Emerge Energy Services Volumes Down 7 Percent

Emerge Energy Services LP announced third quarter 2015 financial and operating results. The companyt reported net loss of $11.9 million, or $0.49 per diluted unit for the three months ended Sept. 30, 2015.

Previously, Emerge Energy announced that it will not make a cash distribution on its common units for the three months ended Sept. 30, 2015. Emerge Energy did not generate available cash to distribute for the three months ended September 30, 2015, due to the challenging oil and natural gas frac sand market and the volatility in wholesale fuel prices during this period.

“The third quarter reflected a continued challenging market, with significant downward pressure on pricing for frac sand and refined fuels as rig counts and oil prices continue to decline,” said Ted W. Beneski, chairman of the board of directors of the general partner of Emerge Energy. “We also expect drilling and well completion activity levels, based on indications from our customers and other industry sources, will be extremely weak in the fourth quarter of this year. While we do ultimately expect a recovery in the frac sand market, we now expect that any market recovery in our frac sand business will occur during the second half of 2016 or, potentially, not until 2017.

“Our fuel segment also had a challenging third quarter, primarily driven by declining oil prices, Beneski said. “We have begun work on two hydrotreater facilities that will allow us to remove sulfur from our transmix diesel so that it can be sold at a premium into the on-road market for ultra low sulfur diesel beginning next spring. We expect margins in the fourth quarter of 2015 to improve significantly over the third quarter, as we expect the market for petroleum products to be more stable in the quarter and we have a solid solution in place for dealing with our transmix diesel.”

“The sand segment generated adjusted EBITDA of $4.2 million for the three months ended Sept. 30, 2015 on sales volume of 799,000 tons,” added Rick Shearer, CEO of Emerge Energy. “Our volumes were down approximately 7 percent from the second quarter of 2015, and market pricing, as well as the prices we have negotiated with our customers, have continued to decline at the plant and in-basin. While we have been able to significantly lower our production costs, and believe we will continue to do so in subsequent quarters, our fixed rail expense, which includes both our operating leases and railcar storage costs, remain significant. We are taking a number of steps to reduce that cost, such as pushing out in-service dates for future railcars and aggressively seeking opportunities to sublease a portion of our idle railcars.

“These are challenging times for our industry, but the Emerge Energy team sees this as a time of opportunity, and we have taken definite steps to build further our position as one of the elite frac sand companies in the industry,” Shearer said. “2015 has been challenging and the balance of this year will continue to press us to improve our business every day. We will meet these challenges and be a better company for it.”