Mammoth Energy Services, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This filing reports annual results; standalone fourth-quarter financial figures are not clearly provided in the supplied text. Mammoth (Nasdaq: TUSK) provides oilfield completion, sand, drilling and related services, as well as electric-infrastructure services.
Financial performance
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $309.5 million | $362.1 million |
| Operating loss | $16.7 million | $16.4 million |
| Net loss | $3.2 million; $0.07 per diluted share | $0.6 million; $0.01 per diluted share |
| Adjusted EBITDA (non-GAAP) | $71.0 million | $86.1 million |
| Cash from operating activities | $31.4 million | $15.3 million |
| Capital expenditures | $19.4 million | $12.7 million |
Revenue fell 15%. Revenue less cost of revenue, before depreciation, depletion, amortization and accretion, was $61.7 million (19.9% of revenue), compared with $83.5 million (23.1%) in 2022. The operating margin was approximately negative 5.4% in 2023. Interest expense and financing charges increased to $16.2 million from $11.5 million. Other income was $42.0 million, principally reflecting $45.4 million of interest charged on delinquent PREPA receivables. Despite $9.1 million of pretax income, the company recorded $12.3 million of income-tax expense, resulting in a net loss and a 134.6% effective tax rate.
Cash and cash equivalents were $16.6 million at year-end; an additional $7.7 million was restricted cash. Working capital was $314.4 million, but includes substantial PREPA-related receivables and should not be viewed as equivalent to readily available liquidity. Year-end debt was $45.0 million principal, or $42.8 million net of issuance costs and discount, down from $83.5 million of revolving borrowings a year earlier. The new revolver was undrawn at year-end, with $20.7 million of borrowing capacity after letters of credit. The $45 million term loan is owed to Wexford, an affiliate, and carried a 12.9% interest rate at year-end.
Material changes versus 2022
- Well-completion revenue declined 23% to $131.3 million; completed stages fell 31%, and an average of 1.8 of six fracturing fleets were active, versus 3.0 in 2022.
- Natural-sand revenue declined 24% to $39.1 million as tons sold fell 14% to about 1.2 million; average price per ton rose 10% to $29.86.
- Infrastructure revenue was nearly flat at $110.5 million. Average crew count fell from approximately 91 to 83, partly offset by greater storm-restoration activity.
- Operating cash flow increased, primarily because of higher receivable collections, including $22.2 million received from PREPA during 2023. Adjusted EBITDA nevertheless declined about 18%.
- Mammoth refinanced its prior credit facility in October 2023, entering a new revolving facility and a $45 million Wexford term facility. It also sold Air Rescue Systems for $3.3 million cash plus contingent consideration, recognizing a $2.1 million gain and a $1.8 million aviation goodwill impairment.
Outlook, risks and unusual items
- Management expects oilfield activity to remain soft into early 2024 but sees indications of a possible recovery around mid-2024, which could support reactivating additional fracturing fleets. It anticipates stronger sand demand in 2024 and expects infrastructure bidding activity to increase. These are expectations, not guidance guarantees.
- Planned 2024 capital expenditures are approximately $15 million, subject to industry conditions and financial results. Several service lines remain suspended or idled because of market conditions.
- PREPA owed approximately $402.3 million at December 31, 2023, comprising $204.8 million for services and $197.5 million of accrued interest. Mammoth recorded no credit-loss allowance and says it believes the receivable is collectible; the auditor identified its measurement as a critical audit matter. PREPA is in bankruptcy, and collection depends substantially on FEMA or other funding and ongoing proceedings.
- After year-end, PREPA paid $64.0 million toward the outstanding receivable: $54.4 million to the assignee under the receivable assignment and $9.6 million to Cobra. The assignment was terminated. Mammoth expected to recognize an approximately $5.5 million financing charge in Q1 2024 related to that termination.
- PREPA has cited municipal and construction excise tax claims alleged to total $70.4 million as a reason to withhold further funds. A Puerto Rico appeals court revoked an order to withhold a $9 million payment, but related proceedings continue. Other litigation includes Foreman claims, including allegations seeking $250 million; the company disputes the claims and says it will defend them.
- Other significant risks include commodity-price and customer-spending volatility, customer concentration, fixed-price infrastructure project cost overruns, weather and logistics disruptions, regulatory and environmental requirements, and floating-rate debt. The Wexford term loan has restrictive covenants and may require up to 50% of specified PREPA proceeds to be applied to debt repayment. Wexford beneficially owns approximately 47.1% of the common stock.
- The quarterly dividend remains suspended. A board-authorized repurchase program permits purchases up to the lesser of $55 million or 10 million shares, but no program shares had been repurchased through the filing date.
Important facts for investors to verify
- Remaining PREPA receivable balance, timing and source of expected collections, and any developments in bankruptcy, FEMA reimbursement, tax claims and litigation.
- Whether the unusually large accrued PREPA interest balance is ultimately collectible; no allowance was recorded, and the audit highlighted estimation uncertainty.
- Current borrowing-base availability, term-loan interest and covenant headroom, including the effects of the Wexford-related-party financing and PREPA proceeds provisions.
- Whether oilfield utilization, sand volumes and pricing, and infrastructure project awards support management’s 2024 outlook and planned capital spending.
- Potential cash or earnings exposure from pending legal matters and tax disputes, including whether recorded accruals are sufficient.
The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management reported effective controls and no material weaknesses.