OREANDA-NEWS. Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ:TUSK) announced today that it has entered into definitive agreements to acquire Sturgeon Acquisitions, LLC (which owns Taylor Frac, LLC; Taylor Real Estate Investments, LLC and South River Road, LLC collectively referred to as “Taylor Frac” or “Taylor”), Stingray Energy Services, LLC and Stingray Cementing, LLC for seven million shares of common stock. Mammoth anticipates closing the transactions in May 2017, subject to regulatory approval and other closing conditions.

Key Highlights of the Transactions:

  • Taylor Frac owns a 0.7 million ton per year sand mine and processing plant with 37.1 million tons of recoverable reserves, 73% of which is more highly valued fine sand grades.  Mammoth plans on expanding the Taylor facility to 1.75 million tons per year by year-end 2017 at an estimated cost of $23 million. 
  • Stingray Energy Services and Stingray Cementing, combined, offer services in fresh water transfer, equipment rental, re-fueling as well as cementing and operate primarily in the Appalachian basin
  • Total consideration of $133.8 million, including 7.0 million shares of common stock valued at approximately $133.4 million based on the closing price of $19.06 per share for Mammoth’s common stock on March 20, 2017, and the assumption of $7.3 million in debt and offset by a positive working capital balance of $6.9 million as of February 28, 2017.
  • Immediately accretive with minimal integration costs. Including the expansion to 1.75 Mtpa, we estimate these businesses will generate EBITDA of approximately $15.0 million in 2017 and $40.6 million in 2018, based on current sand prices. This suggests a 2018 acquisition multiple of 3.3x EBITDA.
  • The addition of sand mining, processing and logistics, as well as water transfer, refueling, equipment rentals and cementing, all of which primarily operate in the northeast, will further expand and integrate Mammoth’s service offerings.

Arty Straehla, Chief Executive Officer, commented, “The pending acquisitions of Taylor Frac, Stingray Energy Services and Stingray Cementing represent a natural step for Mammoth to continue to expand its integrated service offering.  Taylor Frac will provide surety of sand supply for our expanding pressure pumping fleet as well as broaden our service offerings to our customer base.  Once the expansion of the Taylor facility is completed at year end 2017, Mammoth is expected to have sand processing capacity of approximately 2.45 million tons per year to support our six high pressure pumping fleets.  Given the increasing demand for sand, we believe this will differentiate our service offering, giving our customers confidence that their wells will be completed without the need to source sand from third-parties.  We believe Taylor’s costs per ton are among the lowest in the industry at approximately $10 to $12 per ton. In addition, Taylor’s fine grade sands are strategically located on the Canadian National Railway affording us direct access to our transloads in Ohio. We believe that over the coming months we will continue to see increasing demand for pressure pumping, sand and logistics services and that the Taylor acquisition will support our ability to meet this increased demand.”

Taylor Frac

Taylor Frac’s facilities include a wet and dry plant located on 393 acres in Taylor, Wisconsin. As of December 31, 2016, Taylor had proven reserves of 37.1 million tons of high quality Northern White Jordan Substrate frac sand which meets or exceeds all API standards including solubility, turbidity, roundness, sphericity and crush resistance. With approximately 73% of the reserves higher demand fine grades of 40/70 and 100 mesh, Taylor is well positioned to support the shift to finer grade sands in today’s well completion recipes. 

The current capacity of the dry plant is 0.7 Mtpa, which is operating at full utilization.  Mammoth plans to expand capacity at the dry plant to 1.75 Mtpa, which is expected to be completed by year-end 2017 at a cost of approximately $23 million.  Taylor’s facilities are located on the Canadian National Railway (CN), which provides a cost effective solution to the Appalachian Basin (Utica, Marcellus) and Western Canada. As part of the plant expansion, the capacity of the transload facility will be expanded to accommodate 400 rail cars per day (up from 200 today).  Taylor has existing rail car leases in place and when combined with the rail cars leased through Muskie upon completion of this transaction, Mammoth estimates we will have approximately 1,500 rail cars leased at competitive rates. 

Stingray Energy Services and Stingray Cementing

Stingray Energy Services operates primarily in the Appalachian Basin providing fresh water transfer, produced water filtration, rental equipment and re-fueling operations in support of drilling, completion and production activities. The company’s water transfer division is capable of providing fresh water for completion operations on multiple locations simultaneously with more than 30 miles of lay flat hose and associated equipment. As of March 17, 2017, there were 250 pieces of equipment rented on 63 separate pads in the Appalachian Basin with 27 locations utilizing Stingray Energy’s re-fueling services.  

Stingray Cementing operates primarily in the Appalachian Basin providing cementing services in support of drilling operations. The company owns and operates five twin cementers and associated equipment. The company was formed in 2012 and continues to grow in support of customer demand. It recently expanded capacity by 66% in response to strong customer demand and has been operating at or near full utilization.

Transaction Details

The definitive agreement for the acquisition of Sturgeon is with Gulfport Energy Corporation (“Gulfport”), Rhino Exploration LLC and an entity affiliated with Wexford Capital LP (“the Wexford Affiliate”). The definitive agreements for the acquisition of Stingray Energy Services and Stingray Cementing are with the Wexford Affiliate and Gulfport.

Under the terms of the agreements Mammoth will issue an aggregate of 7.0 million shares of common stock based on the pro-rata ownership of the acquired businesses.  Based upon a closing price of Mammoth’s common stock of $19.06 per share on March 20, 2017, the value of the transaction is approximately $133.8 million, including the assumption of $7.3 million in debt and offset by a positive working capital balance of $6.7 million as of February 28, 2017.

About Mammoth Energy Services, Inc.

Mammoth is an integrated, growth-oriented oilfield service company serving companies engaged in the exploration and development of North American onshore unconventional oil and natural gas reserves. Mammoth’s suite of services includes pressure pumping services, well services, natural sand proppant services, contract land and directional drilling services and other energy services. Other energy services currently consists primarily of remote accommodation services.