Good day, ladies and gentlemen, and welcome to the Mammoth Energy Services' Second Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this conference call is being recorded and will be available for replay on Mammoth Energy Services' website. I would now like to introduce your host for today's conference, Mr. Don Crist, Mammoth Energy Service's Director of Investor Relation. Sir, you may begin

Thank you, Candice. Good morning and welcome to Mammoth Energy Services' second quarter 2017 earnings conference call. Joining me on today's call is Arty Straehla, Chief Executive Officer; and Mark Layton, Chief Financial Officer. Before I turn the call over to them, I would like to read our Safe Harbor statement. Some of our comments today may include forward-looking statements reflecting Mammoth Energy Services' views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Mammoth Energy Services' Form 10-K, Forms 10-Q, recent current reports on Form 8-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly any forward-looking statements for any reason. Our comments today may also include non-GAAP financial measures. Additional details and reconciliations to the most directly comparable GAAP financial measures are included in our second quarter earnings press release, which can be found on our website along with our second quarter earnings presentation. Now, I'll turn the call over to Arty.

Thank you, Don, and good morning, everyone. The second quarter of 2017 was a very active one for the entire Mammoth team as we closed on five acquisitions, helping to further our vertical integration and expand into energy infrastructure services. We completed our expansion into the Mid-Continent with the start-up of our fourth pressure pumping fleet and also secured a contract to sell approximately half of Piranha's 1.5 million tons per year capacity for three years at favorable pricing. We made some critical additions to our team and we welcome the new members of our acquired entities to the Mammoth family. I'm very proud of our team and how they've executed during this exciting period and thankful to both our customers and vendors as we remain optimistic for the days ahead. Before giving my usual commentary on our various segments, let me turn the call over to Mark to take you through the financial performance during the quarter.

Thank you, Arty. I hope that all of you have had a chance to read our press release, so I will keep my financial comments brief and focus on certain highlights we feel are important. Mammoth had a strong second quarter of 2017 with revenue coming in at $98 million, up more than 42% from the prior year quarter, and up 31% sequentially. A mix of additional equipment acquisitions, higher activity levels, improved equipment utilization, and pricing for our services all contributed to the higher revenue compared to the prior periods. Net loss for the second quarter of 2017 came in at $1.2 million, which is an improvement of more than $7.2 million when compared to the loss in the second quarter of the prior year of $8 million. On a per share basis, net loss came in at $0.03 per share during the second quarter of 2017 as compared to a loss per share of $0.28 per share in the prior year quarter. Adjusted EBITDA for the second quarter of 2017 came in at $15.3 million, up 19% when compared to the same period in the prior year, and up 32% sequentially. Our adjusted corporate EBITDA margin remained strong in the second quarter, coming in at 16%. As we discussed on our first quarter conference call, start-up cost related to the staffing of our fourth and fifth fleets in the Mid-Continent were expected to compress our margins slightly during the quarter. We expect this compression to persist into the third quarter, but we still remain confident that our corporate EBITDA margins will return to the 18% to 22% range once our sixth fleet begins operating and the Piranha mine ramps up production over the remainder of the year. Selling, general, and administrative expenses came in at $8 million in…

Thank you, Mark. As we first discussed with you in late 2016, we felt that three aspects of the completion market would get tight over the course of 2017, including pressure pumping, sand, and logistics. As we stand today, all three of these areas are tight, which is remarkable given the amount of pressure pumping equipment that has been reactivated so far this year. While it's hard to pinpoint, we estimate that approximately 3 million horsepower has been reactivated so far this year, resulting in approximately 12 million to 13 million horsepower in the market currently. Given that the backlog continues to rise and our inbound calls are increasing, we believe that there is still a shortage of pressure pumping horsepower in the market today. Leading edge pricing has continued to improve, but we are not yet to the level to support newbuild economics. We've been fortunate to add new equipment at a significant discount to the market with prices averaging $479 per horsepower for our recent equipment acquisitions. Over the past two months, we've ramped up operations in the SCOOP/STACK with our fourth fleet now operating in the area. Our fifth fleet is expected to commence operations on August 8, in line with our original forecast. The remaining equipment required for our sixth fleet is expected to be received in the coming weeks, allowing for an October start-up. Pricing for pressure pumping remains strong as is evidenced by our 24% EBITDA margin during the second quarter. Our frac counter remains full into the fourth quarter of '17, with inbound call volume remaining strong for pressure pumping in both the Mid-Continent and Northeast markets for the latter part of the year and for 2018. Turning to sand, the acquisitions of Taylor Frac and our Piranha Proppants assets were transformational events…

Thank you. [Operator Instructions] And our first question comes from John Watson from Simmons & Company. Dir, your line is open.

Good morning guys.

Good morning John.

Arty, I want to start in pressure pumping. Mammoth was one of the first to move average horsepower per fleet to 50,000 and now a number of your competitors are following suit. Can you speak to that trend? And how more pumps on location might positively affect pressure pumping supply and demand dynamics moving forward?

Well, a lot of things -- John, a lot of things have changed since -- over the course of the last few years. Obviously, with heavier pressures, the more sand that is being pumped, the requirement for additional pumps is there. You saw us be the first mover in that category because we've been operating in the high-pressure Utica, and now we've come down to the high-pressure SCOOP. There's parts of each one of the basins that don't necessarily need that much equipment, but the areas where we're pumping are the harder fracs and we are -- we, indeed, need that type of equipment. And John, you're right, you're exactly right. We were one of the first movers to bring on brand new equipment. And that's what we're placing in the marketplace today. And of course, I always like to remind that we got that at an average of $479 per horsepower, which is at the end of the day, we're capital allocators and we like to allocate our capital with the right return.

Right. And then in that line of thinking, can you provide us an update regarding potential timing on moving towards 400,000 horsepower? And your thought process surrounding adding fleets in the current environment?

Well, our fifth fleet goes to work August 8th. And then our sixth fleet is -- we'll have it fully operational and ready to run sometime in October, but we're not considering the seventh fleet at this point in time. We're going to do extremely well -- the operational execution of bringing up four, five and six in a very short amount of time. And when we're more complete on that, we will start considering the seventh.

Okay. That's great to hear. And then lastly, as we think about margins per frac, how much of an impact do you think scale in a basin helps with margin? Should we expect margins to improve meaningfully once you have more fleets to work in the SCOOP/STACK?

Scale certainly helps. And yes, as we roll out additional fleets in the SCOOP/STACK, we would expect that to be beneficial to the margins.

Great. Well, thanks for taking the time guys. I'll turn it back.

Thanks John.

And our next question comes from the line of Daniel Burke from Johnson Rice. Sir, your line is open.

Good morning guys.

Good morning Dan.

Good morning.

I was wondering if you guys could talk a little bit more about the buildout you have underway in the Permian Basin in terms of what you guys have really accomplished over the last, I guess, four, five months?

So, our buildout in the Permian Basin consist of deploying 20 tractors and trailers. As we indicated early on, we through three areas would get tight. One of those being last-mile logistics. The demand for those trailers is high and we expect to achieve a good rate of return on the deployment of those assets in the Permian.

Daniel, I think that the way we look at it, there's been somewhere around 50 million tons of capacity announced with the regional sands. Our response to it has been that we've expanded trucking. Because if you think about 50 million pounds, that's about 2.25 million loads per annum that will need to be trucked. And we think that the return on capital of that investment is extremely well deployed capital.

Okay. That's helpful, Arty. So, we should think about it as a way to really exploit an opportunity on the trucking side and not so much at this point in terms of laying the groundwork for maybe participating in the West Texas market in a larger way on the fracturing side?

Well, Daniel, I think there's some logic to thinking about the Permian and we're not committed to it at this time. But there is -- certainly, you go where the activity is. And certainly having the infrastructure in there to support us is a key element. So, we think that the Permian and the Eagle Ford are both logical places for us to go.

Look, I would agree. Just to trying to keep up with you guys. It's been hard to this year. And then maybe one on -- also maybe on some of the smaller acquisitions, the Stingray entities looked like they had a pretty good first month for you guys. Was that your impression as well? How are you thinking about the performance of those entities in terms of what you've seen to-date?

Well, I'll clarify and then Mark can speak to the financials. The Cementing asset's brought us five twin cementers and ancillary equipment and along with a bulk plan. And on the energy services side, we got water transfer and rental equipment and that type of thing, but you're exactly right. Good start out of the whole with those entities. Mark, you want to comment a little bit further?

Yes, I would echo that. We were pleased with the execution of both of those teams and in the month of June.

Okay. All right. Well, fair enough guys. And then Mark, maybe one last really quick one here. Can you just refresh me, I think you said second half 2017 CapEx is kind of weighted to Q3. Can you refresh my memory on what we're looking in the second half the year in terms of total spend?

Within the back half of the year, total spend is $60 million to $65 million. We've got some flexibility between Q3 and Q4. However, at this time, it's currently weighted a little heavier towards Q3.

Got it. All right guys. Thanks very much.

Thanks Daniel.

[Operator Instructions] And I'm showing no further questions at this time. I would now like to turn the call back to Arty Straehla, Chief Financial Officer, for any further remarks.

Chief Executive Officer. Thank you very much. We're wrapping up a very, very active quarter for us, five acquisitions that we brought on. Not only brought on, but we also integrated them into our teams and have -- the Piranha was a big aspect for us bringing Piranha sand plant on. We feel very good where Mammoth is and we feel even stronger about where Mammoth is going. With the deployment of our additional fleets and additional sand capacity coming on and again, with a lot of our work being contracted out. Thanks everybody for your time. Good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone have a great day.