Q3 2022 Mammoth Energy Services Inc Earnings Call

Private Securities Litigation Reform Act of 1095.

Management will be making forward looking statements as part of today's call that by 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 non on forward looking statements.

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 EBITDA. The definition of this non-GAAP measure and a reconciliation to the nearest GAAP measure can be found at the end of the earnings release and in the Investor presentation, which can be found on the website.

And 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 , Our Australia already thank.

Thank you Ken and good afternoon, everyone. We are extremely pleased with our third quarter performance and the momentum we are seeing across our three major business segments I will provide an overview of each of these businesses before turning the call over to Marc to review our financials in more detail and then we will take your questions.

In the third quarter total revenue grew to $107 2 million.

Representing an increase of 86% year over year and up 20% sequentially. This strong performance resulted in an adjusted EBITDA of $29 8 million.

Compared to a loss in Q3 of last year, and a sequential increase of 30% compared to last quarter as demonstrated by these results. We continue to experience strong demand environments across our three largest segments infrastructure services, well completion services and our sand business.

Our well completion services division continues to improve performance generating strong growth both at the top and bottom line, where the macro demand in the pressure pumping industry remains robust. We currently have four of our six pressure pumping spreads operating which have full schedules through the end of the year and weeks.

Expect to add a fifth spread during the fourth quarter.

Looking to 2023, we plan to activate our sixth fleet in the first half of the year. In addition, we have plans to upgrade one of our existing spreads to tier four dual fuel. This would give us a total of three dual fuel fleets. We exited Q4 with annualized net income per fleet of 10.

And annualized adjusted EBITDA per fleet of roughly $15 million.

Turning to our sand business demand also remains strong as supported by increased pricing. We believe this trend will continue in the fourth quarter and into 2023, while we experienced some railroad constraints during the quarter that were constrained on total volume pricing was up sharply and we anticipate the transfer.

Rotation constraints to ease going forward.

In our infrastructure services division operational improvements are driving enhanced results and we continue to add crew capacity for a sector that has a healthy bidding environment.

The need for seasonal storm restoration services as well as the overall infrastructure project opportunities that have come about as a result of the historic investment in our National Nations infrastructure, which was passed by the federal government last fall continues to present prospects for growth in this business.

Across all of our business segments I am proud of our team's continued commitment hard work and perseverance to manage through today's macro environment.

Relative to supply chain constraints in Labour and inflationary challenges.

As we have stated before we believe our diverse portfolio 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. We believe the future for mammoth is brighter than the past and we remain committed to enhancing value for all of our stakeholders.

Turning now to an update on PREPA, we continued our efforts to hold PREPA accountable for their contractual and financial obligations. We look forward to seeing <unk> plan of adjustment, which we currently anticipate will be filed in early December .

Now, let me turn the call over to Mark to take you through.

<unk> financial performance during the third quarter before we open the call to questions.

You already and Hello, everyone as I, usually do I'm going to take this time to provide additional details on some meaningful metrics in 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 third quarter of 2022 came in at $107 2 million as compared to $57 $5 million during the third quarter of 2021 and $89 $7 million during the second quarter of 2022.

The 20% sequential increase in revenue is primarily attributable to the more favorable macroeconomic environment surrounding our key business segments, most notably well completion services as.

As well as enhanced operational performance by our teams.

We're also seeing increased demand and pricing across our well completions sand and infrastructure businesses, which we believe will continue through the remainder of the year and into 2023.

During the third quarter of 2022, we pumped 1000.

897 stages with approximately $3 five fleets utilized on average.

This average compared to an average utilization of one two fleets during the same quarter last year and three five fleets during the second quarter of 2022.

Our sand division sold approximately 341000 tons of sand during the third quarter of 2022 compared to 315000 tons of sand during the same quarter last year and 350000 tons of sand during the second quarter of 2022.

The average price for the sand sold during the third quarter of 2022.

It was approximately $29 95 per ton.

As compared to $16 58 per ton during the same quarter last year and $26 86 per ton during the second quarter of 2022.

Our infrastructure services Division contributed revenue of $33 3 million in the third quarter of 2022 compared to $25 1 million in the third quarter of 2021, and $25 6 million for the second quarter of 2022.

The increase in revenue is primarily due to improved operational execution, coupled with an increase in crew count.

Net income for the third quarter of 2022 was $7 7 million as compared to a net loss of $40 9 million for the third quarter of 2021, and net income of $1 7 million for the second quarter of 2022.

Adjusted EBITDA at.

Defined and reconciled in our earnings release was $29 $8 million for the third quarter of 2022 as compared to negative $29 3 million for the third quarter of 2021.

And $23 million for the second quarter of 2022.

Capex for the third quarter of 2022 was approximately $5 $1 million. This was up from the $2 $8 million of Capex that we incurred during the second quarter.

The sequential increase in Capex was related to our well completion services business, which we anticipated and guided towards last quarter.

We expect Capex for 2020 to be approximately $20 million, which we intend to fund with cash flow from operations cash on hand, and borrowings under our revolving credit facility.

As of September 32022, we had cash on hand at $10 6 million and debt of approximately $92 8 million.

Our total liquidity was approximately $17 $5 million.

In conclusion, we would like to thank our 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 remainder of the year in 2022 and into 2023.

We believe that the strong macroeconomic backdrop surrounding industrials as well as 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 Sir.

We will now begin the question and answer session. If you would like to ask a question. Please crystal.

And then one on your telephone keypad.

Formation tone will indicate your line is in the question queue.

You May proceed.

And then two if you would like to remove your question from the queue.

For participants using speaker equipment, it may be necessary for you to pick up your handset before pressing the star keys.

One moment, please while we poll for questions.

Question comes from Carter Dunlap from Dunlap equity management. Please proceed with your question Carsten.

Good afternoon gentlemen.

In the excuse me in the Frac business have you.

A couple of questions.

For the quarter were the three operators I'm, sorry, I guess three five units in the same basis.

Patients you referenced I would say last fall and spring and have you mentioned have you mentioned.

As we mentioned we're number four will go and speculate on where five or I'm, sorry, five will go on in Chicago.

We are actually thanks for the question Carter, we are actually.

We have to up in the northeast Marcellus Utica area, and we have two down here in Oklahoma in emerge and.

Area. So we have got all four spreads up and running we anticipate that the fifth spread will be.

<unk> run into some time during the fourth quarter and it's already got a designated customer.

When it's ready to start.

In one of those two basins.

Yes. This one this one will be.

The fifth one will be up in the northeast more than likely.

Okay, and and when when we were able to make.

Back in New Orleans in May.

One of the issues you are facing and everybody else is facing us is crew availability and crew retention could you comment about that.

Yes, we are seeing.

We're seeing additional hiring ease.

He's up just a little bit so we're able to bring people on.

Quite honestly one of the constraints as the supply chain.

And getting.

The parks out of some of our distributors on a on a timely basis, but.

But we feel good about being able to hire the crews and we've changed some of our incentive systems around and we feel good about bringing people on when the availability of equipment. So we always try to time that where they come out pretty close together.

So we are finding a little bit better success and when we talked back in New Orleans, and we think that.

It's a bright future in the six spread by the way we are anticipating would come on in the first half of.

2023.

Okay.

I will get off with sort of global question around the rest of the business is there any hotspots in terms of of.

Cost.

Arent being kept ahead of you aren't staying ahead of.

Now we have.

Very strong pricing capability.

To stay ahead of the inflation curve.

And that's part of that is what you see in our results.

We're up to.

The average for Q3 about $15 million annualized per spread and that's up significantly from where we work and that was with a little bit weaker at the very beginning so it's actually strengthened as we've gone.

Okay, and I keep saying this the last one but is there such a thing as a capacity limit of the sand.

Production or what you can reasonably sell without that same material capex.

You know we.

We feel pretty good because we're not at full production yet on our sand.

As we've talked about in our call we had some constraints with rail and that type of thing now we are entering winter.

Which in the sand business is very significant because you have sand piles.

That are wet that you prepare for the winter. So that you can drown and size them and do everything like that we are going into winter with a very significant wet pop. So we've seen a lot of our other competitors.

We try to look at different aspects of the business.

It is very significant with us going in with a very large wet pile into into wintertime. So we planned ahead.

I can't remember, who I was talking to you, but one of the producers.

Down at Pickering last month was telling me that they were.

Bringing their their sand in wet all the time like a slurry as opposed to ever letting the dry out is that is that.

That unique or is that for a particular basin or is that crazy stuff.

We've heard that its not widespread at least from what we've seen.

Everybody that we've seen either whether we bring it.

In via rail or via truck expects it to be dry.

<unk>, where we're operating.

Okay, well. Thank you very much gentlemen, great great great to hear such success.

Thank you.

Thank you. The next question comes from John Daniel from Daniel <unk>. Please proceed with your question John .

Thank you. Thanks are included in the guidance.

Or do you have been following you for a long time and I've been impressed with the visits making good timing decisions opportunistic M&A or projects startups et cetera.

As you look at the market today, where do you think the best opportunity is to kind of creep.

Create value.

Either product expansion tactical small M&A, just just your thoughts around that.

Well I'll tell you I think and John .

Youll understand this very well with the sand piece, we think that is.

In the near term as we ended up being.

2022 will start in first quarter 'twenty three.

We're still seeing significant pricing capabilities, and we think that having that wet pile, where we've gotten it to is going to be a competitive advantage.

On the Frac side.

We we just.

As you've heard with all the other conference calls the demand is robust.

Not enough Frac units Frac spreads out there to carry all of the demand and I will just get I'll give you an example.

We are in a position, where we're timing that physically coming up.

And we were in a position where the customer has been waiting on us.

And I will wait.

We put things off for a week to 10 days.

Because of people, but because of releases a few supply chain issues.

That seem to be getting a little bit better, but still not there completely yet.

Okay.

One of the other questions I have a follow on to Carter's is about the wet sand I mean, it depends on who you're talking about some of the equipment providers have.

Not necessarily embraced the use of it because of reported issues.

Damage to the equipment fluid into et cetera, I'm, just you are tight and pretty close with a lot of the capital with our providers I'm curious what you've been told will then and if a customer campaigns that they wanted to pump wet sand.

Would you do it.

I don't know Youre running some risk there.

For us having not done it before unlike for other folks to kind of Blaze that trail.

Okay.

It's one of those where we do have our wet piles in our wet piles are significant.

At our sand plants.

But.

Certainly when you ship.

B, a rail youre shipping water weight and that type of thing that take up the sand capabilities.

I think a lot of what Youre seeing is probably regionals in west, Texas that where theyre doing slurry and their trucking it there and.

So they're not waiting for it to be.

Drive and sized.

Appropriately I would.

Thanks.

Okay.

Good luck.

John one of the considerations that we have is the multiple grades that we produce out of our minds.

We have 40 70 is really kind of.

The most expensive sand, but we also produced $3 50 in 2040 as well so.

We have to size occur what the customer specifications are.

Okay.

All I had I appreciate you guys.

Thanks, John Good talking with you, yes, Sir.

Already we have this Ken we've had a few email questions Dan I thought I'd popping hereafter Carter and John Great questions.

Can you provide a sense of how your Q3 EBITDA breaks down between Frac sand T&D and other maybe mark which I will share.

Sure I'll take that one in Q3, well completions represented $13 million of our EBITDA sand represented $3 million infrastructure at $12 million, we had drilling just above breakeven at the EBITDA level and other was $1 million.

Okay.

And then one more question.

Either one of you want to take could you provide some color on what Q4 looks like.

The seasonality in EMEA.

Okay.

We continue to see robust demand for our <unk> services and expect a strong Q4 more specifically in relation to our two largest segments. We expect EBITDA to increase for well completions in Q4 versus Q3 and expect infrastructure to be in a similar range as their Q3.

EBITDA with some potential upside in the event of storm work.

Thanks.

I think where we don't have any other questions on the line so already.

Why don't you wrap it up and we'll move on to the holidays and get to the fourth quarter alright, Thanks, Tim and thanks to everyone for joining us today to hear about our business. We believe mammoth is well positioned for continued growth and supported by the best team members in the business. This concludes our conference call. Thank you all for Joy.

<unk>.

Goodbye.

Thank you very much. This concludes today's teleconference. You may now disconnect. Your lines at this time and thank you very much for your participation.

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