Mammoth Energy Services, Inc. ("Mammoth" or the "Company")
(NASDAQ:TUSK) announced today that it has entered into definitive
agreements to acquire Sturgeon Acquisitions, LLC (which owns Taylor
Frac, LLC; Taylor Real Estate Investments, LLC and South River
Road, LLC collectively referred to as “Taylor Frac” or “Taylor”),
Stingray Energy Services, LLC and Stingray Cementing, LLC for seven
million shares of common stock. Mammoth anticipates closing the
transactions in May 2017, subject to regulatory approval and other
closing conditions.
Key Highlights of the Transactions:
- Taylor Frac owns a 0.7 million ton per year sand mine and
processing plant with 37.1 million tons of recoverable reserves,
73% of which is more highly valued fine sand grades. Mammoth
plans on expanding the Taylor facility to 1.75 million tons per
year by year-end 2017 at an estimated cost of $23
million.
- Stingray Energy Services and Stingray Cementing, combined,
offer services in fresh water transfer, equipment rental,
re-fueling as well as cementing and operate primarily in the
Appalachian basin
- Total consideration of $133.8 million, including 7.0 million
shares of common stock valued at approximately $133.4 million based
on the closing price of $19.06 per share for Mammoth’s common stock
on March 20, 2017, and the assumption of $7.3 million in debt and
offset by a positive working capital balance of $6.9 million as of
February 28, 2017.
- Immediately accretive with minimal integration costs. Including
the expansion to 1.75 Mtpa, we estimate these businesses will
generate EBITDA of approximately $15.0 million in 2017 and $40.6
million in 2018, based on current sand prices. This suggests a 2018
acquisition multiple of 3.3x EBITDA.
- The addition of sand mining, processing and logistics, as well
as water transfer, refueling, equipment rentals and cementing, all
of which primarily operate in the northeast, will further expand
and integrate Mammoth’s service offerings.
Arty Straehla, Chief Executive Officer, commented, “The pending
acquisitions of Taylor Frac, Stingray Energy Services and Stingray
Cementing represent a natural step for Mammoth to continue to
expand its integrated service offering. Taylor Frac will
provide surety of sand supply for our expanding pressure pumping
fleet as well as broaden our service offerings to our customer
base. Once the expansion of the Taylor facility is completed
at year end 2017, Mammoth is expected to have sand processing
capacity of approximately 2.45 million tons per year to support our
six high pressure pumping fleets. Given the increasing demand
for sand, we believe this will differentiate our service offering,
giving our customers confidence that their wells will be completed
without the need to source sand from third-parties. We
believe Taylor’s costs per ton are among the lowest in the industry
at approximately $10 to $12 per ton. In addition, Taylor’s fine
grade sands are strategically located on the Canadian National
Railway affording us direct access to our transloads in Ohio. We
believe that over the coming months we will continue to see
increasing demand for pressure pumping, sand and logistics services
and that the Taylor acquisition will support our ability to meet
this increased demand.”
Taylor Frac
Taylor Frac’s facilities include a wet and dry plant located on
393 acres in Taylor, Wisconsin. As of December 31, 2016, Taylor had
proven reserves of 37.1 million tons of high quality Northern White
Jordan Substrate frac sand which meets or exceeds all API standards
including solubility, turbidity, roundness, sphericity and crush
resistance. With approximately 73% of the reserves higher demand
fine grades of 40/70 and 100 mesh, Taylor is well positioned to
support the shift to finer grade sands in today’s well completion
recipes.
The current capacity of the dry plant is 0.7 Mtpa, which is
operating at full utilization. Mammoth plans to expand
capacity at the dry plant to 1.75 Mtpa, which is expected to be
completed by year-end 2017 at a cost of approximately $23
million. Taylor’s facilities are located on the Canadian
National Railway (CN), which provides a cost effective solution to
the Appalachian Basin (Utica, Marcellus) and Western Canada. As
part of the plant expansion, the capacity of the transload facility
will be expanded to accommodate 400 rail cars per day (up from 200
today). Taylor has existing rail car leases in place and when
combined with the rail cars leased through Muskie upon completion
of this transaction, Mammoth estimates we will have approximately
1,500 rail cars leased at competitive rates.
Stingray Energy Services and Stingray
Cementing
Stingray Energy Services operates primarily in the Appalachian
Basin providing fresh water transfer, produced water filtration,
rental equipment and re-fueling operations in support of drilling,
completion and production activities. The company’s water transfer
division is capable of providing fresh water for completion
operations on multiple locations simultaneously with more than 30
miles of lay flat hose and associated equipment. As of March 17,
2017, there were 250 pieces of equipment rented on 63 separate pads
in the Appalachian Basin with 27 locations utilizing Stingray
Energy’s re-fueling services.
Stingray Cementing operates primarily in the Appalachian Basin
providing cementing services in support of drilling operations. The
company owns and operates five twin cementers and associated
equipment. The company was formed in 2012 and continues to grow in
support of customer demand. It recently expanded capacity by 66% in
response to strong customer demand and has been operating at or
near full utilization.
Transaction Details
The definitive agreement for the acquisition of Sturgeon is with
Gulfport Energy Corporation (“Gulfport”), Rhino Exploration LLC and
an entity affiliated with Wexford Capital LP (“the Wexford
Affiliate”). The definitive agreements for the acquisition of
Stingray Energy Services and Stingray Cementing are with the
Wexford Affiliate and Gulfport.
Under the terms of the agreements Mammoth will issue an
aggregate of 7.0 million shares of common stock based on the
pro-rata ownership of the acquired businesses. Based upon a
closing price of Mammoth’s common stock of $19.06 per share on
March 20, 2017, the value of the transaction is approximately
$133.8 million, including the assumption of $7.3 million in debt
and offset by a positive working capital balance of $6.7 million as
of February 28, 2017.
Conference Call Information
Mammoth will host a conference call on Tuesday, March 21, 2017
at 12:00 p.m. EST to discuss the pending acquisitions of these
businesses. The telephone number to access the conference call is
(844) 265-1561 or international dial in (216) 562-0385. The
conference ID for the call is 92189169. Mammoth encourages
those who would like to participate in the call to dial in
approximately 5 minutes prior to the start. A webcast of the
conference call as well as accompanying slides will be available on
the company’s website www.mammothenergy.com under the
“investors” section.
About Mammoth Energy Services, Inc.
Mammoth is an integrated, growth-oriented oilfield service
company serving companies engaged in the exploration and
development of North American onshore unconventional oil and
natural gas reserves. Mammoth’s suite of services includes pressure
pumping services, well services, natural sand proppant services,
contract land and directional drilling services and other energy
services. Other energy services currently consists primarily of
remote accommodation services. For additional information about
Mammoth, please visit our website at www.mammothenergy.com, where
we routinely post announcements, updates, events, investor
information and presentations and recent news releases.
Forward-Looking Statements and
Cautionary Statements
This news release (and any oral statements made
regarding the subjects of this release, including on the conference
call announced herein) contains certain statements and information
that may constitute “forward-looking statements” within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. All statements, other than statements of historical facts
that address activities, events or developments that we expect,
believe or anticipate will or may occur in the future are
forward-looking statements. The words “anticipate,” “believe,”
“ensure,” “expect,” “if,” “intend,” “plan,” “estimate,” “project,”
“forecasts,” “predict,” “outlook,” “aim,” “will,” “could,”
“should,” “potential,” “would,” “may,” “probable,” “likely,” and
similar expressions, and the negative thereof, are intended to
identify forward-looking statements. Without limiting the
generality of the foregoing, forward-looking statements contained
in this press release specifically include statements, estimates
and projections regarding our business outlook and plans, future
financial position, liquidity and capital resources, operations,
reserves, performance, acquisitions, returns, capital expenditure
budgets, costs and other guidance regarding future developments.
Forward-looking statements are not assurances of future
performance. These forward-looking statements are based on
management’s current expectations and beliefs, forecasts for our
existing operations, experience, and perception of historical
trends, current conditions, anticipated future developments and
their effect on us, and other factors believed to be appropriate.
Although management believes that the expectations and assumptions
reflected in these forward-looking statements are reasonable as and
when made, no assurance can be given that these assumptions are
accurate or that any of these expectations will be achieved (in
full or at all). Moreover, our forward-looking statements are
subject to significant risks and uncertainties, including those
described in our reports filed with the Securities and Exchange
Commission, including our form 10-K for the year-ended December 31,
2016, many of which are beyond our control, which may cause actual
results to differ materially from our historical experience and our
present expectations or projections which are implied or expressed
by the forward-looking statements. Important factors that could
cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, failure
to close one or more of the Sturgeon, Stingray Energy Services or
Stingray Cementing acquisitions, risks relating to economic
conditions; volatility of crude oil and natural gas commodity
prices; delays in or failure of delivery of current or future
orders of specialized equipment; the loss of or interruption in
operations of one or more key suppliers or customers; oil and gas
market conditions; the effects of government regulation, permitting
and other legal requirements, including new legislation or
regulation of hydraulic fracturing; operating risks; the adequacy
of our capital resources and liquidity; weather; litigation;
competition in the oil and natural gas industry; and costs and
availability of resources.
Readers are cautioned not to place undue
reliance on any forward-looking statement which speaks only as of
the date on which such statement is made. We undertake no
obligation to correct, revise or update any forward-looking
statement after the date such statement is made, whether as a
result of new information, future events or otherwise, except as
required by applicable law.
Investor Relations Contact:
Don Crist, Director Investor Relations, (405) 608-6048 dcrist@mammothenergy.com
Mammoth Energy Services (NASDAQ:TUSK)
Historical Stock Chart
From Jun 2024 to Jul 2024
Mammoth Energy Services (NASDAQ:TUSK)
Historical Stock Chart
From Jul 2023 to Jul 2024