MAMMOTH ENERGY SERVICES, INC. 10-K

Item 9A. Controls and Procedures Evaluation of Disclosure Control and Procedures Under the direction of our Chief Executive Officer and Chief Financial Officer, we have established disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. The disclosure controls and procedures are also intended to ensure that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. As of December 31, 2020, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Exchange Act. Based upon our 79 evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2020, our disclosure controls and procedures are effective. 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 Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external purposes in accordance with generally accepted accounting principles. As of December 31, 2020, management conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation, management did not identify any material weaknesses in our internal control over financial reporting and determined that we maintained effective internal control over financial reporting as of December 31, 2020. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Item 9B. Other Information Not applicable. 80 PART III. Item 10. Directors, Executive Officers and Corporate Governance Information required by Item 10 of Part III is incorporated herein by reference to the definitive Proxy Statement to be filed by us pursuant to Regulation 14A of the General Rules and Regulations under the Securities Exchange Act of 1934 within 120 days after the close of the year ended December 31, 2020. We have adopted a Code of Business Conduct and Ethics that applies to directors and employees, including the Chief Executive Officer, the Chief Financial Officer, controller and persons performing similar functions. The Code of Business Conduct and Ethics is posted on our website at http://ir.mammothenergy.com/corporate-governance.cfm. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding an amendment to, or waiver from, a provision of the Code of Business Conduct and Ethics by posting such information on our website at the address specified above. Item 11. Executive Compensation The information required by Item 11 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters The information required by Item 12 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020. Item 13. Certain Relationships and Related Transactions and Director Independence The information required by Item 13 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020. Item 14. Principal Accountant Fees and Services The information required by Item 14 of Part III is incorporated by reference to our definitive Proxy Statement within 120 days after the close of the year ended December 31, 2020. 81 PART IV. Item 15. Exhibits, Financial Statement Schedules The following documents are filed as part of this report or incorporated by reference herein: (1) Financial Statements Page Financial Statements Report of Independent Registered Public Accounting Firm 2 Consolidated Balance Sheets 4 Consolidated Statement of Comprehensive Income (Loss) 5 Consolidated Statement of Changes in Equity 6 Consolidated Statement of Cash Flows 7 Notes to Consolidated Financial Statements 9 (2) Financial Statement Schedules All financial statement schedules have been omitted because they are not applicable or the required disclosure is presented in the financial statements or notes thereto. (3) Exhibits Exhibit Number Exhibit Description 3.1 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. 001-37917), filed with the SEC on November 15, 2016). 3.2 Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K (File No. 001-37917), filed with the SEC on November 15, 2016). 4.1 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). 4.2 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. 2 to the Registration Statement on Form S-1/A (File No. 333-213504), filed with the SEC on October 3, 2016). 4.3 Registration Rights Agreement, dated October 12, 2016, by and between the Company and Mammoth Energy Holdings, LLC (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K (File No. 001-37917), filed with the SEC on November 15, 2016). 4.4 Investor Rights Agreement, dated October 12, 2016, by and between the Company and Gulfport Energy Corporation (incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K (File No. 001-37917), filed with the SEC on November 15, 2016). 10.1 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. 001-37917), filed with the SEC on November 15, 2016). 10.2 Master Service Contract, effective May 16, 2013, by and between Muskie Proppant LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.2 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.3 Master Service Agreement, dated February 22, 2013, by and between Gulfport Energy Corporation and Panther Drilling Systems LLC (incorporated by reference to Exhibit 10.3 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.4 Amendment to Master Service Agreement, dated as of May 23, 2016, by and among Gulfport Energy Corporation, Gulfport Buckeye LLC and Panther Drilling Systems LLC (incorporated by reference to Exhibit 10.4 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.5 Master Service Contract, effective September 9, 2013, by and between Panther Drilling Systems LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.5 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.6 First Amendment, dated February 21, 2013, to Master Field Services Agreement, effective January 1, 2013, by and between Diamondback E&P LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.6 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.7 Master Field Services Agreement, effective January 1, 2013, by and between Diamondback E&P LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.7 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.8 Master Drilling Agreement, effective January 1, 2013, by and between Diamondback E&P LLC and Bison Drilling and Field Services LLC (incorporated by reference to Exhibit 10.8 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.9 Master Service Agreement, dated June 11, 2012, by and between Gulfport Energy Corporation and Redback Energy Services LLC (incorporated by reference to Exhibit 10.9 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 82 10.10 Master Service Contract, effective October 17, 2013, by and between Bison Trucking LLC and Diamondback E&P LLC (incorporated by reference to Exhibit 10.10 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.11 Mammoth Energy Securities, Inc. 2016 Equity Incentive Plan (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 November 15, 2016). 10.12 Form of Option Agreement (incorporated by reference to Exhibit 10.12 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1/A (File No. 333-213504), filed with the SEC on September 23, 2016). 10.13 Form of Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.13 to the Company’s Amendment No. 1 to the Registration Statement on Form S-1/A (File No. 333-213504), filed with the SEC on September 23, 2016). 10.14† Form of Director and Officer Indemnification Agreement (incorporated by reference to Exhibit 10.14 to the Company’s Amendment No. 2 to the Registration Statement on Form S-1/A (File No. 333-213504), filed with the SEC on October 3, 2016). 10.15# Amended & Restated Master Services Agreement for Pressure Pumping Services Agreement, effective as of October 1, 2014, by and between Gulfport Energy Corporation and Stingray Pressure Pumping LLC (incorporated by reference to Exhibit 10.15 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.16# Amendment to Amended and Restated Master Services Agreement, dated as of February 18, 2016 to be effective as of January 1, 2016, by and between Gulfport Energy Corporation and Stingray Pressure Pumping LLC (incorporated by reference to Exhibit 10.16 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.17 Amendment to Master Service Agreement, dated as of July 7, 2016, by and among Gulfport Energy Corporation, Gulfport Buckeye LLC and Stingray Pressure Pumping LLC (incorporated by reference to Exhibit 10.17 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.18# Sand Supply Agreement, effective as of October 1, 2014, by and between Muskie Proppant LLC and Gulfport Energy Corporation (incorporated by reference to Exhibit 10.18 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.19# Amendment to Sand Supply Agreement, dated as of November 3, 2015, by and between Muskie Proppant LLC and Gulfport Energy Corporation (incorporated by reference to Exhibit 10.19 to the Company’s Registration Statement on Form S-1 (File No. 333-213504), filed with the SEC on September 2, 2016). 10.20 Emergency Master Service Agreement for PREPA’s Electrical Grid Repairs-Hurricane Maria, executed on October 19, 2017, by the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions 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 November 14, 2017). 10.21 Amendment No. 1 to Emergency Master Service Agreement for PREPA’s Electrical Grid Repairs-Hurricane Maria, executed on November 1, 2017, by the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions 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 November 14, 2017). 10.22 Amendment No. 2 to Emergency Master Service Agreement for PREPA’s Electrical Grid Repairs-Hurricane Maria, dated as of December 8, 2017, between the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions LLC (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 001-37917), filed with the SEC on January 31, 2018). 10.23 Amendment No. 3 to Emergency Master Service Agreement for PREPA’s Electrical Grid Repairs-Hurricane Maria, dated December 21, 2017, between the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions LLC (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 001-37917), filed with the SEC on January 31, 2018). 10.24 Amendment No. 4 to Emergency Master Service Agreement for PREPA’s Electrical Grid Repairs-Hurricane Maria, dated as of January 28, 2018, between the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions LLC (incorporated by reference to Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 001-37917), filed with the SEC on January 31, 2018). 10.25 Office Lease Agreement, dated as of March 31, 2017, by and between the Company and Caliber Investment Group 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 15, 2017). 10.26 Master Subcontract Agreement, dated as of November 2, 2017, by and among Cobra Acquisitions LLC and T&E Flow Services LLC (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-K (File No. 001-37917), filed with the SEC on February 28, 2018). 10.27 Equipment Lease Agreement, dated as of August 1, 2017, by and among Bison Drilling and Field Services LLC and Predator Drilling LLC (incorporated by reference to Exhibit 10.32 to the Company's Annual Report on Form 10-K (File No. 001-37917), filed with the SEC on February 28, 2018). 10.28 Equipment Lease Agreement, dated as of August 15, 2017, by and among Bison Drilling and Field Services LLC and Predator Drilling LLC (incorporated by reference to Exhibit 10.33 to the Company's Annual Report on Form 10-K (File No. 001-37917), filed with the SEC on February 28, 2018). 10.29 Amendment No. 5 to Emergency Master Service Agreement for PREPA's Electrical Grid Repairs-Hurricane Maria, dated as of February 27, 2018, between the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions LLC (incorporated by reference to Exhibit 10.34 to the Company's Annual Report on Form 10-K (File No. 001-37917), filed with the SEC on February 28, 2018). 10.30 Master Service Contract for PREPA's Electrical Grid Repairs Hurricane Maria, executed on May 26, 2018, by the Puerto Rico Electric Power Authority (PREPA) and Cobra Acquisitions LLC (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 May 31, 2018). 10.31 # Amendment No. 2, dated as of July 10, 2018, between Stingray Pressure Pumping, LLC and Gulfport Energy Corporation to that certain Amended & Restated Master Services Agreement for Pressure Pumping Services, effective as of October 1, 2014, as amended effective January 1, 2016 (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 August 8, 2018). 10.32 Second Amendment to Sand Supply Agreement, dated as of August 6, 2018, between Muskie Proppant LLC and Gulfport Energy Corporation (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 August 8, 2018). 10.33 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). 10.34 First Amendment to Amended and Restated Revolving Credit and Security Agreement (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 November 12, 2019). 83 10.35 Master Service Agreement, dated January 1, 2019, by and between Gulfport Energy Corporation and Aquahawk Energy 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 3, 2019). 10.36 Aviation Support Services Agreement, dated December 28, 2018, by and between Brim Equipment Leasing, Inc. and Cobra Aviation Services 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 3, 2019). 10.37 General Sales Agency Agreement, dated December 21, 2018, by and between Cobra Services LLC and Brim Equipment Leasing, Inc. (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 3, 2019). 10.38 Aircraft Lease and Management Agreement (N745BW), dated December 21, 2018 by and between Cobra Aviation Services LLC and Brim Equipment Leasing, Inc. (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 3, 2019). 10.39 Aircraft Lease and Management Agreement (N745MB), dated December 21, 2018 by and between Cobra Aviation Services LLC and Brim Equipment Leasing, Inc. (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 3, 2019). 10.40 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 ). 10.41 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). 10.42 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). 10.43 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). 10.44 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). 10.45 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). 21.1* List of Significant Subsidiaries of the Company. 23.1* John T. Boyd Company Consent. 23.2* Consent of Grant Thornton LLP with respect to the financial statements of Mammoth Energy Services Inc. 31.1* Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. 31.2* Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(a) promulgated under the Securities Exchange Act of 1934, as amended. 32.1** Certification of Chief Executive Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code. 32.2** Certification of Chief Financial Officer of the Registrant pursuant to Rule 13a-14(b) promulgated under the Securities Exchange Act of 1934, as amended, and Section 1350 of Chapter 63 of Title 18 of the United States Code. 95.1* Mine Safety Disclosure Exhibit. 101.INS* XBRL Instance Document. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Document. 101.LAB* XBRL Taxonomy Extension Labels Linkbase Document. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document. 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. ** Furnished herewith, not filed. + Management contract, compensatory plan or arrangement. # 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. Item 16. Form 10-K Summary None. 84 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MAMMOTH ENERGY SERVICES, INC. Date: February 26, 2021 By: /s/ Mark Layton Mark Layton Chief Financial Officer Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date /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 26, 2021 Mark Layton /s/ Arthur Amron Director (Chairman of the Board) February 26, 2021 Arthur Amron /s/ James D. Palm Director February 26, 2021 James D. Palm /s/ Paul Jacobi Director February 26, 2021 Paul Jacobi /s/ Arthur Smith Director February 26, 2021 Arthur Smith /s/ Corey Booker Director February 26, 2021 Corey Booker 85 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Shareholders Mammoth Energy Services, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Mammoth Energy Services, Inc. (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. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters The critical audit matters communicated below 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. F-2 Our audit procedures related to the collectability of the receivable balances from PREPA included the following, among others. • We obtained an understanding and evaluated the design and operating effectiveness of management’s controls over the collectability of the receivable balances from PREPA. • We evaluated the qualitative assessment performed by management by performing the following: ◦ We inquired of management and internal and external legal counsel to confirm our understanding of the facts and circumstances related to collectability of the PREPA receivable and status of the related litigation. Additionally, we evaluated responses to inquiry letters sent to internal and external legal counsel and obtained written representations from management related to the collectability of the PREPA receivable and related litigation. Through such procedures, we assessed the reasonableness of management’s conclusions that PREPA has the intent and ability to pay the receivable and whether a loss was probable or reasonably possible. • We assessed the sufficiency of management’s disclosures related to the PREPA receivable and related litigation. Fair value measurements used to record impairment of long-lived assets and goodwill As described further in Note 7 to the consolidated financial statements, oil prices declined significantly in March 2020 as a result of geopolitical events that increased the global supply of oil in the market as well as effects of the COVID-19 pandemic which reduced the global demand for oil. As a result, the Company determined that impairment indicators existed, and it was more likely than not that the fair value of certain of its oilfield services assets and of its reporting units were less than their carrying value. Therefore, the Company performed an interim quantitative impairment test that resulted in recording $12.9 million of impairment of other long-lived assets and $55.0 million of impairment of goodwill. The Company measured the fair values of long-lived assets using direct and indirect observable inputs based on a market approach and measured the fair value of the reporting units using a combination of income and market approaches. The significant assumptions include the anticipated cash flows, discount rate, terminal growth rate, selection of an appropriate peer group and valuation multiples. Changes in these inputs could have a significant impact on the estimated fair values of the long-lived assets and reporting units. We identified the fair value measurements used to measure the impairment of long-lived assets and goodwill as a critical audit matter. The principal considerations for our determination that the fair value measurements used to record impairment of long-lived assets and goodwill as a critical audit matter are the degree of complexity and subjectivity inherent in determining management’s estimates used in developing the fair value measurements of the underlying long-lived assets and reporting units. This in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s assumptions. Our audit procedures related to the fair value measurements used to record impairment of long-lived assets and goodwill included the following, among others. • We evaluated the reasonableness of management’s cash flow projections by comparing such projections to historical Company results and available industry data. • We utilized our valuation specialists to assist in evaluating the Company’s discounted cash flow model and certain significant assumptions, including those discussed above. This included the evaluation of peer group and valuation multiples used within the fair value measurement of goodwill. • We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value measurements that would result from such changes in the key assumptions, specifically management’s anticipated cash flows and terminal growth rate, as well as the discount rate used to record impairment of goodwill. • We evaluated the qualifications of, and the methodologies employed by, the third-party specialists utilized by management. • We evaluated whether the assumptions used were consistent with evidence obtained in other areas of the audit. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2012. Oklahoma City, Oklahoma February 26, 2021 F-3 MAMMOTH ENERGY SERVICES, INC. CONSOLIDATED BALANCE SHEETS ASSETS December 31, 2020 2019 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, net 28,461 7,523 Inventories 12,020 17,483 Prepaid expenses 13,825 12,354 Other current assets 758 695 Total current assets 464,748 406,980 Property, plant and equipment, net 251,262 352,772 Sand reserves 65,876 68,351 Operating lease right-of-use assets 20,179 43,446 Intangible assets, net - customer relationships 408 583 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 CURRENT LIABILITIES Accounts payable $ 40,316 $ 39,220 Payables to related parties 3 526 Accrued expenses and other current liabilities 44,408 40,754 Current operating lease liability 8,618 16,432 Current portion of long-term debt 1,165 — Income taxes payable 34,088 33,465 Total current liabilities 128,598 130,397 Long-term debt, net of current portion 81,338 80,000 Deferred income tax liabilities 24,741 36,873 Long-term operating lease liability 11,377 27,102 Asset retirement obligations 4,746 4,241 Other long-term liabilities 10,435 5,031 Total liabilities 261,235 283,644 COMMITMENTS AND CONTINGENCIES (Note 20) EQUITY Equity: Common stock, $ 0.01 par value, 200,000,000 shares authorized, 45,769,283 and 45,108,545 issued and outstanding at December 31, 2020 and 2019 458 451 Additional paid in capital 537,039 535,094 Retained earnings 28,895 136,502 Accumulated other comprehensive loss ( 3,065 ) ( 3,306 ) Total equity 563,327 668,741 Total liabilities and equity $ 824,562 $ 952,385 The accompanying notes are an integral part of these consolidated financial statements. F-4 MAMMOTH ENERGY SERVICES, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME Years Ended December 31, 2020 2019 2018 REVENUE (in thousands, except per share amounts) Services revenue $ 234,081 $ 452,594 $ 1,471,085 Services revenue - related parties 43,091 102,624 118,183 Product revenue 28,404 42,105 75,766 Product revenue - related parties 7,500 27,689 25,050 Total revenue 313,076 625,012 1,690,084 COST AND EXPENSES 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 Selling, general and administrative - related parties (Note 13) 758 1,847 1,898 Depreciation, depletion, amortization and accretion 95,317 117,033 119,877 Impairment of goodwill 54,973 33,664 3,203 Impairment of other long-lived assets 12,897 7,358 5,652 Total cost and expenses 462,393 753,395 1,295,633 Operating (loss) income ( 149,317 ) ( 128,383 ) 394,451 OTHER INCOME (EXPENSE) Interest expense, net ( 5,397 ) ( 4,958 ) ( 3,187 ) Other, net 33,048 42,216 ( 2,036 ) Other, net - related parties 1,890 — — Total other income (expense) 29,541 37,258 ( 5,223 ) (Loss) income before income taxes ( 119,776 ) ( 91,125 ) 389,228 (Benefit) provision for income taxes ( 12,169 ) ( 12,081 ) 153,263 Net (loss) income $ ( 107,607 ) $ ( 79,044 ) $ 235,965 OTHER COMPREHENSIVE INCOME (LOSS) 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 Net (loss) income per share (basic) (Note 16) $ ( 2.36 ) $ ( 1.76 ) $ 5.27 Net (loss) income per share (diluted) (Note 16) $ ( 2.36 ) $ ( 1.76 ) $ 5.24 Weighted average number of shares outstanding (Note 16) 45,644 45,011 44,750 Weighted average number of shares outstanding, including dilutive effect (Note 16) 45,644 45,011 45,021 The accompanying notes are an integral part of these consolidated financial statements. F-5 MAMMOTH ENERGY SERVICES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY Accumulated Additional Other Common Stock Retained Paid-In Comprehensive Shares Amount Earnings Capital Loss Total (in thousands) Balance at January 1, 2018 44,589 $ 446 $ 2,001 $ 508,010 $ ( 2,661 ) $ 507,796 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 ) Balance at December 31, 2018 44,877 $ 449 $ 226,765 $ 530,919 $ ( 4,081 ) $ 754,052 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. F-6 MAMMOTH ENERGY SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 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 provided by (used in) operating activities: Equity based compensation (Note 17) — — 17,487 Stock based compensation 1,952 4,177 5,425 Depreciation, depletion, amortization and accretion 95,317 117,033 119,877 Amortization of coil tubing strings 359 1,641 2,193 Amortization of debt origination costs 831 326 387 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 Impairment of other long-lived assets 12,897 7,358 5,652 Inventory obsolescence — 1,349 — Deferred income taxes ( 12,186 ) ( 42,639 ) 52,226 Other ( 143 ) ( 986 ) 16 Changes in assets and liabilities, net of acquisitions of businesses: Accounts receivable, net ( 32,621 ) ( 27,006 ) ( 78,840 ) 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 Accounts payable 2,526 ( 25,968 ) ( 64,966 ) Payables to related parties ( 522 ) 156 ( 1,008 ) Accrued expenses and other liabilities 3,198 ( 18,800 ) 15,445 Income taxes payable 648 ( 71,499 ) 68,692 Net cash provided by (used in) operating activities 6,967 ( 95,318 ) 386,668 Cash flows from investing activities: Purchases of property and equipment ( 6,761 ) ( 35,417 ) ( 187,285 ) Purchases of property and equipment from related parties ( 76 ) ( 344 ) ( 4,658 ) Business acquisitions, net — — ( 20,824 ) Contributions to equity investee ( 490 ) ( 680 ) ( 702 ) Proceeds from disposal of property and equipment 6,782 3,217 1,514 Purchase of short-term investment ( 1,750 ) — — Net cash used in investing activities ( 2,295 ) ( 33,224 ) ( 211,955 ) Cash flows from financing activities: Borrowings on long-term debt 35,351 156,000 77,000 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 ) Principal payments on financing leases and equipment financing notes ( 1,966 ) ( 2,079 ) ( 292 ) Debt issuance costs ( 1,051 ) — ( 1,199 ) 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 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 Cash and cash equivalents at end of period $ 14,822 $ 5,872 $ 67,625 F-7 MAMMOTH ENERGY SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2020 2019 2018 Supplemental disclosure of cash flow information: (in thousands) Cash paid for interest $ 4,729 $ 4,741 $ 3,212 Cash (recovered) paid for income taxes $ ( 617 ) $ 110,848 $ 32,757 Supplemental disclosure of non-cash transactions: 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 $ — The accompanying notes are an integral part of these consolidated financial statements. F-8 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization and Basis of Presentation The accompanying consolidated financial statements were prepared in accordance with the rules and regulations of the Securities and Exchange Commission, and reflect all adjustments, which in the opinion of management are necessary for the fair presentation of the results. Mammoth Energy Services, Inc. (“Mammoth Inc.” or the “Company”), together with its subsidiaries, is an integrated, growth-oriented company serving both the oil and gas and the electric utility industries in North America and US territories. Mammoth Inc.'s infrastructure division provides construction, upgrade, maintenance and repair services to various public and private owned utilities. Its oilfield services division provides a diversified set of services to the exploration and production industry including well completion, natural sand and proppant and drilling services. Additionally, the Company provides aviation services, coil tubing services, equipment rentals, crude oil hauling, full service transportation, remote accommodation services, equipment manufacturing and infrastructure engineering and design services. The Company was incorporated in Delaware in June 2016. The following companies (“Operating Entities”) are included in these consolidated financial statements: Bison Drilling and Field Services, LLC (“Bison Drilling”), formed November 15, 2010; Bison Trucking LLC (“Bison Trucking”), formed August 9, 2013; White Wing Tubular Services LLC (“White Wing”), formed July 29, 2014; Barracuda Logistics LLC (“Barracuda”), formed October 24, 2014; Mr. Inspections LLC (“MRI”), formed January 25, 2015; Panther Drilling Systems LLC (“Panther”), formed December 11, 2012; Redback Energy Services, LLC (“Redback Energy”), formed October 6, 2011; Redback Coil Tubing, LLC (“Coil Tubing”), formed May 15, 2012; Redback Pump Down Services LLC (“Pump Down”), formed January 16, 2015; Muskie Proppant LLC (“Muskie”), formed September 14, 2011; Stingray Pressure Pumping LLC (“Stingray Pressure Pumping”), acquired November 24, 2014; Silverback Energy LLC (“Silverback”), formerly known as Stingray Logistics LLC, acquired November 24, 2014; Great White Sand Tiger Lodging Ltd. (“Sand Tiger”), formed October 1, 2007; WTL Oil LLC (“WTL”), formerly known as Silverback Energy Services LLC, formed June 8, 2016; Mammoth Equipment Leasing LLC, formed November 14, 2016; Cobra Acquisitions LLC (“Cobra”), formed January 9, 2017; Lion Power Services LLC (“Lion Power”), formerly known as Cobra Energy LLC, formed January 25, 2017; Mako Acquisitions LLC (“Mako”), formed March 28, 2017; Piranha Proppant LLC (“Piranha”), formed March 28, 2017; Higher Power Electrical LLC (“Higher Power”), acquired April 21, 2017; Stingray Energy Services LLC (“SR Energy”), acquired June 5, 2017; Stingray Cementing LLC (“Cementing”), acquired June 5, 2017; Sturgeon Acquisitions LLC (“Sturgeon”), acquired June 5, 2017; Taylor Frac, LLC (“Taylor Frac”), acquired June 5, 2017; Taylor Real Estate Investments, LLC (“Taylor RE”), acquired June 5, 2017; South River Road, LLC (“South River”), acquired June 5, 2017; 5 Star Electric, LLC (“5 Star”), acquired July 1, 2017; Tiger Shark Logistics LLC (“Tiger Shark”), formed October 20, 2017; Cobra Aviation Services LLC (“Cobra Aviation”), formed January 2, 2018; Bison Sand Logistics LLC (“Bison Sand”), formed January 8, 2018; Dire Wolf Energy Services LLC (“Dire Wolf”), formed January 8, 2018; Cobra Logistics Holdings LLC (“Cobra Logistics”), formed February 13, 2018; Black Mamba Energy LLC (“Black Mamba”), formed March 28, 2018; Stingray Cementing and Acidizing LLC (“Stingray Cementing and Acidizing”), formerly known as RTS Energy Services LLC (“RTS”), acquired June 15, 2018; Aquahawk Energy LLC (“Aquahawk”), formed June 28, 2018; Ivory Freight Solutions LLC (“Ivory Freight”), formed July 26, 2018; Cobra Caribbean LLC (“Cobra Caribbean”), formed October 3, 2018; Python Equipment LLC (“Python”), formed December 5, 2018; IFX Transport LLC (“IFX”), formed December 5, 2018; Air Rescue Systems LLC (“ARS”), acquired December 21, 2018; Leopard Aviation LLC (“Leopard”), formed April 29, 2019; Predator Aviation LLC (“Predator”), formed April 19, 2019; Anaconda Manufacturing LLC (“Anaconda”), formed July 31, 2019; and Aquawolf LLC (“Aquawolf”), formed September 25, 2019. At December 31, 2020 and December 31, 2019, Wexford and Gulfport beneficially owned the following shares of outstanding common stock of Mammoth Inc.: 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 % F-9 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Operations The Company's infrastructure services include construction, upgrade, maintenance and repair services to the electrical infrastructure industry as well as repair and restoration services in response to storms and other disasters. The Company's well completion services include equipment and personnel used in connection with the completion and early production of oil and natural gas wells. The Company's natural sand proppant services include the distribution and production of natural sand proppant that is used primarily for hydraulic fracturing in the oil and gas industry. The Company's drilling services include drilling rigs and directional tools for both vertical and horizontal drilling of oil and natural gas wells. The Company also provides other services, including aviation, coil tubing, equipment rentals, crude oil hauling, full service transportation, remote accommodations, equipment manufacturing and infrastructure engineering and design services. Substantially all of the Company’s operations are in North America. During certain of the periods presented in this report, the Company provided its infrastructure services primarily in the northeast, southwest and midwest portions of the United States and in Puerto Rico. The Company’s infrastructure business depends on infrastructure spending on maintenance, upgrade, expansion and repair and restoration. Any prolonged decrease in spending by electric utility companies, delays or reductions in government appropriations or the failure of customers to pay their receivables could have a material adverse effect on the Company’s results of operations and financial condition. During the periods presented, the Company has operated its oil and natural gas businesses in the Permian Basin, the Utica Shale, the Eagle Ford Shale, the Marcellus Shale, the Granite Wash, the SCOOP, the STACK, the Cana-Woodford Shale, the Cleveland Sand and the oil sands located in Northern Alberta, Canada. The Company's oil and natural gas business depends in large part on the conditions in the oil and natural gas industry and, specifically, on the amount of capital spending by its customers. Any prolonged increase or decrease in oil and natural gas prices affects the levels of exploration, development and production activity, as well as the entire health of the oil and natural gas industry. Continuation of or further decreases in the commodity prices for oil and natural gas would have a material effect on the Company’s results of operations and financial condition. 2. Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated financial statements are prepared in accordance with GAAP and include the accounts of the Company and its subsidiaries and the variable interest entities (“VIE”) for which the Company is the primary beneficiary. All material intercompany accounts and transactions between the entities within the Company have been eliminated. Variable Interest Entities The Company consolidates a VIE when it is determined to be the primary beneficiary, which is the party that has both (i) the power to direct the activities that most significantly impact the VIE's economic performance and (ii) through its interests in the VIE, the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. See Note 12 for more information on the Company's VIEs. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include, but are not limited to, the Company's sand reserves and their impact on calculating depletion expense, allowance for doubtful accounts, asset retirement obligations, reserves for self-insurance, depreciation and amortization of property and equipment, business combination valuations, amortization of intangible assets and future cash flows, fair values used to assess recoverability and impairment of long-lived assets, including goodwill, estimates of income taxes and the estimated effects of litigation and other contingencies. Reclassifications Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation. Cash and Cash Equivalents and Short-Term Investment All highly liquid investments with an original maturity of three months or less are considered cash equivalents. The Company maintains its cash accounts in financial institutions that are insured by the Federal Deposit Insurance Corporation, with the exception of cash held by Sand Tiger in a Canadian financial institution. At December 31, 2020, we had $ 2.2 million, in Canadian dollars, of cash in Canadian accounts. Cash balances from time to time may exceed the F-10 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS insured amounts; however, the Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risks on such accounts. The Company's short-term investment consists of a certificate of deposit with a maturity over 90 days. Accounts Receivable Accounts receivable include amounts due from customers for services performed or goods sold. The Company grants credit to customers in the ordinary course of business and generally does not require collateral. Prior to granting credit to customers, the Company analyzes the potential customer's risk profile by utilizing a credit report, analyzing macroeconomic factors and using its knowledge of the industry, among other factors. Most areas in the continental United States in which the Company operates provide for a mechanic’s lien against the property on which the service is performed if the lien is filed within the statutorily specified time frame. Customer balances are generally considered delinquent if unpaid by the 30th day following the invoice date and credit privileges may be revoked if balances remain unpaid. Interest on delinquent trade accounts receivable is recognized in other income when chargeable and collectability is reasonably assured. During certain of the periods presented, the Company provided infrastructure services in Puerto Rico under master services agreements entered into by Cobra, one of the Company's subsidiaries, with the Puerto Rico Electric Power Authority (“PREPA”) to perform repairs to PREPA’s electrical grid as a result of Hurricane Maria. During the years ended December 31, 2020 and 2019, the Company charged interest on delinquent trade accounts receivable pursuant to the terms of its agreements with PREPA totaling $ 32.2 million and $ 42.0 million, respectively. These amounts are included in other, net on the consolidated statement of comprehensive (loss) income. Included in “accounts receivable, net” on the condensed consolidated balance sheets as of December 31, 2020 and 2019 were interest charges of $ 74.3 million and $ 42.0 million, respectively. The Company's subsidiaries Stingray Pressure Pumping and Muskie are party to a pressure pumping and a sand supply contract with Gulfport. On November 13, 2020, Gulfport filed a voluntary petition for relief under chapter 11 of the Bankruptcy Code. During the year ended December 31, 2020, the Company recorded revenue of $ 50.0 million and interest of $ 1.9 million on delinquent trade accounts receivable pursuant to the terms of those contracts. The Company regularly reviews receivables and provides for expected losses through an allowance for doubtful accounts. In evaluating the level of established reserves, the Company makes judgments regarding its customers’ ability to make required payments, payment history, economic events and other factors. As the financial condition of customers changes, circumstances develop, or additional information becomes available, adjustments to the allowance for doubtful accounts may be required. In the event the Company expects that a customer may not be able to make required payments, the Company would increase the allowance through a charge to income in the period in which that determination is made. If it is determined that previously reserved amounts are collectible, the Company would decrease the allowance through a credit to income in the period in which that determination is made. Uncollectible accounts receivable are periodically charged against the allowance for doubtful accounts once a final determination is made regarding their uncollectability. F-11 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Following is a roll forward of the allowance for doubtful accounts for the years ended December 31, 2020, 2019 and 2018 (in thousands): 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 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 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 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. 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. The Company believes these receivables are collectible. PREPA, however, is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA's ability to meet its payment obligations 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. F-12 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Inventory Inventory consists of raw sand and processed sand available for sale, raw materials, chemicals and other products sold as a bi-product of completion and production operations and supplies used in performing services. Inventory is stated at the lower of cost or market (net realizable value) on an average cost basis. The Company assesses the valuation of its inventories based upon specific usage, future utility, obsolescence and other factors. Inventory manufactured at the Company’s sand production facilities includes direct excavation costs, processing costs and overhead allocation. Stockpile tonnages are calculated by measuring the number of tons added and removed from the stockpile. Costs are calculated on a per ton basis and are applied to the stockpiles based on the number of tons in the stockpile. Inventory transported for sale at the Company’s terminal facility includes the cost of purchased or manufactured sand, plus transportation related charges. Coil tubing strings of various widths, diameters and lengths are included in inventory. The strings are used in providing specialized services to customers who are primarily operators of oil or gas wells and are used at various rates based on factors such as well conditions (i.e. pressure and friction), vertical and horizontal length of the well, running speed of the string in the well and total running feet accumulated to the string. The Company obtains usage information from data acquisition software and other established assessment methods and attempts to amortize the strings over their estimated useful life. In no event will a string be amortized over a period longer than 12 months. Amortization of coil strings is included in services cost of revenue in the consolidated statements of comprehensive (loss) income and totaled $ 0.4 million, $ 1.6 million and $ 2.2 million for the years ended December 31, 2020, 2019 and 2018, respectively. See Note 5 for additional disclosure related to inventory. Prepaid Expenses Prepaid expenses primarily consist of insurance costs and rail car freight and lease expense. These costs are expensed over the periods that they benefit. Property and Equipment Property and equipment, including renewals and betterments, are capitalized and stated at cost, while maintenance and repairs that do not increase the capacity, improve the efficiency or safety, or improve or extend the useful life are charged to operations as incurred. Disposals are removed at cost, less accumulated depreciation, and any resulting gain or loss is recorded in operations. Depreciation is calculated using the straight-line method over the shorter of the estimated useful life, or the remaining lease term, as applicable. Depreciation does not begin until property and equipment is placed in service. Once placed in service, depreciation on property and equipment continues while being repaired, refurbished, or between periods of deployment. Sand Reserves Sand reserve costs include engineering, mineralogical studies and other related costs to develop the mine, the removal of overburden to initially expose the mineral and building access ways. Exploration costs are expensed as incurred and classified as product cost of revenue. Capitalization of mine development project costs begins once the deposit is classified as proven and probable reserves. Drilling and related costs are capitalized for deposits where proven and probable reserves exist and the activities are directed at obtaining additional information on the deposit or converting non-reserve minerals to proven and probable reserves and the benefit is to be realized over a period greater than one year. Mining property and development costs are amortized using the units-of-production method on estimated measured tons in in-place reserves. The impact of revisions to reserve estimates is recognized on a prospective basis. Long-Lived Assets The Company reviews long-lived assets for recoverability in accordance with the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 360, Impairment or Disposal of Long-Lived Assets , which requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of assets is measured by comparing the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. These evaluations for impairment are significantly impacted by estimates of revenues, costs and expenses and other factors. If long-lived assets are considered to be impaired, the impairment to be recognized is measured by the amount in which the carrying amount of the assets exceeds the fair value of the assets. See Note 7 for additional disclosure related to impairment of long-lived assets. F-13 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Goodwill Goodwill is tested for impairment annually, or more frequently if events or changes in circumstances indicate that goodwill might be impaired. If it is determined that an impairment exists, an impairment charge is recognized for the excess of carrying value over implied fair value. The fair value is determined using a combination of the income and market approaches. See Notes 7 and 8 for additional disclosures related to goodwill. Other Non-Current Assets Other non-current assets primarily consist of deferred financing costs on our credit facility (see Note 11), sales tax receivables and our equity method investment (see Note 9). Investments are accounted for under the equity method in circumstances where the Company has the ability to exercise significant influence over the operating and investing policies of the investee, but does not have control. Under the equity method, the Company recognizes its share of the investee's earnings in its consolidated statements of comprehensive (loss) income. Investments are evaluated for impairment and a charge to earnings is recognized when any identified impairment is determined to be other than temporary. Asset Retirement Obligations Mine reclamation costs, future remediation costs for inactive mines and other contractual site remediation costs are accrued based on management’s best estimate at the end of each period of the costs expected to be incurred at a site. Such cost estimates include, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates are reflected in earnings in the period an estimate is revised. Following is a roll forward of the Company's asset retirement obligations for the years ended December 31, 2020 and 2019 (in thousands): December 31, 2020 2019 Balance as of beginning of period $ 4,241 $ 3,164 Additions 372 952 Accretion expense 115 120 Foreign currency translation adjustment 18 5 Asset retirement obligation as of end of period $ 4,746 $ 4,241 Business Combinations The Company accounts for its business acquisitions under the acquisition method of accounting as indicated in FASB ASC 805, Business Combinations , which requires the acquiring entity in a business combination to recognize the fair value of all assets acquired, liabilities assumed and any noncontrolling interest in the acquiree and establishes the acquisition date as the fair value measurement point. Accordingly, the Company recognizes assets acquired and liabilities assumed in business combinations, including contingent assets and liabilities and noncontrolling interest in the acquiree, based on fair value estimates as of the date of acquisition. In accordance with FASB ASC 805, the Company recognizes and measures goodwill, if any, as of the acquisition date, as the excess of the fair value of the consideration paid over the fair value of the identified net assets acquired. When the Company acquires a business from an entity under common control, whereby the companies are ultimately controlled by the same party or parties both before and after the transaction, it is treated for accounting purposes in a manner similar to the pooling of interest method of accounting. The assets and liabilities are recorded at the transferring entity’s historical cost instead of reflecting the fair market value of assets and liabilities. Amortizable Intangible Assets Intangible assets subject to amortization include customer relationships and trade names. 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 disclosures related to intangible assets. Fair Value of Financial Instruments 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 F-14 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. Revenue Recognition 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. See Note 3 for additional discussion of the Company's revenue. The timing of revenue recognition may differ from contract billing or payment schedules, resulting in revenues that have been earned but not billed (“unbilled revenue”) or amounts that have been billed, but not earned (“deferred revenue”). 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 $ 1.5 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. Earnings (Loss) per Share Earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of outstanding shares. See Note 16. Equity-based Compensation The Company measures equity-based payments at fair value on the date of grant and expenses the value of these equity-based payments in compensation expense over the applicable vesting periods. See Note 17. Stock-based Compensation The Company's stock-based compensation program consists of restricted stock units granted to employees and restricted stock units granted to non-employee directors under the Mammoth Energy Services, Inc. 2016 Incentive Plan (the “2016 Plan”). The Company recognizes in its financial statements the cost of employee services received in exchange for restricted stock based on the fair value of the equity instruments as of the grant date. In general, this value is amortized over the vesting period; for grants with a non-substantive service condition, this value is recognized immediately. Amounts are recognized in cost of revenue and selling, general and administrative expenses. See Note 18. Income Taxes The Company's operations are included in a consolidated federal income tax return and other state returns. Accordingly, the Company has recognized deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases for all our subsidiaries as if each entity were a corporation, regardless of its actual characterization for U.S. federal income tax purposes. Under FASB ASC 740, Income Taxes , deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using statutory tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of deferred tax assets and liabilities as a result of a change in tax rate are recognized in the period that includes the statutory enactment date. A valuation allowance for deferred tax assets is recognized when it is more likely than not that the benefit of deferred tax assets will not be realized. To assess that likelihood, the Company uses estimates and judgments regarding future taxable income, as well as the jurisdiction in which such taxable income is generated, to determine whether a valuation allowance is required. 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 . 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. During the years ended December 31, 2020 and 2019, no uncertain tax positions existed. Penalties and interest, if any, are recognized in selling, general and administrative expense and interest expense, respectively. Litigation and Contingencies F-15 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 For foreign operations, assets and liabilities are translated at the period-end exchange rate and income statement items are translated at the average exchange rate for the period. Resulting translation adjustments are recorded within accumulated other comprehensive income (loss). Assets and liabilities denominated in foreign currencies, if any, are re-measured at the balance sheet date. Transaction gains or losses are included as a component of current period earnings. Environmental Matters The Company is subject to various federal, state and local laws and regulations relating to the protection of the environment. Management has established procedures for the ongoing evaluation of the Company’s operations, to identify potential environmental exposures and to comply with regulatory policies and procedures. Environmental expenditures that relate to current operations are expensed or capitalized as appropriate. Expenditures that relate to an existing condition caused by past operations and do not contribute to current or future revenue generation are expensed as incurred. Liabilities are recorded when environmental costs are probable and the costs can be reasonably estimated. The Company maintains insurance which may cover in whole or in part certain environmental expenditures. As of December 31, 2020 and 2019, there were no probable environmental matters. Other Comprehensive Income (Loss) Comprehensive income (loss) consists of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) included certain changes in equity that are excluded from net income (loss). Specifically, cumulative foreign currency translation adjustments are included in accumulated other comprehensive income (loss). Concentrations of Credit Risk and Significant Customers Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents in excess of federally insured limits and trade receivables. 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: 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 % — % a. Customer A is a third-party customer. Revenues and the related accounts receivable balances earned from Customer A were derived from the Company's infrastructure services segment. Accounts receivable for Customer A also includes receivables due for interest charged on delinquent accounts receivable. b. Customer B is a related party customer. 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. c. 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. F-16 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Recent Accounting Pronouncements Accounting Pronouncements Recently Adopted In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 “Leases (Topic 842)” amending the current accounting for leases. Under the new provisions, all lessees will report a right of use asset and lease liability on the balance sheet for all leases with a term longer than one year, while maintaining substantially similar classifications for financing and operating leases. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. The Company adopted this ASU effective January 1, 2019 utilizing the transition method permitted by ASU No. 2018-11 “Leases (Topic 842): Targeted Improvements”, issued in August 2018, which permits an entity to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption with no adjustment made to the comparative periods presented in the consolidated financial statements. See Note 15 for the impact the adoption of this standard had on the Company's financial statements. In June 2018, the FASB issued ASU No. 2018-07, “Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Accounting,” which simplifies the accounting for share-based payments granted to non-employees by aligning the accounting with requirements for employee share-based compensation. Upon transition, this ASU requires non-employee awards to be measured at fair value as of the adoption date. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within that fiscal year. 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. In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends current guidance on reporting credit losses on financial instruments. This ASU requires entities to reflect its current estimate of all expected credit losses. The guidance affects most financial assets, including trade accounts receivable. This ASU is effective for fiscal years beginning after December 31, 2019, with early adoption permitted. The Company adopted this standard effective January 1, 2020. It did not have a material impact on the Company's consolidated financial statements. 3. Revenues 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. Infrastructure Services Infrastructure services are typically provided pursuant to master service agreements, repair and maintenance contracts or fixed price and non-fixed price installation contracts. Pricing under these contracts may be unit priced, cost-plus/hourly (or time and materials basis) or fixed price (or lump sum basis). Generally, 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. 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 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. The Company accounts for these pressure pumping agreements as multiple performance obligations satisfied over time. Jobs for these services are typically short-term in nature and range from a few hours to multiple days. Generally, revenue is recognized over time upon the completion of each segment of work based upon a completed field ticket, which includes the charges for the services performed, mobilization of the equipment to the location and personnel. F-17 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. 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. Such amounts are recognized ratably over the period during which the corresponding goods and services are consumed. Natural Sand Proppant Services The Company sells natural sand proppant through sand supply agreements with its customers. Under these agreements, sand is typically sold at a flat rate per ton or a flat rate per ton with an index-based adjustment. The Company recognizes revenue at the point in time when the customer obtains legal title to the product, which may occur at the production facility, rail origin or at the destination terminal. Certain of the Company's sand supply agreements contain a minimum volume commitment related to sand purchases whereby the Company charges a shortfall payment if the customer fails to meet the required minimum volume commitment. These agreements may also contain make-up provisions whereby shortfall payments can be applied in future periods against purchased volumes exceeding the minimum volume commitment. If a make-up right exists, the Company has future performance obligations to deliver excess volumes of product in subsequent periods. In accordance with ASC 606, if the customer fails to meet the minimum volume commitment, the Company will assess whether it expects the customer to fulfill its unmet commitment during the contractually specified make-up period based on discussions with the customer and management's knowledge of the business. If the Company expects the customer will make-up deficient volumes in future periods, revenue related to shortfall payments will be deferred and recognized on the earlier of the date on which the customer utilizes make-up volumes or the likelihood that the customer will exercise its right to make-up deficient volumes becomes remote. 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 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, 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. The Company has elected to account for shipping and handling as activities to fulfill the promise to transfer the sand. If revenue is recognized for the related product before the shipping and handling activities occur, 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 F-18 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 Contract drilling services were provided under daywork contracts. Directional drilling services, including motor rentals, are provided on a day rate or hourly basis, and revenue is recognized as work progresses. Performance obligations are satisfied over time as the work progresses based on the measure of output. Mobilization revenue and costs were recognized over the days of actual drilling. As a result of market conditions, 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 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. Services are provided on a day rate, contracted or hourly basis. Performance obligations for these services are satisfied over time and revenue is recognized as the work progresses based on the measure of output. Jobs for these services are typically short-term in nature and range from a few hours to multiple days. Practical Expedients The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts in which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied distinct good or service that forms part of a single performance obligation. Contract Balances Following is a rollforward of the Company's contract liabilities (in thousands): Balance, January 1, 2018 $ 15,000 Deduction for recognition of revenue ( 15,000 ) Increase for deferral of shortfall payments 4,246 Increase for deferral of customer prepayments 58 Balance, December 31, 2018 4,304 Deduction for recognition of revenue ( 4,827 ) Increase for deferral of shortfall payments 8,442 Increase for deferral of customer prepayments 675 Deduction of shortfall payments due to contract renegotiations ( 1,350 ) Balance, December 31, 2019 7,244 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. F-19 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, 2020, the Company had unsatisfied performance obligations totaling $ 41.8 million, which will be recognized over the next 13 months. 4. Acquisitions 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 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. LLC (“Wexford Investment”), a related party, under the name of Brim Acquisitions LLC (“Brim Acquisitions”), which acquired all outstanding equity interest in Brim Equipment. 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. The acquisition of ARS qualifies under FASB ASC 805, Business Combinations , as a business combination. The purchase of the Brim Equipment Assets was negotiated and funded as part of the acquisition. Therefore, the purchase of the Brim Equipment Assets also qualifies as a business combination under ASC 805. Cobra Aviation is able to exercise significant influence over Brim Acquisitions, but is a minority owner and does not have controlling financial interest. As a result, Cobra Aviation's investment in Brim Acquisitions is accounted for as an equity method investment under FASB ASC 323, Investments-Equity Method and Joint Ventures . See Note 9 for additional information on our investment in Brim Acquisitions. Total consideration paid for ARS and the Brim Equipment Assets was $ 2.7 million and $ 4.2 million, respectively. The Company used cash on hand to fund the acquisitions. The following table summarizes the fair value of ARS and the Brim Equipment Assets as of December 21, 2018 (in thousands): ARS Brim Equipment Assets Accounts receivable $ 146 $ — Property, plant and equipment 1,702 1,990 Identifiable intangible assets - trade name (a) 120 — Goodwill (b) 694 2,243 Other non-current assets 5 — Total assets acquired $ 2,667 $ 4,233 a. Trade name was valued using a “Relief-from-Royalty” method and will be amortized over 20 years. b. 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 the acquisition date through December 31, 2020, ARS and the Brim Equipment Assets provided the following activity (in thousands): 2020 2019 2018 2020 2019 2018 ARS Brim Equipment Assets Revenues $ 1,054 $ 2,153 $ — $ 155 $ 2,616 $ — Net loss (a) ( 359 ) ( 546 ) ( 25 ) ( 86 ) ( 1,056 ) — a. 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 F-20 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS these acquisitions. Acquisition of WTL Oil On May 31, 2018, the Company completed its acquisition of WTL for total consideration of $ 6.1 million. The Company used cash on hand and borrowings under its credit facility to fund the acquisition. The acquisition of WTL expanded the Company's service offerings into the crude oil hauling business. The following table summarizes the fair value of WTL as of May 31, 2018 (in thousands): WTL Property, plant and equipment $ 2,960 Identifiable intangible assets - customer relationships (a) 930 Identifiable intangible assets - trade name (a) 650 Goodwill (b) 1,567 Total assets acquired $ 6,107 a. 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 - 20 years. b. 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 the assembled workforce and future profitability expected to arise from the acquired entity. From the acquisition date through December 31, 2020, WTL provided the following activity (in thousands): 2020 2019 2018 Revenues $ 1,897 $ 8,413 $ 7,511 Net loss (a) ( 5,486 ) ( 2,719 ) ( 149 ) a. 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. Acquisition of RTS Energy Services On June 15, 2018, the Company completed its acquisition of RTS for total consideration of $ 8.1 million. The Company used cash on hand and borrowings under its credit facility to fund the acquisition. The acquisition of RTS expanded Mammoth Inc.'s cementing services into the Permian Basin and added acidizing to the Company's service offerings. The following table summarizes the fair value of RTS as of June 15, 2018 (in thousands): RTS Inventory $ 180 Property, plant and equipment 7,787 Goodwill (a) 133 Total assets acquired $ 8,100 a. 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 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 Net loss (a) ( 2,018 ) ( 6,458 ) ( 3,210 ) a. As a result of market conditions, the Company temporarily shut down its cementing and acidizing operations beginning in July 2019. F-21 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS b. 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 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. 5. Inventories A summary of the Company's inventories is shown below (in thousands): December 31, 2020 2019 Supplies $ 6,312 $ 9,598 Raw materials 613 746 Work in process 3,478 4,608 Finished goods 1,617 2,531 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 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. 6. Property, Plant and Equipment Property, plant and equipment include the following (in thousands): December 31, 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) 15 - 39 years 48,776 47,859 Vehicles, trucks and trailers 5 - 10 years 111,911 135,724 Coil tubing equipment 4 - 10 years 8,541 29,438 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) 3 - 12 years 18,640 18,880 728,574 794,156 Deposits on equipment and equipment in process of assembly (c) 3,191 6,627 731,765 800,783 Less: accumulated depreciation (d) 480,503 448,011 Total property, plant and equipment, net $ 251,262 $ 352,772 a. 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. b. 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. c. 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. F-22 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS d. Includes accumulated depreciation of $ 5.0 million and $ 3.5 million at December 31, 2020 and 2019, respectively, 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, 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, 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 970 3,477 3,539 Amortization expense 1,014 1,121 8,704 Depreciation, depletion, amortization and accretion $ 95,317 $ 117,033 $ 119,877 7. Impairments 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. As a result, the Company impaired goodwill associated with Stingray Pressure Pumping, SR Energy, Taylor Frac and Cobra Aviation, resulting in a $ 30.5 million impairment charge in 2019. To determine fair value at December 31, 2019, 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. Additionally, during the third quarter of 2019, the Company temporarily shut down its cementing and acidizing operations. As a result, the Company recognized goodwill impairment expense of $ 3.2 million associated with Cementing and Stingray Cementing and Acidizing. The fair value was measured using an income 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 goodwill totaling $ 3.2 million. The fair value was measured using an income approach. F-23 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): December 31, 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 Other property, plant and equipment 437 3,557 307 Intangible assets — 846 1,379 $ 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 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 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 well completion segment. The assumptions used in the impairment evaluation for long-lived assets are inherently uncertain and require management’s judgment. A continued period of low oil and natural gas prices or continued reductions in capital expenditures by our customers would likely have an adverse impact on our utilization and the prices that we receive for our services. 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. F-24 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 8. Goodwill and Intangible Assets Goodwill 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 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 a. See Note 7 for a description of impairment losses recognized. Intangible Assets The Company had the following definite lived intangible assets recorded as of the dates presented below (in thousands): December 31, 2020 2019 Customer relationships $ 1,050 $ 1,050 Trade names 9,063 9,063 Less: accumulated amortization - customer relationships ( 642 ) ( 467 ) Less: accumulated amortization - trade names ( 4,697 ) ( 3,858 ) Intangible assets, net $ 4,774 $ 5,788 Amortization expense for intangible assets was $ 1.0 million, $ 1.1 million and $ 8.7 million for the years ended December 31, 2020, 2019 and 2018, respectively. The Company recognized impairment of intangible assets totaling $ 0.8 million and $ 1.4 million, respectively, for the years ended December 31, 2019 and 2018. See Note 7 for a description of these impairment losses. The original lives of customer relationships is 6 years and as of December 31, 2020 the remaining average useful life was 2.33 years. 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. F-25 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: Amount 2021 $ 1,015 2022 1,015 2023 898 2024 771 2025 151 Thereafter 924 $ 4,774 9. Equity Method Investment On December 21, 2018, Cobra Aviation and Wexford Investment, a related party, formed a joint venture under the name of Brim Acquisitions to acquire all outstanding equity interest in Brim Equipment for a total purchase price of approximately $ 2.0 million. 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. 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 $ 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. F-26 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10. 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): December 31, 2020 2019 Accrued Expenses and Other Current Liabilities State and local taxes payable $ 13,838 15,288 Financed insurance premiums (a) 10,394 6,463 Deferred revenue 8,281 7,244 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) 1,290 — 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) 3,348 — Payroll tax liability 1,977 — Other 492 1,175 Total other long-term liabilities $ 10,435 $ 5,031 a. 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, 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 %. b. 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. F-27 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 11. Debt Long-term debt included the following (in thousands): December 31, 2020 2019 Revolving credit facility $ 78,000 80,000 Aviation note 4,551 — Unamortized debt issuance costs ( 48 ) — Total debt 82,503 80,000 Less: current portion 1,165 — Total long-term debt $ 81,338 $ 80,000 Mammoth Credit Facility On October 19, 2018, Mammoth Inc. and certain of its direct and indirect subsidiaries, as borrowers, entered into an amended and restated revolving credit and security agreement with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders, as amended and restated (the “revolving credit facility”). The revolving credit facility matures on October 19, 2023. Borrowings under the revolving credit facility are secured by the assets of Mammoth Inc., inclusive of the subsidiary companies, and are subject to a borrowing base calculation prepared monthly. On November 5, 2019, the Company entered into a first amendment to the revolving credit facility to amend the interest coverage ratio definition to give accrual treatment to certain cash taxes included in the ratio calculation. 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, 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). 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: • the minimum interest coverage ratio of 3.0 to 1.0 was eliminated; • the maximum leverage coverage ratio of 4.0 to 1.0 was eliminated for the first two fiscal quarters of 2020 and, beginning with the fiscal quarter ended September 30, 2020, changed to 2.5 to 1.0; • beginning with the fiscal quarter ended September 30, 2020, a minimum fixed charge coverage ratio of at least 1.1 to 1.0 was added; and • 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 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 F-28 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS cash flows. 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. 12. Variable Interest Entities 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”). Under the Voting Trust Agreements, Dire Wolf transferred 100 % of its membership interest in Cobra Aviation and Predator Aviation transferred 100 % of its membership in Leopard Aviation LLC (“Leopard') to the respective Voting Trustees in exchange for Voting Trust Certificates. Dire Wolf and Predator Aviation retained the obligation to absorb all expected returns or losses of Cobra Aviation and Leopard. 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 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. Dire Wolf and Predator Aviation entered into the Voting Trust Agreements in order to meet certain registration requirements. Dire Wolf's and Predator Aviation's voting rights are not proportional to their respective obligations to absorb expected returns or losses of Cobra Aviation and Leopard and all of Cobra Aviation's and Leopard's activities are conducted on behalf of Dire Wolf and Predator Aviation, which have disproportionately fewer voting rights; therefore, Cobra Aviation and Leopard meet the criteria of a VIE. Cobra Aviation's and Leopard's operational activities are directed by Dire Wolf's and Predator Aviation's officers and Dire Wolf and Predator Aviation have the option to terminate the Voting Trust Agreements at any time. Therefore, the Company, through Dire Wolf and Predator Aviation, is considered the primary beneficiary of the VIEs and consolidates Cobra Aviation and Leopard at December 31, 2020. F-29 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 13. Selling, General and Administrative Expense Selling, general and administrative (“SG&A”) expense includes of the following (in thousands): Years Ended December 31, 2020 2019 2018 Cash expenses: Compensation and benefits $ 14,876 $ 19,364 $ 42,950 Professional services 19,905 17,128 11,854 Other (a) 8,828 10,300 10,718 Total cash SG&A expense 43,609 46,792 65,522 Non-cash expenses: Bad debt provision (b) 21,958 1,434 ( 14,578 ) Equity based compensation (c) — — 17,487 Stock based compensation 1,618 3,326 4,666 Total non-cash SG&A expense 23,576 4,760 7,575 Total SG&A expense $ 67,185 $ 51,552 $ 73,097 a. Includes travel-related costs, IT expenses, rent, utilities and other general and administrative-related costs. b. 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. As a result, during the year ended December 31, 2018, the Company reversed bad debt expense of $ 16.0 million recognized in 2017. c. Represents compensation expense for non-employee awards, which were issued and are payable by certain affiliates of Wexford (the sponsor level). See Note 17 for additional detail. 14. Income Taxes The components of income tax expense (benefit) attributable to the Company for the year ended December 31, 2020, 2019 and 2018, respectively, are as follows (in thousands): Year Ended December 31, 2020 2019 2018 U.S. current income tax expense $ ( 6,931 ) $ 386 $ 25,656 U.S. deferred income tax (benefit) expense ( 12,330 ) ( 21,761 ) 25,372 Foreign current income tax expense 6,948 30,172 75,381 Foreign deferred income tax (benefit) expense 144 ( 20,878 ) 26,854 Total $ ( 12,169 ) $ ( 12,081 ) $ 153,263 F-30 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation of the statutory federal income tax amount to the recorded expense is as follows (in thousands): Year Ended December 31, 2020 2019 2018 (Loss) income before income taxes $ ( 119,776 ) $ ( 91,125 ) $ 389,228 Statutory income tax rate 21 % 21 % 21 % Expected income tax (benefit) expense ( 25,153 ) ( 19,136 ) 81,738 Change in tax rate ( 161 ) — ( 103 ) Foreign income tax rate differential 2,556 9,387 39,080 Foreign earnings not in reported income 3,252 12,581 46,834 Foreign tax credits ( 7,133 ) ( 26,141 ) ( 89,677 ) Withholding taxes 1,019 3,635 13,930 Goodwill impairment 11,544 6,506 675 Other permanent differences 1,290 1,873 12,370 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. F-31 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Deferred tax liabilities attributable to the Company consisted of the following (in thousands): Year Ended December 31, 2020 2019 Deferred tax assets: Allowance for doubtful accounts $ 1,541 $ 1,189 Lease asset 6,060 11,105 Accrued liabilities 740 950 Net operating loss carryover 613 4,180 Foreign tax credits 80,615 76,060 Other 1,919 1,633 Valuation allowance ( 67,888 ) ( 63,783 ) Deferred tax assets 23,600 31,334 Deferred tax liabilities: Property and equipment $ ( 39,057 ) $ ( 55,180 ) Intangible assets ( 450 ) — Lease liability ( 6,030 ) ( 11,151 ) Other ( 2,804 ) ( 1,876 ) Deferred tax liabilities ( 48,341 ) ( 68,207 ) Net deferred tax liability $ ( 24,741 ) $ ( 36,873 ) Reflected in accompanying balance sheet as: Deferred income tax asset $ — $ — 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. The Company has foreign tax credits carryforwards of $ 80.6 million as of December 31, 2020. These credits have a 10 year carryforward period and begin to expire in 2028. The Company maintains a partial valuation allowance related to U.S. foreign tax credit carryforwards, as it cannot objectively assert that these deferred tax assets are more likely than not to be realized. All available positive and negative evidence was weighed to determine whether a valuation allowance was necessary. The more significant evidential matter is the higher foreign tax rate applied to foreign source income in comparison to the U.S. Federal tax rate of 21%. As a result, the Company’s has foreign tax credits in excess of the corresponding U.S. 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, 2020, the Company had undistributed earnings in its Puerto Rico foreign branch. The distribution of these undistributed earnings is subject to a withholding tax in Puerto Rico and since the Company intends to make these distributions in the future, the withholding tax has been accrued. 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. The Company’s U.S. federal tax returns for tax years 2017 through 2020 remain subject to examination by the tax authorities. The Company's state and local income tax returns for tax years 2016 through 2020 remain subject to examination, with few exceptions, by the respective tax authorities. 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. F-32 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 15. Leases 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 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. Lessor accounting remains substantially unchanged with the exception that no leases entered into after the effective date will be classified as leveraged leases. The Company elected the transition practical expedient package whereby an entity was not required to reassess (i) whether any expired or existing contracts are or contained leases, (ii) the lease classification for any expired or existing leases and (iii) initial direct costs for any existing leases. The adoption of ASC 842 resulted in the recognition of approximately $ 60.0 million of operating lease right-of-use assets and operating lease liabilities on our consolidated balance sheet as of January 1, 2019 and did not materially impact our consolidated statement of comprehensive (loss) income for the year ended December 31, 2019. Lessee Accounting Beginning January 1, 2019, for all leases with a term in excess of 12 months, the Company recognized a lease liability equal to the present value of the lease payments and a right-of-use asset representing its right to use the underlying asset for the lease term. For operating leases, lease expense for lease payments is recognized on a straight-line basis over the lease term, while finance leases include both an operating expense and an interest expense component. For all leases with a term of 12 months or less, the Company elected the practical expedient to not recognize lease assets and liabilities and recognizes lease expense for these short-term leases on a straight-line basis over the lease term. The Company's operating leases are primarily for rail cars, real estate, equipment and vehicles and its finance leases are primarily for machinery and equipment. Generally, the Company does not include renewal or termination options in its assessment of the leases unless extension or termination for certain assets is deemed to be reasonably certain. The accounting for some of the Company's leases requires significant judgment, which includes determining whether a contract contains a lease, determining the incremental borrowing rates to utilize in the net present value calculation of lease payments for lease agreements which do not provide an implicit rate and assessing the likelihood of renewal or termination options. Lease agreements that contain a lease and non-lease component are generally accounted for as a single lease component. The rate implicit in the Company's leases is not readily determinable. Therefore, the Company uses its incremental borrowing rate based on information available at the commencement date of its leases in determining the present value of lease payments. 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. Lease expense consisted of the following for the years ended December 31, 2020 and 2019 (in thousands): Year Ended December 31, 2020 2019 Operating lease expense $ 13,735 $ 21,643 Short-term lease expense 812 682 Finance lease expense: Amortization of right-of-use assets 1,311 1,134 Interest on lease liabilities 203 192 Total lease expense $ 16,061 $ 23,651 F-33 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, 2020 2019 Operating leases: Operating lease right-of-use assets $ 20,179 $ 43,446 Current operating lease liability 8,618 16,432 Long-term operating lease liability 11,377 27,102 Finance leases: Property and equipment, net $ 6,065 $ 5,111 Accrued expenses and other current liabilities 1,499 1,365 Other liabilities 4,618 3,856 Other supplemental information related to leases for the years ended December 31, 2020 and 2019 is as follows (in thousands): Year Ended December 31, 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 13,643 $ 21,375 Operating cash flows from finance leases 203 192 Financing cash flows from finance leases 1,318 1,503 Right-of-use assets obtained in exchange for lease obligations: Operating leases $ ( 10,260 ) $ 5,548 Finance leases 2,431 3,721 Year Ended December 31, 2020 2019 Weighted-average remaining lease term: Operating leases 3.2 years 3.4 years Finance leases 4.2 years 4.1 years Weighted-average discount rate: Operating leases 3.5 % 4.4 % Finance leases 3.5 % 4.3 % Maturities of lease liabilities as of December 31, 2020 are as follows (in thousands): Operating Leases Finance Leases 2021 $ 9,150 $ 1,682 2022 6,056 1,547 2023 3,481 1,547 2024 1,799 774 2025 305 333 Thereafter 419 668 Total lease payments 21,210 6,551 Less: Present value discount 1,215 434 Present value of lease payments $ 19,995 $ 6,117 F-34 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Lessor Accounting Certain of the Company's agreements with its customers for contract land drilling services, aviation services and remote accommodation services contain an operating lease component under ASC 842 because (i) there are identified assets, (ii) the customer obtains substantially all of the economic benefits of the identified assets throughout the period of use and (iii) the customer directs the use of the identified assets throughout the period of use. The Company has elected to apply the practical expedient provided to lessors to combine the lease and non-lease components of a contract where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under ASC 606, Revenue from Contracts with Customers , when the non-lease component is the predominant element of the combined component. The Company's agreements for its contract land drilling services contain a service component in addition to a lease component. The Company has determined the service component is greater than the lease component and therefore, reports revenue for its contract land drilling services under ASC 606. The Company's lease agreements are generally short-term in nature and lease revenue is recognized over time based on a monthly, daily or hourly rate basis. 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 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. 16. Dividends and Earnings (Loss) Per Share Dividends On July 16, 2018, the Company initiated a quarterly dividend policy. As a result of oilfield market conditions and other factors, which include collections from PREPA, the Company's Board of Directors suspended the quarterly cash dividend in the third quarter of 2019. The table below summarizes the dividends paid on the Company's common stock. Per Share Total (in thousands) 2019 Paid on February 14, 2019 $ 0.125 $ 5,609 Paid on May 17, 2019 0.125 5,610 Total cash dividends $ 0.25 $ 11,219 2018 Paid on August 14, 2018 $ 0.125 $ 5,595 Paid on November 15, 2018 0.125 5,606 Total cash dividends $ 0.25 $ 11,201 F-35 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) Basic (loss) earnings per share: Allocation of earnings: Net (loss) income $ ( 107,607 ) $ ( 79,044 ) $ 235,965 Weighted average common shares outstanding 45,644 45,011 44,750 Basic (loss) earnings per share $ ( 2.36 ) $ ( 1.76 ) $ 5.27 Diluted (loss) earnings per share: Allocation of earnings: Net (loss) income $ ( 107,607 ) $ ( 79,044 ) $ 235,965 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 a. 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. 17. Equity Based Compensation Upon formation of certain operating entities by Wexford, Gulfport and Rhino, specified members of management (the “Specified Members”) and certain non-employee members (the “Non-Employee Members”) were granted the right to receive distributions from the operating entities after the contribution member’s unreturned capital balance was recovered (referred to as “Payout” provision). On November 24, 2014, the awards were modified in conjunction with the contribution of the operating entities to Mammoth Inc. These awards were not granted in limited or general partner units. The awards are for interests in the distributable earnings of the members of MEH Sub, Mammoth Inc.’s majority equity holder. On the IPO closing date, the unreturned capital balance of Mammoth Inc.'s majority equity holder was not fully recovered from its sale of common stock in the IPO. As a result, Payout did not occur and no compensation cost was recorded. On June 29, 2018, as part of an underwritten secondary public offering, MEH Sub sold 2,764,400 shares of the Company’s common stock at a purchase price to MEH Sub of $ 38.01 per share. Additionally, the selling stockholders granted the underwriters an option to purchase additional shares of the Company's common stock at the same purchase price. On July 30, 2018, in connection with the partial exercise of this option, MEH Sub sold an additional 266,026 shares of common stock to the underwriters. MEH Sub received the proceeds from this offering. 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 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. Payout for the remaining awards is expected to occur as the contribution member's unreturned capital balance is recovered from additional sales by MEH Sub of its shares of the Company's common stock or from dividend distributions, which is not considered probable until the event occurs. For the Specified Member awards, the unrecognized amount, which represents the fair value of the award as of the modification dates or grant date, was $ 5.6 million. The Company adopted ASU 2018-07 as of January 1, 2019. This ASU aligns the accounting for non-employee share-based compensation with the requirements for employee share-based compensation. The standard required non-employee awards to be measured at fair value as of the date of adoption. 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. F-36 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 18. Stock-Based Compensation The 2016 Plan authorizes the Company's Board of Directors or the compensation committee of the Company's Board of Directors to grant incentive restricted stock, restricted stock unit, stock appreciation rights, stock options and performance awards. There are 4.5 million shares of common stock reserved for issuance under the 2016 Plan. Restricted Stock Units The fair value of restricted stock unit awards was determined based on the fair market value of the Company's common stock on the date of the grant. This value is amortized over the vesting period. Forfeitures are recognized as they occur. 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 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 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. 19. Related Party 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”); Everest Operations Management LLC (“Everest”); Elk City Yard LLC (“Elk City Yard”); Double Barrel Downhole Technologies LLC (“DBDHT”); Caliber Investment Group LLC (“Caliber”); Dunvegan North Oilfield Services ULC (“Dunvegan”); Predator Drilling LLC (“Predator”); T&E Flow Services LLC (“T&E”); and Brim Equipment. F-37 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Following is a summary of related party transactions (in thousands): 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 $ 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 a. 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. See Note 3. b. 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. See Note 3. c. SR Energy provides rental services for Gulfport. d. Aquahawk provides water transfer services for Gulfport pursuant to a master services agreement. e. Cementing performs well cementing services for Gulfport. f. Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements. g. Panther provides directional drilling services for El Toro, an affiliate of Wexford, pursuant to a master service agreement. 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 (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 (a) — 420 — — 76 Cobra and T&E (c) — — 1,247 — — Higher Power and T&E (c) — — 2,960 — — $ — $ 420 $ 4,207 $ — $ 76 $ 3 $ 526 F-38 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS a. Cobra Aviation, ARS and Leopard lease helicopters to Brim Equipment pursuant to aircraft lease and management agreements. b. Caliber, an entity controlled by Wexford, leases office space to Anaconda and Mammoth. c. 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. d. 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. 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. 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. The Company incurred costs of approximately $ 1.0 million related to the secondary public offering during the year ended December 31, 2018. On December 21, 2018, Cobra Aviation acquired all outstanding equity interest in ARS and purchased two commercial helicopters, spare parts, support equipment and aircraft documents from Brim Equipment. Following these transactions, and also on December 21, 2018, Cobra Aviation formed a joint venture with Wexford Investments named Brim Acquisitions to acquire all outstanding equity interests in Brim Equipment. 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. 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. 20. Commitments and Contingencies Minimum Purchase Commitments The Company has entered into agreements with suppliers that contain minimum purchase obligations. Capital Spend Commitments The Company has entered into agreements with suppliers to acquire capital equipment. Aggregate future minimum payments under these agreements at December 31, 2020 are as follows (in thousands): Year ended December 31: Capital Spend Commitments Minimum Purchase Commitments 2021 $ 1,275 $ 698 2022 — 93 2023 — 9 2024 — — 2025 — — 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 The Company has various letters of credit that were issued under the Company's revolving credit facility which is collateralized by substantially all of the assets of the Company. The letters of credit are categorized below (in thousands): F-39 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2020 2019 Bonding program $ 5,000 $ — Environmental remediation 3,694 4,182 Insurance programs 3,890 4,105 Rail car commitments 455 455 Total letters of credit $ 13,039 $ 8,742 Insurance The Company has insurance coverage for physical partial loss to its assets, employer’s liability, automobile liability, commercial general liability, workers’ compensation and insurance for other specific risks. The Company has also elected in some cases to accept a greater amount of risk through increased deductibles on certain insurance policies. As of December 31, 2020 and 2019, the workers' compensation and automobile liability policies required a deductible per occurrence of up to $ 0.3 million and $ 0.1 million, respectively. The Company establishes liabilities for the unpaid deductible portion of claims incurred based on estimates. As of December 31, 2020 and 2019, the workers' compensation and auto liability policies contained an aggregate stop loss of $ 5.4 million. The Company establishes liabilities for the unpaid deductible portion of claims incurred relating to workers’ compensation and auto liability based on estimates. As of December 31, 2020 and 2019, accrued claims were $ 1.9 million and $ 2.9 million, respectively. The Company also has insurance coverage for directors and officers liability. As of December 31, 2020 and 2019, the directors and officers liability policy had a deductible per occurrence of $ 1.0 million and an aggregate deductible of $ 10.0 million. As of December 31, 2020 and 2019, the Company did not have any accrued claims for directors and officers liability. The Company also self-insures its employee health insurance. The Company has coverage on its self-insurance program in the form of a stop loss of $ 0.2 million per participant and an aggregate stop-loss of $ 5.8 million for the calendar year ending December 31, 2020. As of December 31, 2020 and 2019, accrued claims were $ 1.3 million and $ 3.0 million, respectively. These estimates may change in the near term as actual claims continue to develop. Warranty Guarantees Pursuant to certain customer contracts in our infrastructure services segment, the Company warrants equipment and labor performed under the contracts for a specified period following substantial completion of the work. Generally, the warranty is for one year or less. No liabilities were accrued as of December 31, 2020 or 2019 and no expense was recognized during the years ended December 31, 2020, 2019 or 2018 related to warranty claims. However, if warranty claims occur, the Company could be required to repair or replace warrantied items, which in most cases are covered by warranties extended from the manufacturer of the equipment. In the event the manufacturer of equipment failed to perform on a warranty obligation or denied a warranty claim made by the Company, the Company could be required to pay for the cost of the repair or replacement. Bonds In the ordinary course of business, the Company is required to provide bid bonds to certain customers in the infrastructure services segment as part of the bidding process. These bonds provide a guarantee to the customer that the Company, if awarded the project, will perform under the terms of the contract. Bid bonds are typically provided for a percentage of the total contract value. Additionally, the Company may be required to provide performance and payment bonds for contractual commitments related to projects in process. These bonds provide a guarantee to the customer that the Company will perform under the terms of a contract and that the Company will pay subcontractors and vendors. If the Company fails to perform under a contract or to pay subcontractors and vendors, the customer may demand that the surety make payments or provide services under the bond. The Company must reimburse the surety for expenses or outlays it incurs. As of December 31, 2020 and 2019, outstanding performance and payment bonds totaled $ 18.1 million and $ 40.4 million, respectively. The estimated cost to complete projects secured by the performance and payment bonds totaled $ 5.6 million as of December 31, 2020. As of December 31, 2020, outstanding bid bonds totaled $ 1.0 million. The Company did not have any bid bonds outstanding as of December 31, 2019. F-40 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Litigation The Company is routinely involved in state and local tax audits. During 2015, the State of Ohio assessed taxes on the purchase of equipment the Company believes is exempt under state law. The Company appealed the assessment and a hearing was held in 2017. As a result of the hearing, the Company received a decision from the State of Ohio. The Company is appealing the decision and while it is not able to predict the outcome of the appeal, this matter is not expected to have a material adverse effect on the Company's business, financial condition, results of operations or cash flows. On June 19, 2018, Wendco of Puerto Rico Inc. filed a putative class action lawsuit in the Commonwealth of Puerto Rico styled Wendco of Puerto Rico Inc.; Multisystem Restaurant Inc.; Restaurant Operators Inc.; Apple Caribe, Inc.; on their own behalf and in representation of all businesses that conduct business in the Commonwealth of Puerto Rico vs. Mammoth Energy Services Inc.; Cobra Acquisitions LLC; D. Grimm Puerto Rico, LLC, et al. The plaintiffs allege that the defendants caused power outages in Puerto Rico while performing restoration work on Puerto Rico’s electrical network following Hurricanes Irma and Maria in 2017, thereby interrupting commercial activities and causing economic loss. 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. 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. Further, COR3 indicated that it is working to develop a solution that will result in payment of taxes owed to the municipalities without placing an undue burden on entities such as Cobra. The Company continues to work with COR3 to resolve these matters. 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 putative collective and class action complaint in LeJeune v. Mammoth Energy Services, Inc. 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. as a defendant, adding Cobra Acquisitions LLC (“Cobra”) as a defendant, and adding ESPADA Caribbean LLC and two officers of ESPADA—James Jorrie and Jennifer Gay Jorrie—as defendants. The amended complaint alleges that the defendants jointly employed the plaintiff and all similarly situated workers and failed to pay them overtime as required by the Fair Labor Standards Act and Puerto Rico law. The complaint also alleges the following violations of Puerto Rico law: 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. Mr. 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. 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 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 F-41 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. 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. On September 13, 2019, the court consolidated the three lawsuits under the case caption In re Mammoth Energy Services, Inc. Securities Litigation . On November 12, 2019, the plaintiffs filed their first amended complaint against Mammoth Energy Services, Inc., Arty Straehla, and Mark Layton. Pursuant to their first amended complaint, the plaintiffs brought a consolidated putative federal securities class action on behalf of all investors who purchased or otherwise acquired Mammoth Energy Services, Inc. common stock between October 19, 2017, and June 5, 2019, inclusive. 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. 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. In September 2019, four derivative lawsuits were filed, two in the Western District of Oklahoma and two in the District of Delaware, purportedly on behalf of the Company and against its officers and directors. In October 2019, the plaintiffs in the two Oklahoma actions voluntarily dismissed their respective cases, with one plaintiff refiling his action in the District of Delaware. On September 13, 2019, the Delaware court consolidated the three actions under the case caption In re Mammoth Energy Services, Inc. Consolidated Shareholder Litigation. On January 17, 2020, the plaintiffs filed their consolidated amended shareholder derivative complaint on behalf of Nominal Defendant, Mammoth Energy Services, Inc., and against Arty Straehla, Mark Layton, Arthur Amron, Paul V. Heerwagen IV, Marc McCarthy, Jim Palm, Matthew Ross, Arthur Smith, Gulfport Energy Corporation, and Wexford Capital LP. 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. 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 September 10, 2019, the U.S. 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. Two other individuals were also charged in the indictment. The indictment is focused on the interactions between a former FEMA official and the former president of Cobra. Neither the Company nor any of its subsidiaries were charged in the indictment. The Company is continuing to cooperate with the related investigation. Given the uncertainty inherent in the criminal litigation, it is not possible at this time to determine the potential outcome or other potential impacts that the criminal litigation could have on the Company. PREPA has stated in court filings that it may contend the alleged criminal activity affects Cobra's entitlement to payment under its contracts with PREPA. 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 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. On September 12, 2019, AL Global Services, LLC (“Alpha Lobo”) filed a second amended third-party petition against the Company in an action styled Jim Jorrie v. Craig Charles, Julian Calderas, Jr., and AL Global Services, LLC v. Jim Jorrie v. Cobra Acquisitions LLC v. 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 F-42 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. 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. 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. Robert L. Malcom and BHI Energy I Power Services LLC in the 242nd Judicial District, District Court of Hale County, Texas. Cobra alleges Malcom breached his non-compete and non-solicit obligations contained in the purchase and sale agreement in which Cobra purchased Higher Power from Malcom. 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 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. 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. The Company believes these receivables are collectible. However, PREPA is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S. District Court for the District of Puerto Rico. As a result, PREPA's ability to meet its payment obligations 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. 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 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 Gulfport’s 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 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 F-43 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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. 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. 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. The Company is involved in various other legal proceedings in the ordinary course of business. Although the Company cannot predict the outcome of these proceedings, legal matters are subject to inherent uncertainties and there exists the possibility that the ultimate resolution of these matters could have a material impact on the Company's business, financial condition, results of operations or cash flows. Defined contribution plan The Company sponsors a 401(k) defined contribution plan for the benefit of substantially all employees at their date of hire. The plan allows eligible employees to contribute up to 92 % of their annual compensation, not to exceed annual limits established by the federal government. 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, 2020, 2019 and 2018, the Company paid $ 2.0 million, $ 3.3 million and $ 5.6 million, respectively, in contributions to the plan. 21. Reporting Segments and Geographic Areas Reporting 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. The Company's Chief Executive Officer and Chief Financial Officer comprise the Company's Chief Operating Decision Maker function (“CODM”). Segment information is prepared on the same basis that the CODM manages the segments, evaluates the segment financial statements, and makes key operating and resource utilization decisions. 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. 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. F-44 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 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. 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. None of these operating segments met the quantitative thresholds of a reporting segment and did not meet the aggregation criteria set forth in ASC 280 Segment Reporting for the year ended December 31, 2020. Therefore, results for these operating segments are included in the column labeled “All Other” in the tables below. Additionally, assets for corporate activities, which primarily include cash and cash equivalents, inter-segment accounts receivable, prepaid insurance and certain property and equipment, are included in the All Other column. Although Mammoth LLC, which holds these corporate assets, meets one of the quantitative thresholds of a reporting segment, it does not engage in business activities from which it may earn revenues and its results are not regularly reviewed by the Company's CODM when making key operating and resource utilization decisions. Therefore, the Company does not include it as a reportable segment. Sales from one segment to another are generally priced at estimated equivalent commercial selling prices. Total revenue and total cost of revenue amounts included in the Eliminations column in the following tables include inter-segment transactions conducted between segments. Receivables due for sales from one segment to another and for corporate allocations to each segment are included in the Eliminations column for total assets in the following tables. All transactions conducted between segments are eliminated in consolidation. Transactions conducted by companies within the same reporting segment are eliminated within each reporting segment. The following tables set forth certain financial information with respect to the Company’s reportable segments (in thousands): 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 Intersegment revenues — 1,124 95 39 2,716 ( 3,974 ) — Total revenue 155,241 88,325 34,360 7,785 31,339 ( 3,974 ) 313,076 Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 122,046 45,647 25,955 10,757 27,616 — 232,021 Intersegment cost of revenues 323 1,836 — 152 1,663 ( 3,974 ) — Total cost of revenue 122,369 47,483 25,955 10,909 29,279 ( 3,974 ) 232,021 Selling, general and administrative 26,058 23,039 7,807 3,149 7,132 — 67,185 Depreciation, depletion, amortization and accretion 29,373 30,411 9,771 10,039 15,723 — 95,317 Impairment of goodwill — 53,406 — — 1,567 — 54,973 Impairment of other long-lived assets — 4,203 — 326 8,368 — 12,897 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 (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 ) Total expenditures for property, plant and equipment $ 258 $ 4,358 $ 1,073 $ 432 $ 716 $ — $ 6,837 As of December 31, 2020: 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 F-45 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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 Intersegment revenue 2,573 1,851 29,796 236 15,232 ( 49,688 ) — Total revenue 213,264 243,802 97,063 31,964 88,607 ( 49,688 ) 625,012 Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 160,449 174,816 87,637 35,925 84,961 — 543,788 Intersegment cost of revenues 12,820 31,727 15 1,028 4,158 ( 49,748 ) — Total cost of revenue 173,269 206,543 87,652 36,953 89,119 ( 49,748 ) 543,788 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 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 (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 ) Total expenditures for property, plant and equipment $ 3,456 $ 14,703 $ 2,877 $ 3,156 $ 11,569 $ — $ 35,761 As of December 31, 2019: Intangible assets, net $ 1,296 $ 3,371 $ — $ — $ 1,121 $ — $ 5,788 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 Intersegment revenues 3,974 898 68,969 95 43,741 ( 117,677 ) — Total revenue 1,085,977 357,252 175,922 66,332 122,278 ( 117,677 ) 1,690,084 Cost of revenue, exclusive of depreciation, depletion, amortization and accretion 581,692 205,892 144,118 60,212 101,890 — 1,093,804 Intersegment cost of revenues 40,601 71,801 74 661 4,513 ( 117,650 ) — Total cost of revenue 622,293 277,693 144,192 60,873 106,403 ( 117,650 ) 1,093,804 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 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 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 Total expenditures for property, plant and equipment 99,006 33,774 17,935 8,698 32,530 — 191,943 As of December 31, 2018: 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 a. Included i n well completion se lling, general and administrative expense is non-cash equity based compensation of $ 17.5 million. F-46 MAMMOTH ENERGY SERVICES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Geographic Areas The following table presents consolidated revenues by country based on sales destination of the products or services (in thousands): 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 22. Quarterly Financial Data (unaudited) Three Months Ended 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 Net income (loss) 28,333 ( 10,889 ) ( 35,709 ) ( 60,779 ) ( 79,044 ) Net income (loss) per share (basic) $ 0.63 $ ( 0.24 ) $ ( 0.79 ) $ ( 1.35 ) $ ( 1.76 ) Net income (loss) per share (diluted) $ 0.63 $ ( 0.24 ) $ ( 0.79 ) $ ( 1.35 ) $ ( 1.76 ) F-47