Hi-Crush Surges Forward in Fourth Quarter, Full Year 2017

Hi-Crush Partners LP reported fourth quarter and full-year 2017 results. Revenues for the fourth quarter of 2017 totaled $216.5 million on sales of 2,985,115 tons of frac sand. This compares to $167.6 million of revenues on sales of 2,456,195 tons of frac sand in the third quarter of 2017.

“Hi-Crush’s performance in the fourth quarter is the result of a year of strategic planning and focused execution,” said Robert E. Rasmus, chief executive officer of Hi-Crush. “We acted quickly, proactively and also took advantage of an improved environment in the frac sand space. From the first quarter, with our purchase of Whitehall and the development of our Permian Basin Kermit facility, to the fourth quarter, when we achieved full utilization at our Kermit facility, while placing into service our Pecos terminal and our 10th PropStream crew, our team worked tirelessly to get us where we are today. I am confident that with our asset base, personnel and financial strength, we are best positioned for sustainable success in 2018 and over the long-term.”

“During the fourth quarter, we benefited from continued growth in pricing and contribution margin, full utilization at our Permian Basin Kermit facility since mid-October, and ongoing strength in demand for Northern White frac sand, offset somewhat by operational issues experienced by Class-1 railroads,” said Laura C. Fulton, chief financial officer of Hi-Crush. “Sales volumes grew by more than 20 percent sequentially, which, combined with pricing gains and per ton margin expansion, drove increases in our Adjusted EBITDA and distributable cash flow by approximately 40 percent. Our strong financial performance in the fourth quarter and throughout 2017 was the direct result of successful execution of our “Mine. Move. Manage.” operating strategy. This includes a focus on efficient production across a diversity of mesh sizes and mine locations, and industry-leading logistics through our owned and operated terminal network, supplemented with our unique last mile capabilities.”

Revenues for the year ended Dec. 31, 2017, totaled $602.6 million on sales of 8,938,713 tons of frac sand, compared to revenues of $204.4 million on sales of 4,253,746 tons of frac sand for the year ended Dec. 31, 2016. The volume increase for the full year 2017 compared to 2016 is a result of dramatically improved market conditions, in addition to increased production capacity availability following the resumption of operations at the Whitehall facility in March 2017 and commencement of operations at the Kermit facility in July 2017.

For the years ended Dec. 31, 2017, and 2016, volumes sold at the mine were up 38 percent and 46 percent, respectively, while volumes sold at the wellsite grew to 11 percent in 2017 from 1 percent in 2016.

Average sales price per ton was $67 and $48 for the years ended Dec. 31, 2017, and 2016, respectively. The increase in average sales price experienced in 2017 was driven by changes in industry market conditions, including generally short supply of frac sand and increasing demand in 2017 compared to excess supply of frac sand with declining demand in 2016, and the resulting sales price trends, as well as the impact of the mix in pricing of volumes sold at the mine, at the terminal or at the wellsite.

Hi-Crush commenced operations at its Permian Basin Kermit production facility in July 2017. Kermit completed its utilization ramp in mid-October 2017, achieving full utilization on its annualized run rate of 3.0 million tons per year. Kermit has contracted approximately 90 percent of its nameplate capacity under long-term, fixed-price arrangements with high-quality customers, including large E&P companies.

In October 2017, Hi-Crush commenced operations at its Pecos terminal, the industry’s first unit train capable terminal with silo storage in the Southern Delaware Basin. The facility includes 20,000 tons of vertical storage, is unit train capable and offers direct access to Class-1 rail.

At the end of 2017, Hi-Crush had 10 PropStream crews in the Permian Basin and Marcellus and Utica plays.

“We are proud to be the industry’s first mover in the Permian, expanding our service offerings to customers through the start-up of our Kermit facility and Pecos terminal, as well as growth in PropStream crews,” said Rasmus. “Since commencing operations at Kermit in July 2017, more than two months ahead of schedule, our team successfully and efficiently ramped production to full utilization in October, adding attractive contribution margin and representing 22 percent of our total volumes sold during the fourth quarter. Feedback on the industry’s first Permian sand from our Kermit facility has been positive. Our customers appreciate the value, quality, and effectiveness of the product we are delivering. Also, we are pleased to have completed our Pecos terminal, which complements our Kermit facility, and allows us to deliver Northern White volumes efficiently and cost-effectively to where they are most demanded.

“Our PropStream last-mile logistics service adds safe and efficient wellsite delivery capabilities and further enhances the value and optionality we offer customers by controlling the supply chain from the mine to the blender hopper, Rasmus concluded. “The investments we have made to date, in addition to our plans for future growth and our expertise, will continue to benefit us throughout 2018 and over the long-term. Along with our leading portfolio of Northern White mines and our owned and operated terminals, we provide the full range of products and services that our customers desire, where and when they need them.”

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