Nov 5, 2021
Operator
Good day and thank you for standing by. Welcome to the Third Quarter 2021 Earnings Conference Call.
At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session.
I would now like to hand the conference over to your speaker today, Rick Black, Investor Relations. Please go ahead sir.
Rick Black
Thank you, operator and good morning everyone. We appreciate you joining us for the Mammoth Energy Conference Call to review third quarter 2021 results.
This call is also being webcast and can be accessed through the audio link on the Events & Presentations page of the Investor Relations section of mammothenergy.com. Information recorded on this call speaks only as of today, November 5, 2021.
So, please be advised that any time-sensitive information may no longer be accurate as of the date of any replay, listening or transcript reading. I would also like to remind you that the 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’s provision for the Private Securities Litigation Reform Act of 1995.
We will be making forward-looking statements as part of today’s call that by their 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 today 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 net income, loss and adjusted EBITDA, reconciliations to the nearest GAAP measures can be found at the end of our earnings press release. Mammoth Energy assumes no obligation to publicly update or revise any forward-looking statements.
And now, I would like to turn the call over to Mammoth Energy’s CEO, Arty Straehla. Arty?
Arty Straehla
Thank you, Rick and good morning everyone. I'll begin with an overview of the third quarter and provide an update on our efforts to recover the PREPA receivable owed to the company before turning the call over to Mark who will walk you through our financials.
We’re pleased with the positive trajectory throughout our business segments during the quarter that led to higher revenue and an improved bottom line compared to last quarter. Based on the directional improvement we experienced in September.
We are encouraged by the positive trends in our infrastructure business due to increase storm work, a new fiber maintenance and installation contract and increase bidding activity as well as internal personnel changes that are gaining traction in this segment. Funding for projects in - infrastructure space remains strong with the added opportunity of a new federal infrastructure bill, which we are optimistic will be passed in the near future.
While we recognize that this is a sector impacted by near term seasonality, we believe that migrating the company further into infrastructure space will allow us to enhance long-term growth and sustainability. In our oilfield businesses improved commodity prices continues to contribute to positive industry environment and increased equipment utilization as we ramped up a second hydraulic fracturing fleet during the third quarter.
In our sand business, we continue to see increase market activity. I will now provide a bit more color on each of our primary segments.
During the third quarter, we pumped 688 stages with approximately 1.2 plates utilized on average. This compared to an average utilization of 0.9 plates during the same quarter last year and during the second quarter.
Our sand division sold approximately 315,000 tons of sand during the third quarter and the average sales price for the sand sold was approximately $16.58 per time. Both metrics represent an increase sequentially from the second quarter.
As these sectors continue to rebound from the significant economic impacts over the past year, we are beginning to see more positives in terms of activity, pricing, scheduling and new inquiries, particularly focused in 2022. We believe our diverse portfolio and ability to adapt quickly to changing environments, positions us well in these segments.
As I mentioned earlier, our infrastructure business improved sequentially. While the business contains seasonality in some inherent lumpiness, we continue to establish ourselves in new markets.
Our fiber business which we organically started only a few months ago is gaining traction. We will kick off our first fiber project in coming weeks and recently won a second project that we expect will begin before the end of the year.
We firmly believe that the migration into the infrastructure space will lead to more sustainable operating performance going forward. It is important to note that the infrastructure space contains improving macro trends related to increase project demand and opportunities in a sustainable macro environment with strong and growing funding capability.
We'll continue to pursue other opportunities within the sector as we strategically structure our service offerings for growth in both the geographic footprint and the depth of projects. This type of work is very much needed in our country to improve infrastructure, repairs, hardening and modernization of electrical grid, along with shift towards renewables continue to grow nationwide, bidding levels continue to be robust.
In addition, we will - we still believe that the federal government will pass an infrastructure bill in the near future. Mammoth’s vertical integration of service offerings through engineering, procurement and construction.
As well as our manufacturing equipment refurbishing facility continues to differentiate our offerings to infrastructure, project needs. We believe these capabilities will provide a competitive advantage going forward.
In addition, having vertically integrated services and equipment manufacturing capabilities will be a key component to scaling operation and controlling costs. We continue to believe that the future of our company will reside primarily in the infrastructure space, which we believe has tremendous growth potential.
I'd like to close my prepared remarks with an update regarding the efforts to collect our receivable from PREPA. As many of you are aware, PREPA continues to breach its contractual obligations by refusing to make payments for services that our subsidiary Cobra provided.
To-date PREPA has contended that they are withholding payment primarily because of the September 2019 indictment of Cobra’s former President along with two FEMA officials. This position is at odds with several reviews that have taken place including the termination memorandum from FEMA dated May 26, 2021.
To-date FEMA, the grantor has not raised the issue of the indictments in a new report, and simply put PREPA has chosen not to comply with this contractual obligations based on a position that not even the grantor recognizes. Sadly PREPA has a long history of not paying contractors.
As PREPA’s bankruptcy filings demonstrate PREPA has not paid other contractors who just like Cobra responded in a time of critical need and restored power in Puerto Rico, following Hurricane Maria. As referenced in the October 6, 2021.
U.S. House of Representatives Natural Resources Committee, the federal government has provided another $9.5 billion in funding to Puerto Rico to rebuild its grid.
To-date those federal funds just like the funds for the work we perform are stuck in PREPA’s own gridlock. Even when significant amounts of federal funds are available PREPA has repeatedly demonstrated an unwillingness to pay its contractors.
In Mammoth’s experience, this gridlock and inability to pay contractors is unique to PREPA. Our teams have responded to several other disaster declarations since we responded to PREPA in its time of need, including disasters caused by Hurricane Michael, Sally, Laura and Ida numerous ice storms, the derecho in 2020 that hit the Midwest.
In each of these responses we were paid for our work. In addition, PREPA owes Cobra approximately $69 million for services performed under the first contract as amended.
Of this amount approximately $62 million relates to what is commonly referred to as the tax gross-up provision of the contract. Despite the existence of two FEMA determination memorandums, a comprehensive review performed by the highly respected RAND Corporation, a review by the U.S.
Army Corps of Engineers and an internal conclusion by FEMA that the tax gross-up costs are eligible. PREPA continues to withhold payments of the amounts owed under the first contract and to knowingly breach their contractual obligations.
While we've been extremely patient and have tried to work with PREPA, it has become apparent to us that the only way to change PREPA’s behavior is to hold them accountable. We urge our stakeholders to visit our website and to contact their representatives.
Congress has the power to write this wrong through the seven-person Puerto Rico Control Board which was created in 2016, as a part of the bipartisan Puerto Rico Oversight, Management and Economic Stability Act, which is commonly referred to as PROMESA. PROMESA intent was to address Puerto Rico's financial crisis without a bailout by American taxpayers.
We now need Congress to push the Control Board to hold PREPA accountable to meet its contractual obligations and to pay its debt. The alternative is that companies like ours, which responded in a time of crisis, pay the price.
Again, please visit our website to review the documents that support compliance of our contract, and the quality of our work that our team performed. Additionally, our website contains information on how you can contact your representatives to help us get paid for the work we performed in Puerto Rico.
Let me turn the call over to Mark to take you through the financial performance during the quarter, before we open the call to questions.
Mark Layton
Thank you, Arty and hello 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 total revenue during the third quarter of 2021 came in at $57.5 million, as compared to $70.5 million during the prior quarter and $47.4 million during the second quarter of this year.
The sequential revenue increase represented revenue increases in each of our segments. As already indicated in his remarks, we believe that we are well equipped, experienced and engaged to lead these businesses to more sustainable operating performance going forward.
The net loss for the third quarter of 2021 was $40.9 million for $0.88 loss per share, as compared to net income $3.4 million or $0.07 income per share for the same quarter last year, and a net loss of $34.8 million or $0.75 loss per share for the second quarter of 2021. Adjusted EBITDA as defined and reconciled in our earnings release was negative $29.7 million for the third quarter of 2021 as compared to $22.1 million for the same quarter last year, and negative $5.5 million for the second quarter of 2021.
During the third quarter of 2021, Mammoth recognized a non-recurring, non-cash expense of $32.6 million related to its settlement with Gulfport Energy Corporation. Excluding this expense adjusted EBITDA was $2.9 million for the third quarter of 2021.
CapEx during the third quarter of 2021 was approximately $2.8 million. Our full year 2021 CapEx budget is $5 million.
As of September 30, 2021, we had cash on hand of approximately $8 million, and debt of approximately $80.6 million. In conclusion, we would like to thank our 825 employees throughout the company for their hard work, dedication and commitment to maintaining safe work sites for themselves and their teammates.
We also want to thank all of our stakeholders for their support as we work diligently to enhance stockholder value. Operator, we would now like to open the call for questions.
Operator
Our first question comes from the line of Daniel Burke from Johnson Rice. Your line is open.
Daniel Burke
Let's see already appreciate the detail that they don't PREPA. I'll direct my questions, therefore, to maybe more of the fundamental side of the business or infrastructure.
It was good to see the sequential improvement in the business. I wondered if you could highlight maybe some of the drivers of that improvement, a little greater detail.
And then at least give us a bit of a look ahead. I heard you guys reference, you know seasonality in Q4.
So I mean, can you sustain the performance of the business in Q3, can you drive closer to EBITDA breakeven excluding the interest on receivable or is that realistically more of a 2022 progression?
Mark Layton
Daniel as we look at Q3, we saw improvement July to August and then August to September, September received a lift from storm activity. As we look into Q4, it's hard for us to forecast storm activity.
But I think as you look at the underlying business itself, through the management changes we've made, we saw improvement throughout Q3 and continue to see that into Q4. As we look forward on a breakeven basis, excluding the interest on the PREPA receivable, that's more than likely a Q1 of 2022 events.
That being said, we continue to expect improvement throughout Q4 ex storm activity.
Arty Straehla
Yes, and Daniel I'll add to that, that were encouraged with what we're seeing on the fiber side. And as you will know, we started that up organically - hired the first person in the May timeframe and starting to build that business.
We think that's going to be a great business for us. But we’ve been awarded a couple of contracts now that are pretty good and the margin seem to be a little bit better than traditional transmission and distribution work.
It does utilize a lot of the same equipment. We think equipment will get tight.
As things go on, and more and more work and more and more hardening is done and that type of thing. And we think we have a competitive advantage there.
One with the equipment that we have and two, the ability to refurbish it, get it ready and even manufacture. We've switched our manufacturing over from the oilfield type equipment to make in infrastructure equipment.
So, we feel pretty good about where that’s going, our engineering group continues to grow. They were awarded a contract to do 500 electric vehicle sites in Southern California.
And we believe that becomes a, segue into doing a little bit more than engineering as we go forward. So a lot of inner workings that are going on, working hard to work on the business and to make it more profitable and holding with accountability and the things you normally do through management.
So we're pretty encouraged with where that segments going to go. And we still believe it was the right decision when we started the infrastructure segment several years ago, as a way to offset the cyclicality of oil and gas.
Daniel Burke
Okay, thank you Arty appreciate all that detail. Let me ask one on the auto side, if you will, in the kind of share.
I mean, already, how many pressure pumping fleets. Do you think you could be operating by kind of mid-2022?
Just want to understand kind of the depth of increase you're seeing right now. And then maybe as a follow up, could you talk about the scope of your DGB program and to what extent that's helping when work or supporting grade levels?
Arty Straehla
Yes, as you well know, we've got two spreads running now. And we're in discussions about bringing the third when you talk about mid-2022.
We actually think with where commodities, you've seen the fluctuations in oil and, but still staying around the $80, $82 barrel per barrel pricing. We think that oil has a significant opportunity to get tight in the May/June timeframe.
I think you got to, you know, you got a lot of factors, a lot of variables in there such as winter and such as gas oils, switching and within coal and all those type things. But we think the possibility exists to get back up to around four spreads with everything that we are seeing right now, by mid-2022.
Daniel Burke
Okay, great. Let's see - let me finish what maybe one last one.
I just wanted to ask you about the credit facility. I guess, as I read the language talks about, you know, waivers to the ratios looks like through year end.
I mean, I would imagine you may have some challenges with those ratios into the first half of 2022. So could you talk about maybe your strategy or how that situation evolves?
Arty Straehla
Daniel, I think we've got a long history with PNC and the bank group and that's been a great relationship. So we certainly continue to appreciate their support of the company.
Looking into 2022, really as we look at the infrastructure business, we've got a number of tailwinds there. We've got a number of tailwinds on the OFs side of the business.
So we're encouraged by what we're seeing on both sides of the business going into 2022. And to your point that the ratios go back into effect, beginning in Q1 of 2022, but based on our analysis of Q1 and the remainder of 2022, we think the opportunity exists for us to get back into compliance with the covenants as they exist.
Mark Layton
Yes and Daniel I’ll add to that you've seen a definitive change in an effort and urgency to collect the PREPA receivable. We have a lot of underlying efforts going on currently that are pursuing that.
We learned in one of their filings and over the summer that the money had been allocated $250 million had been allocated to our specific PW or project worksheet. So with that, PREPA has accessibility.
Now PREPA has despite numerous power outages and lots of problems, they have not made any progress whatsoever. They continue to have all kinds of problems.
Two weeks ago, there was a protest, where they blocked one of the largest avenues or largest streets in Puerto Rico. They also have been protesting at the governor's mansion and Puerto Rico, unfortunately, has the highest electrical rates of any of United States or Commonwealth and they have the poor service.
And that hadn't changed. I touched on that - there has been another $9.6 billion allocated to PREPA and when the House and Natural Resources Board went through, and they started asking questions, it was kind of a deer in the headlights looking and that none of that money has been spent.
They can't get out of their own way their engineering is incomplete. So there are a lot of things.
There's a lot of things that we're communicating with the House and Natural Resources Board, we're communicating with F&B, we're communicating with Core 3, and we're communicating with a lot of other stakeholders that we're looking to get paid. The easiest and simple way is a tax gross-up they owe us $69 million on the first contract.
And the tax gross up comprises $62 million of that. That was we released.
We did a press release about three weeks ago, that said that FEMA had signed off in February of 2019. And said, this is eligible, it could have been funded then and yet they still don't pay.
We're going to pursue our money. We're going to continue to pursue our money and we are going to - that will make a difference in the whole trajectory and reinvestment in growing this company.
Operator
There are no questions at this time. I will now like to turn the call back to our management for any closing remarks.
Arty Straehla
Thank you very much. We believe the future is bright for Mammoth and our team members as we continue to strategically develop our service offerings to grow and deliver stockholder value in the years to come.
This concludes our conference call. Thank you all very much for joining.
Have a good day.
Operator
This concludes today's conference call. You may now disconnect.
Thank you for participating.