Mammoth Energy’s financial risks grow over lawsuit settlements
Oklahoma City energy companies Mammoth Energy and Gulfport Energy have reached a settlement in their lawsuits and counter lawsuits filed two years ago. But the settlement has increased financial risks for Mammoth Energy.
A filing with the Securities and Exchange Commission announced the settlement of suits over Mammoth’s Pressure Pumping and Sand Supply Contracts it had with Gulfport Energy.
Gulfport originally filed suit in 2019 seeking to terminate its services agreement with Mammoth subsidiary, Stingray Pressure Pumping LLC. The suit alleged overpayments and audit costs.
Stingray countersued and Mammoth’s subsidiary Muskie Proppant LLC filed suit to recover delinquent payments.
Gulfport filed Chapter 11 bankruptcy in November 2020. Following its emergence from bankruptcy, Gulfport reached a settlement to terminate the litigation and allow Muskie to make a $3.1 million contract claim against the company.
Mammoth’s board of directors approved the settlement but the bankruptcy court has yet to act on the settlement.
However, the settlement also leaves Mammoth with net accounts receivable due from Gulfport totaling $33 million. Mammoth also stated in the SEC filing that it expects to record a $32 million to $33 million loss.
Mammoth indicated its serious debt issues are growing and could put the company at further risk.
” As a result of this settlement and the lack of payment from the Puerto Rico Electric Power Authority, which owed Mammoth’s subsidiary Cobra Acquisitions LLC approximately $325.1 million as of August 31, 2021, it is likely that Mammoth will be in breach of its leverage ratio and fixed charge coverage ratio contained in its amended and restated revolving credit facility with the lenders party thereto and PNC Bank, National Association, as administrative agent for the lenders.”
Mammoth is in negotiations with the leaders under the revolving credit facility but stated in the SEC filing “no assurance can be provided as to the timing or potential outcome of those negotiations. If an event of default occurs under Mammoth’s revolving credit facility and remains uncured, it could have a material adverse effect on Mammoth’s business, financial condition, results of operations and cash flows.”