Q4 2023 Mammoth Energy Services Inc Earnings Call
Participants
Ken Dennard; IR; Dennard Lascar Associates, LLC
Arty Straehla; CEO & Director; Mammoth Energy Services Inc
Mark Layton; CFO & Secretary; Mammoth Energy Services Inc
John Daniel; Analyst; Daniel Energy Partners
Michael Madison; Analyst; Singular Research
Presentation
Operator
Greetings and welcome to the Mammoth Energy Services Fourth Quarter and Full Year 2023 earnings conference call. (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, and good morning, everyone, and we appreciate you joining us for the Mammoth Energy conference call to review fourth quarter and full year results of this call is also being webcast, and they 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 first. Please be advised that time-sensitive information may no longer may no longer be accurate as of any subset 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.
Our forward-looking statements made pursuant to the Safe Harbor provision 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 the Company's control. Actual results may differ materially.
Please refer to the earnings press release that was issued this morning for a 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 a reconciliation to the most comparable GAAP measures can be found at the end of the earnings release and in the investor presentation, which can also be found on the website. Mammoth Energy assumes no obligation to publicly update or revise any forward-looking statements.
Now I'd like to turn it over to Mammoth Energy's CEO, Arty Straehla.
Arty Straehla
Thank you, Ken, and good morning, everyone. I'll start with some overview comments about our business and 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, we've made a payment of $50.6 million earlier this week and in combination with $13.4 million that was paid by prep in January. Fully service 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 crop up 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 encourage we are encouraged by the recent bidding activity in this segment.
Infrastructure investment and jobs tax 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 sector and we feel strongly that MammoSite infrastructure business is well positioned for long-term growth in 2024 and beyond. The persistent challenges associated with lower US onshore activity and the sustained weakness in natural gas basins during 2023, particularly in the second half of the year, resulting 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 amendment as we continue to significant debt refinancing refinancing transaction began receiving payments from prep on our outstanding receivable and entered into an agreement to monetize a portion of our outstanding proper 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 MammoSite indebtedness outstanding under our previous revolving credit facility. We believe these new agreements provide management 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 also authorized to repurchase up to the lessor of $55 million or $10 million shares of our common stock, subject to certain factors.
Turning now to profit. As we mentioned in our press release, prep has paid $64 million so far in 2024 and has approximately $19 million in theme of funding for Cobra's work, which they received in December. Additionally, Cobra received $22.2 million in payments from copper 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, prep as confirmation trial for the plan of adjustment is currently set to start on March fourth, our next status report is due to the court on March 27th, and the litigation stay has been continued through April fifth. We are currently engaged in mediation with Crapo regarding our claims. If mediation is unsuccessful, we intend to litigate the dispute disputed issues.
As we have demonstrated throughout our history. We have a resilient and diversified business comprised of talented and hard-working 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 where our close poised for growth in 2024, we enter 2024 with an improving line of sight, particularly in our era in our infrastructure and sand divisions, and we will be opportunistic in our well completions business as commodity prices improve and activity increasing. 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.
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 ended December 31st, 2023 was $309.5 million compared to $362.1 million in 2022. The 15% decline in total revenues largely stem 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 2023, we pump 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 was 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.
It 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 that 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 tonnes of sand in the fourth quarter of 2023 at an average sales price of $23.62 per tonne compared to 352,000 tonnes 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 tonnes of sand during 2023 at an average sales price of $29.86 compared to 1.4 million tonnes at an average sales price of $27.11 per tonne 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 the 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 31st, 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 monetize the portion of the prep of 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.
Question and Answer Session
Operator
(Operator Instructions) John Daniel, Daniel Energy Partners.
John Daniel
Good morning. Thank you for including me more. I've got it sort of a strategy question really. And when you see a lot of the big frac companies are pushing hard into electric as we all know it still seems to me like there's going to be a for some time. I would call it a Tier two market. If not, every operator has the scale to pursue big development plans. I wonder if there's any merit in your eyes to have sort of a roll-up of, if you will, of the small one to two fleet Tier two companies, some of whom are fairly distressed right now. Just your thoughts.
Arty Straehla
No, I think, John, you're exactly right. And by the way, congratulations on the Thrive conference. All the feedback is extremely, extremely positive and certainly done a great job there. But we continue to invest in modernizing our fleets. We now have 34 units that are of dual fuel and we continue to bring Tier four. I think you're right on strategic roll-ups. You know, that's how we began as an organization. We were a bunch of strategic put together, and we have continued to focus on the pressure pumping area and the sand area and the infrastructure area, and we are getting to the point from. But going forward with the breadth of the payments that we're receiving, that we're starting to think that way, and that roll-ups would be an interesting way to go without committing obviously to doing that.
John Daniel
No, I'm just I'm just thinking more big picture, just the merits of the strategy as opposed to are you the one that execute or whomever, but just Bruce and I guess the last one for me is just on the natural gas markets. I think we all know that what I see right now, but I guess, are you as you talk to customers up in the Marcellus for two to three to four quarters from now. Are they saying anything differently than how they've sort of presented their plans on Q4 earnings? Like is there any signs of hope or is it still too early?
Arty Straehla
No, I think I think it's still obviously a price-driven commodity. We are seeing a little bit of pickup back in activity in the back half compared with the first half. And we're starting to see a little bit of a long leading indicators like sand. It's picking up some in March compared to where we were in January and February. So there is some activity that is it picking up and customers are engaging and that type of thing. But obviously you got to see some improvement in the commodity.
John Daniel
Okay. And then a quick final one for me. I hate to look at the tragedy of sort of panhandle buyers up there, but is that an opportunity for the Infrastructure business know, we haven't seen it as of yet.
Arty Straehla
We we we think that the it becomes a it's something that we'll certainly look at. But right now, we have not been called out to tried to help, and that's a little bit further. The Canadian is a little bit further of where our market goes in that is in West Texas and come in mid to Dallas area. So our customers have not called us out as yet.
John Daniel
Thank you.
Arty Straehla
Thanks, John.
Operator
Michael Madison, Singular Research.
Michael Madison
Good morning, gentlemen, and thank you for including me far more than I'd like. I'd like to turn to the infrastructure segment. Just it looks like there's a little bit more positive demand news there on. You've talked a lot about bidding activity. You've got your crews and everything. Do you have any kind of a forecast for growth in 2024 that you're looking at?
Mark Layton
Yes. I think as we look at 2024, based on the bidding activity and the demand of our customers. We expect the crew count that we currently have to increase in 2024. So we're encouraged about both the feedback from our customers, both as the macro impacts on the infrastructure business.
Arty Straehla
Yes, I'd add to that a little bit and top, we're seeing additional growth in the transmission aspect of our business, which has been a push that we have tried to put together and tried to grow that aspect of the business. And then as well, our engineering group continues to add engineers. Currently, we have about 56 engineers on board, and we continue to hire into that group because the demand that we see. So we see very strong demand in the engineering sector that we are providing and we think that that will cross over and bring in some of our operational aspects as well. So we're pretty bullish on our infrastructure group.
Michael Madison
Great. And if I could ask you just one more question back to prep. Obviously, it's good news that they're finally paying you net of the recent payments on what's the outstanding balance? And can you just break that down of principal versus interest?
Mark Layton
Absolutely. So following the $50 million that we received earlier this week, the current balance owed is approximately $345 million, which is comprised of about $140 million for services and about $205 million for interest.
Arty Straehla
Yes, let me let me add to that. What we're seeing with proper which is to us very encouraging the cadence and we talked about the payments received. The $50.6 million that we received this this past week from the cadence is picking up significantly proper owes us has another $20 million of the money funded monies that they've been holding since December, and we are pushing hard to receive those and pursuing those next Monday, the prep, a confirmation hearing for their plan of adjustment starts with a two-week trial. And we've always said that we had to go through. You have to go through the bondholders first, and this is what the plan of confirmation. But after you get through the planet confirmation and the plan of adjustment, once it is confirm proper has to deal with us on the remaining part, but we continue to pursue the PMA approved parts pretty aggressively. And then as we talked about, there was a status report due to the judge on March 27th, and the litigation had been stayed till until April fifth. So we feel pretty good about the cadence the way that is moving. We expect to have additional capital coming in and we continue to pursue very hard the monies that they owe us.
Michael Madison
Just comparing those figures to where you stood on previously, it looks like as money is coming in, it's being applied to the services and interest is just continuing to grow. Is that?
Mark Layton
Yes, that's correct. The payments we've received in both 2023 as well as 2024, I've been relative to services performed under the second contract with Crapo, which leads us to about $140 million for services due today, largely comprised of just over $60 million related to the tax gross-up provision under the first contract that we understand that perhaps has not yet submitted to sema for review as well as approximately $74 million that, as you probably recall, is going through an appeal process at Bema that that appeal was filed about a year ago. So based on feedback we've received from other parties we would expect to hear in the near term the resolution of that appeal.
Michael Madison
Well, thank you for all the detail and good luck. Thanks again.
Arty Straehla
Thank you.
Operator
Thank you. This concludes our question-and-answer session. I would now like to turn the floor back over to management for closing comments.
Arty Straehla
Thank you again for joining us on the call today. We continue to position Mammoth for improved growth and success, and it's all made possible by our talented and skilled team members.
This concludes our conference call, and we look forward to speaking to you again after the next quarter. Thank you.
Operator
Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines and have a wonderful day.
