Good day, ladies and gentlemen, and welcome to the Mammoth Energy Services Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] I would now like to introduce your host for today's conference, Mr. Don Crist, Mammoth Energy Services' Director of Investor Relations. Sir, you may begin.

Thank you, Mel. Good morning, and welcome to Mammoth Energy Services' Second Quarter 2019 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, 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 first quarter press release, which can be found on our website along with an updated presentation.Now I'll turn the call over to Arty.

Thank you, Don, and good morning, everyone. Before I discuss Mammoth second quarter operations, let me address one topic which has overshadowed our operations and contribute to the volatility in our stock price beyond the general weakness within the oilfield services group. Recent developments have focused a bright spotlight on the many problems confronting Puerto Rico.During the second quarter, we received approximately $42 million in payments from PREPA. As of July 30, we had approximately $250 million in accounts receivable related to our work in Puerto Rico. We continue to work with PREPA, COR3 and FEMA in an effort to collect our remaining accounts receivable and help PREPA get reimbursed from FEMA. One important thing to note is that PREPA has paid us more than they have been reimbursed by FEMA and we continue to work with PREPA to provide the necessary documentation to obtain additional funding from FEMA. The electric grid in Puerto Rico was fully energized today due in part to the outstanding performance of our crews, which navigated very difficult working conditions, including rain forests and mountains. The quality of our work has not been called into question.Our operations in Puerto Rico have concluded and all of our equipment has now been demobilized from the island [ph]. As we discussed on our last conference call additional expenses were incurred during the second quarter to preform necessary maintenance on returning equipment. The resources we utilized in Puerto Rico were maintaining using support from our Lower 48 operations. We are performing a full evaluation of our Lower 48 operations in order to rightsize the cost structure and streamline operations for our current backlog, which stands at $595 million. This process is expected to be completed over the next three to six months. Industry-wide demand for T&D services remains high,…

Thank you, Arty, and good morning, everyone. 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 second quarter of 2019 came in at $182 million, down 30% from the first quarter of 2019. A majority of the change quarter-over-quarter was due to the work in Puerto Rico coming to an end in our infrastructure segment.Our net loss for the second quarter of 2019 was $11 million as compared to net income of $28 million during the first quarter of 2019. Several factors contributed to the reduction, including a general slowdown in oilfield activity and a work in Puerto Rico coming to an end. On a per share basis, the net loss for the second quarter of 2019 came in at $0.24 per diluted share. Adjusted EBITDA for the second quarter of 2019, came in at $9 million, resulting in a corporate adjusted EBITDA margin of 5%. Selling, general and administrative expenses came in at $9 million or 5% of revenues during the second quarter of 2019, compared to $17 million or 7% of revenues in the first quarter of 2019.CapEx during the second quarter of 2019 was approximately $10 million. The majority of which was related to the organic growth of our trucking, rental and water transfer businesses. For the first half of 2019, CapEx totaled approximately $30 million. We have lowered our full year 2019 CapEx budget to $41 million from $80 million. Of this total approximately $6 million as designated for infrastructure services with approximately $35 million designated for oilfield services. Given our current outlook, we expect the 2019 CapEx program to be completely funded through internally generated cash flows. As a result of oilfield market conditions. Our board of directors has decided to suspend the dividend. As of June 30, 2019, we had $7 million in cash and $82 million of borrowings under our $185 million credit facility, resulting in total liquidity of $100 million net of letters credit. We thank our shareholders for their support.This concludes our prepared remarks and we thank you for your time and attention. We will now open the call for questions.

[Operator Instructions] First question comes from the line of Mr. Tommy Moll of Stephens. You may ask your question.

Good morning, and thanks for taking my questions.

Good morning, Tommy.

Wanted to start on the infrastructure. There were some crosscurrents in the second quarter, and I'm hoping you can help us unpack it to think about what may lie ahead, but my understanding would be that all the revenue that hit in the quarter was U.S. And so my presumption there would be that's a fair way to think about a run rate as you work through your backlog, which is still pretty strong. And then the crosscurrent would -- in the second quarter would be the expense line, whereas you called out there, there were some elevated expenses related to Puerto Rico that may trail into the rest of the year. But that over time, maybe in the next few quarters, we ought to get back to that, call it, mid-teens type margin once Puerto Rico kind of gets fully cleaned up and we've got the run rate in the Lower 48. So if you could help us understand those two dynamics, it'd be a big help. Thanks.

Yes, Tommy there's a few questions in there so I'll try to split the answer up a little bit. Q2 included just under $11 million in revenues from Puerto Rico relative to some of the demobilization. I think -- if you look at the quarter, we exited the quarter at a run rate of about $150 million per year out of North America, so to your point, there's a fair point of noise inside of that quarter but to takeaway as we exited the quarter, about $150 million in revenue run rate. There is some noise inside of the quarter infrastructure segment relative to Puerto Rico and specifically related to the demobilization of people and equipment. So we've got some inflated salaries during the quarter, as we demobilized our personnel. We've also got some repairs and maintenance inside the quarter and some associated labor related to that.The equipment was working in fairly harsh conditions in Puerto Rico, so it will take us some time to work through our equipment, get it prepared to redeploy in the Lower 48. And that also has an ancillary impact on rentals as we ran equipment to do the work that we've got. So there's some noise in Q2, but I think one positive takeaway is that we're fortunate to have the labor that we've got. This is a labor-starved industry and to have the high quality labor that we've got inside of the infrastructure segment is actually a positive on a go forward basis.

Let me expand a little bit on that, Tommy, as well. Remember the entire story at one point, Tom, we had a 1,000 people, over a 1,000 people on the island, we had over a 1,000 pieces of equipment. And that came to an end on March 31. We worked in extremely harsh conditions in Rainforest, in mountains, in tough conditions that took a lot of wear and tear on the equipment. And when we demobilized back, the people made it back faster than the equipment did. And we were stuck in a situation. And that's why we talk about streamlining. One of the first things you do from modeling -- training and modeling pass is you stabilize the process. And that's exactly what we're going through. We exited the island. We did a tremendous job on the island with our teams executed at a very high level. Now that we've exited, we'll come back and we'll put those streamlined processes in and become very efficient at what we do.Remember this store that what we've done from 20 crews in October of 2017 to today, we have over 150 crews deployed and we will continue to work that, as Mark stated, we think that this is there is more demand than supply, and we think that we have a tremendous opportunity in this space. This is part of our industrial shift and moving over we've discussed that in the last four conference calls that we are moving to an industrial focused company. And we think we're looking at a lot of other different opportunities in the industrial side. And that's not that we will completely leave the oil fields service side, we're going to stay in selected investments that we think can bring a return to us.

Thank you, both. And as a follow up, I guess, I did want to spend just a brief minute on the oilfield service side specifically for your pressure pumping business where it sounds like the calendar didn't come through exactly as had been planned for second quarter. Could you update us on what the current utilization is -- how many of your six fleets are running, where they are and what the calendar looks like going forward?

Yes, we have currently -- we have three that are running. Two in the Northeast, one in [indiscernible] area of Oklahoma. The -- quite honestly, the calendar has some whitespace in it as we get ready to go. I think that's true of most frac companies and a lot of it is budget restraint and budget spending by our customers, which as you well know, that is completely changed over the last few years. We'll weather the storm, we'll get through it and we'll be ready to run full out, that's the beginning of the year.

Okay, thank you. That's all for me.

Thanks, Tommy.

Thank you. Next question comes from the line of Jason Wangler from Imperial. You may ask a question.

Good morning. I wanted to talk about maybe I didn't see it, at least in the slides. The backlog in the infrastructure side. Just maybe if you could talk about kind of your outlook on that side? I appreciate Mark's kind of run rate numbers, but wondered if you had kind of some backlog numbers behind that.

Yes. Jason, the backlog currently sits at $595 million and that's all U.S. the pipeline of bidding opportunities for the infrastructure segment is fairly robust. And the one positive take away outside of the run rate that I mentioned earlier, as well as the backlog, is that they're getting more wins on the transmission side of the business, which is the higher margin work and certainly speaks to some of our vertical integration opportunities that we've got inside of that segment.

Okay, great. And then maybe on the pressure pumping side. Obviously -- are you actually stacking those -- that equipment that you're not running? Or what's kind of a plan there? And can you maybe just talk about the -- I'm assuming Appalachia and Mid-Con just kind of the active crews where they're sitting today?

We are warm stacking the equipment to take it down to three and we're making the changes in our staffing and that type of thing that are related to that. We have always been very transparent about what we do and we are -- we think that the next three to six months are going to be tough, but will weather the storm. Don't forget, we were running two crews when we went public in 2016 and it's one of those type situation we know how to manage through this process. We've done this before. We had to -- as we went through 2014 to 2016 timeframe through one of the worst downturns in oilfield services. We were able to go through that. We're able to reduce our debt during that time and we do it by maintaining the disciplined approach to cost and taking cost out of the system where ever -- where it's supposed.

I appreciate the color. I'll turn it back.

[Operator Instructions] We have the next question comes from the line of Praveen Narra of Raymond James. You may ask your question.

Good morning, guys. I just want to come back to Tommy's question on kind of unpacking the infrastructure business. So I guess, if we take out the headwinds -- the headwinds go through -- I'm just -- and the revenues come down; as we go through the remainder of the year, I guess, do we expect the infrastructure EBITDA to be positive for the second half or how do we think about the roll off of those costs?

Praveen, it will take us three to six months to get through the infrastructure segment. We'll expect to see continuous improvement through the back half of the year and exiting the year with positive EBITDA.

Okay, that's helpful. And then I guess previously you guys have given us an expectation on year-end cash balance. Could you update us on that given all the changes? I guess, just wondering if there's significant changes there.

No. We fully expect to collect our receivables from PREPA, and we're working closely with PREPA and COR3 to provide them all of the documentation they need in order to request funding from FEMA. So I think one of the overlooked facts is that PREPA's advanced money to us over and above what FEMA has funded PREPA. So they've gone into their liquidity to pay us for the work that we've done. And as I've already mentioned dimension, there's been no question about the quality of the work that was done. We've received $42 million in payments in Q2, and we continue to have an open dialogue with PREPA regarding the payment stream.

Yes, let me expand on that a little bit. You take a look at it from a higher level, we had a contract with PREPA. We did the work at a high level on-time on-budget. Nobody that says we are not going to get paid. We are working closely with PREPA. And Mark and I were on the island two weeks ago, we had a meeting with Jose Ortiz, and we're working through to help each other. We're working with PREPA to get the documentation correctly, along with COR3, COR3 is a government appointed -- governor appointed group that stands for the Central Office for Recovery, Reconstruction and Resiliency. And I had dinner with Omar Marrero within the last 45 days who heads that up. We are working closely together to get all the documentation that we need in order to get paid. PREPA has been a good partner and we continue to work that process, and we feel good about where we're going to exit from a cash standpoint and where we are at the end of the year.

Perfect. Thank you, guys.

Thank you.

I am showing no further questions at this time. I would now like to turn the call over to Mr. Arty Straehla.

We want to thank everyone for dialing in today. I want to personally thank our team without the hard work performed by each of you, Mammoth would not be what it is today. We believe the future is bright for Mammoth and our team members as we intend to strategically develop our service offerings to grow and deliver shareholder value in the years to come. Thank you to our shareholders for your support and interest in our company. Given the current oilfield market conditions, we are working hard to control cost and transition Mammoth into an industrial company that is less relied on commodity prices and more aligned with the industrial sector. We look forward to seeing many of you at our upcoming conference appearances and speaking with you again in November when we release our third quarter earnings. This concludes our second quarter conference call. Good day.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.