The shares of Mammoth Energy Services, Inc. (NASDAQ: TUSK) have increased significantly during the current trading session following the announcement of a settlement agreement. The price of TUSK stock on US stock charts climbed 24.64% to $4.36 in the most recent update.
Specifics of the Settlement Agreement
Mammoth Energy subsidiary Cobra Acquisitions LLC (“Cobra”) stated that it has entered into a release and settlement agreement with the Financial Oversight and Management Board for Puerto Rico (FOMB) and the Puerto Rico Electric Power Authority (“PREPA”). FOMB is serving as PREPA’s Title III representative. This agreement aims to address any outstanding disputes that may exist between PREPA and Cobra.
Mammoth Energy will be compensated for services completed almost five years ago. With a balance of about $49.3 million as of June 30, 2024, the company’s term credit facility will be repaid in part with the $188.4 million settlement. The remaining $139.1 million will increase Mammoth Energy’s cash on hand, allowing for general corporate purposes and further company reinvestment.
The Agreement’s History and Financial Consequences
Puerto Rico’s electricity system was severely damaged by Hurricane Maria in 2017, and Cobra and PREPA had previously inked two contracts to assist in its reconstruction. In the District of Puerto Rico United States District Court, PREPA has been the focus of bankruptcy proceedings since July 2017. These actions are currently pending.
As of June 30, 2024, Cobra owed PREPA a total of around $359.1 million for these agreements’ receivables. About $18.4 million in FEMA money that PREPA is holding are at risk of being garnished for municipal tax claims made by three Puerto Rican municipalities. Cobra contests that these garnishments are legal.
Due to the Settlement Agreement, Mammoth Energy will record a non-cash, pre-tax charge of approximately $170.7 million in the second quarter of 2024. This charge will adjust its accounts receivable balance from PREPA to reflect the expected settlement amount.
