Q2 2024 Earnings Summary
- Mammoth Energy is poised to receive $188.4 million from PREPA after court approval expected on September 18, which will enable them to eliminate outstanding debt and invest in growth opportunities, leading to a debt-free balance sheet and potential significant value creation for shareholders.
- The company plans to invest the proceeds in expanding their Transmission & Distribution (T&D) group, including engineering and transmission and distribution service businesses, as well as modernizing their frac fleet, indicating strategic investments in high-return areas for future growth.
- NOAA forecasts an active hurricane season, and Mammoth Energy's ability to rapidly deploy crews for storm-related infrastructure work positions them to capitalize on increased demand in their infrastructure services division, potentially boosting revenues.
- Uncertainty regarding the timing of the $188.4 million PREPA payment: The settlement with PREPA requires approval from the Title III court, with the Omnibus hearing scheduled for September 18, 2024. The exact payment date depends on the court's decision and subsequent processes, introducing financial uncertainty for Mammoth.
- Limited involvement in the growing microgrid market: Mammoth has minimal participation in projects where E&P companies are building their own microgrids. The company's work in this area is mostly conducted through utilities controlling the region, potentially causing Mammoth to miss out on direct opportunities in this expanding market segment.
- Dependence on unpredictable storm-related revenue: Mammoth's infrastructure services revenue is significantly influenced by storm events. The company lacks prearranged contracts with entities like FEMA and relies on ad-hoc requests from investor-owned utilities for storm recovery work. This dependence on unpredictable events may lead to revenue volatility.
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PREPA Payment Timing
Q: When will you receive payment from PREPA?
A: We expect to receive payment after the Title III Court approval, with the Omnibus hearing scheduled for September 18. Once approved, PREPA has a set number of days to pay us according to our agreement. -
Use of PREPA Payment Funds
Q: How will you use the funds from the PREPA payment?
A: We plan to invest in our Transmission and Distribution (T&D) group, including our engineering and service businesses, to promote growth. We will also modernize our frac fleet and invest in our portfolio companies with the best returns on capital. Additionally, we're looking for other growth opportunities, leveraging our debt-free and strong balance sheet. -
Opportunities in E&P Micro Grids
Q: Are you involved with E&Ps building micro grids?
A: We've done some work in this area, but mostly through the utility that operates in that region. While there's some involvement, it usually goes through the utility in control of the area where the Exploration and Production (E&P) companies are located. -
Securing Work After Natural Disasters
Q: How do you get work after natural disasters?
A: We're contacted early when the path of storms becomes clear, often deploying crews in advance. Our crews are positioned just outside the storm's path to enter the affected area as soon as possible. -
Contracts with Utilities, Not FEMA
Q: Do you have prearranged deals with FEMA or others?
A: Our contracts are typically with investor-owned utilities, not with FEMA. They may bring us in under mutual assistance agreements or directly request our services.