UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



ý	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED ~~SEPTEMBER~~JUNE 30, ~~2018~~2019



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

Commission File No. 001-37917

Mammoth Energy Services, Inc.

(Exact name of registrant as specified in its charter)




Delaware		32-0498321
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

14201 Caliber Drive, Suite 300 Oklahoma City, Oklahoma	(405) 608-6007	73134
(Address of principal executive offices)		~~(Zip Code)~~

~~(405) 608-6007~~

~~(Registrant’s~~(Registrant’s telephone number, including area code)(Zip Code)Title of each class of securitiesName of each exchange on which registeredTicker SymbolCommon Stock, par value $0.01 per shareThe Nasdaq Global Select MarketTUSK

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.




Large accelerated filer	o	Accelerated filer	ý

Non-accelerated filer	o	Smaller reporting company	o

		Emerging growth company	ýo

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

As of ~~October 30, 2018,~~July 31, 2019, there were ~~44,755,678~~45,004,795 shares of common stock, $0.01 par value, outstanding.

MAMMOTH ENERGY SERVICES, INC.

TABLE OF CONTENTS





		Page
	Glossary of Oil and Natural Gas and Electrical Infrastructure Terms	i
	Cautionary Note Regarding Forward-Looking Statements	iv

PART I. FINANCIAL INFORMATION		1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Comprehensive Income (Loss)	2
	Condensed Consolidated Statements of Changes in Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3130
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5149
Item 4.	Controls and Procedures	5351

PART II. OTHER INFORMATION		5452
Item 1.	Legal Proceedings	5452
Item 1A.	Risk Factors	5452
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5452
Item 4.	Mine Safety Disclosures	5452
Item 5.	Other Information	5552
Item 6.	Exhibits	5653

SIGNATURES		5754

GLOSSARY OF OIL AND NATURAL GAS AND ELECTRICAL INFRASTRUCTURE TERMS



The following is a glossary of certain oil and natural gas industry terms used in this report:
Acidizing	To pump acid into a wellbore to improve a well's productivity or injectivity.
Blowout	An uncontrolled flow of reservoir fluids into the wellbore, and sometimes catastrophically to the surface. A blowout may consist of salt water, oil, natural gas or a mixture of these. Blowouts can occur in all types of exploration and production operations, not just during drilling operations. If reservoir fluids flow into another formation and do not flow to the surface, the result is called an underground blowout. If the well experiencing a blowout has significant open-hole intervals, it is possible that the well will bridge over (or seal itself with rock fragments from collapsing formations) down-hole and intervention efforts will be averted.
Bottomhole assembly	The lower portion of the drillstring, consisting of (from the bottom up in a vertical well) the bit, bit sub, a mud motor (in certain cases), stabilizers, drill collar, heavy-weight drillpipe, jarring devices (“jars”) and crossovers for various threadforms. The bottomhole assembly must provide force for the bit to break the rock (weight on bit), survive a hostile mechanical environment and provide the driller with directional control of the well. Oftentimes the assembly includes a mud motor, directional drilling and measuring equipment, measurements-while-drilling tools, logging-while-drilling tools and other specialized devices.
Cementing	To prepare and pump cement into place in a wellbore.
Coiled tubing	A long, continuous length of pipe wound on a spool. The pipe is straightened prior to pushing into a wellbore and rewound to coil the pipe back onto the transport and storage spool. Depending on the pipe diameter (1 in. to 4 1/2 in.) and the spool size, coiled tubing can range from 2,000 ft. to 23,000 ft. (610 m to 6,096 m) or greater length.
Completion	A generic term used to describe the assembly of down-hole tubulars and equipment required to enable safe and efficient production from an oil or gas well. The point at which the completion process begins may depend on the type and design of the well.
Directional drilling	The intentional deviation of a wellbore from the path it would naturally take. This is accomplished through the use of whipstocks, bottomhole assembly (BHA) configurations, instruments to measure the path of the wellbore in three-dimensional space, data links to communicate measurements taken down-hole to the surface, mud motors and special BHA components and drill bits, including rotary steerable systems, and drill bits. The directional driller also exploits drilling parameters such as weight on bit and rotary speed to deflect the bit away from the axis of the existing wellbore. In some cases, such as drilling steeply dipping formations or unpredictable deviation in conventional drilling operations, directional-drilling techniques may be employed to ensure that the hole is drilled vertically. While many techniques can accomplish this, the general concept is simple: point the bit in the direction that one wants to drill. The most common way is through the use of a bend near the bit in a down-hole steerable mud motor. The bend points the bit in a direction different from the axis of the wellbore when the entire drillstring is not rotating. By pumping mud through the mud motor, the bit turns while the drillstring does not rotate, allowing the bit to drill in the direction it points. When a particular wellbore direction is achieved, that direction may be maintained by rotating the entire drillstring (including the bent section) so that the bit does not drill in a single direction off the wellbore axis, but instead sweeps around and its net direction coincides with the existing wellbore. Rotary steerable tools allow steering while rotating, usually with higher rates of penetration and ultimately smoother boreholes.
Down-hole	Pertaining to or in the wellbore (as opposed to being on the surface).
Down-hole motor	A drilling motor located in the drill string above the drilling bit powered by the flow of drilling mud. Down-hole motors are used to increase the speed and efficiency of the drill bit or can be used to steer the bit in directional drilling operations. Drilling motors have become very popular because of horizontal and directional drilling applications and the day rates for drilling rigs.
Drilling rig	The machine used to drill a wellbore.
Drillpipe or Drill pipe	Tubular steel conduit fitted with special threaded ends called tool joints. The drillpipe connects the rig surface equipment with the bottomhole assembly and the bit, both to pump drilling fluid to the bit and to be able to raise, lower and rotate the bottomhole assembly and bit.
Drillstring or Drill string	The combination of the drillpipe, the bottomhole assembly and any other tools used to make the drill bit turn at the bottom of the wellbore.
Flowback	The process of allowing fluids to flow from the well following a treatment, either in preparation for a subsequent phase of treatment or in preparation for cleanup and returning the well to production.
Horizontal drilling	A subset of the more general term “directional drilling,” used where the departure of the wellbore from vertical exceeds about 80 degrees. Note that some horizontal wells are designed such that after reaching true 90-degree horizontal, the wellbore may actually start drilling upward. In such cases, the angle past 90 degrees is continued, as in 95 degrees, rather than reporting it as deviation from vertical, which would then be 85 degrees. Because a horizontal well typically penetrates a greater length of the reservoir, it can offer significant production improvement over a vertical well.
Hydraulic fracturing	A stimulation treatment routinely performed on oil and gas wells in low permeability reservoirs. Specially engineered fluids are pumped at high pressure and rate into the reservoir interval to be treated, causing a vertical fracture to open. The wings of the fracture extend away from the wellbore in opposing directions according to the natural stresses within the formation. Proppant, such as grains of sand of a particular size, is mixed with the treatment fluid to keep the fracture open when the treatment is complete. Hydraulic fracturing creates high-conductivity communication with a large area of formation and bypasses any damage that may exist in the near-wellbore area.
Hydrocarbon	A naturally occurring organic compound comprising hydrogen and carbon. Hydrocarbons can be as simple as methane, but many are highly complex molecules, and can occur as gases, liquids or solids. Petroleum is a complex mixture of hydrocarbons. The most common hydrocarbons are natural gas, oil and coal.



Mesh size	The size of the proppant that is determined by sieving the proppant through screens with uniform openings corresponding to the desired size of the proppant. Each type of proppant comes in various sizes, categorized as mesh sizes, and the various mesh sizes are used in different applications in the oil and natural gas industry. The mesh number system is a measure of the number of equally sized openings per square inch of screen through which the proppant is sieved.
Mud motors	A positive displacement drilling motor that uses hydraulic horsepower of the drilling fluid to drive the drill bit. Mud motors are used extensively in directional drilling operations.
Natural gas liquids	Components of natural gas that are liquid at surface in field facilities or in gas processing plants. Natural gas liquids can be classified according to their vapor pressures as low (condensate), intermediate (natural gasoline) and high (liquefied petroleum gas) vapor pressure.
Nitrogen pumping unit	A high-pressure pump or compressor unit capable of delivering high-purity nitrogen gas for use in oil or gas wells. Two basic types of units are commonly available: a nitrogen converter unit that pumps liquid nitrogen at high pressure through a heat exchanger or converter to deliver high-pressure gas at ambient temperature, and a nitrogen generator unit that compresses and separates air to provide a supply of high pressure nitrogen gas.
Plugging	The process of permanently closing oil and gas wells no longer capable of producing in economic quantities. Plugging work can be performed with a well servicing rig along with wireline and cementing equipment; however, this service is typically provided by companies that specialize in plugging work.
Plug	A down-hole packer assembly used in a well to seal off or isolate a particular formation for testing, acidizing, cementing, etc.; also a type of plug used to seal off a well temporarily while the wellhead is removed.
Pounds per square inch	A unit of pressure. It is the pressure resulting from a one pound force applied to an area of one square inch.
Pressure pumping	Services that include the pumping of liquids under pressure.
Producing formation	An underground rock formation from which oil, natural gas or water is produced. Any porous rock will contain fluids of some sort, and all rocks at considerable distance below the Earth’s surface will initially be under pressure, often related to the hydrostatic column of ground waters above the reservoir. To produce, rocks must also have permeability, or the capacity to permit fluids to flow through them.
Proppant	Sized particles mixed with fracturing fluid to hold fractures open after a hydraulic fracturing treatment. In addition to naturally occurring sand grains, man-made or specially engineered proppants, such as resin-coated sand or high-strength ceramic materials like sintered bauxite, may also be used. Proppant materials are carefully sorted for size and sphericity to provide an efficient conduit for production of fluid from the reservoir to the wellbore.
Resource play	Accumulation of hydrocarbons known to exist over a large area.
Shale	A fine-grained, fissile, sedimentary rock formed by consolidation of clay- and silt-sized particles into thin, relatively impermeable layers.
Tight oil	Conventional oil that is found within reservoirs with very low permeability. The oil contained within these reservoir rocks typically will not flow to the wellbore at economic rates without assistance from technologically advanced drilling and completion processes. Commonly, horizontal drilling coupled with multistage fracturing is used to access these difficult to produce reservoirs.
Tight sands	A type of unconventional tight reservoir. Tight reservoirs are those which have low permeability, often quantified as less than 0.1 millidarcies.
Tubulars	A generic term pertaining to any type of oilfield pipe, such as drill pipe, drill collars, pup joints, casing, production tubing and pipeline.
Unconventional resource	~~An umbrella~~A term for ~~oil and natural gas that~~the different manner by which resources are exploited as compared to the extraction of conventional resources. In unconventional drilling, the wellbore is ~~produced by means that do not meet~~generally drilled to specific objectives within narrow parameters, often across long, lateral intervals within narrow horizontal formations offering greater contact area with the ~~criteria for conventional~~producing formation. Typically, the well is then hydraulically fractured at multiple stages to optimize production. What has qualified as “unconventional” at any particular time is a complex function of resource characteristics, the available exploration and production technologies, the economic environment, and the scale, frequency and duration of production from the resource. Perceptions of these factors inevitably change over time and often differ among users of the term. At present, the term is used in reference to oil and gas resources whose porosity, permeability, fluid trapping mechanism, or other characteristics differ from conventional sandstone and carbonate reservoirs. Coalbed methane, gas hydrates, shale gas, fractured reservoirs and tight gas sands are considered unconventional resources.
Wellbore	The physical conduit from surface into the hydrocarbon reservoir.
Well stimulation	A treatment performed to restore or enhance the productivity of a well. Stimulation treatments fall into two main groups, hydraulic fracturing treatments and matrix treatments. Fracturing treatments are performed above the fracture pressure of the reservoir formation and create a highly conductive flow path between the reservoir and the wellbore. Matrix treatments are performed below the reservoir fracture pressure and generally are designed to restore the natural permeability of the reservoir following damage to the near wellbore area. Stimulation in shale gas reservoirs typically takes the form of hydraulic fracturing treatments.
Wireline	A general term used to describe well-intervention operations conducted using single-strand or multi-strand wire or cable for intervention in oil or gas wells. Although applied inconsistently, the term commonly is used in association with electric logging and cables incorporating electrical conductors.
Workover	The process of performing major maintenance or remedial treatments on an oil or gas well. In many cases, workover implies the removal and replacement of the production tubing string after the well has been killed and a workover rig has been placed on location. Through-tubing workover operations, using coiled tubing, snubbing or slickline equipment, are routinely conducted to complete treatments or well service activities that avoid a full workover where the tubing is removed. This operation saves considerable time and expense.



The following is a glossary of certain electrical infrastructure industry terms used in this report:
Distribution	The distribution of electricity from the transmission system to individual customers.
Substation	A part of an electrical transmission and distribution system that transforms voltage from high to low, or the reverse.
Transmission	The movement of electrical energy from a generating site, such as a power plant, to an electric substation.

iii

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Various statements contained in this report that express a belief, expectation, or intention, or that are not statements of historical fact, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, or the Exchange Act. In particular, the factors discussed in this report and detailed under Part II, Item 1A. Risk Factors in this report and our Annual Report on Form 10–K for the year ended December 31, ~~2017~~2018 could affect our actual results and cause our actual results to differ materially from expectations, estimates or assumptions expressed, forecasted or implied in such forward-looking statements.

Forward-looking statements may include statements about our:

business strategy;

pending or future acquisitions and future capital expenditures;

ability to obtain permits and governmental approvals;

outcome of a government investigation relating to the contracts awarded to one of our subsidiaries by the Puerto Rico Electric Power Authority and any resulting litigation;

technology;

financial strategy;

future operating results; and

plans, objectives, expectations and intentions.

All of these types of statements, other than statements of historical fact included in this quarterly report, are forward-looking statements. These forward-looking statements may be found in the “Business,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other sections of this quarterly report. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “could,” “should,” “would,” “expect,” “plan,” “project,” “budget,” “intend,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “pursue,” “target,” “seek,” “objective,” “continue,” “will be,” “will benefit,” or “will continue,” the negative of such terms or other comparable terminology.

The forward-looking statements contained in this report are largely based on our expectations, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors, which are difficult to predict and many of which are beyond our control. Although we believe such estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, our management’s assumptions about future events may prove to be inaccurate. Our management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that such statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to many factors including those described in Part II, Item 1A. Risk Factors in this report and our Annual Report on Form 10–K for the year ended December 31, ~~2017~~2018 and Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" and elsewhere in this report. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

MAMMOTH ENERGY SERVICES, INC.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

MAMMOTH ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)


ASSETS	September 30,			December 31,			June 30,			December 31,
	2018			2017			2019			2018
CURRENT ASSETS	(in thousands)						(in thousands)
Cash and cash equivalents	$	19,692		$	5,637		$	7,245		$	67,625
Accounts receivable, net	390,824			243,746			385,626			337,460
Receivables from related parties	25,335			33,788			37,400			11,164
Inventories	19,185			17,814			22,114			21,302
Prepaid expenses	10,969			12,552			10,196			11,317
Other current assets	652			886			699			688
Total current assets	466,657			314,423			463,280			449,556

Property, plant and equipment, net	434,785			351,017			408,408			436,699
Sand reserves	72,207			74,769			69,762			71,708
Operating lease right-of-use assets							52,184			—
Intangible assets, net - customer relationships	3,021			9,623			1,563			1,711
Intangible assets, net - trade names	6,134			6,516			5,625			6,045
Goodwill	98,308			99,811			101,245			101,245
Deferred income tax asset	—			6,739
Other non-current assets	4,046			4,345			6,843			6,127
Total assets	$	1,085,158		$	867,243		$	1,108,910		$	1,073,091
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable	$	139,374		$	141,306		$	72,671		$	68,843
Payables to related parties	1,402			1,378			1,020			370
Accrued expenses and other current liabilities	42,605			40,895			42,658			59,652
Current operating lease liability							17,338			—
Income taxes payable	172,000			36,409			30,780			104,958
Total current liabilities	355,381			219,988			164,467			233,823

Long-term debt	—			99,900			82,036			—
Deferred income tax liabilities	33,601			34,147			56,580			79,309
Long-term operating lease liability							34,807			—
Asset retirement obligation	3,155			2,123			3,534			3,164
Other liabilities	1,703			3,289			4,270			2,743
Total liabilities	393,840			359,447			345,694			319,039

COMMITMENTS AND CONTINGENCIES (Note 18)
COMMITMENTS AND CONTINGENCIES (Note 19)

EQUITY
Equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 44,755,678 and 44,589,306 issued and outstanding at September 30, 2018 and December 31, 2017, respectively	448			446
Common stock, $0.01 par value, 200,000,000 shares authorized, 45,004,795 and 44,876,649 issued and outstanding at June 30, 2019 and December 31, 2018							450			449
Additional paid in capital	529,825			508,010			533,151			530,919
Retained earnings	164,165			2,001			232,990			226,765
Accumulated other comprehensive loss	(3,120		)	(2,661		)	(3,375		)	(4,081		)
Total equity	691,318			507,796			763,216			754,052
Total liabilities and equity	$	1,085,158		$	867,243		$	1,108,910		$	1,073,091

The accompanying notes are an integral part of these condensed consolidated financial statements.

MAMMOTH ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
REVENUE (in thousands, except per share amounts)
Services revenue $ 346,368
$ 63,113
$ 1,210,572
$ 119,864
Services revenue - related parties 18,933
56,861
108,632
134,426
Product revenue 14,955
15,276
67,703
29,043
Product revenue - related parties 3,787
14,055
24,979
39,200
Total revenue 384,043
149,305
1,411,886
322,533

COST AND EXPENSES
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $27,810, $79,283, $24,153 and $57,642, respectively, for the three and nine months ended September 30, 2018 and three and nine months ended September 30, 2017) 216,670
89,346
809,932
191,911
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0 and $0, respectively, for the three and nine months ended September 30, 2018 and three and nine months ended September 30, 2017) 1,425
9
5,645
701
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,183, $10,376, $3,033 and $6,599, respectively, for the three and nine months ended September 30, 2018 and three and nine months ended September 30, 2017) 29,470
25,178
97,917
57,759
Selling, general and administrative (Note 12) (45,761 ) 7,667
56,916
21,473
Selling, general and administrative - related parties (Note 12) 437
355
1,398
986
Depreciation, depletion, amortization and accretion 32,015
27,224
89,718
64,354
Impairment of long-lived assets 4,582
—
4,769
—
Total cost and expenses 238,838
149,779
1,066,295
337,184
Operating income (loss) 145,205
(474 ) 345,591
(14,651 )

OTHER (EXPENSE) INCOME
Interest expense, net (458 ) (1,420 ) (2,654 ) (2,929 )
Bargain purchase gain, net of tax —
—
—
4,012
Other, net (400 ) (320 ) (914 ) (707 )
Total other (expense) income (858 ) (1,740 ) (3,568 ) 376
Income (loss) before income taxes 144,347
(2,214 ) 342,023
(14,275 )
Provision (benefit) for income taxes 74,835
(1,413 ) 174,265
(7,323 )
Net income (loss) $ 69,512
$ (801 ) $ 167,758
$ (6,952 )

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net of tax of ($87), $185, $358 and $812, respectively, for the three and nine months ended September 30, 2018 and three and nine months ended September 30, 2017 327
628
(459 ) 1,037
Comprehensive income (loss) $ 69,839
$ (173 ) $ 167,299
$ (5,915 )

Net income (loss) per share (basic) (Note 14) $ 1.55
$ (0.02 ) $ 3.75
$ (0.17 )
Net income (loss) per share (diluted) (Note 14) $ 1.54
$ (0.02 ) $ 3.73
$ (0.17 )
Weighted average number of shares outstanding (basic) (Note 14) 44,756
44,502
44,718
40,526
Weighted average number of shares outstanding (diluted) (Note 14) 45,082
44,502
45,012
40,526
Dividends declared per share $ 0.125
—
$ 0.125
—



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
REVENUE	(in thousands, except per share amounts)
Services revenue	$	115,760		$	455,545		$	308,861		$	864,204
Services revenue - related parties	36,837			40,611			80,910			89,699
Product revenue	18,362			27,708			30,671			52,748
Product revenue - related parties	10,861			9,730			23,516			21,192
Total revenue	181,820			533,594			443,958			1,027,843

COST AND EXPENSES
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $25,597, $51,280, $26,898 and $51,473, respectively, for the three and six months ended June 30, 2019 and three and six months ended June 30, 2018)	132,688			302,283			290,794			593,262
Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $0, $0, $0 and $0, respectively, for the three and six months ended June 30, 2019 and three and six months ended June 30, 2018)	2,650			2,428			3,363			4,220
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $4,525, $7,395, $3,879 and $6,193, respectively, for the three and six months ended June 30, 2019 and three and six months ended June 30, 2018)	32,677			35,117			62,928			68,447
Selling, general and administrative (Note 12)	8,796			64,595			25,698			102,677
Selling, general and administrative - related parties (Note 12)	659			532			1,093			961
Depreciation, depletion, amortization and accretion	30,145			30,795			58,721			57,703
Impairment of long-lived assets	—			187			—			187
Total cost and expenses	207,615			435,937			442,597			827,457
Operating (loss) income	(25,795		)	97,657			1,361			200,386

OTHER INCOME (EXPENSE)
Interest expense, net	(1,551		)	(959		)	(2,074		)	(2,196		)
Other, net	4,019			(486		)	28,576			(514		)
Total other income (expense)	2,468			(1,445		)	26,502			(2,710		)
(Loss) income before income taxes	(23,327		)	96,212			27,863			197,676
(Benefit) provision for income taxes	(12,438		)	53,512			10,419			99,430
Net (loss) income	$	(10,889	)	$	42,700		$	17,444		$	98,246

OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of tax of $92, $182, $86 and $272, respectively, for the three and six months ended June 30, 2019 and three and six months ended June 30, 2018	350			(325		)	706			(786		)
Comprehensive (loss) income	$	(10,539	)	$	42,375		$	18,150		$	97,460

Net (loss) income per share (basic) (Note 15)	$	(0.24	)	$	0.95		$	0.39		$	2.20
Net (loss) income per share (diluted) (Note 15)	$	(0.24	)	$	0.95		$	0.39		$	2.18
Weighted average number of shares outstanding (basic) (Note 15)	45,003			44,737			44,966			44,700
Weighted average number of shares outstanding (diluted) (Note 15)	45,003			45,059			45,060			44,977
Dividends declared per share	$	0.125		—			$	0.25		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

MAMMOTH ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)

Accumulated
Retained Additional Other
Common Stock Members' Earnings Paid-In Comprehensive
Shares Amount Equity (Deficit) Capital Loss Total
(in thousands)
Balance at January 1, 2017 37,500
$ 375
$ 81,739
$ (56,323 ) $ 400,206
$ (3,216 ) $ 422,781
Net income of Sturgeon prior to acquisition —
—
640
—
—
—
640
Stingray acquisition 1,393
14
—
—
25,748
—
25,762
Sturgeon acquisition 5,607
56
(82,379 ) —
78,313
—
(4,010 )
Stock based compensation 89
1
—
—
3,743
—
3,744
Net income —
—
—
58,324
—
—
58,324
Other comprehensive income —
—
—
—
—
555
555
Balance at December 31, 2017 44,589
$ 446
$ —
$ 2,001
$ 508,010
$ (2,661 ) $ 507,796
Equity based compensation (Note 15) —
—
—
—
17,487
—
17,487
Stock based compensation 167
2
—
—
4,328
—
4,330
Net income —
—
—
167,758
—
—
167,758
Cash dividends declared —
—
—
(5,594 ) —
—
(5,594 )
Other comprehensive loss —
—
—
—
— (459 ) (459 )
Balance at September 30, 2018 44,756
$ 448
$ —
$ 164,165
$ 529,825
$ (3,120 ) $ 691,318



	Three Months Ended June 30, 2019
									Accumulated
							Additional		Other
	Common Stock			Retained			Paid-In		Comprehensive
	Shares	Amount		Earnings			Capital		Loss			Total
	(in thousands)
Balance at March 31, 2019	44,877	$	449	$	249,488		$	532,208	$	(3,725	)	$	778,420
Stock based compensation	128	1		—			943		—			944
Net loss	—	—		(10,889		)	—		—			(10,889		)
Cash dividends paid ($0.125 per share)	—	—		(5,609		)	—		—			(5,609		)
Other comprehensive income	—	—		—			—		350			350
Balance at June 30, 2019	45,005	$	450	$	232,990		$	533,151	$	(3,375	)	$	763,216

	Three Months Ended June 30, 2018
									Accumulated
							Additional		Other
	Common Stock			Retained			Paid-In		Comprehensive
	Shares	Amount		Earnings			Capital		Loss			Total
	(in thousands)
Balance at March 31, 2018	44,714	$	447	$	57,547		$	509,265	$	(3,122	)	$	564,137
Equity based compensation	—	—		—			17,487		—			17,487
Stock based compensation	39	1		—			1,669		—			1,670
Net income	—	—		42,700			—		—			42,700
Other comprehensive loss	—	—		—			—		(325		)	(325		)
Balance at June 30, 2018	44,753	$	448	$	100,247		$	528,421	$	(3,447	)	$	625,669

	Six Months Ended June 30, 2019
									Accumulated
							Additional		Other
	Common Stock			Retained			Paid-In		Comprehensive
	Shares	Amount		Earnings			Capital		Loss			Total
	(in thousands)
Balance at December 31, 2018	44,877	$	449	$	226,765		$	530,919	$	(4,081	)	$	754,052
Stock based compensation	128	1		—			2,232		—			2,233
Net income	—	—		17,444			—		—			17,444
Cash dividends paid ($0.25 per share)	—	—		(11,219		)	—		—			(11,219		)
Other comprehensive income	—	—		—			—		706			706
Balance at June 30, 2019	45,005	$	450	$	232,990		$	533,151	$	(3,375	)	$	763,216

	Six Months Ended June 30, 2018
									Accumulated
							Additional		Other
	Common Stock			Retained			Paid-In		Comprehensive
	Shares	Amount		Earnings			Capital		Loss			Total
	(in thousands)
Balance at December 31, 2017	44,589	$	446	$	2,001		$	508,010	$	(2,661	)	$	507,796
Equity based compensation	—	—		—			17,487		—			17,487
Stock based compensation	164	2		—			2,924		—			2,926
Net income	—	—		98,246			—		—			98,246
Other comprehensive loss	—	—		—			—		(786		)	(786		)
Balance at June 30, 2018	44,753	$	448	$	100,247		$	528,421	$	(3,447	)	$	625,669

The accompanying notes are an integral part of these condensed consolidated financial statements.

MAMMOTH ENERGY SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

Nine Months Ended September 30,
2018 2017
(in thousands)
Cash flows from operating activities:
Net income (loss) $ 167,758
$ (6,952 )
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Equity based compensation (Note 15) 17,487
—
Stock based compensation 4,331
2,648
Depreciation, depletion, accretion and amortization 89,718
64,354
Amortization of coil tubing strings 1,473
2,144
Amortization of debt origination costs 299
299
Bad debt expense (14,543 ) 117
(Gain) loss on disposal of property and equipment (185 ) 126
Gain on bargain purchase —
(4,012 )
Impairment of long-lived assets 4,769
—
Deferred income taxes 6,418
(8,151 )
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net (132,553 ) (37,440 )
Receivables from related parties 8,453
(12,081 )
Inventories (2,665 ) (7,878 )
Prepaid expenses and other assets 1,814
2,644
Accounts payable (5,179 ) 30,445
Payables to related parties 24
8
Accrued expenses and other liabilities (405 ) 14,393
Income taxes payable 135,578
(28 )
Net cash provided by operating activities 282,592
40,636

Cash flows from investing activities:
Purchases of property and equipment (144,898 ) (102,273 )
Purchases of property and equipment from related parties (4,632 ) —
Business acquisitions (14,456 ) (42,008 )
Proceeds from disposal of property and equipment 1,213
782
Business combination cash acquired (Note 4) —
2,671
Net cash used in investing activities (162,773 ) (140,828 )

Cash flows from financing activities:
Borrowings from lines of credit 77,000
118,850
Repayments of lines of credit (176,900 ) (24,850 )
Repayments of equipment financing note (219 ) —
Dividends paid (5,594 ) —
Repayment of acquisition long-term debt (Note 4) —
(8,851 )
Net cash (used in) provided by financing activities (105,713 ) 85,149
Effect of foreign exchange rate on cash (51 ) 82
Net change in cash and cash equivalents 14,055
(14,961 )
Cash and cash equivalents at beginning of period 5,637
29,239
Cash and cash equivalents at end of period $ 19,692
$ 14,278

Supplemental disclosure of cash flow information:
Cash paid for interest $ 2,726
$ 2,300
Cash paid for income taxes $ 32,269
$ 840
Supplemental disclosure of non-cash transactions:
Purchases of property and equipment included in accounts payable and accrued expenses $ 21,124
$ 13,648
Acquisition of Sturgeon, Stingray Cementing LLC and Stingray Energy Services LLC (Note 4) $ —
$ 23,091



	Six Months Ended June 30,
	2019			2018
	(in thousands)
Cash flows from operating activities:
Net income	$	17,444		$	98,246
Adjustments to reconcile net income to cash (used in) provided by operating activities:
Equity based compensation (Note 16)	—			17,487
Stock based compensation	2,233			2,916
Depreciation, depletion, accretion and amortization	58,721			57,703
Amortization of coil tubing strings	1,003			1,120
Amortization of debt origination costs	163			199
Bad debt expense	266			53,790
Loss (gain) on disposal of property and equipment	176			(128		)
Impairment of long-lived assets	—			187
Deferred income taxes	(22,911		)	(27,906		)
Other	(199		)	—
Changes in assets and liabilities, net of acquisitions of businesses:
Accounts receivable, net	(48,530		)	(122,908		)
Receivables from related parties	(26,236		)	3,114
Inventories	(1,815		)	4,156
Prepaid expenses and other assets	1,115			(1,195		)
Accounts payable	7,366			34,186
Payables to related parties	650			538
Accrued expenses and other liabilities	(17,129		)	10,193
Income taxes payable	(74,172		)	94,753
Net cash (used in) provided by operating activities	(101,855		)	226,451

Cash flows from investing activities:
Purchases of property and equipment	(30,085		)	(105,349		)
Purchases of property and equipment from related parties	(135		)	(3,436		)
Business acquisitions	—			(13,356		)
Contributions to equity investee	(680		)	—
Proceeds from disposal of property and equipment	2,465			898
Net cash used in investing activities	(28,435		)	(121,243		)

Cash flows from financing activities:
Borrowings from lines of credit	108,000			52,000
Repayments of lines of credit	(25,964		)	(151,900		)
Principal payments on financing leases and equipment financing notes	(992		)	(145		)
Dividends paid	(11,219		)	—
Net cash provided by (used in) financing activities	69,825			(100,045		)
Effect of foreign exchange rate on cash	85			(98		)
Net change in cash and cash equivalents	(60,380		)	5,065
Cash and cash equivalents at beginning of period	67,625			5,637
Cash and cash equivalents at end of period	$	7,245		$	10,702

Supplemental disclosure of cash flow information:
Cash paid for interest	$	1,830		$	2,543
Cash paid for income taxes	$	116,442		$	32,584
Supplemental disclosure of non-cash transactions:
Purchases of property and equipment included in accounts payable and accrued expenses	$	2,339		$	20,897

The accompanying notes are an integral part of these condensed consolidated financial statements.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.	Organization and Nature of Business

Mammoth Energy Services, Inc. ~~(the “Company,” “Mammoth~~("Mammoth Inc.”" or ~~“Mammoth”~~the "Company"), together with its subsidiaries, is an integrated, growth-oriented company serving both the oil and gas and the electric utility industries in North America and US territories. ~~Mammoth's subsidiaries provide~~Mammoth Inc.'s infrastructure division provides construction, upgrade, maintenance and repair services to various public and private owned utilities. Its oilfield services division provides a diversified set of ~~drilling and completion~~ services to the exploration and production industry including pressure pumping ~~coil tubing,~~and natural sand and proppant services as well as ~~trucking,~~contract land and directional drilling, coil tubing, flowback, cementing, ~~water transfer among others. In addition, its infrastructure division provides transmission, distribution~~acidizing, equipment rental, crude oil hauling and ~~logistics services to various public and private owned utilities throughout the US and Puerto Rico.~~remote accommodation services.

The Company was incorporated in Delaware in June 2016 as a wholly-owned subsidiary of Mammoth Energy Partners LP, a Delaware limited partnership (the “Partnership” or the “Predecessor”). The Partnership was originally formed by Wexford Capital LP (“Wexford”) in February 2014 as a holding company under the name Redback Energy Services Inc. and was converted to a Delaware limited partnership in August 2014. On November 24, 2014, Mammoth Energy Holdings LLC (“Mammoth Holdings,” an entity controlled by Wexford), Gulfport Energy Corporation (“Gulfport”) and Rhino Resource Partners LP (“Rhino”) contributed their interest in certain of the entities presented below to the Partnership in exchange for 20 million limited partner units. Mammoth Energy Partners GP, LLC (the “General Partner”) held a non-economic general partner interest.

On October 12, 2016, the Partnership was converted into a Delaware limited liability company named Mammoth Energy Partners LLC (“Mammoth LLC”), and then Mammoth Holdings, Gulfport and Rhino, as all the members of Mammoth LLC, contributed their member interests in Mammoth LLC to Mammoth Inc. Prior to the conversion and the contribution, Mammoth Inc. was a wholly-owned subsidiary of the Partnership. Following the conversion and the contribution, Mammoth LLC (as the converted successor to the Partnership) was a wholly-owned subsidiary of Mammoth Inc. Mammoth Inc. did not conduct any material business operations until Mammoth LLC was contributed to it. On October 19, 2016, Mammoth Inc. closed its initial public offering of 7,750,000 shares of common stock (the “IPO”), which included an aggregate of 250,000 shares that were offered by Mammoth Holdings, Gulfport and Rhino, at a price to the public of $15.00 per share.

On June 29, 2018, Gulfport and MEH Sub LLC ("MEH Sub"), an entity controlled by Wexford, (collectively, the "Selling Stockholders") completed an underwritten secondary public offering of 4,000,000 shares of the Company’s common stock at a purchase price to the Selling Stockholders of $38.01 per share. The Selling Stockholders granted the underwriters an option to purchase up to an aggregate of 600,000 additional shares of the Company's common stock at the same purchase price. This option was exercised, in part, and on July 30, 2018, the underwriters purchased an additional 385,000 shares of common stock from the Selling Stockholders at the same price per share. The Selling Stockholders received all proceeds from this offering.

At ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, Wexford, Gulfport and Rhino beneficially owned the following shares of outstanding common stock of Mammoth Inc.:


	At September 30, 2018			At December 31, 2017			At June 30, 2019			At December 31, 2018
	Share Count	% Ownership		Share Count	% Ownership		Share Count	% Ownership		Share Count	% Ownership
Wexford	21,986,251	49.1	%	25,009,319	56.1	%	21,992,677	48.9	%	21,988,473	49.0	%
Gulfport	9,824,671	22.0	%	11,171,887	25.1	%	9,829,548	21.8	%	9,826,893	21.9	%
Rhino	104,100	0.2	%	568,794	1.3	%	—	—	%	104,100	0.2	%
Outstanding shares owned by related parties	31,915,022	71.3	%	36,750,000	82.5	%	31,822,225	70.7	%	31,919,466	71.1	%
Total outstanding	44,755,678	100.0	%	44,589,306	100.0	%	45,004,795	100.0	%	44,876,649	100.0	%

Operations

The Company's infrastructure services include electric utility contracting services focused on the ~~repair,~~construction, upgrade, maintenance and ~~construction~~repair of transmission and distribution networks. The Company’s infrastructure services also provide storm repair and restoration services in response to natural disasters including hurricanes and ice or other storm-related damage. The Company's pressure pumping services include equipment and personnel used in connection with the ~~completion and early production of oil and natural gas wells. The Company's natural sand proppant services include the~~

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

completion and early production of oil and natural gas wells as well as water transfer services. The Company's natural sand proppant services include the distribution and production of natural sand proppant that is used primarily for hydraulic fracturing in the oil and gas industry. The Company's contract land and directional drilling services provides drilling rigs and directional tools for both vertical and horizontal drilling of oil and natural gas wells and salt water disposal wells. The Company also provides other services, including contract land and directional drilling, coil tubing, ~~units used to enhance the flow of oil and natural gas,~~ flowback, cementing, aciziding, equipment rentals, crude oil hauling ~~water transfer~~ and remote accommodations.

All of the Company’s operations are in North ~~America~~America. During the periods presented in this report, the Company provided its infrastructure services primarily in the northeast, southwest and midwest portions of the United States and in Puerto Rico. The Company’s infrastructure business depends on infrastructure spending on maintenance, upgrade, expansion and repair and restoration. Any prolonged decrease in spending by electric utility companies or delays or reductions in government appropriations could have a material adverse effect on the ~~Caribbean.~~Company’s results of operations and financial condition. During the periods presented, the Company has operated its oil and natural gas businesses in the Permian Basin, the Utica Shale, the Eagle Ford Shale, the Marcellus Shale, the Granite Wash, the SCOOP, the STACK, the Cana-Woodford Shale, the Cleveland Sand and the oil sands located in Northern Alberta, Canada. ~~The Company operates its energy infrastructure services primarily in the northeast, southwest and midwest portions of the United States and Puerto Rico.~~ The Company's oil and natural gas business depends in large part on the conditions in the oil and natural gas industry and, specifically, on the amount of capital spending by its customers. Any prolonged increase or decrease in oil and natural gas prices affects the levels of exploration, development and production activity, as well as the entire health of the oil and natural gas industry. Changes in the commodity prices for oil and natural gas could have a material effect on the Company’s results of operations and financial condition. The Company’s business also depends on infrastructure spending on maintenance, upgrade, expansion and repair and restoration. Any prolonged decrease in spending by electric utility companies or delays or reductions in government appropriations could have a material adverse effect on the Company’s results of operations and financial condition.


2.	Basis of Presentation and Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated interim financial statements include the accounts of the Company and its subsidiaries and the variable interest ~~entity ("VIE"~~entities (“VIE”) for which the Company is the primary beneficiary. All material intercompany accounts and transactions have been eliminated.

This report has been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, and reflects all adjustments, which in the opinion of management are necessary for the fair presentation of the results for the interim periods, on a basis consistent with the annual audited consolidated financial statements. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) have been omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the summary of significant accounting policies and notes thereto included in the Company’s most recent annual report on Form 10-K.

On June 5, 2017, the Company acquired Sturgeon Acquisitions LLC ("Sturgeon") and Sturgeon's wholly owned subsidiaries Taylor Frac, LLC, Taylor Real Estate Investments, LLC and South River Road, LLC. Prior to its acquisition of Sturgeon, the Company and Sturgeon were under common control and it is required under GAAP to account for this common control acquisition in a manner similar to the pooling of interest method of accounting. Therefore, the Company's historical financial information for all periods included in the accompanying financial statements has been recast to combine Sturgeon with the Company as if the acquisition had been effective since the date Sturgeon commenced operations. Refer to Note 4 - Acquisitions for additional disclosure regarding the acquisition of Sturgeon.

Accounts Receivable

Accounts receivable include amounts due from customers for services performed or goods sold. The Company grants credit to customers in the ordinary course of business and generally does not require collateral. Most areas in which the Company operates provide for a mechanic’s lien against the property on which the service is performed if the lien is filed within the statutorily specified time frame. Customer balances are generally considered delinquent if unpaid by the 30th day following the invoice date and credit privileges may be revoked if balances remain unpaid. Delinquency fees are recognized in other income when chargeable and collectability is reasonably assured.

During the periods presented, the Company provided infrastructure services in Puerto Rico under master services agreements entered into by Cobra Acquisitions LLC ("Cobra"), one of the Company's subsidiaries, with the Puerto Rico Electric Power Authority ("PREPA") to perform repairs to PREPA’s electrical grid as a result of Hurricane Maria. During the three and six months ended June 30, 2019, the Company charged interest on delinquent accounts receivable pursuant to the terms of its agreements with PREPA totaling $3.2 million and $29.0 million, respectively. These amounts are included in other, net on the unaudited condensed consolidated statement of comprehensive income.

The Company regularly reviews receivables and provides for estimated losses through an allowance for doubtful accounts. In evaluating the level of established reserves, the Company makes judgments regarding its customers’ ability to make required payments, economic events and other factors. As the financial condition of customers changes, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. In the event the Company was to determine that a customer may not be able to make required payments, the Company would increase the allowance through a charge to income in the period in which that determination is made.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

If it is determined that previously reserved amounts are collectible, the Company would decrease the allowance through a credit to income in the period in which that determination is made. Uncollectible accounts receivable are periodically charged against the allowance for doubtful accounts once a final determination is made regarding their uncollectability.

Following is a roll forward of the allowance for doubtful accounts for the year ended December 31, ~~2017~~2018 and the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 (in thousands):

Balance, January 1, 2017 $ 5,377
Additions charged to expense 16,206
Additions other 179
Deductions for uncollectible receivables written off (25 )
Balance, December 31, 2017 21,737
Additions charged to expense (14,541 )
Deductions for uncollectible receivables written off (1,839 )
Balance, September 30, 2018 $ 5,357



Balance, January 1, 2018	$	21,737
Additions (reductions) charged to bad debt expense	(14,589		)
Deductions for uncollectible receivables written off	(1,950		)
Balance, December 31, 2018	5,198
Additions charged to bad debt expense	266
Deductions for uncollectible receivables written off	(155		)
Balance, June 30, 2019	$	5,309

In October 2017, Cobra Acquisitions LLC ("Cobra"), one of the Company's subsidiaries, entered into a contract with the Puerto Rico Electric Power Authority ("PREPA") to perform repairs to PREPA’s electrical grid as a result of Hurricane Maria. At December 31, 2017, ~~and through June 30, 2018,~~ the Company reviewed receivables due from PREPA and made specific reserves consistent with Company policy which resulted in additions to the allowance for doubtful accounts totaling $16.0 ~~million and $53.6 million, respectively, for the year ended December 31, 2017 and six months ended June 30, 2018.~~million. During ~~the three months ended September 30,~~ 2018, the Company received payment from PREPA for the amount reserved at December 31, ~~2017 of $16 million.~~2017. As a result, the Company reversed the 2017 ~~and 2018~~ additions to the allowance for doubtful accounts from ~~PREPA. The Company expects to receive payment for~~PREPA during the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019 and that the taxes due as a result of the 2018 Puerto Rico tax return will be paid in the first quarter of 2019.year ended December 31, 2018.

Additionally, the Company has made specific reserves consistent with Company policy which resulted in additions to allowance for doubtful accounts totaling ~~$1.4~~$0.3 million and ~~$0.2~~$1.4 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and year ended December 31, ~~2017.~~2018. The Company will continue to pursue collection until such time as final determination is made consistent with Company policy.

Concentrations of Credit Risk and Significant Customers

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents in excess of federally insured limits and trade receivables. Following is a summary of our significant customers based on percentages of total accounts receivable balances at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 and percentages of total revenues derived for the three and ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017:~~2018:


	REVENUES								ACCOUNTS RECEIVABLE				REVENUES								ACCOUNTS RECEIVABLE
	Three Months Ended September 30,				Nine Months Ended September 30,				At September 30,		At December 31,		Three Months Ended June 30,				Six Months Ended June 30,				At June 30,		At December 31,
	2018		2017		2018		2017		2018		2017		2019		2018		2019		2018		2019		2018
Customer A^(a)	57	%	—	%	63	%	—	%	62	%	56	%	6	%	65	%	22	%	65	%	61	%	65	%
Customer B^(b)	6	%	47	%	9	%	54	%	6	%	12	%	26	%	9	%	23	%	11	%	9	%	3	%
Customer C^(c)													5	%	—	%	10	%	—	%	1	%	2	%


a.	Customer A is a third-party customer. Revenues and the related accounts receivable balances earned from Customer A were derived from the Company's infrastructure services segment. Accounts receivable for Customer A also includes receivables due for interest charged on delinquent accounts receivable.


b.	Customer B is a related party customer. Revenues and the related accounts receivable balances earned from Customer B were derived from the Company's pressure pumping services segment, natural sand proppant services segment ~~contract land~~ and ~~directional drilling~~other businesses.


c.	Customer C is a third-party customer. Revenues and the related accounts receivable balances earned from Customer C were derived from the Company's pressure pumping services segment and ~~other businesses.~~equipment rental business.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, trade receivables, trade payables, amounts receivable or payable to related parties and long-term debt. The carrying amount of cash and cash equivalents, trade receivables, receivables from related parties and trade payables approximates fair value because of the short-term nature

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

of the instruments. The fair value of long-term debt approximates its carrying value because the cost of borrowing fluctuates based upon market conditions.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board ~~(“FASB”~~("FASB") issued Accounting Standards Update ~~(“ASU”~~("ASU") No. 2016-02 ~~“Leases”~~“Leases (Topic 842)” amending the current accounting for leases. Under the new provisions, all lessees will report a ~~right-of-use~~right of use asset and alease liability ~~for~~on the ~~obligation to make payments~~balance sheet for all leases with ~~the exception of those leases with~~ a term ~~of 12 months or less. All other leases will fall into~~longer than one ~~of two categories: (i) a~~year, while maintaining substantially similar classifications for financing ~~lease or (ii) an~~and operating ~~lease.~~leases. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. ~~For sale leaseback transactions, a sale will only be recognized if the criteria in the new revenue recognition standard are met.~~ ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. The Company ~~plans to adopt~~adopted this ASU effective January 1, 2019 utilizing the ~~modified retrospective~~transition method permitted by ASU No. 2018-11 "Leases (Topic 842): Targeted Improvements", issued in August 2018, which permits an entity to recognize a cumulative-effect adjustment to the opening balance of ~~adoption. This new leasing guidance will impact~~retained earnings in the ~~Company~~period of adoption with no adjustment made to the comparative periods presented in ~~situations where it is~~ the ~~lessee, and in certain circumstances it will have a right-of-use asset and lease liability on its~~ consolidated financial statements. ~~The Company is in~~See Note 14 for the ~~process of implementing a new lease accounting system in connection with~~impact the adoption of this standard had on the Company's financial statements.

In June 2016, the FASB issued ASU ~~and are continuing~~No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends current guidance on reporting credit losses on financial instruments. This ASU requires entities to ~~evaluate~~reflect its current estimate of all expected credit losses. The guidance affects most financial assets, including trade accounts receivable. This ASU is effective for fiscal years beginning after December 31, 2019, with early adoption permitted. The Company is currently evaluating the impact this ~~new guidance~~standard may have on ~~the Company's consolidated~~its financial statements and ~~results of operations.~~related disclosures.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Accounting,” which simplifies the accounting for share-based payments granted to non-employees by aligning the accounting with requirements for employee share-based compensation. Upon transition, this ASU requires non-employee awards to be measured at fair value as of the adoption date. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. ~~Early adoption is permitted. Currently, the~~The Company ~~has not elected to early adopt~~adopted this ASU effective January 1, 2019 and ~~is evaluating~~estimates the ~~impact it will have on the Company's consolidated financial statements.~~fair value of its non-employee awards (see Note 16) was approximately $18.9 million as of this date.


3.	Revenues

~~Adoption of ASC 606 "Revenues from Contracts with Customers"~~

~~In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers,” which supersedes the revenue recognition requirements in ASC 605,~~ ~~Revenue Recognition~~, and most industry-specific guidance. The new guidance requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, the Company adopted ASU 2014-09 and its related amendments (collectively, "ASC 606") using the modified retrospective method applied to contracts which were not completed as of January 1, 2018. Revenues for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported under previous revenue recognition guidance. While ASC 606 requires additional disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of the Company's revenues.

The adoption of ASC 606 represents a change in accounting principle. After evaluation of all contracts not completed as of January 1, 2018, the Company determined the cumulative effect of adopting ASC 606 was immaterial, and as such, has not recorded an adjustment to the opening balance of retained earnings on January 1, 2018.

~~Revenue Recognition~~

The Company's primary revenue streams include infrastructure services, pressure pumping ~~services, infrastructure~~ services, natural sand proppant services and other services, which includes contract land and directional drilling, ~~services and other services, which includes~~ coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling ~~water transfer~~ and remote accommodations services. See Note 1920 for the Company's revenue disaggregated by type.

Infrastructure Services

Infrastructure services are typically provided pursuant to master service agreements, repair and maintenance contracts or fixed price and non-fixed price installation contracts. Pricing under these contracts may be unit priced, cost-plus/hourly (or time and materials basis) or fixed price (or lump sum basis). Generally, the Company accounts for infrastructure services as a single performance obligation satisfied over time. In certain circumstances, the Company supplies materials that are utilized during the jobs as part of the agreement with the customer. The Company accounts for these infrastructure agreements as multiple performance obligations satisfied over time. Revenue is recognized over time as work progresses based on the days completed or as the contract is completed. Under certain customer contracts in our infrastructure services segment, the Company warranties equipment and labor performed for a specified period following substantial completion of the work.

Pressure Pumping Services

Pressure pumping services are typically provided based upon a purchase order, contract or on a spot market basis. Services are provided on a day rate, contracted or hourly basis. Generally, the Company accounts for pressure pumping services as a single performance obligation satisfied over time. In certain circumstances, the Company supplies proppant that is utilized for pressure pumping as part of the agreement with the customer. The Company accounts for these pressure pumping agreements as multiple performance obligations satisfied over time. Jobs for these services are typically ~~short-~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~term~~short-term in nature and range from a few hours to multiple days. Generally, revenue is recognized over time upon the completion of each segment of work based upon a completed field ticket, which includes the charges for the services performed, mobilization of the equipment to the location, consumable supplies and personnel.

Pursuant to a contract with one of its customers, the Company has agreed to provide that customer with use of up to two pressure pumping fleets for the period covered by the contract. Under this agreement, performance obligations are

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

satisfied as services are rendered based on the passage of time rather than the completion of each segment of work. The Company has the right to receive consideration from this customer even if circumstances prevent us from performing work. All consideration owed to the Company for services performed during the contractual period is fixed and the right to receive it is unconditional.

Additional revenue is generated through labor charges and the sale of consumable supplies that are incidental to the service being performed. Such amounts are recognized ratably over the period during which the corresponding goods and services are consumed.

~~Infrastructure Services~~

Infrastructure services are typically provided pursuant to master service agreements, repair and maintenance contracts or fixed price and non-fixed price installation contracts. Pricing under these contracts may be unit priced, cost-plus/hourly (or time and materials basis) or fixed price (or lump sum basis). The Company accounts for infrastructure services as a single performance obligation satisfied over time. Revenue is recognized over time as work progresses based on the days completed or as the contract is completed. Under certain customer contracts in our infrastructure services segment, the Company warranties equipment and labor performed for a specified period following substantial completion of the work.

Natural Sand Proppant Services

The Company sells natural sand proppant through sand supply agreements with its customers. Under these agreements, sand is typically sold at a flat rate per ton or a flat rate per ton with an index-based adjustment. The Company recognizes revenue at the point in time when the customer obtains legal title to the product, which may occur at the production facility, rail origin or at the destination terminal.

Certain of the Company's sand supply agreements contain a minimum volume commitment related to sand purchases whereby the Company charges a shortfall payment if the customer fails to meet the required minimum volume commitment. These agreements may also contain make-up provisions whereby shortfall payments can be applied in future periods against purchased volumes exceeding the minimum volume commitment. If a make-up right exists, the Company has future performance obligations to deliver excess volumes of product in subsequent months. In accordance with ASC 606, if the customer fails to meet the minimum volume commitment, the Company will assess whether it expects the customer to fulfill its unmet commitment during the contractually specified make-up period based on discussions with the customer and management's knowledge of the business. If the Company expects the customer will make-up deficient volumes in future periods, revenue related to shortfall payments will be deferred and recognized on the earlier of the date on which the customer utilizes make-up volumes or the likelihood that the customer will exercise its right to make-up deficient volumes becomes remote. As of ~~September~~June 30, ~~2018,~~2019, the Company had deferred revenue totaling ~~$0.4~~$1.1 million related to shortfall payments. This amount is included in accrued expenses and other current liabilities on the unaudited condensed consolidated balance sheet. If the Company does not expect the customer will make-up deficient volumes in future periods, the breakage model will be applied and revenue related to shortfall payments will be recognized when the model indicates the customer's inability to take delivery of excess volumes. During the ~~three and nine~~six months ended ~~September~~June 30, 2019 and 2018, the Company recognized revenue totaling ~~$1.2~~$1.0 million and ~~$1.5~~$0.3 million, respectively, related to shortfall payments.

In certain of the Company's sand supply agreements, the customer obtains control of the product when it is loaded into rail cars and the customer reimburses the Company for all freight charges incurred. The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the sand. If revenue is recognized for the related product before the shipping and handling activities occur, the Company accrues the related costs of those shipping and handling activities.

~~Contract Land and Directional Drilling Services~~

Contract drilling services are provided under daywork contracts. Directional drilling services, including motor rentals, are provided on a day rate or hourly basis, and revenue is recognized as work progresses. Performance obligations are satisfied over time as the work progresses based on the measure of output. Mobilization revenue and costs are recognized over the days of actual drilling.

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Other Services

The Company also provides contract land and directional drilling, coil tubing, pressure control, flowback, cementing, ~~acidizing,~~ equipment rentals, crude oil hauling ~~water transfer~~ and remote accommodations services, which are reported under other services. These services are typically provided based upon a purchase order, contract or on a spot market basis. Services are provided on a day rate, contracted or hourly basis. Performance obligations for these services are satisfied over time and revenue is recognized as the work progresses based on the measure of output. Jobs for these services are typically short-term in nature and range from a few hours to multiple days.

Practical Expedients

The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts in which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied distinct good or service that forms part of a single performance obligation.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

Following is a rollforward of the Company's contract liabilities (in thousands):


Balance, January 1, 2018	$	15,000		$	15,000
Deduction for recognition of revenue	(15,000		)	(15,000		)
Increase for deferral of shortfall payments	362			4,246
Balance, September 30, 2018	$	362
Increase for deferral of customer prepayments				58
Balance, December 31, 2018				4,304
Deduction for recognition of revenue				(2,054		)
Increase for deferral of shortfall payments				153
Increase for deferral of customer prepayments				243
Deduction of shortfall payments due to contract renegotiations				(1,350		)
Balance, June 30, 2019				$	1,296

The Company did not have any contract assets as of ~~September~~June 30, ~~2018~~2019 or ~~January 1,~~December 31, 2018.

Performance Obligations

Revenue recognized in the current period from performance obligations satisfied in previous periods was a nominal amount for the three and ~~nine~~six months ended ~~September~~June 30, 2019 and 2018. As of ~~September~~June 30, ~~2018,~~2019, the Company had unsatisfied performance obligations totaling ~~$141.7~~$114.8 million, which will be recognized over the next ~~3.3~~2.4 years.


4.	Acquisitions

~~(a)~~ Acquisition of Air Rescue Systems and Brim Equipment Assets

On December 21, 2018, Cobra Aviation Services LLC ("Cobra Aviation"), a variable interest entity of the Company, completed a series of transactions that provided for an expansion of its aviation service business. These transactions include (i) the acquisition of all outstanding equity interests in Air Rescue Systems Corporation ("ARS"), (ii) the purchase of two commercial helicopters, spare parts, support equipment and aircraft documents from Brim Equipment Leasing, Inc. ("Brim Equipment") (the "Brim Equipment Assets") and (iii) the formation of a joint venture between Cobra Aviation and Wexford Partners Investment Co. LLC ("Wexford Investment"), a related party, under the name of Brim Acquisitions LLC ("Brim Acquisitions"), which acquired all outstanding equity interest in Brim Equipment. Cobra Aviation owns a 49% economic interest and Wexford Investment owns a 51% economic interest in Brim Acquisitions, and each member contributed its pro rata portion of Brim Acquisitions' initial capital of $2.0 million.

The acquisition of ARS qualifies under FASB ASC 805, Business Combinations, as a business combination. The purchase of the Brim Equipment Assets was negotiated and funded as part of the acquisition. Therefore, the purchase of the Brim Equipment Assets also qualifies as a business combination under ASC 805. Cobra Aviation is able to exercise significant influence over certain aspects of Brim Acquisitions' activities, but is a minority owner and does not have controlling financial interest. As a result, Cobra Aviation's investment in Brim Acquisitions is accounted for as an equity method investment under FASB ASC 323, Investments-Equity Method and Joint Ventures. See Note 8 for additional information on our investment in Brim Acquisitions.

Total consideration paid for ARS was $2.4 million in cash to the sellers plus $0.3 million in consideration to be paid upon completion of certain contractual obligations. Total consideration paid for the Brim Equipment Assets was $4.2 million. The Company used cash on hand to fund the acquisitions.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the fair value of ARS and the Brim Equipment Assets as of December 21, 2018 (in thousands):



	ARS		Brim Equipment Assets
Accounts receivable	$	146	$	—
Property, plant and equipment	1,702		1,990
Identifiable intangible assets - trade name^(a)	120		—
Goodwill^(b)	694		2,243
Other non-current assets	5		—
Total assets acquired	$	2,667	$	4,233


a.	Trade name was valued using a "Relief-from-Royalty" method and will be amortized over 20 years.


b.	Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill recorded in connection with the acquisition is attributable to assembled workforces and future profitability expected to arise from the acquired entity.

From the acquisition date through December 31, 2018 and for the six months ended June 30, 2019, ARS and the Brim Equipment Assets provided the following activity (in thousands):



	2019						2018
	ARS			Brim Equipment Assets			ARS			Brim Equipment Assets
Revenues	$	906		$	1,912		$	—		$	—
Net loss^(a)	(238		)	(885		)	(25		)	—

a. Includes depreciation expense of $0.1 million and $0.02 million, respectively, for ARS for the 2019 and 2018 and $0.2 million for the Brim Equipment Assets for 2019.

The following table presents unaudited pro forma information as if the ARS and the Brim Equipment Assets acquisitions had occurred as of January 1, 2018 (in thousands):



	Six Months Ended June 30, 2018
	ARS		Brim Equipment Assets
Revenues	$	1,473	$	1,971
Net income	141		1,059

The Company recognized $0.3 million of transaction related costs during the year ended December 31, 2018 related to these acquisitions.

Acquisition of WTL Oil LLC

On May 31, 2018, the Company completed its acquisition of WTL Oil LLC ("WTL") for total consideration of $5.5 million in cash to the sellers plus $0.6 million in consideration to be paid upon completion of certain contractual obligations. The seller completed these obligations and the Company paid the additional $0.6 million to the seller during the three months ended September 30, 2018.

$6.1 million. The Company used cash on hand and borrowings under its credit facility to fund the acquisition. The acquisition of WTL expanded the Company's service offerings into the crude oil hauling business.

The following table summarizes the fair value of WTL as of May 31, 2018 (in thousands):

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	WTL
Property, plant and equipment	$	2,960
Identifiable intangible assets - customer relationships^(a)	930
Identifiable intangible assets - trade name^(a)	650
Goodwill^(b)	1,567
Total assets acquired	$	6,107


a.	Identifiable intangible assets were measured using a combination of income approaches. Trade names were valued using a "Relief-from-Royalty" method. Non-contractual customer relationships were valued using a "Multi-period excess earnings" method. Identifiable intangible assets will be amortized over 10-20 years.

Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill recorded in connection with the acquisition is attributable to the assembled workforce and future profitability expected to arise from the acquired entity.

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

From the acquisition date through ~~September~~December 31, 2018 and for the six months ended June 30, ~~2018,~~2019, WTL provided the following activity (in thousands):


	2018			2019			2018
Revenues	$	3,239		$	6,210		$	7,511
Net loss^(a)	(93		)	(808		)	(149		)

a. Includes depreciation and amortization expense of ~~$0.5 million.~~$1.1 million and $1.0 million, respectively, for the 2019 and 2018 periods.

The following table presents unaudited pro forma information as if the acquisition of WTL had occurred as of January 1, ~~2017~~2018 (in thousands):


	Nine Months Ended September 30,
	2018			2017		Six Months Ended June 30, 2018
Revenues	$	5,998		$	2,706	$	3,354
Net (loss) income	(8		)	42
Net income						90

The Company recognized $0.1 million of transaction related costs during the ~~nine months~~year ended ~~September 30,~~December 31, 2018 related to this acquisition.

~~(b)~~ Acquisition of RTS Energy Services LLC

On June 15, 2018, the Company completed its acquisition of RTS Energy Services LLC ("RTS") for total consideration of $7.6 million in cash to the sellers plus $0.5 million to be paid 90 days after closing subject to contractual conditions. The seller completed these obligations and the Company paid the additional $0.5 million to the seller during the three months ended September 30, 2018.

$8.1 million. The Company used cash on hand and borrowings under its credit facility to fund the acquisition. The acquisition of RTS expanded Mammoth's cementing services into the Permian Basin and added acidizing to the Company's service offerings.

The following table summarizes the fair value of RTS as of June 15, 2018 (in thousands):



	RTS
Inventory	$	180
Property, plant and equipment	7,787
Goodwill^(a)	133
Total assets acquired	$	8,100

a. Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill recorded in connection with the acquisition is attributable to the assembled workforce and future profitability expected to arise from the acquired entity.

From the acquisition date through ~~September~~December 31, 2018 and for the six months ended June 30, ~~2018,~~2019, RTS provided the following activity (in thousands):

2018
Revenues $ 4,868
Net loss^(a)
(985 )

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	2019			2018
Revenues	$	2,286		$	6,682
Net loss^(a)	(4,134		)	(3,210		)

a. Includes depreciation expense of ~~$0.5 million.~~$1.1 million and $0.9 million, respectively, for the 2019 and 2018 periods.

The following table presents unaudited pro forma information as if the acquisition of RTS had occurred as of January 1, ~~2017~~2018 (in thousands):

Nine Months Ended September 30,
2018 2017
Revenues $ 14,398
$ 15,646
Net (loss) income (1,841 ) 1,303

~~The Company recognized $0.1 million of transaction related costs during the nine months ended September 30, 2018 related to this acquisition.~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(c) Acquisition of 5 Star~~

On July 1, 2017, the Company completed its acquisition of 5 Star for total consideration of $2.4 million in cash to the sellers. Mammoth funded the purchase price for 5 Star with cash on hand and borrowings under its credit facility. The acquisition of 5 Star added to the infrastructure component of the Company's business.



	Six Months Ended June 30, 2018
Revenues	$	10,160
Net loss	(848		)

The Company recognized $0.1 million of transaction related costs during the year ended December 31, ~~2017 related to this acquisition.~~

~~The following table summarizes the fair value of 5 Star as of July 1, 2017 (in thousands):~~

5 Star
Accounts receivable $ 2,440
Property, plant and equipment 1,863
Identifiable intangible assets - trade names ^(a)
300
Goodwill ^(b)
248
Total assets acquired $ 4,851

Long-term debt and other liabilities $ 2,413
Total liabilities assumed $ 2,413
Net assets acquired $ 2,438


a.	Identifiable intangible assets were measured using a combination of income approaches. Trade names were valued using a "Relief-from-Royalty" method. Identifiable intangible assets will be amortized over 10 years.

~~From the acquisition date through September 30,~~ 2018 ~~5 Star provided the following activity (in thousands):~~

2018 2017
Revenues^(a)
$ 120,318
$ 25,216
Net income^(b)
24,571
4,191

a.~~Includes intercompany revenues of $101.9 million and $16.0 million, respectively, for 2018 and 2017.~~

b.~~Includes depreciation and amortization expense of $2.1 million and $0.8 million, respectively, for 2018 and 2017.~~

~~The following table presents unaudited pro forma information as if the acquisition of 5 Star had occurred as of January 1, 2017 (in thousands):~~

Nine Months Ended September 30, 2017
Revenues $ 12,681
Net income 495

~~(d) Acquisition of Higher Power~~

On April 21, 2017, the Company completed its acquisition of Higher Power for total consideration of $3.3 million in cash to the sellers plus up to $0.8 million in contingent consideration to be paid in equal annual installments over the next three years subject to contractual conditions. As of September 30, 2018, $0.3 million and $0.3 million, respectively, of the contingent consideration are reflected in accrued expenses and other current liabilities and other liabilities on the unaudited condensed consolidated balance sheet. Mammoth funded the purchase price for Higher Power with cash on hand and borrowings under its credit facility. The acquisition of Higher Power added an energy infrastructure component to the Company's business, helping to diversify its service offerings.

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~The Company recognized $0.1 million of transaction related costs during the year ended December 31, 2017 related to this acquisition.~~

~~The following table summarizes the fair value of Higher Power as of April 21, 2017 (in thousands):~~

Higher Power
Property, plant and equipment $ 1,744
Identifiable intangible assets - customer relationships 1,613
Goodwill ^(a)
643
Total assets acquired $ 4,000

~~From the acquisition date through September 30, 2018, Higher Power provided the following activity (in thousands):~~

2018 2017
Revenues^(a)
$ 178,994
$ 39,571
Net income^(b)
32,447
5,127

a.~~Includes intercompany revenues of $160.1 million and $27.4 million, respectively for 2018 and 2017.~~

b.~~Includes depreciation and amortization expense of $4.6 million and $2.0 million, respectively, for 2018 and 2017.~~

~~The following table presents unaudited pro forma information as if the acquisition of Higher Power had occurred as of January 1, 2017 (in thousands):~~

Nine Months Ended September 30, 2017
Revenues $ 11,619
Net loss (236 )

~~(e) Acquisition of Sturgeon~~

On March 20, 2017, and as amended on May 12, 2017, the Company entered into a definitive contribution agreement with MEH Sub, Wexford Offshore Sturgeon Corp., Gulfport, Rhino and Mammoth Energy Partners LLC (the “Sturgeon Contribution Agreement”). Under the Sturgeon Contribution Agreement, the Company agreed to acquire, through its wholly-owned subsidiary Mammoth LLC, all outstanding membership interests in Sturgeon, which owns all of the membership interests in Taylor Frac, Taylor RE and South River (collectively, the "Sturgeon subsidiaries"). The acquisition added sand reserves, increased our production capacity and provided access to the Canadian National Railway, which affords access to the Appalachian basin in support of the Company’s pressure pumping services as well as to western Canada.

The acquisition of Sturgeon closed on June 5, 2017. Pursuant to the Sturgeon Contribution Agreement, Mammoth issued 5,607,452 shares of its common stock for all outstanding equity interests in Sturgeon. Based upon a closing price of Mammoth's common stock of $18.50 per share on June 5, 2017, the total purchase price was $103.7 million.

As a result of this transaction, the Company's historical financial information was recast to combine the unaudited condensed consolidated statements of operations and the unaudited condensed consolidated balance sheets of the Company for all periods prior to the closing of this acquisition included in the accompanying financial statements with those of Sturgeon as if the combination had been in effect since Sturgeon commenced operations on September 13, 2014. Any material transactions between the Company and Sturgeon were eliminated. Sturgeon's financial results were incorporated into the Company's natural sand proppant services division.

~~For the year ended December 31, 2017, $1.3 million of transaction related costs were expensed.~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(f) Acquisition of Chieftain~~

On March 27, 2017, as amended as of May 24, 2017, the Company entered into a Purchase Agreement with Chieftain Sand and Proppant, LLC and Chieftain Sand and Proppant Barron, LLC, unrelated third party sellers (the "Chieftain Sellers"), following the Company's successful bid in a bankruptcy court auction for substantially all of the assets of the Chieftain Sellers (the "Chieftain Assets"). This transaction (the "Chieftain Acquisition") closed on May 26, 2017. Mammoth funded the purchase price for the Chieftain Assets with cash on hand and borrowings under its revolving credit facility. The Chieftain Assets are held by the Company's wholly owned subsidiary Piranha and are included in the Company's sand segment. The Chieftain Acquisition added sand reserves, increased our production capacity and provided access to the Union Pacific railroad, which affords access to both the Mid-Continent and Permian basins in support of the Company’s pressure pumping services.

~~The following table summarizes the fair value of the Chieftain Acquisition as of May 26, 2017 (in thousands):~~

Total
Property, plant and equipment ^(a)
$ 23,373
Sand reserves ^(b)
20,910
Total assets acquired $ 44,283

Asset retirement obligation 1,732
Total liabilities assumed $ 1,732
Total allocation of purchase price $ 42,551
Bargain purchase price ^(c,d)
(6,231 )
Total purchase price $ 36,320


a.	Property, plant and equipment fair value measurements were prepared by utilizing a combined fair market value and cost approach. The market approach relies on comparability of assets using market data information. The cost approach places emphasis on the physical components and characteristics of the asset. It places reliance on estimated replacement cost, depreciation and economic obsolescence.


b.	The fair value of the sand reserves was determined based on the excess cash flow method, a form of the income approach. The method provides a value based on the estimated remaining life of sand reserves, projected financial information and industry projections.


c.	~~Amount reflected in unaudited condensed consolidated statements of comprehensive income (loss) reflected net of income taxes of $2.2 million.~~


d.	~~The fair value of the business was determined based on the excess cash flow method, a form of the income approach.~~

~~From the acquisition date through September 30, 2018, the Chieftain Assets provided the following activity (in thousands):~~

2018 2017
Revenues^(a)
$ 46,783
$ 22,847
Net income^(b)
11,573
5,520

a.~~Includes intercompany revenues of $12.5 million and $12.3 million, respectively, for 2018 and 2017~~

b.~~Includes depreciation, depletion, amortization and accretion of $3.8 million and $2.8 million, respectively, for 2018 and 2017~~

~~The following table presents unaudited pro forma information as if the acquisition of the Chieftain Assets had occurred as of January 1, 2017 (in thousands):~~

Nine Months Ended September 30, 2017
Revenues $ 4,230
Net loss (2,458 )

The Company's historical financial information was adjusted to give pro forma effect to the events that were directly attributable to the Chieftain Acquisition. The Company recognized $0.8 million of transaction related costs during the year ended December 31, 2017 related to this acquisition.

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(g) Acquisition of Stingray~~

On March 20, 2017, and as amended on May 12, 2017, the Company entered into two definitive contribution agreements, one such agreement with MEH Sub, Wexford Offshore Stingray Energy Corp., Gulfport and Mammoth LLC and the other with MEH Sub, Wexford Offshore Stingray Pressure Pumping Corp., Gulfport and Mammoth LLC (collectively, the “Stingray Contribution Agreements”). Under the Stingray Contribution Agreements, the Company agreed to acquire, through its wholly-owned subsidiary Mammoth LLC, all outstanding membership interests in Stingray Cementing LLC ("Cementing") and Stingray Energy Services LLC ("SR Energy") (the “2017 Stingray Acquisition”). The addition of their water transfer, equipment rentals and cementing services further expanded and vertically integrated Mammoth’s service offerings.

The 2017 Stingray Acquisition closed on June 5, 2017. Pursuant to the Stingray Contribution Agreements, Mammoth issued 1,392,548 shares of its common stock for all outstanding equity interests in SR Energy and Cementing. Based upon a closing price of Mammoth's common stock of $18.50 per share on June 5, 2017, the total purchase price was $25.8 million.

~~The following tables summarize the fair values of Cementing and SR Energy as of June 5, 2017 (in thousands):~~

Consideration attributable to Cementing^(a)
$ 12,975
Consideration attributable to SR Energy^(a)
12,787
Total consideration transferred $ 25,762

~~a. See Summary of acquired assets and liabilities below~~

SR Energy Cementing Total
(in thousands)
Cash and cash equivalents $ 1,611
$ 1,060
$ 2,671
Accounts receivable, net 3,913
495
4,408
Receivables from related parties 3,684
1,418
5,102
Inventories —
306
306
Prepaid expenses 35
32
67
Property, plant and equipment^(a)
13,061
7,459
20,520
Identifiable intangible assets - customer relationships^(b)
—
1,140
1,140
Identifiable intangible assets - trade names^(b)
550
270
820
Goodwill^(c)
3,929
6,264
10,193
Other assets 7
—
7
Total assets acquired $ 26,790
$ 18,444
$ 45,234

Accounts payable and accrued liabilities $ 5,890
$ 2,063
$ 7,953
Long-term debt^(d)
5,074
2,000
7,074
Deferred tax liability 3,039
1,406
4,445
Total liabilities assumed $ 14,003
$ 5,469
$ 19,472
Net assets acquired $ 12,787
$ 12,975
$ 25,762


a.	Property, plant and equipment fair value measurements were prepared by utilizing a combined fair market value and cost approach. The market approach relies on comparability of assets using market data information. The cost approach places emphasis on the physical components and characteristics of the asset. It places reliance on estimated replacement cost, depreciation and economic obsolescence.


b.	Identifiable intangible assets were measured using a combination of income approaches. Trade names were valued using a "Relief-from-Royalty" method. Non-contractual customer relationships were valued using a "Multi-period excess earnings" method. Identifiable intangible assets will be amortized over 5-10 years.

Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Goodwill recorded in connection with the acquisition is attributable to the assembled workforces and future profitability expected to arise from the acquired entities.


d.	~~Long-term debt assumed was paid off subsequent to the acquisitions.~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~From the acquisition date through September 30, 2018, SR Energy and Cementing provided the following activity (in thousands):~~

2018 2017
SR Energy Cementing SR Energy Cementing
Revenues^(a)
$ 21,740
$ 6,141
$ 11,572
$ 7,500
Net loss^(b,c)
(2,616 ) (5,827 ) (1,626 ) (1,963 )


a.	~~Includes intercompany revenues of $2.3 million and $0.6 million for SR Energy in 2018 and 2017.~~


b.	Includes depreciation and amortization expense of $4.0 million and $1.3 million, respectively, for SR Energy and Cementing in 2018 and $3.4 million and $4.1 million, respectively, for SR Energy and Cementing in 2017.


c.	Includes non-cash impairment expense of $4.4 million for Cementing in 2018 related to the impairment of intangible assets and goodwill as a result of moving Cementing equipment from the Utica shale to the Permian basin.

~~The following table presents unaudited pro forma information as if the acquisition of SR Energy and Cementing had occurred on January 1, 2017 (in thousands):~~

Nine Months Ended September 30, 2017
Revenues $ 27,482
Net loss (2,550 )

The historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the 2017 Stingray Acquisition. The unaudited pro forma consolidated results are not necessarily indicative of what the consolidated results of operations actually would have been had the 2017 Stingray Acquisition been completed on January 1, 2017. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the Company. The Company recognized $0.2 million of transaction related costs during the year ended December 31, 2017 related to this acquisition.


5.	Inventories

~~Inventory consists~~Inventories consist of raw sand and processed sand available for sale, chemicals and other products sold as a bi-product of completion and production operations and supplies used in performing services. Inventory is stated at the lower of cost or market (net realizable value) on an average cost basis. The Company assesses the valuation of its inventories based upon specific usage and future utility. A summary of the Company's inventories is shown below (in thousands):


	September 30,		December 31,		June 30,		December 31,
	2018		2017		2019		2018
Supplies	$	9,602	$	9,437	$	16,912	$	12,571
Raw materials	141		219		344		199
Work in process	4,110		2,370		2,338		3,273
Finished goods	5,332		5,788		2,520		5,259
Total inventory	$	19,185	$	17,814
Total inventories					$	22,114	$	21,302

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


6.	Property, Plant and Equipment

Property, plant and equipment include the following (in thousands):


		September 30,		December 31,			June 30,		December 31,
	Useful Life	2018		2017		Useful Life	2019		2018
Assets held and used:
Pressure pumping equipment	3-5 years	$	206,461	$	190,211	3-5 years	$	214,588	$	208,968
Drilling rigs and related equipment	3-15 years	138,369		132,260		3-15 years	122,998		122,198
Machinery and equipment^(a)	7-20 years	159,735		97,569
Machinery and equipment						7-20 years	196,691		173,867
Buildings	15-39 years	48,269		45,992		15-39 years	16,887		16,887
Vehicles, trucks and trailers^(b)	5-10 years	120,883		54,055
Vehicles, trucks and trailers						5-10 years	134,952		132,337
Coil tubing equipment	4-10 years	28,068		28,053		4-10 years	29,846		29,128
Land	N/A	14,235		11,317		N/A	13,687		14,235
Land improvements	15 years or life of lease	9,614		9,614		15 years or life of lease	10,056		9,614
Rail improvements	10-20 years	13,795		5,540		10-20 years	13,806		13,806
Other property and equipment	3-12 years	15,193		12,687		3-12 years	14,065		13,614
		754,622		587,298			767,576		734,654
Deposits on equipment and equipment in process of assembly		14,019		20,348
Deposits on equipment and equipment in process of assembly^(a)							8,860		16,865
		768,641		607,646			776,436		751,519
Less: accumulated depreciation^(c)		333,856		256,629
Property, plant and equipment, net		$	434,785	$	351,017
Less: accumulated depreciation							390,168		337,514
Total assets held and used, net							386,268		414,005

Assets subject to operating leases:
Buildings						15-30 years	30,725		29,493
Helicopters						6 years	4,937		4,937
							35,662		34,430
Less: accumulated depreciation							13,522		11,736
Total assets subject to operating leases, net							22,140		22,694

Total property, plant and equipment, net							$	408,408	$	436,699


a.	~~Included in machinery~~Deposits on equipment and equipment ~~are assets under capital leases totaling $1.8 million~~in process of assembly represents deposits placed with vendors for equipment that is in the process of assembly and ~~$1.8 million, respectively, at September 30, 2018 and December 31, 2017.~~


b.	~~Included~~purchased equipment that is being outfitted for its intended use. The equipment is not yet placed in ~~vehicles, trucks and trailers are assets under capital leases totaling $0.3 million and $1.0 million, respectively, at September 30, 2018 and December 31, 2017.~~


c.	~~Accumulated depreciation for assets under capital leases totaled $0.5 million and $0.8 million, respectively, at September 30, 2018 and December 31, 2017.~~service.

Proceeds from customers for horizontal and directional drilling services equipment damaged or lost down-hole are reflected in revenue with the carrying value of the related equipment charged to cost of service revenues and are reported as cash inflows from investing activities in the statement of cash flows. For the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, proceeds from the sale of equipment damaged or lost down-hole were ~~$0.9 million~~a nominal amount and ~~$0.3~~$0.6 million, respectively, and gains on sales of equipment damaged or lost down-hole were ~~$0.8 million~~a nominal amount and ~~$0.2~~$0.5 million, respectively.

A summary of depreciation, depletion, amortization and accretion expense is below (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017		2019		2018		2019		2018
Depreciation expense^(a)	$	28,052	$	24,105	$	79,508	$	56,301	$	28,099	$	27,058	$	56,165	$	51,456
Depletion expense	1,552		682		2,979		1,066		1,734		1,340		1,946		1,427
Amortization expense	2,396		2,412		7,186		6,948		284		2,382		568		4,790
Accretion expense	15		25		45		39		28		15		42		30
Depreciation, depletion, amortization and accretion	$	32,015	$	27,224	$	89,718	$	64,354	$	30,145	$	30,795	$	58,721	$	57,703


a.	~~Includes depreciation expense for assets under capital leases totaling $0.3 million and $0.3 million, respectively, for the nine months ended September 30, 2018 and 2017.~~

Deposits on equipment and equipment in process of assembly represents deposits placed with vendors for equipment that is in the process of assembly and purchased equipment that is being outfitted for its intended use. The equipment is not yet placed in service.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


7.	Intangible Assets and Goodwill

The Company had the following definite lived intangible assets recorded (in thousands):


	September 30,			December 31,			June 30,			December 31,
	2018			2017			2019			2018
Customer relationships	$	35,585		$	35,795		$	2,255		$	2,255
Trade names	8,943			8,793			9,063			9,063
Less: accumulated amortization - customer relationships	(32,564		)	(26,172		)	(692		)	(544		)
Less: accumulated amortization - trade names	(2,809		)	(2,277		)	(3,438		)	(3,018		)
Intangible assets, net	$	9,155		$	16,139		$	7,188		$	7,756

Amortization expense for intangible assets was ~~$7.2~~$0.6 million and ~~$6.9~~$4.8 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018. The original life of customer relationships ranges from 46 to 10 years with a remaining average useful life of ~~4.2~~6.5 years. The original life of trade names ranges from 10 to 20 years with a remaining average useful life of ~~8.9~~8.6 years.

Aggregated expected amortization expense for the future periods is expected to be as follows (in thousands):


	Amount		Amount
Remainder of 2018	$	1,519
2019	1,129
Remainder of 2019			$	567
2020	1,129		1,135
2021	1,123		1,129
2022	1,102		1,108
2023			991
Thereafter	3,153		2,258
	$	9,155	$	7,188

Goodwill was ~~$98.3~~$101.2 million ~~and $99.8 million, respectively,~~ at ~~September~~both June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Changes in the goodwill for the year ended December 31, ~~2017~~2018 and the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 are set forth below (in thousands):

Balance, January 1, 2017 $ 88,727
Additions - 2017 Stingray Acquisition (Note 4) 10,193
Additions - Higher Power Acquisition (Note 4) 643
Additions - 5 Star Acquisition (Note 4) 248
Balance, December 31, 2017 99,811
Additions - WTL Acquisition (Note 4) 1,567
Additions - RTS Acquisition (Note 4) 133
Impairment (3,203 )
Balance, September 30, 2018 $ 98,308



Balance, January 1, 2018	$	99,811
Additions:
WTL	1,567
RTS	133
ARS	694
Brim Equipment Assets	2,243
Impairment	(3,203		)
Balance, December 31, 2018	101,245
Additions	—
Balance, June 30, 2019	$	101,245

During the ~~three months~~year ended ~~September 30,~~December 31, 2018, the Company moved Cementing's equipment from the Utica shale to the Permian basin. As a result, ~~during the three months ended September 30, 2018,~~ the Company recognized impairment on Cementing's intangible assets, including goodwill, non-contractual customer relationships and trade name of $3.2 million, $1.0 million and $0.2 million, respectively.

Cementing's goodwill was measured using an income approach, which provides an estimated fair value based on anticipated cash flows that are discounted using a weighted average cost of capital rate.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


8.	Equity Method Investment

On December 21, 2018, Cobra Aviation and Wexford Investment, a related party, formed a joint venture under the name of Brim Acquisitions to acquire all outstanding equity interest in Brim Equipment for a total purchase price of approximately $1.4 million in cash to the sellers plus $0.6 million in consideration to be paid upon completion of certain contractual obligations. Cobra Aviation owns a 49% economic interest and Wexford Investment owns a 51% economic interest in Brim Acquisitions, and each member contributed its pro rata portion of Brim Acquisitions' initial capital of $2.0 million. Brim Acquisitions, through Brim Equipment, owns one commercial helicopter and leases five commercial helicopters for operations, which it uses to provide a variety of services, including short haul, aerial ignition, hoist operations, aerial photography, fire suppression, construction services, animal/capture/survey, search and rescue, airborne law enforcement, power line construction, precision long line operations, pipeline construction and survey, mineral and seismic exploration, and aerial seeding and fertilization.

The Company uses the equity method of accounting to account for its investment in Brim Acquisitions, which had a carrying value of approximately $1.8 million at June 30, 2019. The investment is included in other non-current assets on the unaudited condensed consolidated balance sheets. The Company recorded an equity method adjustment to its investment of $0.2 million for its share of Brim Acquisitions' income for the six months ended June 30, 2019, which is included in other, net on the unaudited condensed consolidated statements of comprehensive income. The Company made additional investments totaling $0.7 million during the six months ended June 30, 2019.


9.	Accrued Expenses and Other Current Liabilities

Accrued expense and other current liabilities included the following (in thousands):


	September 30,		December 31,		June 30,		December 31,
	2018		2017		2019		2018
Accrued compensation, benefits and related taxes	$	22,561	$	11,552	$	9,957	$	20,898
State and local taxes payable	9,258		2,126		17,057		18,687
Insurance reserves	4,280		2,942		4,413		4,678
Deferred revenue	420		15,210		1,296		4,304
Financed insurance premiums	925		4,876		4,565		6,761
Other	5,161		4,189		5,370		4,324
Total	$	42,605	$	40,895	$	42,658	$	59,652

Financed insurance premiums are due in monthly installments, are unsecured and mature within the twelve month period following the close of the year. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the applicable interest rate associated with financed insurance premiums was ~~2.75%~~3.45%.


9.10.	Debt

On October 19, 2018, Mammoth ~~Credit Facility~~

~~On November 25, 2014, Mammoth~~Inc. and certain of its direct and indirect subsidiaries, as borrowers, entered into aan amended and restated revolving credit and security agreement with the lenders party thereto and PNC Bank, National Association, as a ~~syndicate~~lender and as administrative agent for the lenders, which amended and restated the Company's prior revolving credit and security agreement dated as of ~~banks that provides for maximum borrowings of $170 million.~~November 25, 2014, as amended prior to October 19, 2018. The facility ~~as amended,~~ matures on ~~November 25, 2019.~~October 19, 2023. Borrowings under this facility are secured by the assets of Mammoth Inc., inclusive of certain of the subsidiary companies. The maximum availability of the facility is subject to a borrowing base calculation prepared monthly. ~~Concurrent with the execution of the~~

Outstanding borrowings under this facility ~~the initial advance was used to repay all the debt of the Company then outstanding. Interest is payable monthly~~bear interest at a per annum rate elected by Mammoth Inc. that is equal to an alternate base rate ~~set by~~or LIBOR, in each case plus the ~~lead institution’s commercial lending group plus an~~ applicable margin. Additionally, at the Company's request, outstanding balances are permitted to be converted to LIBOR rate plus applicable margin tranches at set increments of $0.5 million. The LIBOR rate option allows the Company to select interest periods from one, two, three or six months. The applicable margin ~~for either~~ranges from 1.00% to 1.50% per annum in the case of the alternate base rate, orand from 2.00% to 2.50% per annum in the ~~LIBOR rate option can vary from 1.5% to 3.0%, based upon a calculation~~case of LIBOR. The applicable margin depends on the amount of excess availability ~~of the line as a percentage of the maximum credit limit. The deferred loan costs associated with~~under this ~~facility are classified in other non-current assets.~~facility.

At ~~September~~June 30, ~~2018,~~2019, there were no outstanding borrowings under the amended and restated revolving credit facility of $82.0 million and ~~$162.5~~$93.5 million of available borrowing capacity, after giving effect to ~~$6.7~~$8.7 million of outstanding letters of credit. At December 31, ~~2017,~~2018, there were no outstanding borrowings under the amended and restated revolving credit

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

facility ~~of $99.9 million, leaving an aggregate of $62.8~~and $175.8 million of borrowing capacity under the facility, after giving effect to ~~$6.5~~$8.4 million of outstanding letters of credit.

The Mammoth Inc. facility also contains various customary affirmative and restrictive covenants. Among the various covenants are specifically identified financial covenants placing requirements of a minimum interest coverage ratio (3.0 to 1.0), maximum leverage ratio (4.0 to 1.0), and minimum availability ($10 million). As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the Company was in compliance with the financial covenants under the facility.

On October 19, 2018, the Company and certain of its direct and indirect subsidiaries, as borrowers, entered into an amended and restated revolving credit and security agreement with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders (the “A&R Credit Agreement”), which amends and restates the revolving credit and security agreement dated as of July 9, 2018, as amended prior to the A&R Credit Agreement, to, among other things, (i) extend the maturity date to October 19, 2023, (ii) increase the maximum revolving advance amount to $185 million, with the ability to further increase the maximum revolving advance amount to $350 million under certain circumstances, (iii) increase the letter of credit sublimit to 20% of the maximum revolving advance amount and (iv) decrease the interest rates applicable to loans.

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Outstanding borrowings under the A&R Credit Agreement bear interest at a per annum rate elected by the Company that is equal to an alternate base rate or LIBOR, in each case plus the applicable margin. The applicable margin ranges from 1.0% to 1.5% per annum in the case of the alternate base rate, and from 2.0% to 2.5% per annum in the case of LIBOR. The applicable margin depends on the amount of excess availability under the A&R Credit Agreement. The A&R Credit Agreement contains various customary affirmative and restrictive covenants including a minimum interest coverage ratio (3.0 to 1.0) and a maximum leverage ratio (4.0 to 1.0). As of October 30, 2018, the credit facility was undrawn.

~~Sturgeon Credit Facility~~

On June 30, 2015, Sturgeon entered in to a three-year $25.0 million revolving line of credit secured by substantially all of the assets of Sturgeon (“the Sturgeon revolver”). Advances under the Sturgeon revolver bore interest at 2% plus the greater of (a) the Base Rate as set by the lender's commercial lending group, (b) the sum of the Federal Funds Open Rate plus one half of one percent and (c) the sum of the Daily LIBOR rate. Additionally, at Sturgeon’s request, advances could be obtained at LIBOR plus 3%. The LIBOR rate option allowed Sturgeon to select interest periods from one, two, three or six month LIBOR futures spot rates. The Sturgeon revolver was terminated on June 6, 2017.


~~10.~~	~~Other Liabilities~~

~~Other liabilities included the following (in thousands):~~

September 30, December 31,
2018 2017
Capital lease obligations $ 1,638
$ 2,015
Equipment financing arrangement 1,362
1,605
Other 250
500
Total 3,250
4,120
Less: Current portion of capital lease and equipment financing obligations included in accrued expenses and other current liabilities (1,547 ) (831 )
Total Other Liabilities $ 1,703
$ 3,289

The Company leases vehicles and other equipment under capital leases with varying terms and expiration dates through 2020. The weighted average implied interest rate under our capital leases as of September 30, 2018 and December 31, 2017 was 19.6% and 19.1%, respectively. Additionally, the Company entered into a five-year equipment financing arrangement maturing in 2022 that bears interest at 4.6% as of September 30, 2018. Principal and interest on capital leases and the equipment financing arrangement are paid monthly. Aggregate future payments under the Company's non-cancelable capital leases and equipment financing arrangement as of September 30, 2018 are as follows (in thousands):

2018 $ 228
2019 1,540
2020 689
2021 388
2022 360
Total future minimum payments 3,205
Less interest payments (205 )
Present value of future minimum payments $ 3,000

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~


11.	Variable Interest ~~Entity~~Entities

~~On April 6, 2018,~~ Dire Wolf Energy Services LLC ("Dire Wolf") and Predator Aviation LLC ("Predator Aviation"), a wholly owned ~~subsidiary~~subsidiaries of the Company, ~~entered into a~~are party to Voting Trust ~~Agreement~~Agreements with TVPX Aircraft Solutions Inc. (the "Voting Trustee"). Under the Voting Trust ~~Agreement,~~Agreements, Dire Wolf transferred 100% of its membership interest in Cobra Aviation ~~Services~~and Predator Aviation transferred 100% of its membership interest in Leopard Aviation LLC ("~~Cobra Aviation"~~Leopard") to the respective Voting ~~Trustee~~Trustees in exchange for Voting Trust Certificates. Dire Wolf and Predator Aviation retained the obligation to absorb all expected returns or losses of Cobra ~~Aviation.~~Aviation and Leopard. Prior to the transfer of the membership interest to the Voting Trustee, Cobra Aviation was a wholly owned subsidiary of Dire ~~Wolf. Cobra Aviation owns~~Wolf and ~~operates a helicopter primarily for services provided to Cobra Acquisitions,~~Leopard was a wholly owned subsidiary of Predator Aviation. Cobra Aviation owns three helicopters and support equipment, 100% of the ~~Company.~~equity interest in ARS and 49% of the equity interest in Brim Acquisitions. Leopard owns one helicopter. Dire Wolf and Predator Aviation entered into the Voting Trust ~~Agreement~~Agreements in order to meet certain registration requirements.

Dire Wolf's and Predator Aviation's voting rights are not proportional to ~~its obligation~~their respective obligations to absorb expected returns or losses of Cobra Aviation and Leopard, respectively, and all of Cobra Aviation's and Leopard's activities are conducted on behalf of Dire Wolf and Predator Aviation, which ~~has~~have disproportionately fewer voting rights; therefore, Cobra Aviation ~~meets~~and Leopard meet the criteria of a VIE. Cobra ~~Aviation's~~Aviation and Leopard's operational activities are directed by Dire Wolf's and Predator Aviation's officers and Dire Wolf ~~has~~and Predator Aviation have the option to terminate the Voting Trust ~~Agreement~~Agreements at any time. Therefore, the Company, through Dire Wolf and Predator Aviation, is considered the primary beneficiary of the ~~VIE~~VIEs and consolidates Cobra Aviation and Leopard at ~~September~~June 30, ~~2018.~~2019.


12.	Selling, General and Administrative Expense

Selling, general and administrative ("SG&A") expense includes of the following (in thousands):


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,				Six Months Ended June 30,
	2018			2017		2018			2017		2019		2018		2019		2018
Cash expenses:
Compensation and benefits	$	14,864		$	3,577	$	33,541		$	8,958	$	2,154	$	10,978	$	11,384	$	18,677
Professional services	3,267			1,494		8,835			5,075		2,934		2,981		6,723		5,568
Other^(a)	3,701			1,820		9,243			5,700		3,381		3,935		6,626		5,542
Total cash SG&A expense	21,832			6,891		51,619			19,733		8,469		17,894		24,733		29,787
Non-cash expenses:
Bad debt provision^(b)	(68,333		)	103		(14,543		)	78		262		28,263		266		53,790
Equity based compensation^(c)	—			—		17,487			—		—		17,487		—		17,487
Stock based compensation	1,177			1,028		3,751			2,648		724		1,483		1,792		2,574
Total non-cash SG&A expense	(67,156		)	1,131		6,695			2,726		986		47,233		2,058		73,851
Total SG&A expense	$	(45,324	)	$	8,022	$	58,314		$	22,459	$	9,455	$	65,127	$	26,791	$	103,638


a.	Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.

~~During~~$28.3 million and $53.6 million of the ~~three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result,~~bad debt expense recognized during the three and six months ended ~~September~~June 30, 2018 was subsequently reversed during the ~~Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half~~third quarter of 2018. The Company expects to receive payment for the 2018 amounts once the Company files its 2018 Puerto Rico tax return and pays any taxes due as calculated by the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.


c.	Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level). See Note 1516 for additional detail.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


13.	Income Taxes

The ~~components~~Company's effective tax rate was 37% and 50% for the six months ended June 30, 2019 and 2018, respectively. The effective tax rates for the six months ended June 30, 2019 and 2018 differ from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico. During the six months ended June 30, 2019, the Company recorded a benefit related to return to provision adjustments, which was partially offset by changes in the valuation allowance. The majority of the Company's earnings for the periods were derived from Puerto Rico, which has a higher statutory rate compared to the United States. The Company recorded income tax expense ~~(benefit) attributable~~of $10.4 million and $99.4 million for the six months ended June 30, 2019 and 2018, respectively.


14.	Leases

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes the requirements set forth in ASC 840, Leases. The Company adopted this standard effective January 1, 2019 utilizing the transition method which permits an entity to recognize a cumulative-effect adjustment to the ~~Company~~opening balance of retained earnings in the period of adoption with no adjustment made to the comparative periods presented in the consolidated financial statements. Accordingly, the comparative information as of December 31, 2018 and for the three and ~~nine~~six months ended ~~September~~June 30, 2018 has not been adjusted and ~~2017,~~continues to be reported under the previous lease standard. The new guidance requires lessees to report a right of use asset and lease liability on the balance sheet for all leases with a term longer than one year, while maintaining substantially similar classifications for financing and operating leases. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases.

The Company elected the transition practical expedient package whereby an entity was not required to reassess (i) whether any expired or existing contracts are or contained leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The adoption of ASC 842 resulted in the recognition of approximately $60.0 million of operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheet as ~~follows~~of January 1, 2019 and did not materially impact our consolidated statement of comprehensive income for the three and six months ended June 30, 2019.

Lessee Accounting

Beginning January 1, 2019, for all leases with a term in excess of 12 months, the Company recognized a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term, while finance leases include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, the Company elected the practical expedient to not recognize lease assets and liabilities and recognizes lease expense for these short-term leases on a straight-line basis over the lease term.

The Company's operating leases are primarily for rail cars, real estate, equipment and vehicles and its finance leases are primarily for machinery and equipment. Generally, the Company does not include renewal or termination options in its assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. The accounting for some of the Company's leases may require significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates to utilize in the net present value calculation of lease payments for lease agreements which do not provide an implicit rate and assessing the likelihood of renewal or termination options. Lease agreements that contain a lease and non-lease component are generally accounted for as a single lease component.

Lease expense consisted of the following for the three and six months ended June 30, 2019 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,
2018 2017 2018 2017
Foreign current income tax expense (benefit) $ 42,026
$ (101 ) $ 167,738
$ 506
Foreign deferred income tax expense (benefit) 35,321
18
9,935
(2 )
U.S. current income tax (benefit) expense (1,515 )
—
109
—
U.S. deferred income tax benefit (997 )
(1,330 ) (3,517 ) (7,827 )
Total $ 74,835
$ (1,413 ) $ 174,265
$ (7,323 )

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Operating lease expense	$	5,405	$	11,420
Short-term lease expense	148		362
Finance lease expense:
Amortization of right-of-use assets	288		486
Interest on lease liabilities	41		80
Total lease expense	$	5,882	$	12,348

Supplemental balance sheet information related to leases as of June 30, 2019 is as follows:



	June 30, 2019
Operating leases:
Operating lease right-of-use assets	$	52,184
Current operating lease liability	17,338
Long-term operating lease liability	34,807
Finance leases:
Property and equipment, net	$	5,005
Accrued expenses and other current liabilities	1,856
Other liabilities	2,846

Other supplemental information related to leases for the three and six months ended June 30, 2019 is as follows (in thousands):



	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,285	$	11,246
Operating cash flows from finance leases	394		80
Financing cash flows from finance leases	45		723
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	981	$	1,936
Finance leases	1,592		1,592



	June 30, 2019
Weighted-average remaining lease term:
Operating leases	3.7 years
Finance leases	3.4 years
Weighted-average discount rate:
Operating leases	4.5	%
Finance leases	4.5	%

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of June 30, 2019 are as follows (in thousands):



	Operating Leases		Finance Leases
Remainder of 2019	$	9,961	$	1,536
2020	17,556		1,091
2021	13,005		782
2022	9,093		748
2023	4,344		742
Thereafter	2,588		166
Total lease payments	56,547		5,065
Less: Present value discount	4,402		363
Present value of lease payments	$	52,145	$	4,702

As of December 31, 2018, future minimum payments under noncancellable operating leases were $66.2 million in the aggregate, which consisted of the following: $20.2 million in 2019, $16.6 million in 2020, $12.6 million in 2021, $9.3 million in 2022, $5.0 million in 2023 and $2.5 million thereafter.

As of June 30, 2019, the Company was party to one additional operating lease for rail cars that had not yet commenced. This agreement provides for fixed lease payments of $5.4 million to be paid over the five year lease term.

Lessor Accounting

The Company's agreements with its customers for contract land drilling services, aviation services and remote accommodation services contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer obtains substantially all of the economic benefits of the identified assets throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use. The Company has elected to apply the practical expedient provided to lessors to combine the lease and non-lease components of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component. The Company's agreement for its contract land drilling services contain a service component in addition to a lease component. The Company has determined the service component is greater than the lease component and therefore, reports revenue for its contract land drilling services under ASC 606.

The Company's ~~effective tax~~lease agreements are generally short-term in nature and lease revenue is recognized over time based on on a monthly, daily or hourly rate ~~was 51% and 37%, respectively,~~basis. The Company does not provide an option for the ~~nine~~lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets. The Company recognized lease revenue of $1.1 million and $4.2 million, respectively, during the three and six months ended ~~September~~June 30, ~~2018 and 2017. The increase~~2019, which is included in service revenue on the ~~effective tax rate is primarily due to the equity based compensation expense recognized during the nine months ended September 30, 2018 as well as a higher tax rate in Puerto Rico, where most~~unaudited condensed consolidated statement of our income was generated during the nine months ended September 30, 2018, compared to the United States tax rate. No income was generated in Puerto Rico during the nine months ended September 30, 2017. Additionally, the Company's effective tax rate can fluctuate as a result of, among other things, discrete items, state income taxes, permanent differences and changes in pre-taxcomprehensive income.

A valuation allowance for deferred tax assets is recognized when it is more likely than not that the benefit of deferred tax assets will not be realized. To assess that likelihood, the Company uses estimates and judgments regarding future taxable income, as well as the jurisdiction in which such taxable income is generated, to determine whether a valuation allowance is required. During the nine months ended September 30, 2018, the Company recorded a change in valuation allowance of $29.7 million related to foreign tax credits that are not expected to be utilized.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates tax positions taken or expected to be taken in preparation of its tax returns and disallows the recognition of tax positions that do not meet a “more likely than not” threshold of being sustained upon examination by the taxing authorities. During the three months ended September 30, 2018, the Company established a reserve for uncertain tax positions totaling $0.4 million related to the filing of certain state income tax returns on a non-unitary basis.

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”). As a result, the Company recorded a provisional amount for effects of the Tax Act totaling $31.0 million during the fourth quarter of 2017. The Company continues to evaluate the impact of the Tax Act and no revisions were recorded to the provisional amount during the nine months ended September 30, 2018. The Company expects to complete its detailed analysis of the effects of the Tax Act no later than the fourth quarter of 2018.


~~14.~~15.	Earnings (Loss) Per Share

Reconciliations of the components of basic and diluted net income (loss) per common share are presented in the table below (in thousands, except per share data):


	Three Months Ended September 30,					Nine Months Ended September 30,					Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017			2019			2018		2019		2018
Basic earnings (loss) per share:
Allocation of earnings (loss):
Net income (loss)	$	69,512	$	(801	)	$	167,758	$	(6,952	)
Net (loss) income											$	(10,889	)	$	42,700	$	17,444	$	98,246
Weighted average common shares outstanding	44,756		44,502			44,718		40,526			45,003			44,737		44,966		44,700
Basic earnings (loss) per share	$	1.55	$	(0.02	)	$	3.75	$	(0.17	)
Basic (loss) earnings per share											$	(0.24	)	$	0.95	$	0.39	$	2.20

Diluted earnings (loss) per share:
Allocation of earnings (loss):
Net income (loss)	$	69,512	$	(801	)	$	167,758	$	(6,952	)
Net (loss) income											$	(10,889	)	$	42,700	$	17,444	$	98,246
Weighted average common shares, including dilutive effect^(a)	45,082		44,502			45,012		40,526			45,003			45,059		45,060		44,977
Diluted earnings (loss) per share	$	1.54	$	(0.02	)	$	3.73	$	(0.17	)
Diluted (loss) earnings per share											$	(0.24	)	$	0.95	$	0.39	$	2.18


^a.	No incremental shares of potentially dilutive restricted stock awards were included for the three ~~and nine~~ months ended ~~September~~June 30, ~~2017~~2019 as their effect was ~~antidulitive~~antidilutive under the treasury stock method.


~~15.~~16.	Equity Based Compensation

Upon formation of certain operating entities by Wexford, Gulfport and Rhino, specified members of management (the “Specified Members”) and certain non-employee members (the “Non-Employee Members”) were granted the right to receive distributions from the operating entities after the contribution member’s unreturned capital balance was recovered (referred to as “Payout” provision).

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

On November 24, 2014, the awards were modified in conjunction with the contribution of the operating entities to Mammoth. These awards were not granted in limited or general partner units. The awards are for interests in the distributable earnings of the members of MEH Sub, Mammoth’s majority equity holder.

On the IPO closing date, the unreturned capital balance of Mammoth's majority equity holder was not fully recovered from its sale of common stock in the IPO. As a result, Payout did not occur and no compensation cost was recorded.

On June 29, 2018, as part of an underwritten secondary public offering, MEH Sub sold 2,764,400 shares of the Company’s common stock at a purchase price to MEH Sub of $38.01 per share. Additionally, the selling stockholders granted the underwriters an option to purchase additional shares of the Company's common stock at the same purchase price. On July 30, 2018, in connection with the partial exercise of this option, MEH Sub sold an additional 266,026 shares of common stock to the underwriters. MEH Sub received the proceeds from this offering. As a result of the June 29, 2018 offering, a portion of the Non-Employee Member awards reached Payout. During the ~~nine~~three months ended ~~September~~June 30, 2018, the Company recognized equity compensation expense totaling $17.5 million related to these non-employee awards. These awards are at the sponsor level and this transaction had no dilutive impact or cash impact to the Company.

Payout for the remaining awards is expected to occur as the contribution member's unreturned capital balance is recovered from additional sales by MEH Sub of its shares of the Company's common stock or from dividend distributions, which is not considered probable until the event occurs. For the Specified Member awards, the unrecognized amount, which represents the fair value of the award as of the modification dates or grant date, was $5.6 million.

The Company adopted ASU 2018-07 as of January 1, 2019. This ASU aligns the accounting for non-employee share-based compensation with the requirements for employee share-based compensation. The standard required non-employee awards to be measured at fair value as of the date of adoption. For the Company's Non-Employee Member awards, the unrecognized amount, which represents the fair value of the awards as of ~~September 30, 2018~~the date of adoption of ASU 2018-07 was ~~$36.0~~$18.9 million.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


~~16.~~17.	Stock Based Compensation

The 2016 Plan authorizes the Company's Board of Directors or the compensation committee of the Company's Board of Directors to grant restricted stock, restricted stock units, stock appreciation rights, stock options and performance awards. There are 4.5 million shares of common stock reserved for issuance under the 2016 Plan.

Restricted Stock Units

The fair value of restricted stock unit awards was determined based on the fair market value of the Company's common stock on the date of the grant. This value is amortized over the vesting period.

A summary of the status and changes of the unvested shares of restricted stock under the 2016 Plan is presented below.


	Number of Unvested Restricted Shares		Weighted Average Grant-Date Fair Value		Number of Unvested Restricted Shares		Weighted Average Grant-Date Fair Value
Unvested shares as of January 1, 2018	640,632		$	19.44
Unvested shares as of January 1, 2019					434,119		$	22.78
Granted	103,556		27.74		64,507		9.87
Vested	(149,098	)	21.29		(141,479	)	24.88
Forfeited	(20,000	)	20.68		(70,002	)	19.16
Unvested shares as of September 30, 2018	575,090		$	21.56
Unvested shares as of June 30, 2019					287,145		$	23.58

As of ~~September~~June 30, ~~2018,~~2019, there was ~~$7.7~~$3.3 million of total unrecognized compensation cost related to the unvested restricted stock. The cost is expected to be recognized over a weighted average period of approximately ~~1.7 years~~1.0 year.

Included in cost of revenue and selling, general and administrative expenses is stock based compensation expense of ~~$1.4~~$0.9 million and ~~$1.0~~$1.7 million ~~respectively,~~ for the three months ended ~~September~~June 30, 2019 and 2018, respectively, and ~~2017 and $4.3~~$2.2 million and ~~$2.6~~$2.9 million ~~respectively,~~ for the ~~nine~~six months ended ~~September~~June 30, 2019 and 2018, ~~and 2017.~~respectively.


~~17.~~18.	Related Party Transactions

Transactions between the subsidiaries of the Company, including Stingray Pressure Pumping LLC (“Pressure Pumping”), Muskie Proppant LLC (“Muskie”), Stingray Energy Services LLC (“SR Energy”), Stingray Cementing LLC (“Cementing”), Aquahawk Energy LLC (“Aquahawk”), Panther Drilling Systems LLC (“Panther Drilling”), Cobra Aviation, ARS, Cobra and Higher Power Electrical LLC (“Higher Power”) and the following companies are included in Related Party

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

Transactions: Gulfport; Grizzly Oil Sands ULC (“Grizzly”); El Toro Resources LLC (“El Toro”~~); Cementing and SR Energy (collectively, prior to the 2017 Stingray Acquisition, the “2017 Stingray Companies”~~); Everest Operations Management LLC (“Everest”); Elk City Yard LLC (“Elk City Yard”); Double Barrel Downhole Technologies LLC (“DBDHT”); Caliber Investment Group LLC (“Caliber”); ~~Dunvegan North Oilfield Services ULC (“Dunvegan”);~~ Predator Drilling LLC (“Predator”); ~~and~~ T&E Flow Services LLC (“T&E”).; and Brim Equipment.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Following is a summary of related party transactions (in thousands):


		REVENUES								ACCOUNTS RECEIVABLE					REVENUES								ACCOUNTS RECEIVABLE
		Three Months Ended September 30,				Nine Months Ended September 30,				At September 30,		At December 31,			Three Months Ended June 30,				Six Months Ended June 30,				At June 30,		At December 31,
		2018		2017		2018		2017		2018		2017			2019		2018		2019		2018		2019		2018
Pressure Pumping and Gulfport	(a)	$	15,540	$	46,702	$	87,916	$	119,547	$	21,800	$	25,054	(a)	$	33,419	$	33,831	$	70,829	$	72,377	$	26,906	$	8,175
Muskie and Gulfport	(b)	3,787		14,055		24,980		39,201		1,050		1,947		(b)	10,861		9,730		23,516		21,192		6,024		1,193
Panther Drilling and Gulfport	(c)	—		944		55		2,938		12		872
SR Energy and Gulfport														(c)	2,733		4,626		8,040		11,579		3,722		1,658
Cementing and Gulfport	(d)	977		3,179		5,853		4,082		—		2,255		(d)	—		2,048		—		4,876		—		—
SR Energy and Gulfport	(e)	1,743		5,768		13,323		7,333		2,185		3,348
Aquahawk and Gulfport														(e)	98		—		822		—		133		—
Panther Drilling and El Toro	(f)	509		96		854		96		244		—		(f)	124		—		493		345		124		64
Redback Energy and El Toro	(g)	—		26		92		184		—		—
Coil Tubing and El Toro	(h)	154		133		514		133		—		—
Bison Drilling and Predator	(i)	—		—		—		—		—		234
Cobra Aviation/ARS/Leopard and Brim Equipment														(g)	448		—		711		—		441		—
Other Relationships		10		13		24		112		44		78			15		106		15		522		50		74
		$	22,720	$	70,916	$	133,611	$	173,626	$	25,335	$	33,788		$	47,698	$	50,341	$	104,426	$	110,891	$	37,400	$	11,164


a.	Pressure Pumping provides pressure pumping, stimulation and related completion services to Gulfport.


b.	Muskie has agreed to sell and deliver, and Gulfport has agreed to purchase, specified annual and monthly amounts of natural sand proppant, subject to certain exceptions specified in the agreement, and pay certain costs and expenses.


c.	~~Panther Drilling performs drilling~~SR Energy provides rental services to Gulfport.


d.	Cementing performed well cementing services for Gulfport.


e.	Aquahawk provides water transfer services for Gulfport pursuant to a master service agreement.


d.	~~Cementing performs well cementing services for Gulfport.~~


e.	~~SR Energy performs rental services for Gulfport.~~


f.	Panther provides directional drilling services for El Toro, an entity controlled by Wexford, pursuant to a master service agreement.


g.	~~Redback Energy performs completion~~Cobra Aviation, ARS and ~~production services for El Toro~~Leopard lease helicopters to Brim Equipment pursuant to ~~a master service agreement.~~


h.	~~Coil Tubing provides to El Toro services in connection with completion~~aircraft lease and ~~drilling activities.~~


i.	~~Bison Drilling provides equipment rentals to Predator, an entity in which Wexford owns a minority interest.~~management agreements.

Three Months Ended September 30, Nine Months Ended September 30, At September 30, At December 31,
2018 2017 2018 2017 2018 2017
COST OF REVENUE COST OF REVENUE ACCOUNTS PAYABLE
Cobra and T&E (a) $ 1,281
$ —
$ 4,042
$ —
$ 850
$ 457
Higher Power and T&E (a) 144
—
1,603
—
422
3
The Company and 2017 Stingray Companies (b) —
—
—
444
—
—
Other —
9
—
257
—
295
$ 1,425
$ 9
$ 5,645
$ 701
$ 1,272
$ 755

SELLING, GENERAL AND ADMINISTRATIVE COSTS SELLING, GENERAL AND ADMINISTRATIVE COSTS
The Company and Everest (c) $ 16
$ 32
$ 102
$ 140
$ 31
$ 19
The Company and Wexford (d) 267
185
740
583
73
150
The Company and Caliber (e) 116
137
462
209
—
1
Other 38
1
94
54
—
2
$ 437
$ 355
$ 1,398
$ 986
$ 104
$ 172

CAPITAL EXPENDITURES CAPITAL EXPENDITURES
Cobra and T&E (a) $ 116
$ —
$ 1,247
$ —
$ —
$ 66
Higher Power and T&E (a) 187
—
2,960
—
26
385
$ 303
$ —
$ 4,207
$ —
$ 26
$ 451
$ 1,402
$ 1,378

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~



		Three Months Ended June 30,					Six Months Ended June 30,				At June 30,		At December 31,
		2019		2018			2019		2018		2019		2018
		COST OF REVENUE					COST OF REVENUE				ACCOUNTS PAYABLE
Cobra Aviation/ ARS/Leopard and Brim Equipment	(a)	$	2,650	$	—		$	3,363	$	—	$	788	$	—
Cobra and T&E	(b)	—		1,486			—		2,762		—		—
Higher Power and T&E	(b)	—		950			—		1,458		—		—
Other		—		(8		)	—		—		—		240
		$	2,650	$	2,428		$	3,363	$	4,220	$	788	$	240

		SELLING, GENERAL AND ADMINISTRATIVE COSTS					SELLING, GENERAL AND ADMINISTRATIVE COSTS
The Company and Wexford	(c)	$	206	$	290		$	442	$	473	$	42	$	100
The Company and Caliber	(d)	258		145			388		346		64		3
Cobra Aviation/ ARS/Leopard and Brim Equipment	(a)	149		—			166		—		—		—
Other		46		97			97		142		44		27
		$	659	$	532		$	1,093	$	961	$	150	$	130

		CAPITAL EXPENDITURES					CAPITAL EXPENDITURES
Leopard and Brim Equipment	(a)	$	217	$	—		$	217	$	—	$	82	$	—
Cobra and T&E	(b)	—		757			—		1,131		—		—
Higher Power and T&E	(b)	—		1,575			—		2,773		—		—
		$	217	$	2,332		$	217	$	3,904	$	82	$	—
											$	1,020	$	370


a.	Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements.


b.	Cobra and Higher Power ~~purchase~~purchased materials and services from T&E, an entity in which a member of management's family ~~owns~~owned a minority interest.


b.	~~Prior~~ T&E ceased to ~~the 2017 Stingray Acquisition, the 2017 Stingray Companies provided certain services to the Company and, from time to time, the 2017 Stingray Companies paid for goods and services on behalf~~be a related party as of ~~the Company.~~September 30, 2018.


c.	Everest has historically provided office space and certain technical, administrative and payroll services to the Company and the Company has reimbursed Everest in amounts determined by Everest based on estimates of the amount of office space provided and the amount of employees’ time spent performing services for the Company.


d.	Wexford provides certain administrative and analytical services to the Company and, from time to time, the Company pays for goods and services on behalf of Wexford.


e.d.	Caliber leases office space to Mammoth.

On December 21, 2018, Cobra Aviation acquired all outstanding equity interest in ARS and purchased two commercial helicopters, spare parts, support equipment and aircraft documents from Brim Equipment. Following these transactions,

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

and also on December 21, 2018, Cobra Aviation formed a joint venture with Wexford Investments named Brim Acquisitions to acquire all outstanding equity interests in Brim Equipment. Cobra Aviation owns a 49% economic interest and Wexford Investment owns a 51% economic interest in Brim Acquisitions, and each member contributed its pro rata portion of Brim Acquisitions' initial capital of $2.0 million. Cobra Aviation made additional investments in Brim Acquisitions totaling $0.7 million during the six months ended June ~~29, 2018, Gulfport and certain entities~~30, 2019. Wexford Investments is an entity controlled by Wexford, (the "Selling Stockholders") completed an underwritten secondary public offering of 4,000,000 shares of the Company’s common stock at a purchase price to the Selling Stockholders of $38.01 per share. The Selling Stockholders granted the underwriters an option to purchase up to an aggregate of 600,000 additional shareswhich owns approximately 49% of the Company's outstanding common stock at the same purchase price. This option was exercised, in part, and on July 30, 2018, the underwriters purchased an additional 385,000 shares of common stock from the Selling Stockholders at the same price per share. The Selling Stockholders received all proceeds from this offering. The Company incurred costs of approximately $1.0 million related to the secondary public offering during the nine months ended September 30, 2018.stock.


~~18.~~19.	Commitments and Contingencies

~~Lease Obligations~~

~~The Company leases real estate, rail cars and other equipment under long-term operating leases with varying terms and expiration dates through 2062.~~

Minimum Purchase Commitments

The Company has entered into agreements with suppliers that contain minimum purchase obligations. Failure to purchase the minimum amounts may require the Company to pay shortfall fees. However, the minimum quantities set forth in the agreements are not in excess of currently expected future requirements.

Capital Spend Commitments

The Company has entered into agreements with suppliers to acquire capital equipment.

Aggregate future minimum payments under these obligations in effect at ~~September~~June 30, ~~2018~~2019 are as follows (in thousands):


Year ended December 31:	Operating Leases		Capital Spend Commitments		Minimum Purchase Commitments^(a)		Capital Spend Commitments		Minimum Purchase Commitments^(a)
Remainder of 2018	$	6,871	$	23,018	$	12,479
2019	19,726		—		29,273
Remainder of 2019							$	1,479	$	16,510
2020	16,402		—		19,391		—		19,894
2021	12,634		—		265		—		720
2022	9,299		—		—		—		80
2023							—		8
Thereafter	7,290		—		—		—		—
	$	72,222	$	23,018	$	61,408	$	1,479	$	37,212

a. Included in these amounts are sand purchase commitments of $51.9 million. Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $58.5 million. The minimum amount due in the form of shortfall fees under certain sand purchase agreements was $3.8 million as of September 30, 2018.

~~For the nine months ended September 30, 2018 and 2017, the Company recognized rent expense of $16.0 million and $7.4 million, respectively.~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~


a.	Included in these amounts are sand purchase commitments of $29.5 million. Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $33.6 million. The minimum amount due in the form of shortfall fees under certain sand purchase agreements was $2.3 million as of June 30, 2019.

The Company has various letters of credit that were issued under the Company's revolving credit agreement which is collateralized by substantially all of the assets of the Company. The letters of credit are categorized below (in thousands):


	September 30,		December 31,		June 30,		December 31,
	2018		2017		2019		2018
Insurance programs					$	4,105	$	4,105
Environmental remediation	$	3,877	$	3,582	4,182		3,877
Insurance programs	2,405		2,486
Rail car commitments	455		455		455		455
Total letters of credit	$	6,737	$	6,523	$	8,742	$	8,437

The Company has insurance coverage for physical partial loss to its assets, employer’s liability, automobile liability, commercial general liability, workers’ compensation and insurance for other specific risks. The Company has also elected in some cases to accept a greater amount of risk through increased deductibles on certain insurance policies. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the policies require a deductible per occurrence of up to ~~$0.3~~$0.1 million. The Company establishes liabilities for the unpaid deductible portion of claims incurred relating to physical loss to its assets, employer's liability, automobile liability, commercial general liability and workers’ compensation based on estimates. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, the policies contained an aggregate stop loss of ~~$2.0~~$5.4 million. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, accrued claims were ~~$4.3~~$4.4 million and ~~$2.9~~$4.7 million, respectively.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company also self-insures its employee health insurance. The Company has coverage on its self-insurance program in the form of a stop loss of $0.2 million per participant and an aggregate stop-loss of $5.8 million for the calendar year ending December 31, ~~2018.~~2019. These estimates may change in the near term as actual claims continue to develop. As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, accrued claims were ~~$3.1~~$3.4 million and ~~$2.1~~$3.2 million, respectively.

Pursuant to certain customer contracts in our infrastructure services segment, the Company warrants equipment and labor performed under the contracts for a specified period following substantial completion of the work. Generally, the warranty is for one year or less. No liabilities were accrued as of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017~~2018 and no expense was recognized during the ~~nine~~three months ended ~~September~~June 30, ~~2018~~2019 or ~~2017~~2018 related to warranty claims. However, if warranty claims occur, the Company could be required to repair or replace warrantied items, which in most cases are covered by warranties extended from the manufacturer of the equipment. In the event the manufacturer of equipment failed to perform on a warranty obligation or denied a warranty claim made by the Company, the Company could be required to pay for the cost of the repair or replacement.

In the ordinary course of business, the Company is required to provide bid bonds to certain customers in the infrastructure services segment as part of the bidding process. These bonds provide a guarantee to the customer that the Company, if awarded the project, will perform under the terms of the contract. Bid bonds are typically provided for a percentage of the total contract value. Additionally, the Company may be required to provide performance and payment bonds for contractual commitments related to projects in process. These bonds provide a guarantee to the customer that the Company will perform under the terms of a contract and that the Company will pay subcontractors and vendors. If the Company fails to perform under a contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company must reimburse the surety for expenses or outlays it incurs. As of ~~September~~June 30, 2019 and December 31, 2018, outstanding bid bonds totaled $6.7 million and $3.6 million, respectively, and outstanding performance and payment bonds totaled ~~$20.0~~$34.8 million and ~~$7.1~~$22.3 million, respectively. The estimated ~~the~~ cost to complete projects secured by the performance and payment bonds totaled ~~$3.6~~$17.2 million as of ~~September~~June 30, ~~2018. As of December 31, 2017, the Company did not have any outstanding bid bonds or performance and payment bonds.~~2019.

The Company is routinely involved in state and local tax audits. During 2015, the State of Ohio assessed taxes on the purchase of equipment the Company believes is exempt under state law. The Company appealed the assessment and a hearing was held in 2017. As a result of the hearing, the Company received a decision from the State of Ohio. The Company is appealing the decision and while it is not able to predict the outcome of the appeal, this matter is not expected to have a material adverse effect on the Company's financial position, results of operations or cash flows.

~~On January 26, 2017, a collective action lawsuit alleging that Stingray Pressure Pumping LLC ("Pressure Pumping") failed to pay a class~~The Company has become aware of ~~workers in compliance with~~an ongoing investigation by the ~~Fair Labor Standards Act was filed titled Ryan Crosby vs. Stingray Pressure Pumping LLC, in the United Stated District Court~~U.S. Attorney’s Office for the ~~Southern~~ District of ~~Ohio Eastern Division.~~Puerto Rico and the Department of Homeland Security Office of Inspector General relating to the contracts awarded to Cobra by PREPA. The ~~parties~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~reached~~Company has been informed that the investigation is focused on the interactions between a ~~settlement~~FEMA official and the former President of Cobra. The Company has been cooperating with this ~~matter~~investigation. Given the uncertainty inherent with respect to such investigations and any resulting litigation, it is not possible to determine the potential outcome at this time. If it is determined that the Company or its employees engaged in ~~August 2018.~~improper activities, however, the Company may be subject to civil and criminal penalties, and contractual, civil and criminal damages that may include the repayment of all or part of amounts paid to Cobra by PREPA and/or forgoing any of the amounts currently owed to Cobra. The ~~settlement was paid~~Company continues to evaluate this situation and ~~did~~at this time is not able to predict the outcome of the investigation or whether it will have a material impact on the Company's ~~financial position, results of operations or cash flows.~~

On June 27, 2017, a complaint alleging negligence, as a result of a motor vehicle accident, was filed titled Donnelle Banks, individually and as parent and next Friend for Leila Ann Hollis, a minor, vs. Redback Coil Tubing LLC and Mammoth Energy Services, Inc. in the District Court of Gregg County, Texas. The parties reached a settlement of this matter in September 2018. This matter was covered by insurance and did not have a material impact on the Company’s financial position, results of operations or cash flows.

On June 27, 2018, the Company's registered agent notified the Company that it had been served with a putative class action lawsuit titled Wendco of Puerto Rico Inc.; Multisystem Restaurant Inc.; Restaurant Operators Inc.; Apple Caribe, Inc.; on their own behalf and in representation of all businesses that conduct business in the Commonwealth of Puerto Rico vs. Mammoth Energy Services Inc.; Cobra Acquisitions, LLC; D. Grimm Puerto Rico, LLC; Aseguradoras A, B & C; John Doe; Richard Doe, in the Commonwealth of Puerto Rico Superior Court of San Juan. The plaintiffs allege negligent acts by the defendants caused an electrical failure in Puerto Rico resulting in damages of at least $300 million. The Company believes this claim is without merit and will vigorously defend the action. However, the Company continues to evaluate the background facts and at this time is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company's financial position, results of operations or cash flows.

In late 2018 and early 2019, Cobra was served with four lawsuits from municipalities in Puerto Rico alleging failure to pay municipal license and construction excise taxes. The Government of Puerto Rico's Central Recovery and Reconstruction Office ("COR3") has noted the unique nature of work executed by entities such as Cobra in Puerto Rico and that taxes, such as those in these matters, may be eligible for reimbursement by the government. Further, COR3

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

indicated that it is working to develop a solution that will result in payment of taxes owed to the municipalities without placing an undue burden on entities such as Cobra. The Company continues to work with COR3 to resolve these matters. However, the Company continues to evaluate the facts and circumstances and at this time is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company's financial position, results of operations or cash flows.

On April 16, 2019, a putative class and collective action lawsuit alleging that the Company failed to pay a class of workers overtime in compliance with the Fair Labor Standards Act and Puerto Rico law was filed titled Christopher Williams, individually and on behalf of all others similarly situated vs. Higher Power Electrical, LLC, Cobra Acquisitions LLC, and Cobra Energy, LLC in the U.S. District Court for the District of Puerto Rico. On June 24, 2019, the complaint was amended to replace Mr. Williams with Matthew Zeisset, another former Higher Power employee, as the named plaintiff. The defendants have moved to dismiss Mr. Zeisset's claims and compel them to arbitration on an individual basis. The Company is evaluating the background facts and at this time is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company’s financial position, results of operations or cash flows.

In June 2019, the Company was served with two class action lawsuits filed in the Western District of Oklahoma alleging that several of the Company's filings with the SEC contained material misrepresentations and omissions in violation of federal securities laws. The Company believes these claims are without merit and will vigorously defend the actions. However, the Company continues to evaluate the background facts and at this time is not able to predict the outcome of these lawsuits or whether they will have a material impact on the Company's financial position, results of operations or cash flows.

The Company is involved in various other legal proceedings in the ordinary course of business. Although the Company cannot predict the outcome of these proceedings, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material adverse effect on the Company's business, financial condition, results of operations or cash flows.

Defined contribution plan

The Company sponsors a 401(k) defined contribution plan for the benefit of substantially all employees at their date of hire. The plan allows eligible employees to contribute up to 92% of their annual compensation, not to exceed annual limits established by the federal government. The Company makes discretionary matching contributions of up to 3% of an employee’s compensation and may make additional discretionary contributions for eligible employees. For the ~~three and nine~~six months ended ~~September~~June 30, 2019 and 2018, the Company paid ~~$1.1~~$1.9 million and ~~$4.5~~$3.4 million, respectively, in contributions to the plan. ~~The Company did not make contributions to the plan during the three and nine months ended September 30, 2017.~~


~~19.~~20.	Reporting Segments

~~As of September 30, 2018, our revenues, income before income taxes and identifiable assets are primarily attributable to four reportable segments.~~ The Company principally provides ~~energy~~electric infrastructure services to government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities and services in connection with on-shore drilling of oil and natural gas wells for small to large domestic independent oil and natural gas ~~producers~~producers. As of June 30, 2019, the Company's revenues, income before income taxes and ~~electric~~identifiable assets are primarily attributable to three reportable segments including infrastructure services ~~to government-funded utilities, private utilities, public investor-owned utilities~~("Infrastructure"), pressure pumping services ("Pressure Pumping") and ~~co-operative utilities.~~natural sand proppant services ("Sand").

The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function ("CODM"). Segment information is prepared on the same basis that the CODM manages the segments, evaluates the segment financial statements and makes key operating and resource utilization decisions. Segment evaluation is determined on a quantitative basis based on a function of operating income (loss), as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

~~As of September 30,~~Prior to the year ended December 31, 2018, the ~~Company’s~~Company had four reportable segments, ~~include~~including infrastructure services, pressure pumping services, ~~("Pressure Pumping"), infrastructure services ("Infrastructure"),~~ natural sand proppant services ~~("Sand")~~ and contract land and directional drilling services. Based on its assessment of FASB ASC 280, Segment Reporting, guidance at December 31, 2018, the Company changed its reportable segment presentation in 2018, as it determined based upon both a quantitative and qualitative basis that the contract land and directional drilling services ~~("Drilling").~~segment is not of continuing significance for accounting reporting purposes. The Company now includes the results of the entities previously included in the contract land and directional drilling services segment in the reconciling column titled "All Other" in the tables below. The results below for the three and six months ended June 30, 2018 have been retroactively adjusted to reflect this change.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

~~The pressure pumping services segment provides hydraulic fracturing services primarily in~~

During the ~~Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania, Permian Basin in Texas and~~periods presented, the ~~mid-continent region in Oklahoma. The~~ infrastructure services segment ~~provides~~provided electric utility infrastructure services to government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities in Puerto Rico and the northeast, southwest and midwest portions of the United States. The pressure pumping services segment provides hydraulic fracturing and water transfer services primarily in the Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania, Eagle Ford and Permian Basins in Texas and the mid-continent region. The sand segment mines, processes and sells sand for use in hydraulic fracturing. The sand segment primarily services the Utica Shale, Permian Basin, SCOOP, STACK and Montney Shale in British Columbia and Alberta, Canada. ~~The~~

During the periods presented, the Company also provided contract land and directional drilling services, ~~segment provides vertical, horizontal and directional drilling services primarily in the Permian Basin in West Texas.~~

~~MAMMOTH ENERGY SERVICES, INC.~~

~~NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~The Company also provides~~ coil tubing ~~services, pressure control~~ services, flowback services, cementing services, acidizing services, equipment rental services, crude oil hauling ~~services, water transfer~~ services and remote accommodation services. The businesses that provide these services are distinct operating segments, which the CODM reviews independently when making key operating and resource utilization decisions. None of these operating segments meet the quantitative thresholds of a reporting segment and do not meet the aggregation criteria set forth in ASC 280 Segment Reporting. Therefore, results for these operating segments are included in the column labeled "All Other" in the tables below. Additionally, assets for corporate activities, which primarily include cash and cash equivalents, inter-segment accounts receivable, prepaid insurance and certain property and equipment, are included in the All Other column. Although Mammoth LLC, which holds these corporate assets, meets one of the quantitative thresholds of a reporting segment, it does not engage in business activities from which it may earn revenues and its results are not regularly reviewed by the Company's CODM when making key operating and resource utilization decisions. Therefore, the Company does not include it as a reportable segment.

Sales from one segment to another are generally priced at estimated equivalent commercial selling prices. Total revenue and Total cost of revenue amounts included in the Eliminations column in the following tables include inter-segment transactions conducted between segments. Receivables due for sales from one segment to another and for corporate allocations to each segment are included in the Eliminations column for Total assets in the following tables. All transactions conducted between segments are eliminated in consolidation. Transactions conducted by companies within the same reporting segment are eliminated within each reporting segment. The following tables set forth certain financial information with respect to the Company’s reportable segments (in thousands):

Three months ended September 30, 2018 Pressure Pumping Infrastructure Sand Drilling All Other Eliminations Total
Revenue from external customers $ 91,595
$ 237,052
$ 18,742
$ 15,800
$ 20,854
$ —
$ 384,043
Intersegment revenues 815
—
18,268
139
671
(19,893 ) —
Total revenue 92,410
237,052
37,010
15,939
21,525
(19,893 ) 384,043
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 54,023
128,267
29,470
14,104
21,701
—
247,565
Intersegment cost of revenues 18,897
37
546
158
245
(19,883 ) —
Total cost of revenue 72,920
128,304
30,016
14,262
21,946
(19,883 ) 247,565
Selling, general and administrative 4,335
(54,200 ) 1,618
1,362
1,561
—
(45,324 )
Depreciation, depletion, amortization and accretion 12,665
6,591
4,184
4,327
4,248
—
32,015
Impairment of long-lived assets 143
—
—
—
4,439
—
4,582
Operating income (loss) 2,347
156,357
1,192
(4,012 ) (10,669 ) (10 ) 145,205
Interest expense, net 150
159
37
53
59
—
458
Other expense 2
181
199
(5 ) 23
—
400
Income (loss) before income taxes $ 2,195
$ 156,017
$ 956
$ (4,060 ) $ (10,751 ) $ (10 ) $ 144,347


Three months ended September 30, 2017	Pressure Pumping		Infrastructure		Sand		Drilling			All Other			Eliminations			Total
Three months ended June 30, 2019																			Infrastructure			Pressure Pumping			Sand			All Other			Eliminations			Total
Revenue from external customers	$	75,705	$	13,486	$	29,332	$	13,644		$	17,138		$	—		$	149,305		$	41,821		$	82,973		$	29,223		$	27,803		$	—		$	181,820
Intersegment revenues	950		—		3,401		—			287			(4,638		)	—			—			1,668			11,170			584			(13,422		)	—
Total revenue	76,655		13,486		32,733		13,644			17,425			(4,638		)	149,305			41,821			84,641			40,393			28,387			(13,422		)	181,820
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	52,961		10,117		25,178		11,598			14,679			—			114,533			44,864			59,835			32,676			30,640			—			168,015
Intersegment cost of revenues	3,688		—		905		45			—			(4,638		)	—			—			11,797			1,141			562			(13,500		)	—
Total cost of revenue	56,649		10,117		26,083		11,643			14,679			(4,638		)	114,533			44,864			71,632			33,817			31,202			(13,500		)	168,015
Selling, general and administrative	2,511		886		1,841		1,374			1,410			—			8,022			3,035			2,664			1,380			2,376			—			9,455
Depreciation, depletion, amortization and accretion	13,039		1,039		3,034		5,036			5,076			—			27,224			7,818			10,174			4,528			7,625			—			30,145
Operating income (loss)	4,456		1,444		1,775		(4,409		)	(3,740		)	—			(474		)
Operating (loss) income																			(13,896		)	171			668			(12,816		)	78			(25,795		)
Interest expense, net	592		68		87		570			103			—			1,420			386			452			72			641			—			1,551
Other expense	120		10		98		39			53			—			320
Income (loss) before income taxes	$	3,744	$	1,366	$	1,590	$	(5,018	)	$	(3,896	)	$	—		$	(2,214	)
Other (income) expense, net																			(4,045		)	9			(32		)	49			—			(4,019		)
(Loss) income before income taxes																			$	(10,237	)	$	(290	)	$	628		$	(13,506	)	$	78		$	(23,327	)

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Nine months ended September 30, 2018	Pressure Pumping			Infrastructure		Sand		Drilling			All Other			Eliminations			Total
Three months ended June 30, 2018																			Infrastructure		Pressure Pumping			Sand		All Other			Eliminations			Total
Revenue from external customers	$	288,507		$	922,761	$	92,684	$	48,154		$	59,780		$	—		$	1,411,886	$	360,250	$	100,333		$	37,439	$	35,572		$	—		$	533,594
Intersegment revenues	6,447			—		48,186		225			4,807			(59,665		)	—		—		1,073			15,406		1,776			(18,255		)	—
Total revenue	294,954			922,761		140,870		48,379			64,587			(59,665		)	1,411,886		360,250		101,406			52,845		37,348			(18,255		)	533,594
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	182,228			532,532		97,917		43,859			56,958			—			913,494		210,189		61,593			35,117		32,929			—			339,828
Intersegment cost of revenues	50,473			2,582		5,851		280			479			(59,665		)	—		754		16,174			1,019		60			(18,007		)	—
Total cost of revenue	232,701			535,114		103,768		44,139			57,437			(59,665		)	913,494		210,943		77,767			36,136		32,989			(18,007		)	339,828
Selling, general and administrative	27,820			17,437		5,049		4,206			3,802			—			58,314		39,786		20,822			1,787		2,732			—			65,127
Depreciation, depletion, amortization and accretion	40,480			13,092		10,381		14,031			11,734			—			89,718		4,094		13,829			3,881		8,991			—			30,795
Impairment of long-lived assets	143			—		—		187			4,439			—			4,769		—		—			—		187			—			187
Operating income (loss)	(6,190		)	357,118		21,672		(14,184		)	(12,825		)	—			345,591		105,427		(11,012		)	11,041		(7,551		)	(248		)	97,657
Interest expense, net	995			341		193		713			412			—			2,654		106		341			76		436			—			959
Other expense	94			513		222		67			18			—			914
Other expense, net																			330		80			36		40			—			486
Income (loss) before income taxes	$	(7,279	)	$	356,264	$	21,257	$	(14,964	)	$	(13,255	)	$	—		$	342,023	$	104,991	$	(11,433	)	$	10,929	$	(8,027	)	$	(248	)	$	96,212


Nine months ended September 30, 2017	Pressure Pumping		Infrastructure		Sand			Drilling			All Other			Eliminations			Total
Six months ended June 30, 2019																				Infrastructure			Pressure Pumping		Sand			All Other			Eliminations			Total
Revenue from external customers	$	166,082	$	15,195	$	68,244		$	36,867		$	36,145		$	—		$	322,533		$	150,542		$	173,568	$	54,187		$	65,661		$	—		$	443,958
Intersegment revenues	1,409		—		4,848			—			372			(6,629		)	—			—			3,212		24,067			1,243			(28,522		)	—
Total revenue	167,491		15,195		73,092			36,867			36,517			(6,629		)	322,533			150,542			176,780		78,254			66,904			(28,522		)	443,958
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	117,494		11,829		57,760			34,584			28,704			—			250,371			103,828			124,047		62,928			66,282			—			357,085
Intersegment cost of revenues	5,220		—		1,359			45			5			(6,629		)	—			—			25,334		2,188			1,060			(28,582		)	—
Total cost of revenue	122,714		11,829		59,119			34,629			28,709			(6,629		)	250,371			103,828			149,381		65,116			67,342			(28,582		)	357,085
Selling, general and administrative	6,691		1,241		6,315			4,102			4,110			—			22,459			12,553			5,876		2,899			5,463			—			26,791
Depreciation, depletion, amortization and accretion	31,823		1,379		6,603			14,978			9,571			—			64,354			15,537			20,068		7,401			15,715			—			58,721
Operating income (loss)	6,263		746		1,055			(16,842		)	(5,873		)	—			(14,651		)	18,624			1,455		2,838			(21,616		)	60			1,361
Interest expense, net	1,023		72		573			1,227			34			—			2,929			425			649		102			898			—			2,074
Bargain purchase gain	—		—		(4,012		)	—			—			—			(4,012		)
Other expense	127		10		252			263			55			—			707
Other (income) expense, net																				(28,869		)	8		(32		)	317			—			(28,576		)
Income (loss) before income taxes	$	5,113	$	664	$	4,242		$	(18,332	)	$	(5,962	)	$	—		$	(14,275	)	$	47,068		$	798	$	2,768		$	(22,831	)	$	60		$	27,863

Pressure Pumping Infrastructure Sand Drilling All Other Eliminations Total
As of September 30, 2018:
Total assets^(a)
$ 291,492
$ 379,934
$ 186,437
$ 88,507
$ 139,032
$ (244 ) $ 1,085,158
Goodwill $ 86,043
$ 891
$ 2,684
$ —
$ 8,690
$ —
$ 98,308
As of December 31, 2017:
Total assets^(a)
$ 297,140
$ 205,275
$ 190,859
$ 88,527
$ 243,767
$ (158,325 ) $ 867,243
Goodwill $ 86,043
$ 891
$ 2,684
$ —
$ 10,193
$ —
$ 99,811



Six months ended June 30, 2018	Infrastructure		Pressure Pumping			Sand		All Other			Eliminations			Total
Revenue from external customers	$	685,709	$	196,912		$	73,942	$	71,280		$	—		$	1,027,843
Intersegment revenues	—		5,632			29,918		4,193			(39,743		)	—
Total revenue	685,709		202,544			103,860		75,473			(39,743		)	1,027,843
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	404,265		128,205			68,447		65,012			—			665,929
Intersegment cost of revenues	2,545		31,576			5,305		327			(39,753		)	—
Total cost of revenue	406,810		159,781			73,752		65,339			(39,753		)	665,929
Selling, general and administrative	71,637		23,485			3,431		5,085			—			103,638
Depreciation, depletion, amortization and accretion	6,501		27,815			6,197		17,190			—			57,703
Impairment of long-lived assets	—		—			—		187			—			187
Operating income (loss)	200,761		(8,537		)	20,480		(12,328		)	10			200,386
Interest expense, net	182		845			156		1,013			—			2,196
Other expense, net	332		92			23		67			—			514
Income (loss) before income taxes	$	200,247	$	(9,474	)	$	20,301	$	(13,408	)	$	10		$	197,676


a.	Total assets included in the All Other column include Mammoth LLC corporate assets totaling $25.0 million and $148.8 million, respectively, as of September 30, 2018 and December 31, 2017, of which ($6.2) million and $137.4 million are inter-segment accounts receivable which are eliminated in consolidation.


~~20.~~	~~Subsequent Events~~

On October 29, 2018, the Company's board of Directors declared a quarterly cash dividend of $0.125 per share of common stock to be paid on November 15, 2018 to stockholders of record as of the close of business on November 8, 2018. Based on the number of shares outstanding at October 30, 2018, the total dividend payable to stockholders on November 15, 2018 will be approximately $5.6 million.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



	Infrastructure		Pressure Pumping		Sand		All Other		Eliminations		Total
As of June 30, 2019:
Total assets	$	419,368	$	265,244	$	216,857	$	147,611	$	59,830	$	1,108,910
Goodwill	$	3,828	$	86,043	$	2,684	$	8,690	$	—	$	101,245
As of December 31, 2018:
Total assets	$	366,457	$	254,278	$	177,870	$	122,442	$	152,044	$	1,073,091
Goodwill	$	3,828	$	86,043	$	2,684	$	8,690	$	—	$	101,245


21.	Subsequent Events

Subsequent to ~~September~~June 30, ~~2018, subsidiaries in~~2019, the Company borrowed an additional $3.5 million under its credit facility. At July 31, 2019, outstanding borrowings under the Company's ~~infrastructure segment issued payment and performance bonds and bid bonds totaling $4.1~~revolving credit facility totaled $85.5 million, ~~and $3.5~~leaving an aggregate of $90.0 million ~~respectively.~~

~~Subsequent to September 30, 2018, a subsidiary in~~of available borrowing capacity under the ~~Company's infrastructure segment entered into an air charter agreement with aggregate commitments~~facility, which is net of ~~$1.6 million and the Company's pressure pumping subsidiary purchased additional equipment totaling $1.4~~letters of credit of $8.7 million.

~~Subsequent~~As a result of market conditions, subsequent to ~~September~~June 30, ~~2018,~~2019, the Company ~~ordered additional capital equipment with aggregate commitments~~temporarily shut down its cementing and acidizing operations as well as its flowback operations. The Company is currently evaluating the impact this event will have on its consolidated financial statements. An estimate of ~~$8.1 million.~~such impact cannot be made at this time.

As a result of oilfield market conditions, the Company's Board of Directors has suspended the quarterly cash dividend.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and related notes thereto presented in this Quarterly Report and the consolidated financial statements and related notes thereto included in our Annual Report on Form 10-K. This discussion contains forward-looking statements reflecting our current expectations, estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in Item 1A. "Risk Factors” in this Quarterly Report and in our Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the Securities and Exchange Commission, or the SEC, on ~~February 28, 2018~~March 18, 2019 and the section entitled “Forward-Looking Statements” appearing elsewhere in this Quarterly Report.

Overview

We are an integrated, growth-oriented company serving both the electric utility and oil and gas ~~and the electric utility~~ industries in North ~~America and US territories.~~America. Our primary business objective is to grow our operations and create value for stockholders through organic growth opportunities and accretive acquisitions. Our suite of services includes infrastructure services, pressure pumping ~~services, infrastructure~~ services, natural sand proppant services and other energy services, including contract land and directional drilling, ~~services and other energy services, including~~ coil tubing, flowback, cementing, acidizing, equipment rental, crude oil hauling ~~water transfer~~ and remote accommodations. ~~Our pressure pumping services division provides hydraulic fracturing services.~~ Our infrastructure services division provides construction, upgrade, maintenance and repair services to the electrical infrastructure industry. Our pressure pumping services division provides hydraulic fracturing and water transfer services. Our natural sand proppant services division mines, processes and sells proppant used for hydraulic fracturing. Our contract land and directional drilling services division provides drilling rigs and crews for operators as well as rental equipment, such as mud motors and operational tools, for both vertical and horizontal drilling. In addition to these service divisions, we also provide contract land and directional drilling services, coil tubing services, pressure control services, flowback services, cementing services, acidizing services, equipment rentals, full service transportation, crude oil hauling services ~~water transfer~~ and remote accommodations. We believe that the services we offer play a critical role in maintaining and improving electrical infrastructure as well as in increasing the ultimate recovery and present value of production streams from unconventional ~~resources as well as maintaining and improving electrical infrastructure.~~resources. Our complementary suite of services provides us with the opportunity to cross-sell our services and expand our customer base and geographic positioning. We are exploring several opportunities to expand our business lines ~~including, but not limited~~ to ~~full service transportation,~~include telecommunications ~~impacts due to the pending rule changes implemented by the international maritime organization, or IMO, in 2020~~ and general industrial manufacturing, among others, as we shift to a broader industrial focus.

On June 5, 2017, we acquired Sturgeon Acquisitions LLC, or Sturgeon, and Sturgeon's wholly owned subsidiaries Taylor Frac, LLC, Taylor Real Estate Investments, LLC and South River Road, LLC. Prior to the acquisition, we and Sturgeon were under common control and, in accordance with generally accepted accounting principles in the United States, or GAAP, we have accounted for this acquisition in a manner similar to the pooling of interest method of accounting. Therefore, our historical financial information for all periods prior to and including the date of this acquisition included in this Quarterly Report on Form 10-Q has been recast to combine Sturgeon's financial results with our financial results as if the acquisition had been effective since Sturgeon commenced operations.

~~Third~~Second Quarter ~~2018~~2019 Highlights and Recent Developments

~~Extended Pressure Pumping Services~~

Net loss of $10.9 million, or $0.24 per diluted share, for the three months ended June 30, 2019.

Adjusted EBITDA of $8.6 million for the three months ended June 30, 2019. See "Non-GAAP Financial Measures" below for a reconciliation of net income to adjusted EBITDA.

Suspended quarterly cash dividend beginning with the second quarter of 2019 in response to oilfield market conditions.

Reduced our 2019 capital expenditure budget 49% from $80 million to $41 million.

Industry Overview

Energy Infrastructure Industry

In 2017, we expanded into the electric infrastructure business, offering both commercial and ~~Sand Supply Agreements with Gulfport~~

On July 10, 2018, we amended our existing agreement with Gulfport pursuant to which we, through our subsidiary Pressure Pumping, provide hydraulic fracturing, stimulation and related completion and reworkstorm restoration services to ~~Gulfport with two dedicated frac spreads~~government-funded utilities, private utilities, public investor owned utilities and ~~related equipment.~~cooperatives. Since we commenced operations in this line of business, substantially all of our infrastructure revenues has been generated from storm restoration work, primarily from PREPA due to damage caused by Hurricane Maria. On October 19, 2017, Cobra and PREPA entered into an emergency master services agreement for repairs to PREPA’s electrical grid. The ~~amendment extended~~one-year contract, as amended, provided for payments of up to $945 million. On May 26, 2018, Cobra and PREPA entered into a new one-year, $900 million master services agreement to provide additional repair services and begin the ~~term~~initial phase of reconstruction of the ~~existing pressure pumping agreement until December 31, 2021, unless it~~electrical power system in Puerto Rico. Our work under each of the contracts with PREPA has now ended and only a small contingent of non-billable personnel remain on the island to facilitate the demobilization of our remaining equipment.

As of June 30, 2019, PREPA owed us approximately $227.4 million for services performed excluding $29.0 million of interest charged on these delinquent balances as of June 30, 2019. See Note 2. Basis of Presentation and Significant Accounting Policies-Accounts Receivable of our unaudited condensed consolidated financial statements. PREPA is ~~terminated earlier~~currently subject to

bankruptcy proceedings pending in ~~accordance with~~the U.S. District Court for the District of Puerto Rico. As a result, PREPA's ability to meet its ~~terms, and expanded~~payment obligations under the ~~service area to include both Ohio and Oklahoma. The pressure pumping amendment also provides that Gulfport has~~contracts is largely dependent upon funding from the ~~right to suspend pressure pumping services for up to one crew upon a minimum of 90 days prior written notice to Pressure Pumping, with no further payment~~Federal Emergency Management Agency or other ~~obligation~~sources. In the event PREPA (i) does not have or does not obtain the funds necessary to ~~Pressure Pumping~~satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to us or (iii) otherwise fails to pay amounts owed to us for ~~such suspended crew. Pressure Pumping will~~services performed, our financial condition, results of operations and cash flows would be ~~obligated~~materially and adversely affected. In addition, government contracts are subject to ~~resume any such suspended pressure pumping services upon 90 days prior written notice~~various uncertainties, restrictions and regulations, including oversight audits and compliance reviews by ~~Gulfport, unless such notice is waived~~government agencies and representatives. In this regard, we have become aware of an ongoing investigation by ~~Pressure Pumping.~~

~~The pressure pumping amendment also provided~~the U.S. Attorney’s Office for the ~~initial suspension~~District of ~~pressure pumping services~~Puerto Rico and the Department of Homeland Security Office of Inspector General relating to ~~Gulfport for~~the contracts awarded to Cobra by PREPA. We have been informed that the investigation is focused on the interactions between a ~~period July 1, 2018 through September 30, 2018, during which period Pressure Pumping could use~~FEMA official and the ~~dedicated frac spreads for other customers. If during~~former President of Cobra. We have been cooperating with this investigation. Given the initial suspension period Pressure Pumping’s use of the dedicated frac spreads for other customers does not reach a certain level, then Gulfport agreed to pay costs to Pressure Pumping and Pressure Pumping

~~agreed to perform services for Gulfport~~uncertainty inherent with respect to such ~~amounts. In addition, if during such initial suspension period Pressure Pumping was unable~~investigations and any resulting litigation, it is not possible to ~~utilize~~determine the ~~dedicated frac spreads for~~potential outcome at this time. If it is determined that we or our employees engaged in improper activities, however, we may be subject to civil and criminal penalties, and contractual, civil and criminal damages that may include the repayment of all or part of amounts paid to us by PREPA and/or forgoing any of the amounts currently owed to us. Further, as noted above, our contracts with PREPA have concluded and there can be no assurance that we will be able to obtain one or more contracts with PREPA or other customers ~~Gulfport agreed~~ to ~~pay recoupment~~replace the level of services that we provided to PREPA under our previous contracts.

We completed our work in Puerto Rico on March 31, 2019 and, during the second quarter of 2019, we demobilized our remaining crews and approximately 1,000 pieces of equipment back to the U.S. mainland. We have begun to right size our infrastructure operations and perform required maintenance on our equipment which had been subjected to harsh working conditions. We expect this process, with its associated costs, to ~~Pressure Pumping during~~be completed in the ~~period~~coming months.

While we have completed our work in Puerto Rico, the demand for our infrastructure services in the continental United States has continued to increase. We have grown our crew count to a total of ~~October 1, 2018 to~~approximately 156 crews as of June 30, 2019, an increase of 51 from approximately 105 at December 31, ~~2018. No amounts were deferred to the period between October 1,~~ 2018 and an increase of 106 from approximately 50 at December 31, ~~2018.~~2017. Each distribution crew generally consists of five employees. These distribution crews, which now include many of the employees previously located in Puerto Rico, are working for multiple utilities primarily across the northeastern, midwestern and southwestern portions of the United States. We believe we will be able to continue to grow our customer base and increase our revenues in the continental United States over the coming years. We also believe that the skill sets and experience of our crews will afford us enhanced bidding opportunities in both the U.S. and overseas.

~~On August 6, 2018,~~As of June 30, 2019, our infrastructure services backlog was approximately $595 million, all of which is attributable to operations in the continental United States. Estimated backlog for our infrastructure services represents the amount of revenue we ~~amended~~expect to realize over the next 36 months from future work on uncompleted construction projects, including new contracts under which work has not begun. Our estimated backlog also includes amounts payable to us under master service and other service agreements. Estimated infrastructure services backlog for work under master service and other service agreements is determined based on historical trends, experience from similar projects and estimates of customer demand based on communications with our ~~existing agreement with Gulfport~~customers.

Approximately $576 million of our infrastructure services backlog as of June 30, 2019 is attributable to amounts under master service or other service agreements pursuant to which ~~we, through~~ our ~~subsidiary Muskie Proppant, sell~~customers are not contractually committed to purchase a minimum amount of services. Most of these agreements can be canceled on short or no advance notice. Timing of revenue for our infrastructure services backlog can be subject to change as a result of our delays, customer delays, regulatory delays or other factors. These changes could cause estimated revenue to be realized in periods later than originally expected, or not at all. We occasionally experience postponements, cancellations and ~~deliver specified amounts~~reductions in expected future work from master service agreements or other service agreements due to changes in our customers’ spending plans, market volatility, governmental funding and regulatory factors. There can be no assurance as to our customers’ requirements or the accuracy of ~~sand to Gulfport. The amendment extends the term~~our estimates. As a result, our backlog as of ~~the existing sand supply agreement until December 31, 2021.~~any particular date is an uncertain indicator of future revenue and earnings.

~~Amended and Restated Credit Facility~~

~~On October 19, 2018, Mammoth entered into an amended and restated five-year asset backed revolving credit facility led~~Backlog is not a term recognized under accounting principles generally accepted in the United States; however, it is a common measurement used in the infrastructure industry. As such, our methodology for determining backlog is not comparable to the methodologies used by PNC Capital Markets with a maximum revolving advance amount at closing of $185 million and the potential to increase the facility by up to an additional $165 million. For additional information related to this amended and restated agreement, see "—Liquidity and Capital Resources—Our Revolving Credit Facility" below.

~~Industry Overview~~others.

Oil and Natural Gas Industry

The oil and natural gas industry has traditionally been volatile and is influenced by a combination of long-term, short-term and cyclical trends, including the domestic and international supply and demand for oil and natural gas, current and expected future prices for oil and natural gas and the perceived stability and sustainability of those prices, production depletion

rates and the resultant levels of cash flows generated and allocated by exploration and production companies to their drilling, completion and related services and products budget. The oil and natural gas industry is also impacted by general domestic and international economic conditions, political instability in oil producing countries, government regulations (both in the United States and elsewhere), levels of customer demand, the availability of pipeline capacity and other conditions and factors that are beyond our control.

Demand for most of our oil and natural gas products and services depends substantially on the level of expenditures by companies in the oil and natural gas industry. The levels of capital expenditures of our customers are predominantly driven by ~~the~~ oil and natural gas prices. Over the past several years, commodity prices, particularly oil, has seen significant volatility with pricing ranging from a high of $110.53 per barrel on September 6, 2013 to a low of $26.19 per barrel on February 11, 2016. During early 2017, oil prices stabilized around the $50 per barrel level and started a gradual upward trend which continued into the ~~third~~fourth quarter of 2018, ~~where~~when oil prices peaked at $76.41 on October 3, 2018. Due to certain factors related to world politics and major oil producers, the price of oil experienced a sharp decline during the fourth quarter of 2018, with prices falling to a low of $42.53 on December 24, 2018. Oil prices stabilized in early 2019 and started an upward trend reaching a high of $66.30 per barrel on April 23, 2019. Throughout the second quarter of 2019, oil prices averaged ~~$69.60.~~$59.86 per barrel, an increase of approximately 9% over the average price per barrel during the first quarter of 2019 of $54.87.

We anticipate demand for our oil and natural gas services and products will continue to be dependent on the level of expenditures by companies in the oil and natural gas industry and, ultimately, commodity prices. We experienced a weakening in demand for our oilfield services beginning in the third quarter of 2018 which accelerated in the fourth quarter of 2018 as a result of softening of oil prices and budget exhaustion by our customers. With the rebound in commodity prices in early 2019 and the resetting of budgets for the new year, we saw demand for our pressure pumping services increase in the first quarter of 2019. However, utilization rates for our pressure pumping services declined in the second quarter of 2019 and pricing remained challenging. We expect these utilization and pricing trends to continue during the second half of 2019. If commodity prices stabilize at current levels or continue to increase, ~~we expect~~ the capital expenditures of our customers have the potential to increase ~~which~~from current levels as additional cash flows are realized. If this were to occur, we would expect an increase in ~~turn should increase~~ demand for our services and products, particularly in our completion and production, natural sand proppant and contract land and directional drilling businesses. Increase in demand, however, may not result in an increase in pricing as many of the oilfield services we provide are oversupplied. Decreases in commodity prices, however, ~~may~~would be expected to result in a reduction in the capital expenditures of our customers and ~~impact~~reduce the demand and pricing for our drilling, completion and other products and services.

~~We expect~~During the ~~temporary challenges related~~first six months of 2019, we experienced lower utilization rates and pricing for our oil and natural gas services, including our pressure pumping, contract drilling, coil tubing and directional drilling equipment and services, as compared to ~~customer budget limitations~~the first six months of 2018. Further, in response to ~~persist through the end of the year.~~market conditions, subsequent to June 30, 2019, we have temporarily shut down our cementing and acidizing operations as well as our flowback operations. Based on current feedback from our exploration and production customers, we expect ~~exploration and production companies~~them to take ~~extended breaks~~a cautious approach to activity levels in the ~~fourth quarter~~second half of ~~2018~~2019 given the recent volatility in oil prices and investor sentiment calling for activities to remain within or below cash flows. Accordingly, we do not anticipate material increases in the overall pricing for our products and services in the near term. We intend to closely monitor our cost structure in response to market conditions. Further, a significant portion of our revenue from our pressure pumping business is derived from Gulfport pursuant to a contract that expires in December 2021. The termination of our relationship with Gulfport, or nonrenewal of our contract with Gulfport, or one or more of our other customers, if not replaced with comparable levels of service from other customers, could result in lower utilization rates for our pressure pumping equipment and, as a result, ~~of budget exhaustion. We anticipate that these extended breaks will reduce activity levels and pricing for~~would have a material adverse effect on our services in the fourth quarter of 2018. We will continue to adjust our cost structure to market conditions, but we do not believe it is necessary to significantly reduce costs or infrastructure for a temporary slowdown in activity levels and we are actively maintaining our equipment during this temporary slowdown in activity levels. In 2019, we expect a rebound in activity from second half of 2018 levels as customer budgets are refreshed.

~~Energy Infrastructure Industry~~

~~In 2017, we expanded into the electric infrastructure~~ business, offering both commercial and storm restoration services to government-funded utilities, private utilities, public investor owned utilities and cooperatives. Since we commenced operations in this line of business, substantially all of our infrastructure revenues has been generated from storm restoration work, primarily from PREPA due to damage caused by Hurricane Maria. On October 19, 2017, Cobra and PREPA entered into an emergency master services agreement for repairs to PREPA’s electrical grid. The one-year contract, as amended, provides for payments of up to $945.4 million. On May 26, 2018, Cobra and PREPA entered into a new one-year, $900.0 million master

services agreement to provide additional repair services and begin the initial phase of reconstruction of the electrical power system in Puerto Rico. PREPA is currently subject to bankruptcy proceedings pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA's ability to meet its payment obligations under the contract will be largely dependent upon funding from the Federal Emergency Management Agency or other sources. In the event PREPA does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, terminates the contracts, curtails our services prior to the end of the contract terms or otherwise fails to pay amounts owed to us for services performed, our financial condition, results of ~~operations~~operation and cash flows would be materially and adversely affected. In addition, government contracts are subject to various uncertainties, restrictions and regulations, including oversight audits by government representatives and profit and cost controls, which could result in withholding or delayed payments to us or efforts to recover payments already made.

The demand for our infrastructure services in the continental United States has increased since we expanded into the infrastructure business. Our infrastructure teams are working for multiple utilities primarily across the northeastern, midwestern and southwestern portions of the United States. We believe we will be able to continue to grow our customer base in the continental United States and increase the backlog of work over the coming years. In Puerto Rico, the reconstruction process is just beginning with significant front-end engineering required prior to the reconstruction of the electric grid. Staffing levels in Puerto Rico have fluctuated between 500 and 600 people over the past 60 days and we anticipate a ramp up in reconstruction projects throughout 2019.flow.

Natural Sand Proppant Industry

In the natural sand proppant industry, demand growth for frac sand and other proppants is primarily driven by advancements in oil and natural gas drilling and well completion technology and techniques, such as horizontal drilling and hydraulic fracturing, as well as overall industry activity growth. Demand for proppant declined in 2015 and throughout most of 2016 ~~with~~and again in late 2018 due to reduced well completion activity; however, we believe that demand for proppant will continue to grow over the long-term, as it did throughout 2017 and the first half of 2018.

Over the past 1824 months, several new suppliers entered the market and existing suppliers ~~announced~~completed planned capacity additions of frac sand supply, particularly in the Permian Basin. ~~We expect~~The industry expansion caused the frac sand ~~supply~~market to exceed growth in demand over the coming months and quarters. While planned capacity may exceed the expectations for frac sand demand, the collectively available industry capacity is constrained due to (i) availability of the grades of sand that are currently in demand, (ii) general operating conditions and normal downtime and (iii) logistics constraints. The industry is expected to add significant capacity over the next 12 to 18 months,become oversupplied, particularly in finer grades. As a result, pricing for certain grades have fallen significantly from the ~~Permian Basin.~~peaks experienced during the first half of 2018. This price degradation has resulted in the temporary closure of several Northern White plants. We believe that the coarseness, conductivity, sphericity, acid-solubility and crush-resistant properties of our Northern White sand reserves and our transportation infrastructure afford us an advantage over many of our competitors and

make us one of a select group of Northern White sand producers capable of delivering high volumes of frac sand that is optimal for oil and natural gas production to all major unconventional resource basins currently producing throughout North America.

During the first half of 2018, constraints in the rail system adversely impacted frac sand deliveries from our Taylor sand facility in Jackson County, Wisconsin. As a result, we estimate production at our Taylor facility was 23% lower during the first half of 2018 than it would have been in the absence of these constraints. These rail system constraints were largely alleviated ~~during~~by the ~~third quarter~~end of 2018. Production at our Piranha facility was not impacted by these rail constraints, however, another railroad ~~recently~~ instituted a policy during the fourth quarter of 2018 that ~~shifts~~shifted from utilizing unit trains (100 car dedicated trains specifically set up to move sand in large quantities) to manifest shipments (smaller number of sand cars coupled with other types of loads to make up a full train shipment). This shift to manifest shipments ~~could impede~~has not had an impact on the ~~ability to move~~movement of sand from our Piranha ~~facility.~~facility to date, but may in the future.

Further, as a result of adverse market conditions, production at our Muskie sand facility in Pierce County, Wisconsin has been temporarily idled since September 2018. Our Piranha sand facility in New Auburn, Wisconsin and Taylor sand facility in Taylor, Wisconsin are currently running at 60% to 70% capacity. Our contracted capacity has provided a strong baseline of business, which has kept our Taylor and Piranha plants operating and our costs low. Our blended production costs have declined 31% from approximately $17.12 during the first half of 2018 to approximately $11.82 during the first half of 2019.

Results of Operations

Three Months Ended ~~September~~June 30, ~~2018~~2019 Compared to Three Months Ended ~~September~~June 30, ~~2017~~2018


	Three Months Ended						Three Months Ended
	September 30, 2018			September 30, 2017			June 30, 2019			June 30, 2018
	(in thousands)						(in thousands)
Revenue:
Infrastructure services							$	41,821		$	360,250
Pressure pumping services	$	92,410		$	76,655		84,641			101,406
Infrastructure services	237,052			13,486
Natural sand proppant services	37,010			32,733			40,393			52,845
Contract land and directional drilling services	15,939			13,644
Other services	21,525			17,425			28,387			37,348
Eliminations	(19,893		)	(4,638		)	(13,422		)	(18,255		)
Total revenue	384,043			149,305			181,820			533,594

Cost of revenue:
Pressure pumping services (exclusive of depreciation and amortization of $12,657 and $13,009, respectively, for the three months ended September 30, 2018 and 2017)	72,920			56,649
Infrastructure services (exclusive of depreciation and amortization of $6,582 and $1,039, respectively, for the three months ended September 30, 2018 and 2017)	128,304			10,117
Natural sand proppant services (exclusive of depreciation, depletion and accretion of $4,183 and $3,033, respectively, for the three months ended September 30, 2018 and 2017)	30,016			26,083
Contract land and directional drilling services (exclusive of depreciation of $4,325 and $5,032, respectively, for the three months ended September 30, 2018 and 2017)	14,262			11,643
Other services (exclusive of depreciation and amortization of $4,246 and $5,073, respectively, for the three months ended September 30, 2018 and 2017)	21,946			14,679
Infrastructure services (exclusive of depreciation and amortization of $7,812 and $4,088, respectively, for the three months ended June 30, 2019 and 2018)							44,864			210,943
Pressure pumping services (exclusive of depreciation and amortization of $10,163 and $13,841, respectively, for the three months ended June 30, 2019 and 2018)							71,632			77,767
Natural sand proppant services (exclusive of depreciation, depletion and accretion of $4,525 and $3,879, respectively, for the three months ended June 30, 2019 and 2018)							33,817			36,136
Other services (exclusive of depreciation and amortization of $7,622 and $8,969, respectively, for the three months ended June 30, 2019 and 2018)							31,202			32,989
Eliminations	(19,883		)	(4,638		)	(13,500		)	(18,007		)
Total cost of revenue	247,565			114,533			168,015			339,828
Selling, general and administrative expenses	(45,324		)	8,022			9,455			65,127
Depreciation, depletion, amortization and accretion	32,015			27,224			30,145			30,795
Impairment of long-lived assets	4,582			—			—			187
Operating income (loss)	145,205			(474		)
Operating (loss) income							(25,795		)	97,657
Interest expense, net	(458		)	(1,420		)	(1,551		)	(959		)
Other expense, net	(400		)	(320		)
Income (loss) before income taxes	144,347			(2,214		)
Provision (benefit) for income taxes	74,835			(1,413		)
Net income (loss)	$	69,512		$	(801	)
Other income (expense), net							4,019			(486		)
(Loss) income before income taxes							(23,327		)	96,212
(Benefit) provision for income taxes							(12,438		)	53,512
Net (loss) income							$	(10,889	)	$	42,700

Revenue. Revenue for the three months ended ~~September~~June 30, ~~2018 increased $235~~2019 decreased $352 million, or ~~157%~~66%, to ~~$384~~$182 million from ~~$149~~$534 million for the three months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease in total revenue is primarily attributable to a ~~$224~~$318 million ~~increase~~decrease in infrastructure services revenue during the three months ended ~~September~~June 30, ~~2018, representing 95% of the overall increase.~~2019.

Revenue derived from related parties was ~~$23~~$48 million, or 6%26% of our total revenues, for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~$71~~$50 million, or ~~47%~~9% of our total revenue, for the three months ended ~~September~~June 30, ~~2017.~~2018. Substantially all of our related party revenue is derived from Gulfport under pressure pumping and sand contracts. Revenue by operating division was as follows:

Infrastructure Services. Infrastructure services division revenue decreased $318 million, or 88%, to $42 million for the three months ended June 30, 2019 from $360 million for the three months ended June 30, 2018 primarily due to a decline in the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. Operations in Puerto Rico under these contracts concluded on March 31, 2019. For the three months ended June 30, 2019, we generated 26% of total infrastructure services revenue from our

contracts with PREPA compared to 96% for the three months ended June 30, 2018. For additional information regarding our contracts with PREPA and our infrastructure services, see "Industry Overview - Electrical Infrastructure Industry" above.

Pressure Pumping Services. Pressure pumping services division revenue ~~increased $15~~decreased $16 million, or ~~21%~~16%, to ~~$92~~$85 million for the three months ended ~~September~~June 30, ~~2018~~2019 from ~~$77~~$101 million for the three months ended ~~September~~June 30, ~~2017.~~2018. Revenue derived from related parties was ~~$16~~$34 million, or ~~17%~~40% of total pressure pumping revenue, for the three months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$47~~$34 million, or ~~61%~~33% of total pressure pumping revenue, for the three months ended ~~September~~June 30, ~~2017. Substantially all~~2018. All of our related party revenue is derived from Gulfport. Inter-segment revenue, consisting primarily of revenue derived from our sand segment, totaled $2 million and $1 million, respectively, for ~~each of~~ the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

The ~~increase~~decrease in our pressure pumping services revenue was primarily driven by ~~the startup~~a decline in pricing as a result of ~~our fourth, fifth and sixth pressure pumping fleets~~market conditions as well as a decline in June, August and October 2017, respectively, in the SCOOP/STACK and Permian Basin, which contributed revenue of $34 million during the three months ended September 30, 2018 compared to $25 million during the three months ended September 30, 2017.utilization. The number of stages completed ~~decreased slightly to 1,594~~declined 5% from 1,815 for the three months ended ~~September~~June 30, 2018 ~~compared~~ to ~~1,617~~1,717 for the three months ended ~~September~~June 30, ~~2017 primarily due to a decline in utilization.~~

~~Infrastructure Services.~~ ~~Infrastructure services division revenue increased $224 million to $237 million~~2019. An average of 2.7 of our six fleets were active for the three months ended ~~September~~June 30, ~~2018 from $13 million~~2019 as compared to an average of 4.3 fleets for the three months ended ~~September~~June 30, 2017. We generated $220 million, or 93% of total infrastructure services revenue, from our contract with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. For additional information regarding our contracts with PREPA and our infrastructure services, see "Industry Overview - Electrical Infrastructure Industry" above.2018.

Natural Sand Proppant Services. Natural sand proppant services division revenue ~~increased $4~~decreased $13 million, or ~~13%~~24%, to ~~$37~~$40 million for the three months ended ~~September~~June 30, ~~2018,~~2019, from ~~$33~~$53 million for the three months ended ~~September~~June 30, ~~2017.~~2018. Revenue derived from related parties was $4$11 million, or ~~10%~~28% of total sand revenue, for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~$14~~$10 million, or ~~43%~~18% of total sand revenue, for the three months ended ~~September~~June 30, ~~2017.~~2018. Inter-segment revenue, consisting primarily of revenue derived from our pressure pumping segment, totaled ~~$18~~$11 million, or ~~49%~~28% of total sand revenue, for the three months ended ~~September~~June 30, ~~2018~~2019 and $3$15 million, or ~~10%~~29% of total sand revenue, for the three months ended ~~September~~June 30, ~~2017.~~2018.

The ~~increase~~decrease in our natural sand proppant services revenue was primarily attributable to a ~~26%~~30% decline in average price per ton of sand sold from $43.09 per ton during the three months ended June 30, 2018 to $30.09 per ton during the three months ended June 30, 2019, which was partially offset by a 4% increase in tons of sand sold from approximately ~~474,933~~777,850 tons for the three months ended ~~September~~June 30, ~~2017~~2018 to ~~598,438~~812,611 tons for the three months ended ~~September~~June 30, ~~2018, which was partially offset by a 10% decline in price per ton.~~

~~Contract Land and Directional Drilling Services.~~ Contract land and directional drilling services division revenue increased $2 million, or 17%, from $14 million for the three months ended September 30, 2017 to $16 million for the three months ended September 30, 2018. Revenue derived from related parties, consisting of directional drilling revenue from Gulfport and El Toro Resources LLC, or El Toro, was $1 million, or 3% of total drilling revenue, for the three months ended September 30, 2018 and $1 million, or 8% of total drilling revenue, for the three months ended September 30, 2017.

The increase in contract land and directional drilling revenue was primarily attributable to our directional drilling services, which accounted for $2 million, or 105% of the total increase, as a result of increased utilization from 32% for the three months ended September 30, 2017 to 45% for the three months ended September 30, 2018. Our rig moving services accounted for $0.4 million, or 17%, of the operating division increase, primarily due to increased activity. These increases were partially offset by a $1 million decrease in our land drilling services revenue as a result of a decline in average active rigs from five for the three months ended September 30, 2017 to four for the three months ended September 30, 2018, partially offset by an increase in average day rates from approximately $14,800 for the three months ended September 30, 2017 to approximately $17,170 for the three months ended September 30, 2018.2019.

Other Services. Other revenue, consisting of revenue derived from our contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, full service transportation, crude oil hauling ~~water transfer~~ and remote accommodation businesses, ~~increased $5~~decreased $9 million, or 24%, to ~~$22~~$28 million for the three months ended ~~September~~June 30, ~~2018~~2019 from ~~$17~~$37 million for the three months ended ~~September~~June 30, ~~2017.~~2018. Revenue derived from related parties, consisting primarily of equipment rental ~~and cementing~~ revenue from Gulfport, was $3 million, or ~~13%~~11% of total other revenue, for the three months ended ~~September~~June 30, ~~2018~~2019 and $9$7 million, or ~~52%~~19% of total other revenue, for the three months ended ~~September~~June 30, ~~2017.~~2018. Inter-segment revenue, consisting primarily of revenue derived from our ~~infrastructure and~~

pressure pumping and infrastructure segments, totaled $1 million and ~~$0.3~~$2 million, respectively, for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018.

~~During~~The decrease in our other services revenue was primarily due to declines in utilization for our contract land drilling, coil tubing and directional drilling businesses, which was partially offset by an increase in activity for our equipment rental business and increased crude oil hauling revenues due to the acquisition of WTL in the second quarter of ~~2018, we acquired RTS Energy Services LLC, or RTS, a cementing and acidizing business, and WTL Oil LLC, or WTL, a crude oil hauling business. These businesses contributed revenue~~2018. An average of ~~$7 million~~601 pieces of equipment were rented during the three months ended ~~September~~June 30, ~~2018. During~~2019, an increase of 77% from an average of 339 pieces of equipment rented during the three months ended ~~September~~June 30, 2018, we started a water transfer business in the mid-continent region, which generated $2 million in revenue. Revenue from our coil tubing, oilfield rental and other services decreased $4 million during three months ended September 30, 2018 compared to three months ended September 30, 2017 primarily due to declines in utilization.2018.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, ~~increased $133~~decreased $172 million from ~~$115~~$340 million, or ~~77%~~64% of total revenue, for the three months ended ~~September~~June 30, ~~2017~~2018 to ~~$248~~$168 million, or ~~64%~~92% of total revenue, for the three months ended ~~September~~June 30, ~~2018.~~2019. The ~~increase~~decrease was primarily due to ~~an expansion of~~a decline in activity for our infrastructure services business, which represented a ~~$118~~$166 million ~~increase~~decrease in cost of ~~revenue, as well as an increase in pressure pumping division costs of $16 million, primarily related to the addition of three new fleets in 2017.~~revenue. Cost of revenue by operating division was as follows:

Infrastructure Services. Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $166 million, or 79%, to $45 million for the three months ended June 30, 2019 from $211 million for the three months ended June 30, 2018. The decrease is due to a decline in the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. Operations in Puerto Rico under these contracts concluded on March 31, 2019. As a percentage of revenue, cost of revenue,

exclusive of depreciation and amortization expense of $8 million and $4 million for the three months ended June 30, 2019 and 2018, respectively, was 107% and 59% for the three months ended June 30, 2019 and 2018, respectively. The increase is primarily due to increased labor costs as a percentage of revenue. Additionally, expenses were incurred during the three months ended June 30, 2019 to transport and perform necessary maintenance on equipment returning to the U.S. mainland from Puerto Rico.

Pressure Pumping Services. Pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense, ~~increased $16~~decreased $6 million, or ~~29%~~8%, to ~~$73~~$72 million for the three months ended ~~September~~June 30, ~~2018~~2019 from ~~$57~~$78 million for the three months ended ~~September~~June 30, ~~2017. The increase was~~2018 primarily due to ~~the expansion of services into the SCOOP/STACK~~a decline in repairs and ~~the Permian Basin with the addition of three fleets in 2017.~~maintenance expense. As a percentage of revenue, our pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense of $13 million for each of the three months ended September 30, 2018 and 2017, respectively, was 79% and 74% for the three months ended September 30, 2018 and 2017, respectively. The increase in costs as a percentage of revenue was primarily due to an increase in cost of goods sold as a result of selling sand with our service package to customers in the mid-continent region.

~~Infrastructure Services.~~ ~~Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, was $128~~$10 million and $10 million, respectively, for the three months ended September 30, 2018 and 2017. The increase is due to the expansion of our infrastructure business in late 2017 and 2018. The largest components of our cost of revenue include labor-related costs, including contract labor, and travel, meals and lodging expense. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $7 million and $1$14 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, was ~~54%~~85% and ~~75%~~77% for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively. The increase is primarily due to a decline in utilization.

Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, ~~increased $4~~decreased $2 million, or ~~15%~~6%, ~~from $26~~to $34 million for the three months ended ~~September~~June 30, ~~2017 to $30~~2019 from $36 million for the three months ended ~~September~~June 30, 2018, primarily due to ~~an increase~~a decline in cost of goods ~~sold as a result of a 26% increase in tons of sand sold in the 2018 period.~~sold. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $4$5 million and $3$4 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, was ~~81%~~84% and ~~80%~~68% for the three months ended ~~September~~June 30, 2019 and 2018, ~~and 2017,~~ respectively.

~~Contract Land and Directional Drilling Services.~~ Contract land and directional drilling services division cost of revenue, exclusive of depreciation expense, increased $2 million, or 22%, from $12 million for the three months ended September 30, 2017 to $14 million for the three months ended September 30, 2018, The increase is primarily due to ~~an increase~~a decline in ~~directional drilling utilization. As a percentage~~average price per ton of revenue, our contract land and directional drilling services division cost of revenue, exclusive of depreciation expense of $4 million and $5 million for the three months ended September 30, 2018 and 2017, respectively, was 89% and 85% for the three months ended September 30, 2018 and September 30, 2017, respectively.sand sold.

Other Services. Other services division cost of revenue, exclusive of depreciation and amortization expense, ~~increased $7~~decreased $2 million, or ~~50%~~6%, ~~from $15~~to $31 million for the three months ended ~~September~~June 30, ~~2017 to $22~~2019 from $33 million for the three months ended ~~September~~June 30, 2018, primarily due to declines in cost of revenue for our contract land drilling, directional drilling and coil tubing businesses as a result of reduced activity. These declines were partially offset by an increase in costs for our equipment rental business and the acquisition of ~~RTS and~~ WTL in the second quarter of 2018. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $4$8 million and $5$9 million for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, was ~~102%~~110% and ~~84%~~88% for the three months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The increase is primarily the result ~~of start-up costs related to RTS, WTL~~declines in utilization for our contract land drilling, directional drilling and ~~water transfer business in the mid-continent region as well as an increase in labor-related costs as a percentage of revenue.~~coil tubing businesses.

Selling, General and Administrative Expenses. Selling, general and administrative expenses, or SG&A, represent the costs associated with managing and supporting our operations. ~~During the three months ended September 30, 2018, we recognized~~The table below presents a $68 million credit related to the provision for bad debt. Cash SG&A expense increased $15 million primarily related to costs incurred for the expansion of our infrastructure business. Following is a breakoutbreakdown of SG&A expenses for the periods indicated (in thousands):


	Three Months Ended					Three Months Ended
	September 30, 2018			September 30, 2017		June 30, 2019		June 30, 2018
Cash expenses:
Compensation and benefits	$	14,864		$	3,577	$	2,154	$	10,978
Professional services	3,267			1,494		2,934		2,981
Other^(a)	3,701			1,820		3,381		3,935
Total cash SG&A expense	21,832			6,891		8,469		17,894
Non-cash expenses:
Bad debt provision^(b)	(68,333		)	103		262		28,263
Equity based compensation^(c)						—		17,487
Stock based compensation	1,177			1,028		724		1,483
Total non-cash SG&A expense	(67,156		)	1,131		986		47,233
Total SG&A expense	$	(45,324	)	$	8,022	$	9,455	$	65,127


a.	Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.

~~During~~$28.3 million of the ~~three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result,~~bad debt expense recognized during the three months ended ~~September~~June 30, 2018 was subsequently reversed during the ~~Company reversed bad debt expense of $16.0 million recognized in 2017 and $53.6 million recognized in the first half~~third quarter of 2018. ~~The Company expects to receive payment~~


c.	Represents compensation expense for ~~the 2018 amounts once the Company files its 2018 Puerto Rico tax return~~non-employee awards, which were issued and ~~pays any taxes due as calculated~~are payable by ~~the return. The Company expects that the Puerto Rico 2018 tax return will be filed in mid-2019.~~certain affiliates of Wexford (the sponsor level).

Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion, amortization and accretion ~~increased $5~~decreased $1 million, or ~~18%~~3%, to ~~$32~~$30 million for the three months ended ~~September~~June 30, ~~2018~~2019 from ~~$27~~$31 million for the three months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease is primarily attributable to a decline in intangible asset amortization expense, which was partially offset by an increase in ~~property and equipment~~depreciation expense as a result of additional property and equipment purchases in the second half 2018 and first half of ~~2017 and in 2018, resulting in increased depreciation expense.~~

~~Impairment of Long-Lived Assets~~. We recorded an impairment of $5 million on various intangible assets during three months ended September 30, 2018 related to the movement of certain cementing equipment from the Utica shale to the Permian basin.2019.

Operating ~~Income (Loss).~~Income. Operating income ~~increased $146~~decreased $124 million to ~~$145~~an operating loss of $26 million for the three months ended ~~September~~June 30, ~~2018 compared to an~~2019 from operating ~~loss~~income of ~~$0.5~~$98 million for the three months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease was ~~the result of the expansion of our infrastructure services business, which recognized an increase in operating income of $155 million. This increase was partially offset by~~primarily due to a $7$119 million ~~decrease~~decline in operating income for our ~~other~~infrastructure services ~~which was primarily~~division due to ~~impairment expense recognized during the three months ended September 30, 2018.~~a decline in activity.

Interest Expense, Net. Interest expense, net ~~decreased~~increased $1 million during the three months ended ~~September~~June 30, ~~2018~~2019 compared to the three months ended ~~September~~June 30, ~~2017~~2018 primarily due to ~~a decline~~an increase in average borrowings outstanding.

Other ~~Expense,~~Income, Net. ~~Non-operating charges,~~Other income, net ~~resulted in expense of $0.4~~increased $5 million ~~and $0.3 million for~~ during the three months ended ~~September~~June 30, 2019 compared to the three months ended June 30, 2018 ~~and 2017, respectively. Both periods were~~ primarily ~~comprised~~due to the recognition of ~~loss recognition~~interest on ~~assets disposed~~trade account receivable totaling $3 million pursuant to the terms of ~~during the periods.~~our contracts with PREPA.

Income Taxes. We recorded an income tax ~~expense~~benefit of ~~$75~~$12 million on pre-tax ~~income~~loss of ~~$144~~$23 million for the three months ended ~~September~~June 30, ~~2018~~2019 compared to an income tax ~~benefit~~expense of $1$54 million on pre-tax ~~loss~~income of $2$96 million for the three months ended ~~September~~June 30, ~~2017.~~2018. Our effective tax rate was ~~52%~~53% and 56%, respectively, for the three months ended ~~September~~June 30, 2018 compared to 40% for the three months ended September 30, 2017. The increase in effective tax rate is primarily due to a higher tax rate in Puerto Rico, where most of our income was generated during the three months ended September 30, 2018, compared to the United States federal income tax rate as well as the impact of discrete items, state income taxes2019 and ~~permanent differences. No income was generated in Puerto Rico during the three months ended September 30, 2017.~~2018.

~~Results of Operations~~

~~Nine~~Six Months Ended ~~September~~June 30, ~~2018~~2019 Compared to ~~Nine~~Six Months Ended ~~September~~June 30, ~~2017~~2018


	Nine Months Ended						Six Months Ended
	September 30, 2018			September 30, 2017			June 30, 2019			June 30, 2018
	(in thousands)						(in thousands)
Revenue:
Infrastructure services							$	150,542		$	685,709
Pressure pumping services	$	294,954		$	167,491		176,780			202,544
Infrastructure services	922,761			15,195
Natural sand proppant services	140,870			73,092			78,254			103,860
Contract land and directional drilling services	48,379			36,867
Other services	64,587			36,517			66,904			75,473
Eliminations	(59,665		)	(6,629		)	(28,522		)	(39,743		)
Total revenue	1,411,886			322,533			443,958			1,027,843

Cost of revenue:
Pressure pumping services (exclusive of depreciation and amortization of $40,474 and $31,734, respectively, for the nine months ended September 30, 2018 and 2017)	232,701			122,714
Infrastructure services (exclusive of depreciation and amortization of $13,071 and $1,379, respectively, for the nine months ended September 30, 2018 and 2017)	535,114			11,829
Natural sand proppant services (exclusive of depreciation, depletion and accretion of $10,376 and $6,599, respectively, for the nine months ended September 30, 2018 and 2017)	103,768			59,119
Contract land and directional drilling services (exclusive of depreciation of $14,028 and $14,966, respectively, for the nine months ended September 30, 2018 and 2017)	44,139			34,629
Other services (exclusive of depreciation and amortization of $11,710 and $9,563, respectively, for the nine months ended September 30, 2018 and 2017)	57,437			28,709
Infrastructure services (exclusive of depreciation and amortization of $15,524 and $6,489, respectively, for the six months ended June 30, 2019 and 2018)							103,828			406,810
Pressure pumping services (exclusive of depreciation and amortization of $20,047 and $27,818, respectively, for the six months ended June 30, 2019 and 2018)							149,381			159,781
Natural sand proppant services (exclusive of depreciation, depletion and accretion of $7,395 and $6,193, respectively, for the six months ended June 30, 2019 and 2018)							65,116			73,752
Other services (exclusive of depreciation and amortization of $15,709 and $17,166, respectively, for the six months ended June 30, 2019 and 2018)							67,342			65,339
Eliminations	(59,665		)	(6,629		)	(28,582		)	(39,753		)
Total cost of revenue	913,494			250,371			357,085			665,929
Selling, general and administrative expenses	58,314			22,459			26,791			103,638
Depreciation, depletion, amortization and accretion	89,718			64,354			58,721			57,703
Impairment of long-lived assets	4,769			—			—			187
Operating income (loss)	345,591			(14,651		)
Operating income							1,361			200,386
Interest expense, net	(2,654		)	(2,929		)	(2,074		)	(2,196		)
Bargain purchase gain	—			4,012
Other expense, net	(914		)	(707		)
Income (loss) before income taxes	342,023			(14,275		)
Provision (benefit) for income taxes	174,265			(7,323		)
Net income (loss)	$	167,758		$	(6,952	)
Other income (expense), net							28,576			(514		)
Income before income taxes							27,863			197,676
Provision for income taxes							10,419			99,430
Net income							$	17,444		$	98,246

Revenue. Revenue for the ~~nine~~six months ended ~~September~~June 30, ~~2018 increased $1.1 billion,~~2019 decreased $584 million, or ~~338%~~57%, to ~~$1.4~~$444 million from $1 billion ~~from $323 million~~ for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease in total revenue is primarily attributable to a ~~$908~~$535 million ~~increase~~decline in infrastructure services revenue ~~representing 83% of the overall increase. Additionally,~~as well as a $26 million decline in pressure pumping services ~~revenue increased $128 million, representing 12% of the overall increase.~~revenue.

Revenue derived from related parties was ~~$134~~$104 million, or 9%24% of our total revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~$174~~$111 million, or ~~54%~~11% of our total revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

2018. Substantially all of our related party revenue is derived from Gulfport under pressure pumping and sand contracts. Revenue by operating division was as follows:

Infrastructure Services. Infrastructure services division revenue decreased $535 million, or 78%, to $151 million for the six months ended June 30, 2019 from $686 million for the six months ended June 30, 2018 primarily due to a decline in the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. Operations in Puerto Rico under these contracts concluded on March 31, 2019. For the six months ended June 30, 2019, we generated 65% of total infrastructure services revenue from our contracts with

PREPA compared to 97% for the six months ended June 30, 2018. For additional information regarding our contracts with PREPA and our infrastructure services, see "Industry Overview - Electrical Infrastructure Industry" above.

Pressure Pumping Services. Pressure pumping services division revenue ~~increased $128~~decreased $26 million, or ~~76%~~13%, to ~~$295~~$177 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$167~~$203 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Revenue derived from related parties was ~~$88~~$72 million, or ~~30%~~41% of total pressure pumping revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~$120~~$72 million, or ~~71%~~36% of total pressure pumping revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Substantially all of our related party revenue is derived from Gulfport. Inter-segment revenues, consisting primarily of revenue derived from our sand segment, totaled $3 million and $6 million, ~~and $1 million~~respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively.~~2018.

The ~~increase~~decrease in our pressure pumping services revenue was primarily driven by a decline in pricing as a result of market conditions. Additionally, during the ~~startup~~six months ended June 30, 2019, more of our ~~fourth, fifth and sixth pressure pumping fleets~~customers sourced their own consumables, contributing to a decline in ~~June, August and October 2017, respectively, in~~revenue for the SCOOP/STACK and the Permian Basin, which contributed revenue of $126 million during the nine months ended September 30, 2018 compared to $29 million during the nine months ended September 30, 2017. Additionally, theperiod. The number of stages completed increased to ~~5,081~~3,606 for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~3,764~~3,487 for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

~~Infrastructure Services.~~ ~~Infrastructure services division revenue increased $908 million from $15 million~~2018. An average of 3.5 of our six fleets were active for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2019 as compared to ~~$923 million~~an average of 4.0 fleets for the ~~nine~~six months ended ~~September~~June 30, 2018. We generated $885 million, or 96% of total infrastructure services revenue, from our contract with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. For additional information regarding our contracts with PREPA and our infrastructure services, see "Industry Overview - Electrical Infrastructure Industry" above.

Natural Sand Proppant Services. Natural sand proppant services division revenue ~~increased $68~~decreased $26 million, or ~~93%~~25%, to ~~$141~~$78 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, from ~~$73~~$104 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Revenue derived from related parties was ~~$25~~$24 million, or ~~18%~~31% of total sand revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~$39~~$21 million, or ~~54%~~20% of total sand revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Inter-segment revenue, consisting primarily of revenue derived from our pressure pumping segment, totaled ~~$48~~$24 million, or ~~34%~~31% of total sand revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and $5$30 million, or 7%29% of total sand revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

The ~~increase~~decrease in our natural sand proppant services revenue was primarily attributable to a ~~94%~~29% decline in average sales price per ton of sand sold from $43.74 per ton during the six months ended June 30, 2018 to $31.08 per ton during the six months ended June 30, 2019. This was partially offset by a 2% increase in tons of sand sold from approximately ~~1,089,851~~1,513,434 tons for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~2,111,872~~1,478,420 tons for the ~~nine~~six months ended ~~September~~June 30, 2018. We completed the expansion of our Taylor and Piranha sand facilities in March and August 2018, respectively. In May 2017, we acquired a wet and dry plant and sand mine located on approximately 600 acres in New Auburn, Wisconsin through our purchase of the assets of Chieftain. These assets contributed revenue of $35 million to our natural sand proppant division for the nine months ended September 30, 2018 compared to $4 million for the nine months ended September 30, 2017.

~~Contract Land and Directional Drilling Services.~~ Contract land and directional drilling services division revenue increased $11 million, or 31%, from $37 million for the nine months ended September 30, 2017 to $48 million for the nine months ended September 30, 2018. Revenue derived from related parties, consisting primarily of directional drilling revenue from Gulfport and El Toro, was $1 million, or 2% of total drilling revenue, for the nine months ended September 30, 2018 compared to $3 million, or 8% of total drilling revenue, for the nine months ended September 30, 2017.

The increase in contract land and directional drilling revenue was primarily attributable to our directional drilling services, which accounted for $8 million, or 69% of the total increase, as a result of increased utilization from 28% for the nine months ended September 30, 2017 to 45% for the nine months ended September 30, 2018. Our rig moving services accounted for $3 million, or 22%, of the operating division increase, primarily due to increased activity. Our land drilling services accounted for $1 million, or 7%, of the operating division increase, as a result of an increase in average day rates from approximately $14,433 for the nine months ended September 30, 2017 to approximately $16,980 for the nine months ended September 30, 2018, partially offset by a decrease in average active rigs from five for the nine months ended September 30, 2017 to four rigs for the nine months ended September 30, 2018.

2019.

Other Services. Other revenue, consisting of revenue derived from our contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, full service transportation, crude oil hauling ~~water transfer~~ and remote accommodation businesses, ~~increased $28~~decreased $8 million, or ~~77%~~11%, to ~~$65~~$67 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$37~~$75 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Revenue derived from related parties, consisting primarily of equipment rental and cementing revenue from Gulfport, was ~~$20~~$9 million, or ~~31%~~13% of total other revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~$12~~$17 million, or ~~32%~~23% of total other revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Inter-segment revenue, consisting primarily of revenue derived from our infrastructure and pressure pumping segments, totaled $5$1 million and ~~$0.4~~$4 million, respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively.~~2018.

~~Revenue~~The decrease in our other services revenue was primarily due to declines in utilization for ~~Stingray Cementing~~our contract land drilling, coil tubing and ~~Stingray Energy,~~directional drilling businesses, which ~~we acquired~~was partially offset by an increase in ~~June 2017,~~activity for our equipment rental business and increased ~~$16 million for the nine months ended September 30, 2018 compared~~crude oil hauling revenues due to the ~~nine months ended September 30, 2017. During~~acquisition of WTL in the second quarter of ~~2018, we acquired RTS, a cementing and acidizing business, and WTL, a crude oil hauling business. These business contributed revenue~~2018. An average of ~~$8 million~~611 pieces of equipment were rented during the ~~nine~~six months ended ~~September~~June 30, ~~2018. Revenue~~2019, an increase of 76% from ~~our coil tubing, pressure control and flowback services increased $7 million for~~an average of 348 pieces of equipment rented during the ~~nine~~six months ended ~~September~~June 30, 2018 compared to nine months ended September 30, 2017 primarily due to increases in utilization. These increases were partially offset by a decrease in revenue from our remote accommodations business due to a decline in utilization.2018.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, ~~increased $663~~decreased $309 million from ~~$250~~$666 million, or ~~78%~~65% of total revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~$913~~$357 million, or ~~65%~~80% of total revenue, for the ~~nine~~six months ended ~~September~~June 30, ~~2018.~~2019. The ~~increase~~decrease was primarily due to ~~the expansion of~~a decline in activity for our infrastructure services business, which represented a ~~$523~~$303 million ~~increase~~decrease in cost of revenue, as well as an increase in pressure pumping division costs of $110 million, primarily related to the addition of three new fleets during 2017, and an increase in natural sand proppant division costs of $45 million, primarily due to an increase in tons of sand sold during the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.revenue. Cost of revenue by operating division was as follows:

Infrastructure Services. Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $303 million, or 74%, to $104 million for the six months ended June 30, 2019 from $407 million for the six months ended June 30, 2018. The decrease is primarily due to a decline in the work we performed under our contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. Operations in Puerto Rico under these contracts concluded on March 31, 2019. As a percentage of revenue, cost of

revenue, exclusive of depreciation and amortization expense of $16 million and $6 million for the six months ended June 30, 2019 and 2018, respectively, was 69% and 59% for the six months ended June 30, 2019 and 2018, respectively.

Pressure Pumping Services. Pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense, ~~increased $110~~decreased $11 million, or ~~90%~~7%, to ~~$233~~$149 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$123~~$160 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease was primarily due to declines in cost of goods sold and fuel expense as more of our customers sourced their own consumables during the ~~expansion of services into~~six months ended June 30, 2019 as compared to the ~~SCOOP/STACK and the Permian Basin with the addition of three fleets during 2017, which accounted for $85 million, or 77%, of the increase.~~six months ended June 30, 2018. As a percentage of revenue, our pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense of ~~$40~~$20 million and ~~$32~~$28 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, was ~~79%~~85% and ~~73%~~79% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and September 30, 2017, respectively. The increase in costs as a percentage of revenue was primarily due to an increase in cost of goods sold as a result of selling sand with our service package to customers in the mid-continent region.

~~Infrastructure Services.~~ ~~Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, was $535 million and $12 million for the nine months ended September 30,~~ 2018, and 2017, respectively. The increase is due to the expansion of our infrastructure business in late 2017 and 2018. The largest components of our cost of revenue include labor-related costs, including contract labor, and travel, meals and lodging expense. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $13 million and $1 million for the nine months ended September 30, 2018 and 2017, respectively, was 58% and 78% for the nine months ended September 30, 2018 and 2017, respectively.

Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, ~~increased $45~~decreased $9 million, or ~~76%~~12%, from ~~$59~~$74 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~$104~~$65 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, primarily due to ~~an increase~~a decline in cost of goods ~~sold as a result of a 94% increase in tons of sand sold in the 2018 period as compared to the same period in 2017.~~sold. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of ~~$10~~$7 million and $7$6 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, was ~~74%~~83% and ~~81%~~71% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~September 30, 2017,~~2018, respectively. The ~~decrease~~increase is primarily due to ~~startup costs incurred for our Piranha plant, which we acquired~~a decline in ~~May 2017.~~

~~Contract Land and Directional Drilling Services.~~ ~~Contract land and directional drilling services division cost~~average price per ton of revenue, exclusive of depreciation expense, increased $9 million, or 27%, from $35 million for the nine months ended September 30, 2017 to $44 million for the nine months ended September 30, 2018, primarily due to increasedsand sold.

utilization. As a percentage of revenue, our contract land and directional drilling services division cost of revenue, exclusive of depreciation expense of $14 million and $15 million for the nine months ended September 30, 2018 and 2017, respectively, was 91% and 94% for the nine months ended September 30, 2018 and September 30, 2017, respectively. The decrease was primarily due to higher day rates.

Other Services. Other services division cost of revenue, exclusive of depreciation and amortization expense, increased ~~$28~~$2 million, or ~~100%~~3%, from ~~$29~~$65 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2018 to ~~$57~~$67 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, primarily due to ~~the acquisition of Stingray Cementing and Stingray Energy in June 2017 and~~ the acquisitions of RTS and WTL in the second quarter of 2018. This was partially offset by a decline in costs for our contract land drilling, coil tubing and directional drilling businesses as a result of reduced activity. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of ~~$12~~$16 million and ~~$10~~$17 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively, was ~~89%~~101% and ~~79%~~87% for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. The increase is primarily the result of ~~start-up costs related to RTS, WTL~~a decline in utilization in our contract land drilling, coil tubing, cementing and ~~the water transfer business in the mid-continent region as well as an increase in equipment rental expense as a percentage of revenue.~~directional drilling businesses.

Selling, General and Administrative Expenses. Selling, general and administrative expenses represent the costs associated with managing and supporting our operations. These expenses increased $36 million to $58 million for the nine months ended September 30, 2018, from $22 million for the nine months ended September 30, 2017, primarily related to costs incurred for the expansion of our infrastructure business and the recognition of equity based compensation. The equity based compensation represents compensation expense for awards issued by certain Wexford affiliates and had no cash impact to the Company and no dilutive impact relative to the number of shares outstanding. Following istable below presents a ~~breakout~~breakdown of SG&A expenses for the periods indicated (in thousands):


	Nine Months Ended					Six Months Ended
	September 30, 2018			September 30, 2017		June 30, 2019		June 30, 2018
Cash expenses:
Compensation and benefits	$	33,541		$	8,958	$	11,384	$	18,677
Professional services	8,835			5,075		6,723		5,568
Other^(a)	9,243			5,700		6,626		5,542
Total cash SG&A expense	51,619			19,733		24,733		29,787
Non-cash expenses:
Bad debt provision^(b)	(14,543		)	78		266		53,790
Equity based compensation^(c)	17,487			—		—		17,487
Stock based compensation	3,751			2,648		1,792		2,574
Total non-cash SG&A expense	6,695			2,726		2,058		73,851
Total SG&A expense	$	58,314		$	22,459	$	26,791	$	103,638


a.	Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.


b.	~~During~~$53.6 million of the ~~three months ended September 30, 2018, the Company received payment for amounts previously reserved in 2017. As a result, during the three months ended September 30, 2018, the Company reversed~~ bad debt expense recognized during the six months ended June 30, 2018 was subsequently reversed during the third quarter of ~~$16.0 million recognized in 2017.~~2018.


c.	Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).

Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion, amortization and accretion increased ~~$26~~$1 million, or ~~39%~~2%, to ~~$90~~$59 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 from ~~$64~~$58 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~

2018. The increase is primarily attributable to an increase in depreciation expense as a result of additional property and equipment purchases in the second half ~~of 2017 and~~ 2018, ~~resulting~~which was partially offset by a decline in ~~increased depreciation~~intangible asset amortization expense.

~~Impairment of Long-Lived Assets~~. We recorded an impairment of $5 million on various intangible assets during the nine months ended September 30, 2018 related to the movement of certain cementing equipment from the Utica shale to the Permian basin.

Operating Income (Loss). Operating income ~~increased $361~~decreased $199 million to ~~$346~~$1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018 compared to an operating loss of $15~~2019 from $200 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. The ~~increase~~decrease was primarily ~~the result of an expansion of~~due to a $182 million decline in operating income for our infrastructure services ~~business, which accounted for $356~~division due to a decline in activity as well as a $18 million ~~of the increase~~decline in operating income ~~and a $21 million increase in~~for our natural sand proppant ~~operating income. These were partially offset~~

byservices division due to a ~~$12 million~~ decrease in ~~pressure pumping operating income due to an increase in non-cash equity compensation expense during the nine months ended September 30, 2018.~~pricing.

Interest Expense, Net. Interest expense, net was $3$2 million for each of the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017.~~2018. Average outstanding borrowings remained relatively flat for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018.

Other Expense, Net. ~~Non-operating charges,~~Other income, net ~~resulted in expense of $1~~increased $29 million ~~for each of~~during the ~~nine~~six months ended ~~September~~June 30, 2019 compared to the six months ended June 30, 2018 ~~and 2017. Both periods were~~ primarily ~~comprised~~due to the recognition of ~~loss recognition~~interest on ~~assets disposed~~trade account receivable totaling $29 million pursuant to the terms of ~~during the period.~~our contracts with PREPA.

Income Taxes. We recorded income tax expense of ~~$174~~$10 million on pre-tax income of ~~$342~~$28 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 compared to ~~an income tax benefit of $7~~$99 million on pre-tax ~~loss~~income of ~~$14~~$198 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Our effective tax rate was ~~51% for the nine months ended September 30, 2018 compared to~~ 37% for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2019 compared to 50% for the six months ended June 30, 2018. The ~~increase~~decrease in effective tax rate is primarily ~~due~~the result of discreet items related to ~~the equity based compensation expense recognized~~return to provision adjustments recorded during the ~~nine~~six months ended ~~September~~June 30, ~~2018 as well as a higher tax rate~~2019, which was partially offset by changes in ~~Puerto Rico, where most of our income was generated during~~ the ~~nine months ended September 30, 2018, compared to the United States federal income tax rate. No income was generated in Puerto Rico during the nine months ended September 30, 2017.~~valuation allowance.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by management and external users of our financial statements, such as industry analysts, investors, lenders and rating agencies. We define Adjusted EBITDA as net income (loss) before depreciation, depletion, accretion and amortization, impairment of long-lived assets, acquisition related costs, public offering costs, equity based compensation, stock based compensation, ~~bargain purchase gain,~~ interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived ~~assets)~~assets and interest on trade accounts receivable) and provision (benefit) for income ~~taxes.~~taxes, further adjusted to add back interest on trade accounts receivable. We exclude the items listed above from net income (loss) in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industries depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired. Adjusted EBITDA should not be considered as an alternative to, or more meaningful than, net income (loss) or cash flows from operating activities as determined in accordance with GAAP or as an indicator of our operating performance or liquidity. Certain items excluded from Adjusted EBITDA are significant components in understanding and assessing a company’s financial performance, such as a company’s cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies. We believe that Adjusted EBITDA is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet debt service requirements.

The following tables provide a reconciliation of Adjusted EBITDA to the GAAP financial measure of net income or (loss) for each of our operating segments for the specified periods (in thousands).

Consolidated


	Three Months Ended					Nine Months Ended					Three Months Ended					Six Months Ended
	September 30,					September 30,					June 30,					June 30,
Reconciliation of Adjusted EBITDA to net income (loss):	2018		2017			2018		2017			2019			2018		2019			2018
Net income (loss)	$	69,512	$	(801	)	$	167,758	$	(6,952	)
Net (loss) income											$	(10,889	)	$	42,700	$	17,444		$	98,246
Depreciation, depletion, accretion and amortization expense	32,015		27,224			89,718		64,354			30,145			30,795		58,721			57,703
Impairment of long-lived assets	4,582		—			4,769		—			—			187		—			187
Acquisition related costs	99		264			130		2,455			45			77		45			31
Public offering costs	260		—			991		—			—			731		—			731
Equity based compensation	—		—			17,487		—			—			17,487		—			17,487
Stock based compensation	1,415		1,028			4,331		2,648			944			1,660		2,233			2,916
Bargain purchase gain	—		—			—		(4,012		)
Interest expense, net	458		1,420			2,654		2,929			1,551			959		2,074			2,196
Other expense, net	400		320			914		707
Provision (benefit) for income taxes	74,835		(1,413		)	174,265		(7,323		)
Other (income) expense, net											(4,019		)	486		(28,576		)	514
Interest on trade accounts receivable											3,234			—		28,969			—
(Benefit) provision for income taxes											(12,438		)	53,512		10,419			99,430
Adjusted EBITDA	$	183,576	$	28,042		$	463,017	$	54,806		$	8,573		$	148,594	$	91,329		$	279,441

Infrastructure Services



	Three Months Ended					Six Months Ended
	June 30,					June 30,
Reconciliation of Adjusted EBITDA to net income:	2019			2018		2019			2018
Net income	$	6,210		$	52,359	$	41,875		$	99,658
Depreciation and amortization expense	7,818			4,094		15,537			6,501
Acquisition related costs	12			4		12			(4		)
Public offering costs	—			360		—			360
Stock based compensation	9			606		471			1,063
Interest expense	386			106		425			182
Other (income) expense, net	(4,045		)	330		(28,869		)	332
Interest on trade accounts receivable	3,234			—		28,969			—
Provision for income taxes	(16,447		)	52,632		5,193			100,589
Adjusted EBITDA	$	(2,823	)	$	110,491	$	63,613		$	208,681

Pressure Pumping Services

Three Months Ended Nine Months Ended
September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018 2017 2018 2017
Net income (loss) $ 2,195
$ 3,744
$ (7,279 ) $ 5,113
Depreciation and amortization expense 12,665
13,039
40,480
31,823
Impairment of long-lived assets 143
—
143
—
Acquisition related costs 6
1
39
1
Public offering costs 61
—
263
—
Equity based compensation —
—
17,487
—
Stock based compensation 400
428
1,271
1,202
Interest expense 150
592
995
1,023
Other expense, net 2
120
94
127
Adjusted EBITDA $ 15,622
$ 17,924
$ 53,493
$ 39,289

~~Infrastructure Services~~


	Three Months Ended				Nine Months Ended					Three Months Ended						Six Months Ended
	September 30,				September 30,					June 30,						June 30,
Reconciliation of Adjusted EBITDA to net income (loss):	2018		2017		2018			2017		2019			2018			2019		2018
Net income	$	78,405	$	1,366	$	178,064		$	664
Net (loss) income										$	(290	)	$	(11,433	)	$	798	$	(9,474	)
Depreciation and amortization expense	6,591		1,039		13,092			1,379		10,174			13,829			20,068		27,815
Acquisition related costs	—		48		(4		)	90		18			33			18		33
Public offering costs	123		—		483			—		—			202			—		202
Equity based compensation										—			17,487			—		17,487
Stock based compensation	555		29		1,618			29		489			453			899		871
Interest expense	159		68		341			72		452			341			649		845
Other expense, net	181		10		513			10		9			80			8		92
Provision for income taxes	77,612		—		178,200			—
Adjusted EBITDA	$	163,626	$	2,560	$	372,307		$	2,244	$	10,852		$	20,992		$	22,440	$	37,871

Natural Sand Proppant Services

Three Months Ended Nine Months Ended
September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018 2017 2018 2017
Net income $ 956
$ 1,566
$ 21,257
$ 4,209
Depreciation, depletion, accretion and amortization expense 4,184
3,034
10,381
6,603
Acquisition related costs —
167
(38 ) 2,121
Public offering costs 49
—
144
—
Stock based compensation 211
272
602
524
Bargain purchase gain —
—
—
(4,012 )
Interest expense 37
87
193
573
Other expense, net 199
98
222
252
Provision for income taxes —
24
—
33
Adjusted EBITDA $ 5,636
$ 5,248
$ 32,761
$ 10,303

~~Contract Land and Directional Drilling Services~~

Three Months Ended Nine Months Ended
September 30, September 30,
Reconciliation of Adjusted EBITDA to net income (loss): 2018 2017 2018 2017
Net loss $ (4,060 ) $ (5,018 ) $ (14,964 ) $ (18,332 )
Depreciation and amortization expense 4,327
5,036
14,031
14,978
Impairment of long-lived assets —
—
187
—
Acquisition related costs —
(16 ) —
9
Public offering costs 10
—
44
—
Stock based compensation 132
138
540
430
Interest expense, net 53
570
713
1,227
Other expense, net (5 ) 39
67
263
Adjusted EBITDA $ 457
$ 749
$ 618
$ (1,425 )



	Three Months Ended					Six Months Ended
	June 30,					June 30,
Reconciliation of Adjusted EBITDA to net income:	2019			2018		2019			2018
Net income	$	628		$	10,929	$	2,768		$	20,301
Depreciation, depletion, accretion and amortization expense	4,528			3,881		7,401			6,197
Acquisition related costs	8			—		8			(38		)
Public offering costs	—			95		—			95
Stock based compensation	236			205		439			391
Interest expense	72			76		102			156
Other (income) expense, net	(32		)	36		(32		)	23
Adjusted EBITDA	$	5,440		$	15,222	$	10,686		$	27,125

Other Services^(a)


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
Reconciliation of Adjusted EBITDA to net income (loss):	2018			2017			2018			2017
Net (loss) income	$	(7,974	)	$	(2,459	)	$	(9,320	)	$	1,394
Reconciliation of Adjusted EBITDA to net loss:													2019			2018			2019			2018
Net loss													$	(17,515	)	$	(8,907	)	$	(28,057	)	$	(12,250	)
Depreciation and amortization expense	4,248			5,076			11,734			9,571			7,625			8,991			15,715			17,190
Impairment of long-lived assets	4,439			—			4,439			—			—			187			—			187
Acquisition related costs	93			65			133			236			7			40			7			40
Public offering costs	17			—			57			—			—			74			—			74
Stock based compensation	117			162			300			463			210			396			424			592
Interest expense, net	59			103			412			34			641			436			898			1,013
Other expense, net	23			53			18			55			49			40			317			67
(Benefit) provision for income taxes	(2,777		)	(1,437		)	(3,935		)	(7,356		)
Provision (benefit) for income taxes													4,009			880			5,226			(1,158		)
Adjusted EBITDA	$	(1,755	)	$	1,563		$	3,838		$	4,397		$	(4,974	)	$	2,137		$	(5,470	)	$	5,755

~~(a)~~


a.	Includes results for our contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling ~~water transfer~~ and remote accommodations services and corporate related activities. Our corporate related activities do not generate revenue.

Adjusted Net Income (Loss) and Adjusted Earnings (Loss) per Share

Adjusted net income (loss) and adjusted ~~basic and diluted~~ earnings (loss) per share are supplemental non-GAAP financial measures that are used by management to evaluate our operating and financial performance. Management believes these measures provide meaningful information about the Company's performance by excluding certain non-cash charges ~~such as equity based compensation,~~ that may not be indicative of the Company's ongoing operating results. Adjusted net income (loss) and adjusted earnings (loss) per share should not be considered in isolation or as a substitute for net income (loss) and earnings (loss) per share prepared in accordance with GAAP and may not be comparable to other similarly titled measures of other companies. The following tables provide a reconciliation of adjusted net income (loss) and adjusted earnings (loss) per share to the GAAP financial measures of net income (loss) and earnings (loss) per share for the periods specified.

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
(in thousands, except per share amounts)
Net income (loss), as reported $ 69,512
$ (801 ) $ 167,758
$ (6,952 )
Equity based compensation —
—
17,487
—
Adjusted net income (loss) $ 69,512
$ (801 ) $ 185,245
$ (6,952 )

Basic earnings (loss) per share, as reported $ 1.55
$ (0.02 ) $ 3.75
$ (0.17 )
Equity based compensation —
—
0.39
—
Adjusted basic earnings (loss) per share $ 1.55
$ (0.02 ) $ 4.14
$ (0.17 )

Diluted earnings (loss) per share, as reported $ 1.54
$ (0.02 ) $ 3.73
$ (0.17 )
Equity based compensation —
—
0.39
—
Adjusted diluted earnings (loss) per share $ 1.54
$ (0.02 ) $ 4.12
$ (0.17 )



	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2019			2018		2019		2018
	(in thousands, except per share amounts)
Net (loss) income, as reported	$	(10,889	)	$	42,700	$	17,444	$	98,246
Equity based compensation	—			17,487		—		17,487
Adjusted net (loss) income	$	(10,889	)	$	60,187	$	17,444	$	115,733

Basic (loss) earnings per share, as reported	$	(0.24	)	$	0.95	$	0.39	$	2.20
Equity based compensation	—			0.40		—		0.40
Adjusted basic (loss) earnings per share	$	(0.24	)	$	1.35	$	0.39	$	2.60

Diluted (loss) earnings per share, as reported	$	(0.24	)	$	0.95	$	0.39	$	2.18
Equity based compensation	—			0.39		—		0.39
Adjusted diluted (loss) earnings per share	$	(0.24	)	$	1.34	$	0.39	$	2.57

Liquidity and Capital Resources

We require capital to fund ongoing operations, including maintenance expenditures on our existing fleet of equipment, organic growth initiatives, investments and acquisitions. Since ~~November 2014,~~October 2016, our primary sources of liquidity have been cash on hand, borrowings under our revolving credit facility, cash flows from operations and proceeds from our initial public offering. Our primary uses of capital have been for investing in property and equipment used to provide our services, ~~and~~ to acquire complementary ~~businesses.~~businesses and to pay dividends to our stockholders. In ~~addition, on~~ July ~~16, 2018, we initiated~~2019, as a ~~quarterly dividend policy and declared our first quarterly cash dividend, which was paid in August 2018. On October 29, 2018,~~result of oilfield market conditions, our Board of Directors ~~declared a~~suspended the quarterly cash ~~dividend of $0.125 per common share payable on November 15, 2018 to stockholders of record on November 8, 2018.~~dividend. Future declaration of cash dividends are subject to approval by our Board of Directors and may be adjusted at its discretion based on market conditions and capital availability.

As of ~~September~~June 30, ~~2018,~~2019, we had nooutstanding borrowings ~~outstanding~~ under our revolving credit facility of $82 million and ~~$162~~$93 million of available borrowing capacity under this facility, after giving effect to $7$9 million of outstanding letters of credit.

The following table summarizes our liquidity for the periods indicated (in thousands):


	September 30,			December 31,			June 30,			December 31,
	2018			2017			2019			2018
Cash and cash equivalents	$	19,692		$	5,637		$	7,245		$	67,625
Revolving credit facility availability	169,233			169,233			184,233			184,233
Less long-term debt	—			(99,900		)	(82,036		)	—
Less letter of credit facilities (environmental remediation)	(3,877		)	(3,582		)	(4,182		)	(3,877		)
Less letter of credit facilities (insurance programs)	(2,405		)	(2,486		)	(4,105		)	(4,105		)
Less letter of credit facilities (rail car commitments)	(455		)	(455		)	(455		)	(455		)
Net working capital (less cash)^(a)	91,584			88,798			291,568			148,108
Total	$	273,772		$	157,245		$	392,268		$	391,529

Net working capital (less cash) is a non-GAAP measure and is calculated by subtracting total current liabilities of ~~$355~~$164 million and cash and cash equivalents of ~~$20~~$7 million from total current assets of ~~$467~~$463 million as of ~~September~~June 30, ~~2018.~~2019. As of December 31, ~~2017,~~2018, net working capital (less cash) is calculated by subtracting total current liabilities of ~~$220~~$234 million and cash and cash equivalents of $6$68 million from total current assets of ~~$314~~$450 million.

At ~~October 30, 2018,~~July 31, 2019, we had nocash on hand totaling $12 million and outstanding borrowings ~~outstanding~~ under our ~~amended and restated~~ revolving credit facility of $86 million, leaving an aggregate of ~~$177~~$90 million of available borrowing capacity under this facility, which is net of letters of credit of $7$9 million.

Liquidity and Cash Flows

The following table sets forth our cash flows at the dates indicated (in thousands):


	Three Months Ended						Nine Months Ended						Three Months Ended						Six Months Ended
	September 30,						September 30,						June 30,						June 30,
	2018			2017			2018			2017			2019			2018			2019			2018
Net cash provided by operating activities	$	56,141		$	16,632		$	282,592		$	40,636
Net cash provided by (used in) operating activities													$	1,139		$	125,128		$	(101,855	)	$	226,451
Net cash used in investing activities	(41,530		)	(38,135		)	(162,773		)	(140,828		)	(9,182		)	(85,755		)	(28,435		)	(121,243		)
Net cash (used in) provided by financing activities	(5,668		)	27,223			(105,713		)	85,149			(6,108		)	(39,073		)	69,825			(100,045		)
Effect of foreign exchange rate on cash	47			9			(51		)	82			53			(45		)	85			(98		)
Net change in cash	$	8,990		$	5,729		$	14,055		$	(14,961	)	$	(14,098	)	$	255		$	(60,380	)	$	5,065

Operating Activities

Net cash used in operating activities was $102 million for the six months ended June 30, 2019, compared to net cash provided by operating activities ~~was $283~~of $226 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018, compared to $41 million for the nine months ended September 30, 2017.~~2018. Net cash provided by operating activities was ~~$56 million for the~~

~~three months ended September 30, 2018 compared to $17~~$1 million for the three months ended ~~September~~June 30, ~~2017.~~2019, compared to net cash provided by operating activities of $125 million for the three months ended June 30, 2018. The ~~increase~~decrease in operating cash flows was primarily attributable to ~~the increase~~a decline in ~~net income as a result of the expansion of~~activity for our infrastructure services ~~business~~segment as well as a timing difference between cash outflows for income tax payments and ~~improvements in our pressure pumping and sand businesses.~~cash inflows for accounts receivable.

Investing Activities

Net cash used in investing activities was ~~$163~~$28 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, compared to ~~$141~~$121 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2018. Net cash used in investing activities was ~~$42~~$9 million for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to ~~$38~~$86 million for the three months ended ~~September~~June 30, ~~2017.~~2018. Cash used in investing activities was primarily used to purchase property and equipment that is utilized to provide our ~~services and to acquire complementary businesses.~~services.

The following table summarizes our capital expenditures by operating division for the periods indicated (in thousands):

Three Months Ended Nine Months Ended
September 30, September 30,
2018 2017 2018 2017
Pressure pumping services^(a)
$ 5,630
$ 19,581
$ 21,729
$ 72,983
Infrastructure services^(b)
21,737
8,055
78,293
12,013
Natural sand proppant services^(c)
3,145
4,928
15,803
7,898
Contract and directional drilling services^(d)
1,570
2,356
12,271
8,257
Other^(e)
8,663
777
21,434
1,122
Total capital expenditures $ 40,745
$ 35,697
$ 149,530
$ 102,273



	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Infrastructure services^(a)	$	2,177	$	40,778	$	5,431	$	56,556
Pressure pumping services^(b)	4,013		8,233		11,342		16,099
Natural sand proppant services^(c)	990		6,958		1,975		12,658
Other^(d)	2,767		17,042		11,472		23,472
Total capital expenditures	$	9,947	$	73,011	$	30,220	$	108,785

~~a. Capital expenditures primarily for pressure pumping equipment for the nine months ended September 30, 2018 and 2017.~~

~~b. Capital expenditures primarily for trucks and other equipment for the nine months ended September 30, 2018 and 2017.~~

~~c. Capital expenditures primarily for plant upgrades for the nine months ended September 30, 2018 and 2017.~~


a.	Capital expenditures primarily for truck, tooling and other equipment for the six months ended June 30, 2019 and 2018.


b.	Capital expenditures primarily for pressure pumping and water transfer equipment for the six months ended June 30, 2019 and 2018.


c.	Capital expenditures primarily for maintenance for the six months ended June 30, 2019 and plant upgrades for the six months ended June 30, 2018.


d.	Capital expenditures primarily for ~~upgrades to~~equipment for our ~~rig fleet and real estate purchases for the nine months ended September 30, 2018~~rental business and upgrades to our rig fleet for the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~


e.	~~Capital expenditures primarily for equipment for our rental~~2019 and ~~crude oil hauling businesses for the nine months ended September 30,~~ 2018.

Financing Activities

Net cash provided by financing activities was $70 million for the six months ended June 30, 2019, compared to net cash used in financing activities ~~was $106~~of $100 million for the ~~nine~~six months ended ~~September~~June 30, ~~2018, compared to net cash provided by financing activities of $85 million for the nine months ended September 30, 2017.~~2018. Net cash used in financing activities was $6 million for the three months ended ~~September~~June 30, ~~2018,~~2019, compared to ~~net cash provided by financing activities of $27~~$39 million for the three months ended September 30, 2017. Net cash used in financing activities was primarily attributable to $6 million in dividends paid during the three and nine months ended September 30, 2018 and net repayments under our revolving credit facility of $100 million for the nine months ended SeptemberJune 30, 2018. Net cash provided by financing activities for the six months ended June 30, 2019 was primarily attributable to net borrowings under our revolving credit facility of ~~$29~~$82 million, ~~and $94~~partially offset by $11 million ~~for the three and nine~~in dividends paid. Net cash used in financing activities six months ended ~~September~~June 30, ~~2017, respectively.~~2018 was primarily attributable to net repayments under our revolving credit facility of $100 million.

Effect of Foreign Exchange Rate on Cash

The effect of foreign exchange rate on cash was $0.1 million and ($0.1) million, ~~and $0.1 million~~respectively, for the ~~nine~~six months ended ~~September~~June 30, ~~2018~~2019 and ~~2017, respectively.~~2018. The change was driven primarily by a favorable (unfavorable) shift in the weakness (strength) of the Canadian dollar relative to the U.S. dollar for the cash held in Canadian accounts.

Working Capital

Our working capital totaled ~~$111~~$299 million and ~~$94~~$216 million, respectively, at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018. Our cash balances were ~~$20~~$7 million and $6$68 million, respectively, at ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017, respectively.~~2018.

Our Revolving Credit Facility

On October 19, 2018, we and certain of our direct and indirect subsidiaries, as borrowers, entered into an amended and restated revolving credit and security agreement with the lenders party thereto and PNC Bank, National Association, as a lender

and as administrative agent for the lenders, which amends and restates our prior revolving credit and security agreement dated as of July 9, 2018, as amended prior to October 19, 2018, to, among other things, (i) extend the maturity date to October 19, 2023, (ii) increase the maximum revolving advance amount to $185 million, with the ability to further increase the maximum revolving advance amount to $350 million under certain circumstances, (iii) increase the letter of credit sublimit to 20% of the maximum revolving advance amount and (iv) decrease the interest rates applicable to loans.

Outstanding borrowings under this amended and restated revolving credit facility bear interest at a per annum rate elected by us that is equal to an alternate base rate or LIBOR, in each case plus the applicable margin. The applicable margin ranges from 1.00% to 1.50% per annum in the case of the alternate base rate, and from 2.00% to 2.50% per annum in the case of LIBOR. The applicable margin depends on the amount of excess availability under this amended and restated revolving credit facility.

At ~~September~~June 30, ~~2018,~~2019, we had no outstanding borrowings under our ~~then existing revolving~~ credit ~~facility.~~facility of $82 million. At ~~October 30, 2018,~~July 31, 2019, we had ~~availability of $177 million~~outstanding borrowings under our ~~amended and restated revolving~~ credit facility ~~after giving effect to $7~~of $86 million, leaving an aggregate of $90 million of ~~outstanding~~available borrowing capacity under this facility, which is net of letters of ~~credit.~~ credit of $9 million.

Our amended and restated revolving credit facility contains various customary affirmative and restrictive covenants. Among the covenants are two financial covenants, including a minimum interest coverage ratio (3.0 to 1.0), and a maximum leverage ratio (4.0 to 1.0), and minimum availability ($10.0 million). As of ~~September~~June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, we were in compliance with the financial covenants under our then existing revolving credit facility.

Capital Requirements and Sources of Liquidity

~~During 2018,~~Earlier this year, we ~~currently estimate that~~had established a capital expenditure budget of approximately $80 million. In response to current market conditions, we are taking a disciplined approach to our ~~aggregate~~spending and have reduced our 2019 capital ~~expenditures will be approximately $205~~expenditure budget to $41 million. These capital expenditures include ~~$98~~$6 million in our infrastructure ~~services~~ segment for assets for additional crews, ~~$25 million in our natural sand proppant services segment primarily related to expansion projects, $21~~$17 million in our pressure pumping segment for various pressure pumping equipment, $14 million in our contract land and directional drilling services segment primarily for rig upgrades and real estate, $17 million for expansion of our rental equipment business in Ohio and into Oklahoma, $10 million for the expansion of our water transfer ~~business, $8~~operations and maintenance to our existing pressure pumping fleet, $4 million for our natural sand proppant segment for upgrades and maintenance and $14 million for our other services, primarily for the expansion of our ~~crude hauling business, $6 million for coil tubing equipment~~trucking fleet and ~~$6 million for other capital expenditures.~~rental services and upgrades to our drilling rigs. During the ~~nine~~six months ended ~~September~~June 30, ~~2018,~~2019, our capital expenditures totaled ~~$150~~$30 million.

We believe that our cash on hand, operating cash flow and available borrowings under our ~~revolving~~ credit facility will be sufficient to fund our operations for at least the next twelve months. However, future cash flows are subject to a number of variables (including receipt of payments from PREPA), and significant additional capital expenditures could be required to conduct our operations. There can be no assurance that operations and other capital resources, including potential sales of assets or businesses, will provide cash in sufficient amounts to maintain planned or future levels of capital expenditures. Further, we continue to pursue our previously announced acquisition strategy to enhance our portfolio of products and services, market positioning and/or geographic presence in both other existing and new industries. In doing so,while we regularly evaluate acquisition ~~opportunities. However,~~opportunities, we do not have a specific acquisition budget for ~~2018~~2019 since the timing and size of acquisitions cannot be accurately forecasted. We continue to evaluate acquisition opportunities, including transactions involving entities controlled by Wexford and Gulfport. Our acquisitions may be undertaken with cash, our common stock or a combination of cash, common stock and/or other consideration. In the event we make one or more ~~additional~~ acquisitions and the amount of capital required is greater than the amount we have available for acquisitions at that time, we could be required to reduce the expected level of capital expenditures and/or seek additional capital. If we seek additional capital for that or other reasons, we may do so through borrowings under our revolving credit facility, joint venture partnerships, asset sales, offerings of debt or equity securities or other means. We cannot assure you that this additional capital will be available on acceptable terms or at all. If we are unable to obtain funds we need, we may not be able to complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.

Off-Balance Sheet Arrangements

~~Lease Obligations~~

~~We lease real estate, rail cars and other equipment under long-term operating leases with varying terms and expiration dates through 2062.~~

Minimum Purchase Commitments

We have entered into agreements with suppliers that contain minimum purchase obligations. Our failure to purchase the minimum amounts may require us to pay shortfall fees. However, the minimum quantities set forth in the agreements are not in excess of our currently expected future requirements.

Capital Spend Commitments

We have entered into agreements with suppliers to acquire capital equipment.

Aggregate future minimum lease payments under these agreements in effect at ~~September~~June 30, ~~2018~~2019 are as follows (in thousands):

Year ended December 31: Operating Leases Capital Spend Commitments
Minimum Purchase Commitments^(a)
Remainder of 2018 $ 6,871
$ 23,018
$ 12,479
2019 19,726
—
29,273
2020 16,402
—
19,391
2021 12,634
—
265
2022 9,299
—
—
Thereafter 7,290
—
—
$ 72,222
$ 23,018
$ 61,408



Year ended December 31:	Capital Spend Commitments		Minimum Purchase Commitments^(a)
Remainder of 2019	$	1,479	$	16,510
2020	—		19,894
2021	—		720
2022	—		80
2023	—		8
Thereafter	—		—
	$	1,479	$	37,212

~~Other Commitments~~


a.	Included in these amounts are sand purchase commitments of $30 million. Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $34 million. The minimum amount due in the form of shortfall fees under certain sand purchase agreements was $2 million as of June 30, 2019.

Subsequent to September 30, 2018, a subsidiary in our infrastructure segment entered into an air charter agreement with aggregate commitments of $1.6 million and our pressure pumping subsidiary purchased additional equipment totaling $1.4 million.

~~Subsequent to September 30, 2018, we ordered additional capital equipment with aggregate commitments of $8.1 million.~~

New Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, ~~No,~~No. 2016-02 ~~“Leases”~~“Leases (Topic 842)” amending the current accounting for leases. Under the new provisions, all lessees will report a ~~right-of-use~~right of use asset and alease liability ~~for~~on the ~~obligation to make payments~~balance sheet for all leases with ~~the exception of those leases with~~ a term ~~of 12 months or less. All other leases will fall into~~longer than one ~~of two categories: (i) a~~year, while maintaining substantially similar classifications for financing ~~lease or (ii) an~~and operating ~~lease.~~leases. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. ~~For sale leaseback transactions, a sale will only be recognized if the criteria in the new revenue recognition standard are met.~~ ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. We ~~plan to adopt~~adopted this ASU effective January 1, 2019 utilizing the ~~modified retrospective~~transition method permitted by ASU No. 2018-11 "Leases (Topic 842): Targeted Improvements", issued in August 2018, which permits an entity to recognize a cumulative-effect adjustment to the opening balance of ~~adoption. This new leasing guidance will impact us~~retained earnings in ~~situations where we are~~ the ~~lessee, and~~period of adoption with no adjustment made to the comparative periods presented in ~~certain circumstances we will have a right-of-use asset and lease liability on our~~the consolidated financial statements. ~~We are~~See Note 14 to the unaudited condensed consolidated financial statements included elsewhere in this report for the ~~process of implementing a new lease accounting system in connection with~~impact the adoption of this standard had on our financial statements.

In June 2016, the FASB issued ASU ~~and~~No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends current guidance on reporting credit losses on financial instruments. This ASU requires entities to reflect its current estimate of all expected credit losses. The guidance affects most financial assets, including trade accounts receivable. This ASU is effective for fiscal years beginning after December 31, 2019, with early adoption permitted. We are ~~continuing to evaluate~~currently evaluating the impact this ~~new guidance~~standard may have on our ~~consolidated~~ financial statements and ~~results of operations.~~related disclosures.

In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Accounting,” which simplifies the accounting for share-based payments granted to non-employees by aligning the accounting with requirements for employee share-based compensation. Upon transition, this ASU requires non-employee awards to be measured at fair value as of the adoption date. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. ~~Early adoption is permitted. Currently, we have not elected to early adopt~~We adopted this ASU effective January 1, 2019 and ~~are evaluating~~estimate the ~~impact it will have on~~fair value of our ~~consolidated financial statements.~~

non-employee equity awards was approximately $18.9 million as of this date.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The demand, pricing and terms for our products and services are largely dependent upon the level of activity for the U.S. oil and natural gas industry, energy infrastructure industry and natural sand proppant industry. Industry conditions are influenced by numerous factors over which we have no control, including, but not limited to: the supply of and demand for oil and natural gas services, energy infrastructure services and natural sand proppant; ~~the level of~~demand for repair and construction of transmission lines, substations and distribution networks in the energy infrastructure industry and the level of expenditures of utility companies; the level of prices of, and expectations about future prices for, oil and natural gas and natural sand proppant, as well as energy infrastructure services; the cost of exploring for, developing, producing and delivering oil and natural gas; the expected rates of declining current production; the discovery rates of new oil and natural gas reserves and frac sand reserves meeting industry specifications and consisting of the mesh size in demand; access to pipeline, transloading and other transportation facilities and their capacity; weather conditions; domestic and worldwide economic conditions; political instability in oil-producing countries; environmental regulations; technical advances affecting energy consumption; the price and availability of alternative fuels; the ability of oil and natural gas producers and other users of our services to raise equity capital and debt financing; and merger and divestiture activity in industries in which we operate.

The level of activity in the U.S. oil and natural gas exploration and production, energy infrastructure and natural sand proppant industries is volatile. Expected trends may not continue and demand for our products and services may not reflect the level of activity in these industries. Any prolonged substantial reduction in pricing environment would likely affect demand for our services. A material decline in pricing levels or U.S. activity levels could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Interest Rate Risk

We had a cash and cash equivalents balance of ~~$20~~$7 million at ~~September~~June 30, ~~2018.~~2019. We do not enter into investments for trading or speculative purposes. We do not believe that we have any material exposure to changes in the fair value of these investments as a result of changes in interest rates. Declines in interest rates, however, will reduce future income.

Interest under our credit facility is payable at a base rate plus an applicable margin. Additionally, at our request, outstanding balances are permitted to be converted to LIBOR rate plus applicable margin tranches. The applicable margin for either the base rate or the LIBOR rate option can vary from 1.5% to 3.0%, based upon a calculation of the excess availability of the line as a percentage of the maximum credit limit. At ~~September~~June 30, ~~2018,~~2019, we had ~~no outstanding borrowings under our revolving credit facility. As of July 31, 2018, the last day on which we had any material~~ outstanding borrowings under our revolving credit facility of $82 million with a weighted average interest rate of 4.5%. A 1% increase or decrease in the interest rate at that time would have increased or decreased our interest expense by approximately ~~$0.1~~$1 million per ~~year, based on $6 million outstanding and a weighted average interest rate of 6.5%.~~year. We do not currently hedge our interest rate exposure.

Foreign Currency Risk

Our remote accommodation business, which is included in our other ~~energy~~ services ~~segment,~~division, generates revenue and incurs expenses that are denominated in the Canadian dollar. These transactions could be materially affected by currency fluctuations. Changes in currency exchange rates could adversely affect our consolidated results of operations or financial position. We also maintain cash balances denominated in the Canadian dollar. At ~~September~~June 30, ~~2018,~~2019, we had $2$4 million of cash, in Canadian dollars, in Canadian accounts. A 10% increase in the strength of the Canadian dollar versus the U.S. dollar would have resulted in an increase in pre-tax income of approximately ~~$0.2~~$0.01 million as of ~~September~~June 30, ~~2018.~~2019. Conversely, a corresponding decrease in the strength of the Canadian dollar would have resulted in a comparable decrease in pre-tax income. We have not hedged our exposure to changes in foreign currency exchange rates and, as a result, could incur unanticipated translation gains and losses.

Seasonality

We provide completion and production services as well as contract land and drilling services primarily in the Utica, Permian Basin, Eagle Ford, Marcellus, Granite Wash, Cana Woodford and Cleveland sand resource plays located in the continental U.S. We provide infrastructure services primarily in the northeast, southwest and midwest portions of the United ~~States and in Puerto Rico.~~States. We provide remote accommodation services in the oil sands in Alberta, Canada. We serve these markets through our facilities and service centers that are strategically located to serve our customers in Ohio, Texas, Oklahoma, Wisconsin, Minnesota, Kentucky ~~Puerto Rico~~ and Alberta, Canada. A portion of our revenues are generated in Ohio, Wisconsin, Minnesota, North Dakota, Pennsylvania, West Virginia and Canada where weather conditions may be severe.

As a result, our operations may be limited or disrupted, particularly during winter and spring months, in these geographic regions, which would have a material

adverse effect on our financial condition and results of operations. Our operations in Oklahoma and Texas are generally not affected by seasonal weather conditions.

Item 4. Controls and Procedures

Evaluation of Disclosure Control and Procedures

Under the direction of our Chief Executive Officer and Chief Financial Officer, we have established disclosure controls and procedures, as defined in Rule 13a-15(e) and d under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

As of ~~September~~June 30, ~~2018,~~2019, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act. Based upon our evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of ~~September~~June 30, ~~2018,~~2019, our disclosure controls and procedures are effective.

Changes in Internal Control Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(d) and 15d-15(d) under the Exchange Act) that occurred during the quarter ended ~~September~~June 30, ~~2018~~2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Due to the nature of our business, we are, from time to time, involved in litigation or subject to disputes or claims related to our business activities, including breaches of contractual obligations, workers’ compensation claims and employment related disputes. In the opinion of our management, none of the pending litigation, disputes or claims against us is expected to have a material adverse effect on our financial condition, cash flows or results of ~~operations. See~~operations, except as disclosed in Note 1819 "Commitments and Contingencies," of the Notes to Unaudited Condensed Consolidated Financial ~~Statements for additional information.~~Statements.

Item 1A. Risk Factors

Security holders and potential investors in our securities should carefully consider the risk factors in our Annual Report on Form 10-K (Commission File No. 001-37917) filed with the SEC on ~~February 28, 2018 and in our Rule 424(b)(5) prospectus summary and related base prospectus filed with the SEC on June 26, 2018.~~March 18, 2019.

~~Other than set forth below,~~Except as described in Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations, there have been no material changes to the Risk Factors previously disclosed in our ~~Prospectus Summary dated July 26, 2018.~~

~~As of~~Annual Report on Form 10-K for the year ended December 31, 2018, we will no longer be an “emerging growth company” and, as a result, we have begun incurring significant additional financial compliance costs by having to comply with increased disclosure and governance requirements.

~~We have generated over $1.07 billion in revenue throughout the first nine months of~~ 2018. As a result, we will cease to be an emerging growth company as defined in the JOBS Act as of December 31, 2018. We will be an accelerated filer as of December 31, 2018 and will be subject to certain requirements that apply to other public companies, but did not previously apply to us due to our status as an emerging growth company. These requirements include:

the provisions of Section 404(b) of the Sarbanes-Oxley Act ("Section 404") requiring that our independent registered public accounting firm provide an attestation report on the effectiveness of our internal control over financial reporting;

~~the requirement to provide detailed compensation discussion and analysis in proxy statements and reports filed under the Exchange Act; and~~

the "say on pay" provisions, which require a non-binding stockholder vote to approve compensation of certain executive officers, and the "say on golden parachute" provisions, which require a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Act.

We have already begun to incur additional compliance costs in connection with our forthcoming loss of emerging growth company status. We expect that our compliance with these additional requirements, including the provisions of Section 404, will continue to increase professional costs and require management to devote substantial time and effort toward ensuring compliance with these requirements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 4. Mine Safety Disclosures

Our operations are subject to the Federal Mine Safety and Health Act of 1977, as amended by the Mine Improvement and New Emergency Response Act of 2006, which imposes stringent health and safety standards on numerous aspects of mineral extraction and processing operations, including the training of personnel, operating procedures, operating equipment and other matters. Our failure to comply with such standards, or changes in such standards or the interpretation or enforcement thereof, could have a material adverse effect on our business and financial condition or otherwise impose significant restrictions on our ability to conduct mineral extraction and processing operations. Following passage of The Mine Improvement and New Emergency Response Act of 2006, MSHA significantly increased the numbers of citations and orders charged against mining operations. The dollar penalties assessed for citations issued has also increased in recent years. Information concerning mine

~~MAMMOTH ENERGY SERVICES, INC.~~

safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Report.

Item 5. Other Information

Not applicable.

MAMMOTH ENERGY SERVICES, INC.

Item 6. Exhibits

The following exhibits are filed as a part of this report:

Incorporated By Reference
Exhibit Number Exhibit Description Form Commission File No. Filing Date Exhibit No. Filed Herewith Furnished Herewith
3.1

Amended and Restated Certificate of Incorporation of the Company
8-K 001-37917 11/15/2016 3.1
3.2

Amended and Restated Bylaws of the Company
8-K 001-37917 11/15/2016 3.2
4.1

Specimen Certificate for shares of common stock, par value $0.01 per share, of the Company
S-1/A 333-213504 10/3/2016 4.1
4.2

Registration Rights Agreement, dated October 12, 2016, by and between the Company and Mammoth Energy Holdings, LLC
8-K 001-37917 11/15/2016 4.1
4.3

Investor Rights Agreement, dated October 12, 2016, by and between the Company and Gulfport Energy Corporation
8-K 001-37917 11/15/2016 4.2
4.4

Registration Rights Agreement, dated October 12, 2016, by and between the Company and Rhino Exploration LLC
8-K 001-37917 11/15/2016 4.3
10.1

Third Amendment to Revolving Credit and Security Agreement, dated as of July 9, 2018, by and among Mammoth Energy Services, Inc., and certain of its direct and indirect subsidiaries, the lenders party to the Revolving Credit and Security Agreement from time to time and PNC Bank, National Association, as a lender and agent for the lenders.
8-K 001-37917 7/13/2018 10.1
10.2

Amended and Restated Revolving Credit and Security Agreement, dated as of October 19, 2018, by and among Mammoth Energy Services, Inc. and certain of its direct and indirect subsidiaries, the lenders party to the Revolving Credit and Security Agreement from time to time and PNC Bank, National Association, as a lender and agent for the lenders.
8-K 001-37917 10/25/2018 10.1
10.3#

Amendment No. 2, dated as of July 10, 2018, between Stingray Pressure Pumping, LLC and Gulfport Energy Corporation to that certain Amended & Restated Master Services Agreement for Pressure Pumping Services, effective as of October 1, 2014, as amended effective January 1, 2016.
10-Q 001-37917 8/8/2018 10.3
10.4

Second Amendment to Sand Supply Agreement, dated as of August 6, 2018, between Muskie Proppant LLC and Gulfport Energy Corporation
10-Q 001-37917 8/8/2018 10.4
31.1

Certification of Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.
X
31.2

Certification of Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.
X
32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
X
95.1

Mine Safety Disclosure Exhibit
X
101.1 Interactive data files pursuant to Rule 405 of Regulation S-T.

# On October 25, 2018, confidential treatment was granted with respect to certain portions of this amendment and extended with respect to certain portions of the original agreement, as subsequently amended, which portions have been omitted and filed separately with the Securities and Exchange Commission.

Incorporated By Reference

Exhibit Number

Exhibit Description

Form

Commission File No.

Filing Date

Exhibit No.

Filed Herewith

Furnished Herewith

3.1

Amended and Restated Certificate of Incorporation of the Company

8-K

001-37917

11/15/2016

3.1

3.2

Amended and Restated Bylaws of the Company

8-K

001-37917

11/15/2016

3.2

4.1

Specimen Certificate for shares of common stock, par value $0.01 per share, of the Company

S-1/A

333-213504

10/3/2016

4.1

4.2

Registration Rights Agreement, dated October 12, 2016, by and between the Company and Mammoth Energy Holdings, LLC

8-K

001-37917

11/15/2016

4.1

4.3

Investor Rights Agreement, dated October 12, 2016, by and between the Company and Gulfport Energy Corporation

8-K

001-37917

11/15/2016

4.2

31.1

Certification of Chief Executive Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.

31.2

Certification of Chief Financial Officer pursuant to Rule 13(a)-14 and 15(d)-14 under the Securities Exchange Act of 1934.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95.1

Mine Safety Disclosure Exhibit

101.1

Interactive data files pursuant to Rule 405 of Regulation S-T.

MAMMOTH ENERGY SERVICES, INC.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



			MAMMOTH ENERGY SERVICES, INC.
Date:	~~November 1, 2018~~August 2, 2019	By:	/s/ Arty Straehla
			Arty Straehla
			Chief Executive Officer

Date:	~~November 1, 2018~~August 2, 2019	By:	/s/ Mark Layton
			Mark Layton
			Chief Financial Officer

5754



Balance, January 1, 2017	$	5,377
Additions charged to expense	16,206
Additions other	179
Deductions for uncollectible receivables written off	(25		)
Balance, December 31, 2017	21,737
Additions charged to expense	(14,541		)
Deductions for uncollectible receivables written off	(1,839		)
Balance, September 30, 2018	$	5,357



	5 Star
Accounts receivable	$	2,440
Property, plant and equipment	1,863
Identifiable intangible assets - trade names ^(a)	300
Goodwill ^(b)	248
Total assets acquired	$	4,851

Long-term debt and other liabilities	$	2,413
Total liabilities assumed	$	2,413
Net assets acquired	$	2,438



	2018		2017
Revenues^(a)	$	120,318	$	25,216
Net income^(b)	24,571		4,191



	Nine Months Ended September 30, 2017
Revenues	$	12,681
Net income	495



	Higher Power
Property, plant and equipment	$	1,744
Identifiable intangible assets - customer relationships	1,613
Goodwill ^(a)	643
Total assets acquired	$	4,000



	Nine Months Ended September 30, 2017
Revenues	$	11,619
Net loss	(236		)



	Total
Property, plant and equipment ^(a)	$	23,373
Sand reserves ^(b)	20,910
Total assets acquired	$	44,283

Asset retirement obligation	1,732
Total liabilities assumed	$	1,732
Total allocation of purchase price	$	42,551
Bargain purchase price ^(c,d)	(6,231		)
Total purchase price	$	36,320



	Nine Months Ended September 30, 2017
Revenues	$	4,230
Net loss	(2,458		)



Consideration attributable to Cementing^(a)	$	12,975
Consideration attributable to SR Energy^(a)	12,787
Total consideration transferred	$	25,762



	SR Energy		Cementing		Total
	(in thousands)
Cash and cash equivalents	$	1,611	$	1,060	$	2,671
Accounts receivable, net	3,913		495		4,408
Receivables from related parties	3,684		1,418		5,102
Inventories	—		306		306
Prepaid expenses	35		32		67
Property, plant and equipment^(a)	13,061		7,459		20,520
Identifiable intangible assets - customer relationships^(b)	—		1,140		1,140
Identifiable intangible assets - trade names^(b)	550		270		820
Goodwill^(c)	3,929		6,264		10,193
Other assets	7		—		7
Total assets acquired	$	26,790	$	18,444	$	45,234

Accounts payable and accrued liabilities	$	5,890	$	2,063	$	7,953
Long-term debt^(d)	5,074		2,000		7,074
Deferred tax liability	3,039		1,406		4,445
Total liabilities assumed	$	14,003	$	5,469	$	19,472
Net assets acquired	$	12,787	$	12,975	$	25,762



	Nine Months Ended September 30, 2017
Revenues	$	27,482
Net loss	(2,550		)



Balance, January 1, 2017	$	88,727
Additions - 2017 Stingray Acquisition (Note 4)	10,193
Additions - Higher Power Acquisition (Note 4)	643
Additions - 5 Star Acquisition (Note 4)	248
Balance, December 31, 2017	99,811
Additions - WTL Acquisition (Note 4)	1,567
Additions - RTS Acquisition (Note 4)	133
Impairment	(3,203		)
Balance, September 30, 2018	$	98,308



2018	$	228
2019	1,540
2020	689
2021	388
2022	360
Total future minimum payments	3,205
Less interest payments	(205		)
Present value of future minimum payments	$	3,000



Three months ended September 30, 2018	Pressure Pumping		Infrastructure			Sand		Drilling			All Other			Eliminations			Total
Revenue from external customers	$	91,595	$	237,052		$	18,742	$	15,800		$	20,854		$	—		$	384,043
Intersegment revenues	815		—			18,268		139			671			(19,893		)	—
Total revenue	92,410		237,052			37,010		15,939			21,525			(19,893		)	384,043
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion	54,023		128,267			29,470		14,104			21,701			—			247,565
Intersegment cost of revenues	18,897		37			546		158			245			(19,883		)	—
Total cost of revenue	72,920		128,304			30,016		14,262			21,946			(19,883		)	247,565
Selling, general and administrative	4,335		(54,200		)	1,618		1,362			1,561			—			(45,324		)
Depreciation, depletion, amortization and accretion	12,665		6,591			4,184		4,327			4,248			—			32,015
Impairment of long-lived assets	143		—			—		—			4,439			—			4,582
Operating income (loss)	2,347		156,357			1,192		(4,012		)	(10,669		)	(10		)	145,205
Interest expense, net	150		159			37		53			59			—			458
Other expense	2		181			199		(5		)	23			—			400
Income (loss) before income taxes	$	2,195	$	156,017		$	956	$	(4,060	)	$	(10,751	)	$	(10	)	$	144,347