- Volumes of 2.0 million tons sold in 4Q 2018 vs. 2.8 million tons in 3Q 2018
- Second Kermit production facility construction completed on time and under budget; first volumes delivered
- Executed new contracts with E&Ps for logistics services, in-basin and Northern White sand
- Achieving further success in last mile development; completed field testing of new FB Atlas conveyor system
- Board of Directors suspends the quarterly distribution based on current market conditions
"Well completion activity slowed significantly in the fourth quarter, impacting sales volumes and pricing primarily of Northern White sand, and to a lesser extent in-basin sand," said Mr.
For the fourth quarter of 2018, the Partnership reported sales volumes of 1,976,805 tons, compared to 2,775,360 tons sold in the third quarter of 2018, below the previously forecasted range of 2.3 to 2.5 million tons. Volumes sold during the fourth quarter of 2018 were negatively impacted by greater than expected weakness in completions activity and timing of customer demand, as well as typical seasonal slowdowns.
"Our overall volumes were impacted by the headwinds anticipated during the quarter," said Ms.
Kermit Facility Development Update
The Partnership announced the completion in December of construction at its second Kermit production facility. The 3.0 million ton per year facility is located one mile west of the first Kermit facility, with sufficient and separate road access to enable efficient ingress and egress for the two facilities. Both Kermit facilities produce a single product, 100 mesh Permian PearlTM frac sand, and all volumes produced from the two facilities are mined from the same reserves. The reserve life for the Kermit complex is estimated to be approximately 17 years.
"The construction of our second Kermit facility was completed on time and under budget in December and we successfully delivered our first volumes from the facility," said Mr. Rasmus. "Combined with our customer-driven expansion project at
The Partnership also announced new contracts with E&Ps for Northern White sand and PropStream services starting in the first quarter of 2019. The contracts executed with E&Ps to-date support approximately half of currently operating Northern White frac sand production capacity and commit additional PropStream systems and crews primarily in the Northeast with leading operators in the region. In addition, the Partnership announced the execution of pricing amendments to certain of its sand supply agreements supporting the Kermit complex.
"We are excited to deepen relationships with operators that value our reliability, safety record and integrated last mile services," Mr. Rasmus continued. "At the same time, we remain in active discussions with our customers, particularly around the fixed-prices defined in our in-basin sand agreements. While certain discussions are ongoing, we conservatively expect more than
In support of the expansion of its PropStream service,
"Customer demand for our FB silos has been robust and feedback on these systems and our team’s execution has been tremendously positive," continued Mr. Rasmus. "Customers are increasingly focused on the last mile value proposition, and against this backdrop we have explored several ways in which we can utilize the new FB silo service offering to improve efficiencies and deliver further value to our customers. We believe our customer strategy, combined with our Mine. Move. Manage. operational strategy, is pivotal to long-term success in the frac sand and logistics sector. We are committed to fundamentally extending our business beyond the mine, including an increasing concentration on the logistics of frac sand, and serving customers through unique, value added solutions."
The Partnership also announced the Board of Directors’ decision to suspend the quarterly distribution.
"As a result of the challenging conditions experienced in the fourth quarter, the Board of Directors made the decision to suspend the quarterly distribution, which reflects our commitment to financial discipline and maintaining a strong balance sheet," said Ms. Fulton. "Our balance sheet is well positioned for the challenges facing the industry, supported by our financial structure with no maintenance covenants, and enhanced by the Board’s decision to further protect our capital position. With
"We continue to believe some of the market dynamics that coalesced in the fourth quarter are transitory," said Mr. Rasmus. "We anticipate improving activity in 2019 as E&Ps focus a larger share of their capital budgets on completions and additional takeaway capacity in the
"We are proactively taking steps to control costs, including our decision in the third quarter to idle the
This communication relates to the Conversion. This communication is for informational purposes only and does not constitute a solicitation of any vote or approval, in any jurisdiction, pursuant to the Conversion or otherwise.
Important Additional Information
In connection with the Conversion, the Partnership will file with the
Investors and security holders will be able to obtain free copies of proxy statement (when available) and all other documents filed or that will be filed with the
Participants in the Solicitation
The Partnership is managed and operated by the board of directors and executive officers of its general partner,
Information regarding our General Partner’s directors and executive officers is contained in the Partnership’s Annual Report on Form 10-K for the 2017 fiscal year filed with the
Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the Conversion by reading the proxy statement regarding the Conversion when it becomes available. You may obtain free copies of this document as described above.
Forward-Looking Statements and Cautionary Statements
The foregoing contains "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. All statements, other than statements of historical fact, included in this communication that address activities, events or developments that the Partnership expects, believes or anticipates will or may occur in the future are forward-looking statements. Words such as "estimate," "project," "predict," "believe," "expect," "anticipate," "potential," "create," "intend," "could," "may," "foresee," "plan," "will," "guidance," "look," "outlook," "goal," "future," "assume," "forecast," "build," "focus," "work," "continue" or the negative of such terms or other variations thereof and words and terms of similar substance used in connection with any discussion of future plans, actions, or events identify forward-looking statements. However, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding the Conversion, descriptions of the post-Conversion company and its operations, transition plans, opportunities and anticipated future performance. There are a number of risks and uncertainties that could cause actual results to differ materially from the forward-looking statements included in this communication. These include the expected timing and likelihood of completion of the Conversion, the occurrence of any event, change or other circumstances that could give rise to the abandonment of the proposed Conversion, the possibility that unitholders of the Partnership may not approve the Conversion, risks related to disruption of management time from ongoing business operations due to the Conversion, the risk that any announcements relating to the Conversion could have adverse effects on the market price of the Partnership’s common units, the risk that the Conversion and its announcement could have an adverse effect on the ability of the Partnership to retain customers and retain and hire key personnel and maintain relationships with their suppliers and customers and on their operating results and businesses generally, the risk the pending Conversion could distract management of the Partnership and that the Partnership will incur substantial costs, the risk that problems arise that may result in the post-Conversion company not operating as effectively and efficiently as expected, the risk that the post-Conversion company may be unable to achieve expected benefits of the Conversion or it may take longer than expected to achieve those benefits and other important factors that could cause actual results to differ materially from those projected. All such factors are difficult to predict and are beyond the Partnership’s control, including those detailed in the Partnership’s annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K that are available on its website at www.hicrush.com and on the SEC’s website at http://www.sec.gov. All forward-looking statements are based on assumptions that the Partnership believes to be reasonable but that may not prove to be accurate. Any forward-looking statement speaks only as of the date on which such statement is made, and the Partnership undertakes no obligation to correct or update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by applicable law. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.
Use of Non-GAAP Information
This release may include non-GAAP financial measures. Such non-GAAP measures are not alternatives to GAAP measures, and you should not consider these non-GAAP measures in isolation or as a substitute for analysis of our results as reported under GAAP. For additional disclosure regarding such non-GAAP measures, including reconciliations to their most directly comparable GAAP measure, please refer to Hi-Crush’s most recent earnings release at www.hicrush.com.
Caldwell Bailey, Lead Investor Relations Analyst