Hi-Crush Partners Makes Acquisitions


Hi-Crush Partners LP announced that it has entered into a series of purchase agreements, including the acquisition of Permian Basin Sand Co. LLC from a third-party; the acquisition of the Whitehall facility from Hi-Crush Proppants LLC; and the acquisition of the remaining 2 percent additional interest in Hi-Crush Augusta LLC from Hi-Crush Proppants and additional properties located near the Whitehall facility.

Total consideration for these acquisitions is $415 million, exclusive of contingent earnout consideration associated with the Whitehall transaction.

"Today marks another milestone in the continued evolution of Hi-Crush," said Robert E. Rasmus, chief executive officer of Hi-Crush. "Together, these acquisitions allow us to fully and efficiently service the evolving dynamics of the industry. These highly accretive transactions transform our production mix and significantly enhance our cash flow in the near-term and over the long-term. During the second half of 2017, we expect to operate 13.4 million tons of low-cost production across sand grades and types, which coupled with our industry-leading logistics network and last-mile capabilities, provides for the long-term success of Hi-Crush and our stakeholders."

The partnership entered into a definitive agreement to acquire Permian Basin Sand, which owns a 1,226-acre frac sand reserve consisting of more than 55 million tons of 100 mesh frac sand. The acquisition of Permian Basin Sand also includes certain rights to purchase additional acreage of reserves.

Permian Basin Sand is strategically positioned in the heart of the Permian Basin, located within 75 miles of significant Delaware and Midland Basin activity. Under the terms of the agreement, Hi-Crush will acquire Permian Basin Sand for total consideration of $275 million, of which up to $75 million may be paid in the form of newly issued common units to the seller. The Permian Basin Sand acquisition is expected to be completed in March 2017, subject to customary closing conditions.
Hi-Crush intends to construct an on-site processing plant capable of producing 3 million tons per year. Total cost for construction of the Permian Basin production facility is expected to be in the range of $45 million to $50 million, with an in-service date planned during the third or early fourth quarter of 2017.

"In our largest acquisition to date, the Permian Basin Sand purchase transforms Hi-Crush by establishing a presence in the regional sand market, while supplementing and amplifying our ability to deliver sand at the lowest cost directly to the well site," said Rasmus. "As we continue to execute our strategy, we're evolving our production mix and growing our portfolio with the addition of one-of-a-kind, high-quality reserves. Location is critical, and nobody will be closer or better positioned to efficiently serve the Permian Basin. Further, with the ability to design and construct a state-of-the-art, purpose-built production facility, we are able to make this facility uniquely Hi-Crush, while maintaining our low-cost strategy and commitment to quality service."

The Whitehall facility has 80.7 million tons of proven recoverable Northern White frac sand reserves on 1,447-acres, with an annual processing capacity of approximately 2.86 million tons of frac sand per year. At the closing of the acquisition, Acquisition Co. will own all of Whitehall's membership interests.

In addition, Acquisition Co. will acquire the remaining 2 percent ownership interest in Augusta from Proppants and additional properties located near the Whitehall facility (together the "Whitehall Acquisition"). The partnership currently owns a 98 percent interest in the Augusta facility, and the acquisition of the remaining 2 percent ownership interest will increase the partnership's ownership share of the Augusta facility to 100 percent.

"Given the growth in demand we're seeing across our business, we expect to re-start the Whitehall facility in March or early April 2017. Combined with the completion of construction of the Permian Basin plant in the second half of 2017, our ability to deliver the grades and quantities of sand demanded by our customers is greatly enhanced," continued Rasmus. "Upon completion of these acquisitions, we will have consolidated all production assets from our sponsor into the partnership. This further simplifies our structure and maximizes the partnership's participation in the recovery."