Q4 2023 Earnings Summary
- Expected growth in the Infrastructure segment in 2024: Mammoth executives anticipate an increase in crew count due to positive bidding activity and customer demand. They are experiencing additional growth in the transmission aspect of their business and have expanded their engineering team to about 56 engineers to meet the demand. This positions the company well for the expected long-term growth in the infrastructure sector.
- Improving liquidity from PREPA payments strengthens financial position: The company has recently received payments from PREPA totaling $64 million so far in 2024, and expects to receive an additional $20 million of FEMA-funded monies soon. The cadence of payments is picking up significantly. This influx of capital enhances Mammoth's liquidity, enabling further investment in their business, such as upgrading hydraulic fracturing fleets and considering strategic opportunities.
- Potential for strategic acquisitions to spur growth: With the improving financial situation due to PREPA payments, Mammoth is considering strategic roll-ups in the pressure pumping, sand, and infrastructure areas. The company's CEO mentioned that they started as a combination of strategic acquisitions and are open to similar opportunities, stating that "roll-ups would be an interesting way to go". This could position the company for expansion and increased market share.
- Significant outstanding receivables from PREPA totaling $345 million, comprising $140 million for services and $205 million for interest, with uncertainties regarding the timing and amount of future payments. This reliance on legal proceedings and delayed payments poses a financial risk to the company.
- The company's performance is heavily dependent on natural gas prices, which are currently "dicey", leading to reduced demand in the well completion services and sand divisions. Without improvement in commodity prices, utilization may remain low.
- Potential risks associated with planned capital expenditures and investments, such as upgrading fleets and possible acquisitions or roll-ups in the pressure pumping and sand sectors, which may not yield expected returns and could strain financial resources.
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PREPA Payments Update
Q: What's the current status of outstanding PREPA payments?
A: Following the recent $50 million payment received this week, the outstanding balance owed by PREPA is approximately $345 million, consisting of about $140 million for services and $205 million for interest. The cadence of payments is picking up significantly, and we're pushing hard to receive another $20 million in FEMA-funded monies they've been holding since December. The PREPA confirmation hearing for their plan of adjustment starts next Monday, and once confirmed, PREPA will have to address the remaining amounts owed to us. -
Infrastructure Segment Growth
Q: What's the outlook for growth in the Infrastructure segment for 2024?
A: Based on strong bidding activity and customer demand, we expect our crew count to increase in 2024. We're seeing additional growth in the transmission aspect of our business and continue to expand our engineering group, now with about 56 engineers onboard. This positions us well for future opportunities, and we're bullish on our infrastructure group's prospects. -
Strategic Roll-Up Opportunities
Q: What's your view on rolling up small Tier 2 frac companies?
A: We continue to invest in modernizing our fleet, now with 34 dual fuel units and Tier 4 equipment. Strategic roll-ups are an interesting opportunity, and we've begun to think that way, especially as we receive the PREPA payments. It's how we started as an organization, focusing on pressure pumping, sand, and infrastructure areas. -
Natural Gas Market Outlook
Q: Any signs of hope in the natural gas markets for the back half of the year?
A: While the natural gas market remains price-driven, we're seeing a slight pickup in activity in the back half compared to the first half. Sand demand is increasing in March compared to January and February, indicating that customers are beginning to engage more. However, improvement in commodity prices is still needed for a significant uptick. -
Opportunities from Panhandle Fires
Q: Are the panhandle fires creating opportunities for your infrastructure business?
A: We haven't been called out yet to assist with the aftermath of the fires. The affected area is slightly outside of our usual market, which focuses on West Texas and the mid-Dallas area. However, we're open to opportunities should they arise.