What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-02-24 compared with 2022-03-04 · 313 added, 477 removed, 1317 unchanged (37% of the section changed)

1 unchanged sentence

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.

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.

12 unchanged sentences

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Grant Thornton LLP, the independent registered public accounting firm that audited the consolidated financial statements of the Company included in this Annual Report on Form 10-K, has issued their report on the effectiveness of the Company ’ s internal control over financial reporting at December 31, 2021.

The report, which expresses an unqualified opinion on the effectiveness of the Company ’ s internal control over financial reporting at December 31, 2021, is included in this Item under the heading "Report of Independent Registered Public Accounting Firm".

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Mammoth Energy Services, Inc.

Opinion on internal control over financial reporting

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

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2021, and our report dated March 4, 2022 expressed an unqualified opinion on those financial statements.

Basis for opinion

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

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

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

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

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

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

Definition and limitations of internal control over financial reporting

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

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

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

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

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

/s/ GRANT THORNTON LLP

Oklahoma City, Oklahoma

March 4, 2022

Other Information

On February 28, 2022, we and certain of our direct and indirect subsidiaries, as borrowers, entered into the Fourth Amendment to our amended and restated revolving credit facility, as amended, with the lenders party thereto and PNC Bank, National Association, as a lender and as administrative agent for the lenders.

The Fourth Amendment to our revolving credit facility, among other things, (i) amended our financial covenants as outlined below, (ii) provided for a conditional increase of the applicable interest margin, (iii) permitted certain sale-leaseback transactions, (iv) provided for a reduction in the maximum revolving advance amount in an amount equal to 50% of the PREPA claims proceeds, subject to a floor equal to the sum of eligible billed and unbilled accounts receivables, and (v) classified the payments pursuant to our settlement agreement with MasTec Renewables Puerto Rico, LLC as restricted payments and requires $20.0 million of availability both before and after making such payments.

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

• the leverage ratio was eliminated;

• the fixed charge coverage ratio was reduced to 0.85 to 1.0 for the six months ended June 30, 2022 and increases to 1.1 to 1.0 for the periods thereafter;

• a minimum adjusted EBITDA covenant of $4.7 million, excluding interest the accounts receivable from PREPA, for the five months ending May 31, 2022 was added;

• the minimum excess availability covenant was reduced to $7.5 million through the earlier of (i) March 31, 2022 or (ii) the date on which proceeds of permitted sale-leaseback transactions are received, after which the minimum excess availability covenant will increase to $10.0 million.

The Fourth Amendment also permanently waived compliance by the borrowers with the leverage ratio and fixed charge coverage ratio covenants in our revolving credit facility for the fiscal quarters ended September 30, 2021 and December 31, 2021, respectively, ending the limited covenant waiver period contemplated under the third amendment to our revolving credit facility.

Not applicable.

Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

65 unchanged sentences

001-37917), filed with the SEC on January 31, 2018).

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).

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).

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).

Amendment No.

7 unchanged sentences

001-37917), filed with the SEC on November 12, 2019).

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).

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).

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).

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).

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

6 unchanged sentences

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

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

N902TX Helicopter Lease Agreement, dated as of January 10, 2020 and effective as of January 1, 2020, by and between Air Rescu e Systems Corporation 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).

1 unchanged sentence

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

Third Amendment to Amended and Restated Credit Agreement, dated as of November 3, 2021, by and among the Company, certain of its subsidiaries, PNC Bank, National Association, as a lender and administrative agent for the lender, and other lenders party thereto.

Fourth Amendment to Amended and Restated Credit Agreement, dated as of February 28 , 2022, by and among the Company, certain of its subsidiaries, PNC Bank, National Association, as a lender and administrative agent for the lender, and other lenders party thereto.

First Amendment to the Mammoth Energy Services, Inc.

2016 Equity Incentive Plan (incorporated by reference to Appendix A to the Company's Definitive Proxy Statement on Schedule 14A, filed with the SEC on June 10, 202 0 ).

Third Amendment to Amended and Restated Credit Agreement, dated as of November 3, 2021 (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 5, 2021).

Fourth Amendment to Amended and Restated Credit Agreement, dated as of February 28, 2022 (incor porated by reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K (File No.

001-37917), filed with the SEC on March 4, 2022).

List of Significant Subsidiaries of the Company.

7 unchanged sentences

Technical Report Summary for Piranha and Taylor Mines prepared by John T.

Boyd Company.

Boyd Company (incorporated by reference to Exhibit 96.1 to the Company's Annual Report on Form 10-K (File No.

001-37917) filed with the SEC on March 4, 2022) .

101.INS* XBRL Instance Document.

11 unchanged sentences

MAMMOTH ENERGY SERVICES, INC.

March 4, 2022 By:

February 24, 2023 By:

/s/ Mark Layton

2 unchanged sentences

Signature Title Date

/s/ Arty Straehla Chief Executive Officer (principal executive officer) and Director March 4, 2022

/s/ Arty Straehla Chief Executive Officer (principal executive officer) and Director February 24, 2023

Arty Straehla

/s/ Mark Layton Chief Financial Officer (principal financial and accounting officer) March 4, 2022

/s/ Arthur Amron Director (Chairman of the Board) March 4, 2022

Palm Director March 4, 2022

/s/ Paul Jacobi Director March 4, 2022

/s/ Arthur Smith Director March 4, 2022

/s/ Corey Booker Director March 4, 2022

/s/ Mark Layton Chief Financial Officer (principal financial and accounting officer) February 24, 2023

/s/ Arthur Amron Director (Chairman of the Board) February 24, 2023

Palm Director February 24, 2023

/s/ Paul Jacobi Director February 24, 2023

/s/ Arthur Smith Director February 24, 2023

/s/ Corey Booker Director February 24, 2023

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

5 unchanged sentences

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 4, 2022 expressed an unqualified opinion.

Basis for opinion

1 unchanged sentence

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

16 unchanged sentences

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

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 indictment was 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, which concluded in December 2022.

The Company is cooperating with the U.S.

1 unchanged sentence

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.

However, adverse developments in the 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 Contracts as a critical audit matter.

2 unchanged sentences

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 obtained an understanding and evaluated the design and implementation 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 both 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.

◦ We corroborated the facts and circumstances by obtaining and reviewing the relevant legal documents and correspondence with PREPA officials and others involved in the oversight of PREPA.

◦ We inquired of management to gain an understanding of the relevant facts and circumstances related to the current status of FEMA’s review of invoices submitted by PREPA for reimbursement, PREPA’s appeals with FEMA on any amounts initially determined to be ineligible for federal assistance, the status of PREPA’s bankruptcy proceedings and the status of the related litigation.

◦ We corroborated the facts and circumstances by obtaining and reviewing the relevant legal documents and correspondence with officials of PREPA, FEMA and the Federal Oversight and Management Board for Puerto Rico, which is involved in the oversight of PREPA.

◦ 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.

◦ Through such procedures, we assessed the reasonableness of management’s conclusions regarding the collectability of the accounts receivables from PREPA and whether a loss is probable or reasonably possible.

• We assessed the sufficiency of management’s disclosures related to the PREPA receivable and related litigation, including that PREPA’s ability to meet its payment obligations is largely dependent upon funding from FEMA and that the receivable may not be collectible if PREPA (i) does not have or does not obtain the funds necessary to satisfy its obligations 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.

/s/ GRANT THORNTON LLP

1 unchanged sentence

Oklahoma City, Oklahoma

March 4, 2022

February 24, 2023

MAMMOTH ENERGY SERVICES, INC.

35 unchanged sentences

Additional paid in capital 539,138 538,221

Retained earnings (deficit) ( 72,535 ) 28,895

Accumulated deficit ( 73,154 ) ( 72,535 )

Accumulated other comprehensive loss ( 3,841 ) ( 2,931 )

16 unchanged sentences

Services cost of revenue - related parties (exclusive of depreciation, depletion, amortization and accretion of $ 0 , $ 0 and $ 0 , respectively, for 2022, 2021, and 2020)

531 418 4,770

Product cost of revenue (exclusive of depreciation, depletion, amortization and accretion of $ 8,725 , $ 8,993 and $ 9,758 , respectively, for 2022, 2021, and 2020)

3 unchanged sentences

Depreciation, depletion, amortization and accretion 64,271 78,475 95,317

Gains on disposal of assets, net ( 3,908 ) ( 5,147 ) ( 638 )

Impairment of goodwill — 891 54,973

4 unchanged sentences

Interest expense, net ( 11,506 ) ( 6,406 ) ( 5,397 )

Other, net 10,816 33,048 42,216

Other, net - related parties ( 515 ) 1,890 —

Total other income 3,895 29,541 37,258

Loss before income taxes ( 124,293 ) ( 119,776 ) ( 91,125 )

Benefit for income taxes ( 22,863 ) ( 12,169 ) ( 12,081 )

Other income, net 40,912 5,669 32,410

Other (expense) income, net - related parties — ( 515 ) 1,890

Total other income (expense) 29,406 ( 1,252 ) 28,903

Income (loss) before income taxes 12,988 ( 124,293 ) ( 119,776 )

Provision (benefit) for income taxes 13,607 ( 22,863 ) ( 12,169 )

Net loss $ ( 619 ) $ ( 101,430 ) $ ( 107,607 )

OTHER COMPREHENSIVE INCOME (LOSS)

OTHER COMPREHENSIVE LOSS

Foreign currency translation adjustment, net of tax of $ 0 , ($ 36 ) and ($ 54 ), respectively, for 2022, 2021, and 2020

( 910 ) 134 241

Comprehensive loss $ ( 1,529 ) $ ( 101,296 ) $ ( 107,366 )

13 unchanged sentences

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

Cash dividends declared ($ 0.25 per share)

— — ( 11,219 ) — — ( 11,219 )

Other comprehensive income — — — — 241 241

6 unchanged sentences

Net loss — — ( 619 ) — — ( 619 )

Other comprehensive income — — — — 134 134

Other comprehensive loss — — — — ( 910 ) ( 910 )

Balance at December 31, 2022 47,312 $ 473 $ ( 73,154 ) $ 539,138 $ ( 3,841 ) $ 462,616

6 unchanged sentences

Net loss $ ( 619 ) $ ( 101,430 ) $ ( 107,607 )

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

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

Stock based compensation 923 1,191 1,952

3 unchanged sentences

Bad debt expense (Note 2) 3,389 41,662 21,958

(Gain) loss on disposal of property and equipment ( 5,435 ) ( 1,379 ) 55

Gains on disposal of assets, net ( 3,908 ) ( 5,147 ) ( 683 )

Gains from sales of equipment damaged or lost down-hole ( 604 ) ( 288 ) ( 696 )

Impairment of goodwill — 891 54,973

Impairment of other long-lived assets — 1,212 12,897

Inventory obsolescence — — 1,349

Deferred income taxes 7,700 ( 32,005 ) ( 12,186 )

8 unchanged sentences

Income taxes payable 5,800 8,658 648

Net cash (used in) provided by operating activities ( 18,865 ) 6,967 ( 95,318 )

Net cash provided by (used in) operating activities 15,266 ( 18,865 ) 6,967

Cash flows from investing activities:

4 unchanged sentences

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

Net cash provided by (used in) investing activities 5,507 ( 2,295 ) ( 33,224 )

Net cash (used in) provided by investing activities ( 2,124 ) 5,507 ( 2,295 )

Cash flows from financing activities:

3 unchanged sentences

Payments on sale-leaseback transaction ( 4,429 ) ( 2,951 ) ( 268 )

Dividends paid — — ( 11,219 )

Principal payments on financing leases and equipment financing notes ( 4,306 ) ( 2,283 ) ( 1,966 )

Debt issuance costs — — ( 1,051 )

Net cash provided by financing activities 8,428 4,266 66,702

Net cash (used in) provided by financing activities ( 5,601 ) 8,428 4,266

Effect of foreign exchange rate on cash ( 158 ) 7 12

Net (decrease) increase in cash and cash equivalents ( 4,923 ) 8,950 ( 61,753 )

Net increase (decrease) in cash and cash equivalents 7,383 ( 4,923 ) 8,950

Cash and cash equivalents at beginning of period 9,899 14,822 5,872

Cash and cash equivalents at end of period $ 17,282 $ 9,899 $ 14,822

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

MAMMOTH ENERGY SERVICES, INC.

18 unchanged sentences

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, equipment rentals, crude oil hauling, remote accommodation services and equipment manufacturing.

Additionally, the Company provides aviation services, equipment rentals, remote accommodation services and equipment manufacturing.

The Company was incorporated in Delaware in June 2016.

44 unchanged sentences

and Falcon Fiber Solutions LLC (“Falcon”), formed March 3, 2021.

The Company’s infrastructure services include engineering, design, 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.

1 unchanged sentence

The Company also provides other services, including aviation, equipment rentals, remote accommodations and equipment manufacturing.

Substantially all of the Company’s operations are in North America.

During the periods presented in this report, the Company provided its infrastructure services primarily in the northeastern, southwestern, midwestern and western portions of the United States and in Puerto Rico.

The Company’s infrastructure business depends on infrastructure

The Company's operations are concentrated in North America.

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 adverse effect on the Company’s results of operations and financial condition.

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

During the periods presented in this report, the Company provided its infrastructure services primarily in the northeastern, southwestern, midwestern and western portions of the United States.

The Company’s infrastructure business depends on infrastructure spending on maintenance, upgrade, expansion and repair and restoration.

Summary of Significant Accounting Policies

11 unchanged sentences

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

The Company adopted a new accounting policy related to the classification of certain legal expenses.

For matters related to ongoing operations, the Company continues to present legal expense as selling, general and administrative.

For matters determined to be unrelated to ongoing operations, the Company classifies the legal expenses according to the nature of the underlying matter.

The Company believes that this new accounting policy will more accurately present legal expenses on its consolidated statement of comprehensive loss.

The adoption of this policy resulted in the recognition of approximately $ 5.4 million of legal expenses related to a certain legal settlement, which is included in Other, net on the consolidated statement of comprehensive loss for the year ended December 31, 2021.

See Note 19 for additional information.

Previously, the Company included gains and losses on disposal of assets within other income (expense), net on the consolidated statement of comprehensive loss.

The Company now presents gains and losses on disposal of assets as a separate line titled “Gains on disposal of assets, net”.

Cash and Cash Equivalents and Short-Term Investment

1 unchanged sentence

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, 2021, we had $ 1.5 million, in Canadian dollars, of cash in Canadian accounts.

At December 31, 2022, the Company had $ 3.4 million, in Canadian dollars, of cash in Canadian accounts.

Cash balances from time to time may exceed the 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.

The Company’s short-term investment at December 31, 2021 consisted of a certificate of deposit with a maturity over 90 days.

MAMMOTH ENERGY SERVICES, INC.

6 unchanged sentences

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, net on the consolidated statement of comprehensive loss when chargeable and collectability is reasonably assured.

Interest on delinquent trade accounts receivable is recognized in other income, net on the consolidated statement of comprehensive loss when chargeable and collectability is reasonably assured.

During the period October 2017 through March 2019, 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, 2022, 2021 and 2020, the Company charged interest on delinquent trade accounts receivable pursuant to the terms of its agreements with PREPA totaling $ 41.3 million, $ 36.6 million and $ 32.2 million, respectively.

These amounts are included in other, net on the consolidated statement of comprehensive loss.

Included in “accounts receivable, net” on the condensed consolidated balance sheets as of December 31, 2021 and 2020 were interest charges of $ 110.8 million and $ 74.3 million, respectively.

These amounts are included in other income, net on the consolidated statement of comprehensive loss.

Included in “accounts receivable, net” on the consolidated balance sheets as of December 31, 2022 and 2021 were interest charges of $ 152.0 million and $ 110.8 million, respectively.

Allowance for Doubtful Accounts

10 unchanged sentences

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 )

2 unchanged sentences

Additions charged to bad debt expense 41,873

Additions charged to revenue 27,071

Additions charged to other selling, general and administrative expense 273

Additions charged to other, net - related parties 515

Additions charged to other income (expense), net 1,474

Recoveries of receivables previously charged to bad debt expense ( 211 )

2 unchanged sentences

Additions charged to bad debt expense 3,550

Additions charged to revenue 27,071

Additions charged to other selling, general and administrative expense 273

Additions charged to other income (expense), net - related parties 515

Additions charged to other income (expense), net 1,474

Recoveries of receivables previously charged to bad debt expense ( 161 )

3 unchanged sentences

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

Additionally, during the year ended December 31, 2021, the Company recorded additions to allowance for doubtful accounts of $ 0.3 million related to insurance claim receivables for its directors and officers liability policy.

Also, during the year ended December 31, 2021, the Company recorded additions to allowance for doubtful accounts of $ 0.3 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.

1 unchanged sentence

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

See Notes 3 and 19 for additional information.

Following is a roll forward of the allowance for doubtful accounts specifically related to Gulfport (in thousands):

1 unchanged sentence

Additions charged to bad debt expense 41,196

Additions charged to other selling, general and administrative expense 1,759

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

Balance, December 31, 2020 22,581

Additions charged to bad debt expense 41,196

Additions charged to revenue 27,070

2 unchanged sentences

Balance, December 31, 2021 11,714

The Company had net accounts receivable due from Gulfport totaling $ 0.1 million as of December 31, 2021, which is included in “accounts receivable, net” on the consolidated balance sheets.

See Notes 3 and 19 for additional information.

Recoveries of receivables previously charged to bad debt expense ( 147 )

Deductions for uncollectible receivables written off ( 11,567 )

Balance, December 31, 2022 $ —

As of December 31, 2022 and 2021, PREPA owed the Company $ 379.0 million and $ 337.8 million, respectively, which includes interest charged on delinquent balances.

PREPA is currently subject to bankruptcy proceedings, which were filed

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As of December 31, 2021 and 2020, PREPA owed the Company $ 337.8 million and $ 301.2 million, respectively, which includes interest charged on delinquent balances.

PREPA is currently subject to bankruptcy proceedings, which were filed in July 2017 and are currently pending in the U.S.

in July 2017 and are currently pending in the U.S.

District Court for the District of Puerto Rico.

12 unchanged sentences

On July 23, 2021, with the aid of Mammoth, PREPA filed an appeal of the entire $ 47 million that FEMA de-obligated in the May 26, 2021 Determination Memorandum.

The appeal is currently pending.

FEMA approved the appeal in part and denied the appeal in part.

FEMA found that staffing costs of $ 24.4 million are eligible for funding.

On August 4, 2021, the Court denied Cobra’s April 6, 2021 motion to lift the stay order, extended the stay of our motion seeking recovery of amounts owed to Cobra and directed the parties to file an additional joint status report, which was filed on January 22, 2022.

On January 26, 2022, the Court extended the stay and directed the parties to file a further status report by July 25, 2022.

On June 7, 2022, Cobra filed a motion to lift the stay order.

On June 29, 2022 the Court denied Cobra’s motion and extended the stay to January 2023.

On November 21, 2022, FEMA issued a Determination Memorandum related to the 100 % federal funded portion of the second contract between Cobra and PREPA in which FEMA concluded that approximately $ 5.6 million in costs were not authorized costs under the contract.

On December 21, 2022, FEMA issued a Determination Memorandum related to the 90 % federal cost share portion of the second contract between Cobra and PREPA in which FEMA concluded that approximately $ 68.1 million in costs were not authorized costs under the contract.

PREPA filed a first-level administrative appeal of the November 21, 2022 Determination Memorandum and has indicated that they will review the December 21, 2022 Determination Memorandums and, to the extent they feel plausible, file a first-level administrative appeal of the unauthorized amounts.

On January 7, 2023, Cobra and PREPA filed a joint status report with the Court, in which PREPA requested that the Court continue the stay through July 31, 2023 and Cobra requested that the stay be lifted.

On January 18, 2023, the Court entered an order extending the stay and directing the parties to file a further status report addressing (i) the status of any administrative appeals in connection with the November and December determination memorandums regarding the second contract, (ii) the status of the criminal case against the former Cobra president and the FEMA official that concluded in December 2022, and (iii) a summary of the outstanding and unpaid amounts arising from the first and second contracts and whether PREPA disputes Cobra’s entitlement to these amounts with the Court by July 31, 2023.

On January 20, 2023, Cobra submitted a certified claim for approximately $ 379 million to FEMA pursuant to the federal Contract Disputes Act.

On February 1, 2023, FEMA notified Cobra that it had reviewed the claim and determined that no contract, expressed or implied, exists between FEMA and Cobra.

Therefore, no final decision will be issued in response to Cobra’s claim.

Cobra has 90 days from the February 1, 2023 decision to file a notice of appeal.

The Company believes all amounts charged to PREPA, including interest charged on delinquent accounts receivable, were in accordance with the terms of the contracts.

Further, there have been multiple reviews prepared by or on behalf of FEMA that have concluded that the amounts Cobra charged PREPA were reasonable, that PREPA adhered to Puerto Rican legal statutes regarding emergency situations, and that PREPA engaged in a reasonable procurement process.

As noted above, in May 2021 FEMA raised two contract compliance issues and concluded that $ 47 million in costs were not eligible under the contract.

PREPA, however, has filed an appeal of the entire $ 47 million, which is currently pending.

Further, there have been multiple reviews prepared by or on behalf of FEMA, including the determination memorandums mentioned above, that have concluded that the amounts Cobra charged PREPA were reasonable, that PREPA adhered to Puerto Rican legal statutes regarding emergency situations, and that PREPA engaged in a reasonable procurement process.

The Company believes these receivables are collectible and for the reasons previously described as well as other factors, no allowance was deemed necessary at December 31, 2022 or 2021.

However, 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.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

5 unchanged sentences

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 and totaled $ 0.4 million and $ 1.6 million for the years ended December 31, 2020 and 2019, respectively.

We did no t recognize any amortization of coil strings for the year ended December 31, 2021.

See Note 4 for additional disclosure related to inventory.

15 unchanged sentences

The impact of revisions to reserve estimates is recognized on a prospective basis.

Long-Lived Assets

Impairment of 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.

9 unchanged sentences

Other non-current assets primarily consist of deferred financing costs on our credit facility (see Note 10), sales tax receivables and our equity method investment (see Note 8).

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.

Investments are evaluated for impairment and a charge to earnings is recognized when any identified impairment is determined to be other than temporary.

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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

14 unchanged sentences

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 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 debt.

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

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

Revenue Recognition

1 unchanged sentence

The Company had $ 21.1 million and $ 22.0 million, respectively, of unbilled revenue included in accounts receivable, net in the consolidated balance sheets at December 31, 2022 and 2021.

The Company had a nominal amount and $ 1.5 million, respectively, of unbilled revenue included in receivables from related parties, net in the consolidated balance sheets at December 31, 2021 and 2020.

The Company had $ 7.5 million and $ 3.2 million, respectively, of deferred revenue included in accrued expenses and other current liabilities in the consolidated balance sheets at December 31, 2022 and 2021.

5 unchanged sentences

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”).

2016 Incentive Plan, as amended (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.

14 unchanged sentences

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.

The Company recorded an unrecognized tax benefit of $ 1.0 million during the year ended December 31, 2021 related to the 2020 tax year returns in Puerto Rico.

No uncertain tax positions existed at December 31, 2020.

It is the Company’s policy to recognize interest and applicable penalties related to uncertain tax positions in income tax expense.

The Company has recorded interest and penalty payable of $ 2.7 million and $ 1.0 million at December 31, 2022 and 2021, respectively, related to the 2020 and 2021 tax year returns in Puerto Rico.

It is the Company’s policy to recognize interest and applicable penalties in income tax expense.

Litigation and Contingencies

35 unchanged sentences

— % 7 % 16 % — % — %

Customer D (d)

— % 3 % 15 % — % — %

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.

Customer B was a related-party customer until June 29, 2021.

Revenues and the related accounts receivable balances earned from Customer A were derived from the Company’s well completion services segment.

Customer B is a third-party customer.

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

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

Customer C was a related-party customer until June 29, 2021.

Revenues earned from this customer prior to June 29, 2021 are included in services revenue - related parties and product revenue - related parties on the consolidated statements of comprehensive loss.

The related accounts receivable are included in accounts receivable, net on the consolidated balance sheet at December 31, 2021 and receivables due from related parties, net at December 31, 2020.

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 included receivables due for interest charged on delinquent accounts receivable.

Customer C is a third-party customer.

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

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 14 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 16) 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.

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

The related accounts receivable are included in accounts receivable, net on the consolidated balance sheet at December 31, 2021.

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

Accounts receivable for Customer C also included receivables due for interest charged on delinquent accounts receivable.

Customer D is a third-party customer.

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

The Company’s primary revenue streams include well completion services, infrastructure services, natural sand proppant services, drilling services and other services, which includes coil tubing, pressure control, equipment rentals, full service transportation, crude oil hauling, remote accommodations and equipment manufacturing.

See Note 20 for the Company’s revenue disaggregated by type.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Certain of the Company’s customer contracts include provisions entitling the Company to a termination penalty when the customer invokes its contractual right to terminate prior to the contract’s nominal end date.

3 unchanged sentences

As of the modification date, the Company updates its estimate of the transaction price using the expected value method, subject to constraints, and recognizes the amount over the remaining performance period.

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

13 unchanged sentences

On March 22, 2021, Gulfport listed the Stingray Pressure Pumping contract on its master rejection schedule filed with the bankruptcy court.

The Company determined that these factors changed the scope of the contract, accelerated the duration of, and otherwise changed the rights and obligations of each party to the contract.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

determined that these factors changed the scope of the contract, accelerated the duration of, and otherwise changed the rights and obligations of each party to the contract.

As a result, the Company accounted for this as a contract modification during the three months ended March 31, 2021.

5 unchanged sentences

On June 29, 2021, pursuant to the terms of its plan of reorganization, all of the Company’s shares that Gulfport owned were transferred to a trust for the benefit of certain of Gulfport’s creditors.

The revenue recognized related to this agreement is included in “services revenue - related parties” in the accompanying consolidated statement of comprehensive loss and the related accounts receivable is included in “receivables due from related parties” as of December 31, 2020.

The revenue recognized related to this agreement is included in “services revenue - related parties” in the accompanying consolidated statement of comprehensive loss.

See Notes 12 and 19 below.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Natural Sand Proppant Services

7 unchanged sentences

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, 2021 and 2020, the Company had deferred revenue totaling $ 3.0 million and $ 7.9 million, respectively, related to shortfall payments.

As of December 31, 2021, the Company had deferred revenue totaling $ 3.0 million, respectively, related to shortfall payments.

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

The Company did not have any deferred revenue related to shortfall payments at December 31, 2022.

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.

1 unchanged sentence

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.

The Company has elected to account

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

8 unchanged sentences

As a result of this settlement agreement, Muskie recognized bad debt expense of $ 0.2 million during the third quarter of 2021.

As of December 31, 2021, Muskie had net accounts receivable due from Gulfport totaling $ 0.1 million, which includes a nominal amount of interest on delinquent accounts receivable.

Gulfport was a related party until June 29, 2021.

The revenue recognized related to this agreement is included in “product revenue - related parties” in the accompanying consolidated statement of comprehensive loss and the related accounts receivable is included in “accounts receivable, net” in the consolidated balance sheets as of December 31, 2021 and “receivables due from related parties” as of December 31, 2020.

See Notes 12 and 19 below.

3 unchanged sentences

Performance obligations are satisfied over time as the work progresses based on the measure of output.

Mobilization revenue and costs were

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recognized over the days of actual drilling.

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 and equipment manufacturing, 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, its coil tubing, pressure control and full service transportation operations beginning in July 2020 and its crude oil hauling operations beginning in July 2021.

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

As a result of market conditions, the Company temporarily shut down its coil tubing, pressure control and full service transportation operations beginning in July 2020 and its crude oil hauling operations beginning in July 2021.

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

4 unchanged sentences

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.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Contract Balances

4 unchanged sentences

Increase for deferral of customer prepayments 648

Deduction of shortfall payments due to contract renegotiations ( 1,350 )

Balance, December 31, 2020 8,281

4 unchanged sentences

Deduction for recognition of revenue ( 3,207 )

Increase for deferral of shortfall payments 7,023

Deduction for rebate credit recognized ( 140 )

Increase for deferral of customer prepayments 7,647

Balance, December 31, 2022 $ 7,550

The Company did no t have any contract assets as of December 31, 2021, December 31, 2020 or December 31, 2019.

The Company did not have any contract assets as of December 31, 2022, December 31, 2021 or December 31, 2020.

Performance Obligations

1 unchanged sentence

As of December 31, 2022, the Company had unsatisfied performance obligations totaling $ 12.8 million, which will be recognized over the next 21 months.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Inventories consist of raw sand and processed sand available for sale, chemicals and other products sold as a bi-product of completion and production operations and supplies used in performing services.

7 unchanged sentences

Total inventory $ 8,883 $ 8,366

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property, Plant and Equipment

32 unchanged sentences

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, 2021, 2020 and 2019, proceeds from the sale of equipment damaged or lost down-hole were $ 0.3 million, $ 0.7 million, and a nominal amount, respectively, and gain on sales of equipment damaged or lost down-hole were $ 0.3 million, $ 0.7 million, and a nominal amount, 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.

For the years ended December 31, 2021, 2020 and 2019, proceeds

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

from the sale of equipment were $ 11.2 million, $ 6.1 million and $ 3.2 million, respectively, and gains (losses) from the sale or disposal of equipment were $ 5.1 million, $ 0.7 million and ($ 0.1 ) million, respectively.

For the years ended December 31, 2022, 2021 and 2020, proceeds from the sale of equipment damaged or lost down-hole were $ 0.8 million, $ 0.3 million, and $ 0.7 million, respectively, and gains on sales of equipment damaged or lost down-hole were $ 0.6 million, $ 0.3 million, and $ 0.7 million, respectively.

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

For the years ended December 31, 2022, 2021 and 2020, proceeds from the sale of equipment were $ 10.0 million, $ 11.2 million and $ 6.1 million, respectively, and gains from the sale or disposal of equipment were $ 3.9 million, $ 5.1 million and $ 0.7 million, respectively.

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

5 unchanged sentences

Depreciation, depletion, amortization and accretion $ 64,271 $ 78,475 $ 95,317

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment of Goodwill

4 unchanged sentences

The Company performed the qualitative assessment described above during the fourth quarter of 2022.

Based on this assessment, the Company concluded that it was more likely than not that the fair value of each of the Company's reporting units was greater than their carrying value.

Accordingly, no further testing was required and no impairment was recognized during the year ended December 31, 2022.

The Company performed the qualitative assessment described above during the fourth quarter of 2021.

Based on this assessment, the Company concluded that it was more likely than not that the fair value of the Stingray Pressure Pumping, Silverback and Aviation reporting units was greater than their carrying value.

13 unchanged sentences

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.

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):

2021 2020 2019

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

Other property, plant and equipment — 437 3,557

Intangible assets 1,212 — 846

$ 1,212 $ 12,897 $ 7,358

Due to market conditions, the Company has temporarily shut down its crude oil hauling operations beginning in July 2021.

6 unchanged sentences

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.

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.

This could result in the recognition of future material impairment charges on the same, or additional, property and

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

equipment if future cash flow estimates, based upon information then available to management, indicate that their carrying values are not recoverable.

Goodwill and Intangible Assets

13 unchanged sentences

Acquisitions — — — — —

Impairment losses (a)

( 891 ) — — — ( 891 )

Impairment losses — — — — —

Balance as of December 31, 2022

5 unchanged sentences

The Company had the following definite lived intangible assets recorded as of the dates presented below (in thousands):

Customer relationships $ — $ 1,050

Trade names 7,850 7,850

accumulated amortization - customer relationships — ( 642 )

accumulated amortization - trade names ( 6,068 ) ( 5,289 )

1 unchanged sentence

Amortization expense for intangible assets was $ 0.8 million, $ 1.0 million and $ 1.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.

The Company recognized impairment of intangible assets totaling $ 1.2 million and $ 0.8 million, respectively, for the years ended December 31, 2021 and 2019.

The Company recognized impairment of intangible assets totaling $ 1.2 million for the year ended December 31, 2021.

See Note 6 for a description of these impairment losses.

12 unchanged sentences

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’ (loss) income of ($ 0.3 ) million, $ 0.6 million, and $ 1.0 million respectively, for the years ended December 31, 2021, 2020 and 2019, respectively, which is included in other, net on the consolidated statements of comprehensive loss.

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

No additional investments were made during the year ended December 31, 2021.

The Company recorded equity method adjustments to its investment for its share of Brim Acquisitions’ income (loss) of $ 0.1 million, ($ 0.3 ) million, and $ 0.6 million respectively, for the years ended December 31, 2022, 2021 and 2020, respectively, which is included in “other income, net” on the consolidated statements of comprehensive loss.

The Company made additional investments totaling $ 0.5 million during the year ended December 31, 2020.

No additional investments were made during the years ended December 31, 2022 and 2021.

MAMMOTH ENERGY SERVICES, INC.

3 unchanged sentences

Accrued Expenses and Other Current Liabilities

Accrued legal settlement (a)

State and local taxes payable $ 13,336 $ 13,772

Financed insurance premiums (b)

Financed insurance premiums (a)

Deferred revenue 7,550 3,250

Accrued compensation and benefits 6,743 5,133

Sale-leaseback liability (b)

Financing leases 4,003 1,834

Equipment financing note (c)

Insurance reserves 1,509 1,413

Payroll tax liability 95 2,810

Financing leases 1,834 1,499

Sale-leaseback liability (c)

Accrued legal settlement (d)

Other 2,095 2,146

1 unchanged sentence

Other Long-Term Liabilities

Sale-leaseback liability (b)

$ 6,836 $ 7,318

Equipment financing note (c)

Financing leases 2,602 4,375

Sale-leaseback liability (c)

Payroll tax liability — 1,977

Total other long-term liabilities $ 15,485 $ 11,693

In June 2021, the Company reached an agreement to settle a certain legal matter.

See Note 19 for additional detail.

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

4 unchanged sentences

On June 1, 2021, the Company entered into another agreement with FNC whereby the Company sold additional assets from its infrastructure segment to FNC for aggregate proceeds of $ 9.5 million and entered into a 42 month lease agreement whereby the Company agreed to lease back the assets at a monthly rental rate of $ 0.2 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.

On June 1, 2022, the Company entered into another agreement with FNC whereby the Company sold additional assets from its infrastructure segment to FNC for aggregate proceeds of $ 4.6 million and entered into a 42 -month lease agreement whereby the Company agreed to lease back the assets at a monthly rental rate of $ 0.1 million .

Under the agreements, the Company has the option to purchase the assets at the end of the lease terms.

The Company recorded liabilities 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 terms.

In December 2022, the Company entered into a 42 month financing arrangement with FNC for the purchase of seven new pressure pumping units for an aggregate value of $ 9.7 million.

Under this arrangement, the Company has agreed to make monthly principal and interest payments totaling $ 0.3 million over the term of the agreement.

This note is secured by the seven pressure pumping units and bears interest at an imputed rate of approximately 14.3 %.

On August 2, 2021, the Company reached an agreement to settle a certain legal matter, which was paid during 2022.

See Note 19 for additional detail.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Debt included the following (in thousands):

Revolving credit facility 83,520 83,370

11 unchanged sentences

Among the covenants is a financial covenant, including a minimum fixed charges coverage ratio of at least 1.1 to 1.0.

At December 31, 2022, there were outstanding borrowings under the revolving credit facility of $ 83.5 million and $ 19.7 million of available borrowing capacity, after giving effect to $ 6.5 million of outstanding letters of credit and the requirement to maintain a $ 10 million reserve out of the available borrowing capacity.

At December 31, 2021, there were outstanding borrowings under the revolving credit facility of $ 83.4 million and $ 16.5 million of borrowing capacity under the facility, after giving effect to $ 9.0 million of outstanding letters of credit.

As of December 31, 2022, the Company was in compliance with its financial covenants under the revolving credit facility.

As a result of the lack of payment from PREPA, the Company projected that it would likely breach the leverage ratio covenant contained in its revolving credit facility for the fiscal quarter ended September 30, 2021.

On November 3, 2021, the Company entered into a third amendment to its revolving credit facility (the “Third Amendment”) to, among other things, (i) suspend the leverage ratio and fixed charges coverage ratio covenants for the quarters ending September 30, 2021 and December 31, 2021, (ii) permanently reduce the maximum revolving advance amount from $ 130 million to $ 120 million, (iii) add a minimum adjusted EBITDA financial covenant of $ 6.0 million for the quarter ending December 31, 2021, (iv) set the applicable margin on all loans at 3.50 % during the limited covenant waiver period, (v) add a requirement to maintain revolver availability of not less than $ 10.0 million at all times during the limited covenant waiver period, (vi) permanently reduce the maximum revolving advance amount in an amount equal to fifty percent ( 50 %) of any mandatory prepayments made with non-recurring proceeds that are received during the limited covenant waiver period, and (vii) eliminate the declaration of unrestricted subsidiaries during the limited covenant waiver period.

The limited covenant waiver period commenced on the effective date of the Third Amendment and was scheduled to end on the earlier to occur of (i) May 15, 2022, (ii) the Company reporting compliance with both the leverage ratio and the fixed charge coverage ratio covenants for either its fiscal quarter ending September 30, 2021 or December 31, 2021, and (iii) the occurrence of any event of default after the effective date of the Third Amendment.

Under the Third Amendment, the Company also agreed to engage an advisor during the limited covenant waiver period to advise the Company and its subsidiaries with regard to, among other things, efforts to achieve certain operation efficiencies, improvement in results of operations, and general business strategy, and provide assistance to the Company and its subsidiaries in the preparation of the supplemental reporting and information required by the Third Amendment.

At December 31, 2021, there were outstanding borrowings under the revolving credit facility of $ 83.4 million and $ 16.5 million of available borrowing capacity, after giving effect to $ 9.0 million of outstanding letters of credit and the requirement to maintain a $ 10 million reserve out of the available borrowing capacity during the limited waiver period.

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

As of December 31, 2021, the Company was in compliance with its financial covenants under the revolving credit facility, as amended and waived by the Third Amendment.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the maximum revolving advance amount in an amount equal to 50 % of the PREPA claims proceeds, subject to a floor equal to the sum of eligible billed and unbilled accounts receivables, and (v) classifies the payments pursuant to the Company ’ s settlement agreement with MasTec Renewables Puerto Rico, LLC (“MasTec”) as restricted payments and requires $ 20.0 million of availability both before and after making such payments.

The limited covenant waiver period commenced on the effective date of the Third Amendment and ended on February 28, 2022, as discussed below.

On February 28, 2022, the Company entered into a fourth amendment to the revolving credit facility (the “Fourth Amendment”) to, among other things, (i) amend the financial covenants as outlined below, (ii) provide for a conditional increase of the applicable interest margin, (iii) permit certain sale-leaseback transactions, (iv) provide for a reduction in the maximum revolving advance amount in an amount equal to 50 % of the PREPA claims proceeds, subject to a floor equal to the sum of eligible billed and unbilled accounts receivables, and (v) classifies the payments pursuant to the Company ’ s settlement agreement with MasTec Renewables Puerto Rico, LLC (“MasTec”) as restricted payments and requires $ 20.0 million of availability both before and after making such payments.

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

• the leverage ratio was eliminated;

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• the fixed charge coverage ratio was reduced to .85 to 1.0 for the six months ended June 30, 2022 and increases to 1.1 to 1.0 for the periods thereafter;

• a minimum adjusted EBITDA covenant of $ 4.7 million, excluding interest on accounts receivable from PREPA, for the five months ending May 31, 2022 was added;

• the minimum excess availability covenant was reduced to $ 7.5 million through the earlier of (i) March 31, 2022 or (ii) the date on which proceeds of permitted sale-leaseback transactions are received, after which the minimum excess availability covenant will increase to $ 10.0 million.

• the minimum excess availability covenant was reduced to $ 7.5 million through March 31, 2022, after which the minimum excess availability covenant increased to $ 10.0 million.

The Fourth Amendment also permanently waived compliance by the borrowers with the leverage ratio and fixed charge coverage ratio covenants in the revolving credit facility for the fiscal quarters ended September 30, 2021 and December 31, 2021, respectively, ending the limited covenant waiver period under the Third Amendment.

As of March 2, 2022, the Company had $ 83.7 million in borrowings outstanding under its revolving credit facility, leaving an aggregate of $ 10.6 million of available borrowing capacity under this facility, after giving effect to $ 8.5 million of outstanding letters of credit and the requirement to maintain a $ 7.5 million reserve out of the available borrowing capacity.

As of February 22, 2023, the Company had $ 79.7 million in borrowings outstanding under its revolving credit facility, leaving an aggregate of $ 22.3 million of available borrowing capacity under this facility, after giving effect to $ 6.4 million of outstanding letters of credit and the requirement to maintain a $ 10.0 million reserve out of the available borrowing capacity.

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 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.

As of March 2, 2022, the Company was in compliance with the covenants under its revolving credit facility, as amended and waived by the Third Amendment and Fourth Amendment.

The Company’s revolving credit facility is currently scheduled to mature on October 19, 2023.

The Company continues to explore various strategic alternatives to extend, refinance or repay its revolving credit facility at or before the scheduled maturity date.

There is no guarantee that such extension, refinancing or repayment will be secured.

Additionally, any such extended or new credit facility could have terms that are less favorable to the Company than the terms of its existing revolving credit facility, which may significantly increase the Company’s cost of capital and may have a material adverse effect on the Company’s liquidity and financial condition.

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, 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, 2021.

As of December 31, 2021, the Company did not meet the minimum debt coverage ratio of 1.25 to 1.0 set forth in the Aviation Note.

On March 2, 2022, Bank7 granted the Company a waiver of this event of default.

The waiver extended the minimum cash requirement until June 30, 2022.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Aviation Note bore interest at a rate based on the Wall Street Journal Prime Rate plus a margin of 1 %.

The Aviation Note was paid off on September 30, 2022.

Variable Interest Entities

11 unchanged sentences

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, 2022.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Selling, General and Administrative Expense

17 unchanged sentences

See Notes 2 and 19.

The components of income tax benefit attributable to the Company for the year ended December 31, 2021, 2020 and 2019, respectively, are as follows (in thousands):

The components of income tax provision (benefit) attributable to the Company for the year ended December 31, 2022, 2021 and 2020, respectively, are as follows (in thousands):

Year Ended December 31,

3 unchanged sentences

Foreign current income tax expense 5,846 8,852 6,948

Foreign deferred income tax (benefit) expense ( 8,265 ) 144 ( 20,878 )

Foreign deferred income tax expense (benefit) 7,907 ( 8,265 ) 144

Total $ 13,607 $ ( 22,863 ) $ ( 12,169 )

4 unchanged sentences

2022 2021 2020

Loss before income taxes $ ( 124,293 ) $ ( 119,776 ) $ ( 91,125 )

Income (loss) before income taxes $ 12,988 $ ( 124,293 ) $ ( 119,776 )

Statutory income tax rate 21 % 21 % 21 %

Expected income tax (benefit) expense ( 26,102 ) ( 25,153 ) ( 19,136 )

Expected income tax expense (benefit) 2,727 ( 26,102 ) ( 25,153 )

Change in tax rate — — ( 161 )

Change in uncertain tax positions 1,043 — —

Interest and penalties 1,677 1,043 —

Foreign income tax rate differential 4,311 ( 282 ) 2,556

Foreign (loss) earnings not in reported income ( 336 ) 3,252 12,581

Foreign earnings (loss) not in reported income 1,565 ( 336 ) 3,252

Foreign tax credits ( 3,646 ) ( 7,749 ) ( 7,133 )

2 unchanged sentences

Other permanent differences 322 426 1,290

State tax expenses ( 2,449 ) ( 1,664 ) 2,364

State tax benefit ( 1,129 ) ( 2,449 ) ( 1,664 )

CARES act — — ( 2,378 )

3 unchanged sentences

The Company’s effective tax rate was 104.8 % for the year ended December 31, 2022 compared to 18.4 % for the year ended December 31, 2021 and 10.2 % for the year ended December 31, 2020.

The effective tax rate for the year ended December 31, 2021 differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico as well as changes in the valuation allowance.

Additionally, the Company recorded an unrecognized tax benefit of $ 1.0 million during the year ended December 31, 2021 related to the 2020 tax year returns in Puerto Rico.

The effective tax rate for the years ended December 31, 2022 and 2021 differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico as well as changes in the valuation allowance.

Additionally, the Company recorded interest and penalties expense of $ 1.7 million and $ 1.0 million during the years ended December 31, 2022 and 2021, respectively, related to the 2020 and 2021 tax year returns in Puerto Rico.

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

2 unchanged sentences

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 years 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.

MAMMOTH ENERGY SERVICES, INC.

14 unchanged sentences

Property and equipment $ ( 18,989 ) $ ( 28,126 )

Intangible assets — ( 450 )

Lease liability ( 4,057 ) ( 4,392 )

1 unchanged sentence

Deferred tax liabilities ( 26,317 ) ( 39,614 )

Net deferred tax asset (liability) $ 7,229 $ ( 24,741 )

Net deferred tax (liability) asset $ ( 471 ) $ 7,229

Reflected in accompanying balance sheet as:

14 unchanged sentences

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.

A reconciliation of the beginning and ending amounts of liabilities associated with uncertain tax positions for the year ended December 31, 2021 is as follows ($ in thousands):

Balance, January 1, 2021 $ —

Additions for tax positions of prior years 1,043

Balance, December 31, 2021 $ 1,043

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company recorded an unrecognized tax benefit of $ 1.0 million during the year ended December 31, 2021 related to the 2020 tax year returns in Puerto Rico.

It is the Company’s policy to recognize interest and applicable penalties related to uncertain tax positions in income tax expense.

The Company has recorded interest and penalties payable of $ 2.7 million and $ 1.0 million at December 31, 2022 and 2021, respectively, related to the 2021 and 2020 tax year returns in Puerto Rico.

It is the Company’s policy to recognize interest and applicable penalties in income tax expense.

The Company did not have any uncertain tax positions for the years ended December 31, 2022 and 2021.

2 unchanged sentences

The Company’s state and local income tax returns for tax years 2016 through 2022 remain subject to examination, with few exceptions, by the respective tax authorities.

Puerto Rico tax returns for tax years 2017 through 2021 and Canada tax returns for the tax years 2015 through 2021 remain open to examination by the respective tax authorities.

Puerto Rico tax returns for tax years 2017 through

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2022 and Canada tax returns for the tax years 2015 through 2022 remain open to examination by the respective tax authorities.

Lessee Accounting

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 all leases with a term in excess of 12 months.

The Company recognizes 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 all leases with a term in excess of 12 months.

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.

15 unchanged sentences

Total lease expense $ 8,914 $ 11,275

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Supplemental balance sheet information related to leases as of December 31, 2022 and 2021 is as follows (in thousands):

8 unchanged sentences

Other liabilities 2,602 4,375

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other supplemental information related to leases for the years ended December 31, 2022 and 2021 is as follows (in thousands):

23 unchanged sentences

Present value of lease payments $ 10,360 $ 6,605

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Lessor Accounting

4 unchanged sentences

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

During the years ended December 31, 2021, 2020 and 2019, the Company recognized lease revenue, which is included in “services revenue” and “services revenue - related parties” on the consolidated statements of comprehensive loss of $ 2.4 million, $ 1.4 million, and $ 2.3 million, respectively.

Dividends and Earnings (Loss) Per Share

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)

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

Earnings (Loss) Per Share

During the years ended December 31, 2022, 2021 and 2020, the Company recognized lease revenue, which is included in “ services

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

revenue” and “services revenue - related parties” on the consolidated statements of comprehensive loss of $ 3.3 million, $ 2.4 million, and $ 1.4 million, respectively.

Loss Per Share

Year Ended December 31,

13 unchanged sentences

No incremental shares of potentially dilutive restricted stock awards were included for the years ended December 31, 2022, 2021, or 2020 as their effect was antidilutive under the treasury stock method.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Upon formation of certain operating entities by Wexford and Gulfport, 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.

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.

The awards are for interests in the distributable earnings of the members of MEH Sub, Mammoth’s majority equity holder.

On the closing date of Mammoth Inc.’s initial public offering (“IPO”), the unreturned capital balance of Mammoth’s majority equity holder was not fully recovered from its sale of common stock in the IPO.

7 unchanged sentences

Restricted Stock Units

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

17 unchanged sentences

As of December 31, 2022, there was $ 0.4 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 1.0 year.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The cost is expected to be recognized over a weighted average period of approximately 5 months.

Included in cost of revenue and selling, general and administrative expenses is stock-based compensation expense of $ 0.9 million, $ 1.2 million and $ 2.0 million, respectively, for the years ended December 31, 2022, 2021 and 2020.

17 unchanged sentences

SR Energy and Gulfport (c) — — 113 — —

Aquahawk and Gulfport (d) — — 828 — —

Cobra Aviation/ARS/Leopard and Brim Equipment (e) 371 446 2,093 85 44

Panther and El Toro (f) 599 38 573 — —

Cobra Aviation/ARS/Leopard and Brim Equipment (d) 316 371 446 217 85

Panther and El Toro (e) 814 599 38 — —

Other Relationships 3 12 34 6 3

4 unchanged sentences

$ — $ 515 $ 1,890 $ — $ —

$ 88 $ 28,461

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

6 unchanged sentences

On June 29, 2021, Gulfport ceased to be a related party.

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

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

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Panther provides directional drilling services for El Toro, an entity controlled by Wexford, pursuant to a master service agreement.

COST OF REVENUE ACCOUNTS PAYABLE

8 unchanged sentences

The Company and Caliber (b) — 374 774 — —

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

Other Relationships — 8 ( 19 ) — —

$ — $ 387 $ 758 $ — $ —

CAPITAL EXPENDITURES

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

$ — $ — $ 420 $ — $ —

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

4 unchanged sentences

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.

Cobra Aviation made additional investments in Brim Acquisitions totaling $ 0.5 million during the year ended December 31, 2020.

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

2 unchanged sentences

Commitments and Contingencies

The Company has entered into agreements with suppliers that contain minimum purchase obligations and agreements to purchase capital equipment.

Aggregate future minimum payments under these obligations in effect at December 31, 2021 were approximately $ 1.4 million.

From time to time, the Company may enter into agreements with suppliers that contain minimum purchase obligations and agreements to purchase capital equipment.

The Company did not have any unconditional purchase obligations as of December 31, 2022.

MAMMOTH ENERGY SERVICES, INC.

3 unchanged sentences

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

Bonding program $ 1,000 $ 5,000

Environmental remediation $ 3,694 $ 3,694

Insurance programs 2,800 3,890

Bonding program — 1,000

Rail car commitments — 455

29 unchanged sentences

The estimated cost to complete projects secured by the performance and payment bonds totaled $ 1.4 million as of December 31, 2022.

As of December 31, 2021 and 2020, outstanding bid bonds totaled $ 0.6 million and $ 1.0 million, respectively.

The Company did not have any outstanding bid bonds as of December 31, 2022.

Outstanding bid bonds totaled $ 0.6 million as of December 31, 2021.

MAMMOTH ENERGY SERVICES, INC.

17 unchanged sentences

On July 23, 2021, with the aid of Mammoth, PREPA filed an appeal of the entire $ 47 million that FEMA de-obligated in the May 26, 2021 Determination Memorandum.

FEMA approved the appeal in part and denied the appeal in part.

FEMA found that staffing costs of $ 24.4 million are eligible for funding.

On August 4, 2021, the Court extended the stay and directed that an additional status report be filed, which was done on January 22, 2022.

On January 26, 2022, the Court extended the stay and directed the parties to file a further status report by July 25, 2022.

On June 7, 2022, Cobra filed a motion to lift the stay order.

On June 29, 2022 the Court denied Cobra’s motion and extended the stay to January 2023.

On January 20, 2023, Cobra submitted a certified claim for approximately $ 379 million to FEMA pursuant to the federal Contract Disputes Act.

On February 1, 2023, FEMA notified Cobra that it had reviewed the claim and determined that no contract, expressed or implied, exists between FEMA and Cobra.

Therefore, no final decision will be issued in response to Cobra’s claim.

Cobra has 90 days from the February 1, 2023 decision to file a notice of appeal.

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.

2 unchanged sentences

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

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.

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

8 unchanged sentences

On September 21, 2021, the Company and Gulfport reached a settlement under which all litigation relating to the Stingray Pressure Pumping contract and the Muskie contract was terminated, Stingray Pressure Pumping released all claims against Gulfport and its subsidiaries with respect to Gulfport’s bankruptcy proceedings, each of the parties released all claims they had against the others with respect to the litigation matters discussed above and Muskie retained an allowed general unsecured claim against Gulfport of $ 3.1 million.

As a result, during the three months ended September 30, 2021, the Company wrote off its remaining receivable related to the Stingray Pressure Pumping claim resulting in bad debt expense and other expense of $ 31.0 million and $ 1.3 million, respectively, and recorded additional bad debt expense related to the Muskie claim totaling $ 0.2 million.

The Company had net accounts receivable due from Gulfport totaling $ 0.1 million as

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

of December 31, 2021, which is included in “accounts receivable, net” on the balance sheets.

As a result, during 2021, the Company wrote off its remaining receivable related to the Stingray Pressure Pumping claim resulting in bad debt expense and other expense of $ 31.0 million and $ 1.3 million, respectively, and recorded additional bad debt expense related to the Muskie claim totaling $ 0.2 million.

On January 21, 2020, MasTec Renewables Puerto Rico, LLC (“MasTec”) filed a lawsuit against Mammoth Inc.

8 unchanged sentences

Under the terms of the agreement, Cobra paid $ 6.5 million to MasTec on August 2, 2021 and the Company guaranteed payment, by Cobra, of $ 9.25 million on both August 1, 2022 and December 1, 2022.

The agreement bears interest at rates between 6 % and 12 % and includes an acceleration clause that requires Cobra to pay within ten days all unpaid amounts if Cobra collects $ 100 million or more of specified receivables.

The agreement specified interest rates between 6 % and 12 %.

The settlement amount and legal expenses related to the matter of $ 25.0 million and $ 5.4 million, respectively, are reflected in “other, net” on the accompanying consolidated statement of comprehensive loss for the year ended December 31, 2021.

As of December 31, 2021, $ 19.0 million was included in “accrued expenses and other current liabilities” in the accompanying consolidated balance sheets, which includes accrued interest of $ 0.5 million.

Cobra made the second installment payment, including accrued interest, to MasTec on August 23, 2022, the final installment principal payment to MasTec on October 24, 2022 and the final installment interest payment to MasTec on December 1, 2022.

On May 13, 2021, Foreman Electric Services, Inc.

2 unchanged sentences

The petition asserted claims against the Company and Cobra under federal RICO statutes and certain state-law causes of action.

Foreman alleged that it sustained injuries to its business and property in the amount of $ 250 million due to the Company’s and Cobra’s wrongful interference, payment of bribes and other inducements to a FEMA official.

Foreman alleged that it sustained injuries to its business and property in the amount of $ 250 million due to the Company’s and Cobra’s alleged wrongful interference by means of inducements to a FEMA official.

On May 18, 2021, the Company removed this action to the United States District Court for the Western District of Oklahoma and filed a motion to dismiss on July 8, 2021.

1 unchanged sentence

On December 14, 2021, Foreman re-filed its petition against Mammoth Inc.

and Cobra in the Oklahoma Count District Court (Oklahoma State Court).

and Cobra in the Oklahoma County District Court (Oklahoma State Court).

On December 16, 2021, the Company again removed this action to the United States District Court for the Western District of Oklahoma.

Foreman filed a motion to remand this action back to Oklahoma County District Court, which motion is under consideration by the federal court.

The Company and Cobra filed a motion to dismiss on January 31, 2022, which is expected to be fully briefed by March 7, 2022.

Foreman filed a motion to remand this action back to Oklahoma County District Court, which was granted on May 5, 2022.

The case will now proceed according to a schedule that will be set by the Oklahoma County District Court.

In a related matter, on January 12, 2022, a Derivative Complaint on behalf of nominal defendant Machine Learning Integration, LLC (“MLI”), which alleges it would have served as a sub-contractor to Foreman in Puerto Rico, was filed against the Company and Cobra in the U.S.

District Court for the District of Puerto Rico arising from essentially the same facts as Foreman's action and asserting violations of federal RICO statutes and certain state law claims.

MLI alleges it sustained injuries to its business and property in an unspecified amount because the Company’s and Cobra’s wrongful interference, payment of bribes and other inducements to a FEMA official prevented Foreman from obtaining work, and thereby prevented MLI, as Foreman's subcontractor, from obtaining work.

District Court for the District of Puerto Rico alleging essentially the same facts as Foreman’s action and asserting violations of federal RICO statutes and certain non-federal claims.

MLI alleges it sustained injuries to its business and property in an unspecified amount because the Company’s and Cobra’s wrongful

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

interference by means of inducements to a FEMA official prevented Foreman from obtaining work, and thereby prevented MLI, as Foreman’s subcontractor, from obtaining work.

These matters are still in the early stages and at this time, the Company is not able to predict the outcome of these claims or whether they will have a material impact on the Company’s business, financial condition, results of operations or cash flows.

4 unchanged sentences

On February 25, 2022, the Company received an unfavorable decision on the appeal.

The Company intends to appeal 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;

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

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The parties have agreed to a settlement in principle and are in the process of documenting the settlement.

Until the settlement agreement is executed, however, 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 appealed 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.

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

These matters are in various stages in the Court.

On November 14, 2022, the Court entered judgment against Cobra in connection with one of the lawsuits ordering payment of approximately $ 9.0 million.

On January 9, 2023, Cobra appealed the judgment and is currently awaiting a decision from the Court.

To the extent Cobra receives an unfavorable judgment, the Company believes that any such taxes in the judgement that relate to the Emergency Master Service Agreement with PREPA executed on October 19, 2017, would be reimbursable to Cobra.

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.

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 informed the Court that that the plaintiff and the ESPADA defendants reached a settlement on November 5, 2021, and subsequently, that a settlement was reached between the plaintiffs and Cobra on December 6, 2021.

The stipulation of dismissal as to all parties was filed with the Court and the case was dismissed on January 19, 2022.

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.

3 unchanged sentences

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.

The plaintiff alleges the defendant 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 and administratively closed the case pending completion of individual arbitration proceedings initiated by Mr.

Zeisset and opt-in plaintiffs.

3 unchanged sentences

The parties are currently engaged in discovery.

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

The Company believes these claims are without merit and is vigorously defending 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.

In April 2021 a settlement was reached and motion for preliminary approval

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

was filed, which the Court granted on May 4, 2021.

On September 21, 2021, the Court issued a final judgment approving the settlement, which released the defendants from all claims asserted in the litigation, or that could have been asserted arising from the subject matter of the litigation and the purchase or acquisition of Mammoth common stock during the class period in return for a cash payment in the amount of $ 11.0 million for the benefit of the settlement class.

The settlement amount is covered in full under Mammoth’s directors’ and officers’ insurance policy.

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 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 October 5, 2021, the plaintiffs and Nominal Defendant Mammoth entered into the Stipulation and Agreement of Settlement (the “Stipulation”) in the derivative action, which was preliminarily approved by the Court on October 28, 2021.

The terms of the Stipulation required that, in exchange for the full release, discharge and dismissal with prejudice of the claims asserted against the defendants in the derivative action, (1) the individual defendants will cause the insurers under Mammoth’s Directors’ and Officers’ (“D&O”) insurance policy (the “D&O insurers”) to pay $ 1.5 million to Mammoth, which Mammoth will use for general corporate purposes;

and (2) Mammoth will adopt certain corporate governance reforms, which will further enhance Mammoth’s current corporate governance policies.

Additionally, the Stipulation provides that the individual defendants will cause the D&O insurers to pay, subject to Court approval, a separate payment of $ 0.5 million to plaintiffs’ counsel for their attorneys’ fees and expenses.

The approval hearing was held on January 25, 2022 and the final order was entered.

The settlement was covered in full under Mammoth’s D&O insurance policy.

On September 10, 2019, the U.S.

3 unchanged sentences

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.

On May 18, 2022, the former FEMA official and the former president of Cobra each pled guilty to one-count information charging gratuities related to a project that Cobra never bid upon and was never awarded or received any monies for.

On December 13, 2022, the Court sentenced the former Cobra president to custody of the Bureau of Prisons for six months and one day, a term of supervised release of six months and one day and a fine of $ 25,000 .

The Court sentenced the FEMA official to custody of the Bureau of Prisons for six months and one day, a term of supervised release of six months and a fine of $15,000.

The Court also dismissed the indictment against the two defendants.

The Company does not expect any additional activity in the criminal proceeding.

Given the uncertainty inherent in criminal litigation, however, it is not possible at this time to determine the potential impacts that the sentencings 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.

It is unclear what PREPA’s position will be going forward.

Subsequent to the indictment, Cobra received 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.

The aforementioned DOJ investigation is in connection with the issues raised in the criminal matter.

Cobra is cooperating with the DOJ and is not able to predict the outcome of this investigation or if it will have a material impact on Cobra’s or the Company’s business, financial condition, results of operations or cash flows.

With regard to the previously disclosed SEC investigation, on July 6, 2022, the SEC sent a letter saying that it had concluded its investigation as to the Company and that based on information the SEC has as of this date, it does not intend to recommend an enforcement action against the Company.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

4 unchanged sentences

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

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 trial court granted Cobra, Mammoth and Straehla’s motion to compel Alpha Lobo’s claims against them to arbitration.

However, Alpha Lobo has not yet brought its claims in arbitration.

Instead, on March 22, 2022, Alpha Lobo filed a Petition for Writ of Mandamus in the Fourth Court of Appeals, San Antonio, Texas, seeking to overturn the order compelling arbitration.

The appellate court denied the Mandamus on May 4, 2022, without requesting a response.

On June 28, 2022, Alpha Lobo filed a Petition for Writ of Mandamus in the Texas Supreme Court, seeking to overturn the order compelling arbitration.

The Texas Supreme Court denied the Mandamus on August 5, 2022, without requesting a response.

Alpha Lobo has not yet brought its claims in arbitration.

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.

Additionally, there was a parallel arbitration proceeding in which certain Defendants were 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 June 24, 2021, the arbitration panel ruled in favor of Cobra.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Subsequently, the trial Court in this action granted Cobra, the Company and Straehla’s motion to compel arbitration.

Alpha Lobo has not brought their claims in arbitration at this time.

The Company is involved in various other legal proceedings in the ordinary course of business.

8 unchanged sentences

As of December 31, 2022, the Company’s revenues, income 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 principally provides services in connection with on-shore drilling of oil and natural gas wells for small to large domestic independent oil and natural gas producers as well as electric infrastructure services to private utilities, public investor-owned utilities and co-operative utilities.

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 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, 2021, the Company’s four reportable segments include infrastructure services (“Infrastructure”), well completion services (“Well Completion”), natural sand proppant services (“Sand”) and drilling services (“Drilling”).

Prior to the year ended December 31, 2021, the Company included Aquawolf in its “All Other” reconciling column.

Based on its assessment of FASB ASC 280, Segment Reporting , guidance at December 31, 2021, the Company changed its presentation in 2021 to move Aquawolf to the Infrastructure segment.

The results for the years ended December 31, 2020 and 2019 have been retroactively adjusted to reflect this change.

The Infrastructure segment provides electric utility infrastructure services to government-funded utilities, private utilities, public investor-owned utilities and co-operative utilities in the northeastern, southwestern, midwestern and western portions of the United States.

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, 2022, the Company’s four reportable segments include , well completion services (“Well Completion”), infrastructure services (“Infrastructure”), natural sand proppant services (“Sand”) and drilling services (“Drilling”).

The Well Completion segment provides hydraulic fracturing and water transfer services primarily in the Utica Shale of Eastern Ohio, Marcellus Shale in Pennsylvania 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 Sand segment primarily services

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the Utica Shale, Permian Basin, SCOOP, STACK and Montney Shale in British Columbia and Alberta, Canada.

During certain of the periods presented, the Drilling segment provided contract land and directional drilling services primarily in the Permian Basin and mid-continent region.

4 unchanged sentences

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.

MAMMOTH ENERGY SERVICES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

regularly reviewed by the Company’s CODM when making key operating and resource utilization decisions.

Although Mammoth Energy Partners 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.

5 unchanged sentences

The following tables set forth certain financial information with respect to the Company’s reportable segments (in thousands):

Year Ended December 31, 2021 Infrastructure Well Completion Sand Drilling All Other Eliminations Total

Year Ended December 31, 2022 Well Completion Infrastructure Sand Drilling All Other Eliminations Total

Revenue from external customers $ 169,872 $ 111,452 $ 48,916 $ 10,346 $ 21,500 $ — $ 362,086

6 unchanged sentences

Depreciation, depletion, amortization and accretion 22,103 16,171 8,732 6,467 10,798 — 64,271

Impairment of goodwill 891 — — — — — 891

Impairment of other long-lived assets 665 — — — 547 — 1,212

Operating loss ( 38,859 ) ( 55,870 ) ( 6,728 ) ( 11,191 ) ( 15,540 ) — ( 128,188 )

Gains on disposal of assets, net ( 615 ) ( 795 ) ( 89 ) ( 172 ) ( 2,237 ) — ( 3,908 )

Operating (loss) income 11,791 ( 14,720 ) ( 1,206 ) ( 6,965 ) ( 5,318 ) — ( 16,418 )

Interest expense 1,940 7,390 753 545 878 — 11,506

Other (income) expense, net ( 6,785 ) 1,073 ( 874 ) ( 177 ) ( 3,538 ) — ( 10,301 )

Loss before income taxes $ ( 35,999 ) $ ( 58,050 ) $ ( 6,328 ) $ ( 11,307 ) $ ( 12,609 ) $ — $ ( 124,293 )

Other income, net ( 343 ) ( 40,470 ) ( 14 ) — ( 85 ) — ( 40,912 )

Income (loss) before income taxes $ 10,194 $ 18,360 $ ( 1,945 ) $ ( 7,510 ) $ ( 6,111 ) $ — $ 12,988

Total expenditures for property, plant and equipment $ 11,421 $ 885 $ 88 $ 101 $ 395 $ ( 153 ) $ 12,737

4 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Year Ended December 31, 2020 Infrastructure Well Completion Sand Drilling All Other Eliminations Total

Year Ended December 31, 2021 Well Completion Infrastructure Sand Drilling All Other Eliminations Total

Revenue from external customers $ 84,190 $ 93,403 $ 30,880 $ 4,197 $ 16,292 $ — $ 228,962

6 unchanged sentences

Depreciation, depletion, amortization and accretion 26,377 21,880 9,005 7,996 13,217 — 78,475

Gains on disposal of assets, net ( 770 ) ( 286 ) ( 30 ) ( 202 ) ( 3,859 ) — ( 5,147 )

Impairment of goodwill — 891 — — — — 891

3 unchanged sentences

Other (income) expense, net 1,843 ( 6,499 ) ( 844 ) 25 321 — ( 5,154 )

Income (loss) before income taxes $ 6,205 $ ( 69,073 ) $ ( 11,324 ) $ ( 16,865 ) $ ( 28,719 ) $ — $ ( 119,776 )

Loss before income taxes $ ( 58,050 ) $ ( 35,999 ) $ ( 6,328 ) $ ( 11,307 ) $ ( 12,609 ) $ — $ ( 124,293 )

Total expenditures for property, plant and equipment $ 4,327 $ 627 $ 484 $ 44 $ 361 $ — $ 5,843

2 unchanged sentences

Total assets $ 56,036 $ 427,626 $ 156,519 $ 27,457 $ 129,202 $ ( 75,948 ) $ 720,892

Year Ended December 31, 2019 Infrastructure Well Completion Sand Drilling All Other Eliminations Total

Year Ended December 31, 2020 Well Completion Infrastructure Sand Drilling All Other Eliminations Total

Revenue from external customers $ 87,201 $ 157,751 $ 34,265 $ 7,746 $ 26,113 $ — $ 313,076

6 unchanged sentences

Depreciation, depletion, amortization and accretion 30,411 29,373 9,771 10,039 15,723 — 95,317

(Gains) losses on disposal of assets, net ( 388 ) ( 444 ) 1,829 ( 352 ) ( 1,283 ) — ( 638 )

Impairment of goodwill 53,406 — — — 1,567 — 54,973

2 unchanged sentences

Interest expense 1,130 2,794 312 454 707 — 5,397

Other expense ( 41,949 ) 580 67 ( 9 ) ( 905 ) — ( 42,216 )

(Loss) income before income taxes $ 26,044 $ ( 39,020 ) $ ( 12,589 ) $ ( 26,117 ) $ ( 39,503 ) $ 60 $ ( 91,125 )

Other expense, net ( 1,886 ) ( 31,993 ) 10 125 ( 556 ) — ( 34,300 )

Income (loss) before income taxes $ ( 69,073 ) $ 6,205 $ ( 11,324 ) $ ( 16,865 ) $ ( 28,719 ) $ — $ ( 119,776 )

Total expenditures for property, plant and equipment $ 4,358 $ 258 $ 1,073 $ 432 $ 716 $ — 6,837

20 unchanged sentences

Subsequent Events

As discussed above, on February 28, 2022, the Company entered into a fourth amendment to its revolving credit facility.

See Note 10 above for details.

Subsequent to December 31, 2021, the Company ordered additional capital equipment with aggregate commitments of $ 2.7 million.

Subsequent to December 31, 2021, the Company entered into two three-year real estate operating lease agreements with aggregate commitments of $ 0.6 million.

Subsequent to December 31, 2022, the Company granted an aggregate of 250,000 restricted stock units (“RSUs”) to certain non-executive employees of the Company under the 2016 Plan.

Of the RSUs granted, an aggregate of 50,000 RSUs will vest in three substantially equal annual installments, and an aggregate of 200,000 RSUs will vest in four equal annual installments, in each case beginning on the grant date, subject to such plan participants’ continued service.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures