Hi-Crush Frac Sand Volumes Up for Quarter; Down for Year

Hi-Crush Partners LP reported fourth-quarter and full-year 2016 results. Revenues for the quarter ended Dec. 31, 2016, totaled $67.3 million on sales of 1,358,511 tons of frac sand. This compares to $46.6 million of revenues on sales of 1,082,974 tons of frac sand in the third quarter of 2016.

The limited partners’ interest in net loss was $7.2 million for the fourth quarter of 2016, resulting in basic and diluted loss of $0.11 per limited partner unit. Earnings before interest, taxes, depreciation and amortization for the fourth quarter 2016 was $0.1 million, compared to $2.9 million for the third quarter of 2016.

Distributable cash flow attributable to the limited partners for the fourth quarter of 2016 was $4.4 million. No distributions to unitholders were declared for the fourth quarter of 2016, as the partnership continued its distribution suspension to conserve and strategically apply cash.

“Activity for our business continued to improve and gain strength as reflected in the 25 percent sequential increase in the volume of sand we sold during the fourth quarter,” said Robert E. Rasmus, chief executive officer of Hi-Crush. “In addition to an increase in volumes, our profitability continues to improve, as we achieved positive quarterly EBITDA for the first time since the fourth quarter of 2015. We have a significantly improved Hi-Crush platform – one with lower costs, greater efficiencies and an expanded service offering, including our PropStream last-mile integrated logistics solution. This benefits us as proppant intensity increases continue, well completion activity picks up momentum and customer focus remains on surety of supply.”

Revenues for the fourth quarter of 2016 increased due to the sequential increase in sales volumes, combined with higher pricing generally, and the impact of higher volumes sold in-basin during the fourth quarter of 2016. Reflecting the change in mix in customer demand, approximately 57 percent of the volumes were sold in-basin for the fourth quarter of 2016, an increase from 47 percent in the third quarter of 2016 and from 52 percent in the fourth quarter of 2015.

Average sales price per-ton-sold was $49 per ton in the fourth quarter of 2016, compared to $43 per ton in the third quarter of 2016 and $52 per ton in the fourth quarter of 2015, reflecting a higher pricing environment and the mix of greater in-basin sales volumes. Pricing for sand generally rose more than 5 percent quarter over quarter with greater increases for finer mesh sand and in-basin delivery.

“We saw pricing improve in the fourth quarter, especially late in the quarter. The pace of increases has accelerated rapidly in the first quarter,” said Rasmus. “We expect pricing improvement to continue throughout the year.”

Of the 1,358,511 tons of frac sand sold during the fourth quarter of 2016, approximately 91 percent were produced and delivered from the partnership’s facilities, with the remainder being purchased from our sponsor’s Whitehall facility. Contribution margin was $3.45 per ton in the fourth quarter of 2016, compared to $4.47 per ton in the third quarter of 2016.

The decrease in contribution margin per ton was the result of normal seasonal increases in production costs during the winter, and the mix impact of higher production cost per ton from operating Augusta at under 50 percent of capacity for the full fourth quarter of 2016 as compared to one month of operations in the third quarter of 2016. These higher production costs largely offset the sales price increases implemented later in the quarter.

“Customer demand continues to strengthen and our production facilities are effectively sold out for the first quarter,” said Rasmus. “We plan to operate Wyeville, Blair and Augusta near full capacity beginning as early as the second quarter, benefiting our production cost and contribution margin per ton. In addition, our sponsor is making preparations to restart the Whitehall production facility in the second quarter. Our customers are seeking surety of supply as crews get back to work, and we expect we’ll need to fully utilize our existing mines, as well as the capacity of our sponsor’s mine, in order to meet those demands as the cycle progresses.”

For the full year 2016, the limited partners’ interest in net loss was $81.3 million, resulting in basic and diluted loss of $1.64 per limited partner unit. The basic and diluted loss per unit for the year was negatively impacted by $34.0 million of impairments and other expenses primarily associated with the impairment of our goodwill in the first quarter of 2016.

The limited partners’ interest in adjusted net loss, adjusted to exclude the impact of these non-recurring items, was $47.3 million for the full year 2016 representing a diluted adjusted loss of $0.95 per limited partner unit. EBITDA adjusted for the non-cash impairment of goodwill for the full year 2016 was $16.9 million Distributable cash flow attributable to the limited partners for 2016 was $31.2 million.

Revenues for the year ended Dec. 31, 2016, totaled $204.4 million on sales of 4,253,746 tons of frac sand, compared to revenues of $339.6 million on sales of 5,003,702 tons of frac sand for the year ended Dec. 31, 2015. Contribution margin averaged $3.58 per ton for the full year 2016, compared to $18.28 per ton for the full year 2015.

Hi-Crush previously announced the successful pilot test of its PropStream integrated delivery solution in October 2016. Hi-Crush currently has two crews operating in the Permian Basin, both of which are expected to be fully-utilized through the end of 2017. A third PropStream crew is mobilizing in the Northeast to serve the Marcellus and Utica plays.

“The market reception to our PropStream integrated logistics solution this year has been tremendous,” said Chad McEver, vice president, sales and business development of Hi-Crush. “We see more and more interest in a containerized solution to the logistics challenges driven by the demand for ever increasing amounts of sand at the well site. Our PropStream solution delivers those high volumes more efficiently and effectively versus alternative mechanisms.”

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