Mammoth Energy Services, Inc. (TUSK) Q1 2021 Earnings Call Transcript

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Mammoth Energy Services, Inc. (TUSK 2.12%)
Q1 2021 Earnings Call
Apr 29, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen, and welcome to the Mammoth Energy Services first-quarter 2021 earnings conference call. [Operator instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded and will be available for replay on Mammoth Energy Services' website. I would now like to introduce your host for today's conference, Mr.

Don Crist, Mammoth Energy Services' director of investor relations. Sir, you may begin.

Don Crist -- Director of Investor Relations

Thank you, Anne. Good afternoon and welcome to Mammoth Energy Services' first-quarter 2021 earnings conference call. Joining me on today's call are Arty Straehla, chief executive officer; and Mark Layton, chief financial officer. Before I turn the call over to them, I'd like to read our Safe Harbor statement.

Some of our comments today may include forward-looking statements reflecting Mammoth Energy Services' views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Mammoth Energy Services Form 10-K, Forms 10-Q, current reports on Form 8-K, and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason.

Our comments today may also include non-GAAP -- GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our first-quarter 2021 press release, which can be found on our website along with an updated presentation. Now, I'll turn the call over to Arty.

Arty Straehla -- Chief Executive Officer

Thank you, Don, and good afternoon, everyone. The first quarter of 2021 came in as expected as restoration work was completed on the Gulf Coast and infrastructure work moderated slightly. Since the start of the year, we have seen a significant ramp-up in the bidding activity across the infrastructure space as the new administration said its renewable agenda and announced an infrastructure bill to rebuild a broad array of the nation's infrastructure assets. The roughly 30 -- the roughly $2 trillion plan, which is making its way through Congress, includes several areas in which our teams have expertise, including the modernization of the electric grid and the shift to renewables.

In addition to the recent policy announcements, the extension of the renewable and electric vehicle investment tax credits has resulted in an increase in activity levels across electrical infrastructure space. These policy extensions had added work to our industry, which is undergoing a significant rebuilding and hardening effort to make the grid more reliable. As it relates to Mammoth, we have signed two significant multi-year contracts with major utilities over the past several months which we expect will provide a base of business, and in the case of our engineering company, allow for an expansion of projects engineered. As the industry activity has increased, our bidding opportunities have increased and we believe that our backlog will grow over the coming quarters.

Our infrastructure management team has an impressive resumé of construction and -- and renewable projects and we believe that their background, combined with our vertically integrated service offering, positions us well to compete and win renewable projects. Aquawolf, our engineering business, has -- has seen a ramp-up in revenue and projects following the recent signing of a multi-year contract with a major utility. We currently anticipate Aquawolf to grow over the coming months as additional jobs are assigned to them. In addition, Aquawolf continues to work closely with our infrastructure segment to jointly bid projects as we progress toward being an engineering, procurement, and construction, or EPC, company.

The integration of our manufacturing operation into our infrastructure offering is progressing through the manufacturing refurbishment of equipment and products used by our infrastructure teams. We are encouraged by what our infrastructure engineering and manufacturing teams have accomplished and what the future holds. Turning to the oilfield. While oil prices have rebounded from recent lows, activity levels remain depressed industrywide as a result of capital discipline among E&Ps.

We current -- currently believe E&Ps will generally keep production flat with year-end 2020 levels and that pricing and utilization for oilfield services are expected to remain constant for the foreseeable future. During the first quarter of 2021, we pumped 445 stages with approximately one fleet utilized throughout the quarter on average. We have continued to upgrade additional pumps to dynamic gas blending, or DGB, to meet current and anti -- and anticipated industry demand. Our sand division sold approximately 171,000 tons of sand during the first quarter of 2021.

The average sales price for the sand sold during the quarter -- first quarter of 2021 was approximately $16.83 per ton. While Northern White sand pricing remains challenged, we believe a significant reduction in supply has positioned our mines to benefit from an increase in completion activity levels. While the events of the last past year have caused significant impacts on both our daily and professional lives, Mammoth has adapted quickly to the changing environment. Our diverse -- our diverse portfolio of businesses across several industries has performed as expected.

The infrastructure business has a solid foundation from which to grow as it looks to further integrate into other -- our other businesses and continue to lower cost. Before I turn the call over to Mark to take you through the -- the numbers, let me give you an update on Puerto Rico. While I can't get into all the details, on April 6, 2021, Cobra filed a motion to lift the stay order on our administrator claim in the bankruptcy court. Following this filing, PREPA initiated discussions which resulted in both PREPA and Cobra filing a joint motion.

This motion adjourns all deadlines relative to the April 6, 2021 motion until the June 16, 2021, omnibus hearing as a result of PREPA's understanding that FEMA will release a report in the near future relating to the emergency master service agreement between PREPA and Cobra that was executed on October 19, 2017. We believe that this report will provide another affirmation that Cobra performed its work in Puerto Rico at a reasonable cost. As a reminder, we have made public two memorandums from FEMA, as well as the report from the Rand Corporation, all of which state that the contract was obtained properly and our costs were reasonable. All of these documents can be found on our website.

As of March 31, 2021, PREPA owes us $227 million for services performed and $83 million in interest, or approximately $310 million. Let me turn the call over to Mark to take you through the financial performance during the first quarter of 2021. After which, we will take questions.

Mark Layton -- Chief Financial Officer

Thank you, Arty, and good afternoon, everyone. I hope that all of you have had a chance to read our press release, so I will keep my financial comments brief and focus on certain highlights. Mammoth's revenue during the first quarter of 2021 came in at $67 million as compared to $85 million during the fourth quarter of 2020. A majority of the change quarter over quarter was due to a decrease in infrastructure revenue as a result of the completion of restoration work on the Gulf Coast.

The net loss for the first quarter of 2021 was $12 million as compared to a net loss of $12 million during the fourth quarter of 2020. On a per-share basis, the net loss for the first quarter came in at $0.27 per diluted share. Adjusted EBITDA for the first quarter of 2021 was $6 million as compared to $8 million during the fourth quarter of 2020. We saw a positive operating cash flows of $14 million in the first quarter.

As a result, net debt was reduced by approximately $14 million during the first quarter. Capex during the first quarter of 2021 was approximately $1 million. Our full-year 2021 capex budget remains at $9 million. As of March 31, 2021, we had cash on hand of approximately $14 million and debt of approximately $67 million.

We thank our stockholders for their support. This concludes our prepared remarks and we thank you for your time and attention. We will now open the call for questions.

Questions & Answers:

Operator

Thank you. [Operator instructions] We have our first question from the line of Daniel Burke from Johnson Rice. Your line is now open.

Daniel Burke -- Johnson Rice -- Analyst

Yeah. Good afternoon, guys.

Arty Straehla -- Chief Executive Officer

Hi, Daniel.

Daniel Burke -- Johnson Rice -- Analyst

Let's see, a couple of different angles here. Arty, I guess let me start with one on -- on the update on the -- the PREPA situation. I guess -- so to be clear, this -- this FEMA report, you all are aware of this FEMA report because PREPA has notified you? It's -- it's forthcoming? Do you -- and -- and just to be -- I guess I'm just looking for that clarification. And do you expect this to be a publicly disseminated report then?

Arty Straehla -- Chief Executive Officer

Yeah. And, Daniel, so the way the story goes. On -- on April 6, we filed our motion to lift [Inaudible]. And a few days after that, PREPA -- PREPA's attorneys reached out to our attorneys and we talked then, and but that type thing.

And they asked us if we would withdraw. We ended up coming to an agreement with a joint motion to withdraw. And there's -- the omnibus hearing was held yesterday, the one we withdrew from. The next one occurs in June.

So it's not that much time left lost. But we were told that a FEMA report was, quote, imminent and would be coming out, and we expect to see that in the next month to month and a half. So we -- we believe that it will be another affirmation of the things that we've already released four times that our rates were reasonable. Our work was at the very, very tough position on the island.

It was an emergency situation. And we believe that it will be a good report.

Daniel Burke -- Johnson Rice -- Analyst

OK. All right. We'll -- we'll watch the docket on -- on the PREPA's side and stay tuned. All right.

So to shift gears, I guess one that's almost a housekeeping item, but I'll -- I'll [Inaudible] second. When we look at the segment results, where -- where is the $10 million of bad debt expense embedded?

Mark Layton -- Chief Financial Officer

It's primarily embedded inside of the -- the well completion segment, inside of SG&A.

Daniel Burke -- Johnson Rice -- Analyst

Right. Right. OK. So can you talk about the -- if -- if we don't -- if we don't include -- Mark, if we don't or if we try to make allowance for that charge, I mean, it would seem like you guys were -- were highly profitable in -- in well completion.

Am I -- am I missing anything?

Mark Layton -- Chief Financial Officer

Now, there so, you know, a little bit of flow-through from Gulfport inside of -- of well completion. If you strip that activity out, we're -- we're still EBITDA positive. But we are getting some pickup inside of the segment relative to -- to Gulfport floater.

Daniel Burke -- Johnson Rice -- Analyst

OK, so -- all right. That -- that helps me understand. So you all are still billing Gulfport under the terms of the contract?

Mark Layton -- Chief Financial Officer

There was some recognition relative to the rejection of both the pressure pumping agreement inside of the well completion segment, as well as the sand supply agreement, which is in reflect -- reflected in the sand segment. But we expect that -- that Q1 should be the -- the last of what we see relative to financial impact on those contracts.

Daniel Burke -- Johnson Rice -- Analyst

OK, got it. And then I guess to -- to pivot over to infrastructure. Just a final question I guess, Mark, I think we -- we -- Mark and Arty, we kind of go through this for each quarter, but, you know, Q1 was -- was supposed to be kind of a tricky quarter. I mean, a transitional quarter away from the hurricane work that, you know, helped in the second half of last year and -- and a quarter where I'm sure you -- you faced weather disruption is just like, you know, just about any U.S.

business active in the -- the Central U.S. I guess as we look ahead here to Q2, I mean, there's been good news on the business development front with the contracts, but maybe just talk a little bit about what's -- what's a realistic outlook for, you know, sort of revenue progression. And again, you know, sort of EBITDA margin progression as we -- we look at the next couple quarters.

Mark Layton -- Chief Financial Officer

I think as we look at the next couple of quarters, we expect an increase on -- on top line and on margin. We still expect margins for that business to -- to be in the 12% to 18% range. As Arty mentioned in his comments, we're seeing increased bidding opportunities and we expect that to increase throughout the remainder of the year.

Daniel Burke -- Johnson Rice -- Analyst

OK. And then on the 12% to 18% EBITDA range, maybe, again, just -- just a clarification. Is that excluding interest on AR or is that inclusive of interest on AR? And then regardless of which -- which the two you pick, Mark, I mean is it -- does that -- does that margin level come into the frame here in the second half of this year, or it could take longer to get there?

Mark Layton -- Chief Financial Officer

We think that margin comes into frame in the back half of the year. And that would exclude the interest related to Puerto Rico.

Daniel Burke -- Johnson Rice -- Analyst

OK. All right. Perfect guys. Thank you -- thank you for the -- for the time.

Arty Straehla -- Chief Executive Officer

And, Daniel, just to add one thing to your previous comments. Whenever we get the report from -- from FEMA and -- and that's made public, we will make it public as well, putting it on our website with the others.

Daniel Burke -- Johnson Rice -- Analyst

OK, thank you.

Arty Straehla -- Chief Executive Officer

Yup. Thanks, Daniel.

Operator

Thank you. [Operator instructions] I am showing no further questions at this time. I would now like to turn the conference back to Arty.

Arty Straehla -- Chief Executive Officer

Thank you. We want to thank everyone for dialing in today. I want to personally thank our team. We believe the future is bright for Mammoth and our team members as we intend to strategically develop our service offerings to grow and deliver stockholder value in the years to come.

Thank you to our stockholders for your support and interest in the company. While the current oilfield market conditions are challenging, the infrastructure side of the business is seeing opportunities. We are working hard to control costs and continue to pivot Mammoth into a more industrial-focused company. This concludes our first-quarter 2021 conference call.

Good afternoon, everyone.

Operator

[Operator signoff]

Duration: 19 minutes

Call participants:

Don Crist -- Director of Investor Relations

Arty Straehla -- Chief Executive Officer

Mark Layton -- Chief Financial Officer

Daniel Burke -- Johnson Rice -- Analyst

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