Mammoth Energy Announces Filing of Rand Corporation Report Findings
June 09 2020 - 8:00AM
Mammoth Energy Services, Inc. (“Mammoth” or the “Company”)
(NASDAQ:TUSK) today announced that it has filed with the Securities
and Exchange Commission a detailed independent reasonableness
analysis of the October 19, 2017 emergency Master Services
Agreement (the “MSA”) between Cobra Acquisitions LLC (“Cobra”) and
the Puerto Rico Electric Power Authority (“PREPA”). The report adds
further validation to a December 23, 2017 letter from the Federal
Emergency Management Agency (“FEMA”) to the Government of Puerto
Rico that the costs under the MSA were reasonable and the MSA was
awarded in compliance with applicable procurement provisions.
The Rand Report
After over a year of requests under the Freedom of Information
Act, Mammoth received a copy of a detailed independent assessment
of the reasonableness of the emergency MSA dated October 19, 2017
between the Company’s subsidiary Cobra and PREPA for repairs to
PREPA’s electrical grid as a result of Hurricane Maria. This
report, titled “Reasonableness Analysis of Cobra Acquisitions, LLC
Emergency Contract – Cost Validation Report” dated March 28, 2019
(the “Rand Report”), was prepared at the request of FEMA by the
Homeland Security Operational and Analysis Center (“HSOAC”), a
federally funded research and development center operated by the
Rand Corporation for the U.S. Department of Homeland Security.
FEMA’s request for the Rand Report followed a December 22, 2017
Determination Memorandum produced by FEMA that found the MSA to be
reasonable.
The 77-page Rand Report's comprehensive analysis and findings
are significant and contain, among others, the following
conclusions:
Selection of Cobra was reasonable
“Having examined [the foregoing] aspects regarding the
reasonableness of PREPA’s emergency procurement process, HSOAC
finds that selecting Cobra for the MSA was reasonable considering
FEMA policy on emergency situations and existing regulations
regarding contracting.” (page 14)
PREPA adhered to procurement statutes and policies in
awarding the contract to Cobra
“PREPA adhered to Puerto Rican legal statutes regarding
emergency situations and remained consistent with their own
internal policies.” (page 14)
“Thus, according to this evaluation of the procurement process
HSOAC concludes that PREPA engaged in a reasonable procurement
process given the circumstances following Hurricane Maria.” (page
14)
Cobra’s rates were reasonable
“We conclude that Cobra’s blended rates fall within
representative ranges for high voltage emergency repair work. This
conclusion is delivered from analytical investigation which
combined knowledge of work conditions, assumptions into wage
burdens, evaluation of the equipment quantities and workforce
structures, different assumptions about fuel costs, and inclusion
of the best benchmark data and current adjustment factors available
at this time.” (page 48)
“Cobra’s blended rates fall within estimated ranges in all
scenarios we considered.” (page 47)
Other key findings:
“Cobra was uniquely positioned for rapid response to the crisis,
deploying heavy equipment to seaports to barge transports on the
day after contract signature (10/20/17). Transmission work on the
island began on 10/31/17, two weeks after Cobra was awarded the
contract. Furthermore, a fully equipped crew of 463 lineman and 200
support staff arrived on the island within 3 weeks of contract
signing (11/13/17). This fully equipped crew was composed of
quantities of linemen and security which greatly exceeded the
levels proposed in the MSA. This timely delivery of quantities of
work and support labor, in excess of the levels initially proposed
quickly (three weeks after the MSA was signed), clearly reflects
responsiveness to requirements for both immediate availability and
contract flexibility.” (page 22)
“Overall, we concluded that work crew headcounts and equipment
quantities offered by Cobra were sufficiently large to complete
required electricity work and thus, HSOAC deemed quantities
presented in Cobra’s bid document to be reasonable.” (page 27)
“Results show that Cobra’s average hourly labor rate lay between
low and high benchmarks and did not exceed any individual labor
category except for groundman. By comparison, MasTec and
PowerSecure’s crew weighted hourly rates were higher than Cobra’s
and exceed benchmark ranges for most individual labor categories
and overall. These results indicate that Cobra’s labor rates were
competitive relative to others who submitted proposals for the
MSA.” (page 36)
“PREPA’s requested solution delineated four critical
requirements for emergency work – transmission repair capabilities,
aircraft assets for installation in mountainous terrain,
self-logistics resources, and ability to perform with minimal
upfront payment. PREPA stated that Cobra was selected as the only
company with experience in installation of transmission equipment
and towers in mountainous terrain environments. Cobra had five
helicopters, which could be deployed as emergency repair assets.
Additionally, Cobra was able to provide its own logistical support
– including supplies, equipment, fuel, food, water, housing, etc.,
and had crews and equipment ready to deploy.” (page 13)
The foregoing description of the Rand Report does not purport to
be complete and is qualified in its entirety by reference to the
full text of the Rand Report which is included as Exhibit 99.1 to a
Current Report on Form 8-K filed by Mammoth with the Security and
Exchange Commission (the “SEC”) on June 9, 2020, and can be found
on the SEC’s EDGAR website.
About Mammoth Energy Services,
Inc.
Mammoth is an integrated, growth-oriented energy service company
serving companies engaged in the exploration and development of
North American onshore unconventional oil and natural gas reserves
and private utilities, public investor-owned utilities and
co-operative utilities through its energy infrastructure services.
Mammoth’s suite of services and products include: pressure pumping
services, infrastructure services, natural sand and proppant
services, contract land and directional drilling services and other
services.
Investor Contact: Don Crist – Director,
Investor Relationsdcrist@mammothenergy.com(405) 608-6048
Media Contact:Peter
Mirijanianpeter@pmpadc.com(202) 464-8803
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