Mammoth Energy (TUSK) Q3 2025: Drilling Revenue Jumps 207% as Portfolio Shift Gains Traction

October 31, 2025 | By EarningsIQ Research

Drilling and aviation drove segment outperformance for Mammoth Energy as the company’s portfolio transformation accelerated, with record drilling gross margin and positive free cash flow offsetting ongoing sand and infrastructure drag. Disciplined asset sales, cost resets, and redeployment to higher-return businesses are reshaping the company’s earnings power, with management signaling further improvement and margin recovery in 2026.

Summary

• Drilling Margin Inflection: Permian-focused drilling delivered record gross margin and triple-digit sequential growth.
• Portfolio Realignment: Divestitures and aviation investment are refocusing capital on recurring, less cyclical cash flow streams.
• Cost Structure Reset: SG&A run rate cut by nearly 50% as transformation unlocks leaner operations for 2026 recovery.

Performance Analysis

Mammoth Energy’s Q3 results highlight a business in the midst of a structural reset, with clear progress in its drilling and accommodations segments offset by ongoing underperformance in sand and infrastructure. Total revenue declined both sequentially and year-over-year, driven by the sale of Piranha sand assets and continued weakness in the sand business. Net loss widened versus the prior year, but the company generated positive free cash flow from operations, aided by asset monetizations and reduced capital intensity in legacy segments.

The drilling segment was the clear outperformer, with revenue up 207% sequentially and 47% year-over-year, driven by increased horizontal activity in the Permian Basin. Gross margin reached a segment record, and positive EBITDA and free cash flow emerged despite zero segment CapEx. Aviation, now a core pillar within rentals, contributed a full quarter of stable returns, while accommodations benefited from higher occupancy and cost discipline. In contrast, sand revenue fell 49% sequentially, impacted by asset sales, weather, and $0.6 million in one-time rail car costs. Infrastructure suffered from project delays and margin pressure, but management expects operational changes to drive improvement in 2026.

• Drilling Outperformance: Permian strategy and horizontal focus drove segment records in margin and cash flow.
• Sand Reset Underway: Piranha sale, rail car right-sizing, and cost actions position segment for margin recovery next year.
• SG&A Downshift: Structural cost actions reduced run rate by 40%, with further normalization after legal expense adjustments.

Liquidity remains a strategic strength, with over $170 million pro forma cash and equivalents following the release of restricted PREPA funds, and no debt. This provides flexibility for continued transformation, organic investment, and opportunistic M&A aligned with strict return criteria.

Executive Commentary

Strategic Positioning

1. Drilling Focus and Permian Concentration

The decision to concentrate drilling capital in the Permian Basin and on horizontal wells is yielding tangible results. With record gross margin and share gains in target markets, management is doubling down on this core strength, expecting continued momentum into 2026 as customer engagement remains robust.

2. Aviation Platform as Growth Engine

Aviation rentals, which now comprise a significant share of the rental segment, have been scaled through disciplined investment—$40 million year-to-date. Management is targeting long-term contracts and high utilization, with additional aircraft and engines staged for redeployment at higher lease rates, supporting recurring EBITDA and margin stability.

3. Portfolio Pruning and Capital Reallocation

Divestiture of underperforming sand (Piranha) and infrastructure assets has freed capital for redeployment into higher-return, less cyclical businesses. This “fit for purpose” portfolio approach is designed to reduce volatility and improve cash conversion through the cycle.

4. Cost Structure Transformation

SG&A run rate reduction of nearly 50%, achieved through headcount rationalization, shared service efficiency, and discretionary spend discipline, positions Mammoth for margin expansion as the portfolio stabilizes. Legal and legacy cost normalization should further benefit profitability in 2026.

5. Balance Sheet Strength and Capital Flexibility

With over $170 million in pro forma liquidity and no debt, Mammoth has the flexibility to self-fund transformation, invest in organic growth, and selectively pursue M&A. The recent release of $19.8 million in restricted PREPA cash further improves the liquidity profile and strategic optionality.

Key Considerations

Mammoth’s third quarter marks a pivotal point in its transformation, with clear signals that the company is moving away from legacy, cyclical businesses and toward a more resilient, cash-generative portfolio. Investors should weigh the pace of improvement in lagging segments against the demonstrable progress in drilling and aviation.

Key Considerations:

• Segment Divergence: Drilling and accommodations are offsetting sand and infrastructure headwinds, but broad-based margin recovery still hinges on operational execution in lagging segments.
• Recurring Revenue Emphasis: Aviation and long-term rental contracts are increasing the predictability and quality of earnings, reducing historical cyclicality.
• Legacy Drag Resolution: Asset sales and cost takeout are critical to eliminating structural drag from sand and infrastructure, with Q3 representing a potential low point for sand.
• Balance Sheet Optionality: Strong liquidity and no debt enable opportunistic capital deployment, but management is signaling strict return hurdles for any new investment or M&A.

Risks

Execution risk persists, especially in restoring sand and infrastructure margins, as these segments remain exposed to volume volatility and project timing. PREPA receivable and Puerto Rico tax liabilities add uncertainty to the balance sheet, with timing of cash recovery and resolution still undetermined. Market conditions in energy services and aviation leasing could shift, impacting utilization and pricing power, while further transformation costs may weigh on near-term results.

Forward Outlook

For Q4 2025, Mammoth expects:

• Continued portfolio transition with incremental asset redeployments in aviation and drilling
• Improved cash generation as transformation initiatives mature

For full-year 2026, management signaled:

• Margin recovery in sand and infrastructure as cost actions and asset sales take effect
• Growth in aviation and drilling segments, supporting higher recurring EBITDA

Management highlighted several factors that will influence trajectory:

• Ongoing discipline in capital allocation and cost structure
• Potential for additional asset monetization and selective M&A

Takeaways

Mammoth is pivoting toward a more stable, higher-return business model, but the transformation is still underway and not yet fully reflected in consolidated profitability.

• Drilling and Aviation as Growth Anchors: These segments are now the primary drivers of margin and cash flow, validating the strategic shift away from legacy businesses.
• Structural Cost Reset Underpins Recovery: SG&A and asset base rationalization are essential to restoring sustainable profitability as lagging segments stabilize.
• 2026 Will Test Execution: Investors should monitor sand margin recovery, infrastructure project wins, and the ability to maintain discipline in capital deployment and cost structure as the cycle turns.

Conclusion

Mammoth’s Q3 results confirm the early benefits of its portfolio overhaul, with drilling and aviation strength demonstrating the value of capital concentration and operational discipline. Successful execution in lagging segments and continued cost vigilance will be critical to realizing the full earnings power of the reshaped company in 2026 and beyond.

Industry Read-Through

Mammoth’s transformation reflects a broader trend among energy service providers to shed legacy, cyclical assets and build recurring revenue streams through specialty rentals and infrastructure adjacencies. The shift toward aviation leasing and data center-linked infrastructure signals where capital is flowing across the sector, with companies prioritizing cash conversion, balance sheet strength, and operational flexibility. Investors should watch for similar portfolio pruning and cost resets among peers as service providers adapt to a structurally changed end market and rising return-on-capital expectations.

TUSK Energy Oilfield Services Portfolio Transformation Drilling Aviation Sand Cost Structure