Hi-Crush Partners LP (NYSE: HCLP), "Hi-Crush" or the "Partnership",
today reported fourth quarter and full year 2018 results. Revenues
for the fourth quarter of 2018 totaled $162.2 million on sales of
1,976,805 tons of frac sand. This compares to $214.0 million of
revenues on sales of 2,775,360 tons of frac sand in the third
quarter of 2018. The limited partners' interest in net loss was
$(7.7) million for the fourth quarter of 2018, resulting in basic
and diluted loss of $(0.08) per limited partner unit.
Earnings before interest, taxes, depreciation
and amortization adjusted for earnings from equity method
investments and loss on extinguishment of debt ("Adjusted EBITDA")
was $10.2 million in the fourth quarter of 2018, compared to $51.3
million for the third quarter of 2018. Distributable cash flow
attributable to the limited partners for the fourth quarter of 2018
was $1.0 million compared to $40.0 million for the third quarter of
2018.
"During the fourth quarter, we made significant
progress in furthering our relationships with E&Ps and
contracting our last mile solutions, while also completing
construction on our customer-supported second Kermit facility, on
time and under budget," said Robert E. Rasmus, Chairman and Chief
Executive Officer of Hi-Crush. "The demand environment for frac
sand remained challenging in the fourth quarter due to lower
completion activity, along with competitive pressures from
additional in-basin supply coming online. Our financial results for
the fourth quarter reflect this weak market environment experienced
across the industry. Despite these market headwinds, the steps we
have taken under our Mine. Move. Manage. strategy to expand our
customer base and execute on growing our integrated last mile
solutions have continued the transformation of Hi-Crush to a more
logistics-focused service company. We will continue to transform
our business through further expansion of our E&P customer
base, additional deployment of container crews and silo systems,
and our strategic conversion to the C-Corp structure."
Fourth Quarter 2018 Results
Revenues for the fourth quarter of 2018 totaled
$162.2 million, compared to $214.0 million for the third quarter of
2018. The decrease was driven by lower pricing and reduced
volumes. Lower pricing resulted from the slowdown in demand
for frac sand that emerged during the third quarter of 2018 and
continued throughout the fourth quarter, due to decreased well
completion activity. The decline in pricing was exacerbated by the
start-up of new in-basin production capacity in the Permian and the
related impact on sand pricing in other basins as supply shifted to
meet demand. Average sales price was $58 per ton in the fourth
quarter of 2018, compared to $64 per ton in the third quarter of
2018. The sequential reduction in sales volumes reflect generally
lower completions activity levels experienced during the fourth
quarter, but were partially mitigated by increased sales made
directly to E&Ps and through our PropStream® integrated last
mile logistics service. Volumes sold directly to E&Ps
represented 51% of the total in the fourth quarter of 2018,
compared to 40% in the third quarter of 2018. Of the total sales
volumes reported in the fourth quarter of 2018, 36% were sold at
the wellsite through PropStream, compared to 24% in the third
quarter of 2018.
Contribution margin was $14.35 per ton in the
fourth quarter of 2018, compared to $23.92 per ton in the third
quarter of 2018. The sequential decrease in contribution margin per
ton primarily resulted from lower sales prices on Northern White
volumes as well as increased per ton production costs due to lower
capacity utilization resulting from reduced sales volumes.
"Contribution margin per ton was in line with
previous guidance, reflecting our relentless focus on cost
management and efficiency, which offset the lower capacity
utilization we experienced," said Ms. Laura C. Fulton, Chief
Financial Officer of Hi-Crush. "During the quarter, we turned down
orders for volumes that would not have been profitable, and, at the
same time, we were successful in expanding our relationships with
E&Ps, which accounted for more than half of our sales volumes.
This progress, as well as the movement of demand and our business
away from sales at the minegate, reinforces the importance of
relationships we have cultivated with E&Ps as the foundation of
our business going forward."
Full Year 2018 Results
For the full year 2018, the limited partners'
interest in net income was $133.1 million, resulting in $1.46 basic
and $1.42 diluted earnings per limited partner unit. EBITDA
for the full year 2018 was $205.1 million, compared to $120.7
million for the full year 2017. Adjusted EBITDA for the full
year 2018 was $206.1 million, compared to $124.9 million for the
full year 2017. Distributable cash flow attributable to the
limited partners for the full year 2018 was $166.2 million.
Revenues for the year ended December 31, 2018
totaled $842.8 million on sales of 10,407,296 tons of frac sand,
compared to revenues of $602.6 million on sales of 8,938,713 tons
of frac sand in 2017. Contribution margin averaged $25.45 per
ton in 2018, compared to $18.38 per ton in 2017. The increase
in annual volumes sold is a result of improved market conditions
during the first half of 2018, in addition to increased production
capacity from commencement of operations at the Kermit facility in
July 2017.
Average sales price per ton was $67 for each of
the years ended December 31, 2018 and 2017. While average
sales pricing generally increased throughout the entirety of 2017,
prices increased during the first half of 2018 as the industry
struggled to deliver enough volumes to keep pace with surging
demand. These increases were followed by a steep decline in pricing
during the second half of 2018 due to a large increase in supply
from newly constructed in-basin Permian production facilities, a
slowdown in completions activity driven by E&P budget
exhaustion and pipeline capacity constraints.
Operational Update
At the end of the fourth quarter of 2018,
Hi-Crush had 16 PropStream container crews in the Permian Basin and
Marcellus / Utica plays, and 8 FB silo systems operating in the
Permian. During the fourth quarter, the Partnership also completed
successful field testing for the new FB Atlas top-fill conveyor
system with an existing E&P customer in the Permian. This
new technology utilizes hopper bottom trailers capable of
delivering 27 tons of frac sand per truckload to the wellsite,
greatly improving the efficiency of transportation through more
tons per truckload, as well as quicker turnaround times at the
wellsite. The FB Atlas is capable of unloading hopper bottom
trailers in significantly less time than any other solution,
maximizing the utilization of trucking assets.
"Our deployment of PropStream crews in the
fourth quarter was impacted by delays in contract start-ups due to
budget timing considerations of our customers," Mr. Rasmus
continued. "We ended the year with 16 container crews, and 8 FB
silo systems deployed, representing significant progress given the
slowdown in activity facing the industry, particularly in the
fourth quarter. We have contracted additional PropStream crews and
systems in the fourth quarter and over the past several weeks,
which will be deployed in the first quarter, leading to incremental
growth in PropStream contribution to our bottom line. In addition,
the completion of field testing of the FB Atlas top-fill conveyor
system further differentiates Hi-Crush’s last mile offering versus
those services reliant on pneumatic fill solutions.
"We were also pleased to complete construction
on our second Kermit facility during the fourth quarter,
representing an increase in capacity at our Kermit complex in West
Texas to 6.0 million tons per year. We are now serving an
increasing base of customer activity, as demand for frac sand in
the Permian remains strong. We are quickly ramping up our
production capacity during the first quarter, and we expect to
reach full run-rate on the second Kermit facility in March, with
similar production cost per ton as the first Kermit facility for
the remainder of 2019."
The Partnership previously announced the
execution of pricing amendments to certain of its sand supply
agreements supporting the Kermit complex. Including these
amendments, the Partnership expects to generate more than $100
million in EBITDA annually solely from frac sand sales at the
Kermit complex, before any added contribution from logistics
services or other production assets.
"We are focused on trading value for value and
further strengthening the long-term relationships we target with
our E&P customers, and we have been able to achieve this in
contract renegotiations for our in-basin sand," said Mr. Rasmus.
"We have secured the use of additional PropStream crews and
equipment, increased volume commitments and extended terms on
contracts, while committing strategically and collaboratively to
the long-term success of these relationships."
Liquidity and Capital
Expenditures
As of December 31, 2018, the Partnership
had $445.5 million of long-term debt outstanding, and was in
compliance with the covenants defined in its senior secured
revolving credit facility (the "ABL Facility"). As of
December 31, 2018, Hi-Crush had $114.3 million of cash and
$58.2 million in available borrowing capacity under its ABL
Facility, resulting in total liquidity of $172.5 million.
Capital expenditures for the year ended
December 31, 2018, totaled $141.5 million, primarily
associated with the development of the second Kermit facility,
expansion of the Wyeville facility, equipment builds to further
expand market penetration of the FB Industries silo solution,
equipment purchases for PropStream, and various projects at
production facilities and terminals.
Capital expenditures for the full year 2019 will
be comprised of three components. Carryover growth capex from 2018
projects associated with completion of the Kermit construction and
Wyeville expansions are expected to be in the range of $30 to $35
million to be spent during the first half of 2019. For the full
year 2019, maintenance capex is expected to be in the range of $25
to $30 million. Discretionary growth capex related to
spending on logistics assets and continued investment in container
and silo equipment for PropStream for the full year 2019, up to an
additional $45 to $55 million, may be spent as market conditions
dictate and as warranted by customer commitments.
"Hi-Crush has always been committed to
maintaining a fortress balance sheet," said Ms. Fulton. "Our
liquidity and cash position remains strong, as we exited the year
with over $114 million in cash, and no drawings on our ABL
Facility, positioning us well to continue executing on our growth
priorities. Looking ahead to 2019, the remaining capital
commitments for completion of the Kermit facility and Wyeville
expansions will be met through existing liquidity. The total capex
that we project for the year reflects remaining obligations on
these strategic projects, as well as typical maintenance capex, and
a flexible base of discretionary growth capex for the logistics
side of our business."
Corporate Conversion Update
The Partnership filed a preliminary proxy
statement with the Securities and Exchange Commission ("SEC") on
February 5, 2019. The proxy statement relates to a special
meeting of unitholders that is expected to be held in the second
quarter of 2019 and at which unitholders will be asked to consider
and vote upon proposals relating to the conversion of the
Partnership from a Delaware limited partnership to a Delaware
corporation (the "Conversion"), which, subject to unitholder
approval, will be completed through a series of transactions set
forth in a plan of conversion that is attached to and forms a part
of the proxy statement.
"The reasons for the Conversion are numerous,
and, as we noted in the preliminary proxy statement, the Board
believes the Conversion is critical to the future success of
Hi-Crush," said Mr. Rasmus. "With increasing challenges for MLPs
and the growing focus of our business on logistics, the Board
believes that accomplishing our growth plans and executing on our
strategy for long-term success are best achieved through a
traditional corporate structure. We also believe the transition to
a C-Corp will increase our access to, and lower the cost of,
capital by increasing trading liquidity and making Hi-Crush more
accessible to a broader investor base."
Distribution
On January 7, 2019, the Partnership announced
the Board of Directors’ decision to suspend the quarterly
distribution. Hi-Crush previously declared a quarterly cash
distribution of $0.225 per unit on all common units, for the third
quarter of 2018, which was paid in November 2018.
Outlook
For the first quarter of 2019, the Partnership
expects total sales volumes to be in a range of 2.4 to 2.6 million
tons. The forecasted sequential increase is due to additional
volumes sold from the second Kermit facility as well as increasing
Northern White volumes related to the new E&P contracts
previously announced.
"The first quarter of 2019 will be very active
for Hi-Crush, as our second Kermit facility ramps up, new Northern
White E&P contracts begin, existing customers ramp up activity,
and the outlook for commodity prices stabilizes," said Ms. Fulton.
"We expect meaningful sequential growth in our sales volumes
primarily due to our second Kermit facility. We expect
average sand pricing to remain unchanged, despite our expectation
for increased activity levels in the first quarter. We are
pleased with the operational and financial results from the
deployment of our container and silo systems, and see room for
further improvement as we continue to enhance and develop the
systems to meet the challenging and dynamic needs of our E&P
customers. As we progress through the year, we anticipate the
expansion of our PropStream service will move in line with the
expansion of our E&P customer base, further reinforcing our
position as a company built for long-term, structural success."
Conference Call
On Wednesday, February 6, 2019, Hi-Crush
will hold a conference call for investors at 7:30 a.m. Central Time
(8:30 a.m. Eastern Time) to discuss Hi-Crush’s fourth quarter and
full year 2018 results. Hosting the call will be Robert E. Rasmus,
Chairman and Chief Executive Officer and Laura C. Fulton, Chief
Financial Officer. The call can be accessed live over the telephone
by dialing (877) 407-0789, or for international callers, (201)
689-8562. A replay will be available shortly after the call and can
be accessed by dialing (844) 512-2921, or for international callers
(412) 317-6671. The passcode for the replay is 13686710. The replay
will be available until February 20, 2019.
Interested parties may also listen to a
simultaneous webcast of the conference call by logging onto
Hi-Crush’s website at www.hicrush.com under the Investors
Relations-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.hicrush.com under the
Investors Relations-Event Calendar and Presentations section.
Non-GAAP Financial Measures
This news release and the accompanying schedules
include the non-GAAP financial measure of EBITDA, Adjusted EBITDA,
distributable cash flow, adjusted earnings per limited partner unit
and contribution margin, 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").
We define EBITDA as net income plus
depreciation, depletion and amortization and interest expense, net
of interest income. We define Adjusted EBITDA as EBITDA, adjusted
for any non-cash impairments of long-lived assets and goodwill,
earnings (loss) from equity method investments and loss on
extinguishment of debt. We define distributable cash flow as
Adjusted EBITDA less cash paid for interest expense, including
accruals and maintenance and replacement capital expenditures,
including accrual for reserve replacement, plus accretion of asset
retirement obligations and non-cash unit-based compensation. We use
distributable cash flow as a performance metric to compare cash
generating performance of the Partnership from period to period and
to compare the cash generating performance for specific periods to
the cash distributions (if any) that are expected to be paid to our
unitholders. Distributable cash flow will not reflect changes
in working capital balances. We define adjusted earnings per
limited partner unit as earnings per limited partner unit, adjusted
for the impact of non-recurring items.
We use contribution margin, which we define as
total revenues less costs of goods sold excluding depreciation,
depletion and amortization, to measure our financial and operating
performance. Contribution margin excludes other operating expenses
and income, including costs not directly associated with the
operations of our business such as accounting, human resources,
information technology, legal, sales and other administrative
activities.
EBITDA, Adjusted EBITDA, distributable cash
flow, adjusted earnings per limited partner unit and contribution
margin 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.
About Hi-Crush
Hi-Crush is a fully integrated, strategic
provider of proppant and logistics solutions to the North American
petroleum industry. We provide mine-to-wellsite logistics services
that optimize proppant supply to customers in all major oil and gas
basins in the United States, and own and operate multiple frac sand
mining facilities and in-basin terminals. Our PropStream service,
offering both container- and silo-based wellsite delivery and
storage systems, provides the highest level of flexibility, safety
and efficiency in managing the full scope and value of the proppant
supply chain. Visit HiCrush.com.
No Solicitation
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 has filed with the SEC a proxy statement. The
Conversion will be submitted to Partnership’s unitholders for their
consideration. The Partnership may also file other documents with
the SEC regarding the Conversion. The definitive proxy statement
will be sent to the unitholders of the Partnership. This document
is not a substitute for the proxy statement that will be filed with
the SEC or any other documents that the Partnership may file with
the SEC or send to unitholders of the Partnership in connection
with the Conversion. INVESTORS AND SECURITY HOLDERS OF THE
PARTNERSHIP ARE URGED TO READ THE PROXY STATEMENT THAT HAS BEEN
FILED REGARDING THE CONVERSION AND ALL OTHER RELEVANT DOCUMENTS
THAT ARE FILED OR WILL BE FILED WITH THE SEC, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THESE DOCUMENTS, CAREFULLY AND IN
THEIR ENTIRETY BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE CONVERSION AND RELATED MATTERS.
Investors and security holders are able to
obtain free copies of the proxy statement and all other documents
filed or that will be filed with the SEC by the Partnership through
the website maintained by the SEC at http://www.sec.gov. Copies of
documents filed with the SEC by the Partnership will be made
available free of charge on the Partnership’s website at
www.hicrush.com, under the heading "Investors," or by directing a
request to Investor Relations, Hi-Crush Partners LP, 1330 Post Oak
Blvd., Suite 600, Houston, TX 77056, Tel. No. (713) 980-6270.
Participants in the
Solicitation
The Partnership is managed and operated by the
board of directors and executive officers of its general partner,
Hi-Crush GP LLC (our "General Partner"). The Partnership, our
General Partner and our General Partner’s directors and executive
officers may be deemed to be participants in the solicitation of
proxies in respect to the Conversion.
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
SEC on February 20, 2018, and certain of its Current Reports on
Form 8-K. You can obtain a free copy of these documents at the
SEC’s website at http://www.sec.gov or by accessing the
Partnership’s website at www.hicrush.com.
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. You may obtain free copies of
this document as described above.
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,"
"should," "assume," "forecast," "position," "predict," "strategy,"
"expect," "intend," "hope," "plan," "estimate," "anticipate,"
"could," "believe," "project," "budget," "potential," "likely," 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 reports filed
with the SEC, including those described under Item 1A of Hi-Crush’s
Form 10-K for the year ended December 31, 2017 and any
subsequently filed 10-Q. 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, claims or assessments, including
unasserted claims; changes in the price and availability of natural
gas or electricity; changes in prevailing economic conditions;
difficulty collecting receivables; statements regarding the
Conversion; descriptions of our operations and anticipated future
performance following the Conversion; and the risk that we may be
unable to obtain unitholder approval for the Conversion or achieve
expected benefits of the Conversion, or that it may take longer
than expected to achieve those benefits. 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:Caldwell
Bailey, Lead Investor Relations AnalystMarc Silverberg,
ICRir@hicrush.com(713) 980-6270
Unaudited Consolidated Statements of
Operations |
(Amounts
in thousands, except per unit amounts) |
|
|
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
2018 |
|
2017 (a) |
|
2018 (a) |
Revenues |
$ |
162,235 |
|
|
$ |
216,456 |
|
|
$ |
213,972 |
|
Cost of goods sold
(excluding depreciation, depletion and amortization) |
133,877 |
|
|
146,428 |
|
|
147,583 |
|
Depreciation, depletion
and amortization |
9,762 |
|
|
8,220 |
|
|
10,241 |
|
Gross
profit |
18,596 |
|
|
61,808 |
|
|
56,148 |
|
Operating costs and
expenses: |
|
|
|
|
|
General
and administrative expenses |
18,582 |
|
|
12,023 |
|
|
15,634 |
|
Accretion
of asset retirement obligations |
125 |
|
|
115 |
|
|
124 |
|
Other
operating expenses |
929 |
|
|
522 |
|
|
631 |
|
Income
(loss) from operations |
(1,040 |
) |
|
49,148 |
|
|
39,759 |
|
Other income
(expense): |
|
|
|
|
|
Earnings
from equity method investments |
1,250 |
|
|
217 |
|
|
1,624 |
|
Interest
expense |
(10,140 |
) |
|
(3,105 |
) |
|
(8,012 |
) |
Loss on
extinguishment of debt |
— |
|
|
(4,332 |
) |
|
(6,233 |
) |
Net
income (loss) |
$ |
(9,930 |
) |
|
$ |
41,928 |
|
|
$ |
27,138 |
|
Earnings (loss) per
limited partner unit: |
|
|
|
|
|
Basic |
$ |
(0.08 |
) |
|
$ |
0.48 |
|
|
$ |
0.30 |
|
Diluted |
$ |
(0.08 |
) |
|
$ |
0.47 |
|
|
$ |
0.29 |
|
|
Year Ended |
|
December 31, |
|
2018 |
|
2017 (a) |
Revenues |
$ |
842,840 |
|
|
$ |
602,623 |
|
Cost of goods sold
(excluding depreciation, depletion and amortization) |
577,974 |
|
|
438,348 |
|
Depreciation, depletion
and amortization |
38,284 |
|
|
29,449 |
|
Gross
profit |
226,582 |
|
|
134,826 |
|
Operating costs and
expenses: |
|
|
|
General
and administrative expenses |
59,328 |
|
|
43,667 |
|
Accretion
of asset retirement obligations |
498 |
|
|
458 |
|
Other
operating expenses |
2,765 |
|
|
865 |
|
Other
operating income |
— |
|
|
(3,554 |
) |
Income
from operations |
163,991 |
|
|
93,390 |
|
Other income
(expense): |
|
|
|
Earnings
from equity method investments |
5,184 |
|
|
75 |
|
Interest
expense |
(25,347 |
) |
|
(12,971 |
) |
Loss on
extinguishment of debt |
(6,233 |
) |
|
(4,332 |
) |
Net
income |
$ |
137,595 |
|
|
$ |
76,162 |
|
Earnings per limited
partner unit: |
|
|
|
Basic |
$ |
1.46 |
|
|
$ |
0.97 |
|
Diluted |
$ |
1.42 |
|
|
$ |
0.96 |
|
|
(a) Financial information has been recast to
include the results attributable to our sponsor and general
partner. |
Unaudited EBITDA, Adjusted EBITDA and Distributable Cash
Flow |
(Amounts
in thousands) |
|
|
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
2018 |
|
2017 |
|
2018 |
Reconciliation
of distributable cash flow to net income (loss): |
|
|
|
|
|
Net income (loss) |
$ |
(9,930 |
) |
|
$ |
41,928 |
|
|
$ |
27,138 |
|
Depreciation and depletion expense |
9,901 |
|
|
8,357 |
|
|
10,373 |
|
Amortization expense |
1,318 |
|
|
419 |
|
|
1,215 |
|
Interest
expense |
10,140 |
|
|
3,105 |
|
|
8,012 |
|
EBITDA |
11,429 |
|
|
53,809 |
|
|
46,738 |
|
Earnings
from equity method investments |
(1,250 |
) |
|
(217 |
) |
|
(1,624 |
) |
Loss on
extinguishment of debt |
— |
|
|
4,332 |
|
|
6,233 |
|
Adjusted EBITDA |
10,179 |
|
|
57,924 |
|
|
51,347 |
|
Less:
Cash interest paid, including accruals |
(9,738 |
) |
|
(2,833 |
) |
|
(7,688 |
) |
Less:
Maintenance and replacement capital expenditures, including accrual
for reserve replacement (a) |
(3,718 |
) |
|
(5,553 |
) |
|
(4,914 |
) |
Add:
Accretion of asset retirement obligations |
125 |
|
|
115 |
|
|
124 |
|
Add:
Unit-based compensation |
1,931 |
|
|
1,808 |
|
|
1,897 |
|
Distributable cash
flow |
(1,221 |
) |
|
51,461 |
|
|
40,766 |
|
Adjusted
for: Distributable cash flow attributable to assets contributed
from the sponsor, prior to the period in which the contribution
occurred (b) |
2,171 |
|
|
1,116 |
|
|
(725 |
) |
Distributable cash flow
attributable to Hi-Crush Partners LP |
950 |
|
|
52,577 |
|
|
40,041 |
|
Less:
Distributable cash flow attributable to the holder of incentive
distribution rights |
— |
|
|
(593 |
) |
|
— |
|
Distributable cash flow attributable to limited partner
unitholders |
$ |
950 |
|
|
$ |
51,984 |
|
|
$ |
40,041 |
|
|
(a) Maintenance and replacement capital
expenditures, including accrual for reserve replacement, were
determined based on an estimated reserve replacement cost of $1.35
per ton produced and delivered through September 30, 2017.
Effective October 1, 2017, we increased the estimated reserve
replacement cost to $1.85 per ton produced and delivered, due to
the addition of our first Kermit facility. Effective January 1,
2019, we revised our estimated reserve replacement cost to $2.10
per ton as a result of completion of construction of our
second Kermit facility. 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 an actual reserve account or requirement to spend the
capital. |
(b) The Partnership's historical financial
information has been recast to consolidate our sponsor and general
partner for the periods leading up to their contribution into the
Partnership. For purposes of calculating distributable cash flow
attributable to Hi-Crush Partners LP, the Partnership excludes the
incremental amount of recast distributable cash flow earned during
the periods prior to the contribution. |
Unaudited EBITDA, Adjusted EBITDA and Distributable Cash
Flow |
(Amounts in
thousands) |
|
|
|
Year Ended |
|
December 31, |
|
2018 |
|
2017 |
Reconciliation
of distributable cash flow to net income: |
|
|
|
Net income |
$ |
137,595 |
|
|
$ |
76,162 |
|
Depreciation and depletion expense |
38,775 |
|
|
29,872 |
|
Amortization expense |
3,374 |
|
|
1,681 |
|
Interest
expense |
25,347 |
|
|
12,971 |
|
EBITDA |
205,091 |
|
|
120,686 |
|
Earnings
from equity method investments |
(5,184 |
) |
|
(75 |
) |
Loss on
extinguishment of debt |
6,233 |
|
|
4,332 |
|
Adjusted EBITDA |
206,140 |
|
|
124,943 |
|
Less:
Cash interest paid, including accruals |
(24,183 |
) |
|
(10,950 |
) |
Less:
Maintenance and replacement capital expenditures, including accrual
for reserve replacement (a) |
(18,868 |
) |
|
(13,742 |
) |
Add:
Accretion of asset retirement obligations |
498 |
|
|
458 |
|
Add:
Unit-based compensation |
7,439 |
|
|
5,714 |
|
Distributable cash
flow |
171,026 |
|
|
106,423 |
|
Adjusted
for: Distributable cash flow attributable to assets contributed
from the sponsor, prior to the period in which the contribution
occurred (b) |
2,796 |
|
|
6,573 |
|
Distributable cash flow
attributable to Hi-Crush Partners LP |
173,822 |
|
|
112,996 |
|
Less:
Distributable cash flow attributable to the holder of incentive
distribution rights |
(7,664 |
) |
|
— |
|
Distributable cash flow attributable to limited partner
unitholders |
$ |
166,158 |
|
|
$ |
112,996 |
|
|
(a) Maintenance and replacement capital
expenditures, including accrual for reserve replacement, were
determined based on an estimated reserve replacement cost of $1.35
per ton produced and delivered through September 30, 2017.
Effective October 1, 2017, we increased the estimated reserve
replacement cost to $1.85 per ton produced and delivered, due to
the addition of our first Kermit facility. Effective January 1,
2019, we revised our estimated reserve replacement cost to $2.10
per ton as a result of completion of construction of our
second Kermit facility. 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 an actual reserve
account or requirement to spend the capital. |
(b) The Partnership's historical financial
information has been recast to consolidate our sponsor and general
partner, Hi-Crush Whitehall LLC and Other Assets for the periods
leading up to their contribution into the Partnership. For purposes
of calculating distributable cash flow attributable to Hi-Crush
Partners LP, the Partnership excludes the incremental amount of
recast distributable cash flow earned during the periods prior to
the contributions. |
Unaudited Consolidated Cash Flow Information |
(Amounts in
thousands) |
|
|
|
Year Ended |
|
December 31, |
|
2018 |
|
2017 (a) |
Operating
activities |
$ |
237,303 |
|
|
$ |
83,975 |
|
Investing
activities |
(188,137 |
) |
|
(325,120 |
) |
Financing
activities |
57,367 |
|
|
244,026 |
|
Effects of exchange
rate on cash |
(1 |
) |
|
— |
|
Net increase in
cash |
$ |
106,532 |
|
|
$ |
2,881 |
|
|
(a) Financial information has been recast to include
the financial position and results attributable to our sponsor and
general partner. |
Unaudited Consolidated Balance Sheets |
(Amounts in
thousands, except unit amounts) |
|
|
|
December 31, |
|
2018 |
|
2017 (a) |
Assets |
|
|
|
Current assets: |
|
|
|
Cash |
$ |
114,256 |
|
|
$ |
7,724 |
|
Accounts
receivable, net |
101,029 |
|
|
139,486 |
|
Inventories |
57,089 |
|
|
44,272 |
|
Prepaid
expenses and other current assets |
13,239 |
|
|
4,969 |
|
Total
current assets |
285,613 |
|
|
196,451 |
|
Property, plant and
equipment, net |
1,031,188 |
|
|
900,010 |
|
Goodwill and intangible
assets, net |
71,575 |
|
|
8,416 |
|
Equity method
investments |
37,354 |
|
|
17,475 |
|
Other assets |
8,108 |
|
|
5,877 |
|
Total
assets |
$ |
1,433,838 |
|
|
$ |
1,128,229 |
|
Liabilities, Equity and
Partners’ Capital |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
71,039 |
|
|
$ |
48,289 |
|
Accrued
and other current liabilities |
61,337 |
|
|
33,450 |
|
Current
portion of deferred revenues |
19,940 |
|
|
4,399 |
|
Current
portion of long-term debt |
2,194 |
|
|
4,140 |
|
Total
current liabilities |
154,510 |
|
|
90,278 |
|
Deferred
revenues |
9,845 |
|
|
7,384 |
|
Long-term
debt |
443,283 |
|
|
194,462 |
|
Asset
retirement obligations |
10,677 |
|
|
10,179 |
|
Other
liabilities |
8,276 |
|
|
156 |
|
Total
liabilities |
626,591 |
|
|
302,459 |
|
Commitments and
contingencies |
|
|
|
Equity and partners'
capital: |
|
|
|
Limited
partners interest, 100,874,988 and 89,009,188 units outstanding,
respectively |
811,477 |
|
|
1,239,282 |
|
Accumulated other comprehensive loss |
(4,230 |
) |
|
— |
|
Total
partners’ capital |
807,247 |
|
|
1,239,282 |
|
Non-controlling interest |
— |
|
|
(413,512 |
) |
Total
equity and partners' capital |
807,247 |
|
|
825,770 |
|
Total
liabilities, equity and partners' capital |
$ |
1,433,838 |
|
|
$ |
1,128,229 |
|
|
(a) Financial information has been recast to
include the financial position and results attributable to our
sponsor and general partner. |
Unaudited Per Ton Operating Activity |
(Amounts
in thousands, except tons and per ton amounts) |
|
|
|
Three Months Ended |
|
December 31, |
|
September 30, |
|
2018 |
|
2017 |
|
2018 |
Sand sold |
1,976,805 |
|
|
2,985,115 |
|
|
2,775,360 |
|
Sand produced and
delivered |
2,009,855 |
|
|
3,001,744 |
|
|
2,655,831 |
|
Contribution margin |
$ |
28,358 |
|
|
$ |
70,028 |
|
|
$ |
66,389 |
|
Contribution margin per
ton sold |
$ |
14.35 |
|
|
$ |
23.46 |
|
|
$ |
23.92 |
|
|
Year Ended |
|
December 31, |
|
2018 |
|
2017 |
Sand sold |
10,407,296 |
|
|
8,938,713 |
|
Sand produced and
delivered |
10,198,814 |
|
|
9,067,584 |
|
Contribution margin |
$ |
264,866 |
|
|
$ |
164,275 |
|
Contribution margin per
ton sold |
$ |
25.45 |
|
|
$ |
18.38 |
|
Unaudited Net Income per Limited Partner Unit |
(Amounts
in thousands, except units and per unit amounts) |
|
|
|
|
|
Three Months Ended |
|
Year Ended |
|
December 31, |
|
December 31, |
Weighted
average limited partner units outstanding: |
2018 |
|
2017 |
|
2018 |
|
2017 |
Basic common units
outstanding |
98,359,616 |
|
|
90,201,488 |
|
|
91,248,042 |
|
|
86,518,249 |
|
Potentially dilutive common units |
— |
|
|
1,382,733 |
|
|
2,390,138 |
|
|
1,382,733 |
|
Diluted
common units outstanding |
98,359,616 |
|
|
91,584,221 |
|
|
93,638,180 |
|
|
87,900,982 |
|
Reconciliation of net income (loss) and the assumed
allocation of net income (loss) under the two-class method for
purposes of computing earnings (loss) per limited partner
unit: |
|
|
|
Three Months Ended December 31,
2018 |
|
GeneralPartner andIDRs |
|
LimitedPartner Units |
|
Total |
Declared
distribution |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Assumed allocation of
distribution in excess of loss |
— |
|
|
(9,930 |
) |
|
(9,930 |
) |
Add back recast losses
attributable to our sponsor and general partner through October 21,
2018 |
— |
|
|
2,218 |
|
|
2,218 |
|
Assumed allocation of
net loss |
$ |
— |
|
|
$ |
(7,712 |
) |
|
$ |
(7,712 |
) |
|
|
|
|
|
|
Loss per limited
partner unit - basic |
|
|
$ |
(0.08 |
) |
|
|
Loss per limited
partner unit - diluted |
|
|
$ |
(0.08 |
) |
|
|
|
Three Months Ended December 31,
2017 |
|
GeneralPartner andIDRs |
|
LimitedPartner Units |
|
Total |
Declared
distribution |
$ |
— |
|
|
$ |
17,802 |
|
|
$ |
17,802 |
|
Assumed allocation of
earnings in excess of distribution |
— |
|
|
24,126 |
|
|
24,126 |
|
Add back recast losses
attributable to our sponsor and general partner |
— |
|
|
1,250 |
|
|
1,250 |
|
Assumed allocation of
net income |
$ |
— |
|
|
$ |
43,178 |
|
|
$ |
43,178 |
|
|
|
|
|
|
|
Earnings per limited
partner unit - basic |
|
|
$ |
0.48 |
|
|
|
Earnings per limited
partner unit - diluted |
|
|
$ |
0.47 |
|
|
|
|
Year Ended December 31, 2018 |
|
GeneralPartner andIDRs |
|
LimitedPartner Units |
|
Total |
Declared
distribution |
$ |
7,664 |
|
|
$ |
109,836 |
|
|
$ |
117,500 |
|
Assumed allocation of
earnings in excess of distributions |
— |
|
|
20,095 |
|
|
20,095 |
|
Add back recast losses
attributable to our sponsor and general partner through October 21,
2018 |
— |
|
|
3,195 |
|
|
3,195 |
|
Assumed allocation of
net income |
$ |
7,664 |
|
|
$ |
133,126 |
|
|
$ |
140,790 |
|
|
|
|
|
|
|
Earnings per limited
partner unit - basic |
|
|
$ |
1.46 |
|
|
|
Earnings per limited
partner unit - diluted |
|
|
$ |
1.42 |
|
|
|
|
Year Ended December 31, 2017 |
|
GeneralPartner andIDRs |
|
LimitedPartner Units |
|
Total |
Declared
distribution |
$ |
— |
|
|
$ |
31,457 |
|
|
$ |
31,457 |
|
Assumed allocation of
earnings in excess of distributions |
— |
|
|
44,705 |
|
|
44,705 |
|
Add back recast losses
attributable to our sponsor and general partner |
— |
|
|
6,372 |
|
|
6,372 |
|
Add back recast losses
attributable to Whitehall and Other Assets through March 15,
2017 |
— |
|
|
1,471 |
|
|
1,471 |
|
Assumed allocation of
net income |
$ |
— |
|
|
$ |
84,005 |
|
|
$ |
84,005 |
|
|
|
|
|
|
|
Earnings per limited
partner unit - basic |
|
|
$ |
0.97 |
|
|
|
Earnings per limited
partner unit - diluted |
|
|
$ |
0.96 |
|
|
|
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