MAMMOTH ENERGY SERVICES, INC. Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

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The following discussion should be read in conjunction with the unaudited
condensed consolidated financial statements and related notes thereto presented
in this Quarterly Report and the consolidated financial statements and related
notes thereto included in our Annual Report on Form 10-K. This discussion
contains forward-looking statements reflecting our current expectations,
estimates and assumptions concerning events and financial trends that may affect
our future operating results or financial position. Actual results and the
timing of events may differ materially from those contained in these
forward-looking statements due to a number of factors, including those discussed
in Item 1A. "Risk Factors" in our Form 10-K for the year ended December 31,
2021, our Quarterly Report on Form 10-Q for the quarterly period ended March
31,2022 and the section entitled "Forward-Looking Statements" appearing
elsewhere in this Quarterly Report.

Insight

  We are an integrated, growth-oriented energy services company focused on the
construction and repair of the electric grid for private utilities, public
investor-owned utilities and co-operative utilities through our infrastructure
services businesses. We also provide products and services to enable the
exploration and development of North American onshore unconventional oil and
natural gas reserves. Our primary business objective is to grow our operations
and create value for stockholders through organic growth opportunities and
accretive acquisitions. Our suite of services includes infrastructure services,
well completion services, natural sand proppant services, drilling services and
other services. Our infrastructure services division provides engineering,
design, construction, upgrade, maintenance and repair services to the electrical
infrastructure industry. Our well completion services division provides
hydraulic fracturing, sand hauling and water transfer services. Our natural sand
proppant services division mines, processes and sells natural sand proppant used
for hydraulic fracturing. Our drilling services division currently provides
rental equipment, such as mud motors and operational tools, for both vertical
and horizontal drilling. In addition to these service divisions, we also provide
aviation services, equipment rentals, remote accommodations and equipment
manufacturing. We believe that the services we offer play a critical role in
maintaining and improving electrical infrastructure as well as in increasing the
ultimate recovery and present value of production streams from unconventional
resources. Our complementary suite of services provides us with the opportunity
to cross-sell our services and expand our customer base and geographic
positioning.

  Our transformation towards an industrial based company is ongoing. We offer
infrastructure engineering services focused on the transmission and distribution
industry and also have equipment manufacturing operations and offer fiber optic
services. Our equipment manufacturing operations provide us with the ability to
repair much of our existing equipment in-house, as well as the option to
manufacture certain new equipment we may need in the future. The equipment
manufacturing operations have initially served the internal needs for our
pressure pumping, water transfer, equipment rental and infrastructure
businesses, but we expect to expand into third party sales in the future. Our
fiber optic services include the installation of both aerial and buried fiber.
We are continuing to explore other opportunities to expand our business lines as
we shift to a broader industrial focus.

Overview of our services and industry conditions

Infrastructure services

Our infrastructure services business provides engineering, design, construction,
upgrade, maintenance and repair services to the electrical infrastructure
industry. We offer a broad range of services on electric transmission and
distribution, or T&D, networks and substation facilities, which include
engineering, design, construction, upgrade, maintenance and repair of high
voltage transmission lines, substations and lower voltage overhead and
underground distribution systems. Our commercial services include the
installation, maintenance and repair of commercial wiring. We also provide storm
repair and restoration services in response to storms and other disasters. We
provide infrastructure services primarily in the northeast, southwest, midwest
and western portions of the United States. We currently have agreements in place
with private utilities, public IOUs and Co-Ops.

Although the COVID-19 pandemic and resulting economic conditions have not had a
material impact on demand or pricing for our infrastructure services, revenues
from our infrastructure services declined in 2021 as a result of certain
management changes, which resulted in crew departures, as well as a decline in
storm restoration activities. Revenue from our infrastructure services have
continuously improved throughout 2022, as compared to the fourth quarter of
2021. Our infrastructure services business has also been adversely impacted by
the outstanding amounts owed to us by the Puerto Rico Electric Power Authority,
or PREPA, for services performed by our subsidiary, Cobra Acquisitions LLC, or
Cobra, in Puerto
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Rico to restore PREPA's electrical grid damaged by Hurricane Maria. As of
September 30, 2022, PREPA, which is currently subject to bankruptcy proceedings,
owed us approximately $227.0 million for services performed excluding
approximately $141.3 million of interest charged on these delinquent balances as
of September 30, 2022. See Note 2. Basis of Presentation and Significant
Accounting Policies-Accounts Receivable of our unaudited condensed consolidated
financial statements. We continue to vigorously pursue numerous avenues to
collect our receivable from PREPA for work performed by Cobra. 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 Cobra or (iii) otherwise does not pay amounts
owed to Cobra for services performed, the receivable may not be collectible,
which may adversely impact our liquidity, results of operations and financial
condition. In addition, government contracts are subject to various
uncertainties, restrictions and regulations, including oversight audits and
compliance reviews by government agencies and representatives. In this regard,
on September 10, 2019, the U.S. District Court for the District of Puerto Rico
unsealed an indictment that charged the former president of Cobra with
conspiracy, wire fraud, false statements and disaster fraud. Two other
individuals were also charged in the indictment. The indictment is focused on
the interactions between a former FEMA official and the former President of
Cobra. Neither we nor any of our subsidiaries were charged in the indictment. On
May 18, 2022, the former FEMA official and the former president of Cobra pled
guilty to gratuities. The sentencing hearing is scheduled for November 28, 2022.
Given the uncertainty inherent in the criminal litigation, it is not possible at
this time to determine the potential impacts that the plea agreements could have
on us. 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. It is unclear what PREPA's position will be after the terms of the
plea agreements become public. 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 our 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 by the SEC against us. See Note
18. Commitments and Contingencies to our unaudited condensed consolidated
financial statements included elsewhere in this report for additional
information regarding these proceedings. Further, our contracts with PREPA have
concluded and we have not obtained, and there can be no assurance that we will
be able to obtain, one or more contracts with other customers to replace the
level of services that we provided to PREPA.

During the third quarter of 2021, we made leadership changes in our
infrastructure group and have focused on cutting costs, improving margins and
enhancing accountability across the division. During the third quarter of 2022,
operational improvements combined with increased crew count drove enhanced
results. Our crew count increased from approximately 82 crews as of December 31,
2021 to approximately 96 crews as of September 30, 2022, and we continue to add
crew capacity for a sector that has a healthy bidding environment. Funding for
projects in the infrastructure space remains strong with added opportunities
expected from the Infrastructure Investment and Jobs Act, which was signed into
law on November 15, 2021. We anticipate the federal spending to begin fueling
this sector in 2023. We continue to focus on operational execution and pursue
opportunities within this sector as we strategically structure our service
offerings for growth, intending to increase our infrastructure services activity
and expand both our geographic footprint and depth of projects, especially in
fiber maintenance and installation projects. In late 2021, we were awarded a
fiber installation contract as well as an electric vehicle charging station
engineering contract. Both of these projects are currently in process.

We work for multiple utilities primarily across the northeastern, southwestern,
midwestern and western portions of the United States. We believe that we are
well-positioned to compete for new projects due to the experience of our
infrastructure management team, combined with our vertically integrated service
offerings. We are seeking to leverage this experience and our service offerings
to grow our customer base and increase our revenues in the continental United
States over the coming years.

Well Completion and Drilling Services

In March and April 2020, concurrent with the COVID-19 pandemic and quarantine
orders in the U.S. and worldwide, oil prices dropped sharply to below zero
dollars per barrel for the first time in history due to factors including
significantly reduced demand and a shortage of storage facilities. In 2021, U.S.
oil production stabilized as commodity prices increased and demand for crude oil
rebounded, many exploration and production companies set their operating budgets
based on the prevailing prices for oil and natural gas at the time. We have seen
improvements in the oilfield services industry and in both pricing and
utilization of our well completion and drilling services during the first nine
months of 2022 and we expect both pricing and utilization to continue to improve
in the fourth quarter of 2022 and into 2023 as a result of an increase in
budgets
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for publicly traded exploration and production companies and high activity levels, driven by improving energy demand and high commodity prices. The ongoing Russian-Ukrainian war and related humanitarian crisis in Ukrainehowever, could negatively impact global energy markets and commodity price volatility.

In response to market conditions, we have temporarily shut down our cementing
and acidizing operations and flowback operations beginning in July 2019, our
contract drilling operations beginning in December 2019, our rig hauling
operations beginning in April 2020, our coil tubing, pressure control and full
service transportation operations beginning in July 2020 and our crude oil
hauling operations beginning in July 2021. We continue to monitor the market to
determine if and when we can recommence these services.

During the third quarter of 2022, our well completion services division
exhibited strong performance, fueled by the robust demand in the pressure
pumping industry. We are currently operating four of our six pressure pumping
fleets. We expect to add one additional pressure pumping fleet into operation
during the fourth quarter of 2022. Looking to 2023, we plan to activate our
sixth fleet in the first half of 2023, and subject to liquidity requirements, we
have plans to upgrade one of our existing spreads to Tier 4, dual fuel. This
would give us a total of three dual fuel fleets. We are analyzing whether there
might be greater returns for converting and upgrading an existing spread
compared to adding a seventh spread.

We continue to closely monitor our cost structure in response to market
conditions and intend to pursue additional cost savings where possible. Further,
a significant portion of our revenue from our pressure pumping business had
historically been derived from Gulfport. On December 28, 2019, Gulfport filed a
lawsuit alleging our breach of our pressure pumping contract with Gulfport and
seeking to terminate the contract and recover damages for alleged overpayments,
audit costs and legal fees. Gulfport did not make the payments owed to us under
this contract for any periods subsequent to its alleged December 28, 2019
termination date. Further, on November 13, 2020, Gulfport filed petitions for
voluntary relief under chapter 11 of the Bankruptcy Code. On September 21, 2021,
we reached a settlement with Gulfport under which all litigation relating to the
Stingray Pressure Pumping contract was terminated, Stingray Pressure Pumping
released all claims against Gulfport and its subsidiaries with respect to
Gulfport's bankruptcy proceedings and each of the parties released all claims
they had against the others with respect to the litigation matters discussed
above. We have not been able to obtain long-term contracts with other customers
to replace our contract with Gulfport. See Note 18. Commitments and
Contingencies to our unaudited condensed consolidated financial statements
included elsewhere in this report for additional information.

Natural sand retaining services

In our natural sand proppant services business, we experienced a significant
decline in demand of our sand proppant in the second half of 2019 and throughout
2020 as a result of completion activity falling due to lower oil demand and
pricing, increased capital discipline by our customers, budget exhaustion and
the COVID-19 pandemic. Activity rebounded modestly in 2021 and has continued to
increase during the first nine months of 2022, as we saw an increase in the
volume of sand sold. The increase in activity in 2022 resulted in an increase in
demand and pricing for our sand and we expect that prices will continue to
increase in the fourth quarter of 2022 and into 2023.

Further, as a result of adverse market conditions, production at our Muskie sand
facility in Pierce County, Wisconsin has been temporarily idled since September
2018. Our contracted capacity has provided a baseline of business, which has
kept our Taylor and Piranha plants operating and our costs low.

A portion of our revenue from our natural sand proppant business historically
had been derived from Gulfport pursuant to a long-term contract. Gulfport did
not make the payments owed to us under this contract for any periods subsequent
to May 2020. In September 2020, we filed a lawsuit seeking to recover delinquent
payments owed to us under this contract. On November 13, 2020, Gulfport filed
petitions for voluntary relief under chapter 11 of the Bankruptcy Code. On
September 21, 2021, the Company and Gulfport reached a settlement under which
all litigation relating to the Muskie contract was terminated and a portion of
Muskie's contract claim against Gulfport was allowed under Gulfport's plan of
reorganization. See Note 18. Commitments and Contingencies to our unaudited
condensed consolidated financial statements included elsewhere in this report
for additional information.

As the oilfield services and natural sand proppant industries continue to
rebound from the significant economic impacts of 2020 and 2021, we expect
momentum to continue in terms of activity, pricing, scheduling and new bidding
inquiries in the fourth quarter of 2022 and into 2023. We believe our diverse
portfolio of services and ability to adapt quickly to changing environments
positions us well in these segments.

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Our response to COVID-19 and related market conditions

We have taken, and continue to take, responsible steps to protect the health and
safety of our employees during the COVID-19 pandemic. We are also continuing to
monitor the industry and market conditions resulting from the COVID-19 pandemic
and have taken mitigating steps in an effort to preserve liquidity, reduce costs
and lower capital expenditures. These actions have included reducing headcount,
adjusting pay and limiting spending. We will continue to take further actions
that we deem to be in the best interest of the Company and our stockholders if
the adverse conditions recur. Given the dynamic nature of these events, we are
unable to predict the ultimate impact of the COVID-19 pandemic, the volatility
in commodity markets, any changes in the near-term or long-term outlook for our
industries or overall macroeconomic conditions on our business, financial
condition, results of operations, cash flows and stock price or the pace or
extent of any subsequent recovery.

Although demand across our three largest segments has improved during the nine
months ended September 30, 2022 and remained strong in the third quarter of
2022, we continue to mitigate the myriad of external challenges in today's
economic environment as we remain disciplined with our spending to continue to
improve Mammoth's cost structure and focus on enhancing value for our
stockholders.

Financial overview for the third quarter of 2022

• Net profit for the third quarter of 2022 was $7.7 millionWhere $0.16 per diluted share, compared to a net loss of $40.9 millionWhere $0.88 loss per diluted share, for the third quarter of 2021.

•Adjusted EBITDA (as defined and reconciled below) increased to $29.8 million
for the third quarter of 2022, as compared to ($29.3) million for the third
quarter of 2021 and $23.0 million for the second quarter of 2022. See "Non-GAAP
Financial Measures" below for a reconciliation of net income to Adjusted EBITDA.

•Total revenue for the third quarter of 2022 increased $49.7 million, or 86%, to
$107.2 million from $57.5 million for the third quarter of 2021. The increase in
total revenue is due to an increase in revenue across all of our operating
divisions during the third quarter of 2022, driven primarily by increased
utilization and pricing.




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Operating results

Three Months Ended September 30, 2022 Compared to Three Months Ended September
30, 2021
                                                                           Three Months Ended
                                                             September 30,

2022 September 30, 2021

                                                                             (in thousands)
Revenue:
Infrastructure services                                     $           33,296          $           25,070
Well completion services                                                51,532                      22,732
Natural sand proppant services                                          12,910                       8,419
Drilling services                                                        3,118                       1,207
Other services                                                           6,968                       4,572
Eliminations                                                              (622)                     (4,515)
Total revenue                                                          107,202                      57,485

Cost of revenues: infrastructure services (excluding depreciation of $3,966 and $4,933respectively, for the three months ended September 30, 2022 and 2021)

                         26,512                      21,898

Well completion services (excluding depreciation and amortization of $4,767 and $6,538respectively, for the three months ended September 30, 2022 and 2021)

                         35,817                      21,329

Natural sand support services (excluding depreciation, depletion and accretion of $2,863 and $2,533respectively, for the three months ended September 30, 2022 and 2021)

                  9,206                       9,368

Drilling services (excluding amortization of $1,597 and $1,942respectively, for the three months ended September 30, 2022 and 2021)

                          2,804                       1,566

Other services (excluding amortization of $2,638 and $3,202respectively, for the three months ended September 30, 2022 and 2021)

4,739                       3,938
Eliminations                                                              (622)                     (4,515)
Total cost of revenue                                                   78,456                      53,584
Selling, general and administrative expenses                             9,685                      41,429
Depreciation, depletion, amortization and accretion                     15,842                      19,148
Gains on disposal of assets, net                                          (599)                     (3,033)

Impairment of other long-lived assets                                        -                         547
Operating income (loss)                                                  3,818                     (54,190)
Interest expense, net                                                   (3,262)                     (1,484)
Other income, net                                                       10,989                       7,586
Income (loss) before income taxes                                       11,545                     (48,088)
Provision (benefit) for income taxes                                     3,819                      (7,187)
Net income (loss)                                           $            7,726          $          (40,901)



  Revenue. Revenue for the three months ended September 30, 2022 increased $49.7
million, or 86%, to $107.2 million from $57.5 million for the three months ended
September 30, 2021. The increase in total revenue is attributable to an increase
in revenue across all operating divisions during the three months ended
September 30, 2022 primarily due to increased utilization and pricing. Revenue
derived from related parties was $0.4 million for the three months ended
September 30, 2022 and $0.6 million for the three months ended September 30,
2021. Revenue by operating division was as follows:

  Infrastructure Services. Infrastructure services division revenue increased
$8.2 million, or 33%, to $33.3 million for the three months ended September 30,
2022 from $25.1 million for the three months ended September 30, 2021 primarily
due to improved operational execution, coupled with an increase in crew count
and improved pricing.
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Average crew count increased to 96 crews for the three months ended September 30, 2022 against 77 crews for the three months ended September 30, 2021.

  Well Completion Services. Well completion services division revenue increased
$28.8 million, or 127%, to $51.5 million for the three months ended
September 30, 2022 from $22.7 million for the three months ended September 30,
2021. The increase in our well completion services revenue was primarily driven
by a 176% increase in the number of stages completed from 688 for the three
months ended September 30, 2021 to 1,897 for the three months ended
September 30, 2022 as well as an increase in both pricing and sand and chemical
materials revenue. An average of 3.5 of our fleets were active for the three
months ended September 30, 2022 as compared to an average of 1.2 fleets for the
three months ended September 30, 2021.

  Natural Sand Proppant Services. Natural sand proppant services division
revenue increased $4.5 million, or 54%, to $12.9 million for the three months
ended September 30, 2022, from $8.4 million for the three months ended
September 30, 2021 primarily due to an 81% increase in the average price per ton
of sand sold from $16.58 per ton during the three months ended September 30,
2021 to $29.95 per ton during the three months ended September 30, 2022, and an
8% increase in tons of sand sold from 315,066 tons for the three months ended
September 30, 2021 to 341,272 tons for the three months ended September 30,
2022. Additionally, we recognized shortfall revenue of $0.5 million during the
three months ended September 30, 2022.

Drilling Services. Drilling services division revenue increased $1.9 million, or
158%, to $3.1 million for the three months ended September 30, 2022 as compared
to $1.2 million for the three months ended September 30, 2021. The increase is
primarily due to increased utilization for our directional drilling business
from 23% for the three months ended September 30, 2021 to 46% for the three
months ended September 30, 2022.

  Other Services. Other services revenue, consisting of revenue derived from our
aviation, equipment rental, crude oil hauling, remote accommodation and
equipment manufacturing businesses, increased approximately $2.4 million, or
52%, to $7.0 million for the three months ended September 30, 2022, from $4.6
million for the three months ended September 30, 2021. Inter-segment revenue,
consisting primarily of revenue derived from our well completion segment, was
$0.5 million for each of the three months ended September 30, 2022 and 2021,
respectively.

An average of 255 pieces of equipment were rented to customers during the three
months ended September 30, 2022, an increase of 57% from an average of 162
pieces of equipment rented to customers during the three months ended
September 30, 2021, resulting in an increase to revenue of $0.9 million.
Additionally, revenue from our accommodations business increased $1.6 million
primarily due to an increase in rooms rented during the three months ended
September 30, 2022 compared to the three months ended September 30, 2021.

Cost of Revenue (exclusive of depreciation, depletion, amortization and
accretion expense). Cost of revenue, exclusive of depreciation, depletion,
amortization and accretion expense, increased $24.9 million from $53.6 million,
or 93% of total revenue, for the three months ended September 30, 2021 to $78.5
million, or 73% of total revenue, for the three months ended September 30, 2022.
The increase is primarily due to an increase in activity across all operating
divisions. Cost of revenue by operating division was as follows:

  Infrastructure Services. Infrastructure services division cost of revenue,
exclusive of depreciation and amortization expense, increased $4.6 million, or
21%, to $26.5 million for the three months ended September 30, 2022 from $21.9
million for the three months ended September 30, 2021, primarily due to an
increase in activity. As a percentage of revenue, cost of revenue, exclusive of
depreciation and amortization expense of $4.0 million and $4.9 million for the
three months ended September 30, 2022 and 2021, respectively, was 80% and 87%
for the three months ended September 30, 2022 and 2021, respectively. The
decline as a percentage of revenue is primarily due to improved pricing as well
as a decline in labor related costs as a result of improved efficiency of our
crews.

  Well Completion Services. Well completion services division cost of revenue,
exclusive of depreciation and amortization expense, increased $14.5 million, or
68%, to $35.8 million for the three months ended September 30, 2022 from $21.3
million for the three months ended September 30, 2021, primarily due to an
increase in both the cost of consumables and activity. As a percentage of
revenue, our well completion services division cost of revenue, exclusive of
depreciation and amortization expense of $4.8 million and $6.5 million for the
three months ended September 30, 2022 and 2021, respectively, was 70% and 94%
for the three months ended September 30, 2022 and 2021, respectively. The
decrease as a percentage of revenue is primarily due to an increase in
utilization as well as improved pricing.

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  Natural Sand Proppant Services. Natural sand proppant services division cost
of revenue, exclusive of depreciation, depletion and accretion expense,
decreased $0.2 million, or 2%, to $9.2 million for the three months ended
September 30, 2022 from $9.4 million for the three months ended September 30,
2021. As a percentage of revenue, cost of revenue, exclusive of depreciation,
depletion and accretion expense of $2.9 million and $2.5 million for the three
months ended September 30, 2022 and 2021, respectively, was 71% and 112% for the
three months ended September 30, 2022 and 2021, respectively. The decrease as a
percentage of revenue is primarily due to an 81% increase in price per ton of
sand sold.

Drilling Services. Drilling services division cost of revenue, exclusive of
depreciation and amortization expense, increased $1.2 million, or 75%, to $2.8
million for the three months ended September 30, 2022 from $1.6 million for the
three months ended September 30, 2021. As a percentage of revenue, our drilling
services division cost of revenue, exclusive of depreciation and amortization
expense of $1.6 million and $1.9 million for the three months ended
September 30, 2022 and 2021, respectively, was 90% and 130% for the three months
ended September 30, 2022 and 2021, respectively. The decline is primarily due to
an increase in utilization.

  Other Services. Other services division cost of revenue, exclusive of
depreciation and amortization expense, increased $0.8 million, or 20%, to $4.7
million for the three months ended September 30, 2022 from $3.9 million for the
three months ended September 30, 2021. As a percentage of revenue, cost of
revenue, exclusive of depreciation and amortization expense of $2.6 million and
$3.2 million for the three months ended September 30, 2022 and 2021,
respectively, was 68% and 85% for the three months ended September 30, 2022 and
2021, respectively. The decrease is primarily due to a decline in labor costs as
a percentage of revenue and an increase in utilization.

Selling, general and administrative expenses. Selling, general and administrative, or SG&A, expenses represent the costs associated with managing and supporting our operations. The table below provides a breakdown of SG&A fees for the periods indicated (in thousands):

                                            Three Months Ended
                               September 30, 2022       September 30, 2021
Cash expenses:
Compensation and benefits     $             3,676      $             3,353
Professional services(a)                    3,706                    4,134
Other(b)                                    2,059                    2,252
Total cash SG&A expense                     9,441                    9,739
Non-cash expenses:
Bad debt provision(c)                           3                   31,449

Stock based compensation                      241                      241
Total non-cash SG&A expense                   244                   31,690
Total SG&A expense            $             9,685      $            41,429


a.  Certain legal expenses totaling $0.4 million were reclassified to Other, net
for the three months ended September 30, 2021.
b.  Includes travel-related costs, IT expenses, rent, utilities and other
general and administrative-related costs.
c.  The bad debt provision for the three months ended September 30, 2021
includes $31.2 million related to the Stingray Pressure Pumping and Muskie
contracts with Gulfport.

  Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion,
amortization and accretion decreased $3.3 million, or 17%, to $15.8 million for
the three months ended September 30, 2022 from $19.1 million for the three
months ended September 30, 2021. The decrease is primarily attributable to a
decline in property and equipment depreciation expense as a result of lower
capital expenditures and existing assets being fully depreciated.

Gains on disposal of assets, net. Gains on disposal of assets primarily related to the sale of trucking assets during the three months ended
September 30, 2022 and 2021.

Depreciation of long-lived assets. In the three months ended September 30, 2021we began the temporary shutdown of our crude oil transportation operations, which resulted in the deprecation of the trade names of $0.5 million.

  Operating Income (Loss). We reported operating income of $3.8 million for the
three months ended September 30, 2022 compared to an operating loss of $54.2
million for the three months ended September 30, 2021. The decrease in operating
loss is primarily due to an increase in activity and utilization across all
operating divisions.
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  Interest Expense, Net. Interest expense, net increased $1.8 million, or 120%,
to $3.3 million for the three months ended September 30, 2022 from $1.5 million
for the three months ended September 30, 2021. The increase is primarily due to
an increase in the interest rate and average borrowings outstanding under our
revolving credit facility.

  Other Income (Expense), Net. Other income increased $3.4 million during the
three months ended September 30, 2022 compared to the three months ended
September 30, 2021 primarily due to an increase in interest on trade accounts
receivable from $8.0 million for the three months ended September 30, 2021 to
$10.5 million for the three months ended September 30, 2022, as well as a
decline in legal fees unrelated to ongoing operations.

  Income Taxes. We recorded income tax expense of $3.8 million on pre-tax income
of $11.5 million for the three months ended September 30, 2022 compared to an
income tax benefit of $7.2 million on pre-tax losses of $48.1 million for the
three months ended September 30, 2021. Our effective tax rates were 33% and 15%
for the three months ended September 30, 2022 and 2021, respectively. The
effective tax rates for the three months ended September 30, 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.



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Nine Months Ended September 30, 2022 Compared to Nine Months Ended September 30,
2021
                                                                            Nine Months Ended
                                                              September 30,

2022 September 30, 2021

                                                                              (in thousands)
Revenue:
Infrastructure services                                     $            81,892          $           73,690
Well completion services                                                119,223                      63,059
Natural sand proppant services                                           37,548                      24,011
Drilling services                                                         7,944                       3,288
Other services                                                           16,730                      13,640
Eliminations                                                             (4,159)                     (5,958)
Total revenue                                                           259,178                     171,730

Cost of revenues: infrastructure services (excluding depreciation of $12,477 and $17,499respectively, for the nine months ended September 30, 2022 and 2021)

                           67,239                      70,432

Well completion services (excluding depreciation and amortization of $17,944 and $19,668respectively, for the nine months ended September 30, 2022 and 2021)

                           92,159                      47,788

Natural sand support services (excluding depreciation, depletion and accretion of $6,711 and $7,059respectively, for the nine months ended September 30, 2022 and 2021)

                   26,701                      22,631

Drilling services (excluding amortization of $4,928 and
$6,185respectively, for the nine months ended September 30, 2022 and 2021)

                                                        7,530                       4,739

Other services (excluding amortization of $8,378 and $10,148respectively, for the nine months ended September 30, 2022 and 2021)

12,256                      12,407
Eliminations                                                             (4,163)                     (5,958)
Total cost of revenue                                                   201,722                     152,039
Selling, general and administrative expenses                             26,560                      69,313
Depreciation, depletion, amortization and accretion                      50,485                      60,559
Gains on disposal of assets, net                                         (3,738)                     (4,632)

Impairment of long-lived assets                                               -                         547
Operating loss                                                          (15,851)                   (106,096)
Interest expense, net                                                    (8,270)                     (3,878)
Other income (expense), net                                              30,175                      (4,527)
Income (loss) before income taxes                                         6,054                    (114,501)
Provision (benefit) for income taxes                                     11,442                     (26,370)
Net loss                                                    $            (5,388)         $          (88,131)



  Revenue. Revenue for the nine months ended September 30, 2022 increased $87.5
million, or 51%, to $259.2 million from $171.7 million for the nine months ended
September 30, 2021. The increase in total revenue is primarily attributable to
increases in revenue across all operating divisions. Revenue derived from
related parties was $1.0 million, or 0.4% of our total revenue, for the nine
months ended September 30, 2022 and $17.8 million, or 10% of our total revenue,
for the nine months ended September 30, 2021. Substantially all of our related
party revenue was derived from Gulfport under pressure pumping and sand
contracts. For additional information regarding the status of these contracts
and the pending litigation related to the pressure pumping contract, see
"Industry Overview - Oil and Natural Gas Industry," "Industry Overview - Natural
Sand Proppant Industry" and Note 18. Commitments and Contingencies to our
unaudited condensed consolidated financial statements included elsewhere in this
report. Revenue by operating division was as follows:

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Infrastructure Services. Infrastructure services division revenue increased $8.2
million, or 11%, to $81.9 million for the nine months ended September 30, 2022
from $73.7 million for the nine months ended September 30, 2021. There was less
storm activity during the nine months ended September 30, 2022 compared to the
nine months ended September 30, 2021, resulting in a $13.3 million decrease in
storm restoration revenue. This was offset by increases in overhead distribution
as a result of an increase in our crew count, improved efficiency of our crews,
improved pricing for our services as well as an increase in engineering services
revenue.

Well Completion Services. Well completion services division revenue increased
$56.1 million, or 89%, to $119.2 million for the nine months ended September 30,
2022 from $63.1 million for the nine months ended September 30, 2021. We did not
recognize any revenue derived from related parties for the nine months ended
September 30, 2022 compared to $14.8 million, or 23% of total well completion
revenue, for the nine months ended September 30, 2021. All of our well
completion related party revenue was derived from Gulfport under a pressure
pumping contract. On November 13, 2020, Gulfport filed petitions for voluntary
relief under chapter 11 of the Bankruptcy Code. During the nine months ended
September 30, 2021, we recognized revenue totaling $14.8 million related to the
modification of our pressure pumping contract with Gulfport. For additional
information regarding the status of this contract and the pending litigation
related to this contract, see "Industry Overview - Oil and Natural Gas Industry"
above and notes 2 and 3 to our unaudited condensed consolidated financial
statements included elsewhere in this report. Inter-segment revenues, consisting
primarily of revenue derived from our sand segment, was $0.6 million and $0.1
million for the nine months ended September 30, 2022 and 2021, respectively.

The increase in our well completion services revenue was primarily driven by an
increase in pressure pumping services utilization and pricing. The number of
stages completed increased 161% to 4,312 for the nine months ended September 30,
2022 from 1,653 for the nine months ended September 30, 2021. An average of 2.9
of our six fleets were active for the nine months ended September 30, 2022 as
compared to an average of 1.0 fleets for the nine months ended September 30,
2021.

Natural Sand Proppant Services. Natural sand proppant services division revenue
increased $13.5 million, or 56%, to $37.5 million for the nine months ended
September 30, 2022, from $24.0 million for the nine months ended September 30,
2021. We did not recognize any related party revenue for the nine months ended
September 30, 2022. Revenue derived from related parties was $2.1 million,
or 9% of total sand revenue, for the nine months ended September 30, 2021. All
of our related party revenue was derived from Gulfport under a sand supply
contract. On November 13, 2020, Gulfport filed petitions for voluntary relief
under chapter 11 of the Bankruptcy Code. During the three months ended March 31,
2021, we recognized revenue totaling $2.1 million related to the modification of
our sand supply contract with Gulfport. For additional information regarding the
status of this contract and the pending litigation related to this contract, see
"Industry Overview - Natural Sand Proppant Industry" above and notes 2 and 3 to
our unaudited condensed consolidated financial statements included elsewhere in
this report. Inter-segment revenue, consisting primarily of revenue derived from
our pressure pumping segment, was $2.4 million, or 7% of total sand revenue, for
the nine months ended September 30, 2022 and $4.0 million, or 17% of total sand
revenue, for the nine months ended September 30, 2021.

The increase in our natural sand proppant services revenue was primarily due to
a 60% increase in the average sales price per ton of sand sold from $16.37 per
ton during the nine months ended September 30, 2021 to $26.15 per ton during the
nine months ended September 30, 2022 and a 38% increase in tons of sand sold
from approximately 741,458 tons for the nine months ended September 30, 2021 to
approximately 1,019,740 tons for the nine months ended September 30, 2022. These
increases were partially offset by a $3.3 million decline in shortfall revenue
for the nine months ended September 30, 2022 as compared to the nine months
ended September 30, 2021.

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Drilling Services. Drilling services division revenue increased $4.6 million, or
139%, to $7.9 million for the nine months ended September 30, 2022 from $3.3
million for the nine months ended September 30, 2021. The increase in our
drilling services revenue was primarily attributable to increased utilization
for our directional drilling business from 20% during the nine months ended
September 30, 2021 to 43% nine months ended September 30, 2022 as well as
increased pricing.

Other Services. Other services revenue, consisting of revenue derived from our
aviation, equipment rental, crude oil hauling, remote accommodation and
equipment manufacturing businesses, increased $3.1 million, or 23%, to $16.7
million for the nine months ended September 30, 2022 from $13.6 million for the
nine months ended September 30, 2021. Inter-segment revenue, consisting
primarily of revenue derived from our infrastructure and well completion
segments, totaled $1.0 million and $1.8 million for the nine months ended
September 30, 2022 and 2021, respectively.

The increase in our other services revenue was primarily due to an increase in
utilization for our equipment rental business. An average of 240 pieces of
equipment was rented to customers during the nine months ended September 30,
2022, an increase of 105% from an average of 117 pieces of equipment rented to
customers during the nine months ended September 30, 2021. Additionally,
utilization for remote accommodations business increased. Due to market
conditions, we have temporarily shut down our crude oil hauling business
beginning in July 2021, resulting in a decline in revenue of approximately $1.3
million.

  Cost of Revenue (exclusive of depreciation, depletion, amortization and
accretion expense). Cost of revenue, exclusive of depreciation, depletion,
amortization and accretion expense, increased $49.7 million from $152.0 million,
or 89% of total revenue, for the nine months ended September 30, 2021 to $201.7
million, or 78% of total revenue, for the nine months ended September 30, 2022.
The increase is primarily due to an increase in cost of revenue for the well
completion services division. Cost of revenue by operating division was as
follows:

Infrastructure Services. Infrastructure services division cost of revenue,
exclusive of depreciation and amortization expense, decreased $3.2 million, or
5%, to $67.2 million for the nine months ended September 30, 2022 from $70.4
million for the nine months ended September 30, 2021. As a percentage of
revenue, cost of revenue, exclusive of depreciation and amortization expense
of $12.5 million and $17.5 million, respectively, for the nine months ended
September 30, 2022 and 2021 was 82% and 96% for the nine months ended
September 30, 2022 and 2021, respectively. The decrease as a percentage of
revenue is primarily due to declines in labor related costs associated with
improved efficiency of our crews and equipment rental costs as a percentage of
revenue.

Well Completion Services. Well completion services division cost of revenue,
exclusive of depreciation and amortization expense, increased $44.4 million, or
93%, to $92.2 million for the nine months ended September 30, 2022 from $47.8
million for the nine months ended September 30, 2021, primarily due to an
increase in cost of goods sold as a result of providing sand and chemicals with
our service package to customers during the nine months ended September 30, 2022
as well as an increase in activity. As a percentage of revenue, our well
completion services division cost of revenue, exclusive of depreciation and
amortization expense of $18.0 million and $19.7 million for the nine months
ended September 30, 2022 and 2021, respectively, was relatively flat at 77% and
76% for the nine months ended September 30, 2022 and 2021, respectively.

Natural Sand Proppant Services. Natural sand proppant services division cost of
revenue, exclusive of depreciation, depletion and accretion expense, increased
$4.1 million, or 18%, from $22.6 million for the nine months ended September 30,
2021 to $26.7 million for the nine months ended September 30, 2022. As a
percentage of revenue, cost of revenue, exclusive of depreciation, depletion and
accretion expense of $6.7 million and $7.1 million for the nine months ended
September 30, 2022 and 2021, respectively, was 71% and 94% for the nine months
ended September 30, 2022 and 2021, respectively. The decrease in cost as a
percentage of revenue is primarily due to a 60% increase in average sales price.

Drilling Services. Drilling services division cost of revenue, exclusive of
depreciation and amortization expense, increased $2.8 million, or 60%, from $4.7
million for the nine months ended September 30, 2021 to $7.5 million for the
nine months ended September 30, 2022, as a result of increased activity. As a
percentage of revenue, our drilling services division cost of revenue, exclusive
of depreciation and amortization expense of $4.9 million and $6.2 million, for
the nine months ended September 30, 2022 and 2021, respectively, was 95% and
142% for the nine months ended September 30, 2022 and 2021, respectively. The
decrease as a percentage of revenue is primarily due to increased pricing and
utilization.

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Other Services. Other services division cost of revenue, exclusive of
depreciation and amortization expense, decreased $0.1 million, or 1%, from $12.4
million for the nine months ended September 30, 2021 to $12.3 million for the
nine months ended September 30, 2022. As a percentage of revenue, cost of
revenue, exclusive of depreciation and amortization expense of $8.4 million and
$10.1 million for the nine months ended September 30, 2022 and 2021,
respectively, was 73% and 91% for the nine months ended September 30, 2022 and
2021, respectively. The decrease as a percentage of revenue is primarily due to
an increase in utilization.

Selling, general and administrative expenses. Selling, general and administrative expenses represent the costs associated with managing and supporting our operations. The table below provides a breakdown of SG&A fees for the periods indicated (in thousands):

                                             Nine Months Ended
                                September 30, 2022      September 30, 2021
Cash expenses:
Compensation and benefits      $            9,796      $            11,379
Professional services(a)                   10,067                    8,399
Other(b)                                    6,127                    7,058
Total cash SG&A expenses                   25,990                   26,836
Non-cash expenses:
Bad debt provision(c)                        (112)                  41,650

Stock based compensation                      682                      827
Total non-cash SG&A expenses                  570                   42,477
Total SG&A expenses            $           26,560      $            69,313


a.  Certain legal expenses totaling $5.4 million were reclassified to Other, net
for the nine months ended September 30, 2021.
b.  Includes travel-related costs, IT expenses, rent, utilities and other
general and administrative-related costs.
c.  The bad debt provision for the nine months ended September 30, 2021 includes
$41.2 million related to the Stingray Pressure Pumping and Muskie contracts with
Gulfport.

  Depreciation, Depletion, Amortization and Accretion. Depreciation, depletion,
amortization and accretion decreased $10.1 million to $50.5 million for the nine
months ended September 30, 2022 from $60.6 million for the nine months ended
September 30, 2021. The decrease is primarily attributable to a decline in
property and equipment depreciation expense as a result of lower capital
expenditures and existing assets being fully depreciated.

Gains on Disposal of Assets, Net. Gains on the disposal of assets is primarily
related to the sale of trucks, land and buildings during the nine months ended
September 30, 2022 and trucking assets for the nine months ended September 30,
2021.

Depreciation of long-lived assets. In the three months ended September 30, 2021we began the temporary shutdown of our crude oil transportation operations, which resulted in the deprecation of the trade names of $0.5 million.

  Operating Loss. We reported an operating loss of $15.9 million for the nine
months ended September 30, 2022 compared to an operating loss of $106.1
million for the nine months ended September 30, 2021. The reduced operating loss
was primarily due to a decline in costs as a percentage of revenue as well as
increased activity across all operating divisions.

  Interest Expense, Net. Interest expense, net increased $4.4 million, or 113%,
to $8.3 million for the nine months ended September 30, 2022 from $3.9 million
for the nine months ended September 30, 2021 primarily due to an increase in the
interest rate and average borrowings outstanding under our revolving credit
facility.

  Other Income (Expense), Net. We recognized other income, net of $30.2 million
during the nine months ended September 30, 2022 compared to other expense, net
of $4.5 million for the nine months ended September 30, 2021. During the nine
months ended September 30, 2021 we recognized expense of $25.0 million related
to an agreement to settle a legal matter and corresponding legal fees totaling
$5.4 million. We recognized interest on trade accounts receivable of $30.5
million for the nine months ended September 30, 2022 compared to $25.1 million
for nine months ended September 30, 2021.

  Income Taxes. We recorded income tax expense of $11.4 million on pre-tax
income of $6.1 million for the nine months ended September 30, 2022 compared to
an income tax benefit of $26.4 million on pre-tax losses of $114.5 million for
the nine months ended September 30, 2021. Our effective tax rate was 189% for
the nine months ended September 30, 2022 compared to 23% for the nine months
ended September 30, 2021. The increase compared to the nine months ended
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September 30, 2021 was due to the distribution of income between United States and
Porto Rico as well as changes to the valuation allowance.

Non-GAAP Financial Measures

Adjusted EBITDA

Adjusted EBITDA is a supplemental non-GAAP financial measure that is used by
management and external users of our financial statements, such as industry
analysts, investors, lenders and rating agencies. We define Adjusted EBITDA as
net income (loss) before depreciation, depletion, amortization and accretion,
gains on disposal of assets, impairment of other long-lived assets, public
offering costs, stock based compensation, interest expense, net, other income
(expense), net (which is comprised of interest on trade accounts receivable and
certain legal expenses) and provision (benefit) for income taxes, further
adjusted to add back interest on trade accounts receivable. We exclude the items
listed above from net income (loss) in arriving at Adjusted EBITDA because these
amounts can vary substantially from company to company within our industries
depending upon accounting methods and book values of assets, capital structures
and the method by which the assets were acquired. Adjusted EBITDA should not be
considered as an alternative to, or more meaningful than, net loss or cash flows
from operating activities as determined in accordance with GAAP or as an
indicator of our operating performance or liquidity. Certain items excluded from
Adjusted EBITDA are significant components in understanding and assessing a
company's financial performance, such as a company's cost of capital and tax
structure, as well as the historic costs of depreciable assets, none of which
are components of Adjusted EBITDA. Our computations of Adjusted EBITDA may not
be comparable to other similarly titled measures of other companies. We believe
that Adjusted EBITDA is a widely followed measure of operating performance and
may also be used by investors to measure our ability to meet debt service
requirements.

The following tables provide a reconciliation of Adjusted EBITDA to the GAAP
financial measure of net income or (loss) for each of our operating segments for
the specified periods (in thousands).

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