Mammoth Energy Services, Inc. (NASDAQ:TUSK) Q4 2023 Earnings Call Transcript
Mammoth Energy Services, Inc. (NASDAQ:TUSK) Q4 2023 Earnings Call Transcript March 1, 2024
Mammoth Energy Services, Inc. misses on earnings expectations. Reported EPS is $-0.12 EPS, expectations were $-0.09. TUSK isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Greetings, and welcome to the Mammoth Energy Services Fourth Quarter and Full Year 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard. Thank you, sir. You may begin.
Ken Dennard: Thank you, operator. Good morning, everyone. We appreciate you joining us for the Mammoth Energy conference call to review fourth quarter and full year results. This call is also being webcast and can be accessed through the audio link on the Events page www.mammothenergy.com in the Investor Relations section. Information reported on this call speaks only as of today, March 1. Please be advised that any time-sensitive information may no longer be accurate as of any subsequent date. I would also like to remind you that statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance, are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Management will be making forward-looking statements as part of today's call that are by nature, are uncertain and outside of the company's control. Actual results may differ materially. Please refer to the earnings press release that was issued this morning for our disclosure 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 its reconciliations to the most comparable GAAP measures can be found at the end of the earnings press release and in our investor presentation, which can be found on the company's website.
Mammoth Energy assumes no obligation to publicly update or revise any forward-looking statements. And with that now, I would like to turn the call over to Mammoth Energy's CEO, Arty Straehla. Arty?
Arty Straehla: Thank you, Ken, and good morning, everyone. I'll start with some overview comments about our business in the quarter, as well as a recap of 2023 before discussing recent developments and expectations for 2024, then I will turn the call over to Mark to cover the financials in more detail. As noted in our press release this morning, PREPA made a payment of $50.6 million earlier this week and in combination with $13.4 million that was paid by PREPA in January, fully satisfied the obligations to SPCP Group and resulted in Cobra receiving approximately $9.6 million in cash. I'll have some additional updates relative to PREPA later in our prepared remarks. The fourth quarter proved to be an even more challenging than we had originally anticipated, largely due to additional deferred activity by E&P companies, commodity price fluctuations, and customer budget exhaustion.
As we had expected, the impact of these headwinds most directly impacted our well completion and sand divisions in the quarter. During the fourth quarter, we experienced a slight increase in both revenue and adjusted EBITDA in our infrastructure division, and we are encouraged by the recent bidding activity in this segment. The infrastructure investment and JOBS Act are being released for infrastructure projects such as fiber engineering, as well as transmission and distribution, and areas where we are excited participants, which gives us optimism for improvements in 2024. We remain very encouraged about the potential for continued growth in this sector, and we feel strongly that Mammoth's infrastructure business is well-positioned for long-term growth in 2024 and beyond.
The persistent challenges associated with lower U.S. onshore activity and the sustained weakness in natural gas basins during 2023, particularly in the second half of the year, resulted in continued utilization decline in our well completion services division. We remain extremely focused on our cost structure and managing capital expenditures. In our sand division, we experienced reduced demand due to softening macro conditions. We anticipate higher demand in 2024, partially driven by Western Canada, which we expect to be accretive to current pricing. We are also encouraged by industry expectations of a 10% increase in well completions and pressure pumping year-over-year, which will be the largest catalyst for our pumping fleets and sand business in 2024.
Our team is managing this business efficiently, and we are building momentum that we believe will result in performance improvements in 2024. During the operational softness we've experienced over this year, 2023 marked several accomplishments for Mammoth as we continued a significant debt refinancing transaction, began receiving payments from PREPA on our outstanding receivable, and entered into an agreement to monetize a portion of our outstanding PREPA receivable. This agreement allowed us to pull forward some of our capital expenditures, which we believe will benefit utilization in our well completion services division in the back half of 2024. In 2023, we entered into a new revolving credit facility agreement and a new term loan agreement, which refinanced in full Mammoth's indebtedness outstanding under our previous revolving credit facility.
We believe these new agreements provide Mammoth with a solid liquidity base for years to come. In addition, our Board of Directors approved a stock repurchase program pursuant to which Mammoth is authorized to repurchase up to the lesser of $55 million or 10 million shares of our common stock, subject to certain factors. Turning now to PREPA. As we mentioned in our press release, PREPA has paid $64 million so far in 2024 and has approximately $19 million in FEMA funding for Cobra's work, which they received in December. Additionally, Cobra received $22.2 million in payments from PREPA throughout 2023. While we are pleased to receive these funds, this represents only a portion of what is still owed to us. We continue to pursue payment of the outstanding amounts, including the associated interest.
In terms of future milestones, PREPA's confirmation trial for its plan of adjustment is currently set to start on March 4th. Our next status report is due to the court on March 27th, and the litigation stay has been continued through April 5th. We are currently engaged in mediation with PREPA regarding our claims. If mediation is unsuccessful, we intend to litigate the disputed issues. As we have demonstrated throughout our history, we have a resilient and diversified business comprised of talented and hardworking teams that will continue to find solutions that optimize our operational efficiencies with a customer and safety first focus. We believe our diverse portfolio and ability to adapt quickly to changing environments positions us well in these segments.
Despite a challenging year, we see many bright spots ahead across all of our business segments, and with a strong balance sheet, a new revolving credit facility agreement, and a new term loan agreement, we are poised for growth in 2024. We enter 2024 with an improving line of sight, particularly in our infrastructure and sand divisions, and we will be opportunistic in our well completions business as commodity prices improve and activity increases. I am proud of the hard work and perseverance that our teams have demonstrated across our organization. Our continued commitment to safety and high quality standards propel our organization. Now let me turn the call over to Mark to take you through our financial performance in greater detail.
Mark Layton: Thank you, Arty. I hope everyone is doing well and we appreciate you joining us today. As I usually do, I'm going to take this time to provide additional details on some meaningful metrics and several key highlights. A detailed breakdown of our results can be found in our earnings release and in our 2023 10-K once it is on file with the SEC. Mammoth's total revenue during the fourth quarter of 2023 came in at $52.8 million compared to $65 million in the third quarter of 2023. Total revenue for the full year into December 31, 2023 was $309.5 million compared to $362.1 million in 2022. The 15% decline in total revenues largely stemmed from the roughly 20% decline in the U.S. land rig count and associated utilization headwinds, which negatively impacted our well completion services division.
In Q4 of 2023, we pumped 669 stages with approximately 0.9 fleets utilized on average compared to 577 stages and an average utilization of 1.2 fleets during the third quarter of 2023. For the full year of 2023, we pumped 4,220 stages with approximately 1.8 fleets utilized on average compared to 6,149 stages completed and three fleets utilized on average in 2022. This decrease when compared to 2022 is primarily attributable to the softness in utilization that we experienced in the well completion services division in the back half of the year. Sustained lower natural gas prices and commodity price uncertainty have led to utilization headwinds in the basins that we operate in and have caused operators to delay and push activity to the right. As many of our peers have noted on their calls, it will now likely be the second half of 2024 before we see any meaningful activity improvements.
We will remain disciplined stewards of capital and continue to align our spending appropriately with the demand that we are seeing from our customers. Our sand division sold approximately 104,000 tons of sand in the fourth quarter of 2023 at an average sales price of $23.62 per ton compared to 352,000 tons of sand at an average sales price of $30.18 during the third quarter of 2023. On a full year basis, we sold 1.2 million tons of sand during 2023 at an average sales price of $29.86 compared to 1.4 million tons at an average sales price of $27.11 per ton in 2022. Our infrastructure services division contributed revenue of $27.2 million for the fourth quarter of 2023, which represents an increase when compared to $26.7 million for the third quarter despite a sequentially lower average crew count.
For the full year 2023, infrastructure services revenues were $110.5 million, which was roughly flat when compared to the $111.5 million in 2022. We continue to focus on operational execution and pursue opportunities within this sector as we strategically structure our service offerings for growth, especially in fiber projects. Our net loss for the fourth quarter of 2023 was $6 million compared to a net loss of $1.1 million for the third quarter of 2023. Net loss for the full year of 2023 was $3.2 million compared to net loss of $0.6 million in 2022. Adjusted EBITDA, as defined and reconciled in our earnings release, was $10.5 million for the fourth quarter of 2023, a decrease sequentially compared to $13.4 million in the third quarter. Adjusted EBITDA was $71 million for the full year of 2023 compared to $86.1 million for 2022.
CapEx for the fourth quarter and full year 2023 were $4.1 million and $19.4 million, respectively. We have continued to prudently manage our costs to more accurately reflect the activity levels of our customers, as evidenced by another sequential reduction in well completion services spending to align with lower utilization levels. However, we did have slightly higher expectations relative to infrastructure, sand, and other services. Our CapEx budget for 2024 is currently set at $15 million and is heavily weighted towards pressure pumping, but as always, we will continue to monitor customer spending and activity trends in order to most effectively manage our capital to align with demand we see in the market. Selling, general and administrative expenses totaled $8.3 million during the fourth quarter of 2023, down 20% compared to $10.4 million for the third quarter.
Compared to the fourth quarter of 2022, SG&A was down 36%. As we guided to on our last call, we benefited from reduced legal fees related to Puerto Rico in the fourth quarter, which contributed to our lower SG&A expenses. As of December 31, 2023, we had cash on hand of $16.6 million. Our revolving credit facility was undrawn, and we had approximately $20.7 million of available borrowing capacity. Our total liquidity was approximately $37.3 million. The fourth quarter was productive as we successfully completed the refinancing of our credit facility and monetized a portion of the PREPA receivable. These actions both meaningfully increased our liquidity and supplied us with additional capital to invest in our business. We used $26.9 million of these proceeds to repay all outstanding borrowings under our credit facility, which currently remains undrawn, and we plan to use the remainder to invest in our business, which may include upgrading an additional hydraulic fracturing fleet with dual fuel capabilities.
This incremental dual fuel fleet would result in three of our six fleets having dual fuel capabilities. To conclude our call, we would like to thank our 738 employees throughout the company for their hard work, dedication, and commitment to maintaining safe and sustainable work sites for themselves and their teammates. 2023 was a challenging year for a number of reasons, most notably various macroeconomic factors, but we maintain our belief in our teams and the direction that we are headed. We will continue to operate efficiently, safely, and in a disciplined manner with enhanced results and our shareholders in mind as we work towards an approved 2024 and beyond. Operator, we would now like to open the call for questions.
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