Below is a note from our Energy team on why we are removing Mammoth Energy (TUSK) from the short side of Investing Ideas today:
TUSK announced a new $900MM contract with PREPA. For the short to work, we need to see governmental inquiry turn into governmental action; the likelihood of action appears slight given the circumstances that preempted the latest contract extension.
TUSK announced today (5/29/18) that it had officially signed a 1-year $900MM contract with PREPA that would cover additional restoration work on the island of Puerto Rico. The new contract is incremental to the existing $945MM contract Mammoth last amended with PREPA on 2/28/18. Based on the language of the press release, it doesn’t appear that Mammoth’s subsidiary, Cobra Energy, was forced to lower rates in order to secure the selection by PREPA through a formal bidding process. We should get additional clarity on the contract terms once the contract is filed with the SEC.