Attached files
| file | filename |
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| 8-K - FORM 8-K - Hi-Crush Inc. | d477029d8k.htm |
| EX-99.1 - PRESS RELEASE - Hi-Crush Inc. | d477029dex991.htm |
 Investor Presentation
February 2013
Exhibit 99.2 |
 Forward Looking Statements
2
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, 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,”
“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”) and in its
reports filed with the SEC, including our Form 10-Q for the quarterly period ended September
30, 2012. 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. |
 Our
Business Strategy 3
Focus on
Stable, Long-
Term Take-or-
Pay Contracts
Expand
Proved
Reserve Base
and
Processing
Capacity
Maximize
Logistics and
Infrastructure
Advantage
Leverage Low
Operating
Cost
Structure
Achieve Top
Tier Growth |
 Investment Highlights
4
Compelling
Industry
Fundamentals
Growth fueled by increasing raw sand usage in horizontal completions
Increasing pressure on supply growth, particularly in coarse product
High Quality
Product, Low Cost
Operations
Market favors API spec, Northern White frac sand
53.9 million ton reserve base with significant cost structure advantages vs.
competitors Long-Term
Contracted Cash
Flow Stability
Fixed price / volume contracts with 3.1 year weighted average life
Blue-chip, investment grade market leader customer base
Substantial Growth
Opportunities
Significant additional contribution opportunities with Augusta facility
Numerous development prospects in hand in addition to 3rd party acquisition
opportunities Experienced and
Incentivized
Management Team
Vast expertise in developing sand mining and processing facilities
Substantial management ownership incentivized by distribution growth
|
 Shale drilling has revolutionized U.S. energy supply
U.S. recently reversed 40 year domestic oil
production
decline
as
a
result
of
unconventional
oil
development
Proppant volume demand growing faster than shale
drilling activity
Increasingly important due to evolving completion
techniques
Resin-Coated
Sand
Ceramics
Raw Frac
Sand
Other
0.4%
9.0%
13.4%
77.2%
Hydraulic Fracturing Illustration
Proppants are Critical to Shale Revolution
Source: The Freedonia Group.
5
WATER TABLE
Well
Oil / Gas
Flows
Out
Fracturing fluid –
water,
sand and chemicals
pumped into well at high
pressure
SHALE
IMPERVIOUS ROCK
SHALE
Oil or Gas
Oil or Gas
FISSURES
WELLBORE
FISSURES
High Pressure Sand and Fracturing Fluid
2011 Proppant Market Share (Tons) |
 Rapidly Growing Proppant Industry
Proppant Consumed by Volume
Million Tons
2.1
6.3
21.7
30.7
40.2
Source: The Freedonia Group.
Raw sand projected to remain ~3/4 of proppant market, by volume
6
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2001
2006
2011
2016
2021
Raw Frac Sand
Resin-Coated Sand
Ceramics
Other |
 New
Entrants Face Multiple Hurdles 7
Onsite rail loadouts; proximity of
operations
Modern plant efficiencies; scale
Cost Structure
1-3 year approval process; Federal /
state / local
Increasing local opposition;
moratoria
Regulatory Hurdles
Limited design/build expertise
Delays and overruns are common
Construction/Start-up Challenges
Ability to meet quality & reliability
expectations
Contracts/market share with largest
buyers
Customer Relationships
Limited supply of high quality sand
in large, contiguous deposit
Most sites not on rail
Scarcity of Reserves
Barriers to
Entry |
 Hi-Crush Management: Experience in Key Areas
8
Major Oilfield
Service
Companies |
 Wyeville: Our Foundation Asset
9
651 acres
High
quality
“Northern
White”
sand
Extensive coring program with third party
frac-specialized lab testing (StimLab and
PropTester)
53.9 million tons of proven recoverable reserves
Implied 37-year reserve life
On-site rail facilities accommodate unit trains (80+
cars) for superior logistics
Current plant output capacity of 1.6 million tons per
year
Asset Overview
Overview
Modern Wet Plant
Access to Rail Line
Large, Contiguous
Deposit
Dry Plant Silos |
 Critical Logistics Capabilities
10
Logistics Capabilities
Union Pacific mainline bisects Wyeville
Three on-site 5,000 foot rail spurs allow for
direct loading of unit trains from storage silos
connected to dry plant
No sand trucks on public roads
Collaborative relationship with Union Pacific
U.S. rail network provides Hi-Crush with access to all
major domestic oil and gas basins
Wyeville Rail Loading Capability
Wyeville Unit Train-Capable Rail Spur |
 HCLP Sand Destinations
11
Destination
Associated
Basins
Texas
Permian
Eagle Ford
Pennsylvania
New York
Marcellus
Colorado
Niobrara
Piceance
Arkansas
Fayetteville
Oklahoma
Mid-Continent
Ohio
Utica
North Dakota
Bakken
LTM 12/31/12
Pennsylvania
10%
Texas
52%
Oklahoma
14%
Colorado
8%
Arkansas
3%
North Dakota
4%
Ohio
4%
New York
2%
New Mexico
3% |
 Low-Cost Producer
12
Wyeville Production Cost Improvement Since Plant Start-up
Wyeville facility characteristics
which lead to lower costs:
High quality deposit
Plant proximity to main rail line
Contiguous deposit (no need to
truck sand) with low overburden
State-of-the-art, efficient and
modern plant design |
 Market Trends
13
•
Appetite for premium white sand is increasing and continues to
gain market share
•
E&Ps increasing well complexity
•
Service companies continue to make gains in drilling efficiencies
•
Customers increasingly need proppant providers to be able to
“spec-in”
immediately
•
Technology driving increased demand for proppant
•
Barriers to entry continue to expand
•
Industry is ripe for consolidation |
 Asset Contribution Announced January 31
Transaction Overview
Asset
Contribution:
Preferred interest in Augusta facility
Up to $3.75 million quarterly
distributions
Convert to 20% common ownership
in Augusta if certain distribution
thresholds or other conditions are
met
Waiver of assignment of customer
contract from Wyeville to Augusta
Consideration:
$37.5 million cash
Funded from revolver; proceeds
used to repay Augusta leverage
3.75 million convertible Class B Units
Effective Date for
Distributions:
January 1, 2013
14
Convertible Class B Units
Convert to
Common:
Class B units do not receive a
distribution
until HCLP pays at
$2.10/year rate (110% Minimum
Quarterly Distribution) for common and
subordinated units for 2 consecutive
quarters and earns at $2.31/year rate
for common, subordinated and Class B
units for 2 consecutive quarters
Deferred
Participation:
Class B units do not receive
distributions
until converted to common
Sponsor’s Demonstrated Commitment to HCLP
Transaction Reflects Sponsor's Strong Support for HCLP
|
 Augusta: Growth Vehicle
15
Newly built facility completed in July 2012 on
approximately 1,000 acres
High quality Northern White sand
46.2 million tons of coarse grade sand
Efficient logistics capabilities with on-site
processing plant and rail
1.6 million tons per year capacity
Strong long-term take-or-pay contract profile
Dry Plant
Rail Loadout
Wet Plant
Conveyor
Belt
Conveyor Belt Connecting Plants
Large, Contiguous Deposit
On-Site Rail Logistics
Dry Plant and Rail
Loadout Storage Silos
Augusta Asset Overview |
 16
Corporate Structure
Avista Capital Partners
and Co-Investors
Management
Augusta
Facility
41.7% Common
LP
Operating Subsidiaries
(including Wyeville facility)
Public Unitholders
2.2% Common LP
12.1% Convertible Class B Units
44.0% Subordinated LP
Incentive Distribution Rights
39% Ownership
61% Ownership
Hi-Crush
Partners LP
(the Partnership)
Hi-Crush Proppants LLC
(Sponsor)
Hi-Crush GP LLC
(the General Partner)
Non-Economic
GP Interest
100% Ownership
100% Ownership
16
Undeveloped
Acreage
Preferred Interest in Augusta
($3.75 million expected quarterly
distributions) |
 Multiple Future Opportunities
17
•
Contributions: Future contributions from Augusta and sponsor-
level projects in development
•
Organic Expansion: Sponsor owns or has options on additional
acres of undeveloped land
•
M&A: Industry ripe for consolidation of small, private sand
companies |
 Appendix |
  Fourth Quarter and Year-End Summary
19
Three Months
Three Months
Ended
Ended
December 31, 2012
December 31, 2011
Successor
Predecessor
Revenues
$ 16,215
$ 12,678 Cost of goods sold (including depreciation and
depletion) 4,313
3,949 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
|
  Fourth Quarter and Year-End Summary
20
Period From
Period From
August 16
January 1
Year
Through
Through
Ended
December 31, 2012
August 15, 2012
December 31, 2011
Successor
Predecessor
Predecessor
Revenues
$ 28,858
$ 46,776
$ 20,353 Cost of goods sold (including depreciation and
depletion) 7,145
13,336
6,447 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 retirement obligation 56
16
28
Income (loss) from operations
18,771
28,254
11,173 Other (income) expense:
Other income
-
(6)
-
Interest
expense 263
3,240
1,893 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
|
  Fourth Quarter and Year-End Summary
21
Three Months
Three Months
Ended
Ended
December 31, 2012
December 31, 2011
Successor
Predecessor
Reconciliation of EBITDA and 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, including accrual for reserve replacement
(1) (335)
Add: Accretion of asset retirement obligation
53
Distributable Cash Flow (2)
$ 9,675
(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. |
  Fourth Quarter and Year-End Summary
22
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 and Distributable Cash
Flow to Net Income:
Net income
$ 18,508
$ 25,020
$ 9,280
Taxes
-
-
-
Depreciation and depletion
863
1,089
449
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, including accrual for reserve replacement
(1) (593)
Add: Accretion of asset retirement obligation
56
Distributable Cash Flow (2)
$ 18,961
(1) Maintenance and replacement capital expenditures, including accrual for reserve
replacement, were determined based on an estimated reserve replacement cost of $1.35 per ton
sold during the period from August 16 through December 31, 2012. Such expenditures include those associated with the replacement of equipment and sand
reserves, to the extent that such expenditures are made to maintain our long-term operating
capacity. The amount presented does not represent a reserve or requirement to spend the
capital. (2) Consistent with our intention to pay a prorated distribution for the period from the
completion of our initial public offering through September 30, 2012, this represents
distributable cash flow for the same period plus the quarter ended December 31, 2012. As such, it
does not reflect the amount of cash flow that would have been available for distribution over
an entire two fiscal quarters. |
 Production Costs per Ton Sold
23
Hi-Crush Partners LP
Production Cost per ton
Fiscal Quarter:
3Q 2011
4Q 2011
1Q 2012
2Q 2012
3Q 2012
4Q 2012
Predecessor
Successor
Combined
Sand Sold (tons)
126,036
206,557
222,658
316,599
186,957
191,446
378,403
248,158
Production costs ($ in thousands)
$ 2,192
$ 3,806
$ 4,597
$ 5,006
$ 2,644
$ 2,437
$ 5,081
$ 3,845
Production costs per ton
$ 17.39
$ 18.43
$ 20.65
$ 15.81
$ 14.14
$ 12.73
$ 13.43
$ 15.49
9 months
ended
12 months
ended
3 months
ended
6 months
ended
12 months
ended
Year-To-Date:
9/30/2011
12/31/2011
3/31/2012
6/30/2012
9/30/2012
12/31/2012
Predecessor
Successor
Combined
Sand Sold (tons)
126,036
332,593
222,658
539,257
726,213
191,446
917,660
1,165,818
Production costs ($ in thousands)
$ 2,192
$ 5,998
$ 4,597
$ 9,603
$ 12,247
$ 2,437
$ 14,684
$ 18,529
Production costs per ton
$ 17.39
$ 18.03
$ 20.65
$ 17.81
$ 16.86
$ 12.73
$ 16.00
$ 15.89
9 months ended |
 Production Costs –
Non-GAAP Reconciliation
24
Hi-Crush Partners LP
GAAP Reconciliation of Production Costs to Cost of Goods Sold
Fiscal Quarter:
3Q 2011
4Q 2011
1Q 2012
2Q 2012
4Q 2012
(Amounts in thousands)
Predecessor
Successor
Combined
Cost of goods sold
$ 2,498
$ 3,949
$ 4,776
$ 5,495
$ 3,065
$ 2,832
$ 5,897
$ 4,313
Depreciation and depletion
(306)
(143)
(179)
(489)
(421)
(395)
(816)
(468)
Production costs
$ 2,192
$ 3,806
$ 4,597
$ 5,006
$ 2,644
$ 2,437
$ 5,081
$ 3,845
3Q 2012 |