Good day ladies and gentlemen, and welcome to the Mammoth Energy Services' Fourth Quarter and Full-Year 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 Services' Director of Investor Relation. Sir, you may begin.

Thank you, Karen and good morning and welcome to Mammoth Energy Services' fourth quarter and full-year 2017 earnings conference call. Joining me on today's call are 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 fourth quarter press release, which can be found on our website along with our updated presentation. Now, I will turn the call over to Arty.

Thank you, Don, and good morning, everyone. As we reflect on 2017 I want to review what the Mammoth team accomplished. We started the year with two frac spreads operating in the Northeast, one sand processing facility which was not operating, four rigs operating in the Permian and 20 sand hauling trucks operating in the Utica. Additionally our other service lines including directional drilling, coil tubing and flow back were challenged as utilization was low and pricing had not yet started to recover. As we stand today, we have six frac spreads operating in three separate basins an infrastructure division with backlog in excess of $500 million, approximately 4 million tons of sand processing capability from three separate facilities, 62 sand hauling trucks, a full rental division in two basins and six rigs operating in the Permian. We've also seen a significant increase in utilization and pricing in our directional drilling, coil tubing, frac stack and flow back businesses. Starting with our frac business demand remained high in the fourth quarter of 2017 as we continue to expand our customer base as we rolled out our six spread in the Mid-Continent area. Our team continues to operate at high level and is showing in both our financial results and in our high grading of the customers we are working for. Leading edge pricing continues to march higher, but as we've stated in past conference calls, on a standalone basis is not quite to the level needed to support new build economics. We have consistently said that we do not intend to add any additional spreads unless the invested capital exceeds our return hurdles and while we are getting closer, we are not there yet. As you may recall, our prior expansion of new capacity was done with lower equipment prices…

Thank you, Arty. I hope that all of you have had a chance to read our press release, so I'll keep my financial comments brief and focus on certain highlights. Mammoth's revenue during the fourth quarter of 2017 came in at $369 million up more than 147% from the third quarter of 2017. For the full year revenue came in at $691 million up 200% year-over-year. The expansion of our pressure pumping division, the acquisition and growth of our infrastructure segment, the growth of our internal sand production, improved equipment utilization and improved pricing for services all contributed to the higher revenue compared to the prior periods. Net income for the fourth quarter of 2017 came in at $66 million which is an improvement when compared to the third quarter of 2017 loss of $800,000. For the full year of 2017 net income was $59 million. On a per share basis, net income was $1.48 during the fourth quarter of 2017 as compared to a loss per share of $0.02 during the third quarter of 2017. For the full year of 2017, net income came in at $1.42 per share as compared to a loss of $2.94 per share during 2016. Adjusted EBITDA for the fourth quarter of 2017 came in at $110 million up approximately 294% from the third quarter of 2017. Our corporate adjusted EBITDA margin was 30% during the fourth quarter as compared to 19% in the third quarter of 2017. For the full year of 2017 EBITDA came in at $165 million an improvement of 302% from 2016. We remain confident that our corporate EBITDA margins will remains in the 20%b to 30% range throughout 2018, but will ultimately be dependent on the duration of work in Puerto Rico. Selling, general and administrative expenses came in…

[Operator Instructions] Our fist question comes from the line of Tommy Moll with Stephens.

Good morning, thanks for taking my questions.

Good morning, Tommy.

Starting off on sand, it sounds like spot is pretty robust and assuming that remains the case, is it fair to expect that your average selling price is going to continue to tick up as we go through the quarter this year?

Yes, Tommy. We expect a slight uptick during the first half of the year, obviously we expect that to be around specific grades, specifically 40/70. On 100 mesh pricing in the back half of the year we view that as contingent upon the growth of the regional sands primarily in West Texas.

Okay, great, thanks. And then moving on to infrastructure, once you perform the remainder of the extended contract and get to the total 445 in Puerto Rico what's the reasonable timeframe for investors to get an update on what the go forward might look like there? I know you mentioned that there's at least potential for not months or quarters but years of work and granted we won't have great visibility into what the total scope looks like, but just when should we expect the next update from you?

Tommy, what typically happens in this type of situation is, you go from restoration to reconstruction and you know certainly we have been a very big part of the restoration efforts. We have approximately 939 men on the Island right now. We have a variety of equipment. Certainly, with our contacts and what we are actually doing and the way our team has gone out and executed, we think we have an opportunity to be there for years, but it’s a process that you go through. It’s a RFP process and those occur and certainly there is not certainty, but we think that - we think restoration is still going to last a while longer. Yes, as you've seen in many articles, it’s not completed yet of getting the power on completely, before you go to that reconstruction phase, but we anticipate being there awhile and as we get material information we will pass it on to our investors. But I do want to tell you that one of the things that is mentioned in the call and everything previously was that we have over $500 million of backlog in total in our infrastructure business and we have grown our footprint significantly in the Continental United States. Our team is executing at a very high level on many, many fronts.

Yes, well just following on your backlog comment, looking at the dates when I would expect you performing the work in Puerto Rico, is it fair to assume that most of that $0.5 billion in backlog is actually work here in the lower 48? And then if you could give us any insight into how many crews you are running now, and where do you think you top out in the lower 48 and whether run rate type of margin might look like there?

Yes, the backlog is actually, you are correct in your assumptions that you said. We are approximately at $75 million in backlog in Puerto Rico with the remainder of it being between 425 and 450 in Continental United States. So, we are very proud of that growth that has gone on with our team and obviously their execution capability is very strong.

Arty one more from me and then I will turn it back. If we step back here and just look at the progress you've made since the IPO, there has been a very aggressive value creation strategy. Early on, you put capital to work acquiring discounted assets and pressure pumping in sand. More recently, you've put capital to work and infrastructure turning pretty nominal capital investment, all things considered into more than $0.5 billion of backlog. If we step back, how would you characterize the over arching strategy here, what’s the common theme or what are the common themes? And then given where we are in the cycle, what do you think we should expect for the next phase of capital allocation?

Well, Tommy, we said this many times with our investors in our conferences and all that, we view ourselves as capital allocators. We focus on return on invested capital. We look at a multitude of deals. We looked - last year in 2017 we looked at 135 discrete deals. We ended up doing six of them. And as you said the return on net invested capital is extremely strong, extremely high. We have continued to operate that way. We right now have about 30 different discrete acquisitions that we are looking at. We are also always looking at organic growth. That was our story from the IPO forward that we would grow organically and we would grow from M&A. And we view ourselves as a consolidator, especially with the balance sheet that is going to be extremely pristine as we go forward. But you are right, we are totally concerned with return on invested capital and making sure that we get the best return possible.

Great, thanks again.

Just one last comment to that is we talked about our CapEx in the plan and we've got about $125 million of CapEx that we have identified so far and gotten approval for 2018, but that number is likely to change as we go forward and we see opportunities to put our money to work with the best returns.

Thanks, I'll turn it back.

Thanks, Tommy.

And our next question comes from the line of Praveen Narra with Raymond James.

Hey, good morning guys and obviously congrats on a great quarter. In terms of the backlog and it's all - it’s very impressive in terms of how much of a U.S. presence you guys have built, can we talk about how long that average duration of the U.S. backlog is and if you could talk about kind of comparative dynamics you see in the bidding for this infrastructure work has been and what your contract win rate does look like as you've gone after these bids?

Well, let me answer your first question first, and it’s a three-year backlog. Typically, that’s the length of times that you do your contracts with the IOUs and with our customer base. So, that’s over the next three-year period that we will do that. The infrastructure, when we entered this business and we started talking about it, we talked about the infrastructure in general where we thought there would literally be billions if not trillions of dollars associated with infrastructure improvement in the United States. That’s one of the things that we looked towards as we went down these business lines. So, we thought it was the right place to be and the right place to put our money and we think we've got the right team. We've got a management team with a lot of experience and that have done really a magnificent job.

So, I guess, when you are going after some of these contracting opportunities, are you wining the majority of the bids you are putting out there, obviously, they are doing a great job in terms of garnering these awards, is it that you guys are gaining that brand image in the marketplace because of how successful it has been so far?

You know, we go after a lot of different customers and certainly with the utilities, it’s hard to describe what the win rate would be as we go in those, but we expect that backlog to grow significantly over the next few months and next few years.

Yes, I would expand on that little bit. It boils down to execution and the team has done a very good job of executing, so we are winning a fair amount of bids that we put out.

Okay, great. And then just expanding on the prior question in terms of the M&A opportunities that you guys work at, could you give us a sense, obviously specifics can be spared, but can you give us a sense of whether you are working in the same type of business lines that is currently or whether we should expect the number of business lines to expand in practice well?

Well, we look at the opportunities to put capital to work in, that brings us the best return, which means that we are always looking at variety of different areas. We look within our same space, but we also look outside. If we see good opportunities outside of that, again we are capital allocators and we look for the best return on investment.

Okay, perfect, thanks a lot guys, great quarter.

Thank you.

Thank you.

And our next question comes from the line of Jason Wangler with Imperial Capital.

Good morning, guys. One of the, yes just a couple more on the infrastructure side, and Mark you did kind of hit on it with the contract in Puerto Rico with the margins there have been fantastic. As you may be look at Puerto Rico versus the lower -48, you know what do you see the margin, the differences in those margins and the two types of work there?

As you pointed out Jason, storm work is obviously a little bit higher margin in the lower-48 “traditional" work and infrastructure segment. We view that in the range of 15% to 18% on a steady-state basis.

Let me make a comment real quick Praveen about the hurricane work. And the Island was and still has not fully recovered and still has additional work to be done. But it is one of those type of situations where it became a very compressed timeframe for us. We put additional resources and worked together because of devastation. And let me make another point because it is a very tough environment that Puerto Rico works in. As I have said a few times about 60% of the power generations on the cell side of the Island and the majority of the usage is in the Northeast quadrant. And you have to go across mountains, you have to go across forests, you don't go the normal right of ways where all the power structure is along roads and that type of thing. We've had to build roads, but one of the things that Mammoth does is that we have a history of working in tough environments.

And Jason one other point about the lower 48 work to revert is, you obviously have seen our background and our affinity towards vertical integration. In the infrastructure business we look at that similar to our other service lines where we would look to vertically integrate and thus increase our margins in that segment.

Now, I appreciate that its, yes its impressible what you guys have been doing. And then Mark, if I could two, could you just give me the updated cash and debt position and then as you think about obviously message in the accounts receivable and payable throughout the year it sounds like you said you’re thinking about being debt free by the end of the second quarter, just as you're seeing how that progress of payments is going.

Yes, so we're seeing steady payments obviously increased receivables across all segments at the end of Q4, but the current net debt position is approximately $68 million.

Great, I'll turn it back. Thank you.

I would add very quickly that we actually expect the first quarter to be better than the fourth quarter.

I appreciate it. Thank you.

Thank you. Our next question comes from the line of Daniel Burke with Johnson Rice.

Hey, good morning, guys.

Good morning.

Good morning, Daniel.

Hey Arty, just where you left off there, you expect Q1 better than Q4, was that addressed to overall company EBITDA or did I misunderstand what you were referring…?

No, it's overall.

Okay, all right.

We think, the first quarter to be better than the fourth.

Okay, that's helpful. Maybe one on the awful [ph] services side then, Arty you addressed that you'll see some operational delays here in Q1 that will be weather related. A lot of queries on the rail side over the last week or two. You guys kind of see it from both ends the sand and then the pumping side, any comments on what you're seeing there and maybe what type of sand volumes we can look for from your mines in Q1?

We expect a quarter-over-quarter increase in the volume of sand. We have seen a few operational delays in relation to the railroads. Obviously the first quarter is the most difficult quarter of the year given the weather conditions and we've seen some of that impact. But the team is executing well with the six weeks we have and as I said earlier, we expect that quarter-over-quarter increase in volume on sand sales.

Daniel, one of the things I would add to that is, our vertical operation, our vertical integration model helps us tremendously and as you know 2.1 million tons of our 4.4 million ton capability goes to us internally, but it also gives us the ability when times do get rough like they are in the first quarter to continue to service our group because we not only have it we have our own internal sand mines. We do the logistics for our sand and we also truck it the last-mile and that has been a helpful model through very, very tough times.

Got it. And hey Mark, one point of clarification, quarter-over-quarter increase in volume of sand, you mean equity sand is not really a comment on broker volume is that fair?

That's correct. We always source our sand internally first and we broker opportunistically.

Okay, great. And then, so may be as a last one, just an update on against the only oil field side here is we've done a lot on infrastructure. The Permian presences you've established now in the pumping market. Talk maybe a little bit about how that's gone to date and whether you see the allocation of reach you have presently is likely to stick at least for the next couple of quarters or whether there could be some further shifts.

Well, as we stated we started pumping operations in the Permian. Permian’s the most active basin in the world. We wanted to be a part of it. We wanted customers to lead us in. We've done that and we expect to expand further in that area and part of it is a strategic aspect of getting a little bit away from the natural gas markets and moving more towards oil. But always having a customer to lead to us and be a part of that. We feel very good about our presence in the Permian.

Okay, great. Thanks for the time.

Thank you, Daniel.

Thank you. And our next question comes from the line of John Daniel with Simmons.

Hey guys, good quarter. I guess the quick followup the, on the last question, if you look forward the next several quarters are there any plans to relocate, any of the frac equipment basins are you stay put and grow from there?

John, we look at that opportunistically. Obviously the equipment is mobile and as already mentioned earlier we've made a conscious move to move more towards oil, so we'll move the equipment where we have the highest returns. We had a customer to lead us into West Texas and we would expect to further evaluate that.

I'd like to say you've active requests to do that now?

That's correct.

Arty, you mention last year looking at, I wrote it down correctly, 135 deals, how does the deal flow look this year and sort of where do you see the most opportunities presenting themselves?

We see a lot of deal flow and it's one of those where we constantly are looking at. We've got 30 active right now which would then imply a run rate that will probably be higher than last year. We think that there also present some opportunities in the infrastructure business as well that we hadn't really been that much a part of last year. We think that there are some opportunities within that to do some things as well, so we think it's going to be a better year for looking at acquisitions and we're very selective, is got to have the right return.

If you step back and think about some of the opportunities you have and obviously you can't say what they are but last year and narrative that we were hearing from lots of folks was that expectations from sellers was too high. I mean I guess everybody thinks are worth more than they really are, but do you see that same level of expectations today are people more reasonable it's just some thoughts on that would be appreciated?

You know, John, it's some of the deals that we are seeing are the second time around and certainly the public markets are not open for everybody and I think that's become clearer as time has gone on. So we are seeing some opportunities that are coming back with a more reasonable approach and it's not so much of a hockey stick effect that we've seen in the past.

Final one for me and this will be my dummy question for the day or maybe they and done this. But you mentioned the how you get to the RFP process in Puerto Rico, can you speak to us what the competitive landscape is for people bidding against you down there and then just talk about that process is more complicated or less than what you do in the States.

It's not, it's always a competitive type approach to doing it. You may have seen the Wall Street Journal article this morning where Fleur is exiting the island. Fleur worked for the Army Corps of Engineers. We work for PREPA and we were the one that early on went in and started working for PREPA and I think it's paid huge dividends for us. So you have some competitors at better wrestling, you'll have other competitors that want to come in and take part in it. Remember that as you go from restoration to reconstruction, the reconstruction process can go on for years and at the point that I usually make is that super storm Sandy that occurred in 2012 timeframe, they are still doing reconstruction in New York that is FEMA backed to this day. So it could go on five to six years. And the Puerto Rican infrastructure was in very poor shape. They had a bankrupt group that was running it, being PREPA and they just didn't have the money to keep their infrastructure up to the common aspects and common standards and the newer technology. So we think that it has an opportunity to go on for several years. And we think with the execution of our team and what they've done we will have and the amount of people that we have there and the amount of equipment we have there, we will have a comparative advantage to get some of that work.

Fair enough. Thank you very much for your time.

Thank you, John.

Thank you. [Operator Instructions] Our next question comes from the line of James Wicklund with Credit Suisse.

Good morning. Can you hear me?

Yes.

You’re breaking a little bit.

Sorry, [indiscernible] .

Jim, you broke up so badly, I could not understand the question, sorry.

James, put on your [indiscernible] in your handset. James, are you still there?

Operator, we’ll just go to next question.

All right. Our next question comes from the line of Taylor Zurcher with Tudor Pickering Holt.

Hey guys, thanks. You talked about frac pricing not being at a level yet to justify new board economics, could you frame how big that Delta is today and whether you think that gap will close in the near term such that, you might see or order new equipment over the next let’s say couple of quarters.

As we evaluate the market right now. We think that the per stage pricing needs increase 10% to 15%. So we're not too far away from new build economics, but not at the point yet where we're willing to place that order. We think that the shortage of horsepower that we see in the market will likely get us to new build economics but we're not there yet.

Okay, great and then secondarily maybe more of a high level one, it’s clear that the three sort of primary our core segments moving forward or infrastructure pressure pumping in sand. And so, I guess my question is, as we think about the whole test portfolio moving forward, how did - within the existing portfolio how did the other couple segments or several service lines, I'm thinking about drilling and the other well services segments, how do those fit into the whole portfolio over the next 12 plus months?

Well, certainly they are positive cash generators. Because [indiscernible] are not an area where we're going to focus our investment and if it comes back to November 1, 2014 we had 19,130 rigs running in the U.S. We went down to a lower 404 in May of ‘16 and then we've come back up to where we're at the 975 but even the most optimistic say we're going to get to 11 to 1200 and it's still a very, very competitive market out there. So that's not going to be a huge investment area, but we'll pick our investments. If we see something where or if we have some customers lead us in, we'll look at those investments.

To expand on Arty’s comments, we’re seeing some selective investments in the other service lines that meet our return hurdles and we'll continue to invest where we see opportunistic investments.

We still like the organic growth when possible, if the return is there and the pricing is there.

Understood. Thanks.

Thank you.

Thank you. And that concludes our question and answer session for today. I’d like to turn the floor back over to Arty for any closing comments.

Thank you very much. We want to thank everyone for dialing in today during this very busy time. I want to personally thank all of our team. Without the hard work performed by each of you at Mammoth it would not be what it is today. 2017 was a very busy year and together we executed our growth plans. As we look to 2018 we anticipate building on our recent success. We look forward to speaking with you again in early May when we release our first quarter earnings. This concludes our fourth quarter conference call. Have a great day.

Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a great day.