What changed in this filing

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Item 9A. Controls and Procedures

2021-03-01 compared with 2020-03-02 · 664 added, 651 removed, 1212 unchanged (52% of the section changed)

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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 evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2019 , our disclosure controls and procedures are effective.

Based upon our

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

C hanges 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 and Attestation Report of the Registered Public Accounting Firm

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 the Company’s 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.

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.

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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.

Grant Thornton LLP, the independent registered public accounting firm that audited our financial statements for the year ended December 31, 2019 included with this Annual Report on Form 10-K, has also audited the effectiveness of our internal control over financial reporting as of December 31, 2019 , as stated in their accompanying report.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Mammoth Energy Services, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Mammoth Energy Services, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2019, and our report dated February 28, 2020 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the 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 audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

Definition and limitations of internal control over financial reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

February 28, 2020

Other Information

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Financial Statements

Reports of Independent Registered Public Accounting Firms

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets

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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.

Exhibit Number

Exhibit Description

Amended and Restated Contribution Agreement by and among MEH Sub LLC, Gulfport Energy Corporation, Rhino Exploration LLC, Mammoth Energy Partners LLC and Mammoth Energy Services, Inc.

dated as of May 12, 2017 (incorporated by reference to Exhibit A-1 to the Company’s Definitive Schedule 14C, filed with the SEC on May 15, 2017).

Amended and Restated Contribution Agreement by and among MEH Sub LLC, Gulfport Energy Corporation, Mammoth Energy Partners LLC and Mammoth Energy Services, Inc.

dated as of May 12, 2017 (incorporated by reference to Exhibit A-2 to the Company’s Definitive Schedule 14C, filed with the SEC on May 15, 2017).

Amended and Restated Contribution Agreement by and among MEH Sub LLC, Gulfport Energy Corporation, Mammoth Energy Partners LLC and Mammoth Energy Services, Inc.

dated as of May 12, 2017 (incorporated by reference to Exhibit A-3 to the Company’s Definitive Schedule 14C, filed with the SEC on May 15, 2017).

Purchase and Sale Agreement, dated as of March 27, 2017, by and between Mammoth Energy Services, Inc., as purchaser, and Chieftain Sand and Proppant, LLC and Chieftain Sand and Proppant Barron, LLC, as sellers (incorporated by reference to Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No.

001-37917), filed with the SEC on May 15, 2017).

Exhibit Number Exhibit Description

Amended and Restated Certificate of Incorporation of the Company (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No.

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001-37917), filed with the SEC on November 15, 2016).

Description of Securities of the Company.

Description of Securities of the Company (incor porated by reference to Exhibit 4 .1 to the Company's Annua l Report on Form 10-K (File No.

001-37917), filed with the SEC on March 2, 2020).

Specimen Certificate for shares of common stock, par value $0.01 per share, of the Company (incorporated by reference to Exhibit 4.1 to the Company’s Amendment No.

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001-37917), filed with the SEC on November 15, 2016).

Registration Rights Agreement, dated October 12, 2016, by and between the Company and Rhino Exploration LLC (incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K (File No.

001-37917), filed with the SEC on November 15, 2016).

Advisory Services Agreement, dated as of October 19, 2016, by and between the Company and Wexford Capital LP (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.

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001-37917), filed with the SEC on August 8, 2018).

Amended and Restated revolving Credit and Security Agreement, dated as of October 19, 2018, by and among Mammoth Energy Services, Inc., certain direct and indirect subsidiaries, the lenders party thereto and PNC Bank, National Association, as a lender and administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No.

Amended and Restated R evolving Credit and Security Agreement, dated as of October 19, 2018, by and among Mammoth Energy Services, Inc., certain direct and indirect subsidiaries, the lenders party thereto and PNC Bank, National Association, as a lender and administrative agent for the lenders (incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K (File No.

001-37917), filed with the SEC on October 25, 2018).

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001-37917), filed with the SEC on May 3, 2019).

Second Amendment to Amended and Restated Revolving Credit and Security Agreement.

Second Amendment to Amended and Restated Revolving Credit and Security Agreement , dated as of February 26, 2020 (incor porated by reference to Exhibit 10.40 to the Company's Annual Report on Form 10-K (File No.

001-37917), filed with the SEC on March 2, 2020 ).

N745BW Helicopter Lease Agreement, dated as of January 10, 2020 and effective as of January 1, 2020, by and between Cobra Aviation Services LLC and Cobra Acquisitions LLC and Brim Equipment Leasing LLC (incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37917), filed with the SEC on May 11, 2020).

N745MB Helicopter Lease Agreement, dated as of January 10, 2020 and effective as of January 1, 2020, by and between Cobra Aviation LLC and Brim Equipment Leasing LLC (incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37917), filed with the SEC on May 11, 2020).

N810LA Helicopter Lease Agreement, dated as of January 10, 2020 and effective as of January 1, 2020, by and between Cobra Aviation LLC and Brim Equipment Leasing LLC (incorporated by reference to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37917), filed with the SEC on May 11, 2020).

N902TX Helicopter Lease Agreement, dated as of January 10, 2020 and effective as of January 1, 2020, by and between Cobra Aviation LLC and Brim Equipment Leasing LLC (incorporated by reference to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37917), filed with the SEC on May 11, 2020).

N904AF Helicopter Lease Agreement, dated as of January 10, 2020 and effective as of January 1, 2020, by and between Cobra Aviation LLC and Brim Equipment Leasing LLC (incorporated by reference to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q (File No.

001-37917), filed with the SEC on May 11, 2020).

List of Significant Subsidiaries of the Company.

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Mine Safety Disclosure Exhibit.

XBRL Instance Document.

XBRL Taxonomy Extension Schema Document.

XBRL Taxonomy Extension Calculation Linkbase Document.

XBRL Taxonomy Extension Definition Linkbase Document.

XBRL Taxonomy Extension Labels Linkbase Document.

XBRL Taxonomy Extension Presentation Linkbase Document.

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.

104 Cover Page Interactive Data File - the cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

* Filed herewith.

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+ Management contract, compensatory plan or arrangement.

The schedules (or similar attachments) referenced in this agreement have been omitted in accordance with Item 601(b)(2) of Regulation S-K.

A copy of any omitted schedule (or similar attachment) will be furnished supplementally to the Securities and Exchange Commission.

# Confidential treatment with respect to certain portions of this agreement was granted by the SEC which portions have been omitted and filed separately with the SEC.

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MAMMOTH ENERGY SERVICES, INC.

February 28, 2020

February 26, 2021 By:

/s/ Mark Layton

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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.

/s/ Arty Straehla

Chief Executive Officer (principal executive officer) and Director

February 28, 2020

Signature Title Date

/s/ Arty Straehla Chief Executive Officer (principal executive officer) and Director February 26, 2021

Arty Straehla

/s/ Mark Layton

Chief Financial Officer (principal financial and accounting officer)

February 28, 2020

/s/ Arthur Amron

Director (Chairman of the Board)

February 28, 2020

/s/ Marc McCarthy

February 28, 2020

Marc McCarthy

February 28, 2020

/s/ Matthew Ross

February 28, 2020

/s/ Arthur Smith

February 28, 2020

/s/ Jonathan Yellen

February 28, 2020

Jonathan Yellen

/s/ Mark Layton Chief Financial Officer (principal financial and accounting officer) February 26, 2021

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

Palm Director February 26, 2021

/s/ Paul Jacobi Director February 26, 2021

/s/ Arthur Smith Director February 26, 2021

/s/ Corey Booker Director February 26, 2021

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying consolidated balance sheets of Mammoth Energy Services, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2019 and 2018, the related consolidated statements of comprehensive income (loss), changes in equity, and cash flows for each of the three years in the period ended December 31, 2019, and the related notes (collectively referred to as the “financial statements”).

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements 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 Company as of December 31, 2020 and 2019, and the results of its operations and its cash 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.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 28, 2020 expressed an unqualified opinion.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842).

Basis for opinion

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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 PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

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.

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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 supporting the amounts and disclosures in the financial statements.

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 are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to 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.

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

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CONSOLIDATED BALANCE SHEETS

CURRENT ASSETS

(in thousands)

ASSETS December 31,

CURRENT ASSETS (in thousands)

Cash and cash equivalents $ 14,822 $ 5,872

Short-term investment 1,750 —

Accounts receivable, net 393,112 363,053

Receivables from related parties

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

Inventories 12,020 17,483

Prepaid expenses 13,825 12,354

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

Goodwill 12,608 67,581

Other non-current assets 5,115 7,467

Total assets $ 824,562 $ 952,385

LIABILITIES AND EQUITY

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Current operating lease liability 8,618 16,432

Current portion of long-term debt 1,165 —

Income taxes payable 34,088 33,465

Total current liabilities 128,598 130,397

Long-term debt

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

Deferred income tax liabilities 24,741 36,873

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Asset retirement obligations 4,746 4,241

Other liabilities

Other long-term liabilities 10,435 5,031

Total liabilities 261,235 283,644

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

Total equity 563,327 668,741

Total liabilities and equity $ 824,562 $ 952,385

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Years Ended December 31,

(in thousands, except per share amounts)

2020 2019 2018

REVENUE (in thousands, except per share amounts)

Services revenue $ 234,081 $ 452,594 $ 1,471,085

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Services cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $ 85,481 , $ 102,901 and $ 106,127 , respectively, for 2020, 2019 and 2018)

205,657 451,206 961,205

Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $ 0 , $ 0 and $ 0 , respectively, for 2020, 2019 and 2018)

418 4,770 5,885

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $ 9,758 , $ 14,039 and $ 13,668 , respectively, for 2020, 2019 and 2018)

25,946 87,812 126,714

Selling, general and administrative (Note 13) 66,427 49,705 71,199

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Interest expense, net ( 5,397 ) ( 4,958 ) ( 3,187 )

Bargain purchase gain

Other, net 33,048 42,216 ( 2,036 )

Other, net - related parties 1,890 — —

Total other income (expense) 29,541 37,258 ( 5,223 )

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Foreign currency translation adjustment, net of tax of ($ 54 ), ($ 203 ) and $ 397 , respectively, for 2020, 2019 and 2018

241 775 ( 1,420 )

Comprehensive (loss) income $ ( 107,366 ) $ ( 78,269 ) $ 234,545

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Weighted average number of shares outstanding, including dilutive effect (Note 16) 45,644 45,011 45,021

(a) Financial information includes the results attributable to Sturgeon for the entire period presented.

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

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Comprehensive

Additional Other

Common Stock Retained Paid-In Comprehensive

Shares Amount Earnings Capital Loss Total

(in thousands)

Balance at January 1, 2018 44,589 $ 446 $ 2,001 $ 508,010 $ ( 2,661 ) $ 507,796

Net income of Sturgeon prior to acquisition

Stingray acquisition

Sturgeon acquisition

Stock based compensation

Other comprehensive income

Balance at December 31, 2017

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

Stock based compensation 288 3 — 5,422 — 5,425

Net income — — 235,965 — — 235,965

Cash dividends declared ($ 0.25 per share)

— — ( 11,201 ) — — ( 11,201 )

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

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Stock based compensation 232 2 — 4,175 — 4,177

Net loss — — ( 79,044 ) — — ( 79,044 )

Cash dividends declared ($ 0.25 per share)

— — ( 11,219 ) — — ( 11,219 )

Other comprehensive income — — — — 775 775

Balance at December 31, 2019 45,109 $ 451 $ 136,502 $ 535,094 $ ( 3,306 ) $ 668,741

Stock based compensation 660 7 — 1,945 — 1,952

Net loss — — ( 107,607 ) — — ( 107,607 )

Other comprehensive income — — — — 241 241

Balance at December 31, 2020 45,769 $ 458 $ 28,895 $ 537,039 $ ( 3,065 ) $ 563,327

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

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Years Ended December 31,

Cash flows from operating activities

(in thousands)

2020 2019 2018

Cash flows from operating activities (in thousands)

Net (loss) income $ ( 107,607 ) $ ( 79,044 ) $ 235,965

Adjustments to reconcile net (loss) income to cash (used in) provided by operating activities:

Adjustments to reconcile net (loss) income to cash provided by (used in) operating activities:

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

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Amortization of debt origination costs 831 326 387

Bad debt expense (Note 2)

Loss on disposal of property and equipment

Gain on bargain purchase

Bad debt expense (recoveries) (Note 2) 21,958 1,434 ( 14,578 )

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

Impairment of goodwill 54,973 33,664 3,203

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Deferred income taxes ( 12,186 ) ( 42,639 ) 52,226

Other ( 143 ) ( 986 ) 16

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

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Receivables from related parties ( 40,333 ) 3,641 22,624

Inventories 5,103 830 ( 5,502 )

Prepaid expenses and other assets 1,996 ( 1,040 ) 1,423

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Income taxes payable 648 ( 71,499 ) 68,692

Net cash (used in) provided by operating activities

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

Cash flows from investing activities:

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

Business combination cash acquired (Note 4)

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

Net cash used in investing activities ( 2,295 ) ( 33,224 ) ( 211,955 )

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Repayments of long-term debt ( 32,800 ) ( 76,000 ) ( 176,900 )

Proceeds from sale leaseback transaction 5,000 — —

Payments on sale leaseback transaction ( 268 ) — —

Dividends paid — ( 11,219 ) ( 11,201 )

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Debt issuance costs ( 1,051 ) — ( 1,199 )

Repayment of acquisition-related long-term debt

Net cash provided by (used in) financing activities 4,266 66,702 ( 112,592 )

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

Net (decrease) increase in cash and cash equivalents

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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Years Ended December 31,

2020 2019 2018

Supplemental disclosure of cash flow information:

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Cash paid for interest $ 4,729 $ 4,741 $ 3,212

Cash paid for income taxes

Cash (recovered) paid for income taxes $ ( 617 ) $ 110,848 $ 32,757

Supplemental disclosure of non-cash transactions:

Acquisition of Stingray Cementing LLC and Stingray Energy Services LLC

Purchases of property and equipment included in accounts payable $ 1,312 $ 2,303 $ 11,908

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

(a) Financial information includes the results attributable to Sturgeon for the entire period presented.

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

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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 pressure pumping, natural sand and proppant and drilling services as well as coil tubing, equipment rental, crude oil hauling, full service transportation and remote accommodation services.

The Company was incorporated in Delaware in June 2016 as a wholly-owned subsidiary of Mammoth Energy Partners, LP, a Delaware limited partnership (the “Partnership” or the “Predecessor”).

The Partnership was originally formed by Wexford Capital LP (“Wexford”) in February 2014 as a holding company under the name Redback Energy Services Inc.

and was converted to a Delaware limited partnership in August 2014.

On November 24, 2014, Mammoth Energy Holdings, LLC (“Mammoth Holdings,” an entity controlled by Wexford), Gulfport Energy Corporation (“Gulfport”) and Rhino Resource Partners LP (“Rhino”) (collectively known as “Predecessor Interest”) contributed their interest in certain of the entities presented below to the Partnership in exchange for 20 million limited partner units.

Mammoth Energy Partners GP, LLC (the “General Partner”) held a non-economic general partner interest in the Partnership.

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:

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and Aquawolf LLC (“Aquawolf”), formed September 25, 2019.

On October 12, 2016, the Partnership was converted into a Delaware limited liability company named Mammoth Energy Partners LLC (“Mammoth LLC”), and then Mammoth Holdings, Gulfport and Rhino, as all the members of Mammoth LLC, contributed their member interests in Mammoth LLC to Mammoth Inc.

Prior to the conversion and the contribution, Mammoth Inc.

was a wholly-owned subsidiary of the Partnership.

Following the conversion and the contribution, Mammoth LLC (as the converted successor to the Partnership) was a wholly-owned subsidiary of Mammoth Inc.

did not conduct any material business operations until Mammoth LLC was contributed to it.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19, 2016, Mammoth Inc.

closed its initial public offering of 7,750,000 shares of common stock (the “IPO”), which included an aggregate of 250,000 shares that were offered by Mammoth Holdings, Gulfport and Rhino, at a price to the public of $15.00 per share.

Net proceeds to Mammoth Inc.

from its sale of 7,500,000 shares of common stock were approximately $103.1 million .

On the closing date of the IPO, Mammoth Inc.

repaid all outstanding borrowings under its revolving credit facility and used the remaining net proceeds for general corporate purposes, including the acquisition of additional equipment and complementary businesses that enhanced its existing service offerings, broadened its service offerings and expanded its customer relationships.

On June 5, 2017, the Company completed the acquisition of (1) Sturgeon, a Delaware limited liability company, which included the acquisition of Sturgeon's wholly-owned subsidiaries Taylor Frac, a Wisconsin limited liability company, Taylor RE, a Wisconsin limited liability company, and South River, a Wisconsin limited liability company, (2) SR Energy, a Delaware limited liability company;

and (3) Cementing, a Delaware limited liability company (together with SR Energy, the “Stingray Acquisition”) in exchange for the issuance by Mammoth Inc.

of an aggregate of 7,000,000 shares of its common stock.

Prior to its acquisition of Sturgeon, the Company and Sturgeon were under common control and it is required under accounting principles generally accepted in the Unites States of America (“GAAP”) to account for this common control acquisition in a manner similar to the pooling of interest method of accounting.

Therefore, the Company's historical financial information for all periods included in the accompanying financial statements has been recast to combine Sturgeon with the Company as if the acquisition had been effective since the date Sturgeon commenced operations.

Refer to Note 4 for additional disclosure regarding the acquisition of Sturgeon.

On June 29, 2018, Gulfport and MEH Sub LLC (“MEH Sub”), an entity controlled by Wexford, (collectively, the “Selling Stockholders”) completed an underwritten secondary public offering of 4,000,000 shares of the Company’s common stock at a purchase price to the Selling Stockholders of $38.01 per share.

The Selling Stockholders granted the underwriters an option to purchase up to an aggregate of 600,000 additional shares of the Company's common stock at the same purchase price.

This option was exercised, in part, and on July 30, 2018, the underwriters purchased an additional 385,000 shares of common stock from the Selling Stockholders at the same price per share.

The Selling Stockholders received all proceeds from this offering.

At December 31, 2019 and December 31, 2018 , Wexford, Gulfport and Rhino beneficially owned the following shares of outstanding common stock of Mammoth Inc.:

December 31, 2019

December 31, 2018

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

December 31, 2020 December 31, 2019

Share Count % Ownership Share Count % Ownership

Wexford 22,055,766 48.2 % 22,045,273 48.9 %

Gulfport 9,829,548 21.5 % 9,829,548 21.8 %

Outstanding shares owned by related parties 31,885,314 69.7 % 31,874,821 70.7 %

Total outstanding 45,769,283 100.0 % 45,108,545 100.0 %

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 pressure pumping services include equipment and personnel used in connection with the completion and early production of oil and natural gas wells.

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 provides drilling rigs and directional tools for both vertical and horizontal drilling of oil and natural gas wells and salt water disposal wells as well as rig moving services.

The Company also provides other services, including coil tubing, equipment rentals, crude oil hauling, full service transportation and remote accommodations.

All of the Company’s operations are in North America.

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,

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

upgrade, expansion and repair and restoration.

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.

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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.

Changes in the commodity prices for oil and natural gas could have a material effect on the Company’s results of operations and financial condition.

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.

Summary of Significant Accounting Policies

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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 and estimates of income taxes.

Reclassifications

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

Cash and Cash Equivalents

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.

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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 insured amounts;

Cash balances from time to time may exceed the

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

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The Company grants credit to customers in the ordinary course of business and generally does not require collateral.

Most areas in the continental United States in which the Company operates provide for a mineral lien or mechanic’s lien against the property on which the service is performed if the lien is filed within the statutorily specified time frame.

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 accounts receivable is recognized in other income when chargeable and collectability is reasonably assured.

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 year ended

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2019 , the Company charged interest on delinquent accounts receivable pursuant to the terms of its agreements with PREPA totaling $42.0 million .

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.

The Company regularly reviews receivables and provides for estimated 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, economic events and other factors.

As the financial conditions of customers change, circumstances develop or additional information becomes available, adjustments to the allowance for doubtful accounts may be required.

In the event the Company was to determine 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.

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 final determination is made of their uncollectability.

Uncollectible accounts receivable are periodically charged against the allowance for doubtful accounts once a final determination is made regarding their uncollectability.

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):

Balance, December 31, 2016

Additions charged to expense

Additions - other

Balance, January 1, 2018 $ 21,737

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 )

Balance, December 31, 2018 5,198

Additions charged to expense

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 )

Balance, December 31, 2019 5,154

Additions charged to expense

Additions charged to bad debt expense 22,705

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

Additions charged to other, net - related parties 1,427

Recoveries of receivables previously charged to bad debt expense ( 747 )

Deductions for uncollectible receivables written off ( 2,350 )

Balance, December 31, 2020 $ 30,139

At December 31, 2017, the Company reviewed receivables due from PREPA and made specific reserves consistent with Company policy which resulted in additions to allowance for doubtful accounts totaling $16.0 million .

During the year ended December 31, 2018, the Company received payment from PREPA for the amount reserved at December 31, 2017.

During the year ended December 31, 2018, the Company received payment from PREPA of $ 16.0 million for amounts reserved at December 31, 2017.

As a result, the Company reversed the 2017 additions to the allowance for doubtful accounts from PREPA in 2018.

On November 13, 2020, Gulfport filed petitions for voluntary relief under chapter 11 of the Bankruptcy Code.

As of November 13, 2020, Gulfport owed the Company approximately $ 46.9 million, which included interest charges of $ 3.3 million and attorneys’ fees of $ 1.8 million.

FASB ASC 326 , Financial Instruments-Credit Losses, requires companies to reflect its current estimate of all expected credit losses.

As a result, the Company recorded reserves on its pre-petition receivables due from Gulfport for products and services, interest and attorneys’ fees of $ 19.4 million, $ 1.4 million and $ 1.8 million, respectively, during the year ended December 31, 2020.

The Company had accounts receivable due from Gulfport totaling $ 28.4 million as of December 31, 2020, which is included in “receivables from related parties, net” on the condensed balance sheets.

This balance includes pre-petition receivables of $ 24.3 million and post-petition receivables of $ 4.1 million.

Additionally, the Company has made specific reserves consistent with Company policy which resulted in additions to allowance for doubtful accounts totaling $ 3.3 million, $ 1.8 million and $ 1.5 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

These additions were charged to bad debt expense based on the factors described above.

Additionally, during the year ended December 31, 2020, the Company recorded additions to allowance for doubtful accounts of $ 2.2 million related to insurance claim receivables for its directors and officers liability policy.

The Company will continue to pursue collection until such time as final determination is made consistent with Company policy.

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District Court for the District of Puerto Rico.

As a result, PREPA's ability to meet its payment obligations is largely dependent upon funding from the Federal Emergency Management Agency or other sources.

On September 30, 2019, the Company filed a motion with the U.S.

District Court for the District of Puerto Rico seeking recovery of the amounts owed to the Company by PREPA.

PREPA filed a motion to stay the Company's motion on the ground that the ongoing criminal proceedings described in Note 20 below against the former president of Cobra and two other individuals may affect the recovery of those amounts.

On October 17, 2019, the court granted PREPA’s request to stay the Company's motion and, on February 3, 2020, extended the stay until a status conference to be held on June 17, 2020.

As a result, PREPA's ability to meet its payment obligations is largely dependent upon funding from the FEMA or other sources.

On September 30, 2019, Cobra filed a motion with the U.S.

District Court for the District of Puerto Rico seeking recovery of the amounts owed to Cobra by PREPA, which motion was stayed by the court.

On March 25, 2020, Cobra filed an urgent motion to modify the stay order and allow the recovery of approximately $ 61.7 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 the Company or (iii) otherwise does not pay amounts owed to the Company for services performed, the receivable may not be collectible.

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The fair value is determined using a combination of the income and market approaches.

See Notes 7 and 8 for additional disclosure related to goodwill.

See Notes 7 and 8 for additional disclosures related to goodwill.

Other Non-Current Assets

9 unchanged sentences

Balance as of beginning of period $ 4,241 $ 3,164

Additions 372 952

Accretion expense 115 120

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Customer relationships are amortized based on an estimated attrition factor and trade names are amortized over their estimated useful lives.

See Notes 7 and 8 for additional disclosure related to intangible assets.

See Notes 7 and 8 for additional disclosures related to intangible assets.

Fair Value of Financial Instruments

The Company's financial instruments consist of cash and cash equivalents, trade receivables, trade payables, amounts receivable or payable to related parties and long-term debt.

The carrying amount of cash and cash equivalents, trade receivables, trade payables and receivables and payables from related parties approximates fair value because of the short-

The Company's financial instruments consist of cash and cash equivalents, short-term investments, trade receivables, trade payables, amounts receivable or payable to related parties and long-term debt.

The carrying amount of cash and cash

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

term nature of the instruments.

equivalents, trade receivables, trade payables and receivables and payables from related parties approximates fair value because of the short-term nature of the instruments.

The fair value of long-term debt approximates it s carrying value because the cost of borrowing fluctuates based upon market conditions.

1 unchanged sentence

On January 1, 2018, the Company adopted Accounting Standards Update (“ASU”) 2014-09 and its related amendments (collectively, “ASC 606”) using the modified retrospective method applied to contracts which were not completed as of January 1, 2018.

Revenues for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported under previous revenue recognition guidance.

See Note 3 for additional discussion of the Company's revenue.

1 unchanged sentence

The Company had $ 32.3 million and $ 42.1 million, respectively, of unbilled revenue included in accounts receivable, net in the consolidated balance sheets at December 31, 2020 and 2019.

The Company had $1.3 million and $4.1 million , respectively, of unbilled revenue included in receivables from related parties in the consolidated balance sheets at December 31, 2019 and 2018 .

The Company had $ 1.5 million and $ 1.3 million, respectively, of unbilled revenue included in receivables from related parties, net in the consolidated balance sheets at December 31, 2020 and 2019.

The Company had $ 8.3 million and $ 7.2 million, respectively, of deferred revenue included in accrued expenses and other current liabilities in the consolidated balance sheets at December 31, 2020 and 2019.

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Certain income from our infrastructure services segment and income from our remote accommodations business is subject to foreign income taxes, and such taxes are provided in the financial statements pursuant to FASB ASC 740 .

On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Tax Act”).

The Tax Act significantly changed US corporate income tax laws by, among other things, reducing the US corporate income tax rate from 35% to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of US subsidiaries.

As a result, the Company recorded a one-time reduction to income tax expense of $31.0 million during the year ended December 31, 2017, which is included in provision for income taxes in the consolidated statements of comprehensive income (loss).

See Note 14 for further information.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company evaluates tax positions taken or expected to be taken in preparation of its tax returns and disallows the recognition of tax positions that do not meet a “more likely than not” threshold of being sustained upon examination by the taxing authorities.

1 unchanged sentence

Penalties and interest, if any, are recognized in selling, general and administrative expense and interest expense, respectively.

Litigation and Contingencies

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accruals for litigation and contingencies are reflected in the consolidated financial statements based on management’s assessment, including advice of legal counsel, of the expected outcome of litigation or other dispute resolution proceedings and/or the expected resolution of contingencies.

Liabilities for estimated losses are accrued if the potential loss from any claim or legal proceeding is considered probable and the amount can be reasonably estimated.

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 only on information available at the time of the assessment due to the uncertain nature of such matters.

As additional information becomes available, management reassesses potential liabilities related to pending claims and litigation and may revise its previous estimates.

Foreign Currency Translation

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Following is a summary of our significant customers based on accounts receivable balances at December 31, 2020 and 2019 and revenues derived for the years ended December 31, 2020, 2019 and 2018:

ACCOUNTS RECEIVABLE

Years Ended December 31,

At December 31,

REVENUES ACCOUNTS RECEIVABLE

Years Ended December 31, At December 31,

2020 2019 2018 2020 2019

Customer A (a)

— % 15 % 60 % 71 % 73 %

Customer B (b)

16 % 20 % 8 % 7 % 2 %

Customer C (c)

15 % — % — % 6 % — %

Customer A is a third-party customer.

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Customer B is a related party customer.

Revenues and the related accounts receivable balances earned from Customer B were derived from the Company's pressure pumping services segment, natural sand proppant services segment and other businesses.

Revenues and the related accounts receivable balances earned from Customer B were derived from the Company's well completion services segment, natural sand proppant services segment and other businesses.

Accounts receivable for Customer B also includes receivables due for interest charged on delinquent accounts receivable.

Customer C is a third-party customer.

Revenues and the related accounts receivable balances earned from Customer C were derived from the Company's infrastructure services segment.

MAMMOTH ENERGY SERVICES, INC.

17 unchanged sentences

The Company adopted this ASU effective January 1, 2019 and estimates the fair value of its non-employee awards (see Note 17) was approximately $ 18.9 million as of this date.

Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No.

1 unchanged sentence

Measurement of Credit Losses on Financial Instruments,” which amends current guidance on reporting credit losses on financial instruments.

This ASU requires entities to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions and reasonable supportable forecasts.

This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade accounts receivable.

The Company will adopt this standard effective January 1, 2020.

This standard will not have a material impact on the Company’s consolidated financial statements and related disclosures.

Adoption of ASC 606 “Revenues from Contracts with Customers”

In May 2014, the FASB issued ASU 2014-09, “ Revenue from Contracts with Customers ,” which supersedes the revenue recognition requirements in ASC 605, Revenue Recognition , and most industry-specific guidance.

The new guidance requires entities to recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services.

On January 1, 2018, the Company adopted ASU 2014-09 and its related amendments (collectively, “ASC 606”) using the modified retrospective method applied to contracts which were not completed as of January 1, 2018.

Revenues for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts continue to be reported under previous revenue recognition guidance.

While ASC 606 requires additional disclosure of the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers, its adoption has not had a material impact on the measurement or recognition of the Company's revenues.

The adoption of ASC 606 represents a change in accounting principle.

After evaluation of all contracts not completed as of January 1, 2018, the Company determined the cumulative effect of adopting ASC 606 was immaterial, and as such, has not recorded an adjustment to the opening balance of retained earnings on January 1, 2018.

Revenue Recognition

The Company's primary revenue streams include infrastructure services, pressure pumping services, natural sand proppant services, drilling services and other services, which includes coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, full service transportations, crude oil hauling and remote accommodations services.

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.

The Company adopted this standard effective January 1, 2020.

It did not have a material impact on the Company's consolidated financial statements.

The Company's 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, full service transportations, crude oil hauling, remote accommodations, equipment manufacturing and infrastructure engineering and design services.

See Note 21 for the Company's revenue disaggregated by type.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Infrastructure Services

1 unchanged sentence

Pricing under these contracts may be unit priced, cost-plus/hourly (or time and materials basis) or fixed price (or lump sum basis).

The Company accounts for infrastructure services as a single performance obligation satisfied over time.

Generally, the Company accounts for infrastructure services as a single performance obligation satisfied over time.

In certain circumstances, the Company supplies materials that are utilized during the jobs as part of the agreement with the customer.

The Company accounts 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, the Company warranties equipment and labor performed for a specified period following substantial completion of the work.

Pressure Pumping Services

Pressure pumping services are typically provided based upon a purchase order, contract or on a spot market basis.

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, the Company accounts for pressure pumping services as a single performance obligation satisfied over time.

Generally, the Company accounts for well completion services as a single performance obligation satisfied over time.

In certain circumstances, the Company supplies proppant that is utilized for pressure pumping as part of the agreement with the customer.

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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 one of its customers, the Company has agreed to provide that customer with use of up to two pressure pumping fleets for the period covered by the contract.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pursuant to a contract with Gulfport, Stingray Pressure Pumping has agreed to provide Gulfport 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.

The Company has the right to receive consideration from this customer even if circumstances prevent us from performing work.

All consideration owed to the Company for services performed during the contractual period is fixed and the right to receive it is unconditional.

Stingray Pressure Pumping has the right to receive consideration from this customer even if circumstances prevent us from performing work.

All consideration owed to Stingray Pressure Pumping 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.

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.

During the year ended December 31, 2020, Stingray Pressure Pumping generated $ 38.5 million in pre-petition revenues and $ 3.9 million in post-petition revenues under this contract with Gulfport.

As of November 13, 2020, Gulfport owed Stingray Pressure Pumping approximately $ 43.4 million, which included interest charges of $ 3.2 million and attorneys’ fees of $ 1.7 million.

FASB ASC 326 , Financial Instruments-Credit Losses, requires companies to reflect its current estimate of all expected credit losses.

As a result, Stingray Pressure Pumping recorded reserves on its pre-petition receivables due from Gulfport for services, interest and attorneys’ fees of $ 16.2 million, $ 1.4 million and $ 1.7 million, respectively, during the year ended December 31, 2020.

See Notes 13 and 20 below.

Additional revenue is generated through labor charges and the sale of consumable supplies that are incidental to the service being performed.

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As of December 31, 2020 and 2019, the Company had deferred revenue totaling $ 7.9 million and $ 7.2 million, respectively, related to shortfall payments.

These amount is included in accrued expenses and other current liabilities on the consolidated balance sheet.

These amounts are included in accrued expenses and other current liabilities on the consolidated balance sheet.

If the Company does not expect the customer will make-up deficient volumes in future periods, the breakage model will be applied and revenue related to shortfall payments will be recognized when the model indicates the customer's inability to take delivery of excess volumes.

During the years ended December 31, 2019 and 2018, the Company recognized revenue totaling $2.8 million and $1.5 million , respectively, related to shortfall payments.

During the years ended December 31, 2020, 2019 and 2018, the Company recognized revenue totaling $ 24.8 million, $ 2.8 million and $ 1.5 million, respectively, related to shortfall payments.

In certain of the Company's sand supply agreements, the customer obtains control of the product when it is loaded into rail cars and the customer reimburses the Company for all freight charges incurred.

1 unchanged sentence

If revenue is recognized for the related product before the shipping and handling activities occur, the Company accrues the related costs of those shipping and handling activities.

Pursuant to its contract with Gulfport, Muskie has agreed to sell and deliver specified amounts of sand to Gulfport.

In September 2020, Muskie filed a lawsuit against Gulfport to recover delinquent payments due under this agreement.

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

for services and damages that we may be entitled to.

During the year ended December 31, 2020, Muskie generated $ 6.5 million in pre-petition revenues and $ 1.0 million in post-petition revenues under this contract with Gulfport.

As of November 13, 2020, Gulfport owed Muskie approximately $ 3.4 million, which included interest charges of $ 0.04 million and attorneys’ fees of $ 0.02 million.

FASB ASC 326 , Financial Instruments-Credit Losses, requires companies to reflect its current estimate of all expected credit losses.

As a result, Muskie recorded reserves on its pre-petition receivables due from Gulfport for services, interest and attorneys’ fees of $ 3.1 million, $ 0.04 million and $ 0.02 million, respectively, during the year ended December 31, 2020.

See Notes 13 and 20 below.

Drilling Services

3 unchanged sentences

Mobilization revenue and costs were recognized over the days of actual drilling.

As a result of market conditions, the Company temporarily shut down its contract land drilling operations in December 2019.

As a result of market conditions, the Company temporarily shut down its contract land drilling operations beginning in December 2019 and its rig moving operations beginning in April 2020.

Other Services

During the periods presented, the Company also provided coil tubing, pressure control, flowback, cementing, acidizing, equipment rentals, crude oil hauling, full service transportation and remote accommodations services, which are reported under other services.

As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations as well as its flowback operations during the third quarter of 2019.

During the periods presented, the Company also 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, the Company temporarily shut down its cementing and acidizing operations as well as its flowback operations beginning in July 2019 and its coil tubing and full service transportation operations beginning in July 2020.

The Company's other services are typically provided based upon a purchase order, contract or on a spot market basis.

16 unchanged sentences

Balance, December 31, 2019 7,244

The Company did no t have any contract assets as of December 31, 2019 , December 31, 2018 or January 1, 2018.

Deduction for recognition of revenue ( 25,047 )

Increase for deferral of shortfall payments 25,436

Increase for deferral of customer prepayments 648

Balance, December 31, 2020 $ 8,281

The Company did no t have any contract assets as of December 31, 2020, December 31, 2019 or December 31, 2018.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Performance Obligations

Revenue recognized in the current period from performance obligations satisfied in previous periods was a nominal amount for the year ended December 31, 2020.

As of December 31, 2019 , the Company had unsatisfied performance obligations totaling $92.1 million , which will be recognized over the next two years.

As of December 31, 2020, the Company had unsatisfied performance obligations totaling $ 41.8 million, which will be recognized over the next 13 months.

Acquisition of Air Rescue Systems and Brim Equipment Assets

On December 21, 2018, Cobra Aviation, a variable interest entity of the Company, completed a series of transactions that provided for an expansion of its aviation service business.

These transactions include (i) the acquisition of all outstanding equity interests in ARS, (ii) the purchase of two commercial helicopters, spare parts, support equipment and aircraft documents from Brim Equipment Leasing, Inc.

These transactions included (i) the acquisition of all outstanding equity interests in ARS, (ii) the purchase of two commercial helicopters, spare parts, support equipment and aircraft documents from Brim Equipment Leasing, Inc.

(“Brim Equipment”) (the “Brim Equipment Assets”) and (iii) the formation of a joint venture between Cobra Aviation and Wexford Partners Investment Co.

1 unchanged sentence

Cobra Aviation owns a 49 % economic interest and Wexford Investment owns a 51 % economic interest in Brim Acquisitions, and each member contributed its pro rata portion of Brim Acquisitions initial capital of $ 2.0 million.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The acquisition of ARS qualifies under FASB ASC 805, Business Combinations , as a business combination.

7 unchanged sentences

The following table summarizes the fair value of ARS and the Brim Equipment Assets as of December 21, 2018 (in thousands):

Brim Equipment Assets

ARS Brim Equipment Assets

Accounts receivable $ 146 $ —

7 unchanged sentences

From the acquisition date through December 31, 2020, ARS and the Brim Equipment Assets provided the following activity (in thousands):

Brim Equipment Assets

Includes depreciation expense of $0.3 million and $0.02 million , respectively, for ARS for 2019 and 2018 and $0.4 million for the Brim Equipment Assets for 2019.

The following table presents unaudited pro forma information as if the ARS and the Brim Equipment Assets acquisitions had occurred as of January 1, 2017 (in thousands):

Years Ended December 31,

Brim Equipment Assets

Net income (loss)

The Company recognized $0.3 million of transaction related costs during the year ended December 31, 2018 related to these acquisitions.

2020 2019 2018 2020 2019 2018

ARS Brim Equipment Assets

Revenues $ 1,054 $ 2,153 $ — $ 155 $ 2,616 $ —

( 359 ) ( 546 ) ( 25 ) ( 86 ) ( 1,056 ) —

Includes depreciation expense of $ 0.3 million, $ 0.3 million and $ 0.02 million, respectively, for ARS for 2020, 2019 and 2018 and $ 0.4 million and $ 0.4 million for the Brim Equipment Assets for 2020 and 2019.

The Company recognized $ 0.3 million of transaction related costs during the year ended December 31, 2018 related to

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

these acquisitions.

Acquisition of WTL Oil

2 unchanged sentences

The acquisition of WTL expanded the Company's service offerings into the crude oil hauling business.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the fair value of WTL as of May 31, 2018 (in thousands):

10 unchanged sentences

From the acquisition date through December 31, 2020, WTL provided the following activity (in thousands):

Includes depreciation and amortization expense of $2.2 million and $1.0 million , respectively, for 2019 and 2018.

The following table presents unaudited pro forma information as if the acquisition of WTL had occurred as of January 1, 2017 (in thousands):

Years Ended December 31,

Net (loss) income

2020 2019 2018

Revenues $ 1,897 $ 8,413 $ 7,511

( 5,486 ) ( 2,719 ) ( 149 )

Includes depreciation and amortization expense of $ 1.4 million, $ 2.2 million and $ 1.0 million, respectively, for 2020, 2019 and 2018, and impairment expense totaling $ 4.8 million for 2020.

The Company recognized $ 0.1 million of transaction related costs during the year ended December 31, 2018 related to this acquisition.

4 unchanged sentences

The following table summarizes the fair value of RTS as of June 15, 2018 (in thousands):

Inventory $ 180

Property, plant and equipment 7,787

2 unchanged sentences

Goodwill recorded in connection with the acquisition is attributable to the assembled workforce and future profitability expected to arise from the acquired entity.

From the acquisition date through December 31, 2020, RTS provided the following activity (in thousands):

2020 2019 2018

Revenues $ — $ 2,456 $ 6,682

( 2,018 ) ( 6,458 ) ( 3,210 )

As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations beginning in July 2019.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

From the acquisition date through December 31, 2019 , RTS provided the following activity (in thousands):

Includes depreciation expense of $2.3 million and $0.9 million , respectively, for 2019 and 2018.

The following table presents unaudited pro forma information as if the acquisition of RTS had occurred as of January 1, 2017 (in thousands):

Years Ended December 31,

Net (loss) income

Includes depreciation expense of $ 1.7 million, $ 2.3 million and $ 0.9 million, respectively, for 2020, 2019 and 2018.

The Company recognized $ 0.1 million of transaction related costs during the year ended December 31, 2018 related to this acquisition.

As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations during the third quarter of 2019.

As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations beginning in July 2019.

As a result, the Company impaired the balance of RTS's goodwill totaling $ 0.1 million.

In addition, the Company wrote-off obsolete inventory totaling $ 0.2 million.

Acquisition of 5 Star

On July 1, 2017, the Company completed its acquisition of 5 Star for total consideration of $2.4 million in cash to the sellers.

The Company funded the purchase price for 5 Star with cash on hand and borrowings under its credit facility.

The acquisition of 5 Star added to the infrastructure component of the Company's business and provided expansion of the infrastructure segment into the eastern United States.

The Company recognized $0.1 million of transaction related costs during the year ended December 31, 2017 related to this acquisition.

The following table summarizes the fair value of 5 Star as of July 1, 2017 (in thousands):

Accounts receivable

Property, plant and equipment

Identifiable intangible assets - trade names (a)

Total assets acquired

Long-term debt and other liabilities

Total liabilities assumed

Net assets acquired

Identifiable intangible assets were measured using a combination of income approaches.

Trade names were valued using a “Relief-from-Royalty” method.

Non-contractual customer relationships were valued using a “Multi-period excess earnings” method.

Identifiable intangible assets will be amortized over 10 years.

Goodwill was the excess of the consideration transferred over the net assets recognized and represents the future economic benefits arising from other assets acquired that could not be individually identified and separately recognized.

Goodwill recorded in connection with the acquisition is attributable to assembled workforces and future profitability expected to arise from the acquired entity.

From its acquisition date through December 31, 2019 , 5 Star has provided the following activity (in thousands):

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Net (loss) income (b)

Includes intercompany revenues of $7.6 million , $112.6 million and $16.0 million , respectively, for 2019, 2018 and 2017.

Includes depreciation and amortization expense of $6.1 million , $3.5 million and $0.8 million , respectively, for 2019, 2018 and 2017.

The following table presents unaudited pro forma information as if the acquisition of 5 Star had occurred as of January 1, 2017 (in thousands):

December 31, 2017

Acquisition of Higher Power

On April 21, 2017, the Company completed its acquisition of Higher Power for total consideration of $4.0 million .

The Company funded the purchase price for Higher Power with cash on hand and borrowings under its credit facility.

The acquisition of Higher Power added an energy infrastructure component to the Company's business, helping to diversify its service offerings.

The Company recognized $0.1 million of transaction related costs during the year ended December 31, 2017 related to this acquisition.

The following table summarizes the fair value of Higher Power as of April 21, 2017 (in thousands):

Property, plant and equipment

Identifiable intangible assets - customer relationships

Total assets acquired

Goodwill recorded in connection with the acquisition is attributable to assembled workforces and future profitability expected to arise from the acquired entity.

From its acquisition date through December 31, 2019 , Higher Power has provided the following activity (in thousands):

Net (loss) income (b)

Includes intercompany revenues of $26.5 million , $191.2 million and $27.4 million , respectively, for 2019, 2018 and 2017.

Includes depreciation and amortization of $10.5 million , $7.1 million and $2.0 million , respectively, for 2019, 2018 and 2017.

The following table presents unaudited pro forma information as if the acquisition of Higher Power had occurred as of January 1, 2017 (in thousands):

December 31, 2017

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Acquisition of Sturgeon

On March 20, 2017, and as amended on May 12, 2017, the Company entered into a definitive contribution agreement with MEH Sub, Wexford Offshore Sturgeon Corp., Gulfport, Rhino and Mammoth Energy Partners LLC (the “Sturgeon Contribution Agreement”).

Under the Sturgeon Contribution Agreement, the Company agreed to acquire all outstanding membership interests, through its wholly-owned subsidiary Mammoth LLC, in Sturgeon, which owns all of the membership interests in Taylor Frac, Taylor RE and South River (collectively, the “Sturgeon subsidiaries”).

The acquisition added sand reserves, increased our production capacity and provided access to the Canadian National Railway, which affords access to the Appalachian basin in support of the Company’s pressure pumping services as well as to western Canada.

The acquisition of Sturgeon closed on June 5, 2017.

Pursuant to the Sturgeon Contribution Agreement, Mammoth Inc.

issued 5,607,452 shares of its common stock, par value $0.01 per share, for all outstanding equity interests in Sturgeon.

Based upon a closing price of Mammoth Inc.'s common stock of $18.50 per share on June 5, 2017, the total purchase price was $103.7 million .

As a result of this transaction, the Company's historical financial information has been recast to combine the consolidated statements of comprehensive income (loss) and the consolidated balance sheets of the Company for all periods included in the accompanying financial statements with those of Sturgeon as if the combination had been in effect since Sturgeon commenced operations on September 13, 2014.

Any material transactions between the Company and Sturgeon were eliminated.

Sturgeon's financial results were incorporated into the Company's natural sand proppant services division.

The Company recognized $1.3 million of transaction related costs during the year ended December 31, 2017 related to this acquisition.

Acquisition of Chieftain

On March 27, 2017, as amended as of May 24, 2017, the Company entered into a purchase agreement with the Chieftain Sellers, following the Company's successful bid in a bankruptcy court auction for substantially all of the assets of the Chieftain Sellers (the “Chieftain Assets”).

The Chieftain acquisition closed on May 26, 2017.

The Company funded the purchase price for the Chieftain Assets with cash on hand and borrowings under its revolving credit facility.

The Chieftain Assets are held by the Company's wholly owned subsidiary Piranha and are included in the Company's natural sand proppant services segment.

The Chieftain acquisition added sand reserves, increased our production capacity and provided access to the Union Pacific railroad, which affords access to both the Mid-Continent and Permian basins in support of the Company’s pressure pumping services.

The following table summarizes the fair value of the Chieftain Acquisition as of May 26, 2017 (in thousands):

Property, plant and equipment (a)

Sand reserves (b)

Total assets acquired

Asset retirement obligation

Total liabilities assumed

Total allocation of purchase price

Bargain purchase price (c, d)

Total purchase price

Property, plant and equipment fair value measurements were prepared by utilizing a combined fair market value and cost approach.

The market approach relies on comparability of assets using market data information.

The cost approach places emphasis on the physical components and characteristics of the asset.

It places reliance on estimated replacement cost, depreciation and economic obsolescence.

The fair value of the sand reserves was determined based on the excess cash flow method, a form of the income approach.

The method provides a value based on the estimated remaining life of sand reserves, projected financial information and industry projections.

Amount in consolidated statements of comprehensive (loss) income reflected net of income taxes of $2.2 million .

The fair value of the business was determined based on the excess cash flow method, a form of the income approach.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Since the acquisition date, the Chieftain Assets have provided the following activity (in thousands):

Net (loss) income (b)

Includes intercompany revenues of $3.7 million , $14.8 million and $12.3 million , respectively, for 2019, 2018 and 2017.

Includes depreciation and amortization of $5.0 million , $4.9 million and $2.8 million , respectively, for 2019, 2018 and 2017.

The following table presents unaudited pro forma information as if the acquisition of the Chieftain Assets had occurred as of January 1, 2017 (in thousands):

December 31, 2017

The Company's historical financial information was adjusted to give pro forma effect to the events that were directly attributable to the Chieftain Acquisition.

The Company recognized $0.8 million of transaction related costs related to this acquisition.

Acquisition of Stingray

On March 20, 2017, and as amended on May 12, 2017, the Company entered into two definitive contribution agreements, one such agreement with MEH Sub, Wexford Offshore Stingray Energy Corp., Gulfport and Mammoth LLC and the other with MEH Sub, Wexford Offshore Stingray Pressure Pumping Corp., Gulfport and Mammoth LLC (collectively, the “Stingray Contribution Agreements”).

Under the Stingray Contribution Agreements, the Company agreed to acquire all outstanding membership interests, through its wholly-owned subsidiary Mammoth LLC, in Cementing and SR Energy (the “2017 Stingray Acquisition”).

The addition of their water transfer, equipment rentals and cementing services further expanded and vertically integrated the Company’s service offerings.

The 2017 Stingray Acquisition closed on June 5, 2017.

Pursuant to the Stingray Contribution Agreements, Mammoth Inc.

issued 1,392,548 shares of its common stock, par value $0.01 per share, for all outstanding equity interests in SR Energy and Cementing.

Based upon a closing price of Mammoth Inc.'s common stock of $18.50 per share on June 5, 2017, the total purchase price was $25.8 million .

At the acquisition date, the components of the consideration transferred were as follows (in thousands):

Consideration attributable to Cementing (a)

Consideration attributable to SR Energy (a)

Total consideration transferred

See summary of acquired assets and liabilities below

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands)

Cash and cash equivalents

Accounts receivable, net

Receivables from related parties

Prepaid expenses

Property, plant and equipment (a)

Identifiable intangible assets - customer relationships (b)

Identifiable intangible assets - trade names (b)

Total assets acquired

Accounts payable and accrued liabilities

Long-term debt (d)

Deferred tax liability

Total liabilities assumed

Net assets acquired

Property, plant and equipment fair value measurements were prepared by utilizing a combined fair market value and cost approach.

The market approach relies on comparability of assets using market data information.

The cost approach places emphasis on the physical components and characteristics of the asset.

It places reliance on estimated replacement cost, depreciation and economic obsolescence.

Identifiable intangible assets were measured using a combination of income approaches.

Trade names were valued using a “relief-from-Royalty” method.

Non-contractual customer relationships were valued using a “multi-period excess earnings” method.

Identifiable intangible assets will be amortized over 5 - 10 years.

Goodwill recorded in connection with the acquisition is attributable to assembled workforces and future profitability based on the synergies expected to arise from the acquired entities.

Long-term debt assumed was paid off subsequent to the acquisition.

Since the acquisition date, the businesses acquired have provided the following activity (in thousands):

Net loss (b, c)

Includes intercompany revenues of $2.3 million , $3.0 million and $0.6 million , respectively, for SR Energy for 2019, 2018 and 2017 and $0.6 million , $0.3 million and a nominal amount, respectively, for Cementing for 2019, 2018 and 2017.

Includes depreciation and amortization of $4.9 million , $5.4 million and $3.4 million , respectively, for SR Energy for 2019, 2018 and 2017 and $0.8 million , $1.5 million and $4.1 million , respectively, for Cementing for 2019, 2018 and 2017.

Includes non-cash impairment expense of $3.9 million for SR Energy in 2019 and $3.1 million and $4.4 million , respectively, for Cementing in 2019 and 2018.

The following table presents unaudited pro forma information as if the acquisition of SR Energy and Cementing had occurred on January 1, 2017 (in thousands):

December 31, 2017

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The historical financial information was adjusted to give effect to the pro forma events that were directly attributable to the 2017 Stingray Acquisition.

For the year ended December 31, 2017, there were $0.2 million transaction related costs expensed.

The unaudited pro forma consolidated results are not necessarily indicative of what the consolidated results of operations actually would have been had the 2017 Stingray Acquisition been completed on January 1, 2017.

In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations of the Company.

A summary of the Company's inventories is shown below (in thousands):

Supplies $ 6,312 $ 9,598

Raw materials 613 746

2 unchanged sentences

Total inventory $ 12,020 $ 17,483

As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations as well as its flowback operations during the third quarter of 2019.

As a result of this, the Company wrote-off obsolete inventory totaling $1.3 million .

As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations as well as its flowback operations beginning in 2019.

As a result of this, the Company wrote-off obsolete inventory totaling $ 1.3 million during the year ended December 31, 2019.

Property, Plant and Equipment

Property, plant and equipment include the following (in thousands):

Pressure pumping equipment

Drilling rigs and related equipment

Machinery and equipment

Useful Life 2020 2019

Pressure pumping equipment 3 - 5 years

$ 217,945 $ 216,627

Drilling rigs and related equipment 3 - 15 years

113,146 117,783

Machinery and equipment 7 - 20 years

172,272 190,221

Buildings (a)

Vehicles, trucks and trailers

Coil tubing equipment

Land improvements

15 years or life of lease

Rail improvements

Other property and equipment (a)

Deposits on equipment and equipment in process of assembly (b)

accumulated depreciation (c)

15 - 39 years

48,776 47,859

Vehicles, trucks and trailers 5 - 10 years

111,911 135,724

Coil tubing equipment 4 - 10 years

Land N/A 13,417 13,687

Land improvements 15 years or life of lease

10,133 10,135

Rail improvements 10 - 20 years

13,793 13,802

Other property and equipment (b)

18,640 18,880

728,574 794,156

Deposits on equipment and equipment in process of assembly (c)

731,765 800,783

accumulated depreciation (d)

480,503 448,011

Total property, plant and equipment, net $ 251,262 $ 352,772

Included in Buildings and Other property and equipment at December 31, 2019 are costs of $6.7 million and $6.5 million , respectively, related to assets under operating leases.

Included in Buildings at December 31, 2020 and 2019 are costs of $ 7.6 million and $ 6.7 million, respectively, related to assets under operating leases.

Included in Other property and equipment at December 31, 2020 and 2019 are costs of $ 6.0 million and $ 6.5 million, respectively, related to assets under operating leases.

Deposits on equipment and equipment in process of assembly represents deposits placed with vendors for equipment that is in the process of assembly and purchased equipment that is being outfitted for its intended use.

The equipment is not yet placed in service.

Includes accumulated depreciation of $3.5 million at December 31, 2019 related to assets under operating leases.

Proceeds from customers for horizontal and directional drilling services equipment, damaged or lost down-hole are reflected in revenue with the carrying value of the related equipment charged to cost of service revenues and are reported as cash inflows from investing activities in the statement of cash flows.

For the years ended December 31, 2019 , 2018 and 2017 , proceeds from the sale of equipment damaged or lost down-hole were a nominal amount, $1.0 million and $0.5

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

million , respectively, and gain on sales of equipment damaged or lost down-hole were a nominal amount, $0.9 million and $0.3 million , respectively.

Includes accumulated depreciation of $ 5.0 million and $ 3.5 million at December 31, 2020 and 2019, respectively, related to assets under operating leases.

For the years ended December 31, 2020, 2019 and 2018, proceeds from the sale of equipment damaged or lost down-hole were $ 0.7 million, a nominal amount and $ 1.0 million, respectively, and gain on sales of equipment damaged or lost down-hole were $ 0.7 million, a nominal amount and $ 0.9 million, respectively.

Proceeds from assets sold or disposed of as well as the carrying value of the related equipment are reflected in other, net on the consolidated statement of comprehensive (loss) income.

For the years ended December 31, 2019 , 2018 and 2017 , proceeds from the sale of equipment were $3.2 million , $0.8 million and $0.4 million , respectively, and losses from the sale or disposal of equipment were $0.1 million , $1.8 million and $0.4 million , respectively.

For the years ended December 31, 2020, 2019 and 2018, proceeds from the sale of equipment were $ 6.1 million, $ 3.2 million and $ 0.8 million, respectively, and gains (losses) from the sale or disposal of equipment were $ 0.7 million, ($ 0.1 ) million and ($ 1.8 ) million, respectively.

A summary of depreciation, depletion, amortization and accretion expense is shown below (in thousands):

Years Ended December 31,

2020 2019 2018

Depreciation expense $ 93,332 $ 112,435 $ 107,634

Accretion and depletion expense (see Note 2)

Amortization expense (see Note 8)

Accretion and depletion expense 970 3,477 3,539

Amortization expense 1,014 1,121 8,704

Depreciation, depletion, amortization and accretion $ 95,317 $ 117,033 $ 119,877

Impairment of Goodwill

Oil prices declined significantly in March 2020 as a result of geopolitical events that increased the supply of oil in the market as well as effects of the COVID-19 pandemic.

As a result, the Company determined that it was more likely than not that the fair value of certain of its reporting units were less than their carrying value.

Therefore, the Company performed an interim goodwill impairment test.

The Company impaired goodwill associated with Stingray Pressure Pumping, Silverback and WTL, resulting in a $ 55.0 million impairment charge during the first quarter of 2020.

The Company performed an assessment of goodwill during the fourth quarter of 2020 and determined that the fair value of its goodwill was greater than its carrying value.

Therefore, no additional impairment was necessary at December 31, 2020.

To determine fair value, the Company used a combination of the income and market approaches.

The income approach estimates the fair value based on anticipated cash flows that are discounted using a weighted average cost of capital.

The market approach estimates the fair value using comparative multiples, which involves significant judgment in the selection of the appropriate peer group companies and valuation multiples.

The Company performed its annual assessment of goodwill during the fourth quarter of 2019 and determined that the carrying value of goodwill for certain of its entities was greater than their fair values.

9 unchanged sentences

The fair value was measured using an income approach.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Other Long-Lived Assets

A summary of impairment of other long-lived assets is as follows (in thousands):

2020 2019 2018

Water transfer equipment $ 4,203 $ — $ —

Crude oil hauling equipment 3,275 — —

Coil tubing equipment 2,160 — —

Flowback equipment 1,514 — —

Rental equipment 1,308 — —

Drilling rigs and related equipment — 2,955 3,966

1 unchanged sentence

Intangible assets — 846 1,379

For the years ended December 31, 2019 , 2018 and 2017 , the Company recognized impairments of $3.0 million , $4.0 million and $3.8 million , respectively, related to drilling rig assets and $3.6 million , $0.3 million and $0.3 million , respectively, related to other property, plant and equipment.

$ 12,897 $ 7,358 $ 5,652

Oil prices declined significantly in March 2020 as a result of geopolitical events that increased the supply of oil in the market as well as effects of the COVID-19 pandemic.

As a result, the Company determined that it was more likely than not that the fair value of certain of its oilfield services assets were less than their carrying value.

Therefore, the Company performed an interim impairment test.

As a result of the test, the Company recorded impairments totaling $ 12.9 million to its fixed assets during the first quarter of 2020.

The Company measured the fair values of these assets using direct and indirect observable inputs (Level 2) based on a market approach.

For the year ended December 31, 2019, the Company recognized impairments related to drilling rig assets and other property, plant and equipment of $ 3.0 million and $ 3.6 million, respectively.

These assets were deemed impaired based on future expected cash flows of the equipment.

The Company measured the fair values of its drilling rig assets at December 31, 2018 and 2017 and other property, plant and equipment at December 31, 2019 , 2018 and 2017 using significant unobservable inputs (Level 3) based on an income approach.

The Company measured the fair value of its drilling rig assets at December 31, 2019 using significant unobservable inputs (Level 3) based on a market approach.

The Company measured the fair value of its drilling rig assets at December 31, 2019 using direct and indirect observable inputs (Level 2) based on a market approach.

The Company measured the fair values of its other property, plant and equipment at December 31, 2019 using direct and indirect observable inputs (Level 2) based on a market approach.

The Company determined the fair value of WTL's non-contractual customer relationships was less than their carrying value, resulting in impairment expense of $ 0.8 million during the year ended December 31, 2019.

Additionally, during the

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

third quarter of 2019, the Company temporarily shut down its flowback operations, resulting in impairment of non-contractual customer relationships of $0.1 million .

Additionally, during the third quarter of 2019, the Company temporarily shut down its flowback operations, resulting in impairment of non-contractual customer relationships of $ 0.1 million.

For the year ended December 31, 2018, the Company recognized impairments related to drilling rig assets and other property, plant and equipment of $ 4.0 million and $ 0.3 million, respectively.

These assets were deemed impaired based on future expected cash flows of the equipment.

The Company measured the fair values of its drilling rigs and other property, plant and equipment at December 31, 2018 using direct and indirect observable inputs (Level 2) based on a market approach.

During the year ended December 31, 2018, the Company moved Cementing's equipment from the Utica shale to the Permian basin.

As a result, the Company recognized impairment on Cementing's intangible assets, including non-contractual customer relationships and trade name of $ 1.0 million and $ 0.2 million, respectively.

Additionally, the Company recognized impairment of trade name totaling $0.2 million related to the name change of Stingray Logistics to Silverback Energy, which is included in the Company's Pressure Pumping segment.

Additionally, the Company recognized impairment of trade name totaling $ 0.2 million related to the name change of Stingray Logistics to Silverback Energy, which is included in the Company's well completion segment.

The assumptions used in the impairment evaluation for long-lived assets are inherently uncertain and require management’s judgment.

1 unchanged sentence

This could result in the recognition of future material impairment charges on the same, or additional, property and equipment if future cash flow estimates, based upon information then available to management, indicate that their carrying values are not recoverable.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill and Intangible Assets

Changes in the net carrying amount of goodwill by reporting segment (see Note 21) for the years ended December 31, 2020 and 2019 are presented below (in thousands):

Infrastructure

Pressure Pumping

Infrastructure Well Completion Sand Other Total

Balance as of January 1, 2019

Goodwill $ 891 $ 86,043 $ 2,684 $ 14,830 $ 104,448

Accumulated impairment losses — — — ( 3,203 ) ( 3,203 )

891 86,043 2,684 11,627 101,245

Acquisitions — — — — —

Impairment losses (a)

— ( 23,423 ) ( 2,684 ) ( 7,557 ) ( 33,664 )

Balance as of December 31, 2019

Goodwill 891 86,043 2,684 14,830 104,448

Accumulated impairment losses — ( 23,423 ) ( 2,684 ) ( 10,760 ) ( 36,867 )

891 62,620 — 4,070 67,581

Acquisitions — — — — —

Impairment losses (a)

— ( 53,406 ) — ( 1,567 ) ( 54,973 )

Balance as of December 31, 2020

Goodwill 891 86,043 2,684 14,830 104,448

Accumulated impairment losses — ( 76,829 ) ( 2,684 ) ( 12,327 ) ( 91,840 )

$ 891 $ 9,214 $ — $ 2,503 $ 12,608

See Note 7 for a description of impairment losses recognized.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Intangible Assets

1 unchanged sentence

Customer relationships $ 1,050 $ 1,050

Trade names 9,063 9,063

accumulated amortization - customer relationships ( 642 ) ( 467 )

6 unchanged sentences

The original lives of trade names range from 10 to 20 years and as of December 31, 2020 the remaining average useful life was 7.65 years.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Aggregated expected amortization expense for the future periods is expected to be as follows (in thousands):

Year ended December 31:

Thereafter 924

Equity Method Investment

1 unchanged sentence

Brim Acquisitions, through Brim Equipment, owns one commercial helicopter and leases one commercial helicopter for operation, which it uses to provide a variety of services, including short haul, aerial ignition, hoist operations, aerial photography, fire suppression, construction services, animal/capture/survey, search and rescue, airborne law enforcement, power line construction, precision long line operations, pipeline construction and survey, mineral and seismic exploration, and aerial seeding and fertilization.

Brim Acquisitions, through Brim Equipment, owns four commercial helicopters and leases five commercial helicopters for operations, which it uses to provide a variety of services, including short haul, aerial ignition, hoist operations, aerial photography, fire suppression, construction services, animal/capture/survey, search and rescue, airborne law enforcement, power line construction, precision long line operations, pipeline construction and survey, mineral and seismic exploration, and aerial seeding and fertilization.

The Company uses the equity method of accounting to account for its investment in Brim Acquisitions, which had a carrying value of approximately $ 3.7 million and $ 2.6 million, respectively, at December 31, 2020 and 2019.

The investment is included in other non-current assets on the consolidated balance sheets.

The Company recorded equity method adjustments to its investment for its share of Brim Acquisitions' income (loss) of $1.0 million for the year ended December 31, 2019 and ($0.02) million for the period between the acquisition date and December 31, 2018 , which is included in other, net on the consolidated statements of comprehensive (loss) income.

The Company made additional investments totaling $0.7 million during the year ended December 31, 2019 .

The Company recorded equity method adjustments to its investment for its share of Brim Acquisitions' income (loss) of $ 0.6 million and $ 1.0 million, respectively, for the years ended December 31, 2020 and 2019 and ($ 0.02 ) million for the period between the acquisition date and December 31, 2018, which is included in other, net on the consolidated statements of comprehensive (loss) income.

The Company made additional investments totaling $ 0.5 million and $ 0.7 million during the years ended December 31, 2020 and 2019.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accrued Expenses and Other Current Liabilities and Other Long-Term Liabilities

Accrued expense and other current liabilities and Other long-term liabilities included the following (in thousands):

Accrued Expenses and Other Current Liabilities

Accrued expense and other current liabilities included the following (in thousands):

State and local taxes payable $ 13,838 15,288

Financed insurance premiums (a)

Deferred revenue 8,281 7,244

Financed insurance premiums

Accrued compensation, benefits and related taxes

Accrued compensation and benefits 3,710 5,938

Insurance reserves 1,941 2,906

Payroll tax liability 1,816 —

Financing leases 1,499 1,365

Sale leaseback liability (b)

Other 1,639 1,550

Total accrued expenses and other current liabilities $ 44,408 $ 40,754

Other Long-Term Liabilities

Financing leases $ 4,618 3,856

Sale leaseback liability (b)

Payroll tax liability 1,977 —

Other 492 1,175

Total other long-term liabilities $ 10,435 $ 5,031

Financed insurance premiums are due in monthly installments, are unsecured and mature within the twelve-month period following the close of the year.

As of December 31, 2019 , the applicable interest rates associated with financed insurance premiums ranged from 3.45% to 3.75% .

As of December 31, 2020, the applicable interest rate associated with financed insurance premiums was 2.45 %.

As of December 31, 2019, the applicable interest rates associated with financed insurance premiums ranged from 3.45 % to 3.75 %.

On December 30, 2020, the Company entered into an agreement with First National Capital, LLC (“FNC”) whereby the Company agreed to sell certain assets from its infrastructure segment to FNC for aggregate proceeds of $ 5.0 million.

Concurrent with the sale of assets, the Company entered into a 36 month lease agreement whereby the Company will lease back the assets at a monthly rental rate of $ 0.1 million.

Under the agreement, the Company has the option to purchase the assets at the end of the lease term.

The Company recorded a liability for the proceeds received and will continue to depreciate the assets.

The Company has 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.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term debt included the following (in thousands):

Revolving credit facility $ 78,000 80,000

Aviation note 4,551 —

Unamortized debt issuance costs ( 48 ) —

Total debt 82,503 80,000

current portion 1,165 —

Total long-term debt $ 81,338 $ 80,000

Mammoth Credit Facility

5 unchanged sentences

As a result, certain cash tax payments that were made in 2019 were now treated as if they were made in 2018, the year in which the income related to such tax payments was actually received.

As of December 31, 2019 , outstanding borrowings under the revolving credit facility bore interest at a per annum rate elected by Mammoth Inc.

that was equal to an alternate base rate or LIBOR, in each case plus the applicable margin.

As of December 31, 2019 , the applicable margin ranged from 1.00% to 1.50% per annum in the case of the alternate base rate, and from 2.00% to 2.50% per annum in the case of LIBOR.

The applicable margin depends on the amount of excess availability under the revolving credit facility.

At December 31, 2019 , there were outstanding borrowings under the revolving credit facility of $80.0 million and $96.1 million of available borrowing capacity, after giving effect to $8.7 million of outstanding letters of credit.

At December 31, 2018 , there were no outstanding borrowings under the revolving credit facility and $175.8 million of borrowing capacity under the facility, after giving effect to $8.4 million of outstanding letters of credit.

As of December 31, 2019, the revolving credit facility contained various customary affirmative and restrictive covenants.

Among the covenants are two financial covenants, including a minimum interest coverage ratio ( 3.0 to 1.0), and a maximum leverage ratio ( 4.0 to 1.0).

As of December 31, 2019 and 2018 , the Company was in compliance with its covenants under the revolving credit facility.

However, the Company believes that its adjusted EBITDA for the trailing four fiscal quarters would have resulted in a breach of the maximum leverage ratio and/or the interest coverage ratio as early as the end of the first quarter of 2020 if the Company did not receive payments due from PREPA before the end of such quarter.

As the Company believes that such payments from PREPA are unlikely to be received by March 31, 2020, on February 26, 2020, the Company entered into a second amendment to the revolving credit facility to, among other things, (i) amend its financial covenants, as outlined below, (ii) decrease the maximum revolving advance amount from $185 million to $130 million , (iii) decrease the amount that the maximum revolving advance can be increased to (the

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

accordion) from $350 million to $180 million , (iv) increase the applicable margin ranges from 2.00% to 2.50% per annum in the case of the alternate base rate and from 3.00% to 3.50% per annum in the case of LIBOR, (v) increase the aggregate amount of permitted asset dispositions, and (vi) permit certain sale-leaseback transactions.

The Company was in compliance with its financial covenants under the revolving credit facility as of December 31, 2019.

On February 26, 2020, the Company entered into a second amendment to the revolving credit facility to, among other things, (i) amend its financial covenants, as outlined below, (ii) decrease the maximum revolving advance amount from $ 185 million to $ 130 million, (iii) decrease the amount that the maximum revolving advance can be increased to (the accordion) from $ 350 million to $ 180 million, (iv) increase the applicable margin ranges from 2.00 % to 2.50 % per annum in the case of the alternate base rate and from 3.00 % to 3.50 % per annum in the case of LIBOR, (v) increase the aggregate amount of permitted asset dispositions, and (vi) permit certain sale-leaseback transactions.

The financial covenants under the revolving credit facility were amended as follows:

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• from the effective date of February 26, 2020 through September 30, 2020, a minimum excess availability covenant of 10% of the maximum revolving advance amount was added.

As of February 26, 2020, the Company had $87.4 million in borrowings outstanding under its revolving credit facility, leaving an aggregate of $20.6 million of available borrowing capacity under this facility, after giving effect to the recent amendment that reduced the maximum revolving advance amount to $130 million .

The available borrowing capacity is reduced by (i) a minimum excess availability covenant of 10% of the maximum revolving advance amount and (ii) $9.0 million of outstanding letters of credit.

Sturgeon Credit Facility

On June 30, 2015, Sturgeon entered in to a three -year $25.0 million revolving line of credit secured by substantially all of the assets of Sturgeon (“the Sturgeon revolver”).

Advances under the Sturgeon revolver bore interest at 2% plus the greater of (a) the Base Rate as set by the lender's commercial lending group, (b) the sum of the Federal Funds Open Rate plus one half of one percent and (c) the sum of the Daily LIBOR rate.

Additionally, at Sturgeon’s request, advances could be obtained at LIBOR plus 3% .

The LIBOR rate option allowed Sturgeon to select interest periods from one, two, three or six month LIBOR futures spot rates.

The Sturgeon revolver was terminated on June 6, 2017.

As of December 31, 2020, the Company was in compliance with its financial covenants under the revolving credit facility.

At December 31, 2020, there were outstanding borrowings under the revolving credit facility of $ 78.0 million and $ 38.7 million of available borrowing capacity, after giving effect to $ 13.0 million of outstanding letters of credit.

At December 31, 2019, there were outstanding borrowings under the revolving credit facility of $ 80.0 million and $ 96.1 million of borrowing capacity under the facility, after giving effect to $ 8.7 million of outstanding letters of credit.

As of February 24, 2021, the Company had $ 75.0 million in borrowings outstanding under its revolving credit facility, leaving an aggregate of $ 41.7 million of available borrowing capacity under this facility, after giving effect to $ 13.0 million of outstanding letters of credit.

If an event of default occurs under the revolving credit facility and remains uncured, it could have a material adverse effect on the Company's business, financial condition, results of operations and

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The lenders (i) would not be required to lend any additional amounts to the Company, (ii) could elect to increase the interest rate by 200 basis points, (iii) could elect to declare all outstanding borrowings, together with accrued and unpaid interest and fees, to be due and payable, (iv) may have the ability to require the Company to apply all of its available cash to repay outstanding borrowings, and (v) may foreclose on substantially all of the Company's assets.

Aviation Note

On November 6, 2020, Leopard and Cobra Aviation entered into a 39 month promissory note agreement with Bank7 (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, all of which the Company was in compliance with as of December 31, 2020.

Variable Interest Entities

Dire Wolf Energy Services LLC (“Dire Wolf”) and Predator Aviation LLC (“Predator Aviation”), wholly owned subsidiaries of the Company, are party to Voting Trust Agreements with TVPX Aircraft Solutions Inc.

Dire Wolf and Predator Aviation, wholly owned subsidiaries of the Company, are party to Voting Trust Agreements with TVPX Aircraft Solutions Inc.

(the “Voting Trustee”).

2 unchanged sentences

Prior to the transfer of the membership interest to the Voting Trustee, Cobra Aviation was a wholly owned subsidiary of Dire Wolf and Leopard was a wholly owned subsidiary of Predator Aviation.

Cobra Aviation owns three helicopters and support equipment, 100% of the equity interest in ARS and 49% of the equity interest in Brim Acquisitions.

Cobra Aviation owns two helicopters and support equipment, 100 % of the equity interest in ARS and 49 % of the equity interest in Brim Acquisitions.

Leopard owns one helicopter.

9 unchanged sentences

Years Ended December 31,

2020 2019 2018

Cash expenses:

1 unchanged sentence

Professional services 19,905 17,128 11,854

8,828 10,300 10,718

Total cash SG&A expense 43,609 46,792 65,522

1 unchanged sentence

Bad debt provision (b)

21,958 1,434 ( 14,578 )

Equity based compensation (c)

3 unchanged sentences

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

The bad debt provision for the year ended December 31, 2020, includes $ 19.4 million related to the voluntary petitions for relief filed on November 13, 2020, by Gulfport and certain of its subsidiaries.

See Notes 2 and 20.

During the year ended December 31, 2018, the Company received payment for amounts previously reserved in 2017.

4 unchanged sentences

Year Ended December 31,

2020 2019 2018

current income tax expense $ ( 6,931 ) $ 386 $ 25,656

2 unchanged sentences

Foreign deferred income tax (benefit) expense 144 ( 20,878 ) 26,854

Total $ ( 12,169 ) $ ( 12,081 ) $ 153,263

MAMMOTH ENERGY SERVICES, INC.

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Year Ended December 31,

(Loss) income before income taxes, as reported

Bargain purchase gain, net of tax

(Loss) income before income taxes, as taxed

2020 2019 2018

(Loss) income before income taxes $ ( 119,776 ) $ ( 91,125 ) $ 389,228

Statutory income tax rate 21 % 21 % 21 %

1 unchanged sentence

Change in tax rate ( 161 ) — ( 103 )

Tax reform - unrepatriated foreign earnings

Foreign income tax rate differential 2,556 9,387 39,080

5 unchanged sentences

State tax expenses ( 1,664 ) 2,364 5,394

CARES Act ( 2,378 ) — —

Return to provision 894 ( 15,156 ) 6,071

Other — — 680

Change in valuation allowance 3,765 12,006 36,271

Total $ ( 12,169 ) $ ( 12,081 ) $ 153,263

The Company's effective tax rate was 10.2 % for the year ended December 31, 2020 compared to 13.3 % for the year ended December 31, 2019 and 39.4 % for the year ended December 31, 2018.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted and signed into U.S.

law in response to the COVID-19 pandemic, and among other things, permits the carryback of certain net operating losses.

As a result of the enacted legislation, the Company recognized a $ 2.4 million net tax benefit during the year ended December 31, 2020, which consisted of a $ 7.0 million current tax benefit and a $ 4.6 million deferred tax expense.

This impact, along with the rate impact from non-deductible goodwill impairment and the change in valuation allowance, was the primary driver for the difference between the statutory rate of 21% and the effective tax rate for the year ended December 31, 2020.

The effective tax rate for the year ended December 31, 2019 differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico.

For the year ended December 31, 2019, the Company recognized a loss in the United States, which was partially offset by earnings from its operations in Puerto Rico, which has a higher statutory rate compared to the United States.

Additionally, during the year ended December 31, 2019, the Company recorded a benefit related to return to provision adjustments, which was partially offset by changes in the valuation allowance.

The decrease in effective tax rate from 2019 to 2020 is primarily the result of a decline in earnings for the Company's Puerto Rico operations as well as return to provision adjustment recorded in 2019.

The decrease in effective tax rate from 2018 to 2019 is primarily the result of a decline in earnings for the Company's Puerto Rico operations as well as return to provision adjustments and goodwill impairment.

The increase in effective tax rate from 2017 to 2018 is primarily the result of a tax rate change recorded in 2017 related to the Tax Act as discussed below.

Additionally, the Company's tax rate was affected by the mix of earnings between the U.S.

and Puerto Rico, increased foreign tax credits resulting from increased profitability in foreign jurisdictions, changes in valuation allowance on excess foreign tax credit carryforwards and withholding taxes on foreign source income, as well as other items, such as equity compensation expense and certain non-deductible expenses.

On December 22, 2017, the United States enacted the Tax Act.

The Tax Act significantly changed U.S.

corporate income tax laws by, among other things, reducing the U.S.

corporate income tax rate from 35% to 21% starting in 2018 and creating a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings of U.S.

subsidiaries.

Under the accounting rules, companies were required to recognize the effects of changes in tax laws and tax rates on deferred tax assets and liabilities in 2017, the period in which the new legislation was enacted.

The effects of the Tax Act on the Company included (i) remeasurement of deferred taxes and (ii) recognition of liabilities for taxes on mandatory deemed repatriation.

As a result of the Tax Act, the Company recorded a credit of $31.0 million during the fourth quarter of 2017.

This amount, which is included in (benefit) provision for income taxes in the consolidated statements of comprehensive (loss) income, consists of two components:

(i) a $21.3 million credit resulting from the remeasurement of the Company's net deferred tax liabilities in the U.S.

based on the new lower corporate income tax rate, and (ii) a $9.7 million credit related to a reversal of deferred liabilities for unrepatriated foreign earnings.

The SEC staff issued Staff Accounting Bulletin No.

118 in December 2017, which allowed registrants to record provisional amounts for effects of the Tax Act during a one-year measurement period.

The Company completed its analysis of the Tax Act during the fourth quarter of 2018 and recorded a nominal adjustment to its provisional estimates.

MAMMOTH ENERGY SERVICES, INC.

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Allowance for doubtful accounts $ 1,541 $ 1,189

Deferred compensation

Lease asset 6,060 11,105

Accrued liabilities 740 950

1 unchanged sentence

Foreign tax credits 80,615 76,060

Other 1,919 1,633

Valuation allowance ( 67,888 ) ( 63,783 )

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Intangible assets ( 450 ) —

Withholding taxes

Lease liability ( 6,030 ) ( 11,151 )

Other ( 2,804 ) ( 1,876 )

Deferred tax liabilities ( 48,341 ) ( 68,207 )

3 unchanged sentences

Deferred income tax liability ( 24,741 ) ( 36,873 )

Total $ ( 24,741 ) $ ( 36,873 )

During the years ended December 31, 2020 and 2019, the Company recorded changes in its valuation allowance of $ 3.8 million and $ 12.0 million, respectively, related to excess foreign tax credits that are not expected to be utilized.

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income tax liability for which the foreign tax credits are allowed as an offset and, therefore, are not likely to be realized.

At December 31, 2019, the Company had federal net operating loss carryforwards of $17.8 million that are not subject to expiration, however are limited to 80% of taxable income in any carryforward period.

At December 31, 2020, the Company had undistributed earnings in its Puerto Rico foreign branch.

1 unchanged sentence

As of December 31, 2020, the Company had no uncertain tax positions or interest and penalties that qualify for either recognition or disclosure in the financial statements.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s U.S.

2 unchanged sentences

Puerto Rico tax returns for tax years 2017 through 2020 and Canada tax returns for the tax years 2015 through 2020 remain open to examination by the respective tax authorities.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) which supersedes the requirements set forth in ASC 840, Leases .

The Company adopted this standard effective January 1, 2019 utilizing the transition method 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.

Accordingly, the comparative information as of December 31, 2018 and for the years ended December 31, 2018 and 2017, have not been adjusted and continues to be reported under the previous lease standard.

Accordingly, the comparative information for the year ended December 31, 2018 has not been adjusted and continues to be reported under the previous lease standard.

The new guidance requires lessees to 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.

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The Company's incremental borrowing rate reflects the estimated rate of interest that it would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lease expense consisted of the following for the year ended December 31, 2019 (in thousands):

Lease expense consisted of the following for the years ended December 31, 2020 and 2019 (in thousands):

Year Ended December 31,

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Total lease expense $ 16,061 $ 23,651

Supplemental balance sheet information related to leases as of December 31, 2019 is as follows:

December 31, 2019

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases as of December 31, 2020 and 2019 is as follows (in thousands):

Year Ended December 31,

Operating leases:

6 unchanged sentences

Other liabilities 4,618 3,856

Other supplemental information related to leases for the year ended December 31, 2019 is as follows (in thousands):

Other supplemental information related to leases for the years ended December 31, 2020 and 2019 is as follows (in thousands):

Year Ended December 31,

6 unchanged sentences

Finance leases 2,431 3,721

December 31, 2019

Year Ended December 31,

Weighted-average remaining lease term:

Operating leases

Finance leases

Operating leases 3.2 years 3.4 years

Finance leases 4.2 years 4.1 years

Weighted-average discount rate:

1 unchanged sentence

Finance leases 3.5 % 4.3 %

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Maturities of lease liabilities as of December 31, 2020 are as follows (in thousands):

Operating Leases

Finance Leases

Operating Leases Finance Leases

2021 $ 9,150 $ 1,682

2022 6,056 1,547

2023 3,481 1,547

2024 1,799 774

Thereafter 419 668

Total lease payments 21,210 6,551

1 unchanged sentence

Present value of lease payments $ 19,995 $ 6,117

As of December 31, 2018, future minimum payments under noncancellable operating leases were $66.2 million in the aggregate, which consisted of the following:

$20.2 million in 2019, $16.6 million in 2020, $12.6 million in 2021, $9.3 million in 2022, $5.0 million in 2023 and $2.5 million thereafter.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lessor Accounting

6 unchanged sentences

The Company does not provide an option for the lessee to purchase the rented assets at the end of the lease and the lessees do not provide residual value guarantees on the rented assets.

During the year ended December 31, 2019 , the Company recognized lease revenue, which is included in services revenue - related parties and services revenue on the consolidated statements of comprehensive (loss) income, of $1.8 million and $0.6 million , respectively.

During the years ended December 31, 2020 and 2019, the Company recognized lease revenue, which is included in services revenue - related parties and services revenue on the consolidated statements of comprehensive (loss) income, of $ 1.4 million and $ 2.3 million, respectively.

Dividends and Earnings (Loss) Per Share

2 unchanged sentences

The table below summarizes the dividends paid on the Company's common stock.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Per Share Total

(in thousands)

5 unchanged sentences

Total cash dividends $ 0.25 $ 11,201

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings (Loss) Per Share

Year Ended December 31,

2020 2019 2018

(in thousands, except per share data)

8 unchanged sentences

Weighted average common shares, including dilutive effect (a)

45,644 45,011 45,021

Diluted (loss) earnings per share $ ( 2.36 ) $ ( 1.76 ) $ 5.24

No incremental shares of potentially dilutive restricted stock awards were included for the year ended December 31, 2019 as their effect was antidilutive under the treasury stock method.

No incremental shares of potentially dilutive restricted stock awards were included for the years ended December 31, 2020 and 2019 as their effect was antidilutive under the treasury stock method.

Equity Based Compensation

10 unchanged sentences

As a result of the June 29, 2018 offering, a portion of the Non-Employee Member awards reached Payout.

During the year ended December 31, 2018, the

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company recognized equity compensation expense totaling $17.5 million related to these non-employee awards.

During the year ended December 31, 2018, the Company recognized equity compensation expense totaling $ 17.5 million related to these non-employee awards.

These awards are at the sponsor level and this transaction had no dilutive impact or cash impact to the Company.

5 unchanged sentences

For the Company's Non-Employee Member awards, the unrecognized amount, which represents the fair value of the awards as of the date of adoption of ASU 2018-07 was $ 18.9 million.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Stock-Based Compensation

6 unchanged sentences

A summary of the status and changes of the unvested shares of restricted stock units under the 2016 Plan is presented below.

Number of Unvested Restricted Stock Units

Weighted Average Grant-Date Fair Value

Number of Unvested Restricted Stock Units Weighted Average Grant-Date Fair Value

Unvested restricted stock units as of January 1, 2018 640,632 $ 19.44

Granted 103,556 $ 27.74

Vested ( 270,069 ) $ 19.26

Forfeited ( 40,000 ) $ 20.68

Unvested restricted stock units as of December 31, 2018 434,119 $ 22.78

Granted 101,181 $ 6.83

Vested ( 231,896 ) $ 22.45

Forfeited ( 82,163 ) $ 18.55

Unvested restricted stock units as of December 31, 2019 221,241 $ 22.43

Granted 2,401,446 $ 0.98

Vested ( 660,738 ) $ 5.32

Forfeited ( 47,167 ) $ 3.28

Unvested restricted stock units as of December 31, 2020 1,914,782 $ 1.21

As of December 31, 2020, there was $ 1.5 million of total unrecognized compensation cost related to the unvested restricted stock.

The cost is expected to be recognized over a weighted average period of approximately eleven months .

The cost is expected to be recognized over a weighted average period of approximately 1.7 years.

Included in cost of revenue and selling, general and administrative expenses is stock-based compensation expense of $ 2.0 million, $ 4.2 million and $ 5.4 million, respectively, for the years ended December 31, 2020, 2019 and 2018.

Related Party Transactions

Transactions between the subsidiaries of the Company and the following companies are included in Related Party

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Transactions:

Transactions between the subsidiaries of the Company and the following companies are included in Related Party Transactions:

Wexford, Gulfport;

Grizzly Oil Sands ULC (“Grizzly”);

El Toro Resources LLC (“El Toro”);

Cementing and SR Energy (collectively, prior to the 2017 Stingray Acquisition, the “2017 Stingray Companies”);

Everest Operations Management LLC (“Everest”);

1 unchanged sentence

Double Barrel Downhole Technologies LLC (“DBDHT”);

Orange Leaf Holdings LLC (“Orange Leaf”);

Caliber Investment Group LLC (“Caliber”);

3 unchanged sentences

and Brim Equipment.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Following is a summary of related party transactions (in thousands):

ACCOUNTS RECEIVABLE

Years Ended December 31,

At December 31,

Stingray Pressure Pumping and Gulfport

Muskie and Gulfport

SR Energy and Gulfport

Aquahawk and Gulfport

Panther and Gulfport

Cementing and Gulfport

Cobra Aviation/ARS/Leopard and Brim Equipment

Panther and El Toro

Years Ended December 31, At December 31,

2020 2019 2018 2020 2019

REVENUES ACCOUNTS RECEIVABLE

Stingray Pressure Pumping and Gulfport (a) $ 42,460 $ 90,357 $ 96,013 $ 25,429 $ 5,950

Muskie and Gulfport (b) 7,500 27,689 25,050 1,127 1,141

SR Energy and Gulfport (c) 113 8,772 14,717 8 156

Aquahawk and Gulfport (d) — 828 — — —

Cementing and Gulfport (e) — — 5,853 — —

Cobra Aviation/ARS/Leopard and Brim Equipment (f) 446 2,093 — 44 235

Panther and El Toro (g) 38 573 918 — —

Other Relationships 34 1 682 9 41

Stingray Pressure Pumping provides pressure pumping, stimulation and related completion services to Gulfport.

$ 50,591 $ 130,313 $ 143,233 $ 26,617 $ 7,523

OTHER ACCOUNTS RECEIVABLE

Stingray Pressure Pumping and Gulfport (a) $ 1,887 $ — $ — $ 1,841 $ —

Muskie and Gulfport (b) 3 — — 3 —

$ 1,890 $ — $ — $ 1,844 $ —

$ 28,461 $ 7,523

Stingray Pressure Pumping has agreed to provide pressure pumping, stimulation and related completion services to Gulfport.

Other amount represents interest charged on delinquent accounts receivable related to these services.

Muskie has agreed to sell and deliver, and Gulfport has agreed to purchase, specified annual and monthly amounts of natural sand proppant, subject to certain exceptions specified in the agreement, and pay certain costs and expenses.

Other amount represents interest charged on delinquent accounts receivable related to this agreement.

SR Energy provides rental services for Gulfport.

Aquahawk provides water transfer services for Gulfport pursuant to a master services agreement.

Panther performs drilling services for Gulfport pursuant to a master service agreement.

Cementing performs well cementing services for Gulfport.

1 unchanged sentence

Panther provides directional drilling services for El Toro, an affiliate of Wexford, pursuant to a master service agreement.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

COST OF REVENUE

ACCOUNTS PAYABLE

Years Ended December 31,

At December 31,

Cobra Aviation/ARS/Leopard and Brim Equipment

Cobra and T&E

Higher Power and T&E

Panther and DBDHT

The Company and 2017 Stingray Companies

COST OF REVENUE ACCOUNTS PAYABLE

Years Ended December 31, At December 31,

2020 2019 2018 2020 2019

Cobra Aviation/ARS/Leopard and Brim Equipment (a) 72 4,720 — 1 433

Anaconda and Caliber (b) 248 — — — —

Cobra and T&E (c) — — 4,042 — —

Higher Power and T&E (c) — — 1,603 — —

Other Relationships 98 50 240 — —

$ 418 $ 4,770 $ 5,885 $ 1 $ 433

SELLING, GENERAL AND ADMINISTRATIVE COSTS

The Company and Wexford

The Company and Caliber

Cobra Aviation/ARS/Leopard and Brim Equipment

The Company and Wexford (d) 3 650 992 2 1

The Company and Caliber (b) 774 785 648 — 7

Cobra Aviation/ARS/Leopard and Brim Equipment (a) — 233 — — —

Other Relationships ( 19 ) 179 258 — 9

$ 758 $ 1,847 $ 1,898 $ 2 $ 17

CAPITAL EXPENDITURES

Leopard and Brim Equipment

Cobra and T&E

Higher Power and T&E

Leopard and Brim Equipment (a) — 420 — — 76

Cobra and T&E (c) — — 1,247 — —

Higher Power and T&E (c) — — 2,960 — —

$ — $ 420 $ 4,207 $ — $ 76

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements.

Caliber, an entity controlled by Wexford, leases office space to Anaconda and Mammoth.

Cobra and Higher Power purchased materials and services from T&E, an entity in which a member of management's family owned a minority interest.

T&E ceased to be a related party as of September 30, 2018.

Panther rents rotary steerable equipment in connection with its directional drilling services from DBDHT, an affiliate of Wexford.

Prior to the 2017 Stingray Acquisition, the 2017 Stingray Companies provided certain services to the Company and, from time to time, the 2017 Stingray Companies paid for goods and services on behalf of the Company.

Wexford provides certain administrative and analytical services to the Company and, from time to time, the Company pays for goods and services on behalf of Wexford.

The Company leases office space from Caliber, an entity controlled by Wexford.

On June 29, 2018, Gulfport and certain entities controlled by Wexford (the “Selling Stockholders”) completed an underwritten secondary public offering of 4,000,000 shares of the Company’s common stock at a purchase price to the Selling Stockholders of $ 38.01 per share.

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Cobra Aviation made additional investments in Brim Acquisitions totaling $0.7 million during the year ended December 31, 2019 .

Cobra Aviation made additional investments in Brim Acquisitions totaling $ 0.5 million and $ 0.7 million during the years ended December 31, 2020 and 2019, respectively.

Wexford Investments is an entity controlled by Wexford, which owns approximately 48 % of the Company's outstanding common stock.

ARS leases a helicopter to Brim Equipment and Cobra Aviation leases the two helicopters purchased as part of these transactions to Brim Equipment under the terms of aircraft lease and management agreements.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Commitments and Contingencies

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The Company has entered into agreements with suppliers that contain minimum purchase obligations.

Failure to purchase the minimum amounts may require the Company to pay shortfall fees.

However, the minimum quantities set forth in the agreements are not in excess of currently expected future requirements.

Capital Spend Commitments

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Year ended December 31:

Capital Spend Commitments

Minimum Purchase Commitments (a)

Included in these amounts are sand purchase commitments of $19.5 million .

Pricing for certain sand purchase agreements is variable and, therefore, the total sand purchase commitments could be as much as $23.1 million .

The minimum amount due in the form of shortfall fees under certain sand purchase agreements was $1.8 million as of December 31, 2019 .

Capital Spend Commitments Minimum Purchase Commitments

2021 $ 1,275 $ 698

Thereafter — —

$ 1,275 $ 800

Subsequent to December 31, 2020, the Company entered into an agreement with a supplier to provide infrastructure engineering subcontracting services totaling $ 0.5 million and ordered additional capital equipment with aggregate commitments of $ 0.1 million.

Letters of Credit

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The letters of credit are categorized below (in thousands):

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Bonding program $ 5,000 $ —

Environmental remediation 3,694 4,182

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As of December 31, 2020 and 2019, the Company did not have any accrued claims for directors and officers liability.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company also self-insures its employee health insurance.

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The Company did not have any bid bonds outstanding as of December 31, 2019.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is routinely involved in state and local tax audits.

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However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company's business, financial condition, results of operations or cash flows.

On various dates in 2018 and 2019, Cobra was served with four lawsuits from municipalities in Puerto Rico alleging failure to pay municipal license and construction excise taxes.

In 2020, five additional municipalities in Puerto Rico filed lawsuits against Cobra making substantially similar allegations.

Cobra has been served with ten lawsuits from municipalities in Puerto Rico alleging failure to pay construction excise and volume of business taxes.

The Government of Puerto Rico's Central Recovery and Reconstruction Office (“COR3”) has noted the unique nature of work executed by entities such as Cobra in Puerto Rico and that taxes, such as those in these matters, may be eligible for reimbursement by the government.

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However, at this time, the Company is not able to predict the outcome of these matters or whether they will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

On March 20, 2019, EJ LeJeune, a former employee of ESPADA Logistics and Security Group, LLC and ESPADA Caribbean LLC (together, “ESPADA”) filed a collective and class action complaint in LeJeune v.

Mammoth Energy

On March 20, 2019, EJ LeJeune, a former employee of ESPADA Logistics and Security Group, LLC and ESPADA Caribbean LLC (together, “ESPADA”) filed a putative collective and class action complaint in LeJeune v.

Mammoth Energy Services, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Services, Inc.

d/b/a Cobra Energy & ESPADA Logistics and Security Group, LLC, No.

5:19-cv-00286-DAE, in the Western District of Texas.

d/b/a Cobra Energy & ESPADA Logistics and Security Group, LLC, Case No.

5:19-cv-00286-JKP-ESC, in the U.S.

District Court for the Western District of Texas.

On August 5, 2019, the court granted the plaintiff’s motion for leave to amend his complaint, dismissing Mammoth Energy Services, Inc.

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illegal deductions from workers’ wages, failure to timely pay all wages owed, failure to pay a required severance when terminating workers without just cause, failure to pay for all hours worked, failure to provide required meal periods, and failure to pay a statutorily required bonus to eligible workers.

The parties have agreed to stay the case until May 31, 2020 in order to conduct a mediation.

LeJeune seeks to represent a class of workers allegedly employed by one or both defendants and paid a flat amount for each day worked regardless of how many hours were worked.

LeJeune seeks to represent a class of workers allegedly employed by one or more defendants and paid a flat amount for each day worked regardless of how many hours were worked.

The complaint seeks back wages, including overtime wages owed, liquidated damages equal to the overtime wages owed, attorneys’ fees, costs, and pre- and post-judgment interest.

Cobra denies that it employed Mr.

LeJeune and the putative class members and intends to enforce the indemnification obligations owed to it by ESPADA.

At this time, the Company is not able to predict the outcome of these proceedings or whether they will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

On April 16, 2019, a putative class and collective action lawsuit was filed in the U.S.

District Court for the District of Puerto Rico, styled Christopher Williams, individually and on behalf of all others similarly situated v.

Higher Power Electrical, LLC, Cobra Acquisitions LLC, and Cobra Energy LLC.

On June 16, 2020, Cobra answered Mr.

LeJeune’s amended complaint, denying that it employed Mr.

LeJeune and the putative class members and denying that they are entitled to relief from Cobra.

All other defendants have also answered the amended complaint.

The parties stipulated to conditional certification of a collective action, and on August 14, 2020, Court ordered that notice be sent to all individuals engaged by ESPADA to provide services to Cobra in Puerto Rico between January 21, 2017 and the present who were paid a day-rate.

Notice was sent to putative class members on September 15, 2020, and the opt-in period closed on November 14, 2020.

The parties are in discovery.

The Company believes these claims are without merit and will vigorously defend the action.

However, at this time, the Company is not able to predict the outcome of this lawsuit or whether it will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

On April 16, 2019, Christopher Williams, a former employee of Higher Power Electrical, LLC, filed a putative class and collective action complaint titled Christopher Williams, individually and on behalf of all others similarly situated v.

Higher Power Electrical, LLC, Cobra Acquisitions LLC, and Cobra Energy LLC in the U.S.

District Court for the District of Puerto Rico.

On June 24, 2019, the complaint was amended to replace Mr.

Williams with Matthew Zeisset as the named plaintiff.

The plaintiffs allege that the Company failed to pay overtime wages to a class of workers in compliance with the Fair Labor Standards Act and Puerto Rico law.

On July 8, 2019, the defendants moved to dismiss the plaintiffs’ claims and compel them to arbitration on an individual basis.

On August 21, 2019, upon request of the parties, the court stayed proceedings in the lawsuit pending completion of the arbitration proceedings involving Mr.

Zeisset and all opt-in plaintiffs.

The plaintiff and additional claimants subsequently initiated individual arbitration proceedings which remain pending.

In a similar matter, in April 2019, the Company received a demand for arbitration from seven individual claimants alleging the Company failed to pay overtime in violation of the Fair Labor Standards Act and Puerto Rico law.

Other claimants have subsequently initiated individual arbitration proceedings as well.

The plaintiff alleges that the Company failed to pay overtime wages to a class of workers in compliance with the Fair Labor Standards Act and Puerto Rico law.

On August 21, 2019, upon request of the parties, the court stayed proceedings in the lawsuit pending completion of individual arbitration proceedings initiated by Mr.

Zeisset and opt-in plaintiffs.

The arbitrations remain pending.

Other claimants have subsequently initiated additional individual arbitration

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

proceedings asserting similar claims.

All complainants and the respondents have paid the filing fees necessary to initiate the arbitrations.

The parties are currently waiting for arbitrators to be assigned to these matters.

In May 2020, six arbitrations were held in the related matters.

The Company believes these claims are without merit and will vigorously defend the arbitrations.

However, at this time, the Company is not able to predict the outcomes of these proceedings or whether they will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

In June 2019 and August 2019, the Company was served with three class action lawsuits filed in the Western District of Oklahoma.

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On January 10, 2020, the defendants filed their motion to dismiss the first amended complaint.

On March 9, 2020, the plaintiffs filed a second amended complaint for violation of federal securities laws which contains allegations substantially similar to those contained in the plaintiff’s first amended complaint.

On March 30, 2020, the defendants filed their motion to dismiss the second amended complaint.

On January 26, 2021, the court granted the motion to dismiss in part and denied the motion to dismiss in part.

The Company believes the plaintiffs’ claims are without merit and will vigorously defend the action.

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On February 18, 2020, the defendants filed a motion to stay this action.

On August 3, 2020, the Court stayed the litigation pending the outcome of other matters.

The Company believes the plaintiffs’ claims are without merit and will vigorously defend the action.

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District Court for the District of Puerto Rico unsealed an indictment that charged the former president of Cobra Acquisitions LLC with conspiracy, wire fraud, false statements and disaster fraud.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

individuals were also charged in the indictment.

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.

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Subsequent to the indictment, the Company received (i) a preservation request letter from the United States Securities and Exchange Commission (“SEC”) related to documents relevant to an ongoing investigation it is conducting and (ii) a civil investigative demand (“CID”) from the United States Department of Justice (“DOJ”), which requests certain documents and answers to specific interrogatories relevant to an ongoing investigation it is conducting.

Both the SEC and DOJ investigations relate to the same subjects as those at issue in the criminal matter.

Both the aforementioned SEC and DOJ investigations are in connection with the issues raised in the criminal matter.

Following the resignation of Jonathan Yellen from the Company's board of directors and the matters raised in the Company's Form 8-K filed on May 14, 2020, the Company received an expanded preservation request from the SEC.

The Company is cooperating with both the SEC and DOJ and is not able to predict the outcome of these investigations or if either will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

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ESPADA Logistics & Security Group, LLC, ESPADA Caribbean LLC, Arty Straehla, Ken Kinsey, Jennifer Jorrie, and Mammoth Energy Services, Inc., in the 57th Judicial District in Bexar County, Texas.

The petition alleges that the Company should be held vicariously liable under alter ego, agency and respondeat superior theories for Alpha Lobo’s alleged claims against Cobra and Arty Straehla for aiding and abetting, knowing participation in and conspiracy to breach fiduciary duty in connection with Cobra’s execution of an agreement with ESPADA Caribbean, LLC for security services related to Cobra’s work in Puerto Rico.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Caribbean, LLC for security services related to Cobra’s work in Puerto Rico.

The case is currently subject to a statutory stay pending a ruling on the appeal of anti-SLAPP motions to dismiss filed by certain defendants.

The Company believes these claims are without merit and will vigorously defend the action.

On September 16, 2019, Cobra filed a lawsuit against Robert Malcom (“Malcom”) and BHI Energy I Power Services LLC in a case styled Cobra Acquisitions v.

Additionally, there is a parallel arbitration proceeding that has been initiated in which certain Defendants are seeking a declaratory judgment regarding Cobra’s rights to terminate the Alpha Lobo contract and enter into a new contract with a third-party.

On September 16, 2019, Cobra filed a lawsuit against Robert Malcom (“Malcom”) and later added claims against BHI Energy I Power Services LLC (“BHI”) in a case styled Cobra Acquisitions v.

Malcom and BHI Energy I Power Services LLC in the 242nd Judicial District, District Court of Hale County, Texas.

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On September 16, 2019, the court entered a Temporary Restraining Order enjoining Malcom from competing against Higher Power or soliciting its customers and employees.

Subsequently, on October 25, 2019, the court entered a Temporary Injunction enjoining Malcom from competing against Higher Power or soliciting its customers and employees until the time of trial.

Subsequently, on October 25, 2019, the court entered a Temporary Injunction enjoining Malcom from competing against Higher Power in three states or soliciting its customers and employees until the time of trial.

Cobra is seeking to permanently enjoin Malcom from competing against Higher Power or soliciting its customers and employees, and further seeks damages it incurred as a result of Malcom’s breach of his non-compete agreement.

On November 3, 2019, Malcom filed his original counter-petition and third-party petition against Cobra, Higher Power, Keith Ellison and Arty Straehla alleging, among other things, breach of contract, conversion, unjust enrichment, tortious interference, retaliation, violations of the federal Racketeer Influenced and Corrupt Organizations Act, and conspiracy.

The Company moved to dismiss these claims and, on January 24, 2020, after the hearing on the motion to dismiss, Malcom dismissed his claims without prejudice.

As a result, at this time the matter poses no liability to Cobra or other Mammoth Inc.

Cobra’s claims against BHI, Malcom’s employer after he left Higher Power, are for tortious interference and misappropriation of trade secrets.

On November 3, 2019, Malcom filed his original counter-petition and third-party petition against Cobra, Higher Power, Keith Ellison and Arty Straehla alleging claims for breach of contract, conversion, unjust enrichment, tortious interference, retaliation, violations of the federal Racketeer Influenced and Corrupt Organizations Act, and conspiracy.

Cobra and Higher Power moved to dismiss these claims and, on January 24, 2020, after the hearing on the motion to dismiss, Malcom dismissed his claims without prejudice.

On December 23, 2019, Malcom filed an appeal of the Temporary Injunction Order enjoining him from competing against Higher Power.

On April 20, 2020, the Court of Appeals Seventh District of Texas denied Malcom’s appeal.

On February 11, 2021, Cobra and Higher Power entered into a confidential settlement agreement with Malcom and BHI resolving the lawsuit.

As of December 31, 2020, PREPA owed the Company approximately $ 227.0 million for services performed, excluding $ 74.3 million of interest charged on these delinquent balances as of December 31, 2020.

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District Court for the District of Puerto Rico.

As a result, PREPA's ability to meet its payment obligations is largely dependent upon funding from the Federal Emergency Management Agency or other sources.

On September 30, 2019, the Company filed a motion with the U.S.

District Court for the District of Puerto Rico seeking recovery of the amounts owed to the Company by PREPA.

PREPA filed a motion to stay the Company's motion on the ground that the ongoing criminal proceedings described above against the former president of Cobra and two other individuals may affect the recovery of those amounts.

On October 17, 2019, the court granted PREPA’s request to stay the Company's motion and, on February 3, 2020, extended the stay until a status conference to be held on June 17, 2020.

As a result, PREPA's ability to meet its payment obligations is largely dependent upon funding from the FEMA or other sources.

On September 30, 2019, Cobra filed a motion with the U.S.

District Court for the District of Puerto Rico seeking recovery of the amounts owed to Cobra by PREPA, which motion was stayed by the court.

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.

On December 28, 2019, Gulfport filed a lawsuit against Stingray Pressure Pumping in the Superior Court of the State of Delaware.

Pursuant to the complaint, Gulfport seeks to terminate the October 1, 2014, Amended and Restated Master

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Services Agreement for Pressure Pumping Services between Gulfport and Stingray Pressure Pumping (“MSA”).

Pursuant to the complaint, Gulfport seeks to terminate the October 1, 2014, Amended and Restated Master Services Agreement for Pressure Pumping Services between Gulfport and Stingray Pressure Pumping (“MSA”).

In addition, Gulfport alleges breach of contract and seeks damages for alleged overpayments and audit costs under the MSA and other fees and expenses associated with this lawsuit.

The Company believes these claims are without merit and will vigorously defend the action.

The Company believes Gulfport’s claims are without merit and will vigorously defend the action.

On March 26, 2020, Stingray Pressure Pumping filed a counterclaim against Gulfport seeking to recover unpaid fees and expenses due to Stingray Pressure Pumping under the MSA.

In September 2020, Muskie filed a lawsuit against Gulfport to recover delinquent payments due under a natural sand proppant supply contract.

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 that we may be entitled to.

We cannot assure you of the outcomes of our claims in Gulfport’s chapter 11 proceeding, what our recovery on those claims might be, or that we will be able to preserve, extend or renew our contract with Gulfport on favorable terms and conditions or at all.

As of November 13, 2020, Gulfport owed the Company approximately $ 46.9 million, which included interest charges of $ 3.3 million and $ 1.8 million in attorneys’ fees.

FASB ASC 326 , Financial

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Instruments-Credit Losses, requires companies to reflect its current estimate of all expected credit losses.

This balance includes pre-petition receivables of $ 24.3 million and post-petition receivables of $ 4.1 million.

On January 21, 2020, MasTec Renewables Puerto Rico, LLC (“MasTec”) filed a lawsuit against Mammoth Inc., and Cobra, in the U.S.

District Court in the Southern District of Florida.

Pursuant to its complaint, Mastec asserts claims against the Company and Cobra for violations of the federal Racketeer Influenced and Corrupt Organizations Act, tortious interference and violations of Puerto Rico state laws.

Mastec alleges that it sustained injuries to its business and property in the alleged amount of $500 million because of the Company’s and Cobra’s wrongful interference, payment of bribes, and other inducement to a FEMA official in order to secure two infrastructure contracts to aid in the rebuilding of the energy infrastructure in Puerto Rico after Hurricane Maria.

MasTec’s complaint asserts claims against the Company and Cobra Acquisitions for violations of the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”), tortious interference and violations of Puerto Rico state law.

MasTec alleges that it sustained injuries to its business and property in an unspecified amount because it lost the opportunity to perform work under a services contract with a maximum value of $ 500 million due to the Company’s and Cobra’s wrongful interference, payment of bribes, and other inducement to a FEMA official in order to secure two infrastructure contracts to aid in the rebuilding of the energy infrastructure in Puerto Rico after Hurricane Maria.

On April 1, 2020, the defendants filed a motion to dismiss the complaint.

On October 14, 2020, the court dismissed the RICO claims.

The Company believes these claims are without merit and will vigorously defend the action.

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The Company makes discretionary matching contributions of up to 3 % of an employee’s compensation and may make additional discretionary contributions for eligible employees.

For the years ended December 31, 2019 and 2018 the Company paid $3.3 million and $5.6 million , respectively, in contributions to the plan.

The Company did not pay any contributions for the year ended December 31, 2017.

For the years ended December 31, 2020, 2019 and 2018, the Company paid $ 2.0 million, $ 3.3 million and $ 5.6 million, respectively, in contributions to the plan.

Reporting Segments and Geographic Areas

Reporting Segments

As of December 31, 2019 , our revenues, income before income taxes and identifiable assets are primarily attributable to four reportable segments.

As of December 31, 2020, our revenues, loss before income taxes and identifiable assets are primarily attributable to four reportable segments.

The Company principally provides electric infrastructure services to private utilities, public investor-owned utilities and co-operative utilities and services in connection with on-shore drilling of oil and natural gas wells for small to large domestic independent oil and natural gas producers.

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Segment evaluation is determined on a quantitative basis based on a function of operating income (loss) less impairment expense, as well as a qualitative basis, such as nature of the product and service offerings and types of customers.

In 2018, the Company had three reportable segments, including pressure pumping services, infrastructure services and natural sand proppant services.

Based on its assessment of FASB ASC 280, Segment Reporting , guidance at December 31, 2019 , the Company changed its reportable segment presentation in 2019 to include its drilling services, which includes Bison Drilling, Bison Trucking, Panther Drilling, Mako Acquisitions and White Wing Tubular, as its own reportable segment.

The results of the entities were previously included in the reconciling column titled “All Other” in the tables below for the years ended December 31, 2018 and 2017.

As of December 31, 2019 , the Company’s four reportable segments include infrastructure services (“Infrastructure”), pressure pumping services (“Pressure Pumping”), natural sand proppant services (“Sand”) and drilling services (“Drilling”).

The results for the years ended December 31, 2018 and 2017 have been retroactively adjusted to reflect his change in reportable segments.

During the periods presented, the infrastructure services segment provided electric utility infrastructure services to government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities in Puerto Rico and the northeast, southwest and midwest portions of the United States.

The pressure pumping services segment provides

As of December 31, 2020, the Company’s four reportable segments include infrastructure services (“Infrastructure”), well completion services (“Well Completion”), natural sand proppant services (“Sand”) and drilling services (“Drilling”).

In 2019, the Company included Barracuda in its Well Completion segment, Cobra Aviation, ARS and Leopard in its Infrastructure segment and Mako in its Drilling segment.

Based on its assessment of FASB ASC 280, Segment Reporting , guidance at December 31, 2020, the Company changed its 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, the Company changed the name of its pressure pumping segment to the well services segment in 2020.

The results for the years ended December 31, 2019 and 2018 have been retroactively adjusted to reflect these changes.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

hydraulic fracturing services primarily in the Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania, Eagle Ford and Permian Basins in Texas and the mid-continent region.

The well completion services segment provides hydraulic fracturing, sand hauling and water transfer services primarily in the Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania, Eagle Ford and Permian Basins in Texas and the mid-continent region.

The sand segment mines, processes and sells sand for use in hydraulic fracturing.

The sand segment primarily services the Utica Shale, Permian Basin, SCOOP, STACK and Montney Shale in British Columbia and Alberta, Canada.

During the periods presented, the Company also provided coil tubing services, flowback services, cementing services, acidizing services, equipment rental services, crude oil hauling services, full service transportation and remote accommodation services.

The drilling services segment currently provides rental equipment, such as mud motors and operational tools, for both vertical and horizontal drilling.

During the periods presented, the Company also provided aviation services, coil tubing services, flowback services, cementing services, acidizing services, equipment rental services, crude oil hauling services, full service transportation, remote accommodation, equipment manufacturing and infrastructure engineering and design services.

The businesses that provide these services are distinct operating segments, which the CODM reviews independently when making key operating and resource utilization decisions.

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The following tables set forth certain financial information with respect to the Company’s reportable segments (in thousands):

Year Ended December 31, 2019

Infrastructure

Pressure Pumping

Year Ended December 31, 2020 Infrastructure Well Completion Sand Drilling All Other Eliminations Total

Revenue from external customers $ 155,241 $ 87,201 $ 34,265 $ 7,746 $ 28,623 $ — $ 313,076

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Impairment of other long-lived assets — 4,203 — 326 8,368 — 12,897

Operating income (loss)

Operating loss ( 22,559 ) ( 70,217 ) ( 9,173 ) ( 16,638 ) ( 30,730 ) — ( 149,317 )

Interest expense 2,775 1,130 312 454 726 — 5,397

Other expense

Other (income) expense, net ( 32,437 ) ( 2,274 ) 1,839 ( 227 ) ( 1,839 ) — ( 34,938 )

Income (loss) before income taxes $ 7,103 $ ( 69,073 ) $ ( 11,324 ) $ ( 16,865 ) $ ( 29,617 ) $ — $ ( 119,776 )

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Intangible assets, net $ 1,063 $ 2,683 $ — $ — $ 1,028 $ — $ 4,774

Total assets $ 436,604 $ 99,247 $ 172,927 $ 36,252 $ 135,194 $ ( 55,662 ) $ 824,562

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2018

Infrastructure

Pressure Pumping

Year Ended December 31, 2019 Infrastructure Well Completion Sand Drilling All Other Eliminations Total

Revenue from external customers $ 210,691 $ 241,951 $ 67,267 $ 31,728 $ 73,375 $ — $ 625,012

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Total cost of revenue 173,269 206,543 87,652 36,953 89,119 ( 49,748 ) 543,788

Selling, general and administrative (a)

Depreciation and amortization

Selling, general and administrative 23,235 10,889 5,006 4,177 8,245 — 51,552

Depreciation, depletion, amortization and accretion 30,349 40,159 14,050 13,143 19,332 — 117,033

Impairment of goodwill — 23,423 2,684 — 7,557 — 33,664

Impairment of other long-lived assets — — — 2,955 4,403 — 7,358

Operating income (loss)

Operating loss ( 13,589 ) ( 37,212 ) ( 12,329 ) ( 25,264 ) ( 40,049 ) 60 ( 128,383 )

Interest expense 1,674 1,228 193 862 1,001 — 4,958

Other expense

Other (income) expense, net ( 41,949 ) 580 67 ( 9 ) ( 905 ) — ( 42,216 )

Income (loss) before income taxes $ 26,686 $ ( 39,020 ) $ ( 12,589 ) $ ( 26,117 ) $ ( 40,145 ) $ 60 $ ( 91,125 )

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Intangible assets, net $ 1,296 $ 3,371 $ — $ — $ 1,121 $ — $ 5,788

Included in Pressure Pumping selling, general and administrative expense is non-cash equity based compensation of $17.5 million .

Year Ended December 31, 2017

Infrastructure

Pressure Pumping

Total assets $ 420,610 $ 172,608 $ 189,415 $ 55,273 $ 165,912 $ ( 51,433 ) $ 952,385

Year Ended December 31, 2018 Infrastructure Well Completion Sand Drilling All Other Eliminations Total

Revenue from external customers $ 1,082,003 $ 356,354 $ 106,953 $ 66,237 $ 78,537 $ — $ 1,690,084

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Total cost of revenue 622,293 277,693 144,192 60,873 106,403 ( 117,650 ) 1,093,804

Selling, general and administrative

Selling, general and administrative (a)

25,235 29,457 6,522 5,267 6,616 — 73,097

Depreciation, depletion, amortization and accretion 20,206 51,332 13,675 18,144 16,520 — 119,877

Impairment of long-lived assets

Impairment of goodwill — — — — 3,203 — 3,203

Impairment of other long-lived assets 308 143 — 3,966 1,235 — 5,652

Operating loss 417,935 ( 1,373 ) 11,533 ( 21,918 ) ( 11,699 ) ( 27 ) 394,451

Interest expense 421 1,114 291 823 538 — 3,187

Bargain purchase gain

Other expense (income)

Other expense 555 100 859 461 61 — 2,036

(Loss) income before income taxes $ 416,959 $ ( 2,587 ) $ 10,383 $ ( 23,202 ) $ ( 12,298 ) $ ( 27 ) $ 389,228

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Intangible assets, net $ 1,530 $ 4,059 $ — $ — $ 2,167 $ — $ 7,756

Total assets $ 377,318 $ 254,240 $ 177,950 $ 77,329 $ 153,945 $ 32,309 $ 1,073,091

Included i n well completion se lling, general and administrative expense is non-cash equity based compensation of $ 17.5 million.

MAMMOTH ENERGY SERVICES, INC.

3 unchanged sentences

Year Ended December 31,

2020 2019 2018

United States $ 302,205 $ 516,276 $ 654,506

Puerto Rico 53 96,630 1,022,558

Canada 10,723 11,946 13,020

Other 95 160 —

Total $ 313,076 $ 625,012 $ 1,690,084

The following table presents long-lived assets, excluding deferred income tax assets, by country (in thousands):

Year Ended December 31,

2020 2019 2018

United States $ 342,838 $ 526,584 $ 571,555

Puerto Rico — — 32,604

Canada 16,976 18,821 19,376

Total $ 359,814 $ 545,405 $ 623,535

Quarterly Financial Data (unaudited)

Three Months Ended

September 30,

March 31, June 30, September 30, December 31, Total

2020 2020 2020 2020

(in thousands, except per share data)

Revenue $ 97,383 $ 60,109 $ 70,534 $ 85,050 $ 313,076

Gross profit 15,477 11,356 24,605 29,617 81,055

Net (loss) income ( 83,971 ) ( 15,205 ) 3,430 ( 11,861 ) ( 107,607 )

Net (loss) income per share (basic) $ ( 1.85 ) $ ( 0.33 ) $ 0.07 $ ( 0.26 ) $ ( 2.36 )

Net (loss) income per share (diluted) $ ( 1.85 ) $ ( 0.33 ) $ 0.07 $ ( 0.26 ) $ ( 2.36 )

Three Months Ended

March 31, June 30, September 30, December 31, Total

2019 2019 2019 2019

(in thousands, except per share data)

Revenue $ 262,138 $ 181,820 $ 113,417 $ 67,637 $ 625,012

Gross profit (loss) 73,068 13,805 2,283 ( 7,932 ) 81,224

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Net income (loss) per share (diluted) $ 0.63 $ ( 0.24 ) $ ( 0.79 ) $ ( 1.35 ) $ ( 1.76 )

Three Months Ended

September 30,

(in thousands, except per share data)

Net income per share (basic)

Net income per share (diluted)

Subsequent Events

As discussed above, on February 26, 2020, the Company entered into a second amendment to its revolving credit facility.

See Note 11 above for details.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to December 31, 2019 , the Company ordered additional capital equipment with aggregate commitments of $2.2 million .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures