Executive Summary / Key Takeaways

• Mammoth Energy Services has fundamentally transformed its financial position, becoming debt-free with a substantial cash balance following the settlement of the long-standing PREPA receivable dispute and strategic asset divestitures.
• The company recently completed the sale of a significant portion of its infrastructure business for $108.7 million while simultaneously acquiring aircraft for its rental services fleet, signaling a strategic pivot towards higher-return or growth-oriented segments.
• Despite near-term market uncertainties, particularly in natural gas basins impacting well completion services, Mammoth is positioning itself for potential future demand increases through targeted investments, including upgrading its pressure pumping fleet.
• The retained infrastructure segments (engineering and fiber) and the expanded equipment rentals business are viewed as key growth drivers, supported by macro tailwinds and opportunistic capital allocation.
• With a strong balance sheet and significant liquidity, Mammoth is actively evaluating accretive acquisition opportunities across existing and potentially new verticals to unlock shareholder value.

Setting the Scene: A Transformed Energy Services Player

Mammoth Energy Services, Inc. operates at the intersection of the oil and gas and electric utility industries across North America. Founded in 2014 and incorporated in 2016, the company built a diversified portfolio spanning well completion, natural sand proppant, infrastructure services, and various other offerings like directional drilling, aviation, and equipment rentals. A pivotal period in its history began in 2017 with the strategic entry into the infrastructure sector, which quickly became a significant revenue stream, notably through large-scale storm restoration work in Puerto Rico.

However, this growth was accompanied by prolonged litigation over receivables from the Puerto Rico Electric Power Authority (PREPA), creating a substantial financial overhang. Simultaneously, the company's oilfield services segments faced significant headwinds from volatile commodity prices and reduced activity, particularly in natural gas basins, leading to temporary suspensions of certain operations.

This backdrop sets the stage for Mammoth's recent, dramatic transformation. The resolution of the seven-year PREPA dispute, culminating in a settlement agreement and the receipt of substantial cash installments totaling $168.4 million by late 2024 (with a final $20 million contingent on PREPA's bankruptcy plan), has fundamentally altered the company's financial landscape. Utilizing a portion of these proceeds, Mammoth paid off its $50.9 million term credit facility in October 2024, achieving a debt-free balance sheet. This newfound financial strength is now the central theme driving Mammoth's strategic direction.

In the competitive arena, Mammoth operates as a specialized player within markets dominated by global giants like Baker Hughes (BKR), Halliburton (HAL), and Schlumberger (SLB). While these larger competitors boast superior scale, broader global reach, and significantly higher R&D budgets, Mammoth has carved out niche advantages. Its integrated infrastructure services, particularly in areas like storm repair and utility maintenance, offer regional expertise and potentially faster project turnaround times compared to the broader offerings of larger players. In the proppant segment, Mammoth's integrated logistics can provide cost efficiencies. However, its smaller scale can lead to higher operating costs in certain areas, and it lags in the adoption of advanced digital and technological tools that enhance efficiency and performance for its larger rivals. The competitive landscape in natural gas basins is also expected to intensify, potentially pressuring margins.

Mammoth's technological focus, while not on the bleeding edge of digital oilfield innovation seen at the largest competitors, is centered on practical upgrades to enhance efficiency and competitiveness within its core operations. A key initiative involves upgrading its pressure pumping fleet to Tier 4 dual fuel technology. Management states the goal is to improve efficiency and is undertaking these upgrades internally over the next 8-10 months, aiming for cost-effectiveness. While specific quantitative performance metrics for these upgrades compared to older technology or competitor offerings are not detailed, the strategic intent is to better position the fleet to capitalize on anticipated future demand in natural gas basins. This measured approach to technology investment aligns with Mammoth's strategy of prudent capital management and focusing resources where they can yield the best returns within its operational footprint.

Recent Performance and Financial Strength

The first quarter of 2025 provided the first clear look at Mammoth's operational performance following the significant financial de-risking. Total revenue for Q1 2025 increased by 45% year-over-year to $62.5 million, up from $43.2 million in Q1 2024. This growth was broad-based across the company's reportable segments.

The Well Completion Services segment saw a dramatic 161% revenue increase, climbing to $20.9 million from $8.0 million in the prior year period. This surge was primarily driven by a significant increase in activity, with stages completed jumping 118% to 828 and average active pressure pumping fleets rising to 1.3 from 0.6. The increased utilization also improved the segment's cost of revenue as a percentage of revenue, reflecting a better absorption of fixed costs.

Infrastructure Services revenue grew 23% to $30.7 million in Q1 2025, up from $25.0 million. This was mainly attributable to an increase in the average crew count, which rose to 100 from 75, coupled with a $5.1 million increase in storm restoration activity. While substation revenue saw a decrease, the overall segment benefited from higher-margin storm work, leading to a decrease in cost of revenue as a percentage of revenue.

The Natural Sand Proppant Services segment also posted strong growth, with revenue increasing 56% to $6.7 million from $4.3 million. This was driven by a 30% increase in tons of sand sold (189,020 vs. 145,662) and the recognition of $1.6 million in shortfall revenue. This was partially offset by a 12% decline in the average price per ton.

Other services revenue, however, decreased by 14% to $5.9 million, primarily due to lower equipment manufacturing and remote accommodations revenue, partially offset by an increase in equipment rental activity.

Mammoth's profitability saw a notable improvement. The company reported operating income of $0.5 million in Q1 2025, a significant turnaround from an operating loss of $12.0 million in Q1 2024. This was a direct result of the increased activity and improved cost structures across the core segments, coupled with a 26% decrease in Selling, General, and Administrative (SGA) expenses, which fell to $6.5 million, primarily due to lower compensation and benefits. Depreciation, depletion, amortization, and accretion also decreased by 14% to $6.0 million, partly due to assets becoming fully depreciated.

The impact of the PREPA settlement and debt payoff is starkly visible below the operating line. Interest income/expense and financing charges shifted from an $8.1 million expense in Q1 2024 (which included a $5.5 million financing charge related to the PREPA receivable assignment) to a $0.2 million income in Q1 2025, benefiting from the elimination of term credit facility interest. Other expense/income also swung from a $10.1 million income in Q1 2024 (driven by $10.5 million in interest on delinquent PREPA receivables) to a $0.3 million expense in Q1 2025.

Ultimately, Mammoth reported a net loss of $0.5 million, or $0.01 per diluted share, in Q1 2025, a substantial improvement from a net loss of $11.8 million, or $0.25 per diluted share, in Q1 2024. Adjusted EBITDA for Q1 2025 was $2.7 million, compared to $4.5 million in Q1 2024 (note that the Q1 2024 Adjusted EBITDA included the $10.5 million in PREPA interest income, which was excluded in the Q1 2025 calculation).

Financially, Mammoth is in its strongest position in years. As of March 31, 2025, the company held $56.7 million in unrestricted cash and $21.6 million in restricted cash, totaling $78.3 million. Its revolving credit facility was undrawn, with $22.7 million in available borrowing capacity after accounting for outstanding letters of credit. Following the strategic transactions in April 2025, the company's unrestricted cash position surged to $135.4 million as of May 2, 2025, with total cash around $155 million and available borrowing capacity increasing to $67.5 million. The company's net working capital stood at $81.5 million at the end of Q1 2025.

Cash flow from operations in Q1 2025 was $2.7 million, a significant decrease from $47.3 million in Q1 2024, primarily due to lower receipts on accounts receivable after the large PREPA payments received in 2024. Net cash used in investing activities increased to $3.0 million from $1.1 million, driven by higher capital expenditures ($7.2 million vs. $4.2 million). Net cash used in financing activities decreased dramatically to $3.8 million from $48.5 million, reflecting the absence of large debt payments made in the prior year.

Strategic Pivot and Future Outlook

Mammoth's strategic narrative is now defined by leveraging its robust balance sheet and enhanced liquidity. The recent sale of three infrastructure subsidiaries (5 Star Electric, Higher Power Electrical, and Python Equipment) for $108.7 million on April 11, 2025, is a prime example of this strategy in action. Management highlighted that these businesses, acquired for less than $10 million in 2017 and grown organically to over $90 million in annual revenue, were sold at over 4x tangible book value and a 9x trailing EBITDA multiple. This divestiture is framed as unlocking significant value and being accretive to stockholders, allowing Mammoth to monetize successful organic growth and focus its resources.

The company is not exiting infrastructure entirely but is pivoting to focus on the retained engineering and fiber entities. Management is highly optimistic about these segments, citing significant macro tailwinds from data centers, AI, nuclear development, and government funding (Infrastructure Investment and Jobs Act). They are actively investing to add equipment and crews to capitalize on these opportunities, noting strong organic demand, particularly in T&D work, with potential for 25-30% growth over the current run rate. While open to accretive acquisitions in this space, they see ample organic growth potential currently.

Simultaneously, Mammoth is strategically deploying capital in other areas. The purchase of eight small passenger aircraft for approximately $11.5 million in early April 2025 is aimed at expanding and diversifying the equipment rentals segment. These aircraft are already under long-term leases and are expected to be immediately accretive, reflecting a focus on acquiring assets that provide predictable, attractive returns.

For the Well Completion Services segment, the outlook remains cautious in the near term, with management expecting relatively steady activity levels throughout 2025, potentially flat compared to 2024, especially in the first half. This is attributed to ongoing market uncertainties and pressure on commodity prices from factors like tariffs and OPEC+ decisions. However, they anticipate a potential ramp-up in activity in the latter half of 2025 and into 2026, driven by incremental demand for natural gas tied to new LNG export capacity and growing electricity needs. Mammoth aims to achieve utilization exceeding 1.5 active fleets in the near term, which is seen as the threshold for generating free cash flow from this segment. The strategic investment in upgrading the fleet to Tier 4 dual fuel technology is intended to position the company to capture this future demand effectively.

The Sand segment's performance is closely linked to well completion activity. Management expects incremental demand from increased pressure pumping utilization to drive improved results in 2025, with sand pricing anticipated to remain relatively stable.

Mammoth's capital expenditure plan for 2025, excluding acquisitions, is approximately $12 million. This budget is primarily allocated to growth in the equipment rentals business and maintenance/upgrades for the pressure pumping fleet. Growth in the retained infrastructure business is expected to be financed mainly through leasing arrangements.

With a significant cash balance of around $155 million and no debt, Mammoth is actively exploring opportunities to deploy this capital. The focus is on substantial investment for future growth, including evaluating accretive acquisition opportunities in existing segments or potentially new verticals, while maintaining balance sheet strength. Management is committed to disciplined operations, efficiency, and strategic capital allocation to unlock shareholder value. They also anticipate a reduction in Selling, General, and Administrative (SGA) expenses, expecting a decline of 20-25% from the Q1 2025 level on a go-forward basis following the infrastructure sale, reflecting a rightsizing of the corporate cost structure. The company is also undergoing a CEO transition, with a search underway for a successor to Phil Lancaster, who will transition to Peak Utility Services Group.

Risks and Challenges

Despite the significantly improved financial position, Mammoth Energy Services faces several risks and challenges that could impact its investment thesis. The company remains exposed to the inherent volatility of the oil and natural gas industry, which is influenced by global supply and demand, commodity prices, and geopolitical factors. Macroeconomic uncertainty, tariff implications, and OPEC actions continue to pressure commodity prices and could dampen activity levels, particularly in the well completion and sand segments, potentially delaying the anticipated ramp-up in demand.

Increased competition in natural gas basins, driven by the expected increase in demand from LNG and power generation, could lead to margin pressure in the well completion segment as service companies vie for market share.

While the PREPA settlement has resolved the majority of the outstanding receivable, the final $20 million payment is contingent on the effective date of PREPA's bankruptcy plan of adjustment, introducing uncertainty regarding its timing. Furthermore, the company is involved in ongoing litigation, including the Foreman Electric Services lawsuit and municipal tax claims in Puerto Rico. The outcome of these legal proceedings and their potential financial impact remain uncertain and could have a material effect on the company's results or cash flows.

The infrastructure segment, while benefiting from macro tailwinds, is still dependent on spending by electric utility companies and government appropriations. Delays or reductions in this spending, or the failure of customers to make timely payments, could adversely affect results. Seasonal weather conditions in certain operating regions can also disrupt operations.

Inflationary pressures and changes in international tariffs and trade policies could increase operating costs and negatively impact the profitability of certain segments, such as natural sand proppant sales to Canadian customers.

Finally, despite the strategic pivot and focus on capital deployment, the success of future investments and acquisitions is not guaranteed. The company's ability to identify, complete, and successfully integrate accretive assets will be critical to realizing the full potential of its enhanced liquidity. The ongoing search for a successor CEO also introduces a degree of leadership transition risk.

Conclusion

Mammoth Energy Services has undergone a significant transformation, emerging from a period of financial strain and operational challenges with a debt-free balance sheet and a substantial cash reserve. The resolution of the protracted PREPA dispute has been a game-changer, providing the financial flexibility to pursue a new strategic direction focused on value creation.

The recent divestiture of a major portion of its infrastructure business, while retaining key engineering and fiber capabilities, coupled with targeted investments like the aircraft acquisition for its rental fleet, signals a deliberate pivot towards segments management believes offer the greatest potential for accretive growth and returns. While the core oilfield services segments still face market uncertainties, particularly in the near term, Mammoth is strategically positioning its assets, including upgrading its pressure pumping fleet, to capitalize on anticipated future demand increases driven by natural gas dynamics.

With approximately $155 million in cash and no debt, Mammoth is now well-equipped to pursue both organic growth initiatives and opportunistic acquisitions. The investment thesis centers on the company's ability to effectively deploy this capital into accretive opportunities, leverage its niche strengths in retained infrastructure and growing rental services, and navigate the volatile energy landscape. Investors will be closely watching the execution of this capital deployment strategy, the timing and strength of the expected recovery in natural gas markets, the outcome of remaining contingent payments and litigation, and the leadership transition as key indicators of Mammoth's potential to unlock meaningful shareholder value in the coming quarters.