Participants

Arthur Straehla; Chief Executive Officer, Director; Mammoth Energy Services Inc

Mark Layton; Chief Financial Officer; Mammoth Energy Services Inc

Blake McLean; Analyst; Daniel Energy Partners LLC

Michael Mathison; Analyst; Singular Research

Presentation

Operator

Greetings and welcome to the Mammoth Energy Services first quarter earnings conference call. At this time, all participants are in a listen only. A brief question and answer session will follow the formal presentation. And if anyone should require operator assistance during the conference, please press star zero on your telephone. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, [Zack Bob]. Thank you, sir. You may begin.

Good morning, everyone. We appreciate you joining us for the Mammoth Energy conference call to review 2024 first quarter results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of w. w. w. dot Mammoth Energy.com. Information reported on this call speaks only as of today, May second, 2024. Please be advised that any time-sensitive information may no longer be accurate as of any subsequent date.
I would also like to remind you that the statements made in today's discussion that are not historical facts, including statements of expectations or future events or future financial performance. Our forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today's call that by their nature, are uncertain and outside of the company's control, actual results may differ materially. Please refer to the earnings press release that was issued today for our disclosure on forward-looking statements. These factors and other risks and uncertainties are described in detail in the Company's filings with the Securities and Exchange Commission. Management may also refer to non-GAAP measures, including adjusted EBITDA. The definition of this non-GAAP measure and its reconciliation to the most directly comparable GAAP measure can be found at the end of our earnings release and in our investor presentation, which can be found on our website, Mammoth Energy assumes no obligation to publicly update or revise any forward looking statements.
And I'd like to turn it over to Mammoth Energy CEO, RD. strictly.

Arthur Straehla

Thank you, Zach, and good morning, everyone. I'll start with some overview comments about our business and the quarter before discussing recent developments and updated expectations for 2024. Then I will turn the call over to Martin to cover the financials in more detail.
Our first quarter results were challenged for a number of reasons. Most notably, our well completion services division experienced continued activity softness resulting from lower energy prices in the quarter, particularly natural gas and operators electing to defer activity to later in the year. The softness resulting in white space in our frac calendar for the month of March and had a direct impact on our revenue and earnings for the quarter in this segment.
Our Infrastructure Services division was also challenged this quarter, primarily due to experiencing less storm related work in the quarter than we had anticipated, and that caused a slight underperformance relative to our expectations. I'll update everybody on our visibility for the remainder of the year, and I'm in a moment, but we do expect these this first quarter results to serve as our low watermark for 2024, our infrastructure division experienced a sequential decline in both revenue and adjusted EBITDA for the first quarter stemming from less storm-related activity.
However, we are now seeing an uptick in bidding opportunities related to engineering, fiber, transmission and distribution, all of which are areas I believe we have differentiated and specialized capabilities to capitalize on opportunities in the market. Our engineering group continues to do well and we're building up more projects in the T&D space. Currently, the infrastructure investment job back are being released. Funds are being released for infrastructure projects such as fiber and engineering, as well as transmission and distribution areas where we remain excited participants. And this continues to give us optimism for improvements throughout 2024.
Although the storm season in 2023 and so far in 2024 has been benign relative to historical standards. No is forecasting an active storm season this year, and we will be prepared to deploy teams in areas that may be impact. We remain encouraged about the potential for continued growth in this sector and sector, and we feel strongly that MammoSite infrastructure business is well-positioned for long-term growth. Our well completions business experienced persistent challenges associated with lower US onshore activity and sustained weakness in the natural gas basins. In which we operate has continue to result in underutilization in the first quarter, but we are entering the second quarter with improved visibility and line of sight for the remainder of 2024.
We are seeing indications of the increased activity levels in the back half of the year in anticipation of increased natural gas demand, and we will be strategically positioned to capitalize on this anticipated demand if and when it ramps up. As is always a component of our internal analysis and decision making, we continue to weigh opportunities to potentially move our assets to more oily basins, but we haven't had a sufficient opportunity yet that would allow us to sustain the calendar and costs associated with relocation. We remain extremely focused on our cost structure, and we'll continue to efficiently manage our capital expenditures to align with activity levels in demand.
In our sand division, we experienced increased demand resulting in sequential improvement in tonnage sold as well as a slight uptick in pricing relative to the fourth quarter. The higher first quarter demand was primarily driven by Western Canada, and we expect to see additional improvements in demand across North America in the second half of 2024, despite the slow start to the year, we have entered 2024 with an undrawn revolver and cash on the balance sheet, and we believe mammoth remains poised to capitalize on near term opportunities. As we have demonstrated throughout our history, we have a resilient and diversified business comprised of talented, hard-working teams that will continue to find solutions that optimize our operational efficiencies with a customer and safety-first focus. We believe our diverse portfolio and ability to adapt quickly to changing environment positions us well in the sector.
Turning now to prep up, as previously announced, prep has paid $64 million so far in 2024. With respect to our receivable. While while we are pleased with these payments, we are still owed approximately $349 million in principal and interest for Epi has been holding $18.2 million in female funding, specifically related to Cobra's work. Since December, we continue to vigorously pursue payment of the outstanding amounts, especially the $18.2 million prep is withholding funds. We remain engaged in mediation with proper regarding our claims.
If mediation is unsuccessful, we intend to litigate the disputed issues. Looking forward, we enter the second quarter with improved visibility and expect our results to take a meaningful step up as we progress through 2024. We are encouraged by customer conversations and the anticipated ramp in demand and associated well completions activity in the second half of this year. Our current line of sight gives us confidence that we will generate improved adjusted EBITDA results in each of the remaining quarters of 2024. We have a strengthened balance sheet, a new revolving credit facility agreement and a new term loan agreement. And we remain well positioned for growth in 2024.
Now let me turn the call over to Mark to take you through our financial performance in greater detail.

Mark Layton

Thank you already. I hope everyone is doing well and we appreciate you joining us today. As I usually do, I'm going to take this time to provide additional details on some meaningful metrics and several key highlights, a detailed breakdown of our results can be found in our earnings release and in our 10 Q once it is on file with the SEC amendments.
Total revenue during the first quarter of 2024 came in at $43.2 million compared to $52.8 million in the fourth quarter of 2023. The 18% sequential decline in total revenues was primarily attributable to the continued activity softness in the natural gas heavy basins that we operate along with an overall decline in North American energy prices. In the quarter, we believe there are positive demand implications for natural gas on the horizon, and we remain optimistic for associated activity increases later this year. We view the first quarter as the low watermark for 2024 and anticipate improvements in our results moving forward.
In Q1 of 2024, we pumped 380 stages with approximately 0.6 fleets utilized on average compared to 669 stages and an average utilization of 0.9 fleets during the fourth quarter of 2023. This decrease resulted from sustained lower natural gas prices and commodity price uncertainty that continued to lead to the utilization headwinds that we experienced in the well completion services division during the first quarter, operators continue to elect to push much of their activity to the right. And we're slow to reset and finalize their budgets, which resulted in white space on the calendar.
But we now feel that we have a better line of sight for later this year. As many of our peers have noted on their calls, the expectation is that activity will begin to ramp up meaningfully in the second half of 2024. We will remain disciplined stewards of capital and continue to align our spending appropriately the demand that we are seeing from our customers. Our sand division sold approximately 146,000 tons of sand in the first quarter of 2024 at an average sales price of $24.38 per ton compared to 104,000 tons of sand at an average sales price of $23.62 during the fourth quarter of 2023 to lower sequential revenue despite an increase in both tons sold and average sales price stemmed from approximately $2 million in shortfall revenue that was recognized in the fourth quarter of 2023 compared to none in the first quarter.
Our Infrastructure Services division contributed revenue of $25 million for the first quarter of 2024, which represents a sequential decrease when compared to $27.2 million for the fourth quarter. As already mentioned, storm work in the first quarter was much lower than in previous years, and it resulted in a slower start to 2024 than anticipated. However, we are seeing an uptick in bidding activity. We continue to focus on operational execution and pursue opportunities within this sector. As we strategically structure our service offerings for growth, especially around T and D and fiber projects.
Our net loss for the first quarter of 2024 was $11.8 million compared to a net loss of $6 million for the fourth quarter of 2023. Adjusted EBITDA, as defined and reconciled in our earnings release was $4.5 million for the first quarter of 2024, a decrease sequentially compared to $10.5 million in the fourth quarter of 2023. Capex for the first quarter of 2024 was approximately $4.2 million, which was in line with our CapEx for the fourth quarter of 2023.
We continue to prudently manage our costs to more accurately reflect activity levels of our customers. We are revising our CapEx budget for 2024, and we now expect to spend approximately $9 million for the year, which represents a 6 million decrease from our previous guidance. This budget remains heavily weighted towards pressure pumping, but as always, we will continue to monitor customer spending activity trends in order to most effectively manage our capital to align with the demand we see in the market.
Selling, general and administrative expenses totaled approximately $8.8 million during the first quarter of 2024, up 6% compared to $8.3 million for the fourth quarter of 2023. A sequential increase in first quarter SG&A was related to a change in provision for expected credit losses in our Infrastructure segment as well as audit fees. As of March 31st, 2024, we had cash on hand of $22 million. Our revolving credit facility was undrawn, and we had approximately $21 million of available borrowing capacity.
Our total liquidity was approximately $43 million the aggregate $64 million that was paid by prep with respect to our receivables so far this year enabled us to satisfy by a handful our $54.4 million obligation to SPCP. group under the previously reported financing arrangements while adding $9.6 million to our cash position. And we are pleased to have bolstered our liquidity with the credit facility refinancing that occurred in the fourth quarter.
To conclude our call, we would like to thank our 735 employees throughout the Company for their hard work, dedication and commitment to maintaining safe and sustainable worksites for themselves and for their teammates.
Despite the soft start to 2024, we remain we maintain our belief in our teams and the direction that we are headed. We have taken appropriate steps to align our business with demand and strategically positioned management for improved results as activity rebounds later this year, we will continue to prioritize disciplined operations, efficiency and strategic capital allocation, which when coupled with our strong balance sheet, we believe will drive improvements in shareholder value.
Operator, we would now like to open the call up for questions.

Question and Answer Session

Operator

Thank you. And we will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone. The confirmation tone will indicate that your line is in the question queue. You may press star two, if you would like to remove your question from Mr. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the start. One moment, please while we poll for questions. Our first question comes from Blake McLean, Daniel Energy Partners. Please proceed with your question.

Blake McLean

I had a bit of a bigger picture question. I was hoping you could talk to us a little bit about the labor market and kind of how you guys are thinking about the balance between kind of maintaining staff and good hands and wages in a competitive environment?

Arthur Straehla

Yes, I'll take that. When we we do know that the labor market is still competitive, but we are able to find the people and to grow it to grow those businesses as we start to add. And I'm I'm talking primarily about the T&E because that's where the biggest shortages right now with a little bit of the increase in activity in oil and gas, but labor's a little bit. The labor market is a little bit improved over. It was over, say, six months ago. But on the transmission distribution where we are bringing on crews and that type thing, we have been able to attract very talented individuals and and grow that business as we go.

Blake McLean

That's helpful. Thanks. I am I was also hoping maybe you could share some thoughts around kind of the shape of the activity recovery in the back half of this year and early 25 and what you're hearing from customers and what they're looking at and how they're thinking about it. I mean, I know there's there's big demand coal, but they've got to feed, but any color you could provide around kind of the shape of that, that activity uptake would be would be useful for us.

Arthur Straehla

Yes, in our schedule, it has really been pretty dynamic on the phone, especially on the frac side with customers coming in. So kind of late in the process. I know we're going to defer this to a little bit later because of where pricing is and because we can get better rates with the water or some other reason that would lower the cost to it produced. So we've seen a fair number of those where everything has slid to the right, but they still anticipate getting the work done this year. So I mean, we're already looking at things in into the July and August timeframe and that the we believe will come to fruition.

Blake McLean

Got it. That's helpful. Thank you very much for the time this morning.

Arthur Straehla

Thanks, Blake.

Operator

Our next question comes from Michael Mathison with Singular Research. Please proceed with your question.

Michael Mathison

Good morning, guys, and thanks for taking my question. Wally Morton, let's see on just a couple of things on the revenue side. First, on you mentioned there's a lot of bidding activity and infrastructure on low storm volume left to behind a little bit in this quarter. But looking at new build infrastructure, do you have any on the kind of seem imminent to close that would be significant.

Mark Layton

We've won some bids recently and continue to see a fairly robust pipeline, primarily as it relates to transmission projects as well as substation projects.

Arthur Straehla

Yes, one of the emphasis we wanted to do this year is so again, more improved in the transmission area. And I think we've been able to do that. Our bidding is a lot more robust in that area. We currently have a couple of transmission jobs going concurrently right now on the distribution side and just and obviously not containing the customer well or who it is or anything on the T&D side.
But we are in the midst of a 15 crew offer with a major utility, that would certainly be helpful to us, then doesn't guarantee that we're going to get. It doesn't mean we're going to get it, but we think we're very competitive in trying to achieve that and get that bid it just it just brings home the the area that we're in in T&D and where we think that growth will come from. We are already starting to see it more of the precursors.
Our engineering business that we started from scratch a few years back, we'll do $20 million to $23 million in revenue. They were just awarded a nice contract and they continue to to build that business. So that is a precursor to obviously the T&D activity. And we view that as a vertical integration opportunity as we progress. So we feel very good about that.
We all hear and read articles about the demand for grid infrastructure with AI and data centers coming online. I saw a report out of Texas that they need twice the size of the grid in the next eight to 10 years to stay up with the demand. So that bodes well for where we're at and where a lot of our functional growth will come from and a terrific.

Michael Mathison

That's very encouraging. Just a couple of nitpicky questions through the income statement. And I noticed that there was a spike in interest in financing charges relative to Q4 of last year, even though we paid down some debt using the proceeds from the profit payment, can you help me reconcile that what's going on?

Mark Layton

Yes, sure. The largest component of that spike relates to the SPCP. agreement that was entered into in December. So there was just under $3 million that impacted Q4 of '23 and round numbers, about $5 million that impacted Q1 of 24. That's hitting interest expense relative to the SPCP. deal.

Michael Mathison

Terrific. So I wouldn't expect those interest levels going forward?

Mark Layton

That's correct. Those are one-time charges. The $5 million round numbers that was included in Q. one fully extinguishes the SPCP. agreement.

Michael Mathison

Excellent. Well, thank you for the information and good luck in the coming quarter.

Arthur Straehla

Thank you.

Operator

This now concludes our question and answer session. I would now like to turn the floor back over to management for closing comments.

Arthur Straehla

Thank you, Maria, and thank you again for joining us on the call today. We continue to position mammoth for improved results. Growth and success is all made possible by our talented and skilled team members. This concludes our conference call and we look forward to speaking to you again next quarter.

Operator

You may disconnect your lines at this time. Thank you for your participation.