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 JUNEFor the quarterly period ended June 30, 2019
2020
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


FOR THE TRANSITION PERIOD FROMTO


Commission File No. 001-37917

Mammoth Energy Services, Inc.


(Exact name of registrant as specified in its charter)
Delaware32-0498321
(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) (Registrant’s telephone number, including area code)(Zip Code)
Title of each class of securitiesName of each exchange on which registeredTicker Symbol
Common Stock, par value $0.01 per shareThe Nasdaq Global Select MarketTUSK
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)608-600773134
(Address of principal executive offices) (Registrant’s telephone number, including area code)(Zip Code)
Securities registered pursuant to Section 12(b) of The Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common StockTUSKThe Nasdaq Stock Market LLC
NASDAQ Global Select Market



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 filero☐Accelerated filerý☒
Non-accelerated filero☐Smaller reporting companyo☒
Emerging growth companyo☐


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. ¨


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 July 31, 2019,29, 2020, there were 45,004,79545,762,200 shares of common stock, $0.01 par value, outstanding.




MAMMOTH ENERGY SERVICES, INC.





TABLE OF CONTENTS
 
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Item 2.
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Item 3.
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Item 4.
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Item 1.
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Item 1A.
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Item 2.
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Item 4.
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Item 6.
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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:Quarterly Report on Form 10-Q (this “report”):
AcidizingTo pump acid into a wellbore to improve a well's productivity or injectivity.
BlowoutAn 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 assemblyThe 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.
CementingTo prepare and pump cement into place in a wellbore.
Coiled tubingA 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.
CompletionA 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 drillingThe 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-holePertaining to or in the wellbore (as opposed to being on the surface).
Down-hole motorA 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 rigThe machine used to drill a wellbore.
Drillpipe or Drill pipeTubular 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 stringThe combination of the drillpipe, the bottomhole assembly and any other tools used to make the drill bit turn at the bottom of the wellbore.
FlowbackThe 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 drillingA 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 fracturingA 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.
i

HydrocarbonA 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.

i

Mesh sizeThe 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 motorsA 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 liquidsComponents 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 unitA 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.
PluggingThe 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.
PlugA 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 inchA unit of pressure. It is the pressure resulting from a one pound force applied to an area of one square inch.
Pressure pumpingServices that include the pumping of liquids under pressure.
Producing formationAn 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.
ProppantSized 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 playAccumulation of hydrocarbons known to exist over a large area.
ShaleA fine-grained, fissile, sedimentary rock formed by consolidation of clay- and silt-sized particles into thin, relatively impermeable layers.
Tight oilConventional 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 sandsA type of unconventional tight reservoir. Tight reservoirs are those which have low permeability, often quantified as less than 0.1 millidarcies.
TubularsA generic term pertaining to any type of oilfield pipe, such as drill pipe, drill collars, pup joints, casing, production tubing and pipeline.
Unconventional resourceA term for the different manner by which resources are exploited as compared to the extraction of conventional resources. In unconventional drilling, the wellbore is generally drilled to specific objectives within narrow parameters, often across long, lateral intervals within narrow horizontal formations offering greater contact area with the producing formation. Typically, the well is then hydraulically fractured at multiple stages to optimize production.
WellboreThe physical conduit from surface into the hydrocarbon reservoir.
Well stimulationA 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.
WirelineA 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.
WorkoverThe 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.


ii


The following is a glossary of certain electrical infrastructure industry terms used in this report:
DistributionThe distribution of electricity from the transmission system to individual customers.
SubstationA part of an electrical transmission and distribution system that transforms voltage from high to low, or the reverse.
TransmissionThe 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, 20182019 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:about:


•the levels of capital expenditures by our customers and the impact of reduced drilling and completions activity on utilization and pricing for our oilfield services;
•the volatility of oil and natural gas prices and actions by OPEC members and other oil exporting nations affecting commodity price and production levels;
•the threat, occurrence, potential duration or other implications of epidemic or pandemic diseases, including the recent COVID-19 pandemic and its severity, or any government response to such occurrence or threat;
•our ability to protect the health and well-being of our employees during the ongoing COVID-19 pandemic;
•logistical challenges and remote working arrangements;
•the performance of contracts and supply chain disruptions during the ongoing COVID-19 pandemic;
•general economic, business strategy;or industry conditions;
pending or future acquisitions•conditions in the capital, financial and future capital expenditures;credit markets;
•our ability to obtain capital or financing needed for our operations on favorable terms or at all or continue to comply with financial maintenance covenants in our existing revolving credit facility;
•conditions of U.S. oil and natural gas industry and the effect of U.S. energy, monetary and trade policies;
•U.S. and global economic conditions and political and economic developments, including the outcome of the U.S. presidential election and resulting energy and environmental policies;
•our ability to execute our business and financial strategies;
•our ability to continue to grow our infrastructure services segment, recommence certain of our suspended oilfield services or return our natural sand proppant services segment to profitability;
•any loss of one or more of our significant customers and its impact on our revenue, financial condition and results of operations;
•asset impairments;
•our ability to identify, complete and integrate acquisitions of assets or businesses;
•our ability to receive, or delays in receiving, permits and governmental approvals;approvals and/or payments, and to comply with applicable governmental laws and regulations;
•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;•outcome of pending litigation discussed in this report;
•any future litigation, indemnity or other claims;
•regional supply and demand factors, delays or interruptions of production, and any governmental order, rule or regulation that may impose production limits on our customers;
•the availability of transportation, pipeline and storage facilities and any increase in related costs;
•access to and restrictions on use of water;
•technology;
•cybersecurity issues as digital technologies may become more vulnerable and experience a higher rate of cyberattacks in the current environment of remote connectivity;
•competition within the energy services industry;
•availability of equipment, materials or skilled personnel or other labor resources;
•our ability to maintain compliance with financial strategy;covenants under our revolving credit facility;
•payment of any future dividends;
•future operating results; and
•capital expenditures and other 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,
iv

“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, 20182019, Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2020 and Item 2. "Management's“Management's Discussion and Analysis of Financial Condition and Results of Operations"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.




iv
v
MAMMOTH ENERGY SERVICES, INC.





PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
ASSETS June 30, December 31,ASSETSJune 30,December 31,
 2019 201820202019
CURRENT ASSETS (in thousands)CURRENT ASSETS(in thousands)
Cash and cash equivalents $7,245
 $67,625
Cash and cash equivalents$18,025  $5,872  
Accounts receivable, net 385,626
 337,460
Accounts receivable, net353,912  363,053  
Receivables from related parties 37,400
 11,164
Receivables from related parties27,316  7,523  
Inventories 22,114
 21,302
Inventories12,473  17,483  
Prepaid expenses 10,196
 11,317
Prepaid expenses6,236  12,354  
Other current assets 699
 688
Other current assets740  695  
Total current assets 463,280
 449,556
Total current assets418,702  406,980  
    
Property, plant and equipment, net 408,408
 436,699
Property, plant and equipment, net293,150  352,772  
Sand reserves 69,762
 71,708
Sand reserves68,257  68,351  
Operating lease right-of-use assets 52,184
 —
Operating lease right-of-use assets33,210  43,446  
Intangible assets, net - customer relationships 1,563
 1,711
Intangible assets, net - customer relationships496  583  
Intangible assets, net - trade names 5,625
 6,045
Intangible assets, net - trade names4,786  5,205  
Goodwill 101,245
 101,245
Goodwill12,608  67,581  
Other non-current assets 6,843
 6,127
Other non-current assets7,261  7,467  
Total assets $1,108,910
 $1,073,091
Total assets$838,470  $952,385  
LIABILITIES AND EQUITY    LIABILITIES AND EQUITY
CURRENT LIABILITIES    CURRENT LIABILITIES
Accounts payable $72,671
 $68,843
Accounts payable$31,866  $39,220  
Payables to related parties 1,020
 370
Payables to related parties14  526  
Accrued expenses and other current liabilities 42,658
 59,652
Accrued expenses and other current liabilities36,741  40,754  
Current operating lease liability 17,338
 —
Current operating lease liability13,387  16,432  
Income taxes payable 30,780
 104,958
Income taxes payable29,729  33,465  
Total current liabilities 164,467
 233,823
Total current liabilities111,737  130,397  
    
Long-term debt 82,036
 —
Long-term debt89,250  80,000  
Deferred income tax liabilities 56,580
 79,309
Deferred income tax liabilities37,593  36,873  
Long-term operating lease liability 34,807
 —
Long-term operating lease liability19,802  27,102  
Asset retirement obligation 3,534
 3,164
Asset retirement obligationsAsset retirement obligations4,640  4,241  
Other liabilities 4,270
 2,743
Other liabilities5,383  5,031  
Total liabilities 345,694
 319,039
Total liabilities268,405  283,644  
    
COMMITMENTS AND CONTINGENCIES (Note 19) 
 
COMMITMENTS AND CONTINGENCIES (Note 18)COMMITMENTS AND CONTINGENCIES (Note 18)
   
EQUITY   
EQUITY
Equity:    Equity:
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
Common stock, $0.01 par value, 200,000,000 shares authorized, 45,762,200 and 45,108,545 issued and outstanding at June 30, 2020 and December 31, 2019Common stock, $0.01 par value, 200,000,000 shares authorized, 45,762,200 and 45,108,545 issued and outstanding at June 30, 2020 and December 31, 2019458  451  
Additional paid in capital 533,151
 530,919
Additional paid in capital536,333  535,094  
Retained earnings 232,990
 226,765
Retained earnings37,326  136,502  
Accumulated other comprehensive loss (3,375) (4,081)Accumulated other comprehensive loss(4,052) (3,306) 
Total equity 763,216
 754,052
Total equity570,065  668,741  
Total liabilities and equity $1,108,910
 $1,073,091
Total liabilities and equity$838,470  $952,385  

The accompanying notes are an integral part of these condensed consolidated financial statements.
1
MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (LOSS) (unaudited)




Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
REVENUE(in thousands, except per share amounts)
Services revenue$44,878  $115,760  $113,723  $308,861  
Services revenue - related parties8,650  36,837  26,663  80,910  
Product revenue4,706  18,362  13,356  30,671  
Product revenue - related parties1,875  10,861  3,750  23,516  
Total revenue60,109  181,820  157,492  443,958  
COST AND EXPENSES
Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $21,750, $45,305, $25,597 and $51,280, respectively, for the three and six months ended June 30, 2020 and three and six months ended June 30, 2019)42,255  132,688  112,952  290,794  
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, 2020 and three and six months ended June 30, 2019)97  2,650  198  3,363  
Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $2,346, $4,654, $4,525 and $7,395, respectively, for the three and six months ended June 30, 2020 and three and six months ended June 30, 2019)6,401  32,677  17,509  62,928  
Selling, general and administrative (Note 11)13,528  8,796  24,084  25,698  
Selling, general and administrative - related parties (Note 11)198  659  413  1,093  
Depreciation, depletion, amortization and accretion24,116  30,145  49,998  58,721  
Impairment of goodwill—  —  54,973  —  
Impairment of other long-lived assets—  —  12,897  —  
Total cost and expenses86,595  207,615  273,024  442,597  
Operating (loss) income(26,486) (25,795) (115,532) 1,361  
OTHER INCOME (EXPENSE)
Interest expense, net(1,471) (1,551) (3,109) (2,074) 
Other, net8,137  4,019  15,546  28,576  
Other, net - related parties1,133  —  1,133  —  
Total other income7,799  2,468  13,570  26,502  
(Loss) income before income taxes(18,687) (23,327) (101,962) 27,863  
(Benefit) provision for income taxes(3,482) (12,438) (2,786) 10,419  
Net (loss) income$(15,205) $(10,889) $(99,176) $17,444  
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustment, net of tax of ($150), $211, $92 and $182, respectively, for the three and six months ended June 30, 2020 and three and six months ended June 30, 2019668  350  (746) 706  
Comprehensive (loss) income$(14,537) $(10,539) $(99,922) $18,150  
Net (loss) income per share (basic) (Note 14)$(0.33) $(0.24) $(2.18) $0.39  
Net (loss) income per share (diluted) (Note 14)$(0.33) $(0.24) $(2.18) $0.39  
Weighted average number of shares outstanding (basic) (Note 14)45,727  45,003  45,521  44,966  
Weighted average number of shares outstanding (diluted) (Note 14)45,727  45,003  45,521  45,060  
Dividends declared per share$—  $0.125  $—  $0.25  
 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 parties36,837
 40,611
 80,910
 89,699
Product revenue18,362
 27,708
 30,671
 52,748
Product revenue - related parties10,861
 9,730
 23,516
 21,192
Total revenue181,820
 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 accretion30,145
 30,795
 58,721
 57,703
Impairment of long-lived assets—
 187
 —
 187
Total cost and expenses207,615
 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, net4,019
 (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 $272, respectively, for the three and six months ended June 30, 2019 and three and six months ended June 30, 2018350
 (325) 706
 (786)
Comprehensive (loss) income$(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.
2
MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (unaudited)


Three Months Ended June 30, 2020
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at March 31, 202045,714  $457  $52,531  $536,140  $(4,720) $584,408  
Stock based compensation48  1  —  193  —  194  
Net loss—  —  (15,205) —  —  (15,205) 
Other comprehensive income—  —  —  —  668  668  
Balance at June 30, 202045,762  $458  $37,326  $536,333  $(4,052) $570,065  
Three Months Ended June 30, 2019
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at March 31, 201944,877  $449  $249,488  $532,208  $(3,725) $778,420  
Stock based compensation128  1  —  943  —  944  
Net income—  —  (10,889) —  —  (10,889) 
Cash dividends paid ($0.125 per share)—  —  (5,609) —  —  (5,609) 
Other comprehensive income—  —  —  —  350  350  
Balance at June 30, 201945,005  $450  $232,990  $533,151  $(3,375) $763,216  
Six Months Ended June 30, 2020
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at December 31, 201945,109  $451  $136,502  $535,094  $(3,306) $668,741  
Stock based compensation653  7  —  1,239  —  1,246  
Net loss—  —  (99,176) —  —  (99,176) 
Other comprehensive loss—  —  —  —  (746) (746) 
Balance at June 30, 202045,762  $458  $37,326  $536,333  $(4,052) $570,065  
Six Months Ended June 30, 2019
Accumulated
AdditionalOther
Common StockRetainedPaid-InComprehensive
SharesAmountEarningsCapitalLossTotal
(in thousands)
Balance at December 31, 201844,877  $449  $226,765  $530,919  $(4,081) $754,052  
Stock based compensation128  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, 201945,005  $450  $232,990  $533,151  $(3,375) $763,216  
 Three Months Ended June 30, 2019
     Accumulated 
    AdditionalOther 
 Common StockRetainedPaid-InComprehensive 
 SharesAmountEarningsCapitalLossTotal
 (in thousands)
Balance at March 31, 201944,877
$449
$249,488
$532,208
$(3,725)$778,420
Stock based compensation128
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, 201945,005
$450
$232,990
$533,151
$(3,375)$763,216
       
 Three Months Ended June 30, 2018
     Accumulated 
    AdditionalOther 
 Common StockRetainedPaid-InComprehensive 
 SharesAmountEarningsCapitalLossTotal
 (in thousands)
Balance at March 31, 201844,714
$447
$57,547
$509,265
$(3,122)$564,137
Equity based compensation—
—
—
17,487
—
17,487
Stock based compensation39
1
—
1,669
—
1,670
Net income—
—
42,700
—
—
42,700
Other comprehensive loss—
—
—
—
(325)(325)
Balance at June 30, 201844,753
$448
$100,247
$528,421
$(3,447)$625,669
       
 Six Months Ended June 30, 2019
     Accumulated 
    AdditionalOther 
 Common StockRetainedPaid-InComprehensive 
 SharesAmountEarningsCapitalLossTotal
 (in thousands)
Balance at December 31, 201844,877
$449
$226,765
$530,919
$(4,081)$754,052
Stock based compensation128
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, 201945,005
$450
$232,990
$533,151
$(3,375)$763,216
       
 Six Months Ended June 30, 2018
     Accumulated 
    AdditionalOther 
 Common StockRetainedPaid-InComprehensive 
 SharesAmountEarningsCapitalLossTotal
 (in thousands)
Balance at December 31, 201744,589
$446
$2,001
$508,010
$(2,661)$507,796
Equity based compensation—
—
—
17,487
—
17,487
Stock based compensation164
2
—
2,924
—
2,926
Net income—
—
98,246
—
—
98,246
Other comprehensive loss—
—
—
—
(786)(786)
Balance at June 30, 201844,753
$448
$100,247
$528,421
$(3,447)$625,669





The accompanying notes are an integral part of these condensed consolidated financial statements.
3
MAMMOTH ENERGY SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)




Six Months Ended June 30,
20202019
(in thousands)
Cash flows from operating activities:
Net (loss) income$(99,176) $17,444  
Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:
Stock based compensation1,246  2,233  
Depreciation, depletion, accretion and amortization49,998  58,721  
Amortization of coil tubing strings359  1,003  
Amortization of debt origination costs577  163  
Bad debt expense1,679  266  
(Gain) loss on disposal of property and equipment(1,451) 176  
Impairment of goodwill54,973  —  
Impairment of other long-lived assets12,897  —  
Deferred income taxes931  (22,911) 
Other623  (199) 
Changes in assets and liabilities:
Accounts receivable, net7,782  (48,530) 
Receivables from related parties(19,793) (26,236) 
Inventories4,651  (1,815) 
Prepaid expenses and other assets6,079  1,115  
Accounts payable(7,514) 7,366  
Payables to related parties(512) 650  
Accrued expenses and other liabilities(2,818) (17,129) 
Income taxes payable(3,697) (74,172) 
Net cash provided by (used in) operating activities6,834  (101,855) 
Cash flows from investing activities:
Purchases of property and equipment(4,348) (30,085) 
Purchases of property and equipment from related parties(76) (135) 
Contributions to equity investee—  (680) 
Proceeds from disposal of property and equipment2,544  2,465  
Net cash used in investing activities(1,880) (28,435) 
Cash flows from financing activities:
Borrowings from lines of credit22,800  108,000  
Repayments of lines of credit(13,550) (25,964) 
Principal payments on financing leases and equipment financing notes(914) (992) 
Dividends paid—  (11,219) 
Debt issuance costs(1,000) —  
Net cash provided by financing activities7,336  69,825  
Effect of foreign exchange rate on cash(137) 85  
Net change in cash and cash equivalents12,153  (60,380) 
Cash and cash equivalents at beginning of period5,872  67,625  
Cash and cash equivalents at end of period$18,025  $7,245  
Supplemental disclosure of cash flow information:
Cash paid for interest$2,683  $1,830  
Cash (received) paid for income taxes$(6) $116,442  
Supplemental disclosure of non-cash transactions:
Purchases of property and equipment included in accounts payable and accrued expenses$2,780  $2,339  
 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 compensation2,233
 2,916
Depreciation, depletion, accretion and amortization58,721
 57,703
Amortization of coil tubing strings1,003
 1,120
Amortization of debt origination costs163
 199
Bad debt expense266
 53,790
Loss (gain) on disposal of property and equipment176
 (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 assets1,115
 (1,195)
Accounts payable7,366
 34,186
Payables to related parties650
 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 equipment2,465
 898
Net cash used in investing activities(28,435) (121,243)
    
Cash flows from financing activities:   
Borrowings from lines of credit108,000
 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 activities69,825
 (100,045)
Effect of foreign exchange rate on cash85
 (98)
Net change in cash and cash equivalents(60,380) 5,065
Cash and cash equivalents at beginning of period67,625
 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.
4
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Nature of Business
1.Organization and Nature of Business
Mammoth Energy Services, Inc. ("(“Mammoth Inc."” or the "Company"“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 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 services to the exploration and production industry including pressure pumping, and natural sand and proppant services as well as contract land and directional drilling services. Additionally, the Company provides coil tubing flowback, cementing, acidizing,services, equipment rental,rentals, full service transportation, crude oil hauling, and remote accommodation services, oilfield equipment manufacturing and infrastructure engineering and design 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 an aggregate of 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 June 30, 20192020 and December 31, 2018,2019, Wexford Gulfport and RhinoGulfport beneficially owned the following shares of outstanding common stock of Mammoth Inc.:
At June 30, 2020At December 31, 2019
Share Count% OwnershipShare Count% Ownership
Wexford22,055,766  48.2 %22,045,273  48.9 %
Gulfport9,829,548  21.5 %9,829,548  21.8 %
Outstanding shares owned by related parties31,885,314  69.7 %31,874,821  70.7 %
Total outstanding45,762,200  100.0 %45,108,545  100.0 %
  At June 30, 2019 At December 31, 2018
  Share Count % Ownership Share Count % Ownership
Wexford 21,992,677
 48.9% 21,988,473
 49.0%
Gulfport 9,829,548
 21.8% 9,826,893
 21.9%
Rhino —
 —% 104,100
 0.2%
Outstanding shares owned by related parties 31,822,225
 70.7% 31,919,466
 71.1%
Total outstanding 45,004,795
 100.0% 44,876,649
 100.0%


Operations


The Company's infrastructure services include electric utility contracting services focused on the construction, upgrade, maintenance and repair of transmission and distribution networks. The Company’sservices to the electrical infrastructure services also provide stormindustry as well as repair and restoration services in response to natural disasters including hurricanesstorms and ice or other storm-related damage.disasters. The Company's pressure pumping services include equipment and personnel used in connection with 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.wells. 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 drilling services provide drilling rigs and directional tools for both vertical and horizontal drilling of oil and natural gas wells. The Company also provides other services, including contract land and directional drilling, coil tubing, flowback, cementing, aciziding, equipment rentals, crude oil hauling, full service transportation, remote accommodations, oilfield equipment manufacturing and remote accommodations.infrastructure engineering and design services.


All of the Company’s operations are in North America. During certain of 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
5
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
or reductions in government appropriations or the failure of customers to pay their receivables could have a material adverse effect on the 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'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. ChangesContinuation of or further decreases in the commodity prices for oil and natural gas couldwould have a material adverse effect on the Company’s results of operations and financial condition.


2.Basis of Presentation and Significant Accounting Policies

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 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. All such adjustments are of a normal, recurring nature. 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.
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. Prior to granting credit to customers, the Company analyzes the potential customer's risk profile by utilizing a credit report, analyzing macroeconomic factors and using its knowledge of the industry, among other factors. Most areas in the continental United States 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 areInterest on delinquent accounts receivable is recognized in other income when chargeable and collectability is reasonably assured.


During certain of the periods presented, the Company provided infrastructure services in Puerto Rico under master services agreements entered into by Cobra Acquisitions LLC ("Cobra"(“Cobra”), one of the Company's subsidiaries, with the Puerto Rico Electric Power Authority ("PREPA"(“PREPA”) to perform repairs to PREPA’s electrical grid as a result of Hurricane Maria. During the three and six months ended June 30, 2020 and 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 $7.9 million and $15.6 million, respectively, and $3.2 million and $29.0 million, respectively. These amounts are included in other, net“other, net” on the unaudited condensed consolidated statement of comprehensive (loss) income. Included in “accounts receivable, net” on the unaudited condensed consolidated balance sheets as of June 30, 2020 and December 31, 2019 were interest charges of $57.7 million and $42.0 million, respectively.


Pursuant to its contract with Gulfport, Stingray Pressure Pumping LLC (“Stingray Pressure Pumping”), one of the Company's subsidiaries, has agreed to provide Gulfport with use of up to two pressure pumping fleets for the period covered by the contract. Gulfport has filed a legal action in Delaware state court seeking the termination of this contract and monetary damages. During the six months ended June 30, 2020, the Company charged interest on delinquent accounts receivable pursuant to the terms of its agreement with Gulfport totaling $1.1 million. These amounts are included in “other, net - related parties” on the unaudited condensed consolidated statement of comprehensive (loss) income. As of June 30, 2020, $26.6 million related to this contract was included in “receivables from related parties” on the unaudited condensed consolidated balance sheets, which was inclusive of interest charges of $1.1 million.

6
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company regularly reviews receivables and provides for estimatedexpected 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 determineexpects 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, 20182019 and the six months ended June 30, 20192020 (in thousands):


Balance, January 1, 2019$5,198 
Additions charged to bad debt expense1,771 
Recoveries of receivables previously charged to bad debt expense(337)
Deductions for uncollectible receivables written off(1,478)
Balance, December 31, 20195,154 
Additions charged to bad debt expense2,285 
Additions charged to other expense1,918 
Recoveries of receivables previously charged to bad debt expense(606)
Deductions for uncollectible receivables written off(722)
Balance, June 30, 2020$8,029 
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


At December 31, 2017,For the Company reviewed receivables due from PREPAsix months ended June 30, 2020 and made specific reserves consistent with Company policy which resulted in additions to the allowance for doubtful accounts totaling $16.0 million. During 2018, the Company received payment from PREPA for the amount reserved at December 31, 2017. As a result, the Company reversed the 2017 additions to the allowance for doubtful accounts from PREPA during the year ended December 31, 2018.

Additionally,2019, the Company has made specific reserves consistent with Company policy which resulted inrecorded additions to allowance for doubtful accounts totaling $0.3$2.3 million and $1.4$1.8 million, respectively, forrelated to trade accounts receivable. These additions were charged to bad debt expense based on the factors described above. Additionally, during the six months ended June 30, 20192020, the Company recorded additions to allowance for doubtful accounts of $1.9 million related to insurance claim receivables for its directors and year ended December 31, 2018.officers liability policy. The Company will continue to pursue collection until such time as final determination is made consistent with Company policy.


As of June 30, 2020, PREPA owed Cobra approximately $227.0 million for services performed, excluding $57.7 million of interest charged on these delinquent balances as of June 30, 2020. The Company believes these receivables are collectible. PREPA, however, is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA's ability to meet its payment obligations is largely dependent upon funding from the Federal Emergency Management Agency or other sources. On September 30, 2019, Cobra filed a motion with the U.S. District Court for the District of Puerto Rico seeking recovery of the amounts owed to Cobra by PREPA, which motion was stayed by the court. On March 25, 2020, Cobra filed an urgent motion to modify the stay order and allow the recovery of approximately $61.7 million in claims related to a tax gross-up provision contained in the emergency master service agreement, as amended, that was entered into with PREPA on October 19, 2017. This emergency motion was denied on June 3, 2020 and the court extended the stay of Cobra's motion until an omnibus hearing to be held in December 2020. In the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to the Company or (iii) otherwise does not pay amounts owed to the Company for services performed, the receivable may not be collectible.

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 June 30, 20192020 and December 31, 20182019 and percentages of total revenues derived for the three and six months ended June 30, 20192020 and 2018:2019:

7
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
REVENUES ACCOUNTS RECEIVABLEREVENUESACCOUNTS RECEIVABLE
Three Months Ended June 30, Six Months Ended June 30, At June 30,At December 31,Three Months Ended June 30,Six Months Ended June 30,At June 30,At December 31,
20192018 20192018 20192018202020192020201920202019
Customer A(a)
6%65% 22%65% 61%65%
Customer A(a)
— %6 %— %22 %75 %73 %
Customer B(b)
26%9% 23%11% 9%3%
Customer B(b)
17 %26 %19 %23 %7 %2 %
Customer C(c)
5%—% 10%—% 1%2%
Customer C(c)
11 %13 %9 %6 %— %2 %
Customer D(d)
Customer D(d)
6 %4 %11 %4 %3 %3 %
Customer E(e)
Customer E(e)
— %5 %— %10 %— %— %
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 and 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 equipment rental business.

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 and other businesses. Accounts receivable for Customer B also includes receivables due for interest charged on delinquent accounts receivable.
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 equipment rental business.
d.Customer D is a third-party customer. Revenues and the related accounts receivable balances earned from Customer D were derived from the Company's infrastructure services segment.
e.Customer E 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 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 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 FebruaryJune 2016, the Financial Accounting Standards Board ("FASB"(“FASB”) issued Accounting Standards Update ("ASU"(“ASU”) No. 2016-02 “Leases (Topic 842)” amending the current accounting for leases. Under the new provisions, all lessees will 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. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. The Company adopted this ASU effective January 1, 2019 utilizing the 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 retained earnings in the period of adoption with no adjustment made to the comparative periods presented in the consolidated financial statements. See Note 14 for the impact the adoption of this standard had on the Company's financial statements.

In June 2016, the FASB issued ASU 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. The Company is currently evaluating the impactadopted this standard may have on its financial statements and 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. The Company adopted this ASU effective January 1, 2019 and estimates2020. It did not have a material impact on the fair value of its non-employee awards (see Note 16) was approximately $18.9 million as of this date.Company's condensed consolidated financial statements.


3.Revenues
3.  Revenue
The Company's primary revenue streams include infrastructure services, pressure pumping services, natural sand proppant services, drilling services and other services, which includes contract land and directional drilling, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, full service transportation, crude oil hauling, and remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services. See Note 2019 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
8
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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-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 Gulfport, Stingray Pressure Pumping, one of its customers, the CompanyCompany's subsidiaries, has agreed to provide that customerGulfport 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 CompanyStingray Pressure Pumping has the right to receive consideration from this customer even if circumstances prevent us from performing work. All consideration owed to the CompanyStingray Pressure Pumping for services performed during the contractual period is fixed and the right to receive it is unconditional. Gulfport has filed a legal action in Delaware state court seeking the termination of this contract and monetary damages. During the six months ended June 30, 2020, Stingray Pressure Pumping generated $26.3 million in revenues under this contract with Gulfport. Gulfport made payments of $6.8 million to the Company during the six months ended June 30, 2020 related to revenue recognized for services in 2019 prior to the alleged termination date, and owed the Company $26.6 million as of June 30, 2020 under the contract, which includes $1.1 million in interest on delinquent accounts receivable. The revenue recognized and related accounts receivable balance owed to the Company are reflected in “services revenue—related parties” and “receivables from related parties” on the accompanying unaudited condensed consolidated statement of comprehensive (loss) income and unaudited condensed consolidated balance sheets. See Note 18 below.


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.


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 June 30, 2019,2020, the Company had deferred revenue totaling $1.1$9.5 million related to shortfall payments. This amount is included in accrued“accrued expenses and other current liabilitiesliabilities” 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. DuringThe Company recognized revenue totaling $4.9 million and $9.8 million during the three and six months ended June 30, 2020, respectively, and $1.0 million during the six months ended June 30, 2019, and 2018, the Company recognized revenue totaling $1.0 million and $0.3 million, respectively, related to shortfall payments. The Company did not recognize any shortfall revenue during the three months ended June 30, 2019.


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.


9
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Drilling Services
Contract drilling services were 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 were recognized over the days of actual drilling. As a result of market conditions, the Company has temporarily shut down its contract land drilling operations beginning in December 2019 and rig hauling operations beginning in April 2020.

Other Services
TheDuring the periods presented, the Company also provides contract land and directional drilling,provided coil tubing, pressure control, flowback, cementing, equipment rentals, full service transportation, crude oil hauling, and remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services, which are reported under other services. TheseAs a result of market conditions, the Company has temporarily shut down its cementing and acidizing operations as well as its flowback operations beginning in July 2019 and its coil tubing and full service transportation operations beginning in July 2020. The Company's other 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, December 31, 2018$4,304 
Deduction for recognition of revenue(4,827)
Increase for deferral of shortfall payments8,442 
Increase for deferral of customer prepayments675 
Deduction of shortfall payments due to contract renegotiations(1,350)
Balance, December 31, 20197,244 
Deduction for recognition of revenue(9,897)
Increase for deferral of shortfall payments12,036 
Increase for deferral of customer prepayments212 
Balance, June 30, 2020$9,595 
Balance, January 1, 2018 $15,000
Deduction for recognition of revenue (15,000)
Increase for deferral of shortfall payments 4,246
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 not0t have any contract assets as of June 30, 2020, December 31, 2019 or 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 six months ended June 30, 20192020 and 2018.2019. As of June 30, 2019,2020, the Company had unsatisfied performance obligations totaling $114.8$66.5 million, which will be recognized over the next 2.41.4 years.


4.Acquisitions

Acquisition of Air Rescue Systems and Brim Equipment Assets4. Inventories
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 equipment1,702
 1,990
Identifiable intangible assets - trade name(a)
120
 —
Goodwill(b)
694
 2,243
Other non-current assets5
 —
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 income141
 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 $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.
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 the assembled workforce 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, WTL provided the following activity (in thousands):
 2019 2018
Revenues$6,210
 $7,511
Net loss(a)
(808) (149)
a.    Includes depreciation and amortization expense of $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, 2018 (in thousands):
 Six Months Ended June 30, 2018
Revenues$3,354
Net income90

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

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 $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 December 31, 2018 and for the six months ended June 30, 2019, RTS provided the following activity (in thousands):
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 $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, 2018 (in thousands):
 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, 2018 related to this acquisition.

5.Inventories
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, future utility, obsolescence and future utility.other factors. A summary of the Company's inventories is shown below (in thousands):
10
  June 30, December 31,
  2019 2018
Supplies $16,912
 $12,571
Raw materials 344
 199
Work in process 2,338
 3,273
Finished goods 2,520
 5,259
Total inventories $22,114
 $21,302

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30,December 31,
20202019
Supplies$7,030  $9,598  
Raw materials887  746  
Work in process2,926  4,608  
Finished goods1,630  2,531  
Total inventories$12,473  $17,483  
6.Property, Plant and Equipment     

5. Property, Plant and Equipment  
Property, plant and equipment include the following (in thousands):
June 30,December 31,
Useful Life20202019
Pressure pumping equipment3-5 years$218,204  $216,627  
Drilling rigs and related equipment3-15 years113,943  117,783  
Machinery and equipment7-20 years171,809  190,221  
Buildings(a)
15-39 years46,456  47,859  
Vehicles, trucks and trailers5-10 years116,017  135,724  
Coil tubing equipment4-10 years8,653  29,438  
LandN/A13,687  13,687  
Land improvements15 years or life of lease10,135  10,135  
Rail improvements10-20 years13,802  13,802  
Other property and equipment(b)
3-12 years19,112  18,880  
731,818  794,156  
Deposits on equipment and equipment in process of assembly(c)
3,985  6,627  
735,803  800,783  
Less: accumulated depreciation(d)
442,653  448,011  
Total property, plant and equipment, net$293,150  $352,772  
a. Included in Buildings at June 30, 2020 and December 31, 2019 are costs of $7.6 million and $6.7 million, respectively, related to assets under operating leases.
b. Included in Other property and equipment at each of June 30, 2020 and December 31, 2019 are costs of $6.5 million related to assets under operating leases.
c. 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.
d. Includes accumulated depreciation of $4.6 million and $3.5 million at June 30, 2020 and December 31, 2019, respectively, related to assets under operating leases.

Impairment
Oil prices declined significantly in March 2020 as a result of geopolitical events that increased the supply of oil in the market as well as effects of the COVID-19 pandemic. As a result, the Company determined that it was more likely than not that the fair value of certain of its oilfield services assets were less than their carrying value. Therefore, the Company performed an interim impairment test. As a result of the test, the Company recorded the following impairments to its fixed assets during the first quarter of 2020 (in thousands):


11
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   June 30, December 31,
 Useful Life 2019 2018
Assets held and used:     
Pressure pumping equipment3-5 years $214,588
 $208,968
Drilling rigs and related equipment3-15 years 122,998
 122,198
Machinery and equipment7-20 years 196,691
 173,867
Buildings15-39 years 16,887
 16,887
Vehicles, trucks and trailers5-10 years 134,952
 132,337
Coil tubing equipment4-10 years 29,846
 29,128
LandN/A 13,687
 14,235
Land improvements15 years or life of lease 10,056
 9,614
Rail improvements10-20 years 13,806
 13,806
Other property and equipment3-12 years 14,065
 13,614
   767,576
 734,654
Deposits on equipment and equipment in process of assembly(a)
  8,860
 16,865
   776,436
 751,519
Less: accumulated depreciation  390,168
 337,514
Total assets held and used, net  386,268
 414,005
      
Assets subject to operating leases:     
Buildings15-30 years 30,725
 29,493
Helicopters6 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.Water transfer equipmentDeposits on$4,203 
Crude oil hauling equipment and3,275 
Coil tubing equipment in process2,160 
Flowback equipment1,514 
Rental equipment1,308 
Other equipment437 
Total impairment 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.other long-lived assets$12,897 


The Company measured the fair values of these assets using significant unobservable inputs (Level 3) based on an income approach. The Company did not record any impairment of other long-lived assets during the three months ended June 30, 2020 and three or six months ended June 30, 2019.

Disposals
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 unaudited condensed consolidated statement of cash flows. For the six months ended June 30, 20192020 and 2018,2019, proceeds from the sale of equipment damaged or lost down-hole were $0.7 million and a nominal amount, and $0.6 million, respectively, and gains on sales of equipment damaged or lost down-hole were $0.7 million and a nominal amount, respectively.

Proceeds from assets sold or disposed of as well as the carrying value of the related equipment are reflected in “other, net” on the unaudited condensed consolidated statement of comprehensive (loss) income. For the six months ended June 30, 2020 and $0.52019, proceeds from the sale of equipment were $2.2 million and $2.4 million, respectively, and gains (losses) from the sale or disposal of equipment were $0.8 million and ($0.2) million, respectively.


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

Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Depreciation expense$23,740  $28,099  $49,340  $56,165  
Depletion expense93  1,734  93  1,946  
Amortization expense254  284  507  568  
Accretion expense29  28  58  42  
Depreciation, depletion, amortization and accretion$24,116  $30,145  $49,998  $58,721  

6. Goodwill and Intangible Assets
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Depreciation expense$28,099
 $27,058
 $56,165
 $51,456
Depletion expense1,734
 1,340
 1,946
 1,427
Amortization expense284
 2,382
 568
 4,790
Accretion expense28
 15
 42
 30
Depreciation, depletion, amortization and accretion$30,145
 $30,795
 $58,721
 $57,703
Goodwill

Changes in the net carrying amount of goodwill by reporting segment (see Note 19) for the six months ended June 30, 2020 and year ended December 31, 2019 are presented below (in thousands):


12
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

InfrastructurePressure PumpingSandOtherTotal
Balance as of January 1, 2019
Goodwill$3,828  $86,043  $2,684  $11,893  $104,448  
Accumulated impairment losses—  —  —  (3,203) (3,203) 
3,828  86,043  2,684  8,690  101,245  
Acquisitions—  —  —  —  —  
Impairment losses(434) (23,423) (2,684) (7,123) (33,664) 
Balance as of December 31, 2019
Goodwill3,828  86,043  2,684  11,893  104,448  
Accumulated impairment losses(434) (23,423) (2,684) (10,326) (36,867) 
3,394  62,620  —  1,567  67,581  
Acquisitions—  —  —  —  —  
Impairment losses—  (53,406) —  (1,567) (54,973) 
Balance as of June 30, 2020
Goodwill3,828  86,043  2,684  11,893  104,448  
Accumulated impairment losses(434) (76,829) (2,684) (11,893) (91,840) 
$3,394  $9,214  $—  $—  $12,608  
7.Intangible Assets and Goodwill

Oil prices declined significantly in March 2020 as a result of geopolitical events that increased the supply of oil in the market as well as effects of the COVID-19 pandemic. As a result, the Company determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value. Therefore, the Company performed an interim goodwill impairment test. The Company impaired goodwill associated with Stingray Pressure Pumping, Silverback Energy and WTL Oil LLC, resulting in a $55.0 million impairment charge during the first quarter of 2020. To determine fair value, the Company used a combination of the income and market approaches. The income approach estimates the fair value based on anticipated cash flows that are discounted using a weighted average cost of capital. The market approach estimates the fair value using comparative multiples, which involves significant judgment in the selection of the appropriate peer group companies and valuation multiples. The Company did not record any goodwill impairment charges during the six months ended June 30, 2019.

Intangible Assets

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

 June 30, December 31,June 30,December 31,
 2019 201820202019
Customer relationships $2,255
 $2,255
Customer relationships$1,050  $1,050  
Trade names 9,063
 9,063
Trade names9,063  9,063  
Less: accumulated amortization - customer relationships (692) (544)Less: accumulated amortization - customer relationships(554) (467) 
Less: accumulated amortization - trade names (3,438) (3,018)Less: accumulated amortization - trade names(4,277) (3,858) 
Intangible assets, net $7,188
 $7,756
Intangible assets, net$5,282  $5,788  


Amortization expense for intangible assets was $0.6$0.5 million and $4.8$0.6 million respectively, for the six months ended June 30, 2020 and 2019, and 2018.respectively. The original life of customer relationships ranges fromis 6 to 10 years as of June 30, 2020 with a remaining average useful life of 6.52.8 years. The original life of trade names ranges from 10 to 20 years as of June 30, 2020 with a remaining average useful life of 8.67.9 years.


13
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Aggregated expected amortization expense for the future periods is expected to be as follows (in thousands):
Remainder of 2020$507  
20211,015  
20221,015  
2023898  
2024771  
Thereafter1,076  
$5,282  

7. Equity Method Investment
  Amount
Remainder of 2019 $567
2020 1,135
2021 1,129
2022 1,108
2023 991
Thereafter 2,258
  $7,188

Goodwill was $101.2 million at both June 30, 2019 and December 31, 2018. Changes in the goodwill for the year ended December 31, 2018 and the six months ended June 30, 2019 are set forth below (in thousands):
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 year ended December 31, 2018, the Company moved Cementing's equipment from the Utica shale to the Permian basin. As a result, 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 Services LLC (“Cobra Aviation”) and Wexford Partners Investment Co. LLC (“Wexford Investment”), a related party, formed a joint venture under the name of Brim Acquisitions LLC (“Brim Acquisitions”) to acquire all outstanding equity interest in Brim Equipment Leasing, Inc. (“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.$2.0 million. 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 one1 commercial helicopter and leases five5 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$2.0 million and $2.6 million at June 30, 2019.2020 and December 31, 2019, respectively. The investment is included in other“other non-current assetsassets” on the unaudited condensed consolidated balance sheets. The Company recorded an equity method adjustmentadjustments to its investment of ($0.6) million and $0.2 million for its share of Brim Acquisitions' (loss) income for the six months ended June 30, 2020 and 2019, respectively, which is included in other, net“other, net” on the unaudited condensed consolidated statements of comprehensive (loss) income. The Company made additional investments totaling $0.7 million during the six months ended June 30, 2019. The Company did not make any additional investments during the six months ended June 30, 2020.


9.Accrued Expenses and Other Current Liabilities
8. Accrued expenseExpenses and Other Current Liabilities
Accrued expenses and other current liabilities included the following (in thousands):
June 30,December 31,
20202019
State and local taxes payable$15,238  $15,288  
Deferred revenue9,595  7,244  
Accrued compensation, benefits and related taxes3,482  5,938  
Financed insurance premiums2,479  6,463  
Insurance reserves2,590  2,906  
Other3,357  2,915  
Total$36,741  $40,754  
  June 30, December 31,
  2019 2018
Accrued compensation, benefits and related taxes $9,957
 $20,898
State and local taxes payable 17,057
 18,687
Insurance reserves 4,413
 4,678
Deferred revenue 1,296
 4,304
Financed insurance premiums 4,565
 6,761
Other 5,370
 4,324
Total $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 June 30, 20192020 and December 31, 2018,2019, the applicable interest rate associated with financed insurance premiums wasranged from 3.45% to 3.75%.

10.Debt
14
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
9. Debt
On October 19, 2018, Mammoth Inc. 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, whichas amended and restated the Company's prior(the “revolving credit facility”). The revolving credit and security agreement dated as of November 25, 2014, as amended prior to October 19, 2018. The facility matures on October 19, 2023. Borrowings under thisthe revolving credit facility are secured by the assets of Mammoth Inc., inclusive of certain of the subsidiary companies. The maximum availability of the facility iscompanies, and are subject to a borrowing base calculation prepared monthly. On November 5, 2019, the Company entered into a first amendment to the revolving credit facility to amend the interest coverage ratio definition to give accrual treatment to certain cash taxes included in the ratio calculation. As a result, certain cash tax payments that were made in 2019 were now treated as if they were made in 2018, the year in which the income related to such tax payments was actually received.


Outstanding borrowings under thisAs of December 31, 2019, the revolving credit facility bearcontained various customary affirmative and restrictive covenants. Among the covenants are two financial covenants, including a minimum interest atcoverage ratio (3.0 to 1.0), and a per annum rate elected by Mammoth Inc.maximum leverage ratio (4.0 to 1.0). On February 26, 2020, the Company entered into a second amendment to the revolving credit facility to, among other things, (i) amend its financial covenants, as outlined below, (ii) decrease the maximum revolving advance amount from $185 million to $130 million, (iii) decrease the amount that is equalthe maximum revolving advance can be increased to an alternate base rate or LIBOR, in each case plus(the accordion) from $350 million to $180 million, (iv) increase the applicable margin. The applicable margin ranges from 1.00%2.00% to 1.50%2.50% per annum in the case of the alternate base rate and from 2.00%3.00% to 2.50%3.50% per annum in the case of LIBOR. The applicable margin depends onLIBOR, (v) increase the aggregate amount of permitted asset dispositions, and (vi) permit certain sale-leaseback transactions.

The financial covenants under the revolving credit facility were amended as follows:

•the minimum interest coverage ratio of 3.0 to 1.0 was eliminated;
•the maximum leverage coverage ratio of 4.0 to 1.0 was eliminated for the first two fiscal quarters of 2020 and, beginning with the fiscal quarter ended September 30, 2020, changed to 2.5 to 1.0;
•beginning with the fiscal quarter ended September 30, 2020, a minimum fixed charge coverage ratio of at least 1.1 to 1.0 was added; and
•from the effective date of February 26, 2020 through September 30, 2020, a minimum excess availability covenant of 10% of the maximum revolving advance amount was added.

As of June 30, 2020 and December 31, 2019, the Company was in compliance with its covenants under thisthe revolving credit facility.


At June 30, 2020, there were outstanding borrowings under the revolving credit facility of $89.3 million and $18.5 million of available borrowing capacity. This available borrowing capacity reflects (i) a minimum excess availability covenant of 10% of the maximum revolving advance amount and (ii) $9.0 million of outstanding letters of credit. At December 31, 2019, there were outstanding borrowings under the amended and restated revolving credit facility of $82.0$80.0 million and $93.5$96.1 million of available borrowing capacity under the facility, after giving effect to $8.7 million of outstanding letters of credit. At December 31, 2018, there were no

As of July 29, 2020, the Company had $88.2 million in borrowings outstanding borrowings under the amended and restatedits revolving credit
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

facility, and $175.8leaving an aggregate of $19.5 million of available borrowing capacity under this facility. This available borrowing capacity reflects (i) a minimum excess availability covenant of 10% of the facility, after giving effect to $8.4maximum revolving advance amount and (ii) $9.0 million of outstanding letters of credit.

If an event of default occurs under the revolving credit facility and remains uncured, it could have a material adverse effect on the Company's business, financial condition, results of operations and cash flows. 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 (3.0lenders (i) would not be required to 1.0), maximum leverage ratio (4.0lend any additional amounts to 1.0), and minimum availability ($10 million). As of June 30, 2019 and December 31, 2018, the Company, was in compliance(ii) could elect to increase the interest rate by 200 basis points, (iii) could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, (iv) may have the financial covenants underability to require the facility.Company to apply all of its available cash to repay outstanding borrowings, and (v) may foreclose on substantially all of the Company's assets.


11.Variable Interest Entities

10.  Variable Interest Entities
Dire Wolf Energy Services LLC ("(“Dire Wolf"Wolf”) and Predator Aviation LLC ("(“Predator Aviation"Aviation”), wholly owned subsidiaries of the Company, are party to Voting Trust Agreements with TVPX Aircraft Solutions Inc. (the "Voting Trustee"“Voting Trustee”). Under the Voting Trust Agreements, Dire Wolf transferred 100% of its membership interest in Cobra Aviation and Predator Aviation transferred 100% of its membership interest in Leopard Aviation LLC ("Leopard"(“Leopard”) to the respective Voting Trustees in exchange for Voting Trust Certificates. Dire Wolf and Predator Aviation retained the
15
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
obligation to absorb all expected returns or losses of Cobra 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 and Leopard was a wholly owned subsidiary of Predator Aviation. Cobra Aviation owns three3 helicopters and support equipment, 100% of the equity interest in ARSAir Rescue Systems Corporation (“ARS”) and 49% of the equity interest in Brim Acquisitions. Leopard owns one helicopter. Dire Wolf and Predator Aviation entered into the Voting Trust Agreements in order to meet certain registration requirements.


Dire Wolf's and Predator Aviation's voting rights are not proportional to 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 have disproportionately fewer voting rights; therefore, Cobra Aviation and Leopard meet the criteria of a VIE. Cobra Aviation and Leopard's operational activities are directed by Dire Wolf's and Predator Aviation's officers and Dire Wolf and Predator Aviation have the option to terminate the Voting Trust Agreements at any time. Therefore, the Company, through Dire Wolf and Predator Aviation, is considered the primary beneficiary of the VIEs and consolidates Cobra Aviation and Leopard at June 30, 2019.2020.


12.Selling, General and Administrative Expense

11. Selling, General and Administrative Expense
Selling, general and administrative ("SG&A") expense includes of the following (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Cash expenses:
Compensation and benefits$3,720  $2,154  $7,690  $11,384  
Professional services6,147  2,934  9,684  6,723  
Other(a)
2,100  3,381  4,409  6,626  
Total cash SG&A expense11,967  8,469  21,783  24,733  
Non-cash expenses:
Bad debt provision1,624  262  1,679  266  
Stock based compensation135  724  1,035  1,792  
Total non-cash SG&A expense1,759  986  2,714  2,058  
Total SG&A expense$13,726  $9,455  $24,497  $26,791  
a. Includes travel-related costs, information technology expenses, rent, utilities and other general and administrative-related costs.

12. Income Taxes
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Cash expenses:       
Compensation and benefits$2,154
 $10,978
 $11,384
 $18,677
Professional services2,934
 2,981
 6,723
 5,568
Other(a)
3,381
 3,935
 6,626
 5,542
Total cash SG&A expense8,469
 17,894
 24,733
 29,787
Non-cash expenses:       
Bad debt provision(b)
262
 28,263
 266
 53,790
Equity based compensation(c)
—
 17,487
 —
 17,487
Stock based compensation724
 1,483
 1,792
 2,574
Total non-cash SG&A expense986
 47,233
 2,058
 73,851
Total SG&A expense$9,455
 $65,127
 $26,791
 $103,638
a.Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.$28.3 million and $53.6 million of the bad debt expense recognized during the three and six months ended June 30, 2018 was subsequently reversed during the third quarter of 2018.
c.Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level). See Note 16 for additional detail.

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13.Income Taxes
The Company recorded income tax benefit of $2.8 million for the six months ended June 30, 2020 compared to income tax expense of $10.4 million for the six months ended June 30, 2019. The Company's effective tax rate was 3% and 37% for the six months ended June 30, 2020 and 50%2019, respectively.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted and signed into U.S. law in response to the COVID-19 pandemic, and among other things, permits the carryback of certain net operating losses. As a result of the enacted legislation, the Company recognized a $5.2 million net tax expense during the six months ended June 30, 2020, which consists of a $12.3 million deferred tax expense and a $7.2 million current tax benefit. This impact, along with the rate impact from non-deductible goodwill impairment, was the primary driver for the difference between the statutory rate of 21% and the effective tax rate for the six months ended June 30, 2020.

The effective tax rate 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 differdiffered 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 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, 13. 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 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 six months ended June 30, 2018 has not been adjusted and 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 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, theThe 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.term for all leases with a term in excess of 12 months. For
16
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 has 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. 


The rate implicit in the Company's leases is not readily determinable. Therefore, the Company uses its incremental borrowing rate based on information available at the commencement date of its leases in determining the present value of lease payments. The Company's incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Lease expense consisted of the following for the three and six months ended June 30, 2020 and 2019 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Operating lease expense$4,363  $5,405  $9,165  $11,420  
Short-term lease expense118  148  287  362  
Finance lease expense:
Amortization of right-of-use assets317  288  634  486  
Interest on lease liabilities51  41  105  80  
Total lease expense$4,849  $5,882  $10,191  $12,348  

Supplemental balance sheet information related to leases as of June 30, 2020 and December 31, 2019 is as follows (in thousands):
June 30,December 31,
20202019
Operating leases:
Operating lease right-of-use assets$33,210  $43,446  
Current operating lease liability13,387  16,432  
Long-term operating lease liability19,802  27,102  
Finance leases:
Property, plant and equipment, net$4,451  $5,111  
Accrued expenses and other current liabilities1,317  1,365  
Other liabilities3,278  3,856  

17
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 expense148
 362
Finance lease expense:   
Amortization of right-of-use assets288
 486
Interest on lease liabilities41
 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 liability17,338
Long-term operating lease liability34,807
Finance leases: 
Property and equipment, net$5,005
Accrued expenses and other current liabilities1,856
Other liabilities2,846

Other supplemental information related to leases for the three and six months ended June 30, 2020 and 2019 and as of June 30, 2020 and December 31, 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 leases394
 80
Financing cash flows from finance leases45
 723
Right-of-use assets obtained in exchange for lease obligations:   
Operating leases$981
 $1,936
Finance leases1,592
 1,592


Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases$4,193  $5,285  $8,930  $11,246  
Operating cash flows from finance leases51  394  105  80  
Financing cash flows from finance leases300  45  596  723  
Right-of-use assets obtained in exchange for lease obligations:
Operating leases$(1,700) $981  $(2,009) $1,936  
Finance leases(27) 1,592  (27) 1,592  

June 30, 2019
Weighted-average remaining lease term:
Operating leases3.7 years
Finance leases3.4 years
Weighted-average discount rate:
Operating leases4.5%
Finance leases4.5%


June 30,December 31,
20202019
Weighted-average remaining lease term:
Operating leases3.2 years3.4 years
Finance leases3.7 years4.1 years
Weighted-average discount rate:
Operating leases4.3 %4.4 %
Finance leases4.3 %4.3 %
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


Maturities of lease liabilities as of June 30, 20192020 are as follows (in thousands):
Operating LeasesFinance Leases
Remainder of 2020$7,565  $854  
202112,614  1,238  
20228,470  1,214  
20234,280  1,214  
20241,727  440  
Thereafter881  —  
Total lease payments35,537  4,960  
Less: Present value discount2,348  365  
Present value of lease payments$33,189  $4,595  
 Operating Leases Finance Leases
Remainder of 2019$9,961
 $1,536
202017,556
 1,091
202113,005
 782
20229,093
 748
20234,344
 742
Thereafter2,588
 166
Total lease payments56,547
 5,065
Less: Present value discount4,402
 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


TheCertain of 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 agreementagreements for its contract land drilling services
18
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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 lease agreements are generally short-term in nature and lease revenue is recognized over time based on on a monthly, daily or hourly rate basis. The Company does not provide an option for the 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$0.6 million and $4.2$0.9 million respectively, during the three and six months ended June 30, 2020 and 2019, respectively, which is included in service“services revenue” and “services revenue - related parties” on the unaudited condensed consolidated statement of comprehensive (loss) income.

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15.14. (Loss) Earnings (Loss) Per Share


Reconciliations of the components of basic and diluted net (loss) income (loss) per common share are presented in the table below (in thousands, except per share data):
Three Months Ended June 30,Six Months Ended June 30,
2020201920202019
Basic (loss) earnings per share:
Allocation of (loss) earnings:
Net (loss) income$(15,205) $(10,889) $(99,176) $17,444  
Weighted average common shares outstanding45,727  45,003  45,521  44,966  
Basic (loss) earnings per share$(0.33) $(0.24) $(2.18) $0.39  
Diluted (loss) earnings per share:
Allocation of (loss) earnings:
Net (loss) income$(15,205) $(10,889) $(99,176) $17,444  
Weighted average common shares, including dilutive effect(a)
45,727  45,003  45,521  45,060  
Diluted (loss) earnings per share$(0.33) $(0.24) $(2.18) $0.39  
a. No incremental shares of potentially dilutive restricted stock awards were included for the three and six months ended June 30, 2020 and three months ended June 30, 2019 as their effect was antidilutive under the treasury stock method.

15. Equity Based Compensation
 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Basic earnings (loss) per share:       
Allocation of earnings (loss):       
Net (loss) income$(10,889) $42,700
 $17,444
 $98,246
Weighted average common shares outstanding45,003
 44,737
 44,966
 44,700
Basic (loss) earnings per share$(0.24) $0.95
 $0.39
 $2.20
        
Diluted earnings (loss) per share:       
Allocation of earnings (loss):       
Net (loss) income$(10,889) $42,700
 $17,444
 $98,246
Weighted average common shares, including dilutive effect(a)
45,003
 45,059
 45,060
 44,977
Diluted (loss) earnings per share$(0.24) $0.95
 $0.39
 $2.18
a.No incremental shares of potentially dilutive restricted stock awards were included for the three months ended June 30, 2019 as their effect was antidilutive under the treasury stock method.

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).


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 three months ended 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
19
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
unrecognized amount, which represents the fair value of the awards as of the date of adoption of ASU 2018-07 was $18.9 million.
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


17.16. 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 SharesWeighted Average Grant-Date Fair Value
Unvested shares as of January 1, 2019434,119  $22.78  
Granted101,181  6.83  
Vested(231,896) 22.45  
Forfeited(82,163) 18.55  
Unvested shares as of December 31, 2019221,241  22.43  
Granted2,000,000  0.93  
Vested(653,655) 5.11  
Forfeited(47,167) 3.28  
Unvested shares as of June 30, 20201,520,419  $1.32  
  Number of Unvested Restricted Shares Weighted Average Grant-Date Fair Value
Unvested shares as of January 1, 2019 434,119
 $22.78
Granted 64,507
 9.87
Vested (141,479) 24.88
Forfeited (70,002) 19.16
Unvested shares as of June 30, 2019 287,145
 $23.58


As of June 30, 2019,2020, there was $3.3$1.7 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 1.0 year.

2.3 years.

Included in cost of revenue and selling, general and administrative expenses is stock based compensation expense of $0.9$1.2 million and $1.7 million for the three months ended June 30, 2019 and 2018, respectively, and $2.2 million, and $2.9 millionrespectively, for the six months ended June 30, 20192020 and 2018, respectively.2019.


18.Related Party Transactions
17. 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”), Anaconda Manufacturing LLC (“Anaconda”), Cobra Aviation, ARS Cobra and Higher Power Electrical LLC (“Higher Power”)Leopard and the following companies are included in Related Party Transactions: Gulfport;Gulfport, Wexford, Grizzly Oil Sands ULC (“Grizzly”);, El Toro Resources LLC (“El Toro”);, Everest Operations Management LLC (“Everest”); Elk City Yard LLC (“Elk City Yard”);, Double Barrel Downhole Technologies LLC (“DBDHT”);, Caliber Investment Group LLC (“Caliber”);, Predator Drilling LLC (“Predator”); T&E Flow Services LLC (“T&E”); and Brim Equipment.


20
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Following is a summary of related party transactions (in thousands):
REVENUESACCOUNTS RECEIVABLE
Three Months Ended June 30,Six Months Ended June 30,At June 30,At December 31,
202020192020201920202019
Pressure Pumping and Gulfport(a)$8,499  $33,419  $26,322  $70,829  $26,605  $5,950  
Muskie and Gulfport(b)1,875  10,861  3,750  23,516  516  1,141  
SR Energy and Gulfport(c)5  2,733  113  8,040  36  156  
Aquahawk and Gulfport(d)—  98  —  822  —  —  
Panther Drilling and El Toro(e)38  124  38  493  38  —  
Cobra Aviation/ARS/Leopard and Brim Equipment(f)103  448  185  711  104  235  
Other5  15  5  15  17  41  
$10,525  $47,698  $30,413  $104,426  $27,316  $7,523  
  REVENUES ACCOUNTS RECEIVABLE
  Three Months Ended June 30, Six Months Ended June 30, At June 30,At December 31,
  20192018 20192018 20192018
Pressure Pumping and Gulfport(a)$33,419
$33,831
 $70,829
$72,377
 $26,906
$8,175
Muskie and Gulfport(b)10,861
9,730
 23,516
21,192
 6,024
1,193
SR Energy and Gulfport(c)2,733
4,626
 8,040
11,579
 3,722
1,658
Cementing and Gulfport(d)—
2,048
 —
4,876
 —
—
Aquahawk and Gulfport(e)98
—
 822
—
 133
—
Panther Drilling and El Toro(f)124
—
 493
345
 124
64
Cobra Aviation/ARS/Leopard and Brim Equipment(g)448
—
 711
—
 441
—
Other Relationships 15
106
 15
522
 50
74
  $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.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.
f.Panther provides directional drilling services for El Toro, an entity controlled by Wexford, pursuant to a master service agreement.
g.Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements.
a.Pressure Pumping provides pressure pumping, stimulation and related completion services to Gulfport.
  Three Months Ended June 30, Six Months Ended June 30, At June 30,At December 31,
  20192018 20192018 20192018
  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
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.SR Energy provides rental services to Gulfport.
a.Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements.
b.Cobra and Higher Power purchased materials and services from T&E, an entity in which a member of management's family owned a minority interest. T&E ceased to be a related party as of September 30, 2018.
c.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.
d.Caliber leases office space to Mammoth.

d.Aquahawk provides water transfer services for Gulfport pursuant to a master service agreement.
e.Panther provides directional drilling services for El Toro, an entity controlled by Wexford, pursuant to a master service agreement.
f.Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements.

Three Months Ended June 30,Six Months Ended June 30,At June 30,At December 31,
202020192020201920202019
COST OF REVENUECOST OF REVENUEACCOUNTS PAYABLE
Cobra Aviation/ ARS/Leopard and Brim Equipment(a)$8  $2,650  $21  $3,363  $—  $433  
Anaconda and Caliber(b)62  —  124  —  —  —  
Other27  —  53  —  —  —  
$97  $2,650  $198  $3,363  $—  $433  
SELLING, GENERAL AND ADMINISTRATIVE COSTSSELLING, GENERAL AND ADMINISTRATIVE COSTS
The Company and Wexford(c)$—  $206  $—  $442  $—  $1  
The Company and Caliber(b)191  258  383  388  —  7  
Cobra Aviation/ ARS/Leopard and Brim Equipment(a)—  149  —  166  —  —  
Other7  46  30  97  14  9  
$198  $659  $413  $1,093  $14  $17  
CAPITAL EXPENDITURESCAPITAL EXPENDITURES
Leopard and Brim Equipment(a)$—  $217  $—  $217  $—  $76  
$—  $217  $—  $217  $—  $76  
$14  $526  

a.Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements.
b.Caliber leases office space to Anaconda and Mammoth.
c.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.

On December 21, 2018, Cobra Aviation acquired all outstanding equity interest in ARS and purchased two2 commercial helicopters, spare parts, support equipment and aircraft documents from Brim Equipment. Following these transactions,
21
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 AviationThe Company made additional investments in Brim Acquisitions totaling $0.7 million during the six months ended June 30, 2019. The Company did not make any additional investments during the six months ended June 30, 2020. Wexford Investments is an entity controlled by Wexford, which owns approximately 49%48% of the Company's outstanding common stock. 

19.Commitments and Contingencies
18. Commitments and Contingencies
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 acquirepurchase capital equipment.


Aggregate future minimum payments under these obligations in effect at June 30, 20192020 are as follows (in thousands):
Year ended December 31:Capital Spend Commitments
Minimum Purchase Commitments(a)
Remainder of 2020$3,214  $8,671  
2021—  700  
2022—  130  
2023—  9  
2024—  —  
Thereafter—  —  
$3,214  $9,510  
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
a.  Included in these amounts are sand purchase commitments of $8.0 million. Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $9.4 million.


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.

Letters of Credit
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):

June 30,December 31,
 June 30, December 31,20202019
 2019 2018
Environmental remediationEnvironmental remediation$4,477  $4,182  
Insurance programs $4,105
 $4,105
Insurance programs4,105  4,105  
Environmental remediation 4,182
 3,877
Rail car commitments 455
 455
Rail car commitments455  455  
Total letters of credit $8,742
 $8,437
Total letters of credit$9,037  $8,742  


Insurance
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 June 30, 20192020 and December 31, 2018,2019, the workers' compensation and automobile liability policies require a deductible per occurrence of up to $0.3 million and $0.1 million.million, respectively. 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 June 30, 20192020 and December 31, 2018,2019, the workers' compensation and auto liability policies contained an aggregate stop loss of $5.4 million. As of June 30, 20192020 and December 31, 2018,2019, accrued claims were $4.4$2.6 million and $4.7$2.9 million, respectively.


22
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The Company also has insurance coverage for directors and officers liability. As of June 30, 2020 and December 31, 2019, the directors and officers liability policy had a deductible per occurrence of $1.0 million and an aggregate deductible of $10.0 million. As of June 30, 2020 and December 31, 2019, the Company did not have any accrued claims for directors and officers liability.

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, 2019. As of June 30, 2020 and December 31, 2019, accrued claims were $1.8 million and $3.0 million, respectively. These estimates may change in the near term as actual claims continue to develop. As of June 30, 2019 and December 31, 2018, accrued claims were $3.4 million and $3.2 million, respectively.


Warranty Guarantees
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. NoNaN liabilities were accrued as of June 30, 20192020 and December 31, 20182019 and no0 expense was recognized during the three and six months ended June 30, 20192020 or 20182019 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.


Bonds
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 June 30, 2019 and December 31, 2018,2020, outstanding bid bonds totaled $6.7 million$1.3 million. The Company did not have any outstanding bid bonds as of December 31, 2019. As of June 30, 2020 and $3.6 million, respectively, andDecember 31, 2019, outstanding performance and payment bonds totaled $34.8$37.4 million and $22.3$40.4 million, respectively. The estimated cost to complete projects secured by the performance and payment bonds totaled $17.2$5.5 million as of June 30, 2019.2020.


Litigation
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'sCompany’s financial position, results of operations or cash flows.


The Company has become aware of an ongoing investigation by the U.S. Attorney’s Office for the DistrictOn June 19, 2018, Wendco of Puerto Rico and the Department of Homeland Security Office of Inspector General relating to the contracts awarded to Cobra by PREPA. The Company has been informed that the investigation is focused on the interactions between a FEMA official and the former President of Cobra. The Company has been cooperating with this 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 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 Company continues to evaluate this situation and 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, 2018, the Company's registered agent notified the Company that it had been served withInc. filed a putative class action lawsuit titledin the Commonwealth of Puerto Rico styled 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.LLC, et al. The plaintiffs allege negligent acts bythat the defendants caused an electrical failurepower outages in Puerto Rico resultingwhile performing restoration work on Puerto Rico’s electrical network following Hurricanes Irma and Maria in damages of at least $300 million.2017, thereby interrupting commercial activities and causing economic loss. The Company believes this claim isthese claims are without merit and will vigorously defend the action. However, the Company continues to evaluate the background facts and at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company'sCompany’s business, financial position,condition, results of operations or cash flows.


In late 2018 and early 2019, Cobra washas been served with four10 lawsuits from municipalities in Puerto Rico alleging failure to pay municipal licenseconstruction excise and construction excisevolume of business taxes. The Government of Puerto Rico's Central Recovery and Reconstruction Office ("COR3"(“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, the Company is not
23
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
able to predict the outcome of these matters or whether they will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

On March 20, 2019, EJ LeJeune, a former employee of ESPADA Logistics and Security Group, LLC and ESPADA Caribbean LLC (together, “ESPADA”) filed a putative collective and class action complaint in LeJeune v. Mammoth Energy Services, Inc. d/b/a Cobra Energy & ESPADA Logistics and Security Group, LLC, Case No. 5:19-cv-00286-JKP-ESC, in the U.S. District Court for the Western District of Texas. On August 5, 2019, the court granted the plaintiff’s motion for leave to amend his complaint, dismissing Mammoth Energy Services, Inc. as a defendant, adding Cobra Acquisitions LLC (“Cobra”) as a defendant, and adding ESPADA Caribbean LLC and two officers of ESPADA—James Jorrie and Jennifer Gay Jorrie—as defendants. The amended complaint alleges that the defendants jointly employed the plaintiff and all similarly situated workers and failed to pay them overtime as required by the Fair Labor Standards Act and Puerto Rico law. The complaint also alleges the following violations of Puerto Rico law: illegal deductions from workers’ wages, failure to timely pay all wages owed, failure to pay a required severance when terminating workers without just cause, failure to pay for all hours worked, failure to provide required meal periods, and failure to pay a statutorily required bonus to eligible workers. Mr. LeJeune seeks to represent a class of workers allegedly employed by one or more defendants and paid a flat amount for each day worked regardless of how many hours were worked. The complaint seeks back wages, including overtime wages owed, liquidated damages equal to the overtime wages owed, attorneys’ fees, costs, and pre- and post-judgment interest. On June 16, 2020, Cobra answered Mr. LeJeune’s amended complaint, denying that it employed Mr. LeJeune and the putative class members and denying that they are entitled to relief from Cobra. All other defendants have also answered the amended complaint. On July 17, 2020, Mr. LeJeune moved for conditional certification of a collective action and, on July 29, 2020, Cobra filed its response. The Company believes these claims are without merit and will vigorously defend the action. However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company'sCompany’s business, financial position,condition, results of operations or cash flows.


On April 16, 2019, Christopher Williams, a former employee of Higher Power Electrical, LLC, filed a putative class and collective action lawsuit alleging that the Company failed to pay a class of workers overtimecomplaint 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.v. 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 plaintiff alleges that the Company failed to pay overtime wages to a class of workers in compliance with the Fair Labor Standards Act and Puerto Rico law. On August 21, 2019, upon request of the parties, the court stayed proceedings in the lawsuit pending completion of individual arbitration proceedings initiated by Mr. Zeisset and opt-in plaintiffs. The arbitrations remain pending. Other claimants have subsequently initiated additional individual arbitration proceedings asserting similar claims. All complainants and the respondents have paid the filing fees necessary to initiate the arbitrations. In May 2020, six arbitrations were held in the related matters. The Company believes these claims are without merit and will vigorously defend the arbitrations. However, at this time, the Company is not able to predict the outcomes of these proceedings or whether they will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

In June 2019 and August 2019, the Company was served with 3 class action lawsuits filed in the Western District of Oklahoma. On September 13, 2019, the court consolidated the three lawsuits under the case caption In re Mammoth Energy Services, Inc. Securities Litigation. On November 12, 2019, the plaintiffs filed their first amended complaint against Mammoth Energy Services, Inc., Arty Straehla, and Mark Layton. Pursuant to their first amended complaint, the plaintiffs brought a consolidated putative federal securities class action on behalf of all investors who purchased or otherwise acquired Mammoth Energy Services, Inc. common stock between October 19, 2017, and June 5, 2019, inclusive. On January 10, 2020, the defendants have movedfiled their motion to dismiss Mr. Zeisset's claims and compel themthe first amended complaint. On March 9, 2020, the plaintiffs filed a second amended complaint for violation of federal securities laws which contains allegations substantially similar to arbitration on an individual basis.those contained in the plaintiff’s first amended complaint. On March 30, 2020, the defendants filed their motion to dismiss the second amended complaint. The Company is evaluatingbelieves the background factsplaintiffs’ claims are without merit and will vigorously defend the action. However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company’s business, financial position,condition, results of operations or cash flows.


24
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
In JuneSeptember 2019, the Company was served with two class action4 derivative lawsuits were filed, 2 in the Western District of Oklahoma alleging that severaland 2 in the District of Delaware, purportedly on behalf of the Company's filingsCompany against its officers and directors. In October 2019, the plaintiffs in the 2 Oklahoma actions voluntarily dismissed their respective cases, with one plaintiff refiling his action in the District of Delaware. On September 13, 2019, the Delaware court consolidated the three actions under the case caption In re Mammoth Energy Services, Inc. Consolidated Shareholder Litigation. On January 17, 2020, the plaintiffs filed their consolidated amended shareholder derivative complaint on behalf of Nominal Defendant, Mammoth Energy Services, Inc., and against Arty Straehla, Mark Layton, Arthur Amron, Paul V. Heerwagen IV, Marc McCarthy, Jim Palm, Matthew Ross, Arthur Smith, Gulfport Energy Corporation, and Wexford Capital LP. On February 18, 2020, the defendants filed a motion to stay this action. The Company believes the plaintiffs’ claims are without merit and will vigorously defend the action. However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

On September 10, 2019, the U.S. District Court for the District of Puerto Rico unsealed an indictment that charged the former president of Cobra Acquisitions LLC with conspiracy, wire fraud, false statements and disaster fraud. Two other individuals were also charged in the indictment. The indictment is focused on the interactions between a former FEMA official and the former president of Cobra. Neither the Company nor any of its subsidiaries were charged in the indictment. The Company is continuing to cooperate with the related investigation. Given the uncertainty inherent in the criminal litigation, it is not possible at this time to determine the potential outcome or other potential impacts that the criminal litigation could have on the Company. PREPA has stated in court filings that it may contend the alleged criminal activity affects Cobra's entitlement to payment under its contracts with PREPA. Subsequent to the indictment, the Company received (i) a preservation request letter from the United States Securities and Exchange Commission (“SEC”) related to documents relevant to an ongoing investigation it is conducting and (ii) a civil investigative demand (“CID”) from the United States Department of Justice (“DOJ”), which requests certain documents and answers to specific interrogatories relevant to an ongoing investigation it is conducting. Both the aforementioned SEC containedand DOJ investigations are in connection with the issues raised in the criminal matter. Following the resignation of Jonathan Yellen from the Company's board of directors and the matters raised in the Company's Form 8-K filed on May 14, 2020, the Company received an expanded preservation request from the SEC. The Company is cooperating with both the SEC and DOJ and is not able to predict the outcome of these investigations or if either will have a material misrepresentationsimpact on the Company’s business, financial condition, results of operations or cash flows.

On September 12, 2019, AL Global Services, LLC (“Alpha Lobo”) filed a second amended third-party petition against the Company in an action styled Jim Jorrie v. Craig Charles, Julian Calderas, Jr., and omissionsAL Global Services, LLC v. Jim Jorrie v. Cobra Acquisitions LLC v. ESPADA Logistics & Security Group, LLC, ESPADA Caribbean LLC, Arty Straehla, Ken Kinsey, Jennifer Jorrie, and Mammoth Energy Services, Inc., in violationthe 57th Judicial District in Bexar County, Texas. The petition alleges that the Company should be held vicariously liable under alter ego, agency and respondeat superior theories for Alpha Lobo’s alleged claims against Cobra and Arty Straehla for aiding and abetting, knowing participation in and conspiracy to breach fiduciary duty in connection with Cobra’s execution of federal securities laws.an agreement with ESPADA Caribbean, LLC for security services related to Cobra’s work in Puerto Rico. The case is currently subject to a statutory stay pending a ruling on the appeal of anti-SLAPP motions to dismiss filed by certain defendants. The Company believes these claims are without merit and will vigorously defend the actions.action. However, the Company continues to evaluate the background facts and at this time, the Company is not able to predict the outcome of these lawsuitsthis lawsuit or whether theyit will have a material impact on the Company'sCompany’s business, financial condition, results of operations or cash flows. Additionally, there is a parallel arbitration proceeding that has been initiated in which certain Defendants are seeking a declaratory judgment regarding Cobra’s rights to terminate the Alpha Lobo contract and enter into a new contract with a third-party.

On September 16, 2019, Cobra filed a lawsuit against Robert Malcom (“Malcom”) and later added claims against BHI Energy I Power Services LLC (“BHI”) in a case styled Cobra Acquisitions v. Robert L. Malcom and BHI Energy I Power Services LLC in the 242nd Judicial District, District Court of Hale County, Texas. Cobra alleges Malcom breached his non-compete and non-solicit obligations contained in the purchase and sale agreement in which Cobra purchased Higher Power from Malcom. On September 16, 2019, the court entered a Temporary Restraining Order enjoining Malcom from competing against Higher Power or soliciting its customers and employees. Subsequently, on October 25, 2019, the court entered a Temporary Injunction enjoining Malcom from competing against Higher Power in three states or soliciting its customers and employees until the time of trial. Cobra is seeking to permanently enjoin Malcom from competing against Higher Power or soliciting its customers and employees, and further seeks damages it incurred as a result of Malcom’s breach of his non-compete agreement. Cobra’s claims against BHI, Malcom’s employer after he left Higher Power, are for tortious interference and misappropriation of trade secrets. On November 3, 2019, Malcom filed his original counter-petition and third-party petition against Cobra, Higher Power, Keith Ellison and Arty Straehla alleging claims for breach of contract, conversion, unjust enrichment, tortious interference, retaliation, violations of the federal Racketeer Influenced and Corrupt Organizations Act, and conspiracy. Cobra and Higher Power moved to dismiss these claims and, on January
25
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
24, 2020, after the hearing on the motion to dismiss, Malcom dismissed his claims without prejudice. On December 23, 2019, Malcom filed an appeal of the Temporary Injunction Order enjoining him from competing against Higher Power. On April 20, 2020, the Court of Appeals Seventh District of Texas denied Malcom’s appeal. At this time, the Company is not able to predict the outcome of this lawsuit. However, the Company does not believe it will have a material impact on the Company’s business, financial position, results of operations or cash flows.


As of June 30, 2020, PREPA owed the Company approximately $227.0 million for services performed, excluding $57.7 million of interest charged on these delinquent balances as of June 30, 2020. The Company believes these receivables are collectible. PREPA, however, is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA’s ability to meet its payment obligations is largely dependent upon funding from the Federal Emergency Management Agency or other sources. On September 30, 2019, Cobra filed a motion with the U.S. District Court for the District of Puerto Rico seeking recovery of the amounts owed to Cobra by PREPA, which motion was stayed by the court. On March 25, 2020, Cobra filed an urgent motion to modify the stay order and allow the recovery of approximately $61.7 million in claims related to a tax gross-up provision contained in the emergency master service agreement, as amended, that was entered into with PREPA on October 19, 2017. This emergency motion was denied on June 3, 2020 and the court extended the stay of our motion until an omnibus hearing to be held in December 2020. In the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the necessary funds but refuses to pay the amounts owed to the Company or (iii) otherwise does not pay amounts owed to the Company for services performed, the receivable may not be collectible.

On December 18, 2019, Gulfport filed a lawsuit against Stingray Pressure Pumping in the Superior Court of the State of Delaware. Pursuant to the complaint, Gulfport seeks to terminate the October 1, 2014, Amended and Restated Master Services Agreement for Pressure Pumping Services between Gulfport and Stingray Pressure Pumping (“MSA”). In addition, Gulfport alleges breach of contract and seeks damages for alleged overpayments and audit costs under the MSA and other fees and expenses associated with this lawsuit. Further, Gulfport has not made any of the $25.5 million of payments owed to Stingray Pressure Pumping under this contract for any periods subsequent to its alleged December 28, 2019 termination date. During the six months ended June 30, 2020, the Company recognized $26.3 million in revenue under this contract. As of June 30, 2020, Gulfport owed the Company $26.6 million, which includes $1.1 million of interest on past due amounts under the contract. The Company believes Gulfport’s claims are without merit and will vigorously defend the action. However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company’s business, financial condition, results of operations or cash flows. On March 26, 2020, Stingray Pressure Pumping filed a counterclaim against Gulfport seeking to recover unpaid fees and expenses due to Stingray Pressure Pumping under the MSA.

On January 21, 2020, Mastec Renewables Puerto Rico, LLC (“Mastec”) filed a lawsuit against Mammoth Inc., and Cobra, in the U.S. District Court in the Southern District of Florida. Pursuant to its complaint, Mastec asserts claims against the Company and Cobra for violations of the federal Racketeer Influenced and Corrupt Organizations Act, tortious interference and violations of Puerto Rico laws. Mastec seeks unspecified damages based on its claimed deprivation of work under the alleged $500 million contract, including lost profits, mobilization expenses, lost opportunity damages, costs and prejudgment interest because of the Company’s and Cobra’s alleged wrongful interference, payment of bribes, and other inducement to a FEMA official in order to secure two infrastructure contracts to aid in the rebuilding of the energy infrastructure in Puerto Rico after Hurricane Maria. On April 1, 2020, the defendants filed a motion to dismiss the complaint. The Company believes these claims are without merit and will vigorously defend the action. However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company’s business, financial condition, 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'sCompany’s business, financial condition, results of operations or cash flows.


Defined contribution plan

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 six months ended June 30, 20192020 and 2018,2019, the Company paid $1.9$0.9 million and $3.4$1.9 million, respectively, in contributions to the plan.
26
20.Reporting Segments
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

19. Reporting Segments
As of June 30, 2020, the Company's revenues, income before income taxes and identifiable assets are primarily attributable to 4 reportable segments. The Company principally provides 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. As of June 30, 2019, the Company's revenues, income before income taxes and identifiable assets are primarily attributable to three reportable segments including infrastructure services ("Infrastructure"), pressure pumping services ("Pressure Pumping") and 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"(“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), less impairment expense, as well as a qualitative basis, such as nature of the product and service offerings and types of customers.


Prior to the year ended December 31, 2018,2019, the Company had four3 reportable segments, including infrastructure services, pressure pumping services and natural sand proppant services and contract land and directional drilling services. Based on its assessment of FASB ASC 280, Segment Reporting, guidance at December 31, 2018,2019, 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 directional2019 to include its drilling services, segment is not of continuing significance for accounting reporting purposes.which includes Bison Drilling and Field Services LLC, Bison Trucking LLC, Panther Drilling Systems LLC, Mako Acquisitions LLC and White Wing Tubular LLC, as its own reportable segment. The Company now includes the results of the entities were previously included in the contract land and directional drilling services segment in the reconciling column titled "All Other"“All Other” in the tables below.table below for the three months ended June 30, 2019. As of June 30, 2020, the Company’s four reportable segments include infrastructure services (“Infrastructure”), pressure pumping services (“Pressure Pumping”), natural sand proppant services (“Sand”) and drilling services (“Drilling”). The results below for the three and six months ended June 30, 20182019 have been retroactively adjusted to reflect this change.his change in reportable segments.
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



During certain of the periods presented, the infrastructure servicesInfrastructure segment 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 servicesPressure Pumping 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 sandSand segment mines, processes and sells sand for use in hydraulic fracturing. The sandSand segment primarily services the Utica Shale, Permian Basin, SCOOP, STACK and Montney Shale in British Columbia and Alberta, Canada. During certain of the periods presented, the Drilling segment provided contract land and directional drilling services primarily in the Permian Basin and mid-continent region.


During certain of the periods presented, the Company also provided contract land and directional drilling services, coil tubing services, flowback services, cementing services, acidizing services, equipment rental services, full service transportation, crude oil hauling services, and remote accommodation, oilfield equipment manufacturing and infrastructure engineering and design 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):
27
Three months ended June 30, 2019InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$41,821
$82,973
$29,223
$27,803
$—
$181,820
Intersegment revenues—
1,668
11,170
584
(13,422)—
Total revenue41,821
84,641
40,393
28,387
(13,422)181,820
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion44,864
59,835
32,676
30,640
—
168,015
Intersegment cost of revenues—
11,797
1,141
562
(13,500)—
Total cost of revenue44,864
71,632
33,817
31,202
(13,500)168,015
Selling, general and administrative3,035
2,664
1,380
2,376
—
9,455
Depreciation, depletion, amortization and accretion7,818
10,174
4,528
7,625
—
30,145
Operating (loss) income(13,896)171
668
(12,816)78
(25,795)
Interest expense, net386
452
72
641
—
1,551
Other (income) expense, net(4,045)9
(32)49
—
(4,019)
(Loss) income before income taxes$(10,237)$(290)$628
$(13,506)$78
$(23,327)
MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Three months ended June 30, 2020InfrastructurePressure PumpingSandDrillingAll OtherEliminationsTotal
Revenue from external customers$30,579  $16,125  $6,237  $1,250  $5,918  $—  $60,109  
Intersegment revenues—  446  —  25  580  (1,051) —  
Total revenue30,579  16,571  6,237  1,275  6,498  (1,051) 60,109  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion25,368  8,744  6,025  2,027  6,589  —  48,753  
Intersegment cost of revenues27  333  28  21  642  (1,051) —  
Total cost of revenue25,395  9,077  6,053  2,048  7,231  (1,051) 48,753  
Selling, general and administrative8,037  1,477  1,357  1,331  1,524  —  13,726  
Depreciation, depletion, amortization and accretion7,816  7,685  2,348  2,700  3,567  —  24,116  
Operating loss(10,669) (1,668) (3,521) (4,804) (5,824) —  (26,486) 
Interest expense, net720  346  53  143  209  —  1,471  
Other (income) expense, net(7,809) (1,179) (2) (298) 18  —  (9,270) 
Loss before income taxes$(3,580) $(835) $(3,572) $(4,649) $(6,051) $—  $(18,687) 

Three months ended June 30, 2019InfrastructurePressure PumpingSandDrillingAll OtherEliminationsTotal
Revenue from external customers$41,821  $82,973  $29,223  $7,450  $20,353  $—  $181,820  
Intersegment revenues—  1,668  11,170  207  687  (13,732) —  
Total revenue41,821  84,641  40,393  7,657  21,040  (13,732) 181,820  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion44,864  59,835  32,676  9,175  21,465  —  168,015  
Intersegment cost of revenues—  11,797  1,141  229  643  (13,810) —  
Total cost of revenue44,864  71,632  33,817  9,404  22,108  (13,810) 168,015  
Selling, general and administrative3,035  2,664  1,380  844  1,532  —  9,455  
Depreciation, depletion, amortization and accretion7,818  10,174  4,528  3,193  4,432  —  30,145  
Operating income (loss)(13,896) 171  668  (5,784) (7,032) 78  (25,795) 
Interest expense, net386  452  72  332  309  —  1,551  
Other (income) expense, net(4,045) 9  (32) —  49  —  (4,019) 
Income (loss) before income taxes$(10,237) $(290) $628  $(6,116) $(7,390) $78  $(23,327) 

28
Three months ended June 30, 2018InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$360,250
$100,333
$37,439
$35,572
$—
$533,594
Intersegment revenues—
1,073
15,406
1,776
(18,255)—
Total revenue360,250
101,406
52,845
37,348
(18,255)533,594
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion210,189
61,593
35,117
32,929
—
339,828
Intersegment cost of revenues754
16,174
1,019
60
(18,007)—
Total cost of revenue210,943
77,767
36,136
32,989
(18,007)339,828
Selling, general and administrative39,786
20,822
1,787
2,732
—
65,127
Depreciation, depletion, amortization and accretion4,094
13,829
3,881
8,991
—
30,795
Impairment of long-lived assets—
—
—
187
—
187
Operating income (loss)105,427
(11,012)11,041
(7,551)(248)97,657
Interest expense, net106
341
76
436
—
959
Other expense, net330
80
36
40
—
486
Income (loss) before income taxes$104,991
$(11,433)$10,929
$(8,027)$(248)$96,212
Six months ended June 30, 2019InfrastructurePressure PumpingSandAll OtherEliminationsTotal
Revenue from external customers$150,542
$173,568
$54,187
$65,661
$—
$443,958
Intersegment revenues—
3,212
24,067
1,243
(28,522)—
Total revenue150,542
176,780
78,254
66,904
(28,522)443,958
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion103,828
124,047
62,928
66,282
—
357,085
Intersegment cost of revenues—
25,334
2,188
1,060
(28,582)—
Total cost of revenue103,828
149,381
65,116
67,342
(28,582)357,085
Selling, general and administrative12,553
5,876
2,899
5,463
—
26,791
Depreciation, depletion, amortization and accretion15,537
20,068
7,401
15,715
—
58,721
Operating income (loss)18,624
1,455
2,838
(21,616)60
1,361
Interest expense, net425
649
102
898
—
2,074
Other (income) expense, net(28,869)8
(32)317
—
(28,576)
Income (loss) before income taxes$47,068
$798
$2,768
$(22,831)$60
$27,863
Six months ended June 30, 2018InfrastructurePressure PumpingSandAll OtherEliminationsTotal
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 revenue685,709
202,544
103,860
75,473
(39,743)1,027,843
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion404,265
128,205
68,447
65,012
—
665,929
Intersegment cost of revenues2,545
31,576
5,305
327
(39,753)—
Total cost of revenue406,810
159,781
73,752
65,339
(39,753)665,929
Selling, general and administrative71,637
23,485
3,431
5,085
—
103,638
Depreciation, depletion, amortization and accretion6,501
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, net182
845
156
1,013
—
2,196
Other expense, net332
92
23
67
—
514
Income (loss) before income taxes$200,247
$(9,474)$20,301
$(13,408)$10
$197,676

MAMMOTH ENERGY SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Six months ended June 30, 2020InfrastructurePressure PumpingSandDrillingAll OtherEliminationsTotal
Revenue from external customers$56,285  $58,810  $16,391  $5,973  $20,033  $—  $157,492  
Intersegment revenues—  1,382  95  81  1,354  (2,912) —  
Total revenue56,285  60,192  16,486  6,054  21,387  (2,912) 157,492  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion52,314  34,952  16,682  7,662  19,049  —  130,659  
Intersegment cost of revenues35  961  329  152  1,435  (2,912) —  
Total cost of revenue52,349  35,913  17,011  7,814  20,484  (2,912) 130,659  
Selling, general and administrative12,334  3,699  2,608  2,395  3,461  —  24,497  
Depreciation, depletion, amortization and accretion15,750  16,177  4,661  5,577  7,833  —  49,998  
Impairment of goodwill—  53,406  —  —  1,567  —  54,973  
Impairment of other long-lived assets—  4,203  —  326  8,368  —  12,897  
Operating loss(24,148) (53,206) (7,794) (10,058) (20,326) —  (115,532) 
Interest expense, net1,477  639  113  412  468  —  3,109  
Other (income) expense, net(15,086) (1,288) (39) (271) 5  —  (16,679) 
Loss before income taxes$(10,539) $(52,557) $(7,868) $(10,199) $(20,799) $—  $(101,962) 

Six months ended June 30, 2019InfrastructurePressure PumpingSandDrillingAll OtherEliminationsTotal
Revenue from external customers$150,542  $173,568  $54,187  $21,026  $44,635  $—  $443,958  
Intersegment revenues—  3,212  24,067  426  1,453  (29,158) —  
Total revenue150,542  176,780  78,254  21,452  46,088  (29,158) 443,958  
Cost of revenue, exclusive of depreciation, depletion, amortization and accretion103,828  124,047  62,928  21,826  44,456  —  357,085  
Intersegment cost of revenues—  25,334  2,188  501  1,195  (29,218) —  
Total cost of revenue103,828  149,381  65,116  22,327  45,651  (29,218) 357,085  
Selling, general and administrative12,553  5,876  2,899  2,208  3,255  —  26,791  
Depreciation, depletion, amortization and accretion15,537  20,068  7,401  6,770  8,945  —  58,721  
Operating income (loss)18,624  1,455  2,838  (9,853) (11,763) 60  1,361  
Interest expense, net425  649  102  460  438  —  2,074  
Other (income) expense, net(28,869) 8  (32) (22) 339  —  (28,576) 
Income (loss) before income taxes$47,068  $798  $2,768  $(10,291) $(12,540) $60  $27,863  

InfrastructurePressure PumpingSandDrillingAll OtherEliminationsTotal
As of June 30, 2020:
Total assets$402,162  $119,297  $183,214  $51,483  $122,755  $(40,441) $838,470  
As of December 31, 2019:
Total assets$420,285  $175,259  $190,382  $61,545  $142,731  $(37,817) $952,385  

20. Subsequent Events
 InfrastructurePressure PumpingSandAll OtherEliminationsTotal
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 June 30, 2019,On July 2, 2020, the Company borrowed an additional $3.5granted 347,828 restricted stock units with a total grant date fair value of $0.4 million under its credit facility. At July 31, 2019, outstanding borrowings underto non-employee directors. The value of the Company's revolving credit facility totaled $85.5 million, leaving an aggregate of $90.0 million of available borrowing capacity undergrants will be amortized over the facility, which is net of letters of credit of $8.7 million.vesting period.

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As a result of market conditions, subsequent to June 30, 2019, the Company 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 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“Risk Factors” in this Quarterly Report and in our Form 10-K for the year ended December 31, 2018,2019, filed with the Securities and Exchange Commission, or the SEC, on March 18, 20192, 2020, our Quarterly Report on Form 10-Q for the first quarter ended March 31, 2020, filed with the SEC on May 11, 2020, our subsequent Current Reports on Form 8-K filed with the SEC 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 industries in North 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, natural sand proppant services, drilling services and other energy services, including contract land and directional drilling,which includes coil tubing, flowback, cementing, acidizing, equipment rental, full service transportation, crude oil hauling, remote accommodations, oilfield equipment manufacturing and remote accommodations.infrastructure engineering and design 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, sand hauling and water transfer services. Our natural sand proppant services division mines, processes and sells natural sand proppant used for hydraulic fracturing. Our drilling services division currently provides 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, remote accommodations, oilfield equipment manufacturing and remote accommodations.infrastructure engineering and design services. 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. Our complementary suite of services provides us with the opportunity to cross-sell our services and expand our customer base and geographic positioning.

        Our transformation towards an industrial based company is ongoing. During the fourth quarter of 2019, we began infrastructure engineering operations focused on the transmission and distribution industry and also commenced oilfield equipment manufacturing operations. The startup of oilfield equipment manufacturing operations provides us with the ability to repair much of our existing equipment in-house, as well as the option to manufacture certain new equipment we may need in the future. The oilfield equipment manufacturing operations has initially served our internal needs for our water transfer and equipment rental businesses, but we expect to expand into third party sales in the future. We are exploring severalcontinuing to explore other opportunities to expand our business lines to include telecommunications and general industrial manufacturing, among others, as we shift to a broader industrial focus.


Recent Developments

Impact of COVID-19 and Recent Volatility in Commodity Prices

On March 11, 2020, the World Health Organization characterized the global spread of the novel strain of coronavirus, COVID-19, as a “pandemic.” To limit the spread of COVID-19, governments have taken various actions including the issuance of stay-at-home orders and social distancing guidelines, causing some businesses to suspend operations and a reduction in demand for many products from direct or ultimate customers. While many of the stay-at-home orders have expired, the COVID-19 pandemic has resulted in a widespread health crisis and a swift and unprecedented reduction in international and U.S. economic activity which, in turn, has adversely affected the demand for oil and natural gas and caused significant volatility and disruption of the capital and financial markets.

In March and April 2020, concurrent with the spread of COVID-19 and quarantine orders in the U.S. and worldwide, oil prices dropped sharply to below zero for the first time in history due to factors including significantly reduced demand and a shortage of storage facilities. As a result of the oversupply, OPEC members and other oil exporting nations reached an agreement to curtail up to 10% of the world’s supply and certain U.S. producers voluntarily curtailed production. These actions helped to reduce a portion of the excess supply in the market and improve oil prices. However, there is no assurance that the OPEC agreement will continue to be observed by its parties, and downward pressure on commodity prices has continued and
30

could continue for the foreseeable future as a result of production levels, inventories and demand, and national and international economic performance. We cannot predict if, or when, commodity prices will stabilize and at what level.

Beginning in early March 2020, in response to the COVID-19 pandemic and the depressed commodity prices, many exploration and production companies, including our customers, immediately began to substantially reduce their capital expenditure budgets. As a result, demand for our oilfield services, which was already under considerable pressure from reductions in our customers' capital expenditure budgets in 2019, declined further at the end of the first quarter of 2020 and continued to decline further throughout the second quarter. Demand for both gasoline and oil rebounded to some extent toward the end of the second quarter of 2020, but remain below historical levels. As a result, depressed levels of oilfield service activity are expected to continue for the foreseeable future. The ongoing COVID-19 pandemic, the broad reduction in economic activity, the current conditions in the energy industry and the adverse macroeconomic conditions have also had, and are likely to continue to have, an adverse effect on both pricing and utilization for our oilfield services.

We have taken, and continue to take, responsible steps to protect the health and safety of our employees during the COVID-19 pandemic. We are also actively monitoring the impact of the COVID-19 pandemic and the adverse industry and market conditions and have taken mitigating steps to preserve liquidity, reduce costs and lower capital expenditures. These actions have included reducing headcount, adjusting pay and limiting spending. We will continue to take further actions that we deem to be in the best interest of the Company and our stockholders if the current conditions continue, do not improve or worsen. Given the dynamic nature of these events, we are unable to predict the ultimate impact of the COVID-19 pandemic, the depressed commodity markets and adverse macroeconomic conditions on our business, financial condition, results of operations, cash flows and stock price or the pace or extent of any subsequent recovery.

Second Quarter 20192020 Financial Highlights and Recent Developments


•Net loss of $10.9$15 million, or $0.24$0.33 per diluted share for the three months ended June 30, 2019.
2020.


•Adjusted EBITDA of $8.6$7 million for the three months ended June 30, 2019.2020, with Adjusted EBITDA, excluding interest on trade accounts receivable, generated by our infrastructure services segment growing nearly 50% quarter over quarter for the last two consecutive quarters. See "Non-GAAP“Non-GAAP Financial Measures"Measures” below for a reconciliation of net incomeloss to adjustedAdjusted EBITDA.


Suspended quarterly•Positive operating cash dividend beginning withflow of $5 million for the second quarter of 2019 in response to oilfield market conditions.three months ended June 30, 2020.

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 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 alla substantial portion of our infrastructure revenuesrevenue has been generated from storm restoration work, primarily from the Puerto Rico Electric Power Authority, or PREPA, due to damage caused by Hurricane Maria. On October 19, 2017, Cobra Acquisitions LLC, or Cobra, and PREPA entered into an emergency master services agreement for repairs to PREPA’s electrical grid. The 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 initial phase of reconstruction of the 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.March 31, 2019. 


As of June 30, 2019,2020, PREPA owed us approximately $227.4$227 million for services performed excluding $29.0approximately $58 million of interest charged on these delinquent balances as of June 30, 2019.2020. See Note 2. Basis of Presentation and Significant Accounting Policies-AccountsPolicies—Accounts Receivable of our unaudited condensed consolidated financial statements. PREPA is currently subject to

bankruptcy proceedings, which were filed in July 2017 and are currently 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 contracts is largely dependent upon funding from the Federal Emergency Management Agency or other sources. On September 30, 2019, we filed a motion with the U.S. District Court for the District of Puerto Rico seeking recovery of the amounts owed to us by PREPA, which motion was stayed by the court. On March 25, 2020, we filed an urgent motion to modify the stay order and allow our recovery of approximately $62 million in claims related to a tax gross-up provision contained in the emergency master service agreement, as amended, that was entered into with PREPA on October 19, 2017. This emergency motion was denied on June 3, 2020 and the court extended the stay of our motion until an omnibus hearing to be held in December 2020. In the event PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations to Cobra under the contracts, (ii) obtains the
31

necessary funds but refuses to pay the amounts owed to us or (iii) otherwise fails todoes not pay amounts owed to us for services performed, the receivable may not be collected and our financial condition, results of operations and cash flows would be materially and adversely affected. In addition, government contracts are subject to various uncertainties, restrictions and regulations, including oversight audits and compliance reviews by government agencies and representatives. In this regard, we have become aware of an ongoing investigation byon September 10, 2019, the U.S. Attorney’s OfficeDistrict Court for the District of Puerto Rico unsealed an indictment that charged the former president of Cobra with conspiracy, wire fraud, false statements and disaster fraud. Two other individuals were also charged in the Department of Homeland Security Office of Inspector General relating to the contracts awarded to Cobra by PREPA. We have been informed that the investigationindictment. The indictment is focused on the interactions between a former FEMA official and the former President of Cobra. Neither we nor any of our subsidiaries were charged in the indictment. We have been cooperatingare continuing to cooperate with thisthe related investigation. We are also subject to investigations and legal proceedings related to our contracts with PREPA. Given the uncertainty inherent with respect to suchin the criminal litigation, investigations and any resulting litigation,legal proceedings, it is not possible at this time to determine the potential outcome ator other potential impacts that they could have on us. See Note 18. Commitments and Contingencies to our unaudited condensed consolidated financial statements included elsewhere in this time. If it is determined that we or our employees engaged in improper activities, however, we may be subject to civilquarterly report for additional information regarding these investigations 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.proceedings. Further, as noted above, our contracts with PREPA have concluded and we have not obtained, and there can be no assurance that we will be able to obtain, one or more contracts with PREPA or other customers to 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 be completed in the coming months.     

While we have completed our work in Puerto Rico, the demand        Demand for our infrastructure services in the continental United States has continued to increase. We have grownremains steady. Although our crew count declined slightly from approximately 130 crews as of March 31, 2020 to a total of approximately 156120 crews as of June 30, 2019, an increase2020, the COVID-19 pandemic and resulting economic conditions have not had a material impact on demand or pricing for our infrastructure services. Transmission crew size varies based upon the scope of 51 from approximately 105 at December 31, 2018the project and an increasefactors such as voltage, structure type, number of 106 from approximately 50 at December 31, 2017.conductors and type of foundation. Each distribution crew generally consists of five employees. These transmission and 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. WeDuring the fourth quarter of 2019, we hired a new president for our infrastructure division and have added experienced industry personnel to key management positions. With this team in place, 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.


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 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 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 our 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 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 our estimates. As a result, our backlog as of any particular date is an uncertain indicator of future revenue and earnings.

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 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, storage capacity and other conditions and factors that are beyond our control. See “Recent Developments—Impact of COVID-19 and Recent Volatility in Commodity Prices” above.


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 prices of 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,gas. As discussed above, oil prices stabilized around the $50 per barrel leveldropped sharply throughout March and started a gradual upward trend whichApril of 2020 and have continued into the fourth quarter of 2018, 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.experience significant volatility. 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 $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 willprices are expected to continue to be dependent on the level of expenditures by companies in the oilvolatile and natural gas industrywe cannot predict if, or when, commodity prices will improve and ultimately, commodity prices.stabilize. We experienced a weakening in demand for our oilfield services beginning in the third quarter of 2018 which accelerated in the fourth quarter of 2018during 2019 as a result of softening ofreductions in our customers' capital expenditure budgets. The sharp decline in oil prices and budget exhaustion by our customers. Withbeginning in March 2020 further reduced 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, the capital expenditures of our customersoilfield services. While oil prices have the potential to increase from current levels as additional cash flows are realized. If this were to occur,stabilized somewhat during May and June 2020, we would expect an increasecurrently anticipate weakness in 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, would be expected to result in a reduction in the capital expenditures of our customers and reduce the demand and pricing for our drilling, completion and other products and services.services to continue for the remainder of 2020.


During the 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 the first six months of 2018. Further, inIn response to market conditions, subsequent to June 30, 2019, we have temporarily shut down our cementing and acidizing operations as well asand flowback operations beginning in July 2019, our flowback operations.contract drilling operations beginning in December 2019, our rig hauling operations in April 2020 and our coil tubing and full service transportation operations beginning in July 2020. We continue to monitor the market to determine if and when we can recommence these services. Further, we are currently operating only one of our six pressure pumping fleets. Based on current feedback from our exploration and production customers, we expect them to takethey are taking a cautious approach to activity levels in the second half of 20192020 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 pricingMarket fundamentals are challenging for our productsoil field businesses and we expect this trend to continue for the remainder of 2020. Although we believe the reported retirement of equipment across the industry may, at some point, help the market, pricing and utilization for our oilfield services inare expected to remain depressed for the near term. foreseeable
32

future. Notwithstanding the foregoing, we are maintaining our oilfield services equipment and plan to be ready to ramp up our service lines once demand returns.

We intend to closely monitor our cost structure in response to market conditions.conditions and pursue cost savings where possible. 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. TheOn December 28, 2019, Gulfport filed a lawsuit alleging our breach of this contract and seeking to terminate the contract and recover damages for alleged overpayments, audit costs and legal fees. Gulfport has not made the payments owed to us under this contract for any periods subsequent to its alleged December 28, 2019 termination date. As of June 30, 2020, Gulfport owed us approximately $26 million pursuant to this contract excluding approximately $1 million of interest charged on these delinquent balances as of June 30, 2020. We believe Gulfport's actions are without merit and will vigorously defend the lawsuit. However, 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 or greater levels of service from other customers, couldwould result in lower utilization rates for our pressure pumping equipment and, as a result, would have a material adverse effect on our business, financial condition, results of operationoperations and cash 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

In 2018 and throughout most of 2016 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 24 months,2019, several new suppliers entered the market and existing suppliers completed planned capacity additions of frac sand supply, particularly in the Permian Basin. The industry expansion, coupled with increased capital discipline and budget exhaustion, caused the frac sand market to become oversupplied, particularly in finer grades. As a result,grades, during the second half of 2019. With the frac sand market oversupplied, pricing for certainall grades havehas fallen significantly from the peaks experienced throughout 2018 and during the first half of 2018.2019. This price degradation hasoversupply resulted in several industry participants idling and closing high cost mines in an attempt to restore the temporary closuresupply and demand balance and reduce the number of several Northern White plants. We believe thatindustry participants. Nevertheless, demand for our sand declined significantly in the coarseness, conductivity, sphericity, acid-solubilitysecond half of 2019 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. As2020 as a result we estimate production atof completion activity falling due to lower oil pricing as discussed above, increased capital discipline by 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 by the end of 2018. Production atcustomers and budget exhaustion, among other factors. We cannot predict if and when demand and pricing will recover sufficiently to return our Piranha facility was not impacted by these rail constraints, however, another railroad instituted a policy during the fourth quarter of 2018 that shifted from utilizing unit trains (100 car dedicated trains specifically set upnatural sand proppant services segment 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 has not had an impact on the movement of sand from our Piranha facility to date, but may in the future.profitability.


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 Taylor sand facility in Taylor, Wisconsin and Piranha sand facility in New Auburn, Wisconsin and Taylor sand facility in Taylor, Wisconsin are currently running at 60% to 70%approximately 10% 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.




33

Results of Operations


Three Months Ended June 30, 20192020 Compared to Three Months Ended June 30, 20182019
Three Months Ended
June 30, 2020June 30, 2019
(in thousands)
Revenue:
Infrastructure services$30,579  $41,821  
Pressure pumping services16,571  84,641  
Natural sand proppant services6,237  40,393  
Drilling services1,275  7,657  
Other services6,498  21,040  
Eliminations(1,051) (13,732) 
Total revenue60,109  181,820  
Cost of revenue:
Infrastructure services (exclusive of depreciation and amortization of $7,807 and $7,812, respectively, for the three months ended June 30, 2020 and 2019)25,395  44,864  
Pressure pumping services (exclusive of depreciation and amortization of $7,680 and $10,163, respectively, for the three months ended June 30, 2020 and 2019)9,077  71,632  
Natural sand proppant services (exclusive of depreciation, depletion and accretion of $2,346 and $4,525, respectively, for the three months ended June 30, 2020 and 2019)6,053  33,817  
Drilling services (exclusive of depreciation and amortization of $2,699 and $3,192, respectively, for the three months ended June 30, 2020 and 2019)2,048  9,404  
Other services (exclusive of depreciation and amortization of $3,564 and $4,430, respectively, for the three months ended June 30, 2020 and 2019)7,231  22,108  
Eliminations(1,051) (13,810) 
Total cost of revenue48,753  168,015  
Selling, general and administrative expenses13,726  9,455  
Depreciation, depletion, amortization and accretion24,116  30,145  
Operating loss(26,486) (25,795) 
Interest expense, net(1,471) (1,551) 
Other income, net9,270  4,019  
Loss before income taxes(18,687) (23,327) 
Benefit for income taxes(3,482) (12,438) 
Net loss$(15,205) $(10,889) 
 Three Months Ended
 June 30, 2019 June 30, 2018
 (in thousands)
Revenue:   
Infrastructure services$41,821
 $360,250
Pressure pumping services84,641
 101,406
Natural sand proppant services40,393
 52,845
Other services28,387
 37,348
Eliminations(13,422) (18,255)
Total revenue181,820
 533,594
    
Cost of revenue:   
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 $8,969, respectively, for the three months ended June 30, 2019 and 2018)31,202
 32,989
Eliminations(13,500) (18,007)
Total cost of revenue168,015
 339,828
Selling, general and administrative expenses9,455
 65,127
Depreciation, depletion, amortization and accretion30,145
 30,795
Impairment of long-lived assets—
 187
Operating (loss) income(25,795) 97,657
Interest expense, net(1,551) (959)
Other income (expense), net4,019
 (486)
(Loss) income before income taxes(23,327) 96,212
(Benefit) provision for income taxes(12,438) 53,512
Net (loss) income$(10,889) $42,700


Revenue. Revenue for the three months ended June 30, 20192020 decreased $352$122 million, or 66%67%, to $182$60 million from $534$182 million for the three months ended June 30, 2018.2019. The decrease in total revenue is primarily attributable to a $318decreases in pressure pumping services revenue and natural sand proppant revenue of $68 million decrease in infrastructure services revenueand $34 million, respectively, during the three months ended June 30, 2019.

2020. Revenue derived from related parties was $48$11 million, or 26%18% of our total revenues, for the three months ended June 30, 20192020 and $50$48 million, or 9%26% of our total revenue, for the three months ended June 30, 2018.2019. 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$11 million, or 88%27%, to $31 million for the three months ended June 30, 2020 from $42 million for the three months ended June 30, 2019. During the three months ended June 30, 2019, we recognized demobilization revenue totaling approximately $11 million pursuant to our contract with PREPA. For additional information regarding our contracts with PREPA and our
34

infrastructure services, see “Industry Overview - Electrical Infrastructure Industry” above. Revenue from $360our operations in the continental United States remained flat for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

        Pressure Pumping Services. Pressure pumping services division revenue decreased $68 million, or 80%, to $17 million for the three months ended June 30, 20182020 from $85 million for the three months ended June 30, 2019. Revenue derived from related parties was $8 million, or 51% of total pressure pumping revenue, for the three months ended June 30, 2020 compared to $34 million, or 40% of total pressure pumping revenue, for the three months ended June 30, 2019. Substantially all of our related party revenue is derived from Gulfport under a pressure pumping contract. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” and Note 18. Commitments and Contingencies to our unaudited condensed consolidated financial statements included elsewhere in this report. Inter-segment revenue, consisting primarily of revenue derived from our sand segment, was a nominal amount and $2 million for the three months ended June 30, 2020 and 2019, respectively.

        The decrease in our pressure pumping services revenue was primarily driven by declines in utilization and pricing. The number of stages completed decreased 62% from 1,717 for the three months ended June 30, 2019 to 658 for the three months ended June 30, 2020. An average of 1.9 of our fleets were active for the three months ended June 30, 2020 as compared to an average of 2.7 fleets for the three months ended June 30, 2019.

        Natural Sand Proppant Services. Natural sand proppant services division revenue decreased $34 million, or 85%, to $6 million for the three months ended June 30, 2020, from $40 million for the three months ended June 30, 2019. Revenue derived from related parties was $2 million, or 33% of total sand revenue, for the three months ended June 30, 2020 and $11 million, or 28% of total sand revenue, for the three months ended June 30, 2019. Inter-segment revenue, consisting primarily of revenue derived from our pressure pumping segment, was nominal for the three months ended June 30, 2020 and $11 million, or 28% of total sand revenue, for the three months ended June 30, 2019.

        The decrease in our natural sand proppant services revenue was primarily attributable to a 90% decrease in tons of sand sold from 812,611 tons for the three months ended June 30, 2019 to 82,438 tons for the three months ended June 30, 2020, as well as a 50% decline in the average price per ton of sand sold from $30.09 per ton during the three months ended June 30, 2019 to $15.18 per ton during the three months ended June 30, 2020. Included in natural sand proppant services revenue is shortfall revenue of $5 million for the three months ended June 30, 2020. We did not recognize any shortfall revenue during the three months ended June 30, 2019.

Drilling Services. Drilling services division revenue decreased $7 million, or 83%, to $1 million for the three months ended June 30, 2020, from $8 million for the three months ended June 30, 2019. Revenue derived from related parties and inter-segment revenue were nominal for the months ended June 30, 2020 and 2019. The decline in our drilling services revenue was primarily attributable to declines in rig hauling, contract land drilling and directional drilling revenue of $3 million, $2 million and $2 million, respectively. In response to market conditions, we have temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020.

        Other Services. Other revenue, consisting of revenue derived from our coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, full service transportation, crude oil hauling, remote accommodation, oilfield equipment manufacturing and infrastructure engineering and design businesses, decreased $15 million, or 69%, to $6 million for the three months ended June 30, 2020 from $21 million for the three months ended June 30, 2019. Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport, was a nominal amount for the three months ended June 30, 2020 and $3 million, or 14% of total other revenue, for the three months ended June 30, 2019. Inter-segment revenue, consisting primarily of revenue derived from our pressure pumping segment, was $1 million for each of the three months ended June 30, 2020 and 2019.

The decrease in our other services revenue was primarily due to a decline in utilization for our equipment rental business. An average of 175 pieces of equipment were rented to customers during the three months ended June 30, 2020, a decrease of 71% from an average of 601 pieces of equipment rented to customers during the three months ended June 30, 2019. Additionally, utilization for our crude oil hauling business declined. An average of one truck was active during the three months ended June 30, 2020 compared to an average of 26 trucks during the three months ended June 30, 2019. Due to market conditions, we have temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019.

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        Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $119 million from $168 million, or 92% of total revenue, for the three months ended June 30, 2019 to $49 million, or 81% of total revenue, for the three months ended June 30, 2020. The decrease was primarily due to a decline in activity across all business lines. Cost of revenue by operating division was as follows:

        Infrastructure Services. Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $20 million, or 44%, to $25 million for the three months ended June 30, 2020 from $45 million for the three months ended June 30, 2019. The decrease is due to the conclusion on March 31, 2019 of 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%As a percentage 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 decreased $16 million, or 16%, to $85 million for the three months ended June 30, 2019 from $101 million for the three months ended June 30, 2018. Revenue derived from related parties was $34 million, or 40% of total pressure pumping revenue, for the three months ended June 30, 2019 compared to $34 million, or 33% of total pressure pumping revenue, for the three months ended June 30, 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 the three months ended June 30, 2019 and 2018.

The decrease in our pressure pumping services revenue was primarily driven by a decline in pricing as a result of market conditions as well as a decline in utilization. The number of stages completed declined 5% from 1,815 for the three months ended June 30, 2018 to 1,717 for the three months ended June 30, 2019. An average of 2.7 of our six fleets were active for the three months ended June 30, 2019 as compared to an average of 4.3 fleets for the three months ended June 30, 2018.

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

The decrease in our natural sand proppant services revenue was primarily attributable to a 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 777,850 tons for the three months ended June 30, 2018 to 812,611 tons for the three months ended June 30, 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 and remote accommodation businesses, decreased $9 million, or 24%, to $28 million for the three months ended June 30, 2019 from $37 million for the three months ended June 30, 2018. Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport, was $3 million, or 11% of total other revenue, for the three months ended June 30, 2019 and $7 million, or 19% of total other revenue, for the three months ended June 30, 2018. Inter-segment revenue, consisting primarily of revenue derived from our pressure pumping and infrastructure segments, totaled $1 million and $2 million, respectively, for the three months ended June 30, 2019 and 2018.

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. An average of 601 pieces of equipment were rented during the three months ended June 30, 2019, an increase of 77% from an average of 339 pieces of equipment rented during the three months ended June 30, 2018.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $172 million from $340 million, or 64% of total revenue, for the three months ended June 30, 2018 to $168 million, or 92%of total revenue, for the three months ended June 30, 2019. The decrease was primarily due to a decline in activity for our infrastructure services business, which represented a $166 million decrease in cost of 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 $166of $8 million or 79%, to $45 millionfor each of the three months ended June 30, 2020 and 2019, was 83% and 107% for the three months ended June 30, 2020 and 2019, from $211 million for the three months ended June 30, 2018.respectively. 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 increaseddeclines in travel and 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, decreased $6$63 million, or 8%87%, to $9 million for the three months ended June 30, 2020 from $72 million for the three months ended June 30, 2019, from $78 million for the three months ended June 30, 2018 primarily due to a decline in repairs and maintenance expense.activity. As a percentage of revenue, our pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense of $10$8 million and $14$10 million for the three months ended June 30, 20192020 and 2018,2019, respectively, was 85%55% and 77%85% for the three months ended June 30, 20192020 and 2018,2019, respectively. The increasedecrease is primarily due to the recognition of standby revenue during the three months ended June 30, 2020, of which there was a declinelower percentage of costs recognized compared to the three months ended June 30, 2019. Additionally, during the three months ended June 30, 2019, we provided sand and chemicals with our service package to customers, resulting in utilization.higher cost of goods sold as a percentage of revenue for this period in comparison to the three months ended June 30, 2020.


Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $2$28 million, or 6%82%, to $6 million for the three months ended June 30, 2020 from $34 million for the three months ended June 30, 2019, from $36 million for the three months ended June 30, 2018, primarily due to a decline in cost of goods sold as a result of a 90% decrease in tons of sand sold. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $5$2 million and $4$5 million for the three months ended June 30, 20192020 and 2018,2019, respectively, was 84%97% and 68%84% for the three months ended June 30, 2020 and 2019, respectively. The increase in cost as a percentage of revenue is primarily due to a 50% decline in average price per ton of sand sold.

Drilling Services. Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $7 million, or 78%, to $2 million for the three months ended June 30, 2020 from $9 million for the three months ended June 30, 2019. In response to market conditions, we have temporarily shut down our contract land drilling operations beginning in December 2019 and 2018,our rig hauling operations beginning in April 2020. As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $3 million for each of the three months ended June 30, 2020 and 2019, respectively, was 161% and 123% for the three months ended June 30, 2020 and 2019, respectively. The increase is primarily due to a decline in average price per ton of sand sold.utilization.


Other Services. Other services division cost of revenue, exclusive of depreciation and amortization expense, decreased $2$15 million, or 6%67%, to $31$7 million for the three months ended June 30, 20192020 from $33$22 million for the three months ended June 30, 2018,2019, primarily due to declines in cost of revenue for our contract land drilling, directional drillingequipment rental, crude oil hauling and coil tubing businesses as a result of reduced activity. These declines were partially offset by an increaseAdditionally, due to market conditions, we have temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in costs for our equipment rental business and the acquisitionJuly 2019 resulting in a decline in cost of WTL in the second quarter of 2018.revenue. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $8$4 million for each of the three months ended June 30, 2020 and $9 million2019 was 111% and 105% for the three months ended June 30, 20192020 and 2018, respectively, was 110% and 88% for the three months ended June 30, 2019, and 2018, respectively. The increase is primarily the result declinesdue to an increase in utilization for our contract land drilling, directional drilling and coil tubing businesses.labor costs as a percentage of revenue.


Selling, General and Administrative Expenses. Selling, general and administrative expenses, or SG&A, represent the costs associated with managing and supporting our operations. The table below presents a breakdown of SG&A expenses for the periods indicated (in thousands):
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 Three Months Ended
 June 30, 2019 June 30, 2018
Cash expenses:   
Compensation and benefits$2,154
 $10,978
Professional services2,934
 2,981
Other(a)
3,381
 3,935
Total cash SG&A expense8,469
 17,894
Non-cash expenses:   
Bad debt provision(b)
262
 28,263
Equity based compensation(c)
—
 17,487
Stock based compensation724
 1,483
Total non-cash SG&A expense986
 47,233
Total SG&A expense$9,455
 $65,127
a.Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.$28.3 million of the bad debt expense recognized during the three months ended June 30, 2018 was subsequently reversed during the third quarter of 2018.
c.Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level).

Three Months Ended
June 30, 2020June 30, 2019
Cash expenses:
Compensation and benefits$3,720  $2,154  
Professional services6,147  2,934  
Other(a)
2,100  3,381  
Total cash SG&A expense11,967  8,469  
Non-cash expenses:
Bad debt provision1,624  262  
Stock based compensation135  724  
Total non-cash SG&A expense1,759  986  
Total SG&A expense$13,726  $9,455  

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

Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion, amortization and accretion decreased $1$6 million, or 3%20%, to $24 million for the three months ended June 30, 2020 from $30 million for the three months ended June 30, 2019 from $31 million for the three months ended June 30, 2018.2019. The decrease is primarily attributable to a decline in intangible asset amortizationproperty and equipment depreciation expense and sand mine depletion expense.

        Operating Loss. We reported an operating loss of $26 million for each of the three months ended June 30, 2020 and 2019. Operating income for our sand and pressure pumping divisions declined $4 million and $2 million, respectively, which was partially offset by an increase in depreciationoperating income for our infrastructure services division of $3 million.

        Interest Expense, Net. Interest expense, as a resultnet remained flat at approximately $1.5 million for each of additional propertythe three months ended June 30, 2020 and equipment purchases in2019.

        Other Income, Net. Other income, net increased $5 million during the second half 2018 and first half of 2019.
Operating Income. Operating income decreased $124 millionthree months ended June 30, 2020 compared to the three months ended June 30, 2019 primarily due to an operating lossincrease in interest on trade account receivable. Pursuant to the terms of $26our contracts with PREPA and Gulfport, we recognized interest on trade accounts receivable totaling $9 million and $3 million during the three months ended June 30, 2020 and 2019, respectively.

        Income Taxes. We recorded an income tax benefit of $3 million on pre-tax losses of $19 million for the three months ended June 30, 2019 from operating income of $98 million for the three months ended June 30, 2018. The decrease was primarily due to a $119 million decline in operating income for our infrastructure services division due to a decline in activity.

Interest Expense, Net. Interest expense, net increased $1 million during the three months ended June 30, 20192020 compared to the three months ended June 30, 2018 primarily due to an increase in average borrowings outstanding.

Other Income, Net. Other income, net increased $5 million during the three months ended June 30, 2019 compared to the three months ended June 30, 2018 primarily due to the recognition of interest on trade account receivable totaling $3 million pursuant to the terms of our contracts with PREPA.

Income Taxes. We recorded an income tax benefit of $12 million on pre-tax losslosses of $23 million for the three months ended June 30, 2019 compared to income tax expense of $54 million on pre-tax income of $96 million for the three months ended June 30, 2018.2019. Our effective tax rate was 53%19% and 56%53%, respectively, for the three months ended June 30, 2020 and 2019. The decrease compared to the three months ended June 30, 2019 is primarily due to the mix of earnings between the United States and 2018.Puerto Rico.



37

Six Months Ended June 30, 20192020 Compared to Six Months Ended June 30, 20182019
Six Months Ended
June 30, 2020June 30, 2019
(in thousands)
Revenue:
Infrastructure services$56,285  $150,542  
Pressure pumping services60,192  176,780  
Natural sand proppant services16,486  78,254  
Drilling services6,054  21,452  
Other services21,387  46,088  
Eliminations(2,912) (29,158) 
Total revenue157,492  443,958  
Cost of revenue:
Infrastructure services (exclusive of depreciation and amortization of $15,735 and $15,524, respectively, for the six months ended June 30, 2020 and 2019)52,349  103,828  
Pressure pumping services (exclusive of depreciation and amortization of $16,167 and $20,047, respectively, for the six months ended June 30, 2020 and 2019)35,913  149,381  
Natural sand proppant services (exclusive of depreciation, depletion and accretion of $4,654 and $7,395, respectively, for the six months ended June 30, 2020 and 2019)17,011  65,116  
Drilling services (exclusive of depreciation of $5,575 and $6,768, respectively, for the six months ended June 30, 2020 and 2019)7,814  22,327  
Other services (exclusive of depreciation and amortization of $7,828 and $8,941, respectively, for the six months ended June 30, 2020 and 2019)20,484  45,651  
Eliminations(2,912) (29,218) 
Total cost of revenue130,659  357,085  
Selling, general and administrative expenses24,497  26,791  
Depreciation, depletion, amortization and accretion49,998  58,721  
Impairment of goodwill54,973  —  
Impairment of long-lived assets12,897  —  
Operating (loss) income(115,532) 1,361  
Interest expense, net(3,109) (2,074) 
Other income, net16,679  28,576  
(Loss) income before income taxes(101,962) 27,863  
Provision (benefit) for income taxes(2,786) 10,419  
Net (loss) income$(99,176) $17,444  
 Six Months Ended
 June 30, 2019 June 30, 2018
 (in thousands)
Revenue:   
Infrastructure services$150,542
 $685,709
Pressure pumping services176,780
 202,544
Natural sand proppant services78,254
 103,860
Other services66,904
 75,473
Eliminations(28,522) (39,743)
Total revenue443,958
 1,027,843
    
Cost of revenue:   
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(28,582) (39,753)
Total cost of revenue357,085
 665,929
Selling, general and administrative expenses26,791
 103,638
Depreciation, depletion, amortization and accretion58,721
 57,703
Impairment of long-lived assets—
 187
Operating income1,361
 200,386
Interest expense, net(2,074) (2,196)
Other income (expense), net28,576
 (514)
Income before income taxes27,863
 197,676
Provision for income taxes10,419
 99,430
Net income$17,444
 $98,246


Revenue. Revenue for the six months ended June 30, 20192020 decreased $584$287 million, or 57%65%, to $444$157 million from $1 billion$444 million for the six months ended June 30, 2018.2019. The decrease in total revenue is primarily attributable to a $535 million declinedeclines in infrastructure services revenue as well as a $26 million decline inour pressure pumping, services revenue.

infrastructure and sand division revenue of $117 million, $95 million and $62 million, respectively. Revenue derived from related parties was $30 million, or 19% of our total revenue, for the six months ended June 30, 2020 and $104 million, or 24% of our total revenue, for the six months ended June 30, 2019 and $111 million, or 11% of our total revenue, for the six months ended June 30, 2018.2019. 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$95 million, or 78%63%, to $56 million for the six months ended June 30, 2020 from $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 inthe conclusion on March 31, 2019 of 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. Revenue

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from operations in the continental United States increased $3 million, or 5%, to $56 million for the six months ended June 30, 2020 from $53 million for the six months ended June 30, 2019.

Pressure Pumping Services. Pressure pumping services division revenue decreased $26$117 million, or 13%66%, to $60 million for the six months ended June 30, 2020 from $177 million for the six months ended June 30, 20192019. Revenue derived from $203related parties was $26 million, or 44% of total pressure pumping revenue, for the six months ended June 30, 2018. Revenue derived from related parties was2020 compared to $72 million, or 41% of total pressure pumping revenue, for the six months ended June 30, 2019 compared to $72 million, or 36% of total pressure pumping revenue, for the six months ended June 30, 2018.2019. Substantially all of our related party revenue is derived from Gulfport. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” and Note 18, Commitments and Contingencies, to our unaudited condensed consolidated financial statements included elsewhere in this report. Inter-segment revenues, consisting primarily of revenue derived from our sand segment, totaled $3$1 million and $6$3 million respectively, for the six months ended June 30, 2020 and 2019, and 2018.respectively.


The decrease in our pressure pumping services revenue was primarily driven by a declinedeclines in pricing as a resultutilization and pricing. The number of market conditions. Additionally, duringstages completed decreased 41% to 2,140 for the six months ended June 30, 2019, more of our customers sourced their own consumables, contributing to a decline in revenue for the period. The number of stages completed increased to2020 from 3,606 for the six months ended June 30, 2019 from 3,487 for the six months ended June 30, 2018.2019. An average of 3.52.3 of our six fleets were active for the six months ended June 30, 20192020 as compared to an average of 4.03.5 fleets for the six months ended June 30, 2018.2019.


Natural Sand Proppant Services. Natural sand proppant services division revenue decreased $26$62 million, or 25%79%, to $16 million for the six months ended June 30, 2020, from $78 million for the six months ended June 30, 2019,2019. Revenue derived from $104related parties was $4 million, or 23% of total sand revenue, for the six months ended June 30, 2018. Revenue2020 and $24 million, or 30% of total sand revenue, for the six months ended June 30, 2019. Inter-segment revenue, consisting primarily of revenue derived from related partiesour pressure pumping segment, was a nominal amount for the six months ended June 30, 2020 and $24 million, or 31% of total sand revenue, for the six months ended June 30, 2019 and $21 million, or 20% of total sand revenue, for the six months ended June 30, 2018. Inter-segment revenue, consisting primarily of revenue derived from our pressure pumping segment, totaled $24 million, or 31% of total sand revenue, for the six months ended June 30, 2019 and $30 million, or 29% of total sand revenue, for the six months ended June 30, 2018.2019.


The decrease in our natural sand proppant services revenue was primarily attributable to a 29%55% 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 by2019 to $14.06 per ton during the six months ended June 30, 2020, as well as a 2% increase78% decrease in tons of sand sold from approximately 1,513,434 tons for the six months ended June 30, 2018 to 1,478,420 tons for the six months ended June 30, 2019 to approximately 321,722 tons for the six months ended June 30, 2020. Included in natural sand proppant services revenue is shortfall revenue of $10 million and $1 million, respectively, for the six months ended June 30, 2020 and 2019.


Drilling Services. Drilling services revenue decreased $15 million, or 72%, to $6 million for the six months ended June 30, 2020 from $21 million for the six months ended June 30, 2019. Revenue derived from related parties, consisting primarily of revenue from El Toro Resources LLC, was a nominal amount and $1 million for the six months ended June 30, 2020 and 2019, respectively.

The decline in our drilling services revenue was primarily attributable to declines in contract land drilling, rig hauling and directional drilling revenue of $7 million, $6 million and $2 million, respectively. In response to market conditions, we have temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020.

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, and remote accommodation, oilfield equipment manufacturing and infrastructure engineering businesses, decreased $8$25 million, or 11%54%, to $67$21 million for the six months ended June 30, 20192020 from $75$46 million for the six months ended June 30, 2018.2019. Revenue derived from related parties, consisting primarily of equipment rental and cementing revenue from Gulfport, was $9a nominal amount for the six months ended June 30, 2020 and $8 million, or 13%17% of total other revenue, for the six months ended June 30, 2019 and $17 million, or 23% of total other revenue, for the six months ended June 30, 2018.2019. Inter-segment revenue, consisting primarily of revenue derived from our infrastructure and pressure pumping segments, totaled $1 million and $4 million, respectively, for each of the six months ended June 30, 20192020 and 2018.2019.


The decrease in our other services revenue was primarily due to declinesa decline 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.business. An average of 611332 pieces of equipment were rented to customers during the six months ended June 30, 2019, an increase2020, a decrease of 76%46% from an average of 348611 pieces of equipment rented to customers during the six months ended June 30, 2018.2019. Additionally, utilization for our crude oil hauling business declined. An average of four trucks were active during the six months ended June 30, 2020 compared to an average of 27 trucks during the six months ended June 30, 2019. Due to market conditions, we temporarily shut down our cementing and acidizing operations as well as

39

our flowback operations in July 2019. These decreases were partially offset by increases in revenue for our remote accommodations, infrastructure engineering and full service transportation businesses.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $309$226 million from $666$357 million, or 65%80% of total revenue, for the six months ended June 30, 20182019 to $357$131 million, or 80%83%of total revenue, for the six months ended June 30, 2019.2020. The decrease was primarily due to a decline in activity for our infrastructure servicesacross all business which represented a $303 million decrease in cost of revenue.lines. 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$52 million, or 74%50%, to $52 million for the six months ended June 30, 2020 from $104 million for the six months ended June 30, 2019 from $407 million for the six months ended June 30, 2018.2019. The decrease is primarily due to a decline inthe conclusion on March 31, 2019 of 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 for each of the six months ended June 30, 2020 and $6 million2019 was 93% and 69% for the six months ended June 30, 2020 and 2019, respectively. The increase is primarily due to increased labor and 2018, respectively, was 69% and 59% for the six months ended June 30, 2019 and 2018, respectively.equipment rental costs as a percentage of revenue.


Pressure Pumping Services. Pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense, decreased $11$113 million, or 7%76%, to $36 million for the six months ended June 30, 2020 from $149 million for the six months ended June 30, 2019 from $160 million for the six months ended June 30, 2018.2019. The decrease was primarily due to declinesa decline in cost of goods sold and fuel expense as more of our customers sourced their own consumables during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018.activity. As a percentage of revenue, our pressure pumping services division cost of revenue, exclusive of depreciation and amortization expense of $20$16 million and $28$20 million for the six months ended June 30, 20192020 and 2018,2019, respectively, was 85%60% and 79%85% for the six months ended June 30, 2020 and 2019, respectively. The decrease is primarily due to the recognition of standby revenue during the six months ended June 30, 2020, of which there was a lower percentage of costs recognized compared to the six months ended June 30, 2019. Additionally, during the six months ended June 30, 2019, we provided sand and 2018, respectively.chemicals with our service package to customers, resulting in higher cost of goods sold as a percentage of revenue for this period in comparison to the six months ended June 30, 2020.


Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $9$48 million, or 12%74%, from $74 million for the six months ended June 30, 2018 to $65 million for the six months ended June 30, 2019 to $17 million for the six months ended June 30, 2020, primarily due to a decline in cost of goods sold as a result of a decrease in tons of sand sold. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $5 million and $7 million for the six months ended June 30, 2020 and $62019, respectively, was 103% and 83% for the six months ended June 30, 2020 and 2019, respectively. The increase in cost as a percentage of revenue is primarily due to a 55% decline in average price per ton of sand sold.

Drilling Services. Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $14 million, or 64%, from $22 million for the six months ended June 30, 2019 and 2018, respectively, was 83% and 71%to $8 million for the six months ended June 30, 2020, as a result of reduced activity. In response to market conditions, we have temporarily shut down our contract land drilling operations beginning in December 2019 and 2018,our rig hauling operations beginning in April 2020. As a percentage of revenue, our drilling services division cost of revenue, exclusive of depreciation and amortization expense of $6 million and $7 million, for the six months ended June 30, 2020 and 2019, respectively, was 129% and 104% for the six months ended June 30, 2020 and 2019, respectively. The increase is primarily due to a decline in average price per ton of sand sold.utilization.


Other Services. Other services division cost of revenue, exclusive of depreciation and amortization expense, increased $2decreased $26 million, or 3%57%, from $65 million for the six months ended June 30, 2018 to $67$46 million for the six months ended June 30, 2019 to $20 million for the six months ended June 30, 2020, primarily due to 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,equipment rental, crude oil hauling and coil tubing and directional drilling businesses as a result of reduced activity. Additionally, due to market conditions, we have temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019 resulting in a decline in cost of revenue. These declines were partially offset by an increase in costs for our full services transportation, infrastructure engineering and remote accommodations businesses. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $16$8 million and $17$9 million for the six months ended June 30, 20192020 and 2018,2019, respectively, was 101%96% and 87%99% for the six months ended June 30, 2020 and 2019, and 2018, respectively. The increase is primarily the result of a decline in utilization in our contract land drilling, coil tubing, cementing and directional drilling businesses.


40

Selling, General and Administrative Expenses. Selling, general and administrative expenses represent the costs associated with managing and supporting our operations. The table below presents a breakdown of SG&A expenses for the periods indicated (in thousands):
Six Months Ended
June 30, 2020June 30, 2019
Cash expenses:
Compensation and benefits$7,690  $11,384  
Professional services9,684  6,723  
Other(a)
4,409  6,626  
Total cash SG&A expense21,783  24,733  
Non-cash expenses:
Bad debt provision1,679  266  
Stock based compensation1,035  1,792  
Total non-cash SG&A expense2,714  2,058  
Total SG&A expense$24,497  $26,791  
 Six Months Ended
 June 30, 2019 June 30, 2018
Cash expenses:   
Compensation and benefits$11,384
 $18,677
Professional services6,723
 5,568
Other(a)
6,626
 5,542
Total cash SG&A expense24,733
 29,787
Non-cash expenses:   
Bad debt provision(b)
266
 53,790
Equity based compensation(c)
—
 17,487
Stock based compensation1,792
 2,574
Total non-cash SG&A expense2,058
 73,851
Total SG&A expense$26,791
 $103,638
a.a. Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs.
b.$53.6 million of the bad debt expense recognized during the six months ended June 30, 2018 was subsequently reversed during the third quarter of 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 $1decreased $9 million or 2%, to $50 million for the six months ended June 30, 2020 from $59 million for the six months ended June 30, 2019 from $582019. The decrease is primarily attributable to a decline in property and equipment depreciation expense and sand mine depletion expense.

Impairment of Goodwill. As a result of market conditions, we performed an impairment assessment of our goodwill as of March 31, 2020. We determined that the carrying value of goodwill for certain of our entities exceeded their fair values, resulting in impairment expense of $55 million. We did not record any goodwill impairment expense during the six months ended June 30, 2019.
        Impairment of Other Long-Lived Assets. During the six months ended June 30, 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $13 million. We did not record any impairment of other long-lived assets during the six months ended June 30, 2019.

        Operating Income (Loss). We reported an operating loss of $116 million for the six months ended June 30,

2018. The increase is primarily attributable 2020 as compared to an increase in depreciation expense as a resultoperating income of additional property and equipment purchases in the second half 2018, which was partially offset by a decline in intangible asset amortization expense.

Operating Income (Loss). Operating income decreased $199 million to $1 million for the six months ended June 30, 2019 from $200 million for the six months ended June 30, 2018.2019. The decrease was primarily due to a $182 million decline in operating income of $43 million for our infrastructure services division due to a decline in activity as well as a $18the recognition of $68 million decline in operating income for our natural sand proppant services division due to a decrease in pricing.

Interest Expense, Net. Interestimpairment expense net was $2 million for each ofduring the six months ended June 30, 2019 and 2018. Average outstanding borrowings remained relatively flat for2020.

        Interest Expense, Net. Interest expense, net increased $1 million during the six months ended June 30, 20192020 compared to the six months ended June 30, 2018.2019 primarily due to an increase in average borrowings outstanding as well as an increase in the average interest rate under our revolving credit facility.


Other Expense,Income, Net. Other income, net increaseddecreased $12 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019 primarily due to a decline in interest on trade account receivable. Pursuant to the terms of our contracts with PREPA and Gulfport, we recognized interest on trade accounts receivable totaling $17 million and $29 million during the six months ended June 30, 2020 and 2019, compared torespectively.

        Income Taxes. We recorded income tax benefit of $3 million on pre-tax losses of $102 million for the six months ended June 30, 2018 primarily due2020 compared to the recognition of interest on trade account receivable totaling $29 million pursuant to the terms of our contracts with PREPA.

Income Taxes. We recorded income tax expense of $10 million on pre-tax income of $28 million for the six months ended June 30, 2019 compared to $99 million on pre-tax income of $198 million2019. Our effective tax rate was 3% for the six months ended June 30, 2018. Our effective tax rate was2020 compared to 37% for the six months ended June 30, 2019 compared to 50% for2019. During the six months ended June 30, 2018. The decrease2020, we recorded expense of $5 million related to provisions in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which was enacted on March 27, 2020. Our effective tax rate is primarily the result of discreet items relatedwas also impacted by permanent differences such as goodwill impairment. The decrease compared to return to provision adjustments recorded during the six months ended June 30, 2019 which was partially offset by changes inis primarily due to the valuation allowance.mix of earnings between the United States and Puerto Rico.


41

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 (loss) income (loss) before depreciation, depletion, accretionamortization and amortization,accretion, impairment of goodwill, impairment of other long-lived assets, acquisition related costs, public offering costs, equity based compensation, stock based compensation, interest expense, net, other (income) expense, net (which is comprised of the (gain) or loss on disposal of long-lived assets and interest on tradedelinquent accounts receivable) and provision (benefit) for income taxes, further adjusted to add back interest on trade accounts receivable. We exclude the items listed above from net (loss) 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 (loss) 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 EndedSix Months Ended
June 30,June 30,
Reconciliation of Adjusted EBITDA to net (loss) income:2020201920202019
Net (loss) income$(15,205) $(10,889) $(99,176) $17,444  
Depreciation, depletion, amortization and accretion expense24,116  30,145  49,998  58,721  
Impairment of goodwill—  —  54,973  —  
Impairment of other long-lived assets—  —  12,897  —  
Acquisition related costs—  45  —  45  
Stock based compensation196  944  1,246  2,233  
Interest expense, net1,471  1,551  3,109  2,074  
Other income, net(9,270) (4,019) (16,679) (28,576) 
(Benefit) provision for income taxes(3,482) (12,438) (2,786) 10,419  
Interest on trade accounts receivable9,071  3,234  16,767  28,969  
Adjusted EBITDA$6,897  $8,573  $20,349  $91,329  

42
 Three Months Ended Six Months Ended
 June 30, June 30,
Reconciliation of Adjusted EBITDA to net income (loss):2019 2018 2019 2018
Net (loss) income$(10,889) $42,700
 $17,444
 $98,246
Depreciation, depletion, accretion and amortization expense30,145
 30,795
 58,721
 57,703
Impairment of long-lived assets—
 187
 —
 187
Acquisition related costs45
 77
 45
 31
Public offering costs—
 731
 —
 731
Equity based compensation—
 17,487
 —
 17,487
Stock based compensation944
 1,660
 2,233
 2,916
Interest expense, net1,551
 959
 2,074
 2,196
Other (income) expense, net(4,019) 486
 (28,576) 514
Interest on trade accounts receivable3,234
 —
 28,969
 —
(Benefit) provision for income taxes(12,438) 53,512
 10,419
 99,430
Adjusted EBITDA$8,573
 $148,594
 $91,329
 $279,441


Infrastructure Services
Three Months EndedSix Months Ended
June 30,June 30,
Reconciliation of Adjusted EBITDA to net (loss) income:2020201920202019
Net (loss) income$(4,529) $6,210  $(13,980) $41,875  
Depreciation and amortization expense7,816  7,818  15,750  15,537  
Acquisition related costs—  12  —  12  
Stock based compensation45  9  297  471  
Interest expense720  386  1,477  425  
Other income, net(7,809) (4,045) (15,086) (28,869) 
Provision (benefit) for income taxes949  (16,447) 3,440  5,193  
Interest on trade accounts receivable7,929  3,234  15,625  28,969  
Adjusted EBITDA$5,121  $(2,823) $7,523  $63,613  
 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
 $99,658
Depreciation and amortization expense7,818
 4,094
 15,537
 6,501
Acquisition related costs12
 4
 12
 (4)
Public offering costs—
 360
 —
 360
Stock based compensation9
 606
 471
 1,063
Interest expense386
 106
 425
 182
Other (income) expense, net(4,045) 330
 (28,869) 332
Interest on trade accounts receivable3,234
 —
 28,969
 —
Provision for income taxes(16,447) 52,632
 5,193
 100,589
Adjusted EBITDA$(2,823) $110,491
 $63,613
 $208,681


Pressure Pumping Services
Three Months EndedSix Months Ended
June 30,June 30,
Reconciliation of Adjusted EBITDA to net (loss) income:2020201920202019
Net (loss) income$(835) $(290) $(52,556) $798  
Depreciation and amortization expense7,685  10,174  16,177  20,068  
Impairment of goodwill—  —  53,406  —  
Impairment of other long-lived assets—  —  4,203  —  
Acquisition related costs—  18  —  18  
Stock based compensation53  489  388  899  
Interest expense346  452  639  649  
Other (income) expense, net(1,179) 9  (1,288) 8  
Interest on trade accounts receivable1,133  —  1,133  —  
Adjusted EBITDA$7,203  $10,852  $22,102  $22,440  
 Three Months Ended Six Months Ended
 June 30, June 30,
Reconciliation of Adjusted EBITDA to net income (loss):2019 2018 2019 2018
Net (loss) income$(290) $(11,433) $798
 $(9,474)
Depreciation and amortization expense10,174
 13,829
 20,068
 27,815
Acquisition related costs18
 33
 18
 33
Public offering costs—
 202
 —
 202
Equity based compensation—
 17,487
 —
 17,487
Stock based compensation489
 453
 899
 871
Interest expense452
 341
 649
 845
Other expense, net9
 80
 8
 92
Adjusted EBITDA$10,852
 $20,992
 $22,440
 $37,871


Natural Sand Proppant Services
Three Months EndedSix Months Ended
June 30,June 30,
Reconciliation of Adjusted EBITDA to net (loss) income:2020201920202019
Net (loss) income$(3,572) $628  $(7,868) $2,768  
Depreciation, depletion, amortization and accretion expense2,348  4,528  4,661  7,401  
Acquisition related costs—  8  —  8  
Stock based compensation45  236  271  439  
Interest expense53  72  113  102  
Other income, net(2) (32) (39) (32) 
Adjusted EBITDA$(1,128) $5,440  $(2,862) $10,686  

43

 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 expense4,528
 3,881
 7,401
 6,197
Acquisition related costs8
 —
 8
 (38)
Public offering costs—
 95
 —
 95
Stock based compensation236
 205
 439
 391
Interest expense72
 76
 102
 156
Other (income) expense, net(32) 36
 (32) 23
Adjusted EBITDA$5,440
 $15,222
 $10,686
 $27,125
Drilling Services

Three Months EndedSix Months Ended
June 30,June 30,
Reconciliation of Adjusted EBITDA to net (loss):2020201920202019
Net loss$(4,649) $(6,116) $(10,199) $(10,291) 
Depreciation expense2,700  3,193  5,577  6,770  
Impairment of other long-lived assets—  —  326  —  
Acquisition related costs—  2  —  2  
Stock based compensation34  88  128  189  
Interest expense143  332  412  460  
Other income, net(298) —  (271) (22) 
Adjusted EBITDA$(2,070) $(2,501) $(4,027) $(2,892) 

Other Services(a)
Three Months EndedSix Months Ended
June 30,June 30,
Reconciliation of Adjusted EBITDA to net loss:2020201920202019
Net loss$(1,620) $(11,399) $(14,573) $(17,766) 
Depreciation, amortization and accretion expense3,567  4,432  7,833  8,945  
Impairment of goodwill—  —  1,567  —  
Impairment of other long-lived assets—  —  8,368  —  
Acquisition related costs—  5  —  5  
Stock based compensation19  122  162  235  
Interest expense, net209  309  468  438  
Other expense, net18  49  5  339  
(Benefit) provision for income taxes(4,431) 4,009  (6,226) 5,226  
Interest on trade accounts receivable9  —  9  —  
Adjusted EBITDA$(2,229) $(2,473) $(2,387) $(2,578) 
a. Includes results for our coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, full service transportation, crude oil hauling, remote accommodations, oilfield equipment manufacturing and infrastructure engineering and design services and corporate related activities. Our corporate related activities do not generate revenue.

44
 Three Months Ended Six Months Ended
 June 30, June 30,
Reconciliation of Adjusted EBITDA to net loss:2019 2018 2019 2018
Net loss$(17,515) $(8,907) $(28,057) $(12,250)
Depreciation and amortization expense7,625
 8,991
 15,715
 17,190
Impairment of long-lived assets—
 187
 —
 187
Acquisition related costs7
 40
 7
 40
Public offering costs—
 74
 —
 74
Stock based compensation210
 396
 424
 592
Interest expense, net641
 436
 898
 1,013
Other expense, net49
 40
 317
 67
Provision (benefit) for income taxes4,009
 880
 5,226
 (1,158)
Adjusted EBITDA$(4,974) $2,137
 $(5,470) $5,755

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


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


Adjusted net (loss) income (loss) and adjusted (loss) 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 impairment of goodwill and impairment of other long-lived assets, that may not be indicative of the Company's ongoing operating results. Adjusted net (loss) income (loss) and adjusted (loss) earnings (loss) per share should not be considered in isolation or as a substitute for net (loss) income and (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 (loss) income (loss) and adjusted (loss) earnings (loss) per share to the GAAP financial measures of net (loss) income and (loss) and earnings (loss) per share for the periods specified.


Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
(in thousands, except per share amounts)
Net (loss) income, as reported$(15,205) $(10,889) $(99,176) $17,444  
Impairment of goodwill—  —  54,973  —  
Impairment of other long-lived assets—  —  12,897  —  
Adjusted net (loss) income$(15,205) $(10,889) $(31,306) $17,444  
Basic (loss) earnings per share, as reported$(0.33) $(0.24) $(2.18) $0.39  
Impairment of goodwill—  —  1.21  —  
Impairment of other long-lived assets—  —  0.28  —  
Adjusted basic (loss) earnings per share$(0.33) $(0.24) $(0.69) $0.39  
Diluted (loss) earnings per share, as reported$(0.33) $(0.24) $(2.18) $0.39  
Impairment of goodwill—  —  1.21  —  
Impairment of other long-lived assets—  —  0.28  —  
Adjusted diluted (loss) earnings per share$(0.33) $(0.24) $(0.69) $0.39  
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
 (in thousands, except per share amounts)
Net (loss) income, as reported$(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 October 2016, ourOur primary sources of liquidity have been cash on hand, borrowings under our revolving credit facility and cash flows from operations and proceeds from our initial public offering.operations. Our primary uses of capital have been for investing in property and equipment used to provide our services, to acquire complementary businesses and to pay dividends to our stockholders. In July 2019, as a result of oilfield market conditions as well as other factors, which included collection delays from PREPA, our Boardboard of Directorsdirectors suspended the quarterly cash dividend. Future declaration of cash dividends are subject to approval by our Boardboard of Directorsdirectors and may be adjusted at its discretion based on market conditions and capital availability.


As of June 30, 2019, we had outstanding borrowings under our revolving credit facility of $82 million and $93 million of available borrowing capacity under this facility, after giving effect to $9 million of outstanding letters of credit.
45

Liquidity

        

The following table summarizes our liquidity foras of the periodsdates indicated (in thousands):
June 30,December 31,
20202019
Cash and cash equivalents$18,025  $5,872  
Revolving credit facility availability129,787  184,809  
Less minimum excess availability covenant(13,000) —  
Less long-term debt(89,250) (80,000) 
Less letter of credit facilities (environmental remediation)(4,477) (4,182) 
Less letter of credit facilities (insurance programs)(4,105) (4,105) 
Less letter of credit facilities (rail car commitments)(455) (455) 
Net working capital (less cash)(a)
288,940  270,711  
Total$325,465  $372,650  
 June 30, December 31,
 2019 2018
Cash and cash equivalents$7,245
 $67,625
Revolving credit facility availability184,233
 184,233
Less long-term debt(82,036) —
Less letter of credit facilities (environmental remediation)(4,182) (3,877)
Less letter of credit facilities (insurance programs)(4,105) (4,105)
Less letter of credit facilities (rail car commitments)(455) (455)
Net working capital (less cash)(a)
291,568
 148,108
Total$392,268
 $391,529
a.Net working capital (less cash) is a non-GAAP measure and is calculated by subtracting total current liabilities of $164 million and cash and cash equivalents of $7 million from total current assets of $463 million as of June 30, 2019.a.Net working capital (less cash) is a non-GAAP measure and is calculated by subtracting total current liabilities of $112 million and cash and cash equivalents of $18 million from total current assets of $419 million as of June 30, 2020. As of December 31, 2018, net working capital (less cash) is calculated by subtracting total current liabilities of $234 million and cash and cash equivalents of $68 million from total current assets of $450 million.

At July 31, 2019, net working capital (less cash) is calculated by subtracting total current liabilities of $130 million and cash and cash equivalents of $6 million from total current assets of $407 million. Amounts include receivables due from PREPA and Gulfport of $285 million and $27 million, respectively, at June 30, 2020 and $269 million and $7 million, respectively, at December 31, 2019.

        As of July 29, 2020, we had cash on hand totaling $12of $16 million and outstanding borrowings under our revolving credit facility of $86$88 million, leaving an aggregate of $90$20 million of available borrowing capacity under this facility, which is netfacility. This available borrowing capacity reflects (i) a minimum excess availability covenant of 10% of the maximum revolving advance amount and (ii) $9 million of outstanding letters of credit.

Continued prolonged volatility in the capital, financial and/or credit markets due to the COVID-19 pandemic, the depressed commodity markets and/or adverse macroeconomic conditions may further limit our access to, or increase our cost of, $9 million.capital or make capital unavailable on terms acceptable to us or at all. In addition, if we are unable to comply with the covenants under our revolving credit facility and an event of default occurs and remains uncured, our lenders would not be required to lend any additional amounts to us, could elect to increase our interest rate by 200 basis points, could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, may have the ability to require us to apply all of our available cash to repay our outstanding borrowings and may foreclose on substantially all of our assets.


Liquidity and Cash Flows
        
The following table sets forth our cash flows at the dates indicated (in thousands):
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Net cash provided by (used in) operating activities$5,292  $1,139  $6,834  $(101,855) 
Net cash used in investing activities(940) (9,182) (1,880) (28,435) 
Net cash provided by (used in) financing activities439  (6,108) 7,336  69,825  
Effect of foreign exchange rate on cash52  53  (137) 85  
Net change in cash$4,843  $(14,098) $12,153  $(60,380) 
 Three Months Ended Six Months Ended
 June 30, June 30,
 2019 2018 2019 2018
Net cash provided by (used in) operating activities$1,139
 $125,128
 $(101,855) $226,451
Net cash used in investing activities(9,182) (85,755) (28,435) (121,243)
Net cash (used in) provided by financing activities(6,108) (39,073) 69,825
 (100,045)
Effect of foreign exchange rate on cash53
 (45) 85
 (98)
Net change in cash$(14,098) $255
 $(60,380) $5,065


Operating Activities


Net cash provided by operating activities was $5 million for the three months ended June 30, 2020, compared to $1 million for the three months ended June 30, 2019. Net cash provided by operating activities was $7 million for the six months ended June 30, 2020, compared to net cash used in operating activities wasof $102 million for the six months ended June 30, 2019, compared2019. The increase in operating cash flows was primarily attributable to netthe timing of cash provided by operating activities of $226 millioninflows for accounts receivable and cash outflows for income tax payments during the six months ended June 30, 2018.2019.
46


Investing Activities
        Net cash provided by operatingused in investing activities was $1 million for the three months ended June 30, 2019,2020, compared to net cash provided by operating activities of $125$9 million for the three months ended June 30, 2018. The decrease in operating cash flows was primarily attributable to a decline in activity for our infrastructure services segment as well as a timing difference between cash outflows for income tax payments and cash inflows for accounts receivable.

Investing Activities
2019. Net cash used in investing activities was $2 million for the six months ended June 30, 2020, compared to $28 million for the six months ended June 30, 2019, compared to $121 million for the six months ended June 30, 2018. Net cash used in investing activities was $9 million for the three months ended June 30, 2019, compared to $86 million for the three months ended June 30, 2018.2019. Cash used in investing activities was primarily used to purchase property and equipment that is utilized to provide our services.



The following table summarizes our capital expenditures by operating division for the periods indicated (in thousands):
Three Months EndedSix Months Ended
June 30,June 30,
2020201920202019
Infrastructure services(a)
$43  $2,177  $120  $5,431  
Pressure pumping services(b)
2,450  4,013  3,054  11,342  
Natural sand proppant services(c)
354  990  875  1,975  
Drilling services(d)
72  660  80  2,927  
Other(e)
5  2,107  295  8,545  
Total capital expenditures$2,924  $9,947  $4,424  $30,220  
 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 truck, tooling and other equipment for the three and six months ended June 30, 2020 and 2019.
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 equipment for our rental business and upgrades to our rig fleet for the six months ended June 30, 2019 and 2018.

b.  Capital expenditures primarily for pressure pumping and water transfer equipment for the three and six months ended June 30, 2020 and 2019.
c. Capital expenditures primarily for maintenance for the three and six months ended June 30, 2020 and 2019.
d. Capital expenditures primarily for equipment for our upgrades to our rig fleet for the three and six months ended June 30, 2019.
e. Capital expenditures primarily for equipment for our rental business for the three and six months ended June 30, 2020 and 2019.

Financing Activities


        Net cash provided by financing activities was $0.4 million for the three months ended June 30, 2020, compared to net cash used in financing activities of $6 million for the three months ended June 30, 2019. Net cash provided by financing activities for the three months ended June 30, 2020 was primarily attributable to net borrowings under our revolving credit facility of $1 million. Net cash used in financing activities for three months ended June 30, 2019 was primarily attributable to dividends paid of $6 million.

Net cash provided by financing activities was $7 million for the six months ended June 30, 2020, compared to $70 million for the six months ended June 30, 2019, compared to net cash used in financing activities of $100 million for the six months ended June 30, 2018. Net cash used in financing activities was $6 million for the three months ended June 30, 2019, compared to $39 million for the three months ended June 30, 2018.2019. Net cash provided by financing activities for the six months ended June 30, 20192020 was primarily attributable to net borrowings under our revolving credit facility of $9 million, which was partially offset by debt issuance costs of $1 million. Net cash provided by financing activities for six months ended June 30, 2019 was primarily attributable to borrowings under our revolving credit facility of $82 million, which was partially offset by $11 million in dividends paid. Net cash used in financing activities six months ended June 30, 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($0.1) million and ($0.1)$0.09 million, respectively, for the six months ended June 30, 20192020 and 2018.2019. 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 $299$307 million and $216$277 million, respectively, at June 30, 20192020 and December 31, 2018.2019. Our cash balances were $7$18 million and $68$6 million, respectively, at June 30, 20192020 and December 31, 2018.2019.


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 agreementfacility, as subsequently amended, with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders, which amends and restateslenders. At June 30, 2020, we had outstanding borrowings under our prior revolving credit facility of $89 million and security agreement dated as$19 million of July 9, 2018, as amended prior to October 19, 2018, to, among other things,available borrowing capacity under this facility. This available borrowing
47

capacity reflects (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 lettera minimum excess availability covenant of credit sublimit to 20%10% 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 June 30, 2019, we had outstanding borrowings under our credit facility of $82 million. At July 31, 2019, we had outstanding borrowings under our credit facility of $86 million, leaving an aggregate of $90(ii) $9 million of available borrowing capacity under this facility, which is net ofoutstanding letters of 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).credit. As of June 30, 20192020 and December 31, 2018,2019, we were in compliance with the financial covenants under our then existing revolving credit facility. For additional information regarding our revolving credit facility, see Note 9. Debt to our unaudited condensed consolidated financial statements included elsewhere in this report.


Capital Requirements and Sources of Liquidity


Earlier this year, we had established a        We now estimate that during 2020 our aggregate capital expenditure budget of approximately $80 million. In responseexpenditures will be up to current market$10 million, depending upon industry conditions we are taking a disciplined approach toand our spending and have reduced our 2019 capital expenditure budget to $41 million.financial results. These capital expenditures include $6$5 million in our pressure pumping segment for conversion of a portion of our fleet to include dynamic gas blending capabilities, maintenance to our existing pressure pumping fleet and additional water transfer equipment, $3 million in our infrastructure segment for assets for additional crews $17 million in our pressure pumping segment for the expansion of our water transfer operations and maintenance to our existing pressure pumping fleet, $4 million for our natural sand proppant segment for upgrades and maintenance and $14$2 million for our other services,divisions, primarily for the expansion ofadditional equipment for our trucking fleet and rental services and upgrades to our drilling rigs.business. During the six months ended June 30, 2019,2020, our capital expenditures totaled $30$4 million.


We believe that our cash on hand, operating cash flow and available borrowings under our 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),our customers, including PREPA and Gulfport). Further, significant additional capital expenditures could be required to conduct our operations. ThereAccordingly, 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 meet our operating needs and/or maintain planned or future levels of capital expenditures. Further,In addition, while we regularly evaluate acquisition opportunities, we do not have a specific acquisition budget for 20192020 since the timing and size of acquisitions cannot be accurately forecasted. We continue to evaluate acquisition opportunities, including those in the renewable energy sector as well as transactions involving entities controlled by Wexford and Gulfport.Wexford. 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 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, sale-leaseback transactions, 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 ableour ability to conduct operations, make capital expenditures and/or complete acquisitions that may be favorable to us or finance the capital expenditures necessary to conduct our operations.will be impaired.


Off-Balance Sheet Arrangements
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 acquirepurchase capital equipment.


Aggregate future minimum lease payments under these agreements in effect at June 30, 20192020 are as follows (in thousands):
Year ended December 31:Capital Spend Commitments
Minimum Purchase Commitments(a)
Remainder of 2020$3,214  $8,671  
2021—  700  
2022—  130  
2023—  9  
2024—  —  
Thereafter—  —  
$3,214  $9,510  
a.  Included in these amounts are sand purchase commitments of $8 million. Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $9 million.
48

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


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.


New Accounting Pronouncements
In FebruaryJune 2016, the Financial Accounting Standards Board or FASB, issued Accounting Standards Update or ASU, No. 2016-02 “Leases (Topic 842)” amending the current accounting for leases. Under the new provisions, all lessees will 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. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. We adopted this ASU effective January 1, 2019 utilizing the 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 retained earnings in the period of adoption with no adjustment made to the comparative periods presented in the consolidated financial statements. See Note 14 to the unaudited condensed consolidated financial statements included elsewhere in this report for the impact the adoption of this standard had on our financial statements.

In June 2016, the FASB issued ASU(“ASU”) 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 currently evaluating the impactadopted this standard may have on our financial statements and 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. We adopted this ASU effective January 1, 2019 and estimate the fair value of2020. It did not have a material impact on our non-employee equity awards was approximately $18.9 million as of this date.consolidated financial statements.


49

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; 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.


In March and April 2020, concurrent with the spread of COVID-19 and quarantine orders in the U.S. and worldwide, oil prices dropped sharply to below zero for the first time in history due to factors including significantly reduced demand and a shortage of storage facilities. As a result of the oversupply, OPEC members and other oil exporting nations reached an agreement to curtail up to 10% of the world’s supply and certain U.S. producers voluntarily curtailed production. These actions helped to reduce a portion of the excess supply in the market and improve oil prices. However, commodity prices are expected to continue to be weak and volatile as a result of production levels, inventories and demand, and national and international economic performance. We cannot predict if, or when, commodity prices will stabilize and at what level. The COVID-19 pandemic, the broad reduction in economic activity, the current conditions in the energy industry and the adverse macroeconomic conditions have also had an adverse effect on both pricing and utilization for our oilfield services. 

The levellevels of activity in the U.S. oil and natural gas exploration and production, energy infrastructure and natural sand proppant industries ishave been and continue to be volatile. Expected trends may not continueWe are unable to predict the ultimate impact of the COVID-19 pandemic, the depressed commodity markets 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 effectmacroeconomic conditions on our business, financial condition, results of operations, cash flows and cash flows.stock price.


Interest Rate Risk


We had a cash and cash equivalents balance of $7$18 million at June 30, 2019.2020. 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%2.0% to 3.0%3.5%, based upon a calculation of the excess availability of the line as a percentage of the maximum credit limit. At June 30, 2019,2020, we had outstanding borrowings under our revolving credit facility of $82$89 million with a weighted average interest rate of 4.5%3.7%. A 1% increase or decrease in the interest rate at that time would have increased or decreased our interest expense by approximately $1 million per year. We do not currently hedge our interest rate exposure.


Foreign Currency Risk


Our remote accommodation business, which is included in our other services 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 June 30, 2019,2020, we had $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 $0.01$0.1 million as of June 30, 2019.2020. 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.


50

Customer Credit Risk

We are also subject to credit risk due to concentration of our receivables from several significant customers. We generally do not require our customers to post collateral. The inability, delay or failure of our customers to meet their obligations to us due to customer liquidity issues or their insolvency or liquidation may adversely affect our business, financial condition, results of operations and cash flows. This risk may be further enhanced by the ongoing COVID-19 pandemic, the depressed commodity price environment and adverse macroeconomic conditions. See Note 2. Basis of Presentation and Significant Accounting Policies—Accounts Receivable and —Concentrations of Credit Risk and Significant Customers and Note 18. Commitments and Contingencies—Litigation of our unaudited condensed consolidated financial statements.

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. 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 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 June 30, 2019,2020, 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 June 30, 2019,2020, 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 June 30, 20192020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.



51

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, except as disclosed in Note 19 "Commitments18 “Commitments and Contingencies,"” of the Notes to Unaudited Condensed Consolidated Financial Statements.


Item 1A. Risk Factors


Security holdersAs of the date of this filing, our Company and potential investors in our securities should carefully consideroperations continue to be subject to the risk factors previously disclosed in Item 1A. Risk Factors in our Annual Report on Form 10-K (Commission File No. 001-37917) filed with the SEC on March 18, 2019. 

Except as described2, 2020 and our Quarterly Report on Form 10-Q filed with the SEC on May 11, 2020. Depending on the duration of the COVID-19 pandemic and its severity and related economic repercussions, however, the negative impact of many of the risks discussed in Item 2. Management’ssuch reports may be heightened or exacerbated. For a discussion of the recent trends and uncertainties impacting our business, see also “Management’s Discussion and Analysis of Financial Condition and Results of Operations, there have been no material changes to the Risk Factors previously disclosedOperations—Recent Developments—Impact of COVID-19 and Recent Volatility in our Annual Report on Form 10-K for the year ended December 31, 2018.Commodity Prices” and “—Industry Overview.”


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 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.


52
MAMMOTH ENERGY SERVICES, INC.





Item 6. Exhibits


The following exhibits are filed as a part of this report:
Incorporated By Reference
Exhibit NumberExhibit DescriptionFormCommission File No.Filing DateExhibit No.Filed HerewithFurnished Herewith
3.1
8-K001-3791711/15/20163.1
3.2
8-K001-3791711/15/20163.2
4.1
S-1/A333-21350410/3/20164.1
4.2
8-K001-3791711/15/20164.1
4.3
8-K001-3791711/15/20164.2
10.1
X
31.1
X
31.2
X
32.1
X
32.2
X
95.1
X
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X
101.SCHXBRL Taxonomy Extension Schema Document.X
101.CALXBRL Taxonomy Extension Calculation Linkbase Document.X
101.DEFXBRL Taxonomy Extension Definition Linkbase Document.X
101.LABXBRL Taxonomy Extension Labels Linkbase Document.X
101.PREXBRL Taxonomy Extension Presentation Linkbase Document.X
104Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.X




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    Incorporated By Reference   
Exhibit Number Exhibit Description Form Commission File No. Filing Date Exhibit No. Filed HerewithFurnished 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.
         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.           
              
   




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:July 31, 2020By:/s/ Arty Straehla
Arty Straehla
Chief Executive Officer
Date:July 31, 2020By:MAMMOTH ENERGY SERVICES, INC.
Date:August 2, 2019By:/s/ Arty Straehla
Arty Straehla
Chief Executive Officer
Date:August 2, 2019By:/s/ Mark Layton
Mark Layton
Chief Financial Officer



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