Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Mammoth Energy Services Inc (TUSK, Financial) reached a significant settlement agreement with PREPA, expected to bring in $188.4 million.
- The company plans to use a portion of the settlement proceeds to pay off its term credit facility, improving its financial position.
- Infrastructure Services business demonstrated growth both sequentially and year-over-year, with increased bidding opportunities.
- The company has a strong balance sheet with cash on hand and an undrawn revolving credit facility.
- Mammoth Energy Services Inc (TUSK) is strategically positioned to capitalize on anticipated demand increases in 2025.
Negative Points
- Second quarter results were impacted by a $170.7 million non-cash and non-recurring expense related to the PREPA settlement.
- Continued softness in natural gas basins led to underutilization of assets and a decline in well completion services.
- Sand division saw a slight decline in sales volume and pricing compared to the first quarter.
- The company reported a net loss of $156 million for the second quarter, primarily due to the PREPA settlement charges.
- Adjusted EBITDA was negative $160.7 million for the second quarter, reflecting the impact of the settlement agreement.
Q & A Highlights
Q: Can you remind me how you get work for infrastructure projects, especially after natural disasters?
A: We get contacted early on when the path of storms becomes evident. We deploy crews right outside the storm's path to quickly move in post-storm. Contracts are usually with investor-owned utilities, not FEMA, and can be under mutual assistance or direct requests from utilities.
Q: Are you involved in building out microgrids for EMPs?
A: We have done some work in this area, but mostly for utilities in the region where the EMP is located.
Q: Do you have a sense of the timing for the payment from PREPA?
A: The payment must go through the Title III court, with the hearing scheduled for September 18. After court approval, PREPA has a set number of days to pay, likely resulting in receiving the money by the tail end of Q3 or early Q4.
Q: What are the priority uses of cash once you pay down the term loan?
A: We will invest in our T&D group, including engineering and transmission and distribution services, modernize our frac fleet, and invest in portfolio companies with the best return on invested capital. We will also look for growth opportunities.
Q: Can you provide more details on the PREPA settlement and its impact?
A: The settlement agreement with PREPA is for $188.4 million. We plan to use part of this to pay off our term credit facility and the remaining amount to invest back into our businesses and for general corporate purposes.
Q: How did the second quarter results compare to the first quarter?
A: Total revenue increased by 19% to $51.5 million, primarily due to increased infrastructure and storm-related work. However, there was continued softness in natural gas-heavy basins, impacting our well completion services division.
Q: What are your expectations for the second half of the year and beyond?
A: We expect activity levels to remain relatively flat in the second half of the year, with potential for a ramp-up in 2025. We are strategically positioned to capitalize on this anticipated demand.
Q: How is your Infrastructure Services division performing?
A: The Infrastructure Services division demonstrated sequential and year-over-year growth. We are seeing an uptick in bidding opportunities in engineering, fiber, and transmission and distribution, and expect continued growth in revenue and EBITDA.
Q: What is the impact of the PREPA settlement on your financials?
A: The settlement resulted in a $170.7 million non-cash and non-recurring expense. This significantly impacted our net loss for the second quarter, which was $156 million or a loss of $3.25 per diluted share.
Q: What are your plans for capital expenditures in 2024?
A: Our CapEx budget for 2024 is $12 million, up from $9 million. It is heavily weighted towards pressure pumping, but we will continue to align our spending with customer demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
