Fort Worth, Texas
- May 3, 2017 - Emerge Energy Services LP ("Emerge
Energy") today announced first quarter 2017 financial and operating
results.
Highlights
-
Volumes sold increased 51.5% from 826,000 tons
in the fourth quarter of 2016 to 1,251,000 tons in the first
quarter of 2017.
-
Net loss improved $9.4 million from $(20.8)
million for the fourth quarter of 2016 to $(11.4) million for the
first quarter of 2017.
-
Adjusted EBITDA improved $10.7 million from
$(10.6) million for the fourth quarter of 2016 to $68 thousand for
the first quarter of 2017.
-
On April 12, 2017, we completed the acquisition
of Osburn Materials, a local sand producer based outside of San
Antonio Texas, for $20 million.
Overview
Emerge Energy reported net loss of
$(11.4) million, or $(0.38) per diluted unit, for the three months
ended March 31, 2017. For that same period, Emerge
Energy reported Adjusted EBITDA of $0.1 million and Distributable
Cash Flow of $(4.2) million. Net loss, net loss per diluted
unit and Adjusted EBITDA for the three months ended March 31,
2016, were $(34.2) million, $(1.41) per diluted unit and $(9.5)
million, respectively. Adjusted EBITDA and Distributable Cash
Flow are non-GAAP financial measures that Emerge Energy uses to
assess its performance on an ongoing basis.
The results of operations of the
Fuel business have been classified as discontinued operations for
all periods presented and we now operate our continuing business in
a single sand segment.
On April 12, 2017, we completed
the closing of a transaction to acquire Osburn Materials, a local
sand producer based outside of San Antonio Texas, for $20
million. The transaction was funded with a new $40 million
term loan, and the remaining proceeds after transaction fees and
expenses were applied towards a pay down on the outstanding balance
of the revolving credit facility.
Osburn Materials is located
approximately 25 miles south of San Antonio, Texas and currently
produces and sells sand and construction materials but does not
serve the energy markets. The mine has over 80 million tons
of sand reserves, according to internal estimates, and we will
upgrade the existing operations for a conversion into frac sand
sales. The sand reserves, which consist mostly of 40/70 and
100 mesh, meet API specifications for all grades.
We will not make a cash
distribution on our common units for the three months ended
March 31, 2017 as we are restricted from making distributions
to our common unitholders under our amended credit agreement and we
did not generate available cash to distribute for the three months
ended March 31, 2017.
"The first quarter of 2017 marked
an inflection point for the frac sand industry and Emerge Energy,
and we expect this strong momentum to continue throughout 2017,"
said Ted W. Beneski, Chairman of the Board of Directors of the
general partner of Emerge Energy. "Completion activity for
the onshore oil and gas markets continues to strengthen across
North America. Supply and demand tightened quickly, allowing
prices to rise back towards more sustainable levels, and prices are
continuing to rise in the second quarter. Our volumes
increased by 51.5% sequentially to 1.251 million tons, which
reflected a record quarter and another period of substantial market
share gains for Emerge Energy. We also achieved our goal of
hitting breakeven Adjusted EBITDA by generating positive $68
thousand, an improvement of $10.7 million sequentially. As
announced two weeks ago in April, we closed the exciting
acquisition of Osburn Materials to bolster our presence in local
sands. We are now in a stronger position to take advantage of
the current upswing in the market."
Conference Call
Emerge Energy will host its 2017
first quarter results conference call on Wednesday, May 3, 2017 at
9:00 a.m. CT. Callers may listen to the live presentation,
which will be followed by a question and answer segment, by dialing
(855) 850-4275 or (720) 634-2898 and entering pass code
4351733. An audio webcast of the call will be available at
www.emergelp.com within the Investor Relations portion of the
website under the Webcasts & Presentations section. A
replay will be available by audio webcast and teleconference for
seven days following the conclusion of the call. The replay
teleconference will be available by dialing (855) 859-2056 or (404)
537-3406 and the reservation number 4351733.
Operating Results
The following table summarizes
Emerge Energy's consolidated operating results for the three months
ended March 31, 2017 and 2016 and three months ended December
31, 2016.
|
Three Months
Ended |
|
|
March 31, 2017 |
|
December 31, 2016 |
|
March 31, 2016 |
|
|
|
|
|
|
|
|
|
($ in thousands) |
Revenues |
$ |
75,344 |
|
|
$ |
42,619 |
|
|
$ |
29,670 |
|
|
Operating expenses |
|
|
|
|
|
|
Cost
of goods sold (excluding depreciation, depletion and
amortization) |
72,311 |
|
|
51,263 |
|
|
43,790 |
|
|
Depreciation, depletion and amortization |
4,656 |
|
|
4,662 |
|
|
4,907 |
|
|
Selling, general and administrative expenses |
5,878 |
|
|
5,020 |
|
|
6,775 |
|
|
Contract and project terminations |
- |
|
|
- |
|
|
4,026 |
|
|
Total
operating expenses |
82,845 |
|
|
60,945 |
|
|
59,498 |
|
|
Operating income (loss) |
(7,501 |
) |
|
(18,326 |
) |
|
(29,828 |
) |
|
Other
expense (income) |
|
|
|
|
|
|
Interest expense, net |
3,198 |
|
|
3,448 |
|
|
4,594 |
|
|
Other |
691 |
|
|
(885 |
) |
|
(1 |
) |
|
Total
other expense |
3,889 |
|
|
2,563 |
|
|
4,593 |
|
|
Income
(loss) from continuing operations before provision for income
taxes |
(11,390 |
) |
|
(20,889 |
) |
|
(34,421 |
) |
|
Provision (benefit) for income taxes |
- |
|
|
(220 |
) |
|
20 |
|
|
Net
income (loss) from continuing operations |
(11,390 |
) |
|
(20,669 |
) |
|
(34,441 |
) |
|
Income
(loss) from discontinued operations, net of taxes |
- |
|
|
(106 |
) |
|
226 |
|
|
Net
income (loss) |
$ |
(11,390 |
) |
|
$ |
(20,775 |
) |
|
$ |
(34,215 |
) |
|
Adjusted EBITDA (a) |
$ |
68 |
|
|
$ |
(10,648 |
) |
|
$ |
(9,513 |
) |
|
Adjusted EBITDA from Continuing operations (a) |
$ |
68 |
|
|
$ |
(10,543 |
) |
|
$ |
(12,982 |
) |
|
|
|
|
|
|
|
|
Volume
of sand sold (tons in thousands) |
1,251 |
|
|
826 |
|
|
439 |
|
|
|
|
|
|
|
|
|
Volume
of sand produced (tons in thousands): |
|
|
|
|
|
|
Arland, Wisconsin facility |
368 |
|
|
165 |
|
|
- |
|
|
Barron, Wisconsin facility |
532 |
|
|
494 |
|
|
320 |
|
|
New
Auburn, Wisconsin facility |
317 |
|
|
162 |
|
|
169 |
|
|
Kosse,
Texas facility |
65 |
|
|
53 |
|
|
17 |
|
|
Total
volume of sand produced |
1,282 |
|
|
874 |
|
|
506 |
|
|
(a) See section entitled
"Adjusted EBITDA and Distributable Cash Flow" that includes a
definition of Adjusted EBITDA and provides reconciliation to GAAP
net income and cash flows.
Net loss and Adjusted EBITDA from
continuing operations improved in the first quarter of 2017
compared to the fourth quarter of 2016. This improvement was
due to an increase in total volumes sold and higher sales
prices. This was offset by higher production costs on a per
ton bases due to costs incurred to start the wet plants back up
from the winter months and expense incurred to pull railcars out of
storage to meet additional volumes.
Net loss and Adjusted EBITDA
improved for continuing operations for the first quarter of 2017,
compared to same quarter in 2016 mainly due to an increase in total
volumes sold and higher sales prices.
Capital Expenditures
For the three months ended
March 31, 2017, Emerge Energy's capital expenditures totaled
$1.4 million. This includes approximately $939 thousand of
maintenance capital expenditures.
About Emerge Energy Services
LP
Emerge Energy Services LP (NYSE:
EMES) is a growth-oriented limited partnership engaged in the
businesses of mining, producing, and distributing silica sand, a
key input for the hydraulic fracturing of oil and natural gas
wells. Emerge Energy operates its Sand business through its
subsidiary Superior Silica Sands LLC. Emerge Energy also
processed transmix, distributed refined motor fuels, operated bulk
motor fuel storage terminals, and provided complementary fuel
services through its fuel division which was sold on August 31,
2016.
Forward-Looking
Statements
This release contains certain
statements that are "forward-looking statements." These statements
can be identified by the use of forward-looking terminology
including "may," "believe," "will," "expect," "anticipate," or
"estimate." These forward-looking statements involve risks and
uncertainties, and there can be no assurance that actual results
will not differ materially from those expected by management of
Emerge Energy Services LP. When considering these
forward-looking statements, you should keep in mind the risk
factors and other cautionary statements in Emerge Energy's Annual
Report on Form 10-K filed with the SEC. The risk factors and
other factors noted in the Annual Report could cause actual results
to differ materially from those contained in any forward-looking
statement. Except as required by law, Emerge Energy Services
LP does not undertake any obligation to update or revise such
forward-looking statements to reflect events or circumstances that
occur after the date hereof.
PRESS CONTACT
Investor Relations
(817) 618-4020
EMERGE ENERGY
SERVICES LP
CONSOLIDATED STATEMENTS OF
OPERATIONS
($ in thousands except per unit data)
|
Three Months
Ended March 31, |
|
|
2017 |
|
2016 |
|
Revenues |
$ |
75,344 |
|
|
$ |
29,670 |
|
|
Operating expenses: |
|
|
|
|
Cost
of goods sold (excluding depreciation, depletion and
amortization) |
72,311 |
|
|
43,790 |
|
|
Depreciation, depletion and amortization |
4,656 |
|
|
4,907 |
|
|
Selling, general and administrative expenses |
5,878 |
|
|
6,775 |
|
|
Contract and project terminations |
- |
|
|
4,026 |
|
|
Total
operating expenses |
82,845 |
|
|
59,498 |
|
|
Operating income (loss) |
(7,501 |
) |
|
(29,828 |
) |
|
|
|
|
|
|
Other
expense (income): |
|
|
|
|
Interest expense, net |
3,198 |
|
|
4,594 |
|
|
Other |
691 |
|
|
(1 |
) |
|
Total
other expense |
3,889 |
|
|
4,593 |
|
|
Income
(loss) from continuing operations before provision for income
taxes |
(11,390 |
) |
|
(34,421 |
) |
|
Provision (benefit) for income taxes |
- |
|
|
20 |
|
|
Net
income (loss) from continuing operations |
(11,390 |
) |
|
(34,441 |
) |
|
Income
(loss) from discontinued operations, net of taxes |
- |
|
|
226 |
|
|
Net
income (loss) |
$ |
(11,390 |
) |
|
$ |
(34,215 |
) |
|
|
|
|
|
|
Basic
and diluted earnings (loss) per unit: |
|
|
|
|
Earnings (loss) per common unit from continuing operations |
$ |
(0.38 |
) |
|
$ |
(1.42 |
) |
|
Earnings (loss) per common unit from discontinued operations |
- |
|
|
0.01 |
|
|
Basic
and diluted earnings (loss) per common unit |
$ |
(0.38 |
) |
|
$ |
(1.41 |
) |
|
|
|
|
|
|
Weighted average number of common units outstanding - basic and
diluted |
30,061,022 |
|
|
24,121,222 |
|
|
Adjusted EBITDA and Distributable
Cash Flow
We calculate Adjusted EBITDA, a
non-GAAP measure, in accordance with our current Credit Agreement
as: net income (loss) plus consolidated interest expense (net of
interest income), income tax expense, depreciation, depletion and
amortization expense, non-cash charges and losses that are unusual
or non-recurring less income tax benefits and gains that are
unusual or non-recurring and other adjustments allowable under our
existing credit agreement. We report Adjusted EBITDA to our
lenders under our revolving credit facility in determining our
compliance with certain financial covenants. Adjusted EBITDA
should not be considered as an alternative to net income, operating
income, cash flow from operating activities or any other measure of
financial performance presented in accordance with GAAP.
Moreover, our Adjusted EBITDA as presented may not be comparable to
similarly titled measures of other companies. The following
tables reconcile net income (loss) to Adjusted EBITDA for the three
months ended March 31, 2017, December 31, 2016 and
March 31, 2016.
|
Three Months
Ended March 31, |
|
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
2017 |
|
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
Discontinued |
|
Consolidated
(a) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
Net
income (loss) |
$ |
(11,390 |
) |
|
$ |
(34,441 |
) |
|
$ |
- |
|
|
$ |
226 |
|
|
$ |
(11,390 |
) |
|
$ |
(34,215 |
) |
|
|
Interest expense, net |
3,198 |
|
|
4,594 |
|
|
- |
|
|
597 |
|
|
3,198 |
|
|
5,191 |
|
|
|
Depreciation, depletion and amortization |
4,656 |
|
|
4,907 |
|
|
- |
|
|
2,354 |
|
|
4,656 |
|
|
7,261 |
|
|
|
Provision for income taxes |
- |
|
|
20 |
|
|
- |
|
|
6 |
|
|
- |
|
|
26 |
|
|
|
EBITDA |
(3,536 |
) |
|
(24,920 |
) |
|
- |
|
|
3,183 |
|
|
(3,536 |
) |
|
(21,737 |
) |
|
|
Equity-based compensation expense |
347 |
|
|
237 |
|
|
- |
|
|
103 |
|
|
347 |
|
|
340 |
|
|
|
Write
down of sand inventory |
- |
|
|
5,394 |
|
|
- |
|
|
- |
|
|
- |
|
|
5,394 |
|
|
|
Contract and project terminations |
- |
|
|
4,026 |
|
|
- |
|
|
- |
|
|
- |
|
|
4,026 |
|
|
|
Provision for doubtful accounts |
- |
|
|
1,672 |
|
|
- |
|
|
36 |
|
|
- |
|
|
1,708 |
|
|
|
Accretion expense |
29 |
|
|
29 |
|
|
- |
|
|
- |
|
|
29 |
|
|
29 |
|
|
|
Retirement of assets |
(6 |
) |
|
- |
|
|
- |
|
|
- |
|
|
(6 |
) |
|
- |
|
|
|
Reduction in force |
- |
|
|
76 |
|
|
- |
|
|
- |
|
|
- |
|
|
76 |
|
|
|
Other
state and local taxes |
424 |
|
|
469 |
|
|
- |
|
|
147 |
|
|
424 |
|
|
616 |
|
|
|
Permitted acquisition transaction expenses |
213 |
|
|
- |
|
|
- |
|
|
- |
|
|
213 |
|
|
- |
|
|
|
Non-cash deferred lease expense |
1,901 |
|
|
- |
|
|
- |
|
|
- |
|
|
1,901 |
|
|
- |
|
|
|
Unrealized loss on fair value of warrant |
696 |
|
|
- |
|
|
- |
|
|
- |
|
|
696 |
|
|
- |
|
|
|
Non-capitalized cost of private placement |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Gain
on sale of discontinued operations, net of tax |
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
- |
|
|
|
Other
adjustments allowable under our existing credit agreement |
- |
|
|
35 |
|
|
- |
|
|
- |
|
|
- |
|
|
35 |
|
|
|
Adjusted EBITDA |
$ |
68 |
|
|
$ |
(12,982 |
) |
|
$ |
- |
|
|
$ |
3,469 |
|
|
$ |
68 |
|
|
$ |
(9,513 |
) |
|
|
|
Three Months Ended December 31,
2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing |
|
Discontinued |
|
Consolidated (a) |
|
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
|
Net
income (loss) |
$ |
(20,669 |
) |
|
$ |
(106 |
) |
|
$ |
(20,775 |
) |
|
Interest expense, net |
3,448 |
|
|
- |
|
|
3,448 |
|
|
Depreciation, depletion and amortization |
4,662 |
|
|
- |
|
|
4,662 |
|
|
Provision for income taxes |
(220 |
) |
|
- |
|
|
(220 |
) |
|
EBITDA |
(12,779 |
) |
|
(106 |
) |
|
(12,885 |
) |
|
Equity-based compensation expense |
251 |
|
|
- |
|
|
251 |
|
|
Write
down of sand inventory |
- |
|
|
- |
|
|
- |
|
|
Contract and project terminations |
- |
|
|
- |
|
|
- |
|
|
Provision for doubtful accounts |
4 |
|
|
- |
|
|
4 |
|
|
Accretion expense |
30 |
|
|
- |
|
|
30 |
|
|
Retirement of assets |
350 |
|
|
- |
|
|
350 |
|
|
Reduction in force |
- |
|
|
- |
|
|
- |
|
|
Other
state and local taxes |
389 |
|
|
1 |
|
|
390 |
|
|
Permitted acquisition transaction expenses |
- |
|
|
- |
|
|
- |
|
|
Non-cash deferred lease expense |
2,079 |
|
|
- |
|
|
2,079 |
|
|
Unrealized loss on fair value of warrant |
(885 |
) |
|
- |
|
|
(885 |
) |
|
Non-capitalized cost of private placement |
17 |
|
|
- |
|
|
17 |
|
|
Gain
on sale of discontinued operations, net of tax |
1 |
|
|
- |
|
|
1 |
|
|
Other
adjustments allowable under our existing credit agreement |
- |
|
|
- |
|
|
- |
|
|
Adjusted EBITDA |
$ |
(10,543 |
) |
|
$ |
(105 |
) |
|
$ |
(10,648 |
) |
|
(a) Consolidated numbers for
Interest expense, net, Provision for income taxes, Depreciation,
depletion and amortization, Equity-based compensation expense,
Provision for doubtful accounts and Loss (gain) on disposal of
assets include discontinued operations.
The following table reconciles
Consolidated Adjusted EBITDA to our operating cash flows for the
three months ended March 31, 2017, December 31, 2016 and
March 31, 2016:
|
Three Months
Ended, |
|
|
March 31, 2017 |
|
December 31, 2016 |
|
March 31, 2016 |
|
|
|
|
|
|
|
|
|
($ in thousands) |
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
68 |
|
|
$ |
(10,648 |
) |
|
$ |
(9,513 |
) |
|
Non-cash interest expense, net |
(2,684 |
) |
|
(3,001 |
) |
|
(4,642 |
) |
|
Non-cash income tax expense |
(424 |
) |
|
(170 |
) |
|
(642 |
) |
|
Contract and project terminations - non-cash |
- |
|
|
(3 |
) |
|
(25 |
) |
|
Reduction in force |
- |
|
|
- |
|
|
(76 |
) |
|
Write-down of sand inventory |
- |
|
|
- |
|
|
(5,394 |
) |
|
Other
adjustments allowable under our existing credit agreement |
- |
|
|
(1 |
) |
|
(35 |
) |
|
Permitted acquisition transaction expenses |
(213 |
) |
|
- |
|
|
- |
|
|
Non-cash deferred lease expense |
(1,901 |
) |
|
(2,079 |
) |
|
- |
|
|
Change
in other operating assets and liabilities |
(7,785 |
) |
|
(3,589 |
) |
|
18,036 |
|
|
Cash
flows from operating activities: |
$ |
(12,939 |
) |
|
$ |
(19,491 |
) |
|
$ |
(2,291 |
) |
|
|
|
|
|
|
|
|
Cash
flows from investing activities: |
$ |
(1,392 |
) |
|
$ |
(1,263 |
) |
|
$ |
(4,913 |
) |
|
|
|
|
|
|
|
|
Cash
flows from financing activities: |
$ |
16,426 |
|
|
$ |
20,753 |
|
|
$ |
(2,305 |
) |
|
We define Distributable Cash Flow
generally as net income plus (i) non-cash net interest
expense, (ii) depreciation, depletion and amortization
expense, (iii) non-cash charges, and (iv) selected losses
that are unusual or non-recurring; less (v) selected principal
repayments, (vi) selected gains that are unusual or
non-recurring, and (vii) maintenance capital
expenditures. In addition, our Board of Directors utilizes
reserves for future capital expenditures, compliance with law or
debt agreements, and to provide funds for distributions to
unitholders in respect to any one or more of the next four
quarters. Distributable Cash Flow does not reflect changes in
working capital balances. The following table (in thousands)
reconciles net income to Distributable Cash Flow:
|
|
Three Months Ended March 31,
2017 |
|
|
|
|
|
Net income (loss) |
|
$ |
(11,390 |
) |
|
|
|
|
|
Add
(less) reconciling items: |
|
|
|
Add
depreciation, depletion and amortization expense |
|
4,656 |
|
|
Add
non-cash deferred lease expense |
|
1,901 |
|
|
Add
unrealized loss on fair value of warrants |
|
696 |
|
|
Add
amortization of deferred financing costs |
|
663 |
|
|
Add
equity-based compensation, net |
|
347 |
|
|
Add
accretion expense |
|
29 |
|
|
Less
gain on disposal |
|
(6 |
) |
|
Less
income tax expense accrued net of payments |
|
(15 |
) |
|
Less
unrealized gain on fair value of interest rate swaps |
|
(149 |
) |
|
Less
maintenance capital expenditures |
|
(939 |
) |
|
Distributable cash flow |
|
$ |
(4,207 |
) |
|
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Emerge Energy Services LP via Globenewswire
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