Mammoth Energy Services Inc.

Company Overview

Business Model: Mammoth Energy Services, Inc. is an integrated, growth-oriented services company providing products and services primarily to the oil and natural gas, aviation, and utility infrastructure industries. Its core value proposition involves driving returns through improved execution by prioritizing asset utilization, margin expansion, and capital efficiency. The company's suite of services includes rental services (oilfield, construction, and aviation equipment), infrastructure services (engineering, design, construction, upgrade, maintenance, and repair for fiber networks), natural sand proppant services (mining, processing, and selling natural sand proppant for hydraulic fracturing), accommodation services (remote housing and related facilities for oilfield workers), and drilling services (directional drilling). The company aims to increase ultimate recovery and present value of production streams from unconventional resources and improve fiber networks, leveraging cross-selling opportunities.

Market Position: Mammoth Energy Services, Inc. operates in highly competitive markets, competing based on industry experience, technical expertise, financial and operational resources, geographic presence, industry reputation, safety record, and customer service. In the natural sand proppant business, it competes with large national and smaller regional producers, differentiating itself through high-quality Northern White silica sand reserves and connectivity to rail and transportation infrastructure, offering a cost advantage. In infrastructure services, key competitors include Quanta Services, Inc. and MasTec, Inc. The company's strategic strengths include a narrowed focus following divestitures, strategic geographic positioning in major unconventional resource plays (e.g., Utica Shale, Permian Basin, SCOOP/STACK, Marcellus Shale) and southwestern/midwestern U.S. for infrastructure, and an experienced management and operating team with an average of over 29 years of services experience.

Recent Strategic Developments: During 2025, Mammoth Energy Services, Inc. completed four strategic divestitures to narrow its business focus:

• April 11, 2025: Sold a portion of its infrastructure services entities, including distribution, transmission, and substation operations, for approximately $108.7 million.
• June 16, 2025: Sold all equipment previously used in its hydraulic fracturing services for $15.0 million.
• September 15, 2025: Completed the sale of assets related to its natural sand proppant operations at its Piranha Proppant LLC processing plant.
• December 2, 2025: Completed the sale of its engineering services business, Aquawolf, for approximately $30.0 million. These divestitures reflect a strategic shift in the company's business. Additionally, the company received a $150.0 million payment on October 1, 2024, and an $18.4 million payment on October 18, 2024, from the Commonwealth of Puerto Rico and PREPA, respectively, as part of a settlement agreement with PREPA.

Geographic Footprint: Mammoth Energy Services, Inc. primarily operates in North America. Its facilities and service centers are strategically located in Ohio, Texas, Oklahoma, Wisconsin, and Alberta, Canada. Key operational areas include:

• Oil and Natural Gas: Eastern Ohio, Southern Ohio, West Texas, Appalachian Basin, SCOOP and STACK in Oklahoma, Arkoma Basin in Arkansas and Oklahoma, Anadarko Basin in Oklahoma, Marcellus Shale in West Virginia and Pennsylvania, Southeastern New Mexico, Barnett Shale in Texas, Granite Wash and Mississippi Shale in Oklahoma and Texas, Cana Woodford and Woodford Shales and the Cleveland Sand in Oklahoma, and the oil sands in Alberta, Canada.
• Infrastructure Services: Primarily the southwestern and midwestern portions of the United States.
• Natural Sand Proppant Services: Wisconsin (Jackson County) with rail access to Utica Shale, Montney Shale in British Columbia and Alberta, Canada.
• Accommodation Services: Northern Alberta, Canada.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 3.8%
• Operating Margin: -129.6%
• Net Margin: -144.0%

Investment in Growth:

• R&D Expenditure: Not explicitly stated as a separate line item.
• Capital Expenditures: $70.6 million (2025)
• Strategic Investments:
  • Purchases of aircraft and equipment for the rental services segment: $70.0 million (2025)
  • Trailer purchases for fiber optic crews in the infrastructure services segment: $0.1 million (2025)
  • Equipment additions for remote accommodations and drilling businesses: $0.5 million (2025)
  • Purchase of marketable securities: $19.5 million (2025)

Business Segment Analysis

Rental Services

Financial Performance:

• Revenue: $11.1 million (+56.2% YoY)
• Operating Margin: Not explicitly stated, but cost of revenue (exclusive of DDAA) as a percentage of revenue improved from 70% (2024) to 60% (2025).
• Key Growth Drivers: Primarily a $2.5 million increase in aviation rental revenue and a 29% increase in equipment rental revenue, leading to higher equipment utilization and improved absorption of fixed operating costs.

Product Portfolio:

• Equipment rentals: Cranes, light plants, generators, and other oilfield-related and construction equipment.
• Aviation services: Leasing regional aircraft (9 owned as of December 31, 2025), helicopters (2 owned), jet engines (5 owned), and auxiliary power units (10 owned).

Market Dynamics:

• The operating environment for aircraft and aircraft asset leasing is favorable, influenced by population growth, improved global economic health, OEM supply chain challenges, backlogs, airline financing needs, and maintenance facility availability.
• Provides aviation asset financing for operators, offering capital deployment and fleet flexibility while eliminating residual value risk.

Infrastructure Services

Financial Performance:

• Revenue: $4.1 million (+177.6% YoY)
• Operating Margin: Not explicitly stated, but cost of revenue (exclusive of DDAA) as a percentage of revenue improved from 153% (2024) to 144% (2025).
• Key Growth Drivers: Increase in fiber optic revenue related to increased activity.

Product Portfolio:

• Engineering, design, construction, upgrade, maintenance, and repair services for fiber networks.

Market Dynamics:

• Demand is driven by artificial intelligence ("AI") and data center projects, which are expected to drive upgrades and overbuilds of fiber networks to increase data capacity.
• Strong funding for projects, including opportunities from the Infrastructure Investment and Jobs Act ("IIJA") and Broadband Equity, Access and Deployment ("BEAD") program, supporting investments in broadband, utility, transportation, and clean-energy projects.

Natural Sand Proppant Services

Financial Performance:

• Revenue: $16.6 million (-13.1% YoY)
• Operating Margin: Not explicitly stated, but cost of revenue (exclusive of DDAA) as a percentage of revenue increased from 93% (2024) to 109% (2025).
• Key Growth Drivers: A 12% increase in sand volumes sold was offset by a 12% decrease in average price per ton of sand sold (from $23.15 in 2024 to $20.43 in 2025), primarily due to lower completions activity by customers.

Product Portfolio:

• Mines, processes, and sells natural sand proppant (frac sand), primarily premium monocrystalline sand.
• Produces a range of frac sand sizes (20/40-mesh, 30/50-mesh, 40/70-mesh) meeting ISO/API 13503-2 specifications.
• Provides logistics solutions, including rail transport and an in-house railcar fleet.

Market Dynamics:

• Activity remained suppressed throughout 2024 and 2025, following a decline in crude oil and natural gas prices in the second half of 2023.
• Expects 2026 activity to be relatively steady with potential for moderate upside driven by increases in natural gas demand for power and LNG exports.
• Northern White silica sand reserves offer coarseness, conductivity, sphericity, acid-solubility, and crush-resistant properties, providing a competitive advantage for oil and natural gas production in major unconventional resource basins.

Sub-segment Breakdown:

• Taylor in Jackson County, Wisconsin: Mined 525 thousand tons in 2025 (up from 492 thousand tons in 2024). Has 22.1 million tons of proven recoverable proppant sand reserves as of December 31, 2025. Permitted capacity of 2.2 million tons per year for finished product. Produced 0.5 million tons of finished sand product in 2025.
• Piranha in Barron County, Wisconsin: Mined 136 thousand tons in 2025 (up from 53 thousand tons in 2024). Assets sold in September 2025.
• Muskie in Pierce County, Wisconsin: Idled since September 2018 due to market conditions and sold in January 2026.

Accommodation Services

Financial Performance:

• Revenue: $9.0 million (-17.5% YoY)
• Operating Margin: Not explicitly stated, but cost of revenue (exclusive of DDAA) as a percentage of revenue increased from 59% (2024) to 67% (2025).
• Key Growth Drivers: Decline in utilization, with an average of 186 rooms utilized per night in 2025 compared to 216 in 2024, leading to a higher ratio of fixed costs to variable costs.

Product Portfolio:

• Remote accommodations, including housing, kitchen and dining, and recreational service facilities for oilfield workers in remote areas.
• Provides a turnkey solution with modular camps and "all inclusive" services (meals prepared).

Market Dynamics:

• Specializes in remote areas lacking typical town/city infrastructure.
• Demand could decrease if significant development activity does not return to the Canadian oil sands region or if permanent infrastructure develops in these regions.

Drilling Services

Financial Performance:

• Revenue: $3.7 million (+3.3% YoY)
• Operating Margin: Not explicitly stated, but cost of revenue (exclusive of DDAA) as a percentage of revenue improved from 122% (2024) to 103% (2025).
• Key Growth Drivers: Favorable shift in job mix toward higher value horizontal drilling activity, offsetting decreased directional drilling activity.

Product Portfolio:

• Directional drilling services for efficient drilling and production from unconventional resource plays.
• Equipment includes mud motors, measurement-while-drilling (MWD) kits (4 owned), and electromagnetic (EM) technology (1 owned).
• Personnel involved in planning, management, and execution of horizontal/directional drilling.

Market Dynamics:

• Operates in the Anadarko Basin, Arkoma Basin, Powder River Basin, and Permian Basin.
• The evolution of unconventional resource recovery increases the need for precise wellbore placement.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No shares repurchased as of December 31, 2025, or to date, under the authorized program.
• Dividend Payments: No dividends declared or paid.
• Dividend Yield: Not applicable.
• Future Capital Return Commitments: On August 10, 2023, the board authorized a stock repurchase program for up to the lesser of $55 million or 10 million shares of common stock. An amendment on April 11, 2025, permitted repurchases up to the lesser of $50 million or 10 million shares on or before March 31, 2026, provided unrestricted cash exceeds $50 million after each repurchase.

Balance Sheet Position:

• Cash and Equivalents: $102.0 million (2025)
• Total Debt: $0 (2025)
• Net Cash Position: $102.0 million (2025)
• Credit Rating: Not disclosed.
• Debt Maturity Profile:
  • Revolving credit facility matures on October 16, 2028.
  • Operating lease obligations: $2.3 million (less than 1 year), $1.2 million (1-3 years), $0.1 million (3-5 years), $0.5 million (more than 5 years).
  • Financing lease obligations: $0.05 million (less than 1 year), $0.03 million (1-3 years).

Cash Flow Generation:

• Operating Cash Flow: $(19.6) million (2025) from continuing operations.
• Free Cash Flow: Not explicitly stated, but capital expenditures were $70.6 million in 2025.
• Cash Conversion Metrics: Not explicitly stated.

Operational Excellence

Production & Service Model:

• Natural Sand Proppant: Open pit mining, followed by wet plant operations (separating sand from unusable materials, water recycling) and dry plant operations (drying, screening into specific mesh categories, storage in silos). Dry plants are enclosed for year-round operation; wet plants operate seasonally (8 months/year).
• Accommodation Services: Provides modular camps that form dormitories, kitchen/dining facilities, and recreation areas, operated as "all inclusive" with meals. Relies on a third-party subcontractor for manufacturing and installation of modular units.
• Drilling Services: Utilizes mud motors, MWD kits, and EM technology for precise placement of wellbores in long-lateral intervals within narrow formations. Personnel are involved from initial planning to execution.

Supply Chain Architecture: Key Suppliers & Partners:

• Raw Materials (Sand): Owns surface and mineral rights for Taylor sand facility.
• Transportation: Contracts with third-party providers for truck and rail services to transport frac sand. Leases an in-house railcar fleet from various third parties.
• Modular Camps: Relies on a third-party subcontractor for manufacturing and installation of customized modular units for accommodation services.

Facility Network:

• Manufacturing (Sand):
  • Taylor in Jackson County, Wisconsin: Two dry plants (total permitted capacity 3.1 million tons/year), two wet plants (total permitted capacity 3.9 million tons/year).
  • Muskie in Pierce County, Wisconsin: Indoor sand processing plant (temporarily idled since September 2018, sold January 2026).
• Research & Development: Not explicitly detailed as separate facilities.
• Distribution (Sand): Origin transloading facilities on Canadian National Railway Company (CN) rail system.

Operational Metrics:

• Accommodation Services: Average 186 rooms utilized per night during 2025 (capacity of 764 rooms).
• Natural Sand Proppant: Taylor facility produced 0.5 million tons of finished sand product in 2025.

Market Access & Customer Relationships

Go-to-Market Strategy:

• Leverages a broad range of complementary services for cross-selling opportunities.
• Expands infrastructure business by monitoring market conditions and deploying equipment/personnel in existing and new geographic areas.
• Maintains a conservative balance sheet to react to market changes.
• Leverages experienced operational management team expertise and long-term customer relationships.
• Pursues selected, accretive acquisitions, particularly in infrastructure services and industrial-based companies, and potentially in the renewable energy sector.

Distribution Channels:

• Direct Sales: Serves independent oil and natural gas producers, sand suppliers, fiber network owners, and aircraft-based passenger and cargo providers.
• Channel Partners: Not explicitly detailed.
• Digital Platforms: Not explicitly detailed.

Customer Portfolio: Enterprise Customers:

• Tier 1 Clients: Top five customers accounted for approximately 55% of revenue in 2025 and 58% in 2024.
• Strategic Partnerships: Not explicitly detailed beyond general customer relationships.
• Customer Concentration: Significant portion of revenue derived from a relatively small number of customers. Customer A (natural sand proppant) accounted for 18% of revenue in 2025. Customer B (accommodations) accounted for 12% of revenue in 2025. Customer C (rental services) accounted for 10% of revenue in 2025. Customer D (natural sand proppant) accounted for 5% of revenue in 2025. Customer E (other services) accounted for 69% of accounts receivable in 2025.

Geographic Revenue Distribution:

• United States: 62.1% of total revenue (2025)
• Canada: 37.7% of total revenue (2025)
• Other: 0.2% of total revenue (2025)

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics:

• Aircraft Industry: Favorable operating environment for aircraft leasing, driven by population growth, global economic health, OEM supply chain challenges, backlogs, airline financing needs, and maintenance facility availability.
• Oil and Natural Gas Industry: Traditionally volatile, influenced by supply/demand, commodity prices, production depletion rates, capital expenditures by E&P companies, economic conditions, political instability, and government regulations. Experienced challenges in 2024-2025 due to declining rig count and elevated production. Expects steady activity in H1 2026 with potential upside in H2 from LNG export capacity and power demand.
• Natural Sand Proppant Industry: Highly competitive with large national and smaller regional producers. Demand and pricing impacted by commodity price volatility and completion activities. Expects steady activity in 2026 with moderate upside from natural gas demand.
• Infrastructure Industry: Driven by artificial intelligence ("AI") and data center projects, leading to demand for fiber network upgrades and overbuilds. Strong funding from the Infrastructure Investment and Jobs Act ("IIJA") and Broadband Equity, Access and Deployment ("BEAD") program.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors:

• Infrastructure Services: Quanta Services, Inc., MasTec, Inc.
• Natural Sand Proppant Services: Badger Mining Corporation, Covia Holdings Corporation, Hi-Crush Partners LP, Capital Sand Proppants LLC, Athabasca Minerals Inc., Source Energy Services Ltd., U.S. Silica Holdings Inc.

Emerging Competitive Threats:

• Advancements in oilfield service technologies could lead to loss of market share or competitive disadvantage.
• New processes to replace hydraulic fracturing could reduce demand for frac sand.
• Oil and natural gas exploration and production companies developing in-house fracturing and directional drilling capabilities.
• New entrants or disruptive technologies in the aircraft leasing market (e.g., superior aircraft, alternative transportation).

Competitive Response Strategy:

• Focus on improved execution, asset utilization, margin expansion, and capital efficiency.
• Strategic deployment of equipment and personnel in unconventional resource plays and fiber network projects.
• Leverage broad service offerings for cross-selling and expanding customer base.
• Expand infrastructure business capacity and scope as demand warrants.
• Pursue selected, accretive acquisitions in infrastructure and industrial sectors.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Oil and Natural Gas Volatility: Demand for oil and natural gas services is highly dependent on volatile commodity prices, which can lead to reduced capital expenditures by customers, lower demand for services, and decreased utilization/rates. Mitigation: Strategic positioning to capitalize on anticipated demand from LNG export capacity and power demand enhancements.
• Aircraft Obsolescence/Demand Decline: Aircraft assets are long-lived and can become obsolete or less in demand due to superior technology, new manufacturers, alternative transportation, government regulations, or increased operating costs. Impact: Negatively impacts ability to lease or sell assets, potentially leading to impairment charges.
• Customer Concentration: Top five customers accounted for 55% of revenue in 2025. Loss of a significant customer or their failure to pay could substantially reduce revenue and harm financial condition. Mitigation: Broad customer base and wide geographic coverage of operations, but concentration risk remains.
• Energy Transition: Failure to effectively address the energy transition to a lower carbon footprint could adversely affect the oil and gas business, demand for services, access to capital, and market for securities. Impact: Increased regulatory requirements, investor/financial institution divestment, potential litigation.
• Geopolitical Exposure: Ongoing war in Ukraine, instability in the Middle East, and actions in Venezuela increase volatility in oil/natural gas prices, demand, cyberattack exposure, supply chain disruptions, and capital market constraints. Impact: Adverse impact on oilfield services industry and overall business.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Relies on third-party suppliers for specialized equipment and parts (e.g., for rental services, frac sand processing). Shortages, delays, or price increases could increase capital/repair expenditures and operating costs, limiting ability to construct/operate equipment.
• Transportation & Logistics: Relies on third parties for raw materials and transportation (e.g., rail for frac sand). Suspension or termination of these relationships, or increased transportation costs, could result in operational delays, increased costs, and competitive disadvantage.
• Capacity Constraints: Oilfield services equipment refurbishment, new asset construction, and reactivation of idle assets are subject to risks of delays or cost overruns (e.g., shortages of equipment/labor, unscheduled deliveries, permit delays).
• Water Access: Frac sand processing requires significant water. Shortages, restrictions, or inability to secure/maintain permits could increase costs or adversely affect operations.

Operational Challenges:

• Fixed Price Contracts: Inaccuracies in estimating costs for infrastructure services provided under fixed-price contracts could reduce profitability if actual costs exceed estimates.
• Warranty Claims/Faulty Engineering: Infrastructure services expose the company to potential liability for warranty claims and faulty engineering, which could reduce profitability, lead to significant claims, or harm reputation.
• Remote Accommodation Challenges: Customized nature and remote location of modular camps present challenges in timely manufacturing, delivery, installation, and maintenance, potentially leading to contract breaches or non-payment.
• Health and Food Safety: Providing food services in remote accommodations carries health and food safety risks, including food-borne illnesses, which could force temporary closures or harm the business.

Financial & Regulatory Risks

Market & Financial Risks:

• Receivables Losses: May experience losses in excess of recorded reserves for receivables, especially with concentrated customer base.
• PREPA Payment Risk: $20.0 million remains outstanding from PREPA as of December 31, 2025, with payment dependent on PREPA's plan of adjustment. Non-payment could materially and adversely affect financial condition.
• Revolving Credit Facility Restrictions: Imposes restrictions on incurring additional indebtedness, paying dividends, creating liens, making investments, and other actions, which may affect business operations.
• Interest Rate Fluctuations: Revolving credit facility has fluctuating interest rates, which could increase interest expense and adversely affect cash flow if rates rise.
• Foreign Currency Risk: Remote accommodation business generates revenue and incurs expenses in Canadian dollars, exposing the company to currency fluctuations.
• Marketable Securities Risk: Equity investments in publicly traded companies are subject to market price volatility.

Regulatory & Compliance Risks:

• Environmental, Health & Safety: Subject to stringent federal, state, and local laws (RCRA, CERCLA, Clean Water Act, Clean Air Act, OSHA, MSHA). Non-compliance can lead to substantial liability, penalties, and operational restrictions. Changes in regulations could increase compliance costs.
• Seismic Activity Regulation: Legislation or regulatory initiatives addressing seismic activity (e.g., related to wastewater disposal wells) could restrict drilling/production activities and produced water disposal, increasing operating costs.
• Mining Permits: Operations in natural sand proppant services depend on obtaining and renewing required permits and approvals from governmental authorities and third parties. Delays or denials could materially affect operations.
• Trucking Regulations: Increasing trucking regulations (e.g., environmental, hours of service, weight limits) may increase costs and negatively impact results.
• Cybersecurity Risks: Increasing dependence on digital technologies exposes the company to cyber incidents, which could result in information theft, data corruption, operational disruption, and financial loss. Compliance with evolving cybersecurity laws poses challenges.

Geopolitical & External Risks

Geopolitical Exposure:

• Global Conflicts: War in Ukraine, instability in the Middle East, and actions in Venezuela can increase volatility in energy markets and global stability.
• Trade Relations: Changes in U.S. and foreign trade regulations and tariffs could increase costs.

External Risks:

• Severe Weather: Operations in certain parts of the U.S. and Canada are subject to severe weather conditions, which can cause service curtailment, equipment damage, delivery delays, and loss of productivity.
• Economic Conditions: Concerns over global economic conditions, inflation, and credit availability can diminish demand for petroleum products and services.
• Public Health Emergencies: Can cause significant reductions in global economic activity, weakening demand for oil and gas, and disrupting operations.

Innovation & Technology Leadership

Research & Development Focus:

• Core Technology Areas: Focuses on technologies that increase ultimate recovery and present value of production streams from unconventional resources (e.g., directional drilling equipment like MWD and EM technology).
• Innovation Pipeline: Not explicitly detailed, but the company monitors market conditions and intends to expand capacity and scope of infrastructure services as demand warrants.

Intellectual Property Portfolio:

• Patent Strategy: Not explicitly detailed.
• Licensing Programs: Not explicitly detailed.
• IP Litigation: Not explicitly detailed.

Technology Partnerships:

• Strategic Alliances: Not explicitly detailed.
• Research Collaborations: Not explicitly detailed.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: Many key responsibilities are assigned to a small number of employees. The company does not have "key person" life insurance policies on any employees.

Board Composition: The board of directors includes individuals affiliated with Wexford Capital LP, the largest stockholder. The audit committee consists entirely of independent directors.

Human Capital Strategy

Workforce Composition:

• Total Employees: 115 full-time employees as of December 31, 2025.
• Geographic Distribution: Not explicitly detailed, but operations are in Ohio, Texas, Oklahoma, Wisconsin, and Alberta, Canada.
• Skill Mix: Requires skilled and qualified workers with specialized skills and experience for physically demanding work.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Faces intense competition for experienced energy service personnel.
• Retention Metrics: Not explicitly detailed.
• Employee Value Proposition: Invests in employee learning and development, provides opportunities and training for progression, and emphasizes a culture of safety.

Diversity & Development:

• Diversity Metrics: Not explicitly detailed.
• Development Programs: Requires field employees to complete technical and safety training programs, including periodic environmental, health, and safety meetings, live in-person training, and computer-based training. Has a safety recognition program.
• Culture & Engagement: Maintains a culture of safety, committed to employee health and safety, environmental preservation, and community relationships. Empowers all personnel with stop-work authority (SWA).

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: Not explicitly stated.
• Carbon Neutrality: Not explicitly stated.
• Renewable Energy: Not explicitly stated, but the company is evaluating acquisition opportunities in the renewable energy sector.
• The company acknowledges federal, state, and local steps to reduce GHG emissions and the Paris Agreement.

Supply Chain Sustainability:

• Supplier Engagement: Not explicitly detailed.
• Responsible Sourcing: Not explicitly detailed, but mentions compliance with conflict minerals (not in the provided text).

Social Impact Initiatives:

• Community Investment: Works closely with federal, state, and local governments and community organizations to ensure operations comply with legal requirements and community standards.
• Product Impact: Not explicitly detailed.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: Operations in Ohio, Wisconsin, Minnesota, North Dakota, Pennsylvania, West Virginia, and Canada (38% of 2025 revenue) may be limited or disrupted during severe winter and spring months due to weather conditions and road restrictions (e.g., weight limits on muddy roads). Operations in Oklahoma and Texas are generally not affected by seasonal weather.
• Economic Sensitivity: The oil and natural gas industry is historically cyclical, with activity levels significantly affected by oil and natural gas prices. The infrastructure industry is influenced by economic conditions and government funding.
• Industry Cycles: The oil and natural gas industry experiences volatility, impacting demand for services. The natural sand proppant industry also experiences fluctuations in demand and supply.

Planning & Forecasting:

• Monitors market conditions to determine when to recommence idled services and operations and increase workforce.
• Capital expenditure budget for 2026 (excluding aviation equipment) is estimated at $11 million, depending on industry conditions and financial results.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations:

• Oil and Natural Gas: Subject to federal, state, and local regulations for drilling permits, operations, waste handling (RCRA), hazardous substances (CERCLA), water discharges (Clean Water Act, Safe Drinking Water Act, Oil Pollution Act), air emissions (Clean Air Act), and NORM.
• Aviation: Leasing activities are subject to U.S. and international regulatory requirements, including aircraft registration, Certificate of Airworthiness, and U.S. export-control and sanctions laws (Commerce, Treasury/OFAC).
• Natural Sand Proppant: MSHA has primary regulatory jurisdiction over commercial silica operations, including quarries, surface mines, underground mines, and industrial mineral processing facilities. Permitting process involves federal, state, and local authorities (e.g., wetland permits, air quality, water quality, zoning).
• Infrastructure Services: Subject to licensing, permitting, inspection requirements for contractors, environmental and conservation matters, worker safety, wage and hour regulations, and building/electrical codes.

Trade & Export Controls:

• Export Restrictions: U.S. export-control and sanctions laws apply to leasing and export of aircraft, engines, and parts to foreign operators, restricting transactions with sanctioned jurisdictions or parties.

Legal Proceedings:

• PREPA Settlement: Cobra entered into a settlement agreement with PREPA on July 22, 2024, for an administrative expense claim of $170.0 million plus $18.4 million in Withheld FEMA Funds. $20.0 million remains outstanding as of December 31, 2025, pending PREPA's plan of adjustment. Appeals of the settlement order were filed by Puerto Rico municipalities and Foreman Electric Services Inc.
• Foreman Electric Services Inc. Litigation: Foreman filed RICO and state-law claims against Mammoth Energy Services, Inc. and Cobra, alleging wrongful interference. The case was re-filed in Oklahoma County District Court.
• Puerto Rico Municipal Tax Claims: Cobra has 14 lawsuits from Puerto Rico municipalities alleging failure to pay construction excise and volume of business taxes. Judgments have been entered against Cobra in some cases, totaling $5.1 million, $1.6 million, and $3.4 million, plus interest, penalties, and attorneys' fees. Appeals are ongoing.
• Christopher Williams (Fair Labor Standards Act): A putative class and collective action complaint alleging failure to pay overtime wages to workers in Puerto Rico. Arbitrations are pending for remaining claimants.
• Ohio State Tax Assessment: Appealed an unfavorable decision regarding state taxes on equipment purchases, with a final assessment received in April 2025.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate: (6.8)% for 2025, 5.8% for 2024.
• Geographic Tax Planning: Differences from the statutory U.S. federal income tax rate (21%) are primarily due to the mix of earnings between the United States and Puerto Rico, changes in valuation allowance, and Canadian withholding tax.
• Tax Reform Impact: The Inflation Reduction Act of 2022 (IRA) may accelerate the shift toward lower-carbon energy sources, potentially increasing compliance obligations and reducing demand for services. The One Big Beautiful Bill Act (OBBBA), enacted July 4, 2025, phases out or reduces certain IRA tax incentives, moderating its effect but not eliminating broader policy trends.
• Tax Liabilities: Recorded interest and penalties payable of $12.5 million (2025) and $8.5 million (2024) related to tax year returns in Puerto Rico (2019-2023) and the United States (2020).
• Net Operating Loss Carryforwards: Federal NOL and 163(j) interest limitation carryforwards of $199.0 million and $5.1 million, respectively, with indefinite life. State NOL carryforwards of $14.3 million (expire 2040-2045). Puerto Rico NOL carryforwards of $179.2 million (expire 2035).

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage: Maintains commercial general liability, workers’ compensation, business auto, commercial property, motor truck cargo, umbrella liability, professional liability, cybersecurity, and, in certain instances, excess liability, and directors and officers insurance policies.
• Self-Insurance: Self-insures employee health insurance with stop-loss coverage ($0.2 million per participant, $9.1 million aggregate stop-loss for 2025).
• Deductibles: Workers' compensation policy had no deductible in 2025 (vs. $0.3 million in 2024). Primary automobile liability policy required a deductible of up to $0.1 million in 2025 (vs. $0.5 million in 2024). Directors and officers liability policy had a deductible of $1.5 million per occurrence and an aggregate deductible of $10.0 million in 2025.
• Risk Transfer Mechanisms: Utilizes a deductible reimbursement insurance policy from a protected cell captive insurance company and is a member of a group captive insurance company for auto liability coverage. Endeavors to allocate potential liabilities and risks through master service agreements (MSAs) with customers.