question and answer session will follow the formal presentation.
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As a reminder, this conference is being recorded.
I would now like to turn the conference over to your host Ken Dennard Investor Relations.
Thank you operator, good afternoon, everyone. We appreciate you joining us for the Mammoth Energy Conference call to review 2022 second quarter results.
This call is also being webcast and can be accessed through the audio link on the events and presentation page of the Investor Relations section.
Www Mammoth energy Dot com.
Information reported on this call speaks only as of today July 28, 2022. So please be advised that any time sensitive information may no longer be accurate as of the date of any replay listening or transcript reading.
I would also like to remind you that statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward looking statements made pursuant to the safe Harbor provision of the private Securities Litigation Reform Act of 1995.
We will be making forward looking statements as part of today's call and that by their nature are uncertain and outside of the company's control actual results may differ materially. Please.
Refer to the earnings release that was issued today for our disclosure on forward looking statements.
The factors these factors and other risks and uncertainties are described in detail in the company's filings with the Securities and Exchange Commission management May also refer to non-GAAP measures, including adjusted net income or loss and adjusted EBITDA.
Definitions of these non-GAAP measures and their reconciliation to the nearest GAAP measures can be found at the end of the earnings release and in the Investor presentation, which can be found on the website.
Mammoth energy assumes no obligation to publicly update or revise any forward looking statements and now with that behind me I'd like to turn the call over to Mammoth energy CEO already Australia already.
Thank you Ken.
Good afternoon, everyone.
I'll begin with a review of the second quarter, followed by an overview of our businesses before turning the call over to Marc to review our financials in more detail.
We are pleased with our second quarter results and the performance of each of our business segments. In addition, we believe that the trend lines look very positive for our business across the board as we enter the second half of 2022.
Extending into 2023.
Overall second quarter results marked significant improvement and we believe serve as a notable inflection point for Mammoth total revenue was $89 7 million up 44% sequentially from our 2022 first quarter revenue net income was $1 7 million a major positive swing compared.
The net loss of $14 8 million, we reported in the first quarter of 2022, and our second quarter adjusted EBITDA was $23 million.
A sequential increase of 147% compared to $9 3 million for the first quarter of 2022.
Our robust second quarter growth in revenue net income and adjusted EBITDA resulted from substantial gains in our infrastructure services, well completion services and our sand business.
Looking at our infrastructure services segment, we continue to grow and build upon our positive momentum in the first half of 2022 after becoming cash flow positive exiting 2021 since the first quarter. We've been adding crews currently we have more than 100 crews and we expect to add additional crews in the coming weeks in preparation for the seasonal.
Storm restoration services anticipated in the third and fourth quarters. The overall infrastructure backdrop remains strong and we believe the passage of a federal infrastructure Bill last fall will provide opportunities in the infrastructure space for years to come.
As we have said previously we anticipate the federal spending to begins stimulating project lettings across the sector later this year and into 2023.
I'm proud of our infrastructure teams commitment and hard work to mitigate the myriad of headwinds in today's challenging economic environment. As we remained disciplined with our capital spending to continue to improve <unk> cost structure.
Moving to our well completion services segment, we posted the strongest quarter, we've seen since mid 2019, resulting from the robust macro demand that the pressure pumping industry is experiencing.
We currently have four pressure pumping fleets off ready, which have full schedule through the end of the year and we expect to activate a fifth fleet in the fourth quarter.
Looking to 2023, we plan to activate our six fleet in the first quarter of 2023, and we have plans to acquire or build a new tier four dual fuel system.
In 2023.
We anticipate operating seven pressure pumping fleets by the end of 2023.
At today's pricing pricing, we would expect seven operating place to generate between $63 million and $84 million in net income per year and between $105 million and $126 million in EBITDA per year.
Our sand back our same business is also experiencing strong demand as well as increased pricing, which we believe will continue to improve in the back half of the year and into 2023, Mark will provide details on our increasing tonnage produced and improving pricing metrics.
I am very proud of our entire mammoth teams continued commitment and hard work to push through the challenges we have faced over the last few years and I'm confident that we are well equipped to build on the improvements we have made this quarter.
We believe our diverse portfolio and ability to adapt quickly to changing environments positions us well in these segments moving forward. We continue to see improved macroeconomic trends that we believe will drive increased demand.
Turning now to an update on PREPA, we continue our efforts to hold PREPA accountable for their contractual and financial obligations, both FEMA and the financial oversight and management Board for Puerto Rico have roles to play and we continue our efforts to hold with both of them accountable as well.
The implications of this ongoing delay are enormous for both the people of Puerto Rico as well as the unsecured creditors PREPA interest piles up on the unpaid bills at more than $3 $5 million each month, and our PREPA receivable now stands at $358 million.
We are working diligently with congressional leaders to reach a fair resolution and we remain confident that the successful work. We performed during a time of crisis and national disaster recovery should be and will be paid to the company now.
Now, let me turn the call over to Mark to take you through <unk> financial performance during the second quarter before we open the call to questions.
Thank you already and Hello, everyone.
As I, usually do I'm going to take this time to provide additional details on some meaningful metrics and several key highlights.
A detailed breakdown of our results can be found in our earnings release and in our 10-Q.
<unk> total revenue during the second quarter of 2022 came in at $89 7 million as compared to $47 4 million during the second quarter of 2021, and $62 3 million during the first quarter of 2022.
The 44% sequential increase in revenue is primarily attributable to the more favorable macroeconomic environment surrounding our key business segments, most notably well completion services, which posted the strongest quarter since mid 2019.
We're also seeing increased demand and pricing across our sand and infrastructure businesses, which we believe will continue into the back half of the year and into 2023.
We intend to continue leveraging our differentiated service offerings to build upon the earnings growth that we realized in the second quarter.
During the second quarter of 2022, we pumped 1716 stages with approximately $3 five fleets utilized on average.
This average compares to an average utilization nine fleets during the same quarter last year at $1 six fleets during the first quarter of 2022.
Our sand division sold approximately 350000 tons of sand during the second quarter of 2022 compared to 255000 tons of sand during the same quarter last year and 329000 tons of sand during the first quarter of 2022.
The average price for the sand sold during the second quarter of 2022 was approximately $26 86 per ton as compared to $21 44 per ton during the first quarter of 2022.
Our infrastructure services Division contributed revenue of $25 6 million in the second quarter of 2022 compared to $18 4 million in the second quarter of 2021 and $23 million for the first quarter of 2020 to the.
The increase in revenue versus the prior year period is primarily attributable to the increase in storm related activity.
<unk> in higher storm restoration revenue.
Net income for the second quarter of 2022 was $1 7 million as compared to a net loss of $34 8 million for the second quarter of 2021, and a net loss of $14 8 million for the first quarter of 2022.
Adjusted EBITDA as defined and reconciled in our earnings release was $23 million for the second quarter of 2022 as compared to a negative $3 3 million for the second quarter of 2021, and $9 3 million for the fourth quarter of 2022.
Capex for the second quarter of 2022 was approximately $2 8 million.
This was up from the $1 2 million of Capex that we incurred during the first quarter of.
The sequential increase in Capex was related to the increase in pressure pumping fleet utilization within our well completion services Division.
Which we anticipated and guided towards last quarter.
We expect Capex for 2020 to be approximately $20 million and $8 million increase from our previously announced capex guidance for 2022.
We intend to fund our 2022 capex with cash flow from operations cash on hand, and borrowings under our revolving credit facility.
As of June 32022, we had cash on hand of $12 7 million and debt of approximately $85 5 million.
Our total liquidity was approximately $27 million.
In conclusion, we would like to thank our nearly 1000 employees throughout the company for their hard work dedication and commitment to maintaining safe and sustainable work sites for themselves and their teammates as we look ahead to the second half of the year, we believe that the strong macroeconomic backdrop surrounding industrials and oil and.
Gas gives us significant opportunity to capture additional market share.
As always we will maintain our emphasis on operational excellence and efficient execution, which we believe will drive meaningful shareholder value.
Operator, we would now like to open the call up for questions.
Thank you.
At this time.
A question and answer session.
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One moment, please slightly pause for questions.
Our first question.
John Daniel.
Daniel Energy partners. Please go ahead.
Hey, guys. Good afternoon, and thank you for letting me get in the queue.
Yeah.
Hey, there I guess I didn't have a chance to read the press release, because I'm driving.
As I think about your <unk>.
Frankly in hindsight you guys have done.
Really kind of a spectacular job you work fast to reactivate when margins were depressed and Youre reactivating right. It though.
Kind of a sweet spot if you will so kudos on that I'm curious what other assets within the legacy U S. Do you kind of have where maybe you can xerox that playbook and replicate it coil or other things.
Well, we're still and John you know, we try to be as entrepreneurial as we possibly can.
By the way it's good to talk to you seems like old times again.
But you know.
We haven't seen where right now is the time to go back into coiled tubing.
We certainly have our equipment on the site.
We've got it accurate aggregators that one location.
If we see the pricing where we wanted to.
And I'll tell you we are having discussions about the inflection point, so how many rigs and in the.
<unk>.
In our market.
That type of thing so we are.
Obviously looking at that.
We're continuing to do.
Our rental equipment is basically sold out and our water transfer is going strong as well so.
We feel very good about.
Our other equipment. We are we are looking hard at rigs and rig count continues to decline.
You get to an inflection point at 800, and you've got a study it because.
Pricing will come up as it as we know and that type of thing so right.
So that's on the table.
As an opportunity.
Just.
Fair enough okay.
You have a.
You apply here.
A lot of experience on equipment.
Equipment Assembly et cetera, you have supply chain issues are very topical this past this quarter last quarter I'm curious if you could opine on how you see the market, particularly things like just the spare parts for some of the major component parts like engines transmissions and how that's impacting if at all the business.
Yeah.
John .
Very good question, obviously, we start Revpar Dunkin' facility, we started it out.
And we started out to refurbish T&D equipment.
This was a group that in their prior history.
Built $70 million to $80 million a year of Frac equipment. So we have that same manufacturing footprint right now and we continue to refer.
Frac equipment, even as we speak I will tell you it's been a godsend because caterpillar has backed up they have and other vendors are all backed up with in their shops.
Parts are a huge issue.
I will tell you that.
Our guys say that caterpillar gives them a call about every other day looking for parts that are common to some of the 35 to 12 <unk> and some of the key 55 transmissions.
Right.
Parts are really really tough the supply chain on that is tough.
That said, we've got 20 dual fuel.
Frac pumps that we've steadily been moving towards and we're adding another 20, not additive to where converting dual fuel an additional 20.
And then part of our part of our goal is is next year to bring out a dual fuel tier four.
<unk>.
Yes, they are acquired or bring it out.
I'm going to squeeze one more and then turn it over because he said something I take my interest you said cat is calling you.
Every other test I mean is that unusual that they would be calling you looking for help when they should be calling you to sell your stock.
It's unusual that they would be calling for parts.
Okay.
I don't know that they need the expertise I think their labor they have labor constraints as well at least that's what we're told and the.
Lead time are bringing out.
Items is longer than it has ever been and that was one of the reasons that helped us decided to bring our manufacturing back on and into that space to help change out engines and.
Get those get those going.
Okay. Thank you very much good quarter and I Hope PREPA is the right thing to do is to pay their obligations and I'll leave it at that.
Thanks, guys. Thank you John .
Already we had a couple of investors that couldnt be on the call that E. Mailed in some questions. So I thought I'd read those questions to you and you could reply to them and people can hear it on the transcript or.
Read it on the transcript or listen to the replay sure regarding the sand business given the strong market. There is strong market conditions. Please tell us about your current sand capacity in your ability to expand with timing and costs well, we feel good about San business basically we have the ability were doing about 120000.
<unk>.
Per month right now we have the ability to go up to about 150000 sometime in the latter part of third quarter fourth quarter, but we're also at the same time getting pricing. So it's it's a very strong market for US. We continue to go we meet every week with our leadership team in this.
Last week.
Our average sales price was had a three in front of it so which is significant for us because we sell all grades. So when you have an ASP.
Over $31.
For that one particular period Thats, a very strong indicator of where it's going what are just now with that it still has our channel. It still has significant challenges rail.
Rail terms.
Big factor in Q1 lessened up a little bit in Q2 and is really getting stronger.
And then we run into a couple where are quite honestly, our customers were storing sand and we had to implement some different rules.
On that so but.
The takeaway on this is that we will be expanding and adding some additional tonnage to our plants.
And in the Q3 and Q4 and the same investor asked about your Frac business can you discuss current market conditions and pressure pumping in and.
Thank you you had a second question after that sure.
I will tell you and we and we entered a lot of these questions with.
With Johns question and discuss some of the Frac, but.
The Frac is going well, we're sold out with our four fleets through the remainder of the year, we have our fifth fleet come in in the fourth quarter.
It's already.
Sold out and carried on and then we will add.
A six fleet and then eventually <unk>.
Ending on supply chains.
Various factors will go after that seven.
Seventh place it does have its challenges as all businesses do with with labor and.
People move in there is pretty high.
Turnover and as I spoke about the parts and getting parts and getting things out, but thats, where our vertical integration model of having manufacturing the ability to switch from T&D type of equipment to refurbish and now we are refurbishing frac equipment and getting it ready and send it out it's really escalate.
Weighted things by five to 10 weeks and getting some pieces of equipment out that we wouldn't have been able to get out so.
In some basins, we're seeing water as a significant issue.
I think everybody I think our total vertical integration with Frac has been very good for us we have our own trucking we have our last mile logistics that is helping us out tremendously. We also have our own sand sand was very hard to get in Q1 early parts of Q2, we were able to bridge some of that with our own.
Or their own sand, so we feel good about where frac is going and we think.
We have the ability to grow that business significantly.
Moving to infrastructure can you provide.
Provide a little you had some had some color in the formal remarks can you provide an update on that business and the deployment of cruise yes.
Yes sure.
Since the end of last year, we have grown to buy 20 crews continue to grow that business were up over 103 crews. The significance is that we are also building transmission, which everybody knows that follows that business between transmission distribution transmission is a better margin.
Business.
So we continue to build that business continue to add crews.
We continue to build our fiber business.
It's growing significantly with about six projects going now and more on the board and we think that there is a significant way to make some pretty good money.
We've been building our street lighting groups as well and then <unk>.
Again, the vertical integration model, we have our own engineering.
We have grown our engineers by 33% since the end of last year and continue to build that business that business is doing close to $1 million a month in revenues.
So we feel good about the infrastructure business, we feel good about the pivot we made in 2017 to offset a little bit of the oilfield and now the oilfield has come back and we just feel good about the direction. We're TUSK is going.
Thanks Al.
Operator, if you want to Q1 more time to see if there's any questions from the field and otherwise.
We'll wrap up this quarter.
Thank you.
Ladies and gentlemen.
If you wish to ask a question. Please press Star then one on your telephone keypad.
Okay.
It looks like nobody is queued up so.
Already turn it back to you for closing comments.
Thanks, Ken I appreciate it.
Certainly one of them.
Thank our team.
For all they've done this quarter to make US successful we believe the future is bright for us and our team as we continue to strategically develop our service offerings to grow and deliver stockholder value in the years to come. This concludes our conference call. Thank you all for joining.
Thank you this concludes.
Today's conference you may disconnect your lines at this time, thank you for participation.
Okay.
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Yes.
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