Mammoth Energy Services(TUSK) - 2024 Q1 - Quarterly Report

Glossary of Oil and Natural Gas and Electrical Infrastructure Terms This section defines specialized terms across oil and natural gas, natural sand proppant, and electrical infrastructure industries Cautionary Note Regarding Forward-Looking Statements This section warns that forward-looking statements are subject to risks that could cause actual results to differ materially - Forward-looking statements are based on management's estimates and assumptions, which are inherently uncertain and subject to risks beyond the company's control[13] - Key factors affecting actual results include capital expenditures by customers, volatility of oil and natural gas prices, general economic conditions, inflationary pressures, ability to comply with debt covenants, and outcomes of litigation[10][11] PART I. FINANCIAL INFORMATION This part presents the Company's unaudited condensed consolidated financial statements, management's discussion, market risk, and controls Item 1. Condensed Consolidated Financial Statements (Unaudited) This section provides the Company's unaudited condensed consolidated financial statements, including balance sheets, income, equity, cash flow statements, and detailed notes Condensed Consolidated Balance Sheets Total assets decreased from $698.5 million to $628.1 million, primarily due to reduced accounts receivable, with liabilities and equity also declining Key Balance Sheet Metrics | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :----------------------------- | :----------------------------- | :----------------------------- | :----------------------------- | | Cash and cash equivalents | $22,021 | $16,556 | $5,465 | | Restricted cash | — | $7,742 | $(7,742) | | Accounts receivable, net | $389,520 | $447,202 | $(57,682) | | Total current assets | $433,898 | $496,925 | $(63,027) | | Total assets | $628,070 | $698,479 | $(70,409) | | Total current liabilities | $123,317 | $182,553 | $(59,236) | | Total liabilities | $179,806 | $238,379 | $(58,573) | | Total equity | $448,264 | $460,100 | $(11,836) | Condensed Consolidated Statements of Comprehensive (Loss) Income The Company reported a net loss of $11.8 million for Q1 2024, a significant decline from prior-year net income, with total revenue decreasing by 63% Key Comprehensive (Loss) Income Metrics | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | YoY Change (%) | | :------------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------- | | Total revenue | $43,189 | $116,320 | $(73,131) | -62.9% | | Total cost and expenses | $55,221 | $109,971 | $(54,750) | -49.8% | | Operating (loss) income | $(12,032) | $6,349 | $(18,381) | -289.5% | | Net (loss) income | $(11,811) | $8,351 | $(20,162) | -241.4% | | Net (loss) income per share (basic) | $(0.25) | $0.18 | $(0.43) | -238.9% | Condensed Consolidated Statements of Changes in Equity Total equity decreased from $460.1 million to $448.3 million due to a net loss of $11.8 million and other comprehensive loss Key Equity Changes | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Balance at December 31 | $460,100 | $462,616 | | Stock based compensation | $219 | $647 | | Net (loss) income | $(11,811) | $8,351 | | Other comprehensive (loss) income | $(244) | $3 | | Balance at March 31 | $448,264 | $470,698 | Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $47.3 million, primarily due to PREPA receivable collections, while financing activities used $48.5 million Key Cash Flow Metrics | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :------------------------------------ | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Net cash provided by operating activities | $47,349 | $3,240 | $44,109 | | Net cash used in investing activities | $(1,102) | $(5,706) | $4,604 | | Net cash used in financing activities | $(48,489) | $(3,083) | $(45,406) | | Net decrease in cash, cash equivalents and restricted cash | $(2,277) | $(5,555) | $3,278 | - The increase in operating cash flows was primarily attributable to increased receipts on accounts receivable, including $64.0 million from PREPA[206] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the unaudited financial statements, covering accounting policies, asset valuations, debt, equity, and contingencies 1. Organization and Nature of Business Mammoth Energy Services, Inc. is an integrated company serving the oil and gas and electric utility industries in North America and US territories - Mammoth Energy Services, Inc. is an integrated company serving the oil and gas and electric utility industries in North America and US territories[26] - Key services include well completion, infrastructure, natural sand proppant, drilling, aviation, equipment rentals, remote accommodations, and equipment manufacturing[27] - The Company's oil and natural gas business is highly dependent on commodity prices and customer capital spending, while the infrastructure business relies on utility spending and government appropriations[28] 2. Basis of Presentation and Significant Accounting Policies Financial statements are unaudited, prepared under SEC rules and GAAP, consolidating subsidiaries, with detailed policies on receivables, fair value, and new accounting pronouncements - The Company consolidates its subsidiaries and variable interest entities, with all material intercompany transactions eliminated[29] - As of March 31, 2024, PREPA owed Cobra approximately $140.8 million for services, plus $208.0 million in interest on delinquent balances, with the Company believing these receivables are collectible despite PREPA's bankruptcy proceedings[39][40] Customer Revenue and Accounts Receivable | Customer | Revenues (3 Months Ended March 31, 2024) | Revenues (3 Months Ended March 31, 2023) | Accounts Receivable (March 31, 2024) | Accounts Receivable (December 31, 2023) | | :------- | :--------------------------------------- | :--------------------------------------- | :----------------------------------- | :------------------------------------ | | Customer A | 13% | 1% | —% | —% | | Customer B | —% | —% | 90% | 90% | | Customer C | —% | 16% | —% | —% | - The Company adopted ASU 2023-07 (Segment Reporting) and ASU 2023-09 (Income Tax Disclosures) effective for fiscal years beginning after December 15, 2023, and December 15, 2024, respectively, and is evaluating their impact[51][52] 3. Revenue Primary revenue streams include well completion, infrastructure, natural sand proppant, and drilling services, with recognition varying by service type - Revenue streams include well completion, infrastructure, natural sand proppant, drilling, and other services (aviation, equipment rentals, remote accommodations, equipment manufacturing)[53] - Well completion and infrastructure services are generally recognized over time, while natural sand proppant revenue is recognized at the point of transfer of legal title[55][57][58] - The Company had unsatisfied performance obligations totaling $9.9 million as of March 31, 2024, expected to be recognized over the next 10 months[66] 4. Divestitures On July 13, 2023, the Company sold its subsidiary Air Rescue Systems Corporation (ARS) for $3.3 million cash, plus a contingent $0.3 million - The Company sold its subsidiary Air Rescue Systems Corporation (ARS) for $3.3 million cash plus a contingent $0.3 million on July 13, 2023[67] 5. Inventories Inventories, valued at the lower of cost or net realizable value, totaled $12.8 million at March 31, 2024, a slight increase from December 31, 2023 Inventory Breakdown | Inventory Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :------------- | :---------------------------- | :------------------------------- | :-------------------- | | Supplies | $6,678 | $6,757 | $(79) | | Raw materials | $1,523 | $872 | $651 | | Work in process| $3,414 | $3,955 | $(541) | | Finished goods | $1,206 | $1,069 | $137 | | Total inventories | $12,821 | $12,653 | $168 | 6. Property, Plant and Equipment Net property, plant and equipment decreased to $109.2 million, with depreciation expense declining by 46% due to fully depreciated assets Property, Plant and Equipment Summary | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------- | :-------------------- | | Total property, plant and equipment, net | $109,232 | $113,905 | $(4,673) | Depreciation and Amortization Expense | Expense Type | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------- | | Depreciation, depletion, amortization and accretion | $7,021 | $12,956 | $(5,935) | -45.8% | - The decrease in depreciation, depletion, amortization and accretion is primarily attributable to a decline in property and equipment depreciation expense as a result of existing assets being fully depreciated[188] 7. Goodwill and Intangible Assets Goodwill remained stable at $9.2 million for the Well Completions segment, with intangible assets having a net carrying value of $0.7 million Goodwill by Segment | Segment | Goodwill (March 31, 2024, in thousands) | Goodwill (December 31, 2023, in thousands) | | :-------------- | :-------------------------------------- | :--------------------------------------- | | Well Completions | $9,214 | $9,214 | | Other | — | — | | Total | $9,214 | $9,214 | Intangible Assets Summary | Intangible Asset | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--------------- | :---------------------------- | :------------------------------- | | Intangible assets, net | $720 | $913 | - The Company recorded a $1.8 million goodwill impairment charge for the Aviation reporting unit during the third quarter of 2023, based on a qualitative and quantitative assessment following the ARS sale[75][76] 8. Equity Method Investment The Company holds a 49% economic interest in Brim Acquisitions LLC, with a carrying value of $4.1 million and $0.1 million in equity method adjustments - The Company owns a 49% economic interest in Brim Acquisitions LLC, a joint venture with Wexford Investment, which provides helicopter services[80] Equity Method Investment Carrying Value | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------- | :---------------------------- | :------------------------------- | | Carrying value of investment | $4,100 | $4,200 | Equity Method Adjustments | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------- | :----------------------------------------------- | :----------------------------------------------- | | Equity method adjustments | $100 | $200 | 9. Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities Total accrued expenses and other current liabilities significantly decreased to $34.1 million, primarily due to the termination of a $48.9 million financing arrangement Key Liabilities Breakdown | Liability Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | :-------------------- | | Total accrued expenses and other current liabilities | $34,117 | $87,954 | $(53,837) | | Financing arrangement, net | — | $48,943 | $(48,943) | | Total other long-term liabilities | $3,483 | $4,715 | $(1,232) | - The significant decrease in current liabilities is mainly due to the termination of the Assignment Agreement with SPCP Group, which fully extinguished the $54.4 million obligation related to PREPA receivables[84][147] 10. Debt Total long-term debt increased to $45.6 million, primarily due to interest paid-in-kind on the new term credit facility, which has $47.7 million outstanding at 12.8% interest Debt Summary | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | Change (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | :-------------------- | | Term credit facility, including interest paid-in-kind | $47,741 | $45,000 | $2,741 | | Total long-term debt | $45,630 | $42,809 | $2,821 | - The Company entered into a new $75 million revolving credit facility and a $45 million term credit facility on October 16, 2023, refinancing previous debt[87][88][92] - As of March 31, 2024, the new revolving credit facility was undrawn with $21.0 million borrowing capacity, and the new term credit facility had $47.7 million outstanding, bearing interest at 12.8%[90][92][94] 11. Variable Interest Entities Dire Wolf and Predator Aviation transferred membership interests in Cobra Aviation and Leopard to Voting Trustees, but the Company consolidates them as VIEs - Dire Wolf Energy Services LLC and Predator Aviation LLC transferred membership interests in Cobra Aviation and Leopard to Voting Trustees for registration purposes[97] - The Company is considered the primary beneficiary of Cobra Aviation and Leopard, which are classified as Variable Interest Entities (VIEs), and consolidates their financial results[97] 12. Selling, General and Administrative Expense Selling, general and administrative (SG&A) expenses increased by $0.4 million to $8.8 million, primarily due to higher professional services fees SG&A Expense Breakdown | SG&A Component | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------- | | Total SG&A expense | $8,782 | $8,383 | $399 | 4.8% | | Professional services | $2,457 | $1,929 | $528 | 27.4% | - The increase in SG&A was primarily due to an increase in professional fees[187] 13. Income Taxes The Company recorded an income tax expense of $1.8 million on a pre-tax loss of $10.0 million, resulting in an effective tax rate of 18% Income Tax Summary | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | | :-------------------- | :----------------------------------------------- | :----------------------------------------------- | | Income tax expense | $1,785 | $3,333 | | Pre-tax (loss) income | $(10,026) | $11,684 | | Effective tax rate | 18% | 29% | - The effective tax rates differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico, changes in the valuation allowance, and interest and penalties[100] 14. Leases Total lease expense decreased to $2.4 million, with operating lease right-of-use assets at $8.0 million and liabilities at $7.8 million as of March 31, 2024 Lease Expense | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | | :-------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Total lease expense | $2,352 | $2,810 | $(458) | Lease Assets and Liabilities | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :-------------------------------- | :---------------------------- | :------------------------------- | | Operating lease right-of-use assets | $7,990 | $9,551 | | Current operating lease liability | $5,212 | $5,771 | | Long-term operating lease liability | $2,617 | $3,534 | Lease Term and Discount Rate | Metric | March 31, 2024 | December 31, 2023 | | :-------------------------- | :------------- | :---------------- | | Weighted-average remaining lease term (Operating leases) | 2.4 years | 2.5 years | | Weighted-average discount rate (Operating leases) | 8.8% | 8.7% | 15. (Loss) Earnings Per Share The Company reported a basic and diluted net loss per share of $0.25 for Q1 2024, a significant decrease from $0.18 earnings per share in the prior-year period Earnings Per Share Metrics | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Change | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :----- | | Net (loss) income per share (basic) | $(0.25) | $0.18 | $(0.43)| | Net (loss) income per share (diluted) | $(0.25) | $0.17 | $(0.42)| | Weighted average shares outstanding (basic) | 47,964 | 47,443 | 521 | | Weighted average shares outstanding (diluted) | 47,964 | 48,002 | (38) | 16. Equity Based Compensation Equity awards are contingent on "Payout" (recovery of unreturned capital), with $5.6 million and $18.9 million in unrecognized compensation for Specified and Non-Employee Member awards, respectively - Awards for interests in distributable earnings are contingent on "Payout" (recovery of unreturned capital balance), which has not yet occurred, so no compensation cost has been recorded[109][111] Unrecognized Equity Compensation | Award Type | Unrecognized Amount (in millions) | | :-------------------- | :-------------------------------- | | Specified Member awards | $5.6 | | Non-Employee Member awards | $18.9 | 17. Stock Based Compensation The 2016 Incentive Plan has 0.6 million shares available, with 235,716 unvested restricted shares and $0.7 million in unrecognized compensation cost - The 2016 Incentive Plan has 0.6 million shares available for future grants as of March 31, 2024[114] Restricted Stock Details | Metric | March 31, 2024 | December 31, 2023 | | :--------------------------------------- | :------------- | :---------------- | | Unvested shares of restricted stock | 235,716 | 302,383 | | Total unrecognized compensation cost | $0.7 million | N/A | | Weighted average recognition period | 1.6 years | N/A | Stock-Based Compensation Expense | Metric | Three Months Ended March 31, 2024 (in thousands) | Three Months Ended March 31, 2023 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | :------------- | | Stock-based compensation expense | $200 | $600 | $(400) | -66.7% | 18. Related Party Transactions Revenue from related parties was $0.1 million for Q1 2024, with $45.6 million in outstanding debt from Wexford's term credit facility incurring $1.5 million in interest expense Related Party Financials | Metric | Three Months Ended March 31, 2024 (in millions) | Three Months Ended March 31, 2023 (in millions) | | :--------------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Revenue from related parties | $0.1 | $0.2 | | Costs incurred from related parties | $0.1 | Nominal | | Accounts receivable from related parties | $0.1 | Nominal | | Accounts payable for related parties | $0.1 | — | Related Party Debt | Metric | March 31, 2024 (in millions) | December 31, 2023 (in millions) | | :--------------------------------------- | :--------------------------- | :------------------------------ | | Outstanding debt from Wexford term credit facility | $45.6 | $42.8 | - Interest expense from the Wexford term credit facility was $1.5 million for the three months ended March 31, 2024[122] 19. Commitments and Contingencies The Company has $6.3 million in letters of credit and $9.2 million in performance bonds, with ongoing litigation regarding $140.8 million owed by PREPA plus $208.0 million in interest Key Commitments and Bonds | Commitment Type | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Total letters of credit | $6,282 | $6,282 | | Outstanding performance and payment bonds | $9,200 | $10,000 | - As of March 31, 2024, PREPA owed Cobra approximately $140.8 million for services, excluding $208.0 million of interest, with ongoing litigation and mediation regarding these amounts and related tax claims[130] - The Assignment Agreement with SPCP Group for $54.4 million of PREPA receivables was terminated in February 2024 after PREPA paid $64.0 million, with $54.4 million going to SPCP Group and $9.6 million to Cobra[147] - The Company is involved in other legal proceedings, including a RICO lawsuit by Foreman Electric Services, Inc., state tax audits, and a DOJ investigation related to a former Cobra president's criminal matter, but does not expect a material adverse effect from most of these[133][135][136][139][140][141] 20. Reporting Segments The Company operates through four reportable segments: Well Completion, Infrastructure, Natural Sand Proppant, and Drilling services, with most segments experiencing operating losses in Q1 2024 - The Company's four reportable segments are Well Completion, Infrastructure, Natural Sand Proppant, and Drilling services. "All Other" includes aviation, equipment rentals, remote accommodations, equipment manufacturing, and corporate activities[150][151] Segment Performance Overview | Segment | Revenue (Q1 2024, in thousands) | Revenue (Q1 2023, in thousands) | Change (in thousands) | YoY Change (%) | Operating (Loss) Income (Q1 2024, in thousands) | | :-------------------- | :------------------------------ | :------------------------------ | :-------------------- | :------------- | :---------------------------------------------- | | Well Completion | $8,159 | $67,179 | $(59,020) | -87.9% | $(4,870) | | Infrastructure | $25,038 | $28,280 | $(3,242) | -11.5% | $(2,372) | | Natural Sand Proppant | $4,307 | $12,442 | $(8,135) | -65.4% | $(3,710) | | Drilling | $511 | $1,355 | $(844) | -62.3% | $(1,629) | | All Other | $5,174 | $7,064 | $(1,890) | -26.8% | $549 | | Total External Revenue| $43,189 | $116,320 | $(73,131) | -62.9% | $(12,032) | - Bison Trucking LLC was reclassified from the Drilling segment to the "All Other" reconciling column, with prior period results retroactively adjusted[150] 21. Subsequent Events Subsequent to March 31, 2024, the Company issued $5.0 million in bid bonds and $1.4 million in performance and payment bonds for its infrastructure segment - After March 31, 2024, the Company issued $5.0 million in bid bonds and $1.4 million in performance and payment bonds for its infrastructure segment[155] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2024 financial performance, industry trends, operational results, and liquidity, highlighting revenue decline, net loss, and improved operating cash flow Overview Mammoth Energy Services is an integrated energy services company focused on North American oil and gas development and electric grid infrastructure, pursuing organic growth and acquisitions - Mammoth Energy Services is an integrated company providing services for North American onshore unconventional oil and natural gas development and electric grid infrastructure[158] - The Company's strategy is to grow through organic opportunities and accretive acquisitions, offering a complementary suite of services including well completion, infrastructure, natural sand proppant, drilling, aviation, equipment rentals, crude oil hauling, remote accommodations, and equipment manufacturing[158] - The Company is focused on improving operational efficiencies, cost structure, and expanding its industrial business lines, including fiber optic services[159][160] Overview of Our Industries The oil and natural gas industry remains volatile, leading to reduced demand for services, while the energy infrastructure industry shows growth potential due to federal funding - The oil and natural gas industry is volatile, with declining crude oil and natural gas prices in 2023 and Q1 2024 slowing completion activities and reducing demand for well completion and sand proppant services[161][162][165] - The Company temporarily shut down several oilfield services (cementing, acidizing, flowback, contract drilling, rig hauling, coil tubing, pressure control, full service transportation, crude oil hauling) and idled its Muskie sand facility due to adverse market conditions[164][166] - The energy infrastructure industry is encouraged by Infrastructure Investment and Jobs Act funds, leading to an uptick in bidding opportunities for engineering, fiber, and transmission and distribution services, despite a slight decrease in average crew count (from 78 to 75) and storm restoration activity in Q1 2024[167][168] - As of March 31, 2024, PREPA owed the Company approximately $140.8 million for services, plus $208.0 million in interest, with ongoing litigation and mediation for recovery[170] First Quarter 2024 Financial Overview Q1 2024 revenue decreased by 63% to $43.2 million, resulting in a $11.8 million net loss, while operating cash flow significantly increased to $47.3 million Q1 2024 Financial Highlights | Metric | Q1 2024 (in millions) | Q1 2023 (in millions) | Change (in millions) | YoY Change (%) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | :------------- | | Revenue | $43.2 | $116.3 | $(73.1) | -62.9% | | Net (loss) income | $(11.8) | $8.4 | $(20.2) | -240.5% | | Net (loss) income per diluted share | $(0.25) | $0.17 | $(0.42) | -247.1% | | Adjusted EBITDA | $4.5 | $30.7 | $(26.2) | -85.3% | | Net cash flow provided by operating activities | $47.3 | $3.2 | $44.1 | 1378.1% | Results of Operations Total revenue decreased by 63% to $43.2 million, leading to a $12.0 million operating loss, with cost of revenue increasing to 94% of total revenue Consolidated Financial Performance | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | YoY Change (%) | | :--------------------------------------- | :--------------------- | :--------------------- | :-------------------- | :------------- | | Total revenue | $43,189 | $116,320 | $(73,131) | -62.9% | | Operating (loss) income | $(12,032) | $6,349 | $(18,381) | -289.5% | | Interest expense and financing charges, net | $(8,137) | $(3,289) | $(4,848) | 147.4% | | Net (loss) income | $(11,811) | $8,351 | $(20,162) | -241.4% | Revenue by Segment | Segment | Q1 2024 Revenue (in thousands) | Q1 2023 Revenue (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------------- | | Well Completion Services | $8,273 | $67,300 | $(59,027) | -87.7% | | Infrastructure Services | $25,038 | $28,280 | $(3,242) | -11.5% | | Natural Sand Proppant Services | $4,307 | $12,467 | $(8,160) | -65.5% | | Drilling Services | $511 | $1,355 | $(844) | -62.3% | | Other Services | $6,179 | $7,514 | $(1,335) | -17.8% | - Well completion services revenue decreased by 88% due to an 81% decrease in stages completed (from 2,018 to 380) and a $20.5 million decrease in sand and chemical materials revenue, with average active fleets dropping from 3.6 to 0.6[175][176] - Natural sand proppant services revenue decreased by 66% due to a 63% decrease in tons sold (from 391,439 to 145,662) and a 21% decline in average price per ton (from $31.02 to $24.38)[178] - Cost of revenue as a percentage of total revenue increased from 77% in Q1 2023 to 94% in Q1 2024, primarily due to decreased utilization and a higher ratio of fixed costs to variable costs across well completion, natural sand proppant, drilling, and other services[182][183][184][185][186] - Interest expense and financing charges increased by $4.8 million, primarily due to a $5.5 million financing charge related to the Assignment Agreement with SPCP Group[190] Non-GAAP Financial Measures This section defines Adjusted EBITDA as a supplemental non-GAAP measure, showing a consolidated Adjusted EBITDA of $4.5 million for Q1 2024, a significant decrease from Q1 2023 - Adjusted EBITDA is a non-GAAP measure defined as net (loss) income before DDA, gains/losses on asset disposal, stock-based compensation, interest expense, other income/expense (adjusted for interest on trade receivables and certain legal expenses), and income taxes, further adjusted to add back interest on trade accounts receivable[193] Adjusted EBITDA Reconciliation | Metric | Q1 2024 (in thousands) | Q1 2023 (in thousands) | Change (in thousands) | YoY Change (%) | | :-------------------- | :--------------------- | :--------------------- | :-------------------- | :------------- | | Net (loss) income | $(11,811) | $8,351 | $(20,162) | -241.4% | | Adjusted EBITDA | $4,527 | $30,703 | $(26,176) | -85.3% | Adjusted EBITDA by Segment | Segment | Q1 2024 Adjusted EBITDA (in thousands) | Q1 2023 Adjusted EBITDA (in thousands) | | :-------------------- | :------------------------------------- | :------------------------------------- | | Well Completion Services | $(1,312) | $12,584 | | Infrastructure Services | $8,465 | $12,925 | | Natural Sand Proppant Services | $(2,526) | $4,181 | | Drilling Services | $(748) | $(263) | | Other Services | $648 | $1,276 | Liquidity and Capital Resources Liquidity sources include cash, credit facilities, and operating cash flows, with net cash from operations increasing to $47.3 million due to PREPA collections - Primary liquidity sources are cash on hand, borrowings under revolving and term credit facilities, and cash flows from operations[201] Liquidity Metrics | Metric | March 31, 2024 (in thousands) | December 31, 2023 (in thousands) | | :--------------------------------------- | :---------------------------- | :------------------------------- | | Cash and cash equivalents | $22,021 | $16,556 | | Net working capital (less cash) | $288,560 | $297,816 | | Total liquidity | $283,868 | $290,106 | - Net cash provided by operating activities increased to $47.3 million in Q1 2024, primarily due to $64.0 million received from PREPA[206][230] - As of April 30, 2024, the new revolving credit facility was undrawn with $13.6 million of available borrowing capacity (after letters of credit and reserves)[204][221] - 2024 capital expenditure estimate revised down to $9.0 million (from $15 million) due to lower commodity prices and softer demand for oilfield services, with $4.2 million spent in Q1 2024[232] - The Company continues to monitor market conditions for recommencing temporarily shut down oilfield services and increasing workforce, which would increase liquidity requirements[233] Item 3. Quantitative and Qualitative Disclosures About Market Risk The Company faces market risks from volatile oil and gas, energy infrastructure, and natural sand proppant industries, interest rate fluctuations, foreign currency, and significant customer credit risk - The Company's business is highly dependent on the volatile oil and natural gas, energy infrastructure, and natural sand proppant industries, influenced by commodity prices, demand, and economic conditions[237][238][239] - Interest rate risk from variable-rate debt (term loan at 12.8% interest) means a 1% change would impact annual interest expense by approximately $0.5 million[241] - Foreign currency risk from Canadian dollar operations is minor; a 10% change in the Canadian dollar's strength against the U.S. dollar would impact pre-tax income by approximately $0.1 million[242] - Significant customer credit risk exists, particularly from PREPA, which owes $348.8 million (including interest) as of March 31, 2024, with collectability dependent on FEMA funding and ongoing bankruptcy proceedings[243][244] - Operations in certain regions (Ohio, Wisconsin, Minnesota, Pennsylvania, West Virginia, Canada) are subject to seasonality due to severe weather, and the Company faces inflationary pressures on costs[245][246] Item 4. Controls and Procedures Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2024, with no material changes in internal control over financial reporting - As of March 31, 2024, the Company's disclosure controls and procedures were deemed effective by management, including the CEO and CFO[248] - No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2024[249] PART II. OTHER INFORMATION This part covers additional information including legal proceedings, risk factors, unregistered sales of equity securities, mine safety disclosures, and other miscellaneous items Item 1. Legal Proceedings The Company is routinely involved in various litigation and regulatory matters, with management expecting no material adverse effect on financial condition or operations, except as detailed in Note 19 - The Company is routinely involved in litigation, disputes, claims, and regulatory matters, including contractual obligations, workers' compensation, and employment-related issues[251] - Management believes that none of the pending legal matters are expected to have a material adverse effect on the Company's financial condition, cash flows, or results of operations, except as disclosed in Note 19[251] Item 1A. Risk Factors The Company's operations remain subject to risk factors previously disclosed in its Annual Report on Form 10-K, with recent trends discussed in Management's Discussion and Analysis - The Company's operations are subject to risk factors previously disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023[252] - Recent trends and uncertainties impacting the business are further detailed in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section[252] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable for the reporting period, indicating no unregistered sales of equity securities or use of proceeds to report - This item is not applicable for the reporting period[253] Item 4. Mine Safety Disclosures The Company's operations are subject to the Federal Mine Safety and Health Act of 1977, with non-compliance or changes in standards potentially affecting the business - The Company's operations are subject to the Federal Mine Safety and Health Act of 1977, which imposes stringent health and safety standards on mineral extraction and processing[254] - Failure to comply with these standards or changes in their interpretation could materially affect the business. Mine safety violation information is in Exhibit 95.1[254] Item 5. Other Information No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the first quarter ended March 31, 2024 - No directors or officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2024[255] Item 6. Exhibits This section lists all exhibits filed as part of the report, including corporate governance documents, certifications, mine safety disclosures, and XBRL interactive data files - The exhibits include corporate governance documents, CEO and CFO certifications, mine safety disclosures, and XBRL interactive data files[257] SIGNATURES This section contains the signatures of the Company's CEO, Arty Straehla, and CFO, Mark Layton, certifying the report filing on May 2, 2024 - The report is signed by Arty Straehla (Chief Executive Officer) and Mark Layton (Chief Financial Officer) on May 2, 2024[260]