Mammoth Energy Services, Inc.

Ladies and gentlemen, thank you for standing by and welcome to the Mammoth Energy Services second quarter 2021 earnings conference call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press the start and the one key on your touch-tone telephone. If you require operator assistance, please press start and zero. I would now like to hand the conference over to your speaker host, Rick Black, Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Mammoth Energy conference call to review second quarter 2021 results. This call is also being webcast and can be accessed through the audio link on the events and presentations page of the investor relations section of mammothenergy.com. Information recorded on this call speaks only as of today, July 30th, 2021, so please be advised that any time-sensitive information may no longer be accurate as of the date of any replay. I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements or expectations or future events or future financial performance, are considered forward-looking statements made pursuant to the State Harbor's provision of 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 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 net income, loss, and adjusted EBITDA reconciliations to the nearest gap 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 CEO, Artie Strayall.

Artie? Thank you, Rick, and good morning, everyone. Second quarter results did not meet our expectations. However, we are extremely focused on improving near-term results as we continue migrating the company further into the infrastructure space as a part of our shift to a broader industrial focus to enhance long-term growth and sustainability. During the quarter, our oilfield businesses did observe some positive green shoots. While oil prices have rebounded from recent lows, activity levels remain depressed industry-wide due to capital discipline amongst E&Ps. We currently believe ENPs will generally keep production flat with year-end levels. However, we are currently seeing some upticks in pricing and utilization for our oil field services. In general, our customers are taking a very measured and conservative approach to new projects and capital spending. But it does now appear we are moving away from the extreme down cycle that occurred over the past year and a half. For example, we are in the process of staffing an additional crack crew that is currently scheduled to start working in mid-August. In addition, we expect increased market activity in our sand business in the second half of 2021. During the second quarter of 2021, we pumped 520 stages with approximately one fleet utilized throughout the quarter on average. Our sand division sold approximately 255,000 tons of sand during the second quarter of 2021, and the average sales price for the sand sold was approximately 1580 per ton. While northern white sand pricing remains challenged, we believe a significant reduction in supply has positioned our mines well to benefit from an increase in completion activity levels. Despite the events of the past year having had significant impacts on our company and the sectors in which we operate, Mammoth has adapted quickly to the changing environment. We believe our diverse portfolio and migration into the infrastructure space provides a solid foundation from which to grow in the future. Our infrastructure business underperformed during the second quarter, primarily due to management and crew turnover that we are actively working to mitigate. While there are always challenges to growing and expanding, I believe we are well-equipped, experienced, engaged to lead these businesses to more sustainable operating performance going forward. In the infrastructure space, improving macro trends related to increased project bidding levels and funding capacity in the sector persists. We continue to pursue opportunities within this sector as we strategically structure our service offerings for growth in both the geographic footprint and the depth of projects. The need for and recognition of infrastructure projects, repairs, hardening, and modernization of the electrical grid and shift to renewables continues to grow across the country. Bidding levels continue to be robust. In addition, we believe that at some point the federal government will pass an infrastructure bill. As we mentioned last quarter, our infrastructure companies signed two significant multi-year contracts with major utilities, which we expect will provide a base of business, and to date these projects are progressing. We continue to build our offerings in the infrastructure space, including our engineering group. Today we employ 25 people in that group, which reflects significant growth from one engineer a short time ago. We currently anticipate continued growth in this group as additional jobs are assigned to them. In addition, our engineering group continues to work closely with our infrastructure team. This allows us to jointly bid projects as we progress towards expanding the engineering procurement and construction, or EPC, capabilities of our company. Likewise, our manufacturing equipment refurbishment facility has converted from primarily oilfield service equipment to very specific and specialized infrastructure equipment and products. We believe this capability will provide a competitive advantage going forward. In addition, a few months ago, we entered the fiber optic space and hired an experienced industry veteran to lead our new subsidiary company called Falcon. We believe this is a large market that represents additional opportunities for our company, and we've already begun bidding on new projects. We are pleased with our continued strategic efforts to build out and scale our engineering design, T&D services, and equipment capabilities to compete for infrastructure projects to grow in this space. Having vertically integrated services and equipment manufacturing capabilities will be a key component to scaling operations, controlling costs, and differentiating mammoth in a very competitive landscape. We continue to believe that the future of our company will reside primarily in the infrastructure space, which we believe has tremendous growth potential. Before I turn the call over to Mark to take you through the numbers, let me give you an update on Puerto Rico. We are continuing our efforts to collect our outstanding receivable from PREPA, the Puerto Rico Electrical Power Authority, for work performed by our subsidiary, COBRA, in Puerto Rico. We believe that published documentation today continues to show that our team performed a difficult job in a difficult environment to save lives and aid the people of Puerto Rico in their time of need. As a reminder, we earned and were paid over $1 billion for the work that COBRA performed for CREPA. Also, please note that on June 8, We posted to our website additional information addressing two documents recently released by the Federal Emergency Management Agency that relate to hurricane repair work performed by COBRA. One of these documents we released is a FEMA determination memorandum dated May 26, 2021, related to the first of two contracts COBRA successfully performed for PREPA. In the determination memorandum, FEMA concluded, based on its review of certain documents, that $890 million of the total contract amount of $945 million were eligible contract costs and that $47 million, or 5% of the total contract, were to be disallowed. In addition to the determination memorandum, the company also recently obtained a draft cost analysis prepared by FEMA. This cost analysis represented yet another confirmation that the work performed by COBRA in Puerto Rico was both within the scope of the PREPA contract in all material respects and was at a lower overall cost than other contractors on the island. As of June 30th, 2021, PREPA owed us $227 million for services performed and $92 million in interest for an aggregate amount of approximately $319 million. Yesterday, we issued a press release announcing that on July 23, 2021, with our aid, PREPA filed an appeal of the entire $47 million that FEMA de-obligated in the May 2021 Determination Memorandum. FEMA has 90 days following the receipt of the appeal to notify PREPA of the disposition of the appeal or request additional information. If PREPA does not receive a decision within 180 days after the appeal was filed, PREPA can file a demand for arbitration. We think this appeal by PREPA for the entire deobligated amount is significant. Lastly, we have recently sought and obtained help from Senate and congressional members in pursuit of collecting the receivable due from PREPA. We believe the assistance of these senators and congressional members will be beneficial to the efforts to collect the receivable from PREPA, and we continue to pursue multiple avenues to collect the money owed. Again, please visit our website to review these documents. 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.