10-Q: Mammoth Energy Q3 Loss Narrows Amid Strategic Divestitures

Mammoth Energy Services reports a reduced net loss in Q3 2025, driven by strategic divestitures and improved performance in several segments, despite declines in natural sand proppant and accommodation services.

Summary

• Net loss for the third quarter of 2025 was $12.6 million ($0.26 per diluted share), an improvement from a net loss of $24.0 million ($0.50 per diluted share) for the third quarter of 2024.
• Total revenue for the third quarter of 2025 decreased by 13% to $14.8 million from $17.1 million for the third quarter of 2024.
• Adjusted EBITDA for the third quarter of 2025 was ($4.4) million, compared to ($2.9) million for the third quarter of 2024.
• For the nine months ended September 30, 2025, net loss was $4.3 million ($0.09 per diluted share), a significant improvement from a net loss of $191.8 million ($3.99 per diluted share) in the same period of 2024.
• Nine-month revenue decreased 3% to $46.8 million from $48.4 million in 2024.
• Net income from discontinued operations for the nine months ended September 30, 2025, was $45.0 million, compared to a net loss of $20.3 million in 2024, primarily due to the sale of infrastructure services entities and hydraulic fracturing equipment.
• The company completed the sale of a portion of its infrastructure services entities for aggregate proceeds of $108.7 million on April 11, 2025.
• On June 16, 2025, the company sold all equipment previously used in its hydraulic fracturing services for $15.0 million.
• Net cash used in operating activities from continuing operations was $11.0 million for the nine months ended September 30, 2025, compared to net cash provided of $39.8 million in the prior year.
• Capital expenditures from continuing operations for the nine months ended September 30, 2025, totaled $44.6 million, primarily for aviation and other equipment rental services.

Sentiment

Score: 6

Explanation: The company reported a significant reduction in net loss and successful divestitures, indicating a positive strategic shift and improved liquidity. The payoff of substantial debt and an undrawn revolving credit facility are strong financial positives. However, continuing operations still show an operating loss and negative Adjusted EBITDA, with revenue declines in key segments (natural sand proppant, accommodations). The impairment charge on natural sand proppant assets and ongoing litigation risks temper the overall sentiment, suggesting a mixed but improving outlook.

Positives

• Net loss significantly narrowed to $12.6 million in Q3 2025 from $24.0 million in Q3 2024.
• Net loss for the nine months ended September 30, 2025, improved dramatically to $4.3 million from $191.8 million in the prior year.
• Net income from discontinued operations was $45.0 million for the nine months ended September 30, 2025, compared to a loss of $20.3 million in 2024, reflecting successful divestitures.
• Rental services revenue increased 27% to $2.8 million in Q3 2025 and 32% to $7.8 million for the nine months, driven by aviation and equipment rentals.
• Infrastructure services revenue increased 9% to $4.8 million in Q3 2025 and 6% to $14.9 million for the nine months, due to increased fiber optic activity.
• Drilling services revenue increased 44% to $2.3 million in Q3 2025 and 14% to $3.2 million for the nine months, with improved pricing.
• Selling, general and administrative expenses decreased by $93.8 million for the nine months ended September 30, 2025, primarily due to the absence of an $89.2 million charge related to the PREPA settlement from 2024.
• Interest income, net of interest expense and financing charges, was $0.9 million in Q3 2025, compared to interest expense of $1.1 million in Q3 2024, due to the payoff of long-term debt.
• Cash and cash equivalents increased to $98.2 million at September 30, 2025, from $60.8 million at December 31, 2024.
• Unrestricted cash on hand was $106.6 million as of October 29, 2025.
• The revolving credit facility was undrawn with $44.1 million of available borrowing capacity as of October 29, 2025.
• The company fully paid off its term credit facility in October 2024, and Wexford waived the 1% early termination penalty.
• The $18.4 million letter of credit related to the PREPA settlement was released in October 2025, and the $19.3 million cash collateral was returned to the company, along with $0.5 million in interest.
• The One Big Beautiful Bill Act (OBBBA) is expected to benefit the company through lower projected cash taxes due to current expensing of qualified capital expenditures and increased allowable interest expense deductions.

Negatives

• Total revenue decreased by 13% in Q3 2025 and 3% for the nine months ended September 30, 2025.
• Adjusted EBITDA for Q3 2025 was ($4.4) million, a decline from ($2.9) million in Q3 2024.
• Natural sand proppant services revenue decreased 45% in Q3 2025 due to a 25% decrease in tons sold and a 20% decline in average price per ton.
• Accommodation services revenue decreased 21% in Q3 2025 and 28% for the nine months due to a decline in utilization.
• Cost of revenue as a percentage of total revenue increased to 95% in Q3 2025 from 78% in Q3 2024.
• Natural sand proppant services cost of revenue as a percentage of revenue increased to 152% in Q3 2025 from 65% in Q3 2024, partly due to $0.6 million in expenses related to the return of rail cars.
• Infrastructure services cost of revenue as a percentage of revenue increased to 98% in Q3 2025 from 82% in Q3 2024, due to increased subcontractor expense.
• Impairment of long-lived assets totaling $31.7 million was recognized during the nine months ended September 30, 2025, related to natural sand proppant operations.
• Operating loss increased to $9.0 million in Q3 2025 from $6.1 million in Q3 2024.
• Net cash used in operating activities from continuing operations was $11.0 million for the nine months ended September 30, 2025, a significant decrease from $39.8 million provided in 2024.
• Net cash used in investing activities from continuing operations was $51.8 million for the nine months ended September 30, 2025, compared to $2.8 million provided in 2024, primarily due to an increase in purchases of property, plant and equipment and marketable securities.
• The company expects an adjusted EBITDA loss from continuing operations ranging from $2.0 million to $3.0 million in Q4 2025.
• Expected cash outflow related to discontinued operations of $1.0 million to $2.0 million in Q4 2025.
• Ongoing litigation with Puerto Rico municipalities regarding construction excise and volume of business taxes, with judgments against Cobra totaling $5.1 million, $1.6 million, and $3.4 million. Appeals were denied, and a motion for reconsideration is intended.

Risks

• Volatility of oil and natural gas prices and actions by OPEC+ affecting commodity price and production levels.
• General economic, business or industry conditions and concerns over a potential economic slowdown or recession.
• Inflationary pressure on the cost of services, equipment, and other goods in the company's industries.
• Loss of one or more significant customers and its impact on results of operations, financial condition, and cash flows.
• Ability to comply with the applicable financial covenants and other terms and conditions of the revolving credit facility.
• Failure to receive, or delays in receiving, the remaining $20.0 million payment under the settlement agreement with the Puerto Rico Electric Power Authority (PREPA).
• Outcome or settlement of litigation matters discussed in the report on financial condition and cash flows, including those with Puerto Rico municipalities.
• Regional supply and demand factors, delays or interruptions of production, and any governmental order, rule or regulation that may impose production limits on customers.
• Sustained weakness in the natural gas basins in which the company operates and adverse impact on demand for natural sand proppant services.
• Changes in U.S. and foreign trade regulations and tariffs, including potential increases of tariffs on goods imported into the U.S., and uncertainty regarding the same, potentially impacting natural sand proppant services to Canadian customers.
• Extreme weather conditions, wildfires, and other natural disasters in areas where services are provided.
• Cyberattacks and any resulting loss of information.
• Competition within the industries in which the company operates.
• Customer credit risk due to concentration of receivables from several significant customers, particularly the remaining $20.0 million due from PREPA, which is in bankruptcy proceedings.
• Seasonality of operations in geographic regions like Ohio, Wisconsin, Pennsylvania, West Virginia, and Canada, where severe weather conditions may limit or disrupt operations during winter and spring months.
• Uncertainty regarding the ultimate impact of volatility in commodity prices, any changes in the near-term or long-term outlook for the company's industries, or overall macroeconomic conditions on its business, financial condition, results of operations, cash flows, and stock price.

Future Outlook

For the fourth quarter of 2025, the company expects to generate an adjusted EBITDA loss from continuing operations ranging from $2.0 million to $3.0 million. Cash outflow related to discontinued operations is projected to be $1.0 million to $2.0 million, largely funded by proceeds from the sale of underutilized assets. Aggregate capital expenditures from continuing operations for 2025 are estimated at approximately $45.5 million, primarily for aviation and other equipment rental services. The company plans to continue evaluating acquisition opportunities, including in the renewable energy sector and transactions involving entities controlled by Wexford.

Management Comments

• "We are focused on driving returns through improved execution by prioritizing asset utilization, margin expansion, and capital efficiency across the portfolio."
• "While macroeconomic uncertainty including tariffs and demand volatility continue to affect parts of the market, we remain proactive in repositioning Mammoth to perform through differing business cycles."
• "We believe that our cash on hand, operating cash flow, available borrowings under our currently undrawn credit facility and proceeds from divestitures will be sufficient to meet our short-term and long-term funding requirements."

Industry Context

The oil and natural gas industry continues to experience volatility, influenced by factors such as supply and demand, commodity prices, and capital expenditures by exploration and production companies. The company notes persistent challenges in its natural sand proppant services segment due to lower U.S. onshore activity and sustained weakness in natural gas basins, with macroeconomic uncertainty, tariff implications, and OPEC+ production increases softening activity expectations for 2025. The utility infrastructure industry, where the company provides engineering, design, and fiber optic services, is subject to fluctuations based on the financial condition of customers, their capital spending, economic and political conditions, and governmental regulations. The company's strategic divestitures of certain infrastructure and hydraulic fracturing services reflect a repositioning aimed at navigating these diverse and challenging business cycles.

Comparison to Industry Standards

• NA

Corporate Governance

Legal Proceedings

• **PREPA Settlement**: Cobra entered into a settlement agreement with PREPA on July 22, 2024, for outstanding amounts related to Puerto Rico grid restoration. PREPA paid $168.4 million in 2024, with $20.0 million remaining payable within seven days of PREPA's plan of adjustment effective date.
• **Foreman Electric Services, Inc. Lawsuit**: Foreman filed a RICO and state-law petition against Mammoth and Cobra in Oklahoma, alleging $250 million in damages. The case was re-filed and remanded to state court. An amended petition added Arty Straehla, Mark Layton, and Wexford as defendants, alleging fraudulent transfer. The company settled this matter in July 2025 without material adverse effect.
• **Machine Learning Integration, LLC (MLI) Derivative Complaint**: MLI filed a derivative complaint in Puerto Rico alleging similar facts to Foreman's action, asserting RICO violations and non-federal claims, claiming unspecified damages as a subcontractor.
• **Ohio State Tax Audit**: The company received an unfavorable decision on an appeal regarding Ohio equipment purchase taxes in February 2022, which was partially affirmed and reversed by the Ohio Supreme Court in August 2023. The final assessment in April 2025 did not have a material adverse effect.
• **Puerto Rico Municipal Tax Lawsuits**: Cobra has been served with 14 lawsuits from Puerto Rico municipalities alleging failure to pay construction excise and volume of business taxes. Judgments were entered against Cobra for $9.0 million (November 2022), $5.1 million (May 16, 2025), $1.6 million (May 20, 2025), and $3.4 million (July 3, 2025). Appeals were denied, and Cobra intends to file a motion for reconsideration with the Supreme Court of Puerto Rico. The amount of loss cannot be reasonably estimated.
• **Christopher Williams/Matthew Zeisset Class Action**: A putative class and collective action complaint was filed in Puerto Rico alleging failure to pay overtime wages. Individual arbitration proceedings are ongoing, and the company has settled with a portion of claimants. An estimated liability has been recognized.

Related Party Transactions

• Transactions with Wexford, El Toro Resources LLC, Elk City Yard LLC, Caliber Investment Group LLC, Grizzly Oil Sands ULC, and Brim Equipment.
• Revenue from related party transactions was $0.5 million for the three months ended September 30, 2025, and $1.2 million for the nine months ended September 30, 2025.
• Costs incurred from related party transactions was $0.1 million for the three months ended September 30, 2025, and $0.3 million for the nine months ended September 30, 2025.
• Accounts receivable from related party transactions was $0.4 million at September 30, 2025.
• Cobra Aviation and Wexford Investment, an entity controlled by Wexford, formed Brim Acquisitions LLC (a joint venture), with Cobra Aviation owning a 49% economic interest and Wexford Investment owning a 51% economic interest.
• Cobra Aviation and Leopard each lease one helicopter to Brim Equipment under aircraft lease and management agreements.
• The term credit facility with Wexford Capital LP (an affiliate) was fully paid off on October 2, 2024, including accrued and unpaid interest, in the aggregate amount of $50.9 million, and Wexford waived the 1% early termination penalty.

Stakeholder Impact

• **Shareholders**: Potential for increased shareholder value through the authorized stock repurchase program (up to $50 million or 10 million shares). Reduced net loss and improved liquidity could be positive. However, ongoing operating losses and segment declines could negatively impact sentiment.
• **Creditors**: The payoff of the term credit facility and an undrawn revolving credit facility with significant available capacity improve the company's credit profile. The release of PREPA-related collateral further strengthens liquidity.
• **Employees**: The strategic shift and divestitures of certain infrastructure and hydraulic fracturing services could lead to workforce adjustments in those areas, though not explicitly stated.
• **Customers**: Continued volatility in the oil and natural gas industry and fluctuations in utility infrastructure demand impact service volumes and pricing. The company's focus on asset utilization and capital efficiency aims to better serve customers through different cycles.
• **Suppliers**: Inflationary pressures on costs of goods and services could impact supplier relationships and pricing.

Next Steps

• Receive the remaining $20.0 million payment from PREPA following the effective date of PREPA's plan of adjustment in its bankruptcy proceedings.
• File a motion to reconsider the Supreme Court of Puerto Rico's decision to deny hearing the appeal on municipal tax judgments.
• Fund Q4 2025 adjusted EBITDA loss and discontinued operations cash outflow, largely from proceeds from asset sales.
• Continue to evaluate acquisition opportunities, including in the renewable energy sector and transactions involving entities controlled by Wexford.
• Assess the impact of new accounting pronouncements (ASU 2023-09, ASU 2024-03, ASU 2025-05) on consolidated financial statements.

Key Dates

Recommendation

The company has made significant strides in improving its financial position by divesting underperforming assets, resolving major litigation (PREPA settlement, Foreman lawsuit), and paying off substantial debt, leading to a dramatic reduction in net loss and improved liquidity. The undrawn revolving credit facility and increased cash reserves provide a strong financial foundation. However, the core continuing operations still face challenges, as evidenced by the Q3 operating loss, negative Adjusted EBITDA, and revenue declines in key segments like natural sand proppant and accommodations. The impairment charge on natural sand proppant assets and ongoing, unresolved municipal tax litigation in Puerto Rico present continued uncertainties. While the strategic repositioning is positive, the path to consistent profitability in continuing operations is not yet clear, warranting a "hold" as the company navigates these transitions and aims for improved operational performance.

Keywords

Oilfield services, Utility infrastructure, Natural sand proppant, Hydraulic fracturing, Directional drilling, Rental services, Accommodation services, SEC filing, 10-Q, TUSK, Energy services, Financial results, Divestitures, Puerto Rico, PREPA, Capital expenditures, Cash flow, Litigation, Market risk, Commodity prices