Mammoth Energy Services, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Financial amounts below are in U.S. dollars.
Business context
Mammoth provides electric-grid construction and repair services alongside oilfield services, including hydraulic fracturing, sand hauling, water transfer, frac sand, directional drilling and equipment rentals. Management described an ongoing shift toward a broader industrial focus, particularly infrastructure, fiber installation and equipment manufacturing. Its four reportable segments are infrastructure, well completion, natural sand proppant and drilling services.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $229.0 million | $313.1 million |
| Operating loss | $128.2 million | $149.3 million |
| Net loss | $101.4 million; $2.18 per diluted share | $107.6 million; $2.36 per diluted share |
| Adjusted EBITDA (non-GAAP) | $(11.6) million | $50.0 million |
| Operating cash flow | $(18.9) million | $7.0 million |
| Capital expenditures | $5.8 million | $6.8 million |
Cost of revenue, excluding depreciation and amortization, was 87% of revenue, versus 74% in 2020. Cash and cash equivalents were $9.9 million at year-end, compared with $14.8 million a year earlier. Working capital was $290.5 million, but included $337.8 million due from PREPA and related liabilities of $42.3 million; thus, the reported working-capital figure is heavily dependent on collection of the disputed receivable.
Year-end revolving-credit borrowings were $83.4 million; total debt was $86.7 million, including the aviation note. Disclosed revolver availability was approximately $16.5 million after letters of credit and a required reserve. On March 2, 2022, availability was approximately $10.6 million. The revolving facility is secured by company assets.
Changes versus FY2020
- Revenue fell 27%, with infrastructure revenue down 41% to $93.4 million, principally due to $58.4 million less storm-restoration revenue and a reduction in crews from about 100 to 82.
- Well-completion revenue declined 5% to $84.3 million; completed stages fell 12%, and an average of 1.1 of six fracturing fleets operated during 2021.
- Sand revenue edged up 1% to $34.9 million as tons sold rose 107% and average selling price increased 15%. It included $12.0 million of shortfall revenue, down from $24.8 million.
- Other-services revenue declined 36% to $18.5 million, and drilling revenue declined 44% to $4.3 million. Several service lines remained idled.
- Net loss narrowed by $6.2 million, but adjusted net loss increased to $99.3 million from $39.7 million and adjusted EBITDA fell from positive $50.0 million to negative $11.6 million. The reported operating loss benefited from much lower impairment charges than in 2020, while bad-debt expense increased.
Outlook, risks and unusual items
- PREPA collection risk: PREPA owed $337.8 million at year-end, including $110.8 million of interest; the underlying amount for services was approximately $227.0 million. PREPA is in bankruptcy, has made no payments since 2019, and collection depends substantially on FEMA or other funding. FEMA identified about $47 million in costs as unauthorized; PREPA appealed that determination. The company recorded no allowance against the PREPA receivable. The auditor identified its collectability as a critical audit matter.
- Gulfport settlement and credit losses: Mammoth settled litigation with Gulfport in September 2021. The settlement led to substantial receivable write-offs; 2021 bad-debt expense included $41.2 million related to Gulfport contracts, and total receivable write-offs were $83.0 million. Gulfport-related services and contracts ended.
- Other litigation: A MasTec settlement resulted in a $25.0 million settlement expense and $5.4 million of related legal fees in 2021. At year-end, approximately $19.0 million, including accrued interest, was recorded as a current liability; settlement payments were scheduled for 2022. SEC and DOJ investigations related to PREPA contracts remained ongoing. The company and its subsidiaries were not charged in the referenced criminal indictment and said they were cooperating. Other Puerto Rico-related claims and proceedings also remained outstanding.
- Credit facility amendments: A February 28, 2022 amendment eliminated the leverage-ratio covenant, revised fixed-charge and minimum-EBITDA requirements, adjusted minimum availability requirements and linked reductions in maximum borrowing capacity to PREPA claim proceeds. The company reported compliance under the amended facility as of March 2, 2022. A separate aviation-note covenant default at December 31, 2021 was waived by the lender on March 2, 2022.
- Management outlook: Management expected approximately $6 million of 2022 capital expenditures, subject to conditions and results. It anticipated challenging oilfield pricing and utilization, described producers as cautious, and said it was prepared to ramp services if demand, pricing and margins strengthened. The company was operating two of six pressure-pumping fleets. Management cited infrastructure opportunities, including a fiber contract expected to generate about $4.5 million over the following year and an EV-charging engineering contract that could generate up to $5.0 million through 2024. These are expected contract values, not guaranteed results.
- Other risks: COVID-19 and commodity-price volatility, customer concentration, competition and rail constraints in frac sand, labor availability, severe weather, regulation, litigation, and limited borrowing capacity may affect results. The top five customers accounted for 35% of 2021 revenue, versus 50% in 2020. The quarterly dividend remained suspended.
- Controls and audit: The independent auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management reported effective controls and no material weaknesses.
Most important facts for investors to verify
- Developments in PREPA’s bankruptcy, FEMA funding and appeal, and the recoverability and accounting treatment of the $337.8 million receivable.
- Current borrowing-base availability, covenant compliance, amendment terms and settlement-payment requirements under the revolving credit facility.
- Cash generation and operating trends, particularly adjusted EBITDA, infrastructure crew levels, staffed fracturing fleets and the sustainability of sand shortfall revenue.
- Final cash costs and status of the MasTec settlement, Gulfport claims and remaining PREPA-related investigations and litigation.
- Whether new infrastructure contracts convert into delivered work and revenue, and whether management’s 2022 capital-spending outlook remains appropriate.