Good day, ladies and gentlemen, and welcome to the Mammoth Energy Services Fourth Quarter and Full-Year 2018 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 Web site. 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, Liz. Good morning and welcome to Mammoth Energy Services fourth quarter 2018 and full-year 2018 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'd 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 and 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 year-end and fourth quarter press release which can be found on our Web site along with our updated presentation. Now I will like to turn the call over to Arty.

Thank you, Don, and good morning everyone. 2018 was a very good year for Mammoth. We saw year-over-year growth across all of our business lines, but most notably in our Infrastructure segment. This growth is best represented in our 2018 financials with revenues growing more than 140%, net income growing more than 530%, and adjusted EBITDA growing more than 230% when compared to 2017. When compared to 2016 the year we went public and earned $41 million in EBITDA, we have grown EBITDA by more than 12 times to over $540 million. While these stats are great on their own, this growth was executed while protecting the balance sheet exiting the year with $68 million in cash and no debt. From a portfolio perspective, our fourth quarter results again underscore our differentiation from many of the OFS companies we are compared to. This differentiation was expanded further in December through the purchase of Air Rescue services or ARS, and our investment in Brim, as we have done in our oilfield service business lines we are always looking at ways to vertically integrate our operations and have a helicopter fleet is a big step towards that goal. We are now able to bid on transmission projects with greater certainty as under most circumstances we will not be reliant on aircraft lease from third parties to perform the work. Additionally with Brim holding several FAA certificates, we are in position to expand or modify our fleet based upon our customers needs. The acquisition of ARS in late December allowed us to enter into a new business line that is distinctly different from both Cobra Aviation and Brim. ARS is a safety training and safety equipment manufacturer, which is highly respected in the aviation industry. ARS's main business line is the training of…

Thank you, Arty, and good morning everyone. 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. Mammoth's revenue during the fourth quarter of 2018 came in at $278 million, down 25% from the third quarter of 2018, a reduction of activity in Puerto Rico in our infrastructure segment and a slowdown in the oilfield completions market contributed to the lower revenue compared to the prior period. For the Full-Year of 2018, revenue came in at $1.7 billion, up 144% from 2017. Increased activity levels across all of our segments drove the increase year-over-year. Net income for the fourth quarter of 2018 came in at $68 million which was slightly below the third quarter of 2018. On a per share basis net income for the fourth quarter came in at $1.51 per diluted share. For the full-year of 2018 net income came in at $394 million or $5.24 per diluted share up 270% year over year. During the fourth quarter of 2018, we've recognized the tax benefit of $21 million or $0.46 per share related to a change in the mix of earnings between our United States and Puerto Rico operations. For the full-year of 2018, income taxes were $153 million resulting in effective corporate tax rate of 39%. Adjusted EBITDA for the fourth quarter of 2018 came in at $84 million as comparables consensus estimates of $86 million. Our corporate adjusted EBITDA margin was 30% during the fourth quarter of 2018. For the Full-Year of 2018 adjusted EBITDA came in at $547 million up 230% year over year. The difference between analyst estimates is $480 million and actuals are the result of the reversal of bad debt expense of approximately $68…

[Operator Instructions] Our first question comes from line of Tommy Moll with Stephens. Your line is now open.

Good morning, and thanks for taking my questions.

Good morning, Tommy.

Arty, I'm sure you'll get a lot of questions on Puerto Rico today, so I will limit myself to one for now, but you mentioned that you anticipate some additional RFPs to start coming out maybe the second-half of this year for work that could begin sometime next year.

Yes.

Does that assume that the Congress will in the interim approve additional funding or is your visibility there based on plans that have already been approved?

No. It's based on additional funding that we think will be coming, but it's also based on the amount of work that has to be done. The fragility of the system is it's no better than it was before Hurricane Maria. And we think that there will be -- there is a lot of work going to come. Unfortunately, in this type of situation, there is a lot of front-end engineering that has to take place and that's being done right now. So, that means that once a front-end engineering is done, the RFPs will be led, we think that will come in the second-half of 2019 and then the work we'll commence in 2020.

Okay. Like I said I anticipate you'll get a lot more on Puerto Rico, so I'll refrain from asking follow-ups until later potentially and move over to one follow up on sand. You mentioned pricing is up so far this year at 30% versus the lows in Q4 which is great to hear. And I just wanted to clarify. Excuse me. Is that up of the 27 and change average price from Q4 or that's the blend and we're up off of some lower number than that. And then also any insight you can give us into what is driving the market up into the right would be helpful. Thank you.

Hey, Tom, this is Don. So the 30% that we referenced there is spot market 40/70. Obviously we have three contracts in place that are at much higher rates than spot today. To frame that the -- in the fourth quarter 40/70 hit a low in the mid-teens and it's up significantly off of those lows today.

Now to the second, the compound part of that that question was what we're seeing in the marketplace and that type of thing. And our orders have picked up significantly after the first-half of the year, 40/70 is selling very well and we don't know if this is a complete flight to quality and some of the issues with -- so we've seen several reports as you have on the quality of West Texas regional sand and the crush factor being much stronger out of sand coming from northern white plants. So but one thing is we are seeing is we're seeing the strengthening in that market both on a pricing and a quantity basis.

Okay. And so Don, I appreciate your [indiscernible] on the pricing changes, maybe just to try to laser on a key issue. If you are looking at the blend though at the segment level, so far in first quarter or what you see for first quarter shaping up are you pretty comfortable going back into a positive gross margin territory for the segment.

Tommy, yes, this is Mark, Absolutely. We think we'll swing back positive for that segment inside of Q1.

Okay. Great, thank you, that's all for me. I'll get back in the line, thank you.

Thanks, Tommy.

Our next question comes from the line of Jason Wangler with Imperial Capital. Your line is now open.

Hey, good morning guys.

Hey, Jason.

I just wanted to ask excuse me on the infrastructure side -- pertaining to the U.S. side how do you see that business, I assume you are going to be pulling the equipment back and the people back from Puerto Rico and getting to work on the U.S. stuff but is that timing going to work out well with the backlog that you have or just how we should be thinking about that segment going forward being predominantly U.S. focused.

No, the timing is working out, it's working out extremely well both bringing the equipment back and being able to put it and make it fully utilize as well as bringing the people back - the growth in our, if you remember I think you remember the numbers, at the end of the third quarter of 2017 in the continental United States we had $30 billion of backlog. Today we have $625 million dollars of backlog and that is that continues to grow. So this really is gives us the ability to avert some capital and bring those assets back from Puerto Rico to put them to work.

Okay, that's great, and then maybe for Mark just obviously with the slowdown in Puerto Rico how do you think about working capital specifically accounts receivable kind of coming into you guys as you start to slow that in the first quarter and obviously kind of don't have much going on the rest of the year either [indiscernible] until those contracts come up for bid, how should we be thinking about that turning into cash?

I think we view as near-term conversion to cash throughout the relationship with PREPA. They've continued to pay us better than what we see from lower 48 utilities for storm work. So we fully expect that we will see that receivable convert to cash in the near term.

Great…

As of March 8, we had $281 million in receivables from PREPA and just a reminder I mean they've paid us in excess of a $1 billion in the last year. So we expect to collect those monies and we do expect to elect them very quickly. The small amount of debt that we took on was just a timing issue with the taxes and we expect to be out of debt very quickly as this year progresses.

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

Our next question comes from the line of Daniel Burke with Johnson Rice. Your line is now open.

Yes, good morning, guys. I guess anyway it's easier…

Good morning, Daniel.

Good morning. It's easier to say on the U.S. infrastructure side backlog now up over $600 million that's defined inside of a three-year window. Certainly you guys are ramping. But is it reasonable to assume that by the time we get to the second-half of this year you'll be at an annualized $200 million revenue run rate? Can you get there that quickly with the manpower and the equipment you'll be redeploying?

We think so Daniel as we have been -- all along we've been excited about this business and we'll continue to deploy capital. The need is certainly there, we see the demand and the team has executed at a very high level as we've mentioned before in Puerto Rico. So what that really has become is a showcase for the talents of the team and we fully expect that that will transition that work to North America.

And also I wouldn't underestimate the use of the helicopters the Brim investment that we have and the Cobra acquisition of additional helicopters at the end of December. Right now, we are managing 11 helicopters, all total. So all that we own and then we are contracting with others. And we think that the aviation gives us a very good business opportunity with those assets.

Got it. And then, Arty just to be clear that 11 helis, how do those split between continental U.S. and Puerto Rico as of today?

We have -- go ahead, Don.

As of today, Daniel, we have two helicopters in Puerto Rico that are working. A lot of them, of the 11 helicopters are on the West Coast, working from PG&E after the wildfires there. So for the most part, it's all Continental United States. One of our owned helicopters is in Puerto Rico today. One of them is kind of third party and then the other four of our owned helicopters are here in the States.

Okay. Maybe just one on Puerto Rico, would demo be incremental to the year-end backlog figure that you all described?

Daniel, the demobilization is included in that year-end backlog figure.

Okay. Okay, good to understand. And then I'll ping pong just if you allow one last question then back on the U.S. infrastructure side. I mean any change with the greater weighting of higher margin transmission work. I mean mid-teens U.S. EBITDA margin, is that still sort of a guidepost for this year for 2019.

Yes, 15% to 18% is still the guidepost that that hasn't moved.

Okay. All right guys I'll leave it. I'll leave it there for now thank you.

Thanks, Daniel.

Our next question comes from the line of Marshall Adkins with Raymond James. Your line is now open.

Good morning, guys, I'm just trying to get my arms around all this. So from what you've said so far it sounds like the Puerto Rican backlog goes away because they're shutting this down over the course of 2019, a little bit more to do. But you lose over $500 million of backlog from that. But you can take all those assets move to the U.S. and they're going to be fully utilized in short order with similar profitability. That's what I'm hearing I just want you to comment on that, and make sure that I'm kind of hearing it right.

Marshall, I think it's important to characterize Puerto Rico as a pause. It's not a shutdown; it's a pause while the engineering catches up. So we fully expect that RFPs will be pushed out in Q3 or Q4 this year. And the same amount of work that we anticipated all along still has to be done in Puerto Rico. So while we work through this pause in Puerto Rico we'll shift those assets back to North America and put them to work, but it's certainly not a "Stop" in Puerto Rico, it's just a pause on that work.

Okay, but it sounds like you're still confident that you can take those assets and put them to work doing, similar type work at similar margins, is that a fair statement?

We will put that equipment to work in the Lower 48 and we expect those margins to be 15% to 18%.

Okay. So maybe it was a little bit on margins there -- but then we ramp back up in 2020 and you move stuff hopefully back down there? Correct.

We think we have shown our execution in Puerto Rico. Our teams have been there for 16 months and have executed at a very high level through their execution and their knowledge of the system. We fully expect to bid on that work and be competitive.

Yes, so I would add on a broader note about Tusk we're going to build cash this year and if you look at our ROIC for 2018 it was 35% and we're going to be poised for what comes next and obviously very -- we look at a lot of acquisitions a lot of other opportunities and I think the message really for Test 18 was an exceptional year, if you to look at us 18 months before in 2017 I don't think we had any idea where we would be today. So we think that same opportunity lies in front of us with future growth of some of the existing lines that we really want to focus on and with future opportunities to do some M&A.

Right. Well, clearly all have been very adept at moving and adjusting to changing market conditions that was going to be my next question is it seems like you're putting a lot of money into this other oilfield services. I would like to hear more about what you're kind of looking at there -- getting a little more detail kind of specifically your rental tool seems to be improving what type -- I mean there's a lot of parts of the rental business, what are you focusing on there and then water handling as well seems to become a bigger deal. What's -- and there's many components that what specifically you focus on there? Just give us a little more color about those type investments that seems to be that's your next kind of big push?

Yes, absolutely is. We really like what's going on in rental business. We expanded the Mid-Con. But one of the things out of expanding the Mid-Con, it's not all oilfield services. We've been able to get some niches in the construction industry here. So with some of our cranes, we've actually got cranes out and deployed at Tinker Air Force Base here in Oklahoma City as we've -- so we're not only looking at those opportunities that exist in the oilfield on the rental side. We're also looking at it for other areas as well. We think generators are a strong aspect of that rental business and we've made some investments there. But one of the things we get to do is we get to pick and choose the best investments within that particular grouping. So we see some investments that are 8-month, 9-month, 10-month type paybacks in that area. Water transfer business started organically in last year is growing significantly. We invested some money in that and we continue to invest money as we see that grow. The other thing that we're trying to take advantage of is logistics areas, not only just trucking in the oilfield but other areas as well. We hired a truck broker to come on to our team and we're looking at broken -- brokering other commercial activities. So, the move in making the transition from an oilfield services company like we were in 2016 to an energy services company, and going to the industrial side, that part truly continues for us. We made and Marshall I haven't talked to you in a long time. But we made application MSCI to move our GICS code over and they're going to revisit that we've been in active communication with them and they're going to revisit that in after our annual reporting comes out. We think that's a big move. We think we get other investors. We initiated the dividend last year. We're paying 2.3% dividend and returning money to shareholders. That is indicative of an industrial company. So, and you know, my background pretty well, so more come from a more of industrial background.

Great, Arty, that's helpful, thank you.

Thanks, Marshall.

[Operator Instructions] Our next question comes from the line of Taylor Zurcher with Tudor, Pickering, Holt & Co. Your line is now open.

Hey, good morning.

Good morning.

Most of my questions have been answered; maybe I'll pass it out on the pressure pumping side. You talked in the script about your six frac fleets being effectively fully utilized at least since late January and so as we think about the sequential changes in utilization from Q1 to or from Q4 to Q1, I suspect there's some weather issues that you're dealing with and that you typically deal with every year up in the northeast so I'm curious if you could help us understand how we should expect average utilization changes from Q4 to Q1

Yes. Really, really feel very good about -- very strong. We thought that a lot of our issues as things wound down obviously with the price of oil dropping 30% in a short period of time like it did. It was one of those type things that affected a lot of other people. But it was also budget exhaustion. The E&Ps don't get rewarded if they go outside their cash flows and they had exhausted their budgets. And we saw that we thought and we correctly predicted that the market would pick up for us right after the beginning of the year. And it did a little bit earlier than that in sand, but it certainly did with the utilization of our crews. But if you look at it we have four crews up in the Northeast and not a lot of discussion, but I think everybody probably saw there was 204 [ph] Bs taken out of the system in the last weekly EI report. We're down 1.1 trillion Ts in storage. That's one of the lowest marks we've been in a long time. Last year storage at this time was 1.5 trillion and five-year average is 1.7 trillion. So we think significant opportunities are in the gas markets so, are going to be there. And that's why we have four spreads up there currently working and oil price is at $58, lot different commentary than when it was at $42.

Got it. That's helpful. And then on the pricing side, I mean you're still doing pretty healthy adjusted EBITDA per fleet. So two part question is, is that - my back of the envelope math would suggest around $13 million and EBITDA per fleet on annualized basis today. Is that something you think you can hold constant moving forward? And then the second part is, you've had some of your peers in the Mid-Con in particular, talk about how pricing is fairly challenged in that market at least relative to other markets around the country? And so, curious, if you're seeing any delta in pricing between the Utica and Mid-Continue?

The Mid-Con is highly competitive right now. To answer your first question, we think that $13 million dollars per fleet can be held Q4 to Q1 sequentially. Pricing is relatively unchanged, but the activity levels have picked up quite a bit. All six of our fleets have been working since late January, so we're optimistic about the utilization of our fleet. And I think it's important to note that as commodity prices recover, we expect that pricing for our services will recover as well.

Don't forget that we also have two fleets under contract that are operating under contract with a little bit different pricing scheme there and then the same thing holds true on our sand. We have contraction - contracted sand that were -- those contracts were made during pretty, pretty good times.

Got it, thanks. I will turn it back.

Thank you.

Our next question comes from the line of John Daniel with Simmons. Your line is now open.

Hey guys, thanks for squeezing me in.

Hi, John.

I just wanted to follow-up on -- I think Daniel asked the question and you answered that you expect to be with your U.S. infrastructure back on a $200 million sort of annual run rate from rev for the back half to the year, I just want to make sure that I heard that correctly and then just sort of your vision, Arty, in terms of what that growth rate could be as you head into 2020?

Well, let me answer the first part -- the second part of your question first and we think the growth rate - we are bidding on a lot of work and we're focusing on some transmission things. We've actually been bidding some with the E&P's putting in electrical infrastructure out in West Texas in the Permian. So we think the future is very bright. We have a very, very strong business development group and they are in a lot of offices in -- we look at a lot of different things, I mean we're actually looking at things internationally as well. When you think about it from an international perspective, we have the ability to do things like logistics and supply chain and all those things that we've proven that we have done under pretty tough conditions in Puerto Rico, I know everybody, people have been going to San Juan and so, all things are all back to normal. Remember that they weren't when we went there in 2017 and we had to establish not only housing which we had experienced with our lodging up in the oil sands and then the supply chain. We had an ex-military guys that are part of our team that set up things logistically. So we're doing a lot of bidding on a lot of different projects and so we think that the growth is going to be there and we're going to grow it, continue to grow it significantly. Helicopters were a big part of that. When you start to do bidding for transmission type business you remember from manufacturing background we like to control our inputs. Helicopters are a part of that input and having the availability of our helicopters is a very very strong part because it's a one stop deal for customers on transmission business.

Okay. So in other words, occupancy could be growing that from the $200 million run rate. Just make sure I translate it correctly.

Yes.

Okay, okay. [Technical Difficulty] sort of direct modeling question but just given that we're here in mid March right now. Mark can you give us just frame first where infrastructure might shake out in terms of top line in margin for Q1. And do you expect any type of one-off costs or benefits this quarter just as this thing is winding down.

Yes, I think as you look at Tier 1 the swing there really depends on the demobilization of equipment which is included in that $140 million in backlog, demobilization is about $50 million of that, so that certainly maybe a one-off type item in tier 1.

Okay.

And then margins in Puerto Rico we would expect to be in a similar zip code to what we saw for Q4.

Got it. So if I think from a -- I'll just pop it down offline. Okay. That's it for me. Thanks, guys.

Thanks, John.

We have a follow-up question from the line of Tommy Moll with Stephens. Your line is now open.

Yes. Thanks for working me back in. And it's been partly answered but, I just want to make sure I'm hearing you correctly on the redeployment of assets from Puerto Rico to the lower 48. Is are we hearing from you that, on the current backlog, you can immediately take those assets redeploy, and your revenue run rate should go up in the lower 48 just as you run through the backlog quicker. Or we should assume there's maybe a longer lead time where you bring the assets back, you go out and build more work. Theoretically your backlog will grow. And then with that, the quarterly run rate for revenue on rise with it.

Tommy, I think that your question has two answers. One, we expect the revenue growth rate to grow with those assets coming back, but we also expect the expense side to come down. We're currently renting equipment to do the workload that we have right now, at the tune of about a $1.5 million a month. So that will displace those rentals and take the cost of doing business down. So we see it as certainly a good opportunity for the deployment of those assets.

Okay. And then last one for me. There were recently some pretty large E&Ps that had analyst days talking about some aggressive medium-term growth plans particularly in the Permian. And one of the themes that you guys have capitalized on in the past is to figure out what's going to be tight and then go out and get exposure to that before everyone else gets there kind of skate toward the trucks going not where the truck is I guess is the way to put it. Are there any other themes that you have in mind as areas in oilfield that you think are likely to get really tight here and or those some of the areas that you're already involved in?

I think as we look to oilfield right now and our investments we're making it's already mentioned earlier we're certainly excited about the rental side of the business as well as the water transfer side of the business. So we continue to invest and see high demand in those two particular areas in the oil field.

Okay. Thanks.

Appreciate it.

Thanks, Tommy.

And that concludes today's question-and-answer session. I'd like to turn the call back to management for closing remarks.

Thank you everybody. We thank everybody for dialing in today. I want to personally thank our team without team. Without the hard work performed by each of you, Mammoth would not be what it is today. In particular, I want to thank our infrastructure teams who have shown the utmost professionalism while working in a very challenging environment and have answered the call when natural disasters have occurred. Future is bright for Mammoth and our roughly 2,380 team members, as we intend to continue to grow and deliver shareholder value appreciation in the years to come. Thank you to our shareholders for your support and interest in our company. We look forward to seeing many of you at our upcoming conference appearances and speaking with you again in May when we release our first quarter earnings. This concludes our fourth quarter conference call. Good day.

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