Domestic crude oil production increased 1.0 million bbl/d – rising more than the combined increases in the rest of the world – to reach its highest level in 24 years. This increase marked the largest observed annual increase in U.S. history.
Emerge Energy Services Announces Second Quarter 2018 Results
Fort Worth, Texas – August 1, 2018 – Emerge Energy Services LP (“Emerge Energy”) today announced second quarter 2018 financial and operating results.
· Total volumes sold increased 6% sequentially to a record 1,589 thousand tons in the second quarter.
· Net income of $9.4 million and diluted earnings per unit of $0.30 for the second quarter.
· Adjusted EBITDA increased 34% sequentially to $23.4 million for the second quarter.
Emerge Energy reported net income of $9.4 million, or $0.30 per diluted unit, for the three months ended June 30, 2018, compared to a net loss of $6.1 million, or $(0.30) per diluted unit for the three months ended June 30, 2017. For the three months ended March 31, 2018, net income was $1.5 million, or $0.05 per diluted unit.
Net revenues were $101.8 million for the three months ended June 30, 2018, compared to $82.6 millionfor the three months ended June 30, 2017, and $106.8 million for the three months ended March 31, 2018. Despite the 6% increase in volumes sequentially in the second quarter, net revenues decreased due to a decrease in the higher priced, terminal sales volumes. Volumes sold through our terminals totaled 26% of volume in the second quarter of 2018, compared to 39% in the first quarter of 2018.
Adjusted EBITDA was $23.4 million for the three months ended June 30, 2018, compared to $7.5 millionfor the three months ended June 30, 2017, and $17.4 million for the three months ended March 31, 2018.
Emerge Energy generated Distributable Cash Flow of $17.3 million for the three months ended June 30, 2018. Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge Energy uses to assess its performance on an ongoing basis. Emerge Energy will not make a cash distribution on its common units for the three months ended June 30, 2018, as the board of directors of its general partner did not approve a cash distribution.
“We delivered solid results in the second quarter,” noted Ted W. Beneski, Chairman of the board of directors of the general partner of Emerge Energy. “Our total volumes sold improved by 6% sequentially to 1.6 million tons, and our Adjusted EBITDA increased by 34% sequentially to $23.4 millionas higher sand prices, an increase of in-basin sales at our San Antonio and Kosse plants, and lower logistics costs boosted our margins.”
“The demand for frac sand remains healthy, but we experienced a minor slowdown to finish the second quarter, and the softness has partially continued into early third quarter. Conversations with our customers indicate that the conditions are temporary given the Permian takeaway constraints. However, we acknowledge that the frac sand industry faces a state of transition with the utilization of new in-basin plants increasing throughout the year. As a top five producer in the frac sand industry in the United States, we believe we are at the forefront of diversifying our business model to meet the new needs of the industry with both northern white and in-basin capabilities.”
“Demand for our San Antonio product is very strong, and we have made considerable progress on customer contracting by executing several agreements. San Antonio production volumes increased in the second quarter, but we incurred a two-month construction delay at the new dry plant. We are now expecting completion in late-August, so the San Antonio volumes should improve significantly in the third quarter. Also, we are now highly confident that we will receive the new NSR permit by late-August, allowing us to expand the plant to the ultimate 4.0 million tons per year capacity by the end of the third quarter this year.”
“We are excited about our previously announced new Oklahoma facility. We continue to work through the permitting process and expect to break ground on the new plant by mid-August. With the 1.5 million tons of new capacity at this plant, our total in-basin capacity will be 6.1 million tons, or approximately 50% of our total frac production capacity.”
“Finally, due to the San Antonio construction delay, we are updating our 2018 full year guidance to $110 million for Adjusted EBITDA and $50 million for net income. Despite the delay, we are nicely positioned for a strong second half of the year.”
Emerge Energy will host its 2018 second quarter results conference call on Wednesday, August 1, 2018at 3:00 p.m. CT. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (855) 850-4275 or (720) 634-2898 and entering pass code 9248628. An audio webcast of the call will be available at www.emergelp.com within the Investor Relations portion of the website under the Webcasts & Presentations section. A replay will be available by audio webcast and teleconference for seven days following the conclusion of the call. The replay teleconference will be available by dialing (855) 859-2056 or (404) 537-3406 and the reservation number 9248628.
The following table summarizes Emerge Energy’s operating results for the six months ended June 30, 2018, and 2017, and three months ended March 31, 2018:
|Three Months Ended||Six Months Ended June 30,|
|June 30, 2018||March 31, 2018||June 30, 2017||2018||2017|
|($ in thousands)|
|Frac sand revenues||$||100,788||$||105,971||$||80,909||$||206,759||$||156,091|
|Non-frac sand revenues||1,054||779||1,693||1,833||1,855|
|Cost of goods sold (excluding depreciation, depletion and amortization)||72,650||80,242||71,428||152,892||143,739|
|Depreciation, depletion and amortization||5,355||4,861||5,675||10,216||10,331|
|Selling, general and administrative expenses||7,390||8,571||6,850||15,961||12,728|
|Contract and project terminations||–||1,689||–||1,689||–|
|Total operating expenses||85,395||95,363||83,953||180,758||166,798|
|Operating income (loss)||16,447||11,387||(1,351||)||27,834||(8,852||)|
|Other expense (income):|
|Interest expense, net||6,736||10,492||5,082||17,228||8,280|
|Total other expense||6,966||9,804||2,074||16,770||5,963|
|Income (loss) from continuing operations before provision for income taxes||9,481||1,583||(3,425||)||11,064||(14,815||)|
|Provision (benefit) for income taxes||53||97||–||150||–|
|Net income (loss) from continuing operations||9,428||1,486||(3,425||)||10,914||(14,815||)|
|Income (loss) from discontinued operations, net of taxes||–||–||(2,657||)||–||(2,657||)|
|Net income (loss)||$||9,428||$||1,486||$||(6,082||)||$||10,914||$||(17,472||)|
|Adjusted EBITDA (a)||$||23,362||$||17,386||$||7,534||$||40,748||$||7,602|
|Volume of frac sand sold (tons in thousands)||1,519||1,437||1,284||2,956||2,529|
|Volume of non-frac sand sold (tons in thousands)||70||66||108||136||114|
|Total volume of sand sold (tons in thousands)||1,589||1,503||1,392||3,092||2,643|
|Terminal sand sales (tons in thousands)||415||587||544||1,002||1,132|
|Volume of frac sand produced by plant (tons in thousands):|
|Arland, Wisconsin facility||493||407||508||900||876|
|Barron, Wisconsin facility||509||498||518||1,007||1,050|
|New Auburn, Wisconsin facility||310||345||302||655||619|
|San Antonio, Texas facility (b)||109||59||–||168||–|
|Kosse, Texas facility||108||99||47||207||112|
|Total volume of frac sand produced||1,529||1,408||1,375||2,937||2,657|
(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.
(b) Emerge Energy commenced frac sand production at the San Antonio facility in July 2017.
Net income (loss) improved $7.9 million for the second quarter of 2018, compared to first quarter of 2018, mainly due to one-time non-cash charges of $3.9 million write-off of deferred financing costs relating to the reduction of our revolving credit facility, and $1.7 million to write off the land owner agreements and related prepaid royalties incurred in the first quarter. We also incurred a one-time charge of $1.1 million of professional fees related to the refinancing in January 2018. Net income also improved in the second quarter of 2018 due to increased prices and higher volumes at our San Antonioand Kosse facilities. Volumes sold through our terminals totaled 26% of volume in the second quarter of 2018, compared to 39% in the first quarter of 2018.
Adjusted EBITDA improved $6.0 million for the second quarter of 2018, compared to the first quarter of 2018, mainly due to higher sand prices and increased volumes in the second quarter and a $4 millionpayment of deferred expenses in the first quarter.
Net income (loss) improved $15.5 million and Adjusted EBITDA improved $15.8 million for the second quarter of 2018, compared to same quarter in 2017, mainly due to an increase in total volumes sold, higher prices, and lower production costs on a per-ton basis. This was offset by increased selling, general and administrative expenses due to increased staffing in 2018.
During the three months ended June 30, 2017, we recorded a non-cash charge of $2.7 million related to the August 2016 sale of the Fuel business.
For the three months ended June 30, 2018, Emerge Energy’s capital expenditures totaled $25.7 million.
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.
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.