2013-02-01 01:07:36 -
News Release
Hi-Crush Partners LP Reports Fourth Quarter 2012 Results and
Acquisition of Preferred Interest in Augusta Facility
Overview of Financial Results
(Thomson Reuters ONE via COMTEX) --Houston, Texas, January 31, 2013 - Hi-Crush
Partners LP (NYSE: HCLP), "Hi-Crush" or the "Partnership", today reported
net
income of $9.4 million, or $0.35 per limited partner unit, for the fourth
quarter of 2012.
Revenues for the quarter ended December 31, 2012 totaled $16.2 million and
reflect an average selling price in line with projections. Hi-Crush sold
248,158 tons of frac sand for the quarter ended December 31, 2012, or
approximately 1.2 million tons for the year ended December 31, 2012 for the
predecessor and successor periods combined. For the quarter ended December
31, 2012, distributable cash flow was $9.7 million and earnings before interest,
taxes, depreciation and amortization ("EBITDA") was $10.0 million.
"While we experienced the well-publicized headwinds as a number of E&P companies
had exhausted their budgets and reduced drilling, we are seeing increased
activity in the first quarter," said Robert Rasmus, Co-Chief Executive Officer
of HCLP. "The underlying market dynamics of renewed development programs,
increased drilling and completion efficiency and the average number of frac
stages per well, combined with strong demand for premium proppants are all
working in our long-term favor as we enter 2013."
On January 17, 2013, Hi-Crush declared its fourth quarter cash distribution of
$0.475 per unit for all common and subordinated units. This amount corresponds
to the minimum quarterly cash distribution of $0.475 per unit, or $1.90 on an
annualized basis.
Acquisition of Preferred Interest in Augusta Facility
Hi-Crush also announced today that it has entered into an agreement with Hi-
Crush Proppants LLC (the "Sponsor") to acquire an interest in Hi-Crush Augusta
LLC ("Augusta"), the entity that owns the Sponsor's Augusta raw frac sand
processing facility, for $37.5 million in cash and 3.75 million of newly issued
convertible Class B units in Hi-Crush. The Sponsor will not receive
distributions on the Class B units unless certain thresholds are met and until
they convert into common units. The preferred interest in Augusta entitles the
Partnership to a preferred distribution of $3.75 million per quarter, or $15
million annually. This cash flow stream is supported by a long-term, take or
pay contract with an investment grade customer.
"We are delighted to announce our first accretive asset acquisition as a public
company," said Robert Rasmus. "The Augusta plant is a premier facility
providing coarse Northern White frac sand under a long-term contract, and this
interest is expected to generate stable cash flow for the Partnership and its
unitholders for many years to come. Beyond this, our Sponsor has the ability to
execute additional asset contributions to support increased distributions for
our unitholders."
Hi-Crush plans to fund the cash portion of the transaction by drawing on its
existing $100 million revolving credit facility, which is currently undrawn.
The cash proceeds will be used by the Sponsor to repay funded debt incurred for
Augusta's construction.
The equity consideration will consist of Class B units issued to the Sponsor.
The Class B units do not participate in distributions unless and until they
convert into common units. The Class B units are eligible for conversion into
common units once the Partnership has, for two consecutive quarters, (i) earned
$2.31 per common unit, subordinated unit and Class B unit on an annualized basis
and (ii) paid $2.10 per unit in annualized distributions on each common and
subordinated unit, or 110% of the current minimum quarterly distribution (MQD),
and (iii) Hi-Crush's general partner has determined that Hi-Crush is expected to
maintain such performance for at least two succeeding quarters.
Our Sponsor has also waived an existing right to require that the Partnership
assign to the Sponsor a long-term customer contract for sand produced by the
Partnership's Wyeville facility. As previously disclosed, this contract was
initially scheduled to be assigned from Wyeville to Augusta on May 1, 2013, but
will remain at Wyeville for the duration of the contract.
"We believe this transaction structure reflects our Sponsor's strong support for
the Partnership and its unitholders," said James Whipkey, Co-Chief Executive
Officer of the Partnership. "The Sponsor's Class B units will not be eligible
for conversion until the common units are paid 10 percent more than their
current distribution and the Partnership maintains a minimum 1.1 times coverage
ratio. Both of these tests must be maintained for two consecutive quarters
before the Class B units become eligible for conversion. The Sponsor is also
electing to leave in place at the Partnership a meaningful long-term customer
contract that was contractually scheduled to transfer to the Sponsor in May of
this year," Mr. Whipkey said. "We believe the effect of the $3.75 million
quarterly preferred distribution combined with the Partnership's retention of
this long-term customer contract will be to largely replace the cash flow lost
from the termination of the Baker Hughes contract."
Under the agreement, effective January 1, 2013, the Partnership's acquired
interest in Augusta is entitled to the first $3.75 million per quarter in
distributable cash flow of the Augusta facility and will, upon the satisfaction
of certain conditions, but no sooner than March 31, 2018 without the approval of
the Conflicts Committee of the Board of Directors of the general partner,
convert into a 20% common ownership position in Augusta. Augusta's principal
assets include 46.2 million tons of proven reserves on approximately 1,000
acres, and newly constructed processing facilities with an annual capacity of
1.6 million tons.
Barclays was the Sponsor's sole financial advisor in the transaction. Evercore
Partners advised the Conflicts Committee of the Board of Directors of the
general partner of the Partnership, which was comprised entirely of independent
directors and approved the transaction.
Earnings Conference Call
A conference call for investors will be held on Friday, February 1, 2012 at
10:00 a.m. Central Time (11:00 a.m. Eastern Time) to discuss Hi-Crush's fourth
quarter results, an update on the Baker Hughes matter and the Augusta
transaction. Hosting the call will be Robert E. Rasmus, Co-Chief Executive
Officer, James M. Whipkey, Co-Chief Executive Officer and Laura C. Fulton, Chief
Financial Officer.
The call can be accessed live over the telephone by dialing (877) 705-6003, or
for international callers, (201) 493-6725. A replay will be available shortly
after the call and can be accessed by dialing (877) 870-5176, or for
international callers (858) 384-5517. The passcode for the replay is 408118.
The replay will be available until February 15, 2013.
Interested parties may also listen to a simultaneous webcast of the conference
call by logging onto Hi-Crush's website at www.hicrushpartners.com in the
Investors-Event Calendar and Presentations section. A replay of the webcast will
also be available for approximately 30 days following the call.
The slide presentation to be referenced on the call will also be on Hi-Crush's
website at www.hicrushpartners.com in the Investors-Event Calendar and
Presentations section.
Non-GAAP Financial Measures
This news release and the accompanying schedules include the non-GAAP financial
measure of EBITDA, Distributable Cash Flow and Production Costs, which may be
used periodically by management when discussing our financial results with
investors and analysts. The accompanying schedules of this news release provide
reconciliations of these non-GAAP financial measures to their most directly
comparable financial measures calculated and presented in accordance with
generally accepted accounting principles in the United States of America
("GAAP"). EBITDA, Distributable Cash Flow and Production Costs are presented as
management believes the data provides a measure of operating performance that is
unaffected by historical cost basis and provides additional information and
metrics relative to the performance of our business.
Distributions to Foreign Investors
The declaration of the distribution is intended to be a qualified notice to
nominees under Treasury Regulation Section 1.1446-4(b), with 100% of the
Partnership's distributions to foreign investors attributable to income that is
effectively connected with a United States trade or business. Accordingly, the
Partnership's distributions to foreign investors are subject to federal income
tax withholding at the highest effective tax rate.
About Hi-Crush
Hi-Crush is a domestic producer of monocrystalline sand, a specialized mineral
that is used as a "proppant" (frac sand) to enhance the recovery rates of
hydrocarbons from oil and natural gas wells. Our reserves, which are located in
Wyeville, Wisconsin, consist of "Northern White" sand, a resource that exists
predominately in Wisconsin and limited portions of the upper Midwest region of
the United States. For more information, visit www.hicrushpartners.com.
Forward-Looking Statements
Some of the information in this news release may contain forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Forward-looking statements give our current expectations, and
contain projections of results of operations or of financial condition, or
forecasts of future events. Words such as "may," "assume,"
"forecast,"
"position," "predict," "strategy," "expect,"
"intend," "plan," "estimate,"
"anticipate," "could," "believe," "project,"
"budget," "potential," or
"continue," and similar expressions are used to identify forward-looking
statements. They can be affected by assumptions used or by known or unknown
risks or uncertainties. Consequently, no forward-looking statements can be
guaranteed. When considering these forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in Hi-Crush's
prospectus relating to its initial public offering filed with the Securities and
Exchange Commission ("SEC"). Actual results may vary materially. You are
cautioned not to place undue reliance on any forward-looking statements. You
should also understand that it is not possible to predict or identify all such
factors and should not consider the risk factors in our reports filed with the
SEC or the following list to be a complete statement of all potential risks and
uncertainties. Factors that could cause our actual results to differ materially
from the results contemplated by such forward-looking statements include: the
volume of frac sand we are able to sell; the price at which we are able to sell
frac sand; the outcome of any pending litigation; changes in the price and
availability of natural gas or electricity; changes in prevailing economic
conditions; and difficulty collecting receivables. All forward-looking
statements are expressly qualified in their entirety by the foregoing cautionary
statements. Hi-Crush's forward looking statements speak only as of the date
made and Hi-Crush undertakes no obligation to update or revise its forward-
looking statements, whether as a result of new information, future events or
otherwise.
Investor contact:
Investor Relations
ir@hicrushpartners.com
(713) 960-4811
Unaudited Condensed Consolidated Statement of Operations
(Amounts in thousands, except tons, units and per unit amounts)
Three Months Three Months
Ended Ended
December 31, 2012 December 31, 2011
------------------- ------------------
Successor Predecessor
Revenues $ 16,215 $ 12,678
Cost of goods sold (including 4,313 3,949
depreciation & depletion)
------------------- ------------------
Gross profit 11,902 8,729
------------------- ------------------
Operating costs and expenses:
General and administrative 2,203 1,159
Exploration expense 64 288
Accretion of asset retirement obligation 53 15
------------------- ------------------
Income from operations 9,582 7,267
------------------- ------------------
Other (income) expense:
Other income - -
Interest expense 183 1,133
------------------- ------------------
Net income $ 9,399 $ 6,134
------------------- ------------------
Earnings per unit:
Common units $ 0.35
-------------------
Subordinated units $ 0.35
-------------------
Limited partner units outstanding:
Common units 13,640,351
-------------------
Subordinated units 13,640,351
-------------------
Unaudited Condensed Consolidated Statement of Operations
(Amounts in thousands, except tons, units and per unit amounts)
Period From Period From
August 16 January 1 Year
Through Through Ended
Dec. 31, 2012 Aug. 15, 2012 Dec. 31, 2011
----------------------------------------------------
Successor Predecessor Predecessor
Revenues $ 28,858 $ 46,776 $ 20,353
Cost of goods sold
(including depreciation 7,145 13,336 6,447
and depletion)
----------------------------------------------------
Gross profit 21,713 33,440 13,906
----------------------------------------------------
Operating costs and
expenses:
General and administrative 2,795 4,631 2,324
Exploration expense 91 539 381
Accretion of asset 56 16 28
retirement obligation
----------------------------------------------------
Income (loss) from 18,771 28,254 11,173
operations
----------------------------------------------------
Other (income) expense:
Other income - (6) -
Interest expense 263 1,893
3,240
----------------------------------------------------
Net income $ 18,508 $ 25,020 $ 9,280
----------------------------------------------------
Earnings per unit:
Common units $ 0.68
---------------
Subordinated units $ 0.68
---------------
Limited partner units
outstanding:
Common units 13,640,351
---------------
Subordinated units 13,640,351
---------------
Unaudited EBITDA and Distributable Cash Flow
(Amounts in thousands)
Three Months Three Months
Ended Ended
December 31, 2012 December 31, 2011
------------------- ------------------
Successor Predecessor
Reconciliation of EBITDA & Distributable
Cash Flow to Net Income:
Net income $ 9,399 $ 6,134
Taxes - -
Depreciation and depletion 468 143
Interest expense, net 183 1,133
------------------- ------------------
EBITDA $ 10,050 $ 7,410
------------------
Less:
Cash interest paid (93)
Maintenance and replacement capital expenditures,
incl. accrual for reserve (335)
replacement (1)
Add: Accretion of asset retirement 53
obligation
-------------------
Distributable Cash Flow (2) $ 9,675
-------------------
Period From Period From
August 16 January 1 Year
Through Through Ended
December 31, 2012 August 15, 2012 December 31, 2011
------------------- ----------------- ------------------
Successor Predecessor Predecessor
Reconciliation of
EBITDA & Distributable
Cash Flow to Net
Income:
Net income $ 18,508 $ 25,020 $ 9,280
Taxes - - -
Depreciation and 863 1,089 449
depletion
Interest expense, net 263 3,240 1,893
------------------- ----------------- ------------------
EBITDA $ 19,634 $ 29,349 $ 11,622
----------------- ------------------
Less:
Cash interest paid (136)
Maintenance and replacement capital
expenditures,
incl. accrual
for reserve (593)
replacement (1)
Add: Accretion of
asset retirement 56
obligation
-------------------
Distributable Cash $ 18,961
Flow (2)
-------------------
1. Maintenance and replacement capital expenditures, including accrual for
reserve replacement, were determined based on an estimated reserve
replacement cost of $1.35 per ton sold during the period from August 16
through December 31, 2012. Such expenditures include those associated with
the replacement of equipment and sand reserves, to the extent that such
expenditures are made to maintain our long-term operating capacity. The
amount presented does not represent a reserve or requirement to spend the
capital.
2. Consistent with our intention to pay a prorated distribution for the period
from the completion of our initial public offering through September
30, 2012, this represents distributable cash flow for the same period plus
the quarter ended December 31, 2012. As such, it does not reflect the amount
of cash flow that would have been available for distribution over an entire
two fiscal quarters.
Unaudited Condensed Consolidated Cash Flow Information
(Amounts in thousands)
Period From Period From
August 16 January 1 Year
Through Through Ended
Dec. 31, 2012 Aug. 15, 2012 Dec. 31, 2011
--------------- --------------- --------------
Successor Predecessor Predecessor
Depreciation and depletion $ 863 $ 1,089 $ 449
Net cash provided by operating 18,383 16,660 18,788
activities
Net cash used in investing (2,239) (80,045) (50,199)
activities
Net cash provided (used) by (7,631) 61,048 42,465
financing activities
Net increase (decrease) in cash 8,513 (2,337) 11,054
Unaudited Condensed Consolidated Balance Sheet
(Amounts in thousands)
December 31, December 31,
2012 2011
Successor Predecessor
Assets
Current assets
Cash $ 10,498 $ 11,054
Restricted cash - 30
Accounts receivable 8,199 4,026
Inventories 3,541 2,374
Due from Sponsor 5,615 -
Prepaid exp. & other current assets 393 294
---------------- ---------------
Total current assets 28,246 17,778
---------------- ---------------
Property, plant and equipment, net 72,844 52,708
Deferred charges, net 1,095 1,743
---------------- ---------------
Total Assets $ 102,185 $ 72,229
---------------- ---------------
Liabilities and Partners' Capital
Current liabilities
Accounts payable $ 1,977 $ 4,954
Accrued liabilities 1,756 866
Deferred revenue 1,714 9,178
---------------- ---------------
Total current liabilities 5,447 14,998
Long-term debt - 46,112
Asset retirement obligation 1,555 832
---------------- ---------------
Total liabilities 7,002 61,942
Total Partners' Capital 95,183 10,287
---------------- ---------------
Total Liabilities and Partners' Capital $ 102,185 $ 72,229
---------------- ---------------
Unaudited Production Cost Per Ton
4Q 2012 4Q 2011
Sand Sold (tons) 248,158 206,557
Production costs ($ in thousands) $ 3,845 $ 3,806
Production costs per ton $ 15.49 $ 18.43
12 months 12 months
ended ended
12/31/2012 12/31/2011
--------------------------------------------
Combined Successor Predecessor
| |
Sand Sold (tons) 1,165,818| 439,604 726,214| 332,593
| |
| |
| |
Production costs ($ in thousands) $ 18,529| $ 6,282 $ 12,247| $ 5,998
| |
| |
| |
Production costs per ton $ 15.89 | $ 14.29 $ 16.86 | $ 18.03
Unaudited Reconciliation of Production Costs to Cost of Goods Sold
(Amounts in thousands)
4Q 2012 4Q 2011
Cost of goods sold $ 4,313 $ 3,949
Depreciation and depletion (468) (143)
Production costs $ 3,845 $ 3,806
12 months 12 months
ended ended
12/31/2012 12/31/2012
---------------------------------- -----------
Combined Successor Predecessor
| |
| |
| |
Cost of goods sold $ 20,481| $ 7,145 $ 13,336| $ 6,447
| |
| |
| |
Depreciation and depletion (1,952)| (863) (1,089)| (449)
| |
| |
| |
Production costs $ 18,529 | $ 6,282 $ 12,247 | $ 5,998
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(i) the releases contained herein are protected by copyright and
other applicable laws; and
(ii) they are solely responsible for the content, accuracy and
originality of the information contained therein.
Source: Hi-Crush Partners LP via Thomson Reuters ONE
[HUG#1674382]
