Mammoth Energy Services, Inc. TUSK US Equity☆

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this 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 Factors” and the section entitled “Forward-Looking Statements” appearing elsewhere in this annual 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, well completion services, natural sand proppant services, drilling services and other services, which includes aviation, equipment rental, crude oil hauling, remote accommodations, equipment manufacturing and infrastructure engineering and design services. Our infrastructure services division provides construction, upgrade, maintenance and repair services to the electrical infrastructure industry. Our well compeltion 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 aviation services, equipment rentals, crude oil hauling services, remote accommodations, equipment manufacturing and 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 equipment manufacturing operations. Our equipment manufacturing operations provide 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 equipment manufacturing operations have initially served the internal needs for our water transfer, equipment rental and infrastructure businesses, but we expect to expand into third party sales in the future. We are continuing to explore other opportunities to expand our business lines as we shift to a broader industrial focus.

Our revenues, operating (loss) income and identifiable assets are primarily attributable to four reportable segments: infrastructure services; well completion services; natural sand proppant services; and drilling services. In 2019, we included Barracuda Logistics LLC, or Barracuda, in our pressure pumping segment, Cobra Aviation Services LLC, or Cobra Aviation, Air Rescue Systems Corporation, or ARS, and Leopard Aviation LLC, or Leopard, in our infrastructure segment and Mako Acquisitions LLC, or Mako, in our drilling segment. Based on our assessment of FASB ASC 280, Segment Reporting, guidance at December 31, 2020, we changed our presentation in 2020 to move Barracuda to the sand segment and Cobra Aviation, ARS, Leopard and Mako to the reconciling column titled “All Other”. Additionally, we changed the name of our pressure pumping segment to the well completion segment in 2020. The results for the years ended December 31, 2019 and 2018 have been retroactively adjusted to reflect these changes.

Since the dates presented below, we have conducted our operations through the following entities:

Infrastructure Services Segment

•Cobra Acquisitions LLC, or Cobra—January 2017

•Lion Power Services LLC, formerly Cobra Energy LLC—January 2017

•Higher Power Electrical LLC—April 2017

•5 Star Electric LLC—July 2017

•Cobra Logistics LLC—February 2018

•Cobra Caribbean LLC—October 2018

•Python Equipment LLC—December 2018

Well Completion Services Segment

•Stingray Pressure Pumping LLC—March 2012

•Silverback Energy LLC—November 2012

•Redback Pump Down Services LLC—January 2015

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•Mr. Inspections LLC—January 2015

•Mammoth Equipment Leasing LLC—November 2016

•Bison Sand Logistics LLC—January 2018

•Aquahawk Energy LLC—June 2018

Natural Sand Proppant Services Segment

•Muskie Proppant LLC—September 2011

•Barracuda—October 2014

•Piranha Proppant LLC—May 2017

•Sturgeon Acquisitions LLC—June 2017

•Taylor Frac, LLC—June 2017

•Taylor Real Estate Investments, LLC—June 2017

•South River Road, LLC—June 2017

Drilling Services Segment

•Bison Drilling and Field Services, LLC—November 2010

•Panther Drilling Systems LLC—December 2012

•Bison Trucking LLC—August 2013

•White Wing Tubular Services LLC—September 2014

Other

•Great White Sand Tiger Lodging Ltd.—October 2007

•Redback Energy Services, LLC—October 2011

•Redback Coil Tubing, LLC—May 2012

•WTL Oil LLC, or WTL, formerly Silverback—June 2016

•Mammoth Energy Partners, LLC—June 2016

•Mako —March 2017

•Stingray Energy Services LLC, or Stingray Energy Services—June 2017

•Stingray Cementing LLC—June 2017

•Tiger Shark Logistics LLC—October 2017

•Dire Wolf Energy Services LLC—January 2018

•Cobra Aviation—January 2018

•Black Mamba Energy LLC—March 2018

•Stingray Cementing and Acidizing, formerly RTS Energy Services LLC—June 2018

•Ivory Freight Solutions LLC—July 2018

•IFX Transport LLC—December 2018

•ARS—December 2018

•Predator Aviation LLC—April 2019

•Leopard—April 2019

•Anaconda Manufacturing LLC—September 2019

•Aquawolf LLC—September 2019

Impact of the Ongoing COVID-19 Pandemic and 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, and continues to adversely affect, 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. While OPEC members and certain other nations agreed in April 2020 to cut production and subsequently extended such production cuts through December 2020, which helped to reduce a portion of the excess supply in the market and improve crude oil prices, they agreed to increase production by 500,000 barrels per day beginning in January 2021. As a result, downward pressure on commodity prices could continue for the foreseeable future. We cannot predict if, or when, commodity prices will stabilize and at what price points and when global inventories will return to normalized levels.

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Beginning in early March 2020, in response to the ongoing 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 remainder of 2020. Demand for both gasoline and oil rebounded to some extent toward the end of the second quarter of 2020 and stabilized to some degree throughout the second half of 2020, but remains 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, the reduced demand for oil and oilfield services 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.

2020 Highlights

•Net loss of $108 million, or $2.36 per diluted share, and adjusted net loss of $40 million, or $0.88 per diluted share, for the year ended December 31, 2020. See “Non-GAAP Financial Measures” below for a reconciliation of net loss to adjusted net loss.

•Adjusted EBITDA of $50 million for the year ended December 31, 2020. See “Non-GAAP Financial Measures” below for a reconciliation of net loss to Adjusted EBITDA.

•In the fourth quarter of 2020, approximately 66% of our revenue was derived from the industrial sector. Given the expected demand in the industrial sector, we believe that we are well positioned to grow our industrial business rapidly over the coming years.

Overview of Our Industries

Energy Infrastructure Industry

Our infrastructure services business provides construction, upgrade, maintenance and repair services to the electrical infrastructure industry. We offer a broad range of services on electric transmission and distribution, or T&D, networks and substation facilities, which include construction, upgrade, maintenance and repair of high voltage transmission lines, substations and lower voltage overhead and underground distribution systems. Our commercial services include the installation, maintenance and repair of commercial wiring. We also provide storm repair and restoration services in response to storms and other disasters. We provide infrastructure services primarily in the northeast, southwest and midwest portions of the United States.

We currently have agreements in place with private utilities, public IOUs and Co-Ops. Since we commenced operations in this line of business, a substanital portion of our infrastructure revenue has been generated from storm restoration work, primarily from PREPA, due to damage caused by Hurricane Maria. On October 19, 2017, 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 second 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 ended on March 31, 2019.

As of December 31, 2020, PREPA owed us approximately $227 million for services we performed, excluding $74 million of interest charged on these delinquent balances as of December 31, 2020. See Note 2. Summary of Significant Accounting Policies-Accounts Receivable to our consolidated financial statements included elsewhere in this annual report. 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

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largely dependent upon funding from the FEMA 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. On December 9, 2020, the Court again extended the stay of our motion and directed PREPA to file a status motion by June 7, 2021.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 us or (iii) otherwise does 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, 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 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 we nor any of our subsidiaries were charged in the indictment. We are continuing to cooperate with the related investigation. We are also subject to investigations and legal proceedings related to our contracts with PREPA. Given the uncertainty inherent in the criminal litigation, investigations and legal proceedings, it is not possible at this time to determine the potential outcome or other potential impacts that they could have on us. See Note 20. Commitments and Contingencies to our consolidated financial statements included elsewhere in this annual report for additional information regarding these investigations and 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.

Demand for our infrastructure services in the continental United States remains steady, and our crew count remained stable at approximately 115 crews throughout 2020. 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 the project and factors such as voltage, structure type, number of conductors and type of foundation. Each distribution crew generally consists of five employees. These transmission and distribution crews work for multiple utilities primarily across the northeastern, midwestern and southwestern portions of the United States. During the fourth quarter of 2019, we hired a new president for our infrastructure division and have added experienced industry personnel to key management positions. Our infrastructure management team also has experience with both solar and wind projects and we believe that this experience, combined with our vertically integrated service offering, positions us well to compete and win renewable projects. With this team in place, we believe we will be able 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.

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 the Ongoing COVID-19 Pandemic and 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. As discussed above, oil prices dropped sharply throughout March and April of 2020 and have continued to experience significant volatility. Oil and natural gas prices are expected to continue to be volatile and we cannot predict if, or when, commodity prices will improve and stabilize. We experienced a weakening in demand for our oilfield services during 2019 as a result of reductions in our customers' capital expenditure budgets. The sharp decline in oil prices beginning in March 2020 further reduced the utilization and pricing of our oilfield services.

In response to market conditions, we temporarily shut down our cementing and acidizing operations and flowback operations beginning in July 2019, our contract drilling operations beginning in December 2019, our rig hauling operations

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beginning 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 only operating one of our six pressure pumping fleets. Based on current feedback from our exploration and production customers, they are taking a cautious approach to activity levels for 2021 given the recent volatility in oil prices and investor sentiment calling for activities to remain within or below cash flows. Market fundamentals are challenging for our oilfield businesses and we expect this trend to continue for at least the first half of 2021. 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 are expected to remain depressed for the foreseeable future. While the oilfield portion of our service offerings continue to experience significant challenges, we expect to be ready to ramp up our oilfield service offerings when oilfield demand, pricing and margins strengthen.

We intend to closely monitor our cost structure in response to market 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. On 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. We believe Gulfport's actions are without merit and are vigorously defending the lawsuit. Further, on November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. Gulfport may take action in its chapter 11 proceeding to terminate its agreement with us and/or seek to reduce our claims for services and damages to which we may be entitled. We cannot assure you of the outcome of our claims in Gulfport’s chapter 11 proceeding, what our recovery on those claims might be or whether we will be able to preserve, extend or renew our contract with Gulfport on favorable terms and conditions or at all. Likewise, we cannot assure you whether we would be able to obtain replacement long-term contracts with other customers sufficient to continue providing the level of services that we currently provide to Gulfport. The termination of our relationship or nonrenewal of our contract with Gulfport, or one or more of our other significant customers, would have a material adverse effect on our business, financial condition, results of operations and cash flows.

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.

In 2018 and 2019, several new and existing suppliers completed planned capacity additions of frac sand supply, particularly in the Permian Basin. The industry expansion, coupled with increased capital discipline, budget exhaustion and the impact on oil demand from the COVID-19 pandemic, caused the frac sand market to become oversupplied, particularly in finer grades. With the frac sand market oversupplied, pricing for all grades has fallen significantly from the peaks experienced throughout 2018 and during the first half of 2019. This oversupply resulted in several industry participants idling and closing high cost mines in an attempt to restore the supply and demand balance and reduce the number of industry participants. Nevertheless, demand for our sand declined significantly in the second half of 2019 and throughout 2020 as a result of completion activity falling due to lower oil demand and pricing as discussed above, increased capital discipline by our customers and budget exhaustion, among other factors. We cannot predict if and when demand and pricing will recover sufficiently to return our natural sand proppant services segment to 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 are currently running at approximately 12% capacity. Our contracted capacity has provided a strong baseline of business, which has kept our Taylor and Piranha plants operating and our costs low.

A portion of our revenue from our natural sand proppant business is derived from Gulfport pursuant to a contract that expires in December 2021. Gulfport has not made the payments owed to us under this contract for any periods subsequent to May 2020. In September 2020, we filed a lawsuit seeking to recover delinquent payments owed to us under this contract. Further, on November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. Gulfport may take action in its chapter 11 proceeding to terminate its agreement with us and/or seek to reduce our claims for services and damages to which we may be entitled. We cannot assure you of the outcome of our claims in Gulfport’s chapter 11 proceeding, what our recovery on those claims might be or whether we will be able to preserve, extend or renew our contract with Gulfport on favorable terms and conditions or at all. The termination of our relationship or nonrenewal of our contract with Gulfport, or one or more of our other customers, could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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Results of Operations

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

Years Ended

Revenue: (in thousands)

Cost of revenue:

Selling, general and administrative expenses 67,185 51,552

Depreciation, depletion, amortization and accretion 95,317 117,033

Impairment of other long-lived assets 12,897 7,358

Revenue. Revenue for 2020 decreased $312 million, or 50%, to $313 million from $625 million for 2019. The decrease in total revenue is attributable to declines in revenue across all business lines. Revenue derived from related parties was $51 million, or 16% of our total revenue, for 2020 and $130 million, or 21% of our total revenue, for 2019. Substantially all of our related party revenue is derived from Gulfport under pressure pumping and sand contracts. For additional information regarding the status of these contracts, see “Industry Overview – Oil and Natural Gas Industry,” “Industry Overview – Natural Sand Proppant Industry” and Note 20. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report. Revenue by division was as follows:

Infrastructure Services. Infrastructure services division revenue decreased $58 million, or 27%, to $155 million for 2020 from $213 million for 2019 primarily 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. For additional information regarding our contracts with PREPA and our infrastructure services, see “Overview of Our Industries - Electrical Infrastructure Industry” above. Revenue from our operations in the continental United States increased $37 million, or 31%, to $155 million for 2020 from $118 million for 2019.

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Well Completion Services. Well completion services division revenue decreased $156 million, or 64%, to $88 million for 2020 from $244 million for 2019. Revenue derived from related parties was $42 million, or 48% of total well completion revenue, for 2020 and $91 million, or 37% of total well completion revenue, for 2019. Substantially all of our related party revenue is derived from Gulfport under a pressure pumping contract. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. In 2020, we recognized pre-petition revenue totaling $39 million and post-petition revenue totaling $4 million in accordance with the terms of this contract. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above. Intersegment revenue, consisting primarily of revenue derived from our other services and sand segment, totaled $1 million and $2 million, respectively, for 2020 and 2019.

The decrease in our well completion services revenue was primarily driven by a decline in pricing as well as a decline in utilization. The number of stages completed decreased 46% to 2,880 for 2020 from 5,378 for 2019. An average of 1.5 of our fleets were active throughout 2020 compared to 2.4 fleets for 2019.

Natural Sand Proppant Services. Natural sand proppant services division revenue decreased $63 million, or 65%, to $34 million for 2020, from $97 million for 2019. Revenue derived from related parties was $8 million, or 24% of total sand revenue, for 2020 and $28 million, or 29% of total sand revenue, for 2019. All of our related party revenue is derived from Gulfport under a sand supply contract. On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. In 2020, we recognized pre-petition revenue totaling $7 million and post-petition revenue totaling $1 million in accordance with the terms of this contract. For additional information regarding the status of this contract, see “Industry Overview – Natural Sand Proppant Industry” above. Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was nominal for 2020 and $30 million, or 31% of total sand revenue, for 2019.

The decrease in our natural sand proppant services revenue was primarily attributable to a 75% decline in tons of sand sold from approximately 2.0 million tons in 2019 to 0.5 million tons in 2020 coupled with a 51% decline in average price per ton of sand sold from $29.70 in 2019 to $14.58 in 2020. Included in natural sand proppant services revenue is shortfall revenue of $25 million and $3 million, respectively, for the 2020 and 2019.

Drilling Services. Drilling services division revenue decreased $24 million, or 75%, to $8 million for 2020, from $32 million for 2019. Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was nominal for 2020 and $1 million for 2019.

The decline in our drilling services revenue was primarily attributable to declines in contract land drilling, rig hauling and directional drilling revenue of $9 million, $9 million and $6 million, respectively. In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and our rig hauling operations beginning in April 2020.

Other Services. Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rental, crude oil hauling, full service transportation, remote accommodation, equipment manufacturing and infrastructure engineering and design businesses, decreased $58 million, or 65%, to $31 million for 2020 from $89 million for 2019. Revenue derived from related parties, consisting primarily of equipment rental revenue from Gulfport and aviation revenue from Brim Equipment Leasing, Inc., or Brim, was $1 million, or 3% of total other services revenue, for 2020 and $11 million, or 12% of total other services revenue, for 2019. Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, totaled $3 million and $15 million, respectively, for 2020 and 2019.

The decrease in our other services revenue was primarily due to a decline in utilization for our equipment rental business. We rented an average of 204 pieces of equipment to customers during 2020, a decrease of 63% from an average of 557 pieces of equipment rented to customers during 2019. Additionally, utilization for our crude oil hauling and aviation businesses declined. Due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations in July 2019 and our coil tubing and full service transportation operations beginning in July 2020. These decreases were partially offset by increases in revenue for our remote accommodations and infrastructure engineering businesses.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion expense). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $312 million from $544 million, or 87% of

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total revenue, for 2019 to $232 million, or 74%of total revenue, for 2020. The decrease was primarily due to a decline in activity across all of our 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 $51 million from $173 million for 2019 to $122 million for 2020. The decline 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. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $29 million in 2020 and $30 million in 2019, was 79% and 81%, respectively, for 2020 and 2019.

Well Completion Services. Well completion services division cost of revenue, exclusive of depreciation and amortization expense, decreased $160 million, or 77%, from $207 million for 2019 to $47 million for 2020 primarily due to a decline in activity. As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $30 million in 2020 and $40 million in 2019, was 54% and 85%, respectively, for 2020 and 2019. The decrease was primarily due to the recognition of standby revenue during 2020, of which there was a lower percentage of costs recognized compared to 2019. Additionally, during 2019 we provided sand and 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 2020.

Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $62 million, or 70%, from $88 million for 2019 to $26 million for 2020 primarily due to a decrease 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 $10 million in 2020 and $14 million in 2019, was 76% and 90%, respectively, for 2020 and 2019. The decrease in cost as a percentage of revenue is primarily due to an increase in shortfall revenue, partially offset by a 51% decline in average price per ton of sand sold.

Drilling Services. Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $26 million, or 70%, from $37 million for 2019 to $11 million for 2020, as a result of reduced activity. In response to market conditions, we temporarily shut down our contract land drilling operations beginning in December 2019 and 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 $10 million in 2020 and $13 million in 2019, was 140% and 116%, respectively, for 2020 and 2019. The increase was primarily due to a decline in utilization.

Other Services. Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $60 million, or 67%, from $89 million for 2019 to $29 million for 2020, primarily due to declines in costs for our equipment rental and crude oil hauling businesses as a result of reduced activity. Additionally, due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019 and our coil tubing and full service transportation operations beginning in July 2020. We continue to monitor market conditions to evaluate if and when we can recommence providing these services. These declines were partially offset by an increase in costs for our equipment manufacturing and infrastructure engineering and design businesses. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $16 million in 2020 and $19 million in 2019, was 93% and 101%, respectively, for 2020 and 2019.

Selling, General and Administrative Expenses. Selling, general and administrative expenses, or SG&A, represent the costs associated with managing and supporting our operations. Following is a breakout of SG&A expenses for the periods indicated (in thousands):

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Years Ended

Cash expenses:

Non-cash expenses:

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

Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion, amortization and accretion decreased $22 million, or 19%, to $95 million for 2020 from $117 million in 2019. The decrease is primarily due to a decline in property and equipment depreciation expense as well as a decline in depletion expense.

Impairment of Goodwill. We recorded impairment of goodwill of $55 million and $34 million, respectively, in 2020 and 2019. 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. As a result of our annual assessment of goodwill, we determined that the carrying value of goodwill for certain of our entities exceeded their fair values at December 31, 2019, resulting in impairment expense of $30 million. During 2019, we temporarily shut down our cementing and acidizing operations, resulting in impairment of goodwill totaling $3 million.

Impairment of Other Long-lived Assets. We recorded impairments of other long-lived assets of $13 million and $7 million, respectively, in 2020 and 2019. During 2020, we recorded impairment of property and equipment, including water transfer, crude oil hauling, coil tubing and equipment rental assets, totaling $13 million. During 2019, we temporarily shut down our flowback operations, resulting in fixed asset impairments of $4 million during 2019. Additionally, we recorded impairment expense $3 million related to specified drilling rigs and $1 million related to WTL's customer relationship intangible asset during 2019.

Operating Loss. We reported an operating loss of $149 million for 2020 compared to an operating loss $128 million for 2019. The increased operating loss was primarily due to increases in impairment expense of $27 million and SG&A expense of $15 million, partially offset by a 15% decline in cost of revenue as a percentage of revenue.

Interest Expense, net. Interest expense, net remained relatively flat at $5 million for each of 2020 and 2019.

Other Income (Expense), net. Other income, net decreased $7 million during 2020 compared to 2019 primarily due to a decline in the recognition of interest on trade accounts receivable pursuant to the terms of our contracts with PREPA.

Income Taxes. During 2020, we recorded an income tax benefit of $12 million on pre-tax loss of $120 million compared to an income tax benefit of $12 million on pre-tax loss of $91 million for 2019. Our effective tax rate was 10.2% for 2020 compared to 13.3% for 2019. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as return to provision adjustments, goodwill impairment and changes in the valuation allowance that may not be consistent from year to year. See Note 14 to our consolidated financial statements for additional detail regarding our change in tax expense.

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Year Ended December 31, 2019 Compared to Year Ended December 31, 2018

Years Ended

Revenue: (in thousands)

Cost of Revenue:

Selling, general and administrative expenses 51,552 73,097

Depreciation, depletion, amortization and accretion 117,033 119,877

Impairment of other long-lived assets 7,358 5,652

Revenue. Revenue for 2019 decreased $1.1 billion, or 63%, to $625 million from $1.7 billion for 2018. The decrease in total revenue is primarily attributable to a $873 million decrease in infrastructure services revenue, representing 82% of the overall decrease. Additionally, well completion services and natural sand proppant services revenue decreased $113 million and $79 million, respectively, representing 11% and 7% of the overall decrease. Revenue derived from related parties was $130 million, or 21% of our total revenues, for 2019 and $143 million, or 8% of our total revenues, for 2018. Substantially all of our related party revenue is derived from Gulfport under pressure pumping and sand contracts. For additional information regarding the status of these contracts, see “Industry Overview – Oil and Natural Gas Industry,” “Industry Overview – Natural Sand Proppant Industry” and Note 20. Commitments and Contingencies to our consolidated financial statements included elsewhere in this report. Revenue by division was as follows:

Infrastructure Services. Infrastructure services division revenue decreased $873 million, or 80%, to $213 million for 2019 from $1.1 billion for 2018 primarily 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. For additional information regarding our contracts with PREPA and our infrastructure services, see “Overview of Our

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Industries - Electrical Infrastructure Industry” above. Revenue from our operations in the continental United States increased $58 million, or 96%, to $118 million for 2019 from $60 million for 2018.

Well Completion Services. Well completion services division revenue decreased $113 million, or 32%, to $244 million for 2019 from $357 million for 2018. Revenue derived from related parties was $91 million, or 37% of total well completion revenue, for 2019 and $96 million, or 27% of total well completion revenue, for 2018. Substantially all of our related party revenue was derived from Gulfport under a well completion contract. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above. Intersegment revenue, consisting primarily of revenue derived from our sand segment, was $2 million and $1 million, respectively, for 2019 and 2018.

The decrease in our well completion services revenue was primarily driven by a decline in pricing as well as a decline in utilization. The number of stages completed decreased 14% to 5,378 for 2019 from 6,245 for 2018. An average of 2.4 of our fleets were active throughout 2019 compared to 3.6 fleets for 2018.

Natural Sand Proppant Services. Natural sand proppant services division revenue decreased $79 million, or 45%, to $97 million for 2019, from $176 million for 2018. Revenue derived from related parties was $28 million, or 29% of total sand revenues, for 2019 and $25 million, or 14% of total sand revenues, for 2018. All of our related party revenue is derived from Gulfport under a sand supply contract. For additional information regarding the status of this contract, see “Industry Overview – Natural Sand Proppant Industry” above. Intersegment revenue, consisting primarily of revenue derived from our well completion segment, was $30 million, or 31% of total sand revenue, for 2019 and $69 million, or 39% of total sand revenue, for 2018.

The decrease in our natural sand proppant services revenue was primarily attributable to a 25% decline in tons of sand sold from approximately 2.7 million tons in 2018 to 2.0 million tons in 2019 coupled with a 24% decline in average price per ton of sand sold from $39.16 in 2018 to $29.70 in 2019.

Drilling Services. Drilling services division revenue decreased $34 million, or 52%, to $32 million for 2019, from $66 million for 2018. Revenue derived from related parties, consisting primarily of directional drilling revenue from El Toro Resources LLC, was $1 million for each of 2019 and 2018. The decline in our drilling services revenue was primarily attributable to decreases in revenue for our contract land drilling and directional drilling businesses of $19 million and $11 million, respectively, due to declines in utilization. Our average active rigs decreased from 4.3 in 2018 to 1.4 in 2019. Directional drilling utilization declined from 49% in 2018 to 30% in 2019.

Other Services. Revenue from other services, consisting of revenue derived from our aviation, coil tubing, pressure control, flowback, cementing, equipment rental and remote accommodation businesses, decreased $33 million, or 27%, to $89 million for 2019 from $122 million for 2018. Revenue derived from related parties, consisting primarily of equipment rental and cementing revenue from Gulfport and aviation revenue from Brim, was $11 million, or 12% of total other services revenue, for 2019 and $21 million, or 17% of total other services revenue, for 2018. Intersegment revenue, consisting primarily of revenue derived from our infrastructure and well completion segments, was $15 million and $44 million, respectively for 2019 and 2018.

The decrease in other services revenue was primarily due to a decline in intersegment aviation revenue with our infrastructure segment. We provided aviation services to our transmission and distribution business in Puerto Rico under their contracts with PREPA for repairs to Puerto Rico's electrical grid as a result of Hurricane Maria. Work under these contracts concluded on March 31, 2019. Additionally, other services revenue decreased due to a decline in utilization from 39% in 2018 to 17% in 2019 for our coil tubing business. Due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations during the third quarter of 2019 resulting in a decline in revenue. We continue to monitor market conditions to evaluate if and when we can recommence providing these services. These decreases were partially offset by an increase in activity for our equipment rental business. An average of 557 pieces of equipment were rented during 2019, an increase of 41% from 395 pieces of equipment rented during 2018.

Cost of Revenue (exclusive of depreciation, depletion, amortization and accretion). Cost of revenue, exclusive of depreciation, depletion, amortization and accretion expense, decreased $550 million from $1.1 billion, or 65% of total revenue, for 2018 to $544 million, or 87%of total revenue, for 2019. The decrease was primarily due to a decline in activity across all business lines. Cost of revenue by operating division was as follows:

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Infrastructure Services. Infrastructure services division cost of revenue, exclusive of depreciation and amortization expense, decreased $449 million from $622 million for 2018 to $173 million for 2019. The decline 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. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $30 million in 2019 and $20 million in 2018, was 81% and 57%, respectively, for 2019 and 2018.

Well Completion Services. Well completion services division cost of revenue, exclusive of depreciation and amortization expense, decreased $71 million, or 26%, from $278 million for 2018 to $207 million for 2019 primarily due to a decline in activity. As a percentage of revenue, our well completion services division cost of revenue, exclusive of depreciation and amortization expense of $40 million in 2019 and $51 million in 2018, was 85% and 78%, respectively, for 2019 and 2018. The increase in costs as a percentage of revenue was primarily due to a decline in utilization.

Natural Sand Proppant Services. Natural sand proppant services division cost of revenue, exclusive of depreciation, depletion and accretion expense, decreased $56 million, or 39%, from $144 million for 2018 to $88 million for 2019 primarily due to a decrease in cost of goods sold as well as a 24% decline in production costs per ton of sand. As a percentage of revenue, cost of revenue, exclusive of depreciation, depletion and accretion expense of $14 million in both 2019 and 2018, was 90% and 82%, respectively, for 2019 and 2018. The increase in cost as a percentage of revenue is primarily due to a 24% decline in average price per ton of sand sold.

Drilling Services. Drilling services division cost of revenue, exclusive of depreciation and amortization expense, decreased $24 million, or 39%, from $61 million for 2018 to $37 million for 2019 primarily due a decline in activity for our contract land drilling and directional drilling businesses. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $13 million in 2019 and $18 million in 2018, was 116% and 92%, respectively, for 2019 and 2018. The increase is primarily due to an increase in labor-related costs as a percentage of revenue.

Other Services. Other services cost of revenue, exclusive of depreciation and amortization expense, decreased $17 million, or 16%, from $106 million for 2018 to $89 million for 2019, primarily due to a decline in costs for our coil tubing business as a result of reduced activity. Additionally, due to market conditions, we temporarily shut down our cementing and acidizing operations as well as our flowback operations during the third quarter of 2019 resulting in a decline in cost of revenue. We continue to monitor market conditions to evaluate if and when we can recommence providing these services. These declines were partially offset by an increase in costs for our equipment rental and crude oil hauling businesses. As a percentage of revenue, cost of revenue, exclusive of depreciation and amortization expense of $19 million and $17 million in 2019 and 2018, was 101% and 87%, respectively, for 2019 and 2018.

Selling, General and Administrative Expenses. Selling, general and administrative expenses represent the costs associated with managing and supporting our operations. Following is a breakout of SG&A expenses for the periods indicated (in thousands):

Years Ended

Cash expenses:

Non-cash expenses:

Equity based compensation(c) — 17,487

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

b. During the year ended December 31, 2018, we received payment for amounts reserved in 2017. As a result, during the year ended December 31, 2018, we reversed bad debt expense of $16 million recognized in 2017.

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, accretion and amortization decreased $3 million, or 2%, to $117 million for 2019 from $120 million in 2018. The decrease is primarily due to a decline in intangible asset amortization expense partially offset by an increase in property and equipment depreciation expense.

Impairment of Goodwill. We recorded impairment of goodwill of $34 million and $3 million, respectively, in 2019 and 2018. As a result of our annual assessment of goodwill, we determined that the carrying value of goodwill for certain of our entities exceeded their fair values at December 31, 2019, resulting in impairment expense of $30 million. During 2019, we temporarily shut down our cementing and acidizing operations, resulting in impairment of goodwill totaling $3 million. We recorded expense of $3 million in 2018 related to impairment of goodwill as a result of the movement of certain cementing equipment from the Utica Shale to the Permian Basin.

Impairment of Other Long-lived Assets. We recorded impairments of other long-lived assets of $7 million and $6 million, respectively, in 2019 and 2018. During 2019, we temporarily shut down our flowback operations, resulting in fixed asset impairments of $4 million during 2019. Additionally, we recorded impairment expense $3 million related to specified drilling rigs and $1 million related to WTL's customer relationship intangible asset during 2019. We recorded impairment expense of $4 million related to specified drilling rigs in 2018 and $1 million related to impairment of intangible assets as a result of the movement of certain cementing equipment from the Utica shale to the Permian basin.

Operating (Loss) Income. Operating income decreased $522 million to an operating loss of $128 million for 2019 compared to operating income of $394 million for 2018. The decrease is primarily due to a $432 million decline in operating income for our infrastructure services division due to a decline in activity.

Interest Expense, net. Interest expense, net increased $2 million to $5 million during 2019 compared to $3 million during 2018 primarily due to an increase in average borrowings outstanding under our revolving credit facility.

Other Income (Expense), net. Other income, net increased $44 million during 2019 compared to 2018 primarily due to the recognition of interest on trade accounts receivable totaling $42 million pursuant to the terms of our contracts with PREPA.

Income Taxes. During 2019, we recorded an income tax benefit of $12 million on pre-tax loss of $91 million compared to income tax expense of $153 million on pre-tax income of $389 million for 2018. Our effective tax rate was 13.3% for 2019 compared to 39.4% for 2018. Our tax rate is affected by recurring items, such as tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as discrete items, such as return to provision adjustments, goodwill impairment and equity based compensation that may not be consistent from year to year. See Note 14 to our consolidated financial statements for additional detail regarding our change in tax expense.

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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 before depreciation, depletion, amortization and accretion, impairment of goodwill, impairment of other long-lived assets, inventory obsolescence charges, 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 trade accounts receivable) and (benefit) provision for income taxes, further adjusted to add back interest on trade accounts receivable. We exclude the items listed above from net (loss) income 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 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 also 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

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net (loss) income: 2020 2019 2018

Inventory obsolescence charges — 1,349 —

Acquisition related costs — 45 191

Public offering costs — — 982

Equity based compensation — — 17,487

Interest on trade accounts receivable 34,130 42,040 —

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Infrastructure Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net (loss) income: 2020 2019 2018

Impairment of other long-lived assets — — 308

Acquisition related costs — 12 (4)

Public offering costs — — 461

Interest on trade accounts receivable 32,214 42,040 —

Well Completion Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net loss: 2020 2019 2018

Impairment of other long-lived assets 4,203 — 143

Acquisition related costs — 18 39

Public offering costs — — 264

Equity based compensation — — 17,487

Interest on trade accounts receivable 1,888 — —

Natural Sand Proppant Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net (loss) income: 2020 2019 2018

Depreciation, depletion, amortization and accretion 9,771 14,050 13,675

Impairment of goodwill — 2,684 —

Acquisition related costs — 8 (38)

Public offering costs — — 145

Interest on trade accounts receivable 3 — —

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Drilling Services

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net loss: 2020 2019 2018

Acquisition related costs — 2 —

Public offering costs — — 45

Other (income) expense, net (227) (9) 461

Other Services(a)

Years Ended December 31,

Reconciliation of Adjusted EBITDA to net loss: 2020 2019 2018

Inventory obsolescence charges — 1,349 —

Acquisition related costs — 5 194

Public offering costs — — 68

Interest on trade accounts receivable 25 — —

a. Includes results for our aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services and corporate related activities. Our corporate related activities do not generate revenue.

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

Adjusted net (loss) income and adjusted basic and diluted (loss) earnings 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 expense and equity based compensation, that may not be indicative of the Company's ongoing operating results. Adjusted net (loss) income and adjusted (loss) earnings per share should not be considered in isolation or as a substitute for net (loss) income and (loss) earnings 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 and adjusted (loss) earnings per share to the GAAP financial measures of net (loss) income and (loss) earnings per share for the periods specified.

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Years Ended December 31,

(in thousands, except per share amounts)

Equity based compensation — — 17,487

Basic (loss) earnings per share, as reported $ (2.36) $ (1.76) $ 5.27

Impairment of other long-lived assets 0.28 0.16 0.13

Equity based compensation — — 0.39

Adjusted basic (loss) earnings per share $ (0.88) $ (0.85) $ 5.86

Diluted (loss) earnings per share, as reported $ (2.36) $ (1.76) $ 5.24

Impairment of other long-lived assets 0.28 0.16 0.13

Equity based compensation — — 0.39

Adjusted diluted (loss) earnings per share $ (0.88) $ (0.85) $ 5.83

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. Our primary sources of liquidity have been cash flows from operations and borrowings under our revolving credit facility. Our primary uses of capital have been for investing in property and equipment used to provide our services and acquire complementary businesses. In July 2019, as a result of oilfield market conditions as well as other factors, which include collections from PREPA, our board of directors suspended our quarterly cash dividend. Future declaration of cash dividends are subject to approval by our board of directors and may be adjusted at its discretion based on market conditions and capital availability.

As of December 31, 2020, we had outstanding borrowing under our revolving credit facility of $78 million.

The following table summarizes our liquidity as of the dates indicated (in thousands):

December 31,

Less letter of credit facilities (bonding program) (5,000) —

Less letter of credit facilities (insurance programs) (3,890) (4,105)

Less letter of credit facilities (environmental remediation) (3,694) (3,877)

Less letter of credit facilities (rail car commitments) (455) (455)

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a. Net working capital (less cash) is a non-GAAP measure and, as of December 31, 2020, is calculated by subtracting total current liabilities of $129 million and cash and cash equivalents of $15 million from total current assets of $465 million. As of December 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 $301 million and $28 million, respectively, at December 31, 2020, and $269 million and $7 million, respectively, at December 31, 2019.

As of February 24, 2021, we had $75 million in borrowings outstanding under our revolving credit facility, leaving an aggregate of $42 million of available borrowing capacity under this facility, after giving effect to $13 million of outstanding letters of credit.

Liquidity and Cash Flows

The following table sets forth our cash flows for the years indicated (in thousands):

Years Ended December 31,

Net cash provided by (used in) operating activities $ 6,967 $ (95,318) $ 386,668

Effect of foreign exchange rate on cash 12 87 (133)

Operating Activities

Net cash provided by (used in) operating activities was $7 million, ($95) million and $387 million, respectively, for the years ended December 31, 2020, 2019 and 2018. The increase in operating cash flows was primarily attributable to the timing of cash inflows for accounts receivable and cash outflows for income tax payments during 2019.

Investing Activities

Net cash used in investing activities was $2 million, $33 million and $212 million, respectively, for the years ended December 31, 2020, 2019 and 2018. Net cash used for acquisitions totaled $21 million for 2018. We did not make any acquisitions during 2020 or 2019. Substantially all remaining cash used in investing activities was used to purchase property and equipment that is utilized to provide our services, which was partially offset by proceeds from the disposal of property and equipment.

The following table summarizes our capital expenditures by operating division for the periods indicated (in thousands):

Years Ended December 31,

a. Capital expenditures primarily for truck, tooling and equipment purchases for new infrastructure crews for the years ended December 31, 2020, 2019 and 2018.

b. Capital expenditures primarily for various pressure pumping and water transfer equipment for the years ended December 31, 2020, 2019 and 2018.

c. Capital expenditures primarily for the upgrade and expansion of our plants for the year ended December 31, 2018 and maintenance for the years ended December 31, 2020 and 2019.

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d. Capital expenditures primarily for directional drilling equipment for the year ended December 31, 2020 and upgrades to our rig fleet for the years ended December 31, 2019 and 2018.

e. Capital expenditures primarily for equipment for our equipment rental and crude hauling businesses for the years ended December 31, 2019 and 2018 and various equipment for the year ended December 31, 2020.

Financing Activities

Net cash provided by (used in) financing activities was $4 million, $67 million and ($113) million, respectively, for the years ended December 31, 2020, 2019 and 2018. Net cash provided by financing activities for the year ended December 31, 2020 was primarily attributable to proceeds of $5 million received from a sale leaseback transaction and proceeds of $5 million received from a note payable, partially offset by net payments under our revolving credit facility of $2 million, principal payment on financing leases and equipment notes of $2 million and payment of debt issuance costs of $1 million. Net cash provided by financing activities for the year ended December 31, 2019 was primarily attributable to net borrowings under our revolving credit facility of $80 million, partially offset by dividends paid of $11 million. Net cash used in financing activities for the year ended December 31, 2018 was primarily attributable to net repayments under our revolving credit facility of $100 million and cash dividends paid totaling $11 million.

Effect of Foreign Exchange Rate on Cash

The effect of foreign exchange rate on cash was a nominal amount, $0.1 million and ($0.1) million, respectively, for the years ended December 31, 2020, 2019 and 2018. The year-over-year effect 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 $336 million and $277 million, respectively, at December 31, 2020 and 2019. Our cash balances totaled $15 million and $6 million, respectively, at December 31, 2020 and 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 facility, as subsequently amended, with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders. At December 31, 2020, we had outstanding borrowings under our revolving credit facility of $78 million and $39 million of available borrowing capacity, after giving effect to $13 million of outstanding letters of credit. As of December 31, 2020, we were in compliance with the covenants under our revolving credit facility. For additional information regarding our revolving credit facility, see Note 11. Debt to our consolidated financial statements included elsewhere in this report.

Sale Leaseback Transaction

On December 30, 2020, we entered into an agreement with First National Capital, LLC, or FNC, whereby we agreed to sell certain assets from our infrastructure segment to FNC for aggregate proceeds of $5.0 million. Concurrent with the sale of assets, we entered into a 36 month lease agreement whereby we will lease back the assets at a monthly rental rate of $0.1 million. Under the agreement, we have the option to purchase the assets at the end of the lease term. We recorded a liability for the proceeds received and will continue to depreciate the assets. We imputed an interest rate so that the carrying amount of the financial liability will be the expected repurchase price at the end of the initial lease term.

Aviation Note

On November 6, 2020, Leopard and Cobra Aviation entered into a 39 month promissory note agreement with Bank7, or the Aviation Note, in an aggregate principal amount of $4.6 million and received net proceeds of $4.5 million. The Aviation Note bears interest at a rate based on the Wall Street Journal Prime Rate plus a margin of 1%. Principal and interest payments of $0.1 million are due monthly beginning on March 1, 2021, with a final payment of $0.2 million due on February 1, 2024. The Aviation Note is collateralized by Leopard and Cobra Aviation's assets, including a $1.8 million certificate of deposit. The Aviation Note contains various customary affirmative and restrictive covenants.

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Capital Requirements and Sources of Liquidity

During 2020, our capital expenditures totaled $7 million and included $0.3 million in our infrastructure segment primarily related to truck, tooling and equipment purchases for new crews, $4 million in our well completion segment primarily related to various pressure pumping and water transfer equipment, $1 million in our natural sand proppant services segment for various maintenance equipment, $0.4 million in our drilling services segment primarily for upgrades to our rig fleet and $1 million for our other businesses primarily related to equipment additions for our equipment rental business.

During 2021, we currently estimate that our aggregate capital expenditures will be $9 million, depending upon industry conditions and our financial results. These capital expenditures include $6 million in our infrastructure segment for assets for additional crews, $2.5 million in our well completion segment for conversion of a portion of our fleet to include DGB capabilities and maintenance to our existing pressure pumping fleet and $0.5 million for our other divisions, primarily for additional equipment for our rental business.

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 our customers, including PREPA and Gulfport). Further, significant additional capital expenditures could be required to conduct our operations. Accordingly, 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. In addition, while we regularly evaluate acquisition opportunities, we do not have a specific acquisition budget for 2021 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. 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, our ability to conduct operations, make capital expenditures and/or complete acquisitions that may be favorable to us will be impaired.

Contractual and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments as of December 31, 2020 (in thousands):

Total Less than 1 year 1-3 Years 3-5 Years More than 5 Years

Contractual obligations:

Revolving credit facility(a) $ 78,000 $ — $ 78,000 $ — $ —

Equipment financing obligations(g) 1,221 731 490 — —

Capital purchase commitments (i) 1,275 1,275 — — —

a.Excludes interest payments.

b.Assumption of revolving credit facility balance outstanding as of December 31, 2020 of $78 million using the weighted average interest rate as of December 31, 2020 of 3.72%

c.Assumption of an interest rate of 5%.

d.Obligations under a sale leaseback arrangement for a portion of our infrastructure segment assets.

e.Operating lease obligations primarily relate to rail cars, real estate and other equipment.

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f.Financing lease obligations primarily relate to equipment for our infrastructure segment.

g.Equipment financing obligations primarily relate to vehicles and other equipment for our well completion segment.

h.Purchase commitments are comprised primarily of software subscriptions.

i.Obligations arising from capital improvements and equipment purchases

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 specified may require us to pay shortfall fees. However, the minimum quantities set forth in the agreements are not in excess of our current expected future requirements.

Capital Spend Commitments

We have entered into agreements with suppliers to acquire capital equipment. These commitments are included in our 2020 capital budget discussed under the heading “Capital Requirements and Sources of Liquidity.”

Aggregate future minimum payments under these agreements in effect at December 31, 2020 are as follows (in thousands):

Thereafter — —

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Critical Accounting Policies and Estimates

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. Below, we have provided expanded discussion of our more significant accounting policies, estimates and judgments. We believe these accounting policies reflect our more significant estimates and assumptions used in preparation of our financial statements. See Note 2 of our consolidated financial statements included elsewhere in this annual report for a discussion of additional accounting policies and estimates made by management.

Use of Estimates. In preparing the financial statements, our management makes informed judgments and estimates that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include but are not limited to our sand reserves and their impact on calculating depletion expense, allowance for doubtful accounts, asset retirement obligations, reserves for self-insurance, depreciation and amortization of property and equipment, business combination valuations, amortization of intangible assets, and future cash flows and fair values used to assess recoverability and impairment of long-lived assets, including goodwill, estimates of income taxes and the estimated effects of litigation and other contingencies.

Revenue Recognition. On January 1, 2018, we adopted the new revenue guidance under ASC 606, Revenue from Contracts with Customers, using the modified retrospective method applied to contracts which were not completed as of January 1, 2018. The adoption of ASC 606 did not have a material impact on our consolidated financial statements. Our primary revenue streams include infrastructure services, well completion services, natural sand proppant services, drilling services and other services, which includes aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

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, we account for infrastructure services as a single performance obligation satisfied over time. In certain circumstances, we supply materials that are utilized during the jobs as part of the agreement with the customer. We account 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, we warrant equipment and labor performed for a specified period following substantial completion of the work.

Well Completion Services. Well completion 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, we account for well completion services as a single performance obligation satisfied over time. In certain circumstances, we supply proppant that is utilized for pressure pumping as part of the agreement with the customer. These pressure pumping agreements are accounted for as multiple performance obligations satisfied over time. Jobs for well completion 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 and personnel.

Pursuant to a contract with Gulfport, we have agreed to provide that customer with use of up to two pressure pumping fleets for the period covered by the contract. Under this agreement, performance obligations are satisfied as services are rendered based on the passage of time rather than the completion of each segment of work. We have the right to receive consideration from this customer even if circumstances prevent us from performing work. All consideration owed to us 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. Further, On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code. For additional information regarding the status of this contract, see “Industry Overview – Oil and Natural Gas Industry” above.

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.

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Natural Sand Proppant Services. We sell natural sand proppant through sand supply agreements with our 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. We recognize 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 our sand supply agreements contain a minimum volume commitment related to sand purchases whereby we charge 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, we have future performance obligations to deliver excess volumes of product in subsequent periods. In accordance with ASC 606, if the customer fails to meet the minimum volume commitment, we assess whether we expect 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 we expect the customer will make-up deficient volumes in future periods, revenue related to shortfall payments is 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. If we do not expect the customer will make-up deficient volumes in future periods, we apply the breakage model and revenue related to shortfall payments is recognized when the model indicates the customer's inability to take delivery of excess volumes.

In certain of our sand supply agreements, the customer obtains control of the product when it is loaded into rail cars and the customer reimburses us for all freight charges incurred. We have 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, we accrue the related costs of those shipping and handling activities.

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, we temporarily shutdown our contract land drilling operations beginning in December 2019 and our rig moving operations beginning in April 2020.

Other Services. During the periods presented in this report, wealso provided aviation, coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services, which are reported under other services. As a result of market conditions, we have temporarily shut down our cementing and acidizing operations as well as our flowback operations beginning in July 2019 and our coil tubing and full service transportation operations beginning in July 2020. 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.

Allowance for Doubtful Accounts. We regularly review receivables and provide for estimated losses through an allowance for doubtful accounts. In evaluating the level of established reserves, we make judgments regarding our 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 we expect that a customer may not be able to make required payments, we would increase the allowance through a charge to income in the period in which that determination is made. If it is determined that previously reserved amounts are collectible, we 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.

Depreciation, Depletion, Amortization and Accretion. In order to depreciate and amortize our property and equipment, we estimate useful lives, attrition factors and salvage values of these items. Our estimates may be affected by such factors as changing market conditions, technological advances in the industries in which we operate or changes in regulations governing such industries. Depletion of our mining property and development costs is calculated using the units-of-production method on estimated measured tons of in-place reserves.

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Impairment of Long-Lived Assets. Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of such assets is evaluated by measuring the carrying amount of the assets against the estimated undiscounted future cash flows associated with the assets. If such evaluations indicate that the future undiscounted cash flow from the assets is not sufficient to recover the carrying value of such assets, the assets are adjusted to their estimated fair values.

Goodwill. Goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. If it is determined that an impairment exists, an impairment charge is recognized for the excess of carrying value over implied fair value. The fair value is determined using a combination of the income and market approaches.

Asset Retirement Obligations. Mine reclamation costs, future remediation costs for inactive mines or other contractual site remediation costs are accrued based on management’s best estimate at the end of each period of the costs expected to be incurred at a site. Such cost estimates include, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates at inactive mines are reflected in earnings in the period an estimate is revised.

Equity-based Compensation. We measure equity-based payments at fair value on the date of grant and expense the value of these equity-based payments in compensation expense over the applicable vesting periods.

Share-based Compensation. The share-based compensation program consists of restricted stock units granted to employees and restricted stock units granted to non-employee directors under the Mammoth Energy Services, Inc. 2016 Incentive Plan (the “2016 Plan”). We recognize in our financial statements the cost of employee services received in exchange for restricted stock based on the fair value of the equity instruments as of the grant date. In general, this value is amortized over the vesting period; for grants with a non-substantive service condition, this value is recognized immediately. Amounts are recognized in cost of revenues and selling, general, and administrative expenses.

Income Taxes. Our operations are included in a consolidated federal income tax return and other state returns. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities as a result of a change in tax rate is recognized in the period that includes the statutory enactment date. A valuation allowance for deferred tax assets is recognized when it is more likely than not that the benefit of deferred tax assets will not be realized.

Litigation and Contingencies. Accruals for litigation and contingencies are based on our assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies. Significant judgment is required in both the determination of probability of loss and the determination as to whether the amount is reasonably estimable. Accruals are based on information available at the time of the assessment due to the uncertain nature of such matters. As additional information becomes available, we reassess potential liabilities related to pending claims and litigation and may revise previous estimates, which could materially affect our results of operations in a given period.

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New Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 15. Leases to our consolidated financial statements included elsewhere in this annual report for the impact the adoption of this standard had on our financial statements.

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 estimated the fair value of our non-employee awards was approximately $18.9 million as of this date.

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. We adopted this standard effective January 1, 2020. It did not have a material impact on the our consolidated financial statements.

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Item 7A. 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 COVID-19 pandemic 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. In the third quarter of 2020, many U.S. producers resumed completion activities to stem production declines and stabilize their production base as demand for crude oil rebounded but continued to be soft. 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 price points or global inventories return to normalized levels. 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 levels of activity in the U.S. oil and natural gas exploration and production, energy infrastructure and natural sand proppant industries have been and continue to be volatile. We are unable to predict the ultimate impact of the ongoing COVID-19 pandemic, the depressed commodity markets, the reduced demand for oil and oilfield services and adverse macroeconomic conditions on our business, financial condition, results of operations, cash flows and stock price.

Interest Rate Risk

We had a cash and cash equivalents balance of $15 million at December 31, 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 2.0% to 3.5%, based upon a calculation of the excess availability of the line as a percentage of the maximum credit limit. At December 31, 2020, we had outstanding borrowings under our revolving credit facility of $78 million with a weighted average interest rate of 3.72%. A 1% increase or decrease in the interest rate 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 energy services business 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 December 31, 2020, we had $2 million of cash in Canadian accounts. A 10% increase in the strength of the Canadian dollar versus the U.S. dollar would have resulted in a decrease in pre-tax income of approximately $0.04 million as of December 31, 2020. Conversely, a corresponding decrease in the strength of the Canadian dollar would have resulted in a comparable increase 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.

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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, the reduced demand for oil and oilfield services 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 20. Commitments and Contingencies—Litigation of our consolidated financial statements contained elsewhere in this annual report.

Seasonality

We provide infrastructure services in the northeast, southwest and midwest portions of the United States. We provide well completion 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 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. For the years ended December 31, 2020, 2019 and 2018, we generated approximately 35%, 43% and 17%, respectively, of our revenue from our operations 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.

Inflation

Inflation in the United States has been relatively low in recent years and did not have a material impact on our results of operations for the years ended December 31, 2020, 2019 or 2018. Although the impact of inflation has been insignificant in recent years, it is still a factor in the United States economy and we tend to experience inflationary pressure on the cost of oilfield services and equipment as increasing oil and gas prices increase drilling activity in our areas of operations.

Item 8. Financial Statements and Supplementary Data

The information required by this item appears beginning on page F-1 following the signature pages of this report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A. 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 15d-15(e) 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 December 31, 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

79

evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2020, our disclosure controls and procedures are effective.

Changes in Internal Controls 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 December 31, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles.

As of December 31, 2020, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, management did not identify any material weaknesses in our internal control over financial reporting and determined that we maintained effective internal control over financial reporting as of December 31, 2020.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Item 9B. Other Information

Not applicable.

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PART III.

Item 10. Directors, Executive Officers and Corporate Governance

Information required by Item 10 of Part III is incorporated herein by reference to the definitive Proxy Statement to be filed by us pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 within 120 days after the close of the year ended December 31, 2020.

We have adopted a Code of Business Conduct and Ethics that applies to directors and employees, including the Chief Executive Officer, the Chief Financial Officer, controller and persons performing similar functions. The Code of Business Conduct and Ethics is posted on our website at http://ir.mammothenergy.com/corporate-governance.cfm. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by posting such information on our website at the address specified above.

Item 11. Executive Compensation

The information required by Item 11 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by Item 12 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by Item 13 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020.

Item 14. Principal Accountant Fees and Services

The information required by Item 14 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020.

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PART IV.

Item 15. Exhibits, Financial Statement Schedules

The following documents are filed as part of this report or incorporated by reference herein:

(1) Financial Statements

Page

Financial Statements

Report of Independent Registered Public Accounting Firm 2

Consolidated Balance Sheets 4

Consolidated Statement of Comprehensive Income (Loss) 5

Consolidated Statement of Changes in Equity 6

Consolidated Statement of Cash Flows 7

Notes to Consolidated Financial Statements 9

(2) Financial Statement Schedules

All financial statement schedules have been omitted because they are not applicable or the required disclosure is presented in the financial statements or notes thereto.

(3) Exhibits

Exhibit Number Exhibit Description

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83

21.1* List of Significant Subsidiaries of the Company.

23.1* John T. Boyd Company Consent.

95.1* Mine Safety Disclosure Exhibit.

101.INS* XBRL Instance Document.

101.SCH* XBRL Taxonomy Extension Schema Document.

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF* XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB* XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.

* Filed herewith.

** Furnished herewith, not filed.

+ Management contract, compensatory plan or arrangement.

Item 16. Form 10-K Summary

None.

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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: February 26, 2021 By: /s/ Mark Layton

Mark Layton

Chief Financial Officer

Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature Title Date

Arty Straehla

Mark Layton

/s/ Arthur Amron Director (Chairman of the Board) February 26, 2021

Arthur Amron

/s/ James D. Palm Director February 26, 2021

James D. Palm

/s/ Paul Jacobi Director February 26, 2021

Paul Jacobi

/s/ Arthur Smith Director February 26, 2021

Arthur Smith

/s/ Corey Booker Director February 26, 2021

Corey Booker

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F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Mammoth Energy Services, Inc.

Opinion on the financial statements

We have audited the accompanying consolidatedbalance sheets of Mammoth Energy Services, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidatedstatements of comprehensive (loss) income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Companyas of December 31, 2020 and 2019, and the results of itsoperations and itscash flows for each of the three years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical audit matters

The critical audit matters communicated below aremattersarising from the current period audit of the financial statements that werecommunicated or required to be communicated to the audit committee and that: (1) relateto accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Collectability of the receivable balances from PREPA

As described further in Note 2 and Note 20 to the consolidated financial statements, Cobra Acquisitions LLC (“Cobra”) and the Puerto Rico Electric Power Authority (“PREPA”) entered into an emergency master services agreement in October 2017 and a master service contract in May 2018 for repairs to PREPA’s electrical grid due to damage caused by Hurricane Maria in 2017. As of December 31, 2020, the consolidated financial statements include accounts receivable from PREPA for approximately $227 million for services performed as well as receivables of approximately $74 million of interest charges on delinquent balances (collectively, “PREPA Receivable”). PREPA is currently subject to bankruptcy proceedings that are currently pending in the U.S. District Court for the District of Puerto Rico. Furthermore, 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 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 U.S. Department of Homeland Security - Federal Emergency Management Agency (“FEMA”) official and the former president of Cobra. The Company is cooperating with the Department of Justice in the criminal matter and neither the Company nor any of its subsidiaries were charged in the indictment. However, adverse developments in the ongoing criminal investigation and/or related litigation may affect PREPA’s willingness or intent to remit payment to Cobra. We identified the collectability of the receivable balances associated with the PREPA receivable as a critical audit matter.

The principal considerations for our determination that the collectability of the PREPA receivable is a critical audit matter include the high degree of estimation uncertainty resulting from significant management judgment. Given that FEMA ultimately provides the funds to repay the PREPA receivable, and given the related litigation described in Notes 2 and 20, management’s qualitative evaluation of the PREPA receivable and the determination of PREPA’s ability and intent to remit payment required a high degree of auditor judgment and an increased extent of effort to assess the reasonableness of management’s estimates and assumptions.

F-2

Our audit procedures related to the collectability of the receivable balances from PREPA included the following, among others.

•We obtained an understanding and evaluated the design and operating effectiveness of management’s controls over the collectability of the receivable balances from PREPA.

•We evaluated the qualitative assessment performed by management by performing the following:

◦We inquired of management and internal and external legal counsel to confirm our understanding of the facts and circumstances related to collectability of the PREPA receivable and status of the related litigation. Additionally, we evaluated responses to inquiry letters sent to internal and external legal counsel and obtained written representations from management related to the collectability of the PREPA receivable and related litigation. Through such procedures, we assessed the reasonableness of management’s conclusions that PREPA has the intent and ability to pay the receivable and whether a loss was probable or reasonably possible.

•We assessed the sufficiency of management’s disclosures related to the PREPA receivable and related litigation.

Fair value measurements used to record impairment of long-lived assets and goodwill

As described further in Note 7 to the consolidated financial statements, oil prices declined significantly in March 2020 as a result of geopolitical events that increased the global supply of oil in the market as well as effects of the COVID-19 pandemic which reduced the global demand for oil. As a result, the Company determined that impairment indicators existed, and it was more likely than not that the fair value of certain of its oilfield services assets and of its reporting units were less than their carrying value. Therefore, the Company performed an interim quantitative impairment test that resulted in recording $12.9 million of impairment of other long-lived assets and $55.0 million of impairment of goodwill. The Company measured the fair values of long-lived assets using direct and indirect observable inputs based on a market approach and measured the fair value of the reporting units using a combination of income and market approaches. The significant assumptions include the anticipated cash flows, discount rate, terminal growth rate, selection of an appropriate peer group and valuation multiples. Changes in these inputs could have a significant impact on the estimated fair values of the long-lived assets and reporting units. We identified the fair value measurements used to measure the impairment of long-lived assets and goodwill as a critical audit matter.

The principal considerations for our determination that the fair value measurements used to record impairment of long-lived assets and goodwill as a critical audit matter are the degree of complexity and subjectivity inherent in determining management’s estimates used in developing the fair value measurements of the underlying long-lived assets and reporting units. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s assumptions.

Our audit procedures related to the fair value measurements used to record impairment of long-lived assets and goodwill included the following, among others.

•We evaluated the reasonableness of management’s cash flow projections by comparing such projections to historical Company results and available industry data.

•We utilized our valuation specialists to assist in evaluating the Company’s discounted cash flow model and certain significant assumptions, including those discussed above. This included the evaluation of peer group and valuation multiples used within the fair value measurement of goodwill.

•We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value measurements that would result from such changes in the key assumptions, specifically management’s anticipated cash flows and terminal growth rate, as well as the discount rate used to record impairment of goodwill.

•We evaluated the qualifications of, and the methodologies employed by, the third-party specialists utilized by management.

•We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit.

/s/ GRANT THORNTON LLP

We have served as the Company’s auditor since 2012.

Oklahoma City, Oklahoma

February 26, 2021

F-3

MAMMOTH ENERGY SERVICES, INC.

CONSOLIDATED BALANCE SHEETS

ASSETS December 31,

CURRENT ASSETS (in thousands)

Short-term investment 1,750 —

Receivables from related parties, net 28,461 7,523

Intangible assets, net - customer relationships 408 583

Intangible assets, net - trade names 4,366 5,205

LIABILITIES AND EQUITY

CURRENT LIABILITIES

Payables to related parties 3 526

Accrued expenses and other current liabilities 44,408 40,754

Current operating lease liability 8,618 16,432

Current portion of long-term debt 1,165 —

Long-term debt, net of current portion 81,338 80,000

COMMITMENTS AND CONTINGENCIES (Note 20)

EQUITY

Equity:

Accumulated other comprehensive loss (3,065) (3,306)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

MAMMOTH ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

Years Ended December 31,

REVENUE (in thousands, except per share amounts)

COST AND EXPENSES

Selling, general and administrative - related parties (Note 13) 758 1,847 1,898

OTHER INCOME (EXPENSE)

Other, net - related parties 1,890 — —

OTHER COMPREHENSIVE INCOME (LOSS)

Net (loss) income per share (basic) (Note 16) $ (2.36) $ (1.76) $ 5.27

Net (loss) income per share (diluted) (Note 16) $ (2.36) $ (1.76) $ 5.24

The accompanying notes are an integral part of these consolidated financial statements.

F-5

MAMMOTH ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Accumulated

Additional Other

Common Stock Retained Paid-In Comprehensive

Shares Amount Earnings Capital Loss Total

(in thousands)

Cash dividends declared ($0.25 per share) — — (11,201) — — (11,201)

Other comprehensive loss — — — — (1,420) (1,420)

Cash dividends declared ($0.25 per share) — — (11,219) — — (11,219)

Other comprehensive income — — — — 775 775

Other comprehensive income — — — — 241 241

The accompanying notes are an integral part of these consolidated financial statements.

F-6

MAMMOTH ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

Cash flows from operating activities (in thousands)

Equity based compensation (Note 17) — — 17,487

Amortization of debt origination costs 831 326 387

(Gain) loss on disposal of property and equipment (1,379) 55 947

Inventory obsolescence — 1,349 —

Changes in assets and liabilities, net of acquisitions of businesses:

Cash flows from investing activities:

Purchases of property and equipment from related parties (76) (344) (4,658)

Business acquisitions, net — — (20,824)

Contributions to equity investee (490) (680) (702)

Proceeds from disposal of property and equipment 6,782 3,217 1,514

Purchase of short-term investment (1,750) — —

Cash flows from financing activities:

Proceeds from sale leaseback transaction 5,000 — —

Payments on sale leaseback transaction (268) — —

Effect of foreign exchange rate on cash 12 87 (133)

Net increase (decrease) in cash and cash equivalents 8,950 (61,753) 61,988

Cash and cash equivalents at beginning of period 5,872 67,625 5,637

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MAMMOTH ENERGY SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31,

Supplemental disclosure of cash flow information: (in thousands)

Supplemental disclosure of non-cash transactions:

Right-of-use assets obtained for financing lease liabilities $ 2,431 $ 3,721 $ —

The accompanying notes are an integral part of these consolidated financial statements.

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MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Basis of Presentation

The accompanying consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments, which in the opinion of management are necessary for the fair presentation of the results.

Mammoth Energy Services, Inc. (“Mammoth Inc.” or the “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 well completion, natural sand and proppant and drilling services. Additionally, the Company provides aviation services, coil tubing services, equipment rentals, crude oil hauling, full service transportation, remote accommodation services, equipment manufacturing and infrastructure engineering and design services. The Company was incorporated in Delaware in June 2016.

The following companies (“Operating Entities”) are included in these consolidated financial statements: Bison Drilling and Field Services, LLC (“Bison Drilling”), formed November 15, 2010; Bison Trucking LLC (“Bison Trucking”), formed August 9, 2013; White Wing Tubular Services LLC (“White Wing”), formed July 29, 2014; Barracuda Logistics LLC (“Barracuda”), formed October 24, 2014; Mr. Inspections LLC (“MRI”), formed January 25, 2015; Panther Drilling Systems LLC (“Panther”), formed December 11, 2012; Redback Energy Services, LLC (“Redback Energy”), formed October 6, 2011; Redback Coil Tubing, LLC (“Coil Tubing”), formed May 15, 2012; Redback Pump Down Services LLC (“Pump Down”), formed January 16, 2015; Muskie Proppant LLC (“Muskie”), formed September 14, 2011; Stingray Pressure Pumping LLC (“Stingray Pressure Pumping”), acquired November 24, 2014; Silverback Energy LLC (“Silverback”), formerly known as Stingray Logistics LLC, acquired November 24, 2014; Great White Sand Tiger Lodging Ltd. (“Sand Tiger”), formed October 1, 2007; WTL Oil LLC (“WTL”), formerly known as Silverback Energy Services LLC, formed June 8, 2016; Mammoth Equipment Leasing LLC, formed November 14, 2016; Cobra Acquisitions LLC (“Cobra”), formed January 9, 2017; Lion Power Services LLC (“Lion Power”), formerly known as Cobra Energy LLC, formed January 25, 2017; Mako Acquisitions LLC (“Mako”), formed March 28, 2017; Piranha Proppant LLC (“Piranha”), formed March 28, 2017; Higher Power Electrical LLC (“Higher Power”), acquired April 21, 2017; Stingray Energy Services LLC (“SR Energy”), acquired June 5, 2017; Stingray Cementing LLC (“Cementing”), acquired June 5, 2017; Sturgeon Acquisitions LLC (“Sturgeon”), acquired June 5, 2017; Taylor Frac, LLC (“Taylor Frac”), acquired June 5, 2017; Taylor Real Estate Investments, LLC (“Taylor RE”), acquired June 5, 2017; South River Road, LLC (“South River”), acquired June 5, 2017; 5 Star Electric, LLC (“5 Star”), acquired July 1, 2017; Tiger Shark Logistics LLC (“Tiger Shark”), formed October 20, 2017; Cobra Aviation Services LLC (“Cobra Aviation”), formed January 2, 2018; Bison Sand Logistics LLC (“Bison Sand”), formed January 8, 2018; Dire Wolf Energy Services LLC (“Dire Wolf”), formed January 8, 2018; Cobra Logistics Holdings LLC (“Cobra Logistics”), formed February 13, 2018; Black Mamba Energy LLC (“Black Mamba”), formed March 28, 2018; Stingray Cementing and Acidizing LLC (“Stingray Cementing and Acidizing”), formerly known as RTS Energy Services LLC (“RTS”), acquired June 15, 2018; Aquahawk Energy LLC (“Aquahawk”), formed June 28, 2018; Ivory Freight Solutions LLC (“Ivory Freight”), formed July 26, 2018; Cobra Caribbean LLC (“Cobra Caribbean”), formed October 3, 2018; Python Equipment LLC (“Python”), formed December 5, 2018; IFX Transport LLC (“IFX”), formed December 5, 2018; Air Rescue Systems LLC (“ARS”), acquired December 21, 2018; Leopard Aviation LLC (“Leopard”), formed April 29, 2019; Predator Aviation LLC (“Predator”), formed April 19, 2019; Anaconda Manufacturing LLC (“Anaconda”), formed July 31, 2019; and Aquawolf LLC (“Aquawolf”), formed September 25, 2019.

At December 31, 2020 and December 31, 2019, Wexford and Gulfport beneficially owned the following shares of outstanding common stock of Mammoth Inc.:

Share Count % Ownership Share Count % Ownership

F-9

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Operations

The Company's infrastructure services include construction, upgrade, maintenance and repair services to the electrical infrastructure industry as well as repair and restoration services in response to storms and other disasters. The Company's well completion services include equipment and personnel used in connection with the completion and early production of oil and natural gas 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 include drilling rigs and directional tools for both vertical and horizontal drilling of oil and natural gas wells. The Company also provides other services, including aviation, coil tubing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

Substantially 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, delays 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. Continuation of or further decreases in the commodity prices for oil and natural gas would have a material effect on the Company’s results of operations and financial condition.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements are prepared in accordance with GAAP and 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 between the entities within the Company have been eliminated.

Variable Interest Entities

The Company consolidates a VIE when it is determined to be the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE's economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. See Note 12 for more information on the Company's VIEs.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include, but are not limited to, the Company's sand reserves and their impact on calculating depletion expense, allowance for doubtful accounts, asset retirement obligations, reserves for self-insurance, depreciation and amortization of property and equipment, business combination valuations, amortization of intangible assets and future cash flows, fair values used to assess recoverability and impairment of long-lived assets, including goodwill, estimates of income taxes and the estimated effects of litigation and other contingencies.

Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.

Cash and Cash Equivalents and Short-Term Investment

All highly liquid investments with an original maturity of three months or less are considered cash equivalents. The Company maintains its cash accounts in financial institutions that are insured by the Federal Deposit Insurance Corporation, with the exception of cash held by Sand Tiger in a Canadian financial institution. At December 31, 2020, we had $2.2 million, in Canadian dollars, of cash in Canadian accounts. Cash balances from time to time may exceed the

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MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

insured amounts; however, the Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risks on such accounts. The Company's short-term investment consists of a certificate of deposit with a maturity over 90 days.

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. Interest on delinquent trade 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, one of the Company's subsidiaries, with the Puerto Rico Electric Power Authority (“PREPA”) to perform repairs to PREPA’s electrical grid as a result of Hurricane Maria. During the years ended December 31, 2020 and 2019, the Company charged interest on delinquent trade accounts receivable pursuant to the terms of its agreements with PREPA totaling $32.2 million and $42.0 million, respectively. These amounts are included in other, net on the consolidated statement of comprehensive (loss) income. Included in “accounts receivable, net” on the condensed consolidated balance sheets as of December 31, 2020 and 2019 were interest charges of $74.3 million and $42.0 million, respectively.

The Company's subsidiaries Stingray Pressure Pumping and Muskie are party to a pressure pumping and a sand supply contract with Gulfport. On November 13, 2020, Gulfport filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. During the year ended December 31, 2020, the Company recorded revenue of $50.0 million and interest of $1.9 million on delinquent trade accounts receivable pursuant to the terms of those contracts.

The Company regularly reviews receivables and provides for expected 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, payment history, 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 expects 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. 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.

F-11

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Following is a roll forward of the allowance for doubtful accounts for the years ended December 31, 2020, 2019 and 2018 (in thousands):

Additions charged to bad debt expense 1,528

Recoveries of receivables previously charged to bad debt expense (16,117)

Deductions for uncollectible receivables written off (1,950)

Additions charged to bad debt expense 1,771

Recoveries of receivables previously charged to bad debt expense (337)

Deductions for uncollectible receivables written off (1,478)

Additions charged to bad debt expense 22,705

Additions charged to other selling, general and administrative expense 3,950