Greetings, and welcome to the Mammoth Energy Services First Quarter Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Ken Dennard. Thank you, Ken. You may begin.

Thanks, operator. Good afternoon, everyone. We appreciate you joining us for the Mammoth Energy conference call to review the 2023 first 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 at mammothenergy.com. Information reported on this call speaks only as of today, April 27, 2023. Please be advised that any time-sensitive information may no longer be accurate as of the time of any subsequent date. I would also like to remind you that statements made in today's discussion that are not historical facts include statements of expectations or future events or future financial performance, which are forward-looking statements made pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Management 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 SEC. Management may also refer to non-GAAP measures, including adjusted EBITDA. The definitions of these non-GAAP measures and their reconciliations to the most comparable GAAP measures can be found at the end of the earnings release and in our Investor Relations presentation, which can be found on the website. Mammoth Energy assumes no obligation to publicly update or revise any forward-looking statements. And now with that behind me, I'd like to turn the call over to Mammoth Energy's CEO, Arty Straehla. Arty?

Thank you, Ken, and good afternoon, everyone. We had a solid first quarter that I'm pleased to discuss on today's call. I will also provide an update regarding our ongoing pursuit of the PREPA receivables owed to us before turning the call over to Mark, to review our financials in more detail. Our first quarter performance was in line with our expectations, contributing to significant year-over-year growth in revenue, net income, and adjusted EBITDA. For the first quarter of 2023, net income came in at $8.4 million compared to a net loss of $14.8 million in Q1 of last year. First quarter 2023 adjusted EBITDA was $30.7 million compared to $9.3 million in Q1 of last year. I'm proud of the hard work across all of our business segments by our talented teams that contributed to the meaningful growth we have realized over the last year in this most recent quarter. While we face no shortage of challenges every day and have experienced persistent supply chain constraints and logistical problems over the last few years, we have, and intend to continue to operate to the best of our ability to meet the needs of our customers. Recently, we have experienced some improvements throughout the supply chain, and we anticipate more improvement to come in the back half of the year, but we believe it is important to note that these constraints still remain an obstacle that we must navigate. While we may never return to the way things were pre-COVID, we're proud of the adaptability of our team to adjust to this new normal. Now I'll walk you through each of our major business segments. In our well completion services, we generated strong growth in the quarter. We exited the quarter with three of our six pressure pumping spreads actively operating. Today, we are seeing regional production slowdowns due to lower natural gas prices, particularly in the Northeast, where we have a concentration of frac crews. Natural gas prices have been cut nearly in half compared to what they were at the end of 2022, while we remain bullish long-term on natural gas. In the near term, the lower prices are reducing activity in our well completion segment and are leading to more calendar white space. We have a deep understanding of how this pullback impacts our business and have already made changes to manage the large variable costs in the well completions segment. However, we expect this will reduce near-term utilization as we adjust to current market conditions. We plan to offset this reduction by significantly lowering our capital expenditures for the year. Turning to our Infrastructure Services division, operational improvements, team performance, and higher utilization of crews and equipment continue to drive improved results. Revenue, net income, and adjusted EBITDA grew year-over-year in this segment despite increases in SG&A and legal expenses, but we expect these expenses to have less impact in the coming quarters. The bidding and pricing environment for infrastructure services throughout our footprint continue to be robust, with added opportunities expected from the historic federal investment in our nation's infrastructure through the Infrastructure Investment and Jobs Act. We continue to view this sector as a key growth driver for Mammoth over the long term, and I'm pleased with the continued progress we are achieving. As a reminder, we have grown this division strictly by organic means over the past five years. The Sand business also grew in the quarter and we are pleased with our team's performance. As we have mentioned before, we entered into two strategic sand supply agreements late last year at attractive pricing. These contracts are providing a solid foundation for predictable cash flow in our natural sand proppant division. 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 March 27, 2023, Cobra was notified that FEMA had approved $233 million in Cobra invoices related to the December 21, 2022 determination memorandum. The 90% federal cost share of the approved amount was $210 million, which was obligated and made available for drawdown on March 27, 2023. Of this $210 million, approximately $99 million has been represented by both PREPA and FEMA as intended to pay Cobra for outstanding invoices and the remaining $111 million is a reimbursement to PREPA for payments already made on Cobra invoices. PREPA inexplicably refuses to pay Cobra for the work accomplished in the aftermath of Hurricane Maria and has so far failed to take the steps necessary to obtain the funds from COR3, which were appropriated by Congress to FEMA and then obligated to COR3 for payments to Cobra. We continue to vigorously pursue payment of the over $390 million owed to us from PREPA and continue exhausting efforts with congressional members, legal teams, and frequent meetings with decision makers. Now let me turn the call over to Mark to take you through our financial performance in greater detail.

Thank you, Arty. I hope everyone is doing well, and we appreciate you joining us today. As I usually do, I'm going to take this time to provide additional details on some meaningful metrics and several key highlights. A detailed breakdown of our results can be found in our earnings release and in our 10-Q, which we expect to file tomorrow after market close. Mammoth's total revenue during the first quarter of 2023 came in at $116.3 million compared to $62.3 million during the same quarter last year. In Q1 of 2023, we pumped 2018 stages with approximately 3.6 fleets utilized on average, compared to 699 stages and an average utilization of 1.6 fleets during the same quarter last year. This 87% year-over-year increase in revenue is a key indicator that we have capitalized on favorable market conditions and have driven improved operational efficiencies. Looking forward, as Arty mentioned earlier, we are seeing some softness related to natural gas prices, which may adversely impact results for our Well Completion Services division in the near term. We plan to offset this by significantly reducing our capital expenditures as we progress through the year. Our Sand division sold approximately 391,000 tons of sand during the first quarter of 2023 compared to 329,000 tons of sand during the same quarter last year. The average price per ton sold during the first quarter of 2023 was approximately $31.02 per ton compared to $21.44 per ton during the same quarter last year. Our Infrastructure Services division contributed revenue of $28.3 million for the first quarter of 2023 compared to $23 million for the same quarter last year. As Arty mentioned, there were some cost headwinds in the quarter that we anticipate becoming less impactful as we progress through 2023. We expect this, coupled with operational execution, to drive improvement as the year progresses. Net income for the first quarter of 2023 was $8.4 million compared to a net loss of $14.8 million for the same quarter of last year. Adjusted EBITDA, as defined and reconciled in our earnings release, was $30.7 million for the first quarter of 2023, an increase of 230% compared to the $9.3 million for the same quarter of 2022. CapEx for the first quarter of 2023 was approximately $6 million. In light of the commodity price softness that we're seeing and its direct impact on some of our customer spending, we intend to continue to prudently manage our costs. As a result, we are reducing our previously announced full-year 2023 CapEx budget to approximately $24 million. As of March 31, 2023, we had cash on hand of $11.7 million and debt of approximately $84.6 million. Our total liquidity was approximately $29.1 million. As always, to conclude our call, we would like to thank our 975 employees throughout the company for their hard work, dedication, and commitment to maintaining safe and sustainable work sites for themselves and their teammates. Despite some of the softness that we're seeing on the horizon, our businesses continue to perform well, and we're confident that the diversified and differentiated nature of our service offerings positions us well to continue generating favorable results in 2023. We will maintain our focus on operational excellence and efficient execution in each of our businesses, which we believe will enable us to drive meaningful shareholder value. Operator, we would now like to open the call up for questions.

Our first question is from Ignacio Bernaldez of EF Hutton.

Congratulations on the quarter. Two quick questions. The first, any more color on the bidding and pricing environment for infrastructure services and specifically how the Infrastructure Investment Jobs Act is bolstering or contributing to that environment?

We continue to see an increase in bidding activity, primarily for projects. So we think that bodes well for the remainder of the year. To date, we've not seen a lot of activity in relation to the Infrastructure Act, but we expect that bidding activity to start hitting the market late this year.

Yes. I'd add on to that, Ignacio, that we are seeing some of the activities and some price increases that are going through to our customers. The utility started out a little bit tight this year, as it was described to us from some of our key customers, which are larger investor-owned utilities. The goods or their products that they use had inflation hit them about 20% to 30%, I'm talking about poles and transformers and wooden and metal poles and all those types of things that they utilize. So they trimmed back a little bit at the very beginning on crews and now they're going back out and regenerating. So we're seeing activity move up pretty quickly. In addition to that, we have worked out some of the issues we've had previously with bonding and that type of thing, and we feel pretty good about where the team is going specifically in being able to do some of the higher-priced transmission and substation work and some things away from distribution. But all in all, a good quarter for our team.

That's really helpful. I appreciate that. And then just secondly, you mentioned white space on the calendar through 2023. I guess what's the extent of that? Maybe, again, a little more color on that?

Sure. As we exited the fourth quarter, natural gas was averaging around $5.56 per MMBtu. We saw some prices less than $2, and that's caused some of the operators to pull back. But we are seeing, a lot of it is just delays because they still have amounts of gas that they have to get to hit their quota for the year. And so we've just seen some delays on things. We've also seen it where some of the folks that are delaying are also continuing to drop, but just not complete right now.

That's really helpful. Congratulations on the quarter. Really appreciate it.

The next question is from John Daniel of Daniel in Partners.

First is housekeeping. Mark, can you remind me what the budget was for '23?

We had started out for a CapEx budget of just over $60 million. So we peeled that back $30-plus million.

Okay. Are you guys still pursuing with the Tier 4 fuel upgrade? Or can you walk us through what might have been put on hold?

We're still proceeding with the Tier 4 upgrades. That is one area where we continue to see some supply chain difficulties on those engines, but we are continuing to proceed on that front.

John, I can provide some more details regarding the supply chain issue. As mentioned in our previous call, I visited their factory to discuss matters with them. They have received the first Tier 4 dual fuel engine, but it was delivered incomplete, similar to receiving a car without a steering wheel or tires. We are still operating out of our manufacturing facility, but the process is slower than expected. Mark referred to this delay, which is primarily due to supply chain challenges we've encountered.

I apologize for the cell phone issues, but given the successful ramp-up in bringing those fleets back and the current modest pause, can you explain how you are managing the labor situation?

We've had to cut back on the frac crews as a result of the white space in the calendar. Historically, we've been able to ramp up and find qualified crews. So we're not too concerned about having to ramp back up, but we've certainly actively managed that staffing level at the frac side to align with the activity that we've got on the calendar.

Fair enough. I'm not trying to put you in a difficult position, but when it comes to the customers driving the slowdown, are they attempting to collaborate with you at all? I would assume they will return and utilize that equipment in the future.

Yes. The customers have absolutely been very supportive in working with us, and the schedule has been very dynamic, but our sales team has done an excellent job of filling in those gaps and working with each of our customers.

The next question is from Don Crist of Johnson Rice.

Your commentary about market opportunities has been widely discussed in the industry this quarter. However, I wanted to dive deeper, particularly regarding your divisions and specifically sand. There is considerable conversation about increased gas completions as we approach the year's end. I am curious if you've had any discussions with customers on the demand for sand, especially since it serves as a leading indicator for the frac side of the business. Could you provide any insights on that?

Yes, we're supported by our two contracts, which is definitely beneficial. The demand for sand remains strong. There was a slight decrease in activity due to the situation in Canada, as we mainly supply sand to Canada, Colorado, and the Northeast. However, we anticipate a robust increase in June and July. Overall, our business has performed well, even during this winter season.

And one further on sand for me, it sounds like pricing has been fairly stable over the last three or four months. Do you see that continuing? Or do you think it kind of pulls back for a month or two and then kind of goes forward with demand?

Based on what we've seen over the next two to three months, it looks like pricing will be fairly stable.

One thing to note is that a significant portion of our pricing is influenced by the product mix we have. The 40/70 grade is the benchmark, and everything else follows. Currently, we are observing that pricing remains quite strong, but any fluctuations you might notice are due to the inclusion of 30/50 and 20/40 mixes alongside the 40/70.

I appreciate all the color and thanks for including me.

The next question is from Michail Paraskevopoulos from Marktfeld.

I congratulate you on the quarter, big increases. Kind of looking at the demand environment, where there's cutbacks in drilling activity, cutbacks in well completion. You previously forecast EBITDA of around $15 to $18 per frac spread that's out there operating. In today's demand environment, are we still within that range or dropping a little bit, do you think?

Likely peeling back a little bit to put that in perspective, closer to the $12 million to $15 million per spread on an annual EBITDA basis.

Okay. Got it. And if you can allow one more question, coming back to that news on PREPA, I just want to make sure that I've fully got the implications. Is the Fed share that has been approved payable directly to you? Or does it have to go through PREPA and is complicated by their unwillingness to pay?

It has to go through the way the system is set up; COR3 is the grant recipient, and they need to submit the paperwork from PREPA. PREPA must make a request for reimbursement. Then, COR3 will pay them, and PREPA will pay us. We discovered about this on March 27 through some congressional leaders who were inquiring for us. They put in a request for requisition of $130 million, and the timing for that is approaching. I'm not suggesting that payment is imminent, as PREPA has been difficult in this regard. However, they do have funds appropriated by Congress for a specific FEMA determination memorandum, which have been made available to COR3 as the grant recipient. While they can continue to refuse to pay, I don't think Congress will take kindly to those funds not going to the people who completed the work.

Right. again, was struck by their unwillingness to pay even when they themselves have been paid. So I wanted to make sure I understand when money is likely to fall into your hands. It sounds though like if I understood what you said, there is some possibility of getting $130 million maybe sooner rather than later. Is that fair?

To clarify the portion of that $210 million that relates to unpaid invoices for Cobra is $99 million.

Correct.

And that money to the extent that COR3 draws is not fungible. So that money can only be paid to Cobra once drawn.

Our next question is from Carter Dunlap of Dunlap Equity Management.

Is there any plans to mobilize any of the spreads from, let's say, the Northeast to your other basins?

We don't have any near-term plans, but we've certainly got the capability to move those spreads and can do so fairly quickly. So our crews are able to be moved along with those spreads and have been fairly mobile. So to the extent that the sales team lines up work in the Mid-Continent, we're certainly willing and capable of moving those spreads.

And one last question. You mentioned 3.6 as the average for the quarter. Could you remind me how many spreads are converted, excluding the natural gas dual fuel? Were you aiming to finish four or five?

So we've currently got almost two spreads converted to Tier 2 dual fuel. As we've referenced earlier, we're in the process of converting one spread to Tier 4, but that conversion has been impacted by supply chain restraints.

Thank you, everyone, for being with us today. We appreciate your participation. We remain confident that Mammoth is well positioned for ongoing growth, backed by a skilled team that ranks among the best in the industry. This wraps up our conference call, and we look forward to speaking with you again next quarter. Thank you.

This concludes today's conference. Thank you for joining us. You may now disconnect your lines.