I’m hopeful the combo of new CEO + clean balance sheet + industry tailwinds drives solid results. The next few quarters will be telling in terms of understanding Lancaster’s strategy.
I can’t figure out what the company’s true DNA is. Infrastructure services has become the largest segment and I don’t think that was intentional- Cobra was spun up in 2017 seemingly because of the PREPA contract. I don’t know how they won that contract and they certainly haven’t replicated it since. No one segment stands out and I doubt there’s some hidden value to be unlocked through divestiture.
Removing interest expense and experiencing even moderate cyclical demand should get them profit-positive these next few quarters. That’s interesting to me insofar as it gets the stock to trade closer to book. I’m more interested in two other things:
1. Use of capital: Last earnings call management said most capital in excess of debt repayment would be spent on Capex. I wonder if Lancaster follows this. I’m iffy about reinvesting in mediocre segments or papering over those segments through acquisition. This is his time to swing for the fences and I respect his history working within various lines throughout his career.
2. Take-private threat: This is a major negative tail risk and the likelihood of occurrence is not trivial. Wexford owns 47% of Mammoth and could force delisting that would be very painful for minority shareholders if they take board control. Alternatively, they could tender a full buyout (or whatever they need to force a short-form merger) and could finance the entire buyout with the cash on Mammoth’s balance sheet. Forced delisting seems to make more sense for Wexford. The fact that Wexford could do this at any time in the past tempers concern they’d do it now, especially at a time when I’d expect cost to do is increasing with an improving valuation. Something definitely to keep an eye out for though.
Thanks for this idea but it reminds me of corsa coal. Even with loads of cash, a shitty company always stay shitty, they just burn more cash. No return for shareholders or special dividend proposed?
Not familiar with Corsa Coal, but yeah TUSK is not a great company but there are multiple paths to profit here if management does some smart things. Management mentioned potential to conduct strategic review so might have something come out by end of year.
Just some comments here, I have looked this myself a couple of months ago. ROIC negative and getting worse. Shareholders constantly diluting, but slightly, which is not so bad. Operating Margin negative. Volatility in P/E shows inconsistent earnings. Maybe there is some value here and maybe things will improve, but too many "maybes" here. I personally act when most of the possibilities are in my favour and I stay away of narratives. Great work though, keep it up!
Agreed, it's not a great business. Some intriguing optionality here though, and an easy activist playbook as I outlined on selling the oil services segment and focusing on infrastructure as core secular growth business unit.
I’m hopeful the combo of new CEO + clean balance sheet + industry tailwinds drives solid results. The next few quarters will be telling in terms of understanding Lancaster’s strategy.
I can’t figure out what the company’s true DNA is. Infrastructure services has become the largest segment and I don’t think that was intentional- Cobra was spun up in 2017 seemingly because of the PREPA contract. I don’t know how they won that contract and they certainly haven’t replicated it since. No one segment stands out and I doubt there’s some hidden value to be unlocked through divestiture.
Removing interest expense and experiencing even moderate cyclical demand should get them profit-positive these next few quarters. That’s interesting to me insofar as it gets the stock to trade closer to book. I’m more interested in two other things:
1. Use of capital: Last earnings call management said most capital in excess of debt repayment would be spent on Capex. I wonder if Lancaster follows this. I’m iffy about reinvesting in mediocre segments or papering over those segments through acquisition. This is his time to swing for the fences and I respect his history working within various lines throughout his career.
2. Take-private threat: This is a major negative tail risk and the likelihood of occurrence is not trivial. Wexford owns 47% of Mammoth and could force delisting that would be very painful for minority shareholders if they take board control. Alternatively, they could tender a full buyout (or whatever they need to force a short-form merger) and could finance the entire buyout with the cash on Mammoth’s balance sheet. Forced delisting seems to make more sense for Wexford. The fact that Wexford could do this at any time in the past tempers concern they’d do it now, especially at a time when I’d expect cost to do is increasing with an improving valuation. Something definitely to keep an eye out for though.
Looks like TUSK received another $18M due from PREPA today:
https://ir.mammothenergy.com/news-events/press-releases/detail/128/cobra-acquisitions-llc-announces-receipt-of-18-4-million
Thanks for this idea but it reminds me of corsa coal. Even with loads of cash, a shitty company always stay shitty, they just burn more cash. No return for shareholders or special dividend proposed?
Not familiar with Corsa Coal, but yeah TUSK is not a great company but there are multiple paths to profit here if management does some smart things. Management mentioned potential to conduct strategic review so might have something come out by end of year.
Just some comments here, I have looked this myself a couple of months ago. ROIC negative and getting worse. Shareholders constantly diluting, but slightly, which is not so bad. Operating Margin negative. Volatility in P/E shows inconsistent earnings. Maybe there is some value here and maybe things will improve, but too many "maybes" here. I personally act when most of the possibilities are in my favour and I stay away of narratives. Great work though, keep it up!
Agreed, it's not a great business. Some intriguing optionality here though, and an easy activist playbook as I outlined on selling the oil services segment and focusing on infrastructure as core secular growth business unit.
How much does management own?
About 5% in total doing a quick search. Nothing notable
why don't you have a say with them
Ha I don’t own enough shares :)