Mammoth Energy Services, Inc.

Greetings and welcome to the Mammoth Energy Services second quarter 2023 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Plack, Investor Relations. Thank you, Rick. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Mammoth Energy call to review 2023 second quarter 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 reported on this call speaks only as of the day, August 11, 2023, so please be advised that any time-sensitive information may no longer be accurate as of any subsequent date. 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 considered forward-looking statements made pursuant to the Safe 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 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 will also refer to non-GAAP measures, including adjusted EBITDA. This definition of a non-GAAP measure and the reconciliation to the most comparable GAAP measure can be found at the end of the earnings press release that was issued today. It's also in the investor presentation on the company's website. Mammoth Energy assumes no obligation to publicly update or revise any forward-looking statements. And with that, I would now like to turn the call over to Mammoth's CEO, Arti Shrela.

Arti? Thank you, Rick, and good morning, everyone. I'll start with a high-level overview of our results for the second quarter, followed by our outlook for the second half of the year and the overall market environment before providing an update on our PREPA receivable. Then I'll turn the call over to Mark to cover the financials in more detail. As we foreshadowed during our first quarter earnings call, results for the second quarter were challenged, primarily related to industry-wide pressure due to lower demand for our pressure pumping fleets and a declining rig count. The result for Mammoth was a lower active fleet count, which negatively impacted our top and bottom lines for the quarter. Despite a tough quarter, we see many bright spots ahead across all of our business segments, and we expect exit this year and enter 2024 better position for growth. I'd like to also mention that we are very pleased to announce today that we've entered into two non-binding agreements with lenders to refinance and repay our existing revolving credit facility. which Mark will discuss in his remarks. In addition, our board of directors has authorized a stock repurchase program subject to certain conditions discussed in our earnings release. We believe these actions will enhance our financial capacity and flexibility and return value to our existing shareholders. Our overall performance in the quarter was heavily impacted by the decreased activity of our customers, which resulted in significant utilization headwinds in our well completion services division. This was a common theme amongst our peers during the second quarter, and while we anticipate these headwinds persist into the third quarter, we expect to see improvements as we exit 2023. Currently, we believe there will be increased opportunities later this year and into 2024. Our lower average active pressure pumping fleet count and corresponding decrease in stages completed during the quarter were the primary contributors to our decreases in revenue, net income, and adjusted EBITDA. Despite the industry-wide challenges seen in the pressure pumping market, our center and infrastructure services divisions performed well during the quarter, and the resilience in their results gives us optimism for what we can achieve in the future. We are also pleased with the continued growth of our infrastructure segment and the strong macro tailwinds created from the Infrastructure Investment and Jobs Act. We're beginning to see funding for these projects hit the market and expect bidding activity to ramp up in late 2023 and into 2024. As we have demonstrated throughout our history, we have a resilient, diversified business comprised of talented and hardworking teams that will continue to find solutions that optimize our operational efficiencies with a customer and safety first focus. Supply chain and logistical obstacles have somewhat subsided, and as we work through industry-wide constraints in our well completion services segment, we expect to see utilization improvement late this year and into 2024. Now I'll walk you through each of our major business segments. In our well completion services division, we exited a quarter with three of our six pressure pumping spreads actively operating. The industry environment today remains choppy as demand from our customers is constrained due to regional production slowdowns in response to lower natural gas prices, particularly in the northeast where we have a concentration of frack fleets. We are currently operating one of our six pressure pumping fleets. Despite this short-term softness, we are seeing indications that activity levels will begin to ramp back up in the fourth quarter and into 2024, creating the opportunity to reactivate fleets. Additionally, in response to the recent near-term reduced fleet utilization, we have reduced headcount and further amended our 2023 capital expenditures budget. We now expect capex of approximately $18 million for the year. Turning to our infrastructure services division, operational efficiencies, team performance, and sustained utilization of crews and equipment continue to drive improved results. Revenue, net income, and adjusted EBITDA grew year over year in this segment. We're encouraged by the robust bidding activity in the infrastructure space, specifically in the substation area. A critical part of the infrastructure funding for upgrading the grid is adding substation capacities. This is an area where we believe our team excels in the infrastructure segment. We are also seeing a number of opportunities related to fiber, which continues to be a growth driver for this business. We remain very encouraged about the potential for continued growth in this sector, and we feel strongly that Mammoth's infrastructure business is well positioned. for long-term growth into 2024 and beyond. As a reminder, we have grown our fiber division strictly by organic means. The sand business was resilient during the second quarter, despite the impacts of the wildfires in Western Canada, which hindered our ability to transport sand. This resulted in a marginal decrease in profit sales in the quarter. Pricing for sand also remained stable. This is largely due to the strategic sand supply agreements that we mentioned last quarter that provide us with a solid foundation for predictable cash flow. We continue to be pleased with our team's performance in this business and are excited to build on our momentum. As we have stated before, we believe our diverse portfolio and ability to adapt quickly to changing environments positions us well in these segments. Before I turn the call over to Mark, I'd like to provide an update regarding PREPA. On June 15, 2023, COBRA received a payment from PREPA in the amount of $10.75 million for a portion of the work completed in the aftermath of Hurricane Maria. We were pleased to receive this payment, but it's still only a portion of what is owed and a fraction of what FEMA has made available to PREPA for the work performed by COBRA. COBRA's work has been affirmed by FEMA and numerous independent reviewers However, as of today, we are still owed over $390 million by PREPA, and we will continue to pursue payment for the work that we have completed. Now let me turn the call over to Mark to take you through our financial performance in greater detail.