Mammoth Energy Services, Inc. — Q1 2017 Form 10-Q
Business context and reporting period. The filing covers the three months ended March 31, 2017. Mammoth provides oilfield services across pressure pumping, well services, sand proppant, drilling and remote accommodations, primarily to North American onshore oil and gas producers.
Financial performance
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Revenue | $74.4 million | $34.5 million |
| Operating loss | $7.6 million | $19.1 million |
| Net loss | $4.9 million; $0.13 per share | $21.1 million; $0.70 per share |
| Adjusted EBITDA (non-GAAP) | $11.1 million | $(1.6) million |
| Operating cash flow | $14.1 million | $20.6 million |
| Capital expenditures | $30.9 million | $0.5 million |
- Revenue rose 116% year over year. Pressure pumping revenue increased to $40.6 million, sand revenue to $14.2 million, and drilling revenue to $10.8 million. Other energy services revenue declined 31% to $5.5 million.
- Cost of revenue was 79% of revenue, compared with 95% a year earlier. Revenue less cost of revenue was approximately $15.5 million, or 20.9% of revenue, versus $1.6 million, or 4.7%.
- Cash and cash equivalents were $12.3 million at March 31, down from $28.7 million at December 31. Current assets were $79.9 million and current liabilities $51.0 million (working capital $28.9 million).
- No long-term debt was outstanding. The revolving facility was undrawn, with $144.1 million of borrowing availability at quarter-end; the company reported compliance with its covenants.
Changes, outlook and risks
- Improved results reflected stronger service activity: pressure-pumping fleet utilization increased to 63% from 21%, while stages completed rose to 860 from 204. Sand volumes sold increased to approximately 227,840 tons from 66,500, but average selling price declined to $62 per ton from $77.
- Management said recovering commodity prices had supported increased customer activity and expected demand to continue rising if prices held or improved. No specific earnings or revenue guidance was provided. Management anticipated lower second-quarter remote-accommodations revenue if it could not replace a major construction project that substantially ended in March.
- Management estimated 2017 capital expenditures of approximately $143 million, including $66 million for pressure-pumping equipment and $23 million for sand-plant expansion. It also planned to spend $35.3 million on the pending Chieftain acquisition. Management stated existing cash, operating cash flow and facility availability should fund operations for at least 12 months and the Chieftain purchase, while noting acquisition and capital needs could require additional financing.
- Two major transactions were pending: a $35.3 million cash-and-credit-funded purchase of Chieftain sand assets, and the acquisition of Taylor Frac, Stingray Energy and Stingray Cementing for 7.0 million shares, valued at approximately $133.4 million based on the March 20 share price. Both were expected to close in Q2, subject to conditions.
- Key exposures include volatile oil and gas activity and pricing, weather disruption in northern operating regions, Canadian-dollar movements, and customer concentration. Related parties accounted for 59% of Q1 revenue; one related-party customer represented 59% of revenue. Several employment-related lawsuits and an Ohio tax assessment remained unresolved, though management did not expect the noted settlements and assessment to have a material effect. The filing reports no impairment losses in the quarter.
Investor verification priorities
- Track collection of receivables and related-party balances, given customer concentration and the significant related-party revenue share.
- Confirm closing, financing, dilution and integration effects of the pending acquisitions, and progress against the $143 million capital plan.
- Monitor pressure-pumping utilization and sand pricing/margins, as well as the expected decline in remote-accommodations revenue.
- Reconcile the MD&A cash-flow narrative: operating cash flow was $14.1 million versus $20.6 million in the prior-year quarter, although the discussion describes an increase attributable to collection timing.