Hi-Crush Partners reported second quarter 2018 results. Revenues for the second quarter of 2018 totaled $248.5 million on sales of 3,037,504 tons of frac sand. This compares to $218.1 million of revenues on sales of 2,617,627 tons of frac sand in the first quarter of 2018.
The limited partners’ interest in net income was $60.5 million for the second quarter of 2018, resulting in $0.68 basic and $0.67 diluted earnings per limited partner unit. For purposes of calculating earnings per unit, the general partner’s allocation of net income was $7.6 million for the second quarter of 2018.
Earnings before interest, taxes, depreciation and amortization adjusted for earnings from equity method investments was $81.5 million in the second quarter of 2018, compared to $64.5 million for the first quarter of 2018. Distributable cash flow attributable to the limited partners for the second quarter of 2018 was $66.6 million compared to $56.4 million for the first quarter of 2018. Distributable cash flow attributable to the holder of the incentive distribution rights for the second quarter of 2018 was $7.8 million compared to $2.0 million for the first quarter of 2018.
“The Hi-Crush team’s dedication to execution and customer service was instrumental in achieving record volumes this quarter and increasing volumes by 16 percent sequentially over the first quarter,” said Robert E. Rasmus, chief executive officer of Hi-Crush. “Our strong financial results reflect our expanding capabilities and the investments we have made throughout the cycle, particularly in frac sand logistics. Our announcements last week of the acquisition of FB Industries, execution of the amendment to an existing supply agreement with a major E&P in the Permian, and the related contract-backed expansion of our Northern White and in-basin Permian capacity, evidence our commitment to investing in our future to further improve our operating results and cash flow.”
Revenues for the second quarter of 2018 totaled $248.5 million, compared to $218.1 million for the first quarter of 2018. The increase was driven by increased sales volumes and improved pricing. Sales volumes increased as Class-1 rail service improved in the early part of the quarter.
Pricing of sand, when comparing similar mesh size, location and point of sale increased by low single digits per ton. Average sales price declined to $70 per ton in the second quarter of 2018, compared to $73 per ton in the first quarter of 2018 as a result of an increase in volumes sold at the mine gate. The percentage of volumes sold at each delivery point varies quarter to quarter due to customer mix; however, volumes sold at the terminal or the wellsite are generally expected to grow over time as customers increasingly prefer landing sand closer to, or at, the wellsite.
Of total sales volumes in the second quarter, 20 percent were sold at the wellsite through PropStream, compared to 21 percent in the first quarter of 2018. Volumes sold direct to E&Ps were 31 percent in the second quarter of 2018, compared to 33 percent sold in the first quarter of 2018 and increased from 7 percent in the second quarter of 2017.
Contribution margin was $30.94 per ton in the second quarter of 2018, compared to $29.08 per ton in the first quarter of 2018. The 6 percent growth in contribution margin per ton primarily resulted from the absence of non-recurring costs incurred in the first quarter of 2018 and higher pricing. In the first quarter of 2018, contribution margin per ton was negatively impacted by higher production costs related to reduced sales volumes as a result of the Class-1 rail congestion and service issues, as well as normal wet plant maintenance for the Wisconsin plants.
“Our PropStream last mile logistics service continues to gain market share with customers we are targeting, which are the end users of sand, the E&Ps. Our sales volumes sold directly to E&Ps are increasing and we fully expect that over the near and medium-term, more E&Ps will continue to request direct sourced arrangements with proppant suppliers. Hi-Crush has led the way in this continuing market evolution,” said Rasmus. “In addition to strong PropStream results, our operations benefited from an improvement in Class-1 rail service and less railroad congestion in the second quarter of 2018 relative to the first quarter.”
On July 23, 2018, Hi-Crush announced it had entered into a purchase agreement to acquire FB Industries Inc., a leading manufacturer and marketer of silo-based frac sand management systems for total consideration of approximately $60 million and the potential for additional performance based payments. The transaction is subject to customary closing conditions and is expected to close in the third quarter of 2018. The partnership expects to deploy 15 to 20 FB silo systems by the end of 2018.
“As we expand on our ‘Mine. Move. Manage.’ operating strategy, and further diversify our business within frac sand logistics, the FB acquisition makes Hi-Crush the industry’s only vertically-integrated provider of frac sand and proppant logistics solutions with a diversified production base, an owned and operated terminal network, and a differentiated last mile service offering both container and silo-based solutions,” explained Rasmus. “We are extremely excited to expand our last mile service capabilities with the addition of silo-based systems.”