Cobra Acquisitions LLC Announces Approval of Settlement Agreement by Title III Court

Rhea-AI Summary

Cobra Acquisitions , a subsidiary of Mammoth Energy Services, Inc. (NASDAQ: TUSK), announced the approval of a Settlement Agreement with Puerto Rico Electric Power Authority (PREPA) by the Title III Court. The agreement entails total settlement proceeds of $188.4 million, with PREPA required to pay $150 million within ten business days of the September 18th hearing. The remaining $38.4 million will be paid according to specific terms.

CEO Arty Straehla expressed satisfaction with the approval, noting that the proceeds will allow the company to pay off all outstanding amounts under their term credit facility and terminate it. The remaining funds are expected to have a transformative impact on the business. The settlement stems from work completed over five years ago and includes provisions for handling withheld FEMA funds.

Positive

• Settlement Agreement approval secures $188.4 million in total proceeds
• Immediate payment of $150 million within ten business days
• Ability to pay off all outstanding amounts under term credit facility
• Expected cash surplus on balance sheet after debt repayment
• Potential for transformative impact on business operations

Negative

• Extended delay in receiving payment for work completed over five years ago
• Remaining $38.4 million subject to conditions and potential delays

Financial Analyst

This settlement approval is a significant positive development for Mammoth Energy Services. The $188.4 million settlement, with $150 million to be paid within 10 business days, will have a transformative impact on the company's financial position. Key points:

• Immediate debt reduction: The company plans to pay off all outstanding amounts under its term credit facility, improving its balance sheet.
• Enhanced liquidity: The remaining proceeds will result in increased cash reserves, providing financial flexibility for future operations and potential growth initiatives.
• Resolution of long-standing issue: This settles a dispute over work completed over five years ago, removing uncertainty and potential legal costs.

Investors should monitor how management utilizes the additional cash to drive growth and create shareholder value. The stock may see a positive reaction as the market digests this favorable resolution.

Legal Expert

The approval of the Settlement Agreement by the Title III Court is a crucial legal milestone for Cobra Acquisitions. Key legal implications include:

• Enforceability: The court's approval makes the agreement legally binding, ensuring PREPA's compliance with payment terms.
• Risk mitigation: It eliminates potential prolonged litigation, saving time and resources for both parties.
• Structured payout: The tiered payment schedule, including provisions for FEMA funds, demonstrates a well-crafted legal framework to address complex financial situations.

The inclusion of specific timelines and conditions for payments showcases a robust legal strategy. However, investors should note the potential for appeals, particularly regarding the Withheld FEMA Funds, which could impact the final $18.4 million payment.

PREPA Required to Pay Cobra $150 Million within Ten Business Days

OKLAHOMA CITY, Sept. 19, 2024 /PRNewswire/ -- Cobra Acquisitions LLC ("Cobra"), a wholly owned subsidiary of Mammoth Energy Services, Inc. ("Mammoth" or the "Company") (NASDAQ: TUSK), today announced that the previously disclosed Settlement Agreement with the Puerto Rico Electric Power Authority ("PREPA") was approved by the Title III Court at the omnibus hearing held on September 18, 2024.

Under the terms of the Settlement Agreement, which was approved by Judge Laura Taylor Swain, Cobra will receive total settlement proceeds of $188.4 million. Additionally, PREPA is required to pay Cobra $150 million within ten business days of the September 18^th hearing. The remaining $38.4 million, of which $18.4 million relates to funds PREPA has received from the Federal Emergency Management Agency ("FEMA") but are currently withholding, are to be paid out according to the terms of the Settlement Agreement, which can be found below.

Arty Straehla, Chief Executive Officer, commented, "We are pleased with the results of the omnibus hearing and are happy to have received approval of the Settlement Agreement. We look forward to receiving the money owed to us for work completed over five years ago. The initial $150 million payment is expected to arrive within ten business days, and the remaining $38.4 million will follow. These proceeds will allow us to pay off all outstanding amounts under our term credit facility, together with accrued and unpaid interest, and terminate the facility. We expect that the remaining proceeds from the Settlement Agreement will result in cash on our balance sheet, which we believe will have a transformative impact on our business going forward."

Settlement Agreement Terms
The proceeds of the Settlement Agreement will be paid to Cobra through three installments: (i) $150.0 million on the later of (A) ten business days following approval of the Settlement Agreement by the Title III Court and (B) August 31, 2024; (ii) $20.0 million within seven days following the effective date of PREPA's plan of adjustment; and (iii) $18.4 million in the Withheld FEMA Funds within either (A) ten business days after the deadline for appealing the entry of the settlement order by the Title III Court under the applicable bankruptcy rules of procedure if no such appeal is filed, or (B) if the provisions of the settlement order allowing PREPA to release the Withheld FEMA Funds to Cobra without retaining any liability to the Specified Municipalities are appealed by the Specified Municipalities, within ten business days of the filing of the notice of such appeal.

About Mammoth Energy Services, Inc.
Mammoth is an integrated, growth-oriented energy services company focused on the providing products and services to enable the exploration and development of North American onshore unconventional oil and natural gas reserves as well as the construction and repair of the electric grid for private utilities, public investor-owned utilities and co-operative utilities through its infrastructure services businesses. Mammoth's suite of services and products include: well completion services, infrastructure services, natural sand and proppant services, drilling services and other energy services. For more information, please visit www.mammothenergy.com.

Contacts:
Mark Layton, CFO
Mammoth Energy Services, Inc
investors@mammothenergy.com

Rick Black / Ken Dennard
Dennard Lascar Investor Relations
TUSK@dennardlascar.com

Forward-Looking Statements and Cautionary Statements
This news release (and any oral statements made regarding the subjects of this release, including on the conference call announced herein) contains certain statements and information that may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts that address activities, events or developments that Mammoth expects, believes or anticipates will or may occur in the future are forward-looking statements. The words "anticipate," "believe," "ensure," "expect," "if," "intend," "plan," "estimate," "project," "forecasts," "predict," "outlook," "aim," "will," "could," "should," "potential," "would," "may," "probable," "likely" and similar expressions, and the negative thereof, are intended to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this news release specifically include statements, estimates and projections regarding the Company's business outlook and plans, future financial position, liquidity and capital resources, operations, performance, acquisitions, returns, capital expenditure budgets, plans for stock repurchases under its stock repurchase program, costs and other guidance regarding future developments. Forward-looking statements are not assurances of future performance. These forward-looking statements are based on management's current expectations and beliefs, forecasts for the Company's existing operations, experience and perception of historical trends, current conditions, anticipated future developments and their effect on Mammoth, and other factors believed to be appropriate. Although management believes that the expectations and assumptions reflected in these forward-looking statements are reasonable as and when made, no assurance can be given that these assumptions are accurate or that any of these expectations will be achieved (in full or at all). Moreover, the Company's forward-looking statements are subject to significant risks and uncertainties, including those described in its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other filings it makes with the SEC, including those relating to the Company's acquisitions and contracts, many of which are beyond the Company's control, which may cause actual results to differ materially from historical experience and present expectations or projections which are implied or expressed by the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: demand for our services; the volatility of oil and natural gas prices and actions by OPEC members and other exporting nations affecting commodities prices and production levels; the impact of the war in Ukraine and the Israel-Hamas war on the global energy and capital markets and global stability; performance of contracts and supply chain disruptions; inflationary pressures; high interest rates and their impact on the cost of capital; instability in the banking and financial services sectors; the outcome of ongoing government investigations and other legal proceedings, including those relating to the contracts awarded to the Company's subsidiary Cobra by PREPA; the failure to receive or delays in receiving the Title III Court approval relating to the Settlement Agreement to settle all outstanding matters between Cobra and PREPA and/or payments thereunder discussed in this news release; the Company's inability to replace the prior levels of work in its business segments, including its infrastructure and well completion services segments; risks relating to economic conditions, including concerns over a potential economic slowdown or recession; impacts of the recent federal infrastructure bill on the infrastructure industry and our infrastructure services business; the loss of or interruption in operations of one or more of Mammoth's significant suppliers or customers; the loss of management and/or crews; the outcome or settlement of our litigation matters and the effect on our financial condition and results of operations; the effects of government regulation, permitting and other legal requirements; operating risks; the adequacy of capital resources and liquidity; Mammoth's ability to comply with the applicable financial covenants and other terms and conditions under Mammoth's revolving credit facility and term loan; weather; natural disasters; litigation; volatility in commodity markets; competition in the oil and natural gas and infrastructure industries; and costs and availability of resources.

Investors are cautioned not to place undue reliance on any forward-looking statement which speaks only as of the date on which such statement is made. We undertake no obligation to correct, revise or update any forward-looking statement after the date such statement is made, whether as a result of new information, future events or otherwise, except as required by applicable law.

 

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SOURCE Mammoth Energy Services, Inc.

FAQ

What is the total value of the Settlement Agreement between Cobra Acquisitions and PREPA?

The total value of the Settlement Agreement between Cobra Acquisitions and PREPA is $188.4 million.

How much is PREPA required to pay Cobra within ten business days?

PREPA is required to pay Cobra $150 million within ten business days of the September 18th hearing.

How will Mammoth Energy Services (TUSK) use the settlement proceeds?

Mammoth Energy Services plans to use the proceeds to pay off all outstanding amounts under their term credit facility, terminate the facility, and expects the remaining funds to have a transformative impact on their business.

When was the work completed for which Cobra is receiving this settlement?

The work for which Cobra is receiving this settlement was completed over five years ago, as stated in the press release.

What are the payment terms for the remaining $38.4 million of the settlement?

The remaining $38.4 million will be paid in two installments: $20 million within seven days following the effective date of PREPA's plan of adjustment, and $18.4 million in Withheld FEMA Funds subject to specific conditions and timelines.