Form 8-K Hi-Crush Partners LP For: Feb 23

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February 23, 2016 6:10 AM EST


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
   _______________________________
Form 8-K
  _______________________________ 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 23, 2016
  _______________________________ 
Hi-Crush Partners LP
(Exact name of registrant as specified in its charter)
   _______________________________
Delaware
(State or other jurisdiction of incorporation)
 
001-35630
90-0840530
(Commission File Number)
(IRS Employer Identification No.)
 
 
Three Riverway, Suite 1350
Houston, Texas
77056
(Address of principal executive offices)
(Zip Code)
(713) 980-6200
(Registrant’s telephone number, including area code)

(Not Applicable)
(Former name or former address, if changed since last report)
  _______________________________
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligations of the registrant under any of the following (See General Instruction A.2 below):
¨
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
 
 






Item 2.02. Results of Operations and Financial Condition
On February 23, 2016, Hi-Crush Partners LP (the “Partnership”) issued a press release announcing its fourth quarter 2015 February 23, 2016 conference call. The press release and presentation slides are being furnished with this Current Report on Form 8-K as Exhibits 99.1 and 99.2, respectively.
In accordance with General Instruction B.2 to Form 8-K, the information provided under this Item 2.02 and the information attached to this Form 8-K as Exhibit 99.1 and Exhibit 99.2 shall be deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as expressly set forth by specific reference in such filing.
Item 9.01 - Financial Statements and Exhibits
(d) Exhibits
 
Exhibit Number
  
Exhibit Description
 
 
99.1
  
Press Release dated February 23, 2016 announcing fourth quarter 2015 financial results.
 
 
 
99.2
 
Presentation slides.










































SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
Hi-Crush Partners LP
 
 
 
 
 
 
 
 
 
By:
 
Hi-Crush GP LLC, its general partner
 
 
 
 
 
 
Date:
February 23, 2016
 
By:
 
/s/ Laura C. Fulton
 
 
 
 
 
Laura C. Fulton
 
 
 
 
 
Chief Financial Officer



















































INDEX TO EXHIBITS
 
Exhibit Number
  
Exhibit Description
 
 
 
99.1
  
Press Release dated February 23, 2016 announcing fourth quarter 2015 financial results.
99.2
 
Presentation slides





Exhibit 99.1
News Release

Hi-Crush Partners LP Reports Fourth Quarter and Full-Year 2015 Results

•
4Q 2015 Revenues of $72 million vs. $131 million in 4Q 2014
•
4Q 2015 Adjusted EBITDA of $20 million vs. $45 million in 4Q 2014
•
4Q 2015 $0.30 basic and diluted earnings per limited partner unit
•
4Q 2015 $0.35 diluted adjusted earnings per limited partner unit, excluding impairments and other expenses

Houston, Texas, February 23, 2016 - Hi-Crush Partners LP (NYSE: HCLP), “Hi-Crush” or the “Partnership”, today reported fourth quarter and full year 2015 results. The limited partners' interest in net income was $11.2 million for the fourth quarter of 2015, resulting in basic and diluted earnings of $0.30 per limited partner unit. In the fourth quarter of 2015, the Partnership received a settlement payment of $22.5 million for past and future obligations under a customer contract. The settlement payment is non-recurring income and $10.2 million was recognized as other revenue related to make-whole payments and the remainder as other operating income. Net income, adjusted earnings before interest, taxes and depreciation and amortization (“Adjusted EBITDA”) and distributable cash flow each include the positive impact of the contract settlement payment.

The basic and diluted earnings per unit during the fourth quarter of 2015 was negatively impacted by $1.9 million of impairments and other expenses associated with the write-down of certain transload assets, as well as costs associated with reducing headcount. The limited partners' interest in adjusted net income, adjusted to exclude the impact of non-recurring items, was $13.2 million for the fourth quarter of 2015 and the diluted adjusted earnings were $0.35 per limited partner unit.

Non-cash charges represented $1.7 million of the $1.9 million of impairments and other expenses incurred during the fourth quarter of 2015. Excluding the non-cash portion of the impairments and other expenses, the Partnership reported Adjusted EBITDA of $19.7 million for the fourth quarter of 2015. Distributable cash flow attributable to the limited partners for the fourth quarter of 2015 was $15.7 million. No distributions to unitholders were declared for the fourth quarter as the Partnership continued its distribution suspension to conserve cash.

Revenues for the quarter ended December 31, 2015 totaled $72.1 million, including other revenues and payments of make-whole penalties, on sales of 1.2 million tons of frac sand. This compares to $81.5 million of revenues on sales of 1.4 million tons of frac sand in the third quarter of 2015. Approximately 52% of the volumes were sold in-basin for the fourth quarter of 2015, an increase from 49% in the third quarter of 2015. Average sales price per ton sold decreased to $52 per ton in the fourth quarter of 2015 from $57 per ton in the third quarter of 2015 and $67 per ton in the second quarter of 2015, reflecting continued pricing pressure as a result of the general slowdown in market activity, particularly for well completions.

Of the 1.2 million tons of frac sand sold during the fourth quarter of 2015, approximately 66% were produced and delivered from the Partnership's facilities, with the remainder being purchased from the sponsor's Whitehall facility. Contribution margin was $9.66 per ton in the fourth quarter of 2015, a decrease from the third quarter contribution margin of $14.00 per ton, or 31%, due primarily to the decrease in sales prices, particularly for sand sold FOB mine, as well as the impact of empty railcar storage costs.
 
“We benefited in the quarter from the contract settlement payment, but the fourth quarter was very challenging," said Robert E. Rasmus, Chief Executive Officer of Hi-Crush. “These difficult conditions have extended into the first quarter of 2016, and while pricing has not deteriorated further, it has not improved. We anticipate that the lower levels of activity we experienced late in the fourth quarter will continue at least through the first half of the year. Although, the trend forward into 2016 reflects the impact of further oil price declines with fewer wells being completed, we remain confident that the long-term fundamentals of the industry remain strong.”

For the full year 2015, the limited partners' interest in net income was $27.0 million, resulting in basic and diluted earnings of $0.73 per limited partner unit. The basic and diluted earnings per unit for the year was negatively impacted by $25.7 million of impairments and other expenses associated with the write-down of assets acquired from D&I Silica, LLC in June 2013, as well as costs associated with reducing headcount. The limited partners' interest in adjusted net income, adjusted to exclude the impact of these non-recurring items, was $52.6 million for the full year 2015 and the diluted adjusted earnings were $1.42 per limited partner unit.





Non-cash charges represented $24.8 million of the $25.7 million of impairments and other expenses incurred in the full year 2015. The remaining charges were related to severance, and costs associated with the realignment of development and operational priorities. Excluding the non-cash portion of the impairments and other expenses, the Partnership reported adjusted earnings before interest, taxes and depreciation and amortization (“Adjusted EBITDA”) of $81.9 million for 2015. Distributable cash flow attributable to the limited partners for 2015 was $67.5 million.

Revenues for the year ended December 31, 2015 totaled $339.6 million on sales of 5.0 million tons of frac sand, compared to revenues of $386.5 million on sales of 4.6 million tons of frac sand for the year ended December 31, 2014. Contribution margin averaged $18.28 per ton for the full year 2015, a decrease from the full year 2014 contribution margin of $37.34 per ton, or 51%, due primarily to the decrease in sales prices experienced throughout the year.

In November 2015, the Partnership announced the completion of an amendment to its Revolving Credit Facility Agreement. The amendment, among other things, includes a reduction in the commitment level from $150 million to $100 million, waives the compliance ratios through June 30, 2017 (the “Effective Period”), and establishes certain minimum quarterly EBITDA covenants.

“This quarter, we took additional steps to conserve cash through the idling of the Augusta production facility and additional transload facilities. We have continued our drive for cost reductions across the entirety of our business,” said Laura C. Fulton, Chief Financial Officer of Hi-Crush. “In addition, the agreement reached with our bank group provides us with flexibility through mid-2017. We are keenly focused on maintaining liquidity, while being opportunistic and strategic in our growth plans.”

As of December 31, 2015, the Partnership had $254.4 million of long-term debt outstanding, and was in compliance with the covenants defined in the Revolving Credit Facility Agreement.

The Partnership reiterated the guidance for 2016 capital expenditures in the range of $15-$25 million for the continued development of new distribution terminal facilities and the expansion of rail track at the Wyeville facility.

Since August 1, 2015, Hi-Crush has reduced operational and administrative staffing levels by approximately 23%, including reductions at the Augusta facility, transload and other facilities.

Conference Call
A conference call for investors will be held on Tuesday, February 23, 2016 at 8:00 a.m. Central Time (9:00 a.m. Eastern Time) to discuss Hi-Crush’s fourth quarter and year-end results of 2015. Hosting the call will be Robert E. Rasmus, Chief Executive Officer and Laura C. Fulton, Chief Financial Officer. The call can be accessed live over the telephone by dialing (877) 407-3982, or for international callers, (201) 493-6780. 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 13629122. The replay will be available until March 8, 2016.

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 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.hicrushpartners.com under the Investors Relations-Event Calendar and Presentations section.

Hi-Crush Partners LP filed with the Securities and Exchange Commission (the “SEC”) its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 (the “Form 10-K”) on February 23, 2016. An electronic copy of the Form 10-K (including these financial statements) is available on Hi-Crush’s website at www.hicrushpartners.com under the “Investors Relations” section, and also may be obtained through the SEC’s website at www.sec.gov. Interested parties also may receive a hard copy of the Form 10-K and these financial statements free of charge upon request to the secretary of our general partner at our principal executive offices. Our principal executive offices are located at Three Riverway, Suite 1350, Houston, Texas 77056, and our telephone number is (713) 980-6200.

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. We use distributable cash flow to evaluate whether we are generating sufficient cash flow to support distributions to our unitholders. We define distributable cash flow as Adjusted EBITDA less cash paid for interest expense, income attributable to non-controlling interests and maintenance and replacement capital expenditures, including accrual for reserve replacement, plus accretion of asset retirement obligations and non-cash unit based compensation. 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 define contribution margin as total revenues less costs of goods sold excluding depreciation, depletion and amortization, and is used 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 an integrated producer, transporter, marketer and distributor of high-quality monocrystalline sand, a specialized mineral that is used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells. Our reserves, which are located in 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. Hi-Crush owns and operates the largest distribution network in the Marcellus and Utica shales, and has distribution capabilities throughout North America. 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 reports filed with the SEC, including those described under 1A of Hi-Crush’s Form 10-K for the year ended December 31, 2015. 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
(713) 980-6270

Marc Silverberg, ICR Inc.
(646) 277-1293





Unaudited Condensed Consolidated Statements of Operations
(Amounts in thousands, except per unit amounts)
 
Three Months Ended
 
December 31,
 
2015
 
2014
Revenues
$
72,077

 
$
130,929

Cost of goods sold (including depreciation, depletion and amortization)
62,634

 
82,319

Gross profit
9,443

 
48,610

Operating costs and expenses:
 
 
 
General and administrative expenses
4,419

 
7,059

Impairments and other expenses
1,941

 
—

Accretion of asset retirement obligations
85

 
62

Other operating income
(12,310
)
 
—

Income from operations
15,308

 
41,489

Other income (expense):
 
 
 
Interest expense
(4,127
)
 
(3,110
)
Net income
11,181

 
38,379

(Income) loss attributable to non-controlling interest
57

 
(251
)
Net income attributable to Hi-Crush Partners LP
$
11,238

 
$
38,128

Earnings per limited partner unit:
 
 
 
Basic
$
0.30

 
$
0.85

Diluted
$
0.30

 
$
0.85






Consolidated Statements of Operations
(Amounts in thousands, except per unit amounts)
 
Year Ended
 
December 31,
 
2015
 
2014 (a)
Revenues
$
339,640

 
$
386,547

Cost of goods sold (including depreciation, depletion and amortization)
261,371

 
225,984

Gross profit
78,269

 
160,563

Operating costs and expenses:
 
 
 
General and administrative expenses
22,365

 
26,346

Impairments and other expenses
25,659

 
—

Accretion of asset retirement obligations
336

 
246

Other operating income
(12,310
)
 
—

Income from operations
42,219

 
133,971

Other income (expense):
 
 
 
Interest expense
(13,809
)
 
(9,946
)
Net income
28,410

 
124,025

Income attributable to non-controlling interest
(145
)
 
(955
)
Net income attributable to Hi-Crush Partners LP
$
28,265

 
$
123,070

Earnings per limited partner unit:
 
 
 
Basic
$
0.73

 
$
3.09

Diluted
$
0.73

 
$
3.00


(a) Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC.






Unaudited EBITDA, Adjusted EBITDA and Distributable Cash Flow
(Amounts in thousands)
 
Three Months Ended
 
December 31,
 
2015
 
2014
Reconciliation of distributable cash flow to net income:
 
 
 
Net income
$
11,181

 
$
38,379

Depreciation and depletion expense
2,239

 
2,277

Amortization expense
421

 
801

Interest expense
4,127

 
3,110

EBITDA
$
17,968

 
$
44,567

Non-cash impairments of long-lived assets
1,731

 
—

Adjusted EBITDA
$
19,699

 
$
44,567

Less: Cash interest paid
(3,076
)
 
(2,698
)
Less: Income attributable to non-controlling interest
57

 
(251
)
Less: Maintenance and replacement capital expenditures, including accrual for reserve replacement (a)
(1,072
)
 
(1,357
)
Add: Accretion of asset retirement obligations
85

 
62

Add: Unit-based compensation
(2
)
 
548

Distributable cash flow
$
15,691

 
$
40,871

Less: Distributable cash flow attributable to holders of incentive distribution rights
—

 
(8,157
)
Distributable cash flow attributable to limited partner unitholders
$
15,691

 
$
32,714

(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 during the period. 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.






Unaudited EBITDA, Adjusted EBITDA and Distributable Cash Flow
(Amounts in thousands)
 
Year Ended
 
December 31,
 
2015
 
2014
Reconciliation of distributable cash flow to net income:
 
 
 
Net income
$
28,410

 
$
124,025

Depreciation and depletion expense
12,270

 
8,858

Amortization expense
2,620

 
5,186

Interest expense
13,809

 
9,946

EBITDA
$
57,109

 
$
148,015

Non-cash impairments of long-lived assets
24,792

 
—

Adjusted EBITDA
$
81,901

 
$
148,015

Less: Cash interest paid
(11,516
)
 
(8,682
)
Less: Income attributable to non-controlling interest
(145
)
 
(955
)
Less: Maintenance and replacement capital expenditures, including accrual for reserve replacement (a)
(4,733
)
 
(5,001
)
Add: Accretion of asset retirement obligations
336

 
246

Add: Unit-based compensation
2,983

 
1,470

Distributable cash flow
$
68,826

 
$
135,093

Adjusted for: Distributable cash flow attributable to Hi-Crush Augusta LLC, net of intercompany eliminations, prior to the Augusta Contribution (b)
—

 
(7,199
)
Distributable cash flow attributable to Hi-Crush Partners LP
68,826

 
127,894

Less: Distributable cash flow attributable to holders of incentive distribution rights
(1,311
)
 
(18,401
)
Distributable cash flow attributable to limited partner unitholders
$
67,515

 
$
109,493

(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 during the period. 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 Augusta for all periods presented. For purposes of calculating distributable cash flow attributable to Hi-Crush Partners LP, the Partnership excludes the incremental amount of recasted distributable cash flow earned during the periods prior to the acquisition by the Partnership on April 28, 2014 of substantially all of the remaining equity interests in Hi-Crush Augusta LLC (the "Augusta Contribution").





Consolidated Cash Flow Information
(Amounts in thousands)
 
Year Ended
 
December 31,
 
2015
 
2014 (a)
Operating activities
$
87,316

 
$
104,370

Investing activities
(61,545
)
 
(264,715
)
Financing activities
(20,003
)
 
144,383

Net increase (decrease) in cash
$
5,768

 
$
(15,962
)

(a) Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC.






Consolidated Balance Sheets
(Amounts in thousands, except unit amounts)
 
December 31,
 
2015
 
2014
Assets
 
 
 
Current assets:
 
 
 
Cash
$
10,414

 
$
4,646

Restricted cash
—

 
691

Accounts receivable
41,477

 
82,117

Inventories
27,971

 
23,684

Prepaid expenses and other current assets
4,504

 
4,081

Total current assets
84,366

 
115,219

Property, plant and equipment, net
276,455

 
241,325

Goodwill and intangible assets, net
45,524

 
66,750

Other assets
13,284

 
12,826

Total assets
$
419,629

 
$
436,120

Liabilities, Equity and Partners’ Capital
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
11,059

 
$
24,878

Accrued and other current liabilities
6,340

 
12,248

Due to sponsor
1,325

 
13,459

Current portion of long-term debt
3,258

 
2,000

Total current liabilities
21,982

 
52,585

Long-term debt
251,137

 
198,364

Asset retirement obligations
7,066

 
6,730

Total liabilities
280,185

 
257,679

Commitments and contingencies
 
 
 
Equity and Partners’ capital:
 
 
 
General partner interest
—

 
—

Limited partner interests, 36,959,970 and 36,952,426 units outstanding, respectively
136,820

 
175,962

Total partners’ capital
136,820

 
175,962

Non-controlling interest
2,624

 
2,479

Total equity and partners' capital
139,444

 
178,441

Total liabilities, equity and partners’ capital
$
419,629

 
$
436,120






Unaudited Per Ton Operating Activity
 
Three Months Ended
 
Year Ended
 
December 31,
 
December 31,
 
2015
 
2014
 
2015
 
2014
Sand sold (in tons)
1,209,171

 
1,481,914

 
5,003,702

 
4,584,811

Sand produced and delivered (in tons)
794,387

 
1,005,492

 
3,506,193

 
3,704,630

Contribution margin ($ in thousands)
$
11,680

 
$
51,266

 
$
91,468

 
$
171,191

Contribution margin per ton
$
9.66

 
$
34.59

 
$
18.28

 
$
37.34






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:
2015
 
2014
 
2015
 
2014
Basic
36,959,879

 
36,952,426

 
36,958,988

 
33,370,020

Diluted
37,151,769

 
37,033,443

 
37,150,878

 
35,783,540

Reconciliation of net income and the assumed allocation of net income under the two-class method for purposes of computing earnings per limited partner unit:
 
Three Months Ended December 31, 2015
 
General Partner and IDRs
 
Limited Partner Units
 
Total
Declared distribution
$
—

 
$
—

 
$
—

Assumed allocation of earnings in excess of distributions
—

 
11,238

 
11,238

Assumed allocation of net income
$
—

 
$
11,238

 
$
11,238

 
 
 
 
 
 
Earnings per limited partner unit - basic
 
 
$
0.30

 
 
Earnings per limited partner unit - diluted
 
 
$
0.30

 
 
 
Year Ended December 31, 2015
 
General Partner and IDRs
 
Limited Partner Units
 
Total
Declared distribution
$
1,311

 
$
42,502

 
$
43,813

Assumed allocation of distributions in excess of earnings
—

 
(15,548
)
 
(15,548
)
Assumed allocation of net income
$
1,311

 
$
26,954

 
$
28,265

 
 
 
 
 
 
Earnings per limited partner unit - basic
 
 
$
0.73

 
 
Earnings per limited partner unit - diluted
 
 
$
0.73

 
 
Reconciliation of adjusted earnings per limited partner unit to the most directly comparable GAAP financial measure:
 
December 31, 2015
 
Three Months Ended
 
Year Ended
Net income attributable to Hi-Crush Partners LP
$
11,238

 
$
28,265

Add: Impairments and other expenses
1,941

 
25,659

Adjusted net income attributable to Hi-Crush Partners LP
$
13,179

 
$
53,924

 
 
 
 
Adjusted earnings per limited partner unit - basic
$
0.36

 
$
1.42

Adjusted earnings per limited partner unit - diluted
$
0.35

 
$
1.42






INVESTOR PRESENTATION FEBRUARY 2016

 
Forward Looking Statements Some of the information included herein may contain forward-looking statements within the meaning of the federal securities laws. Forward- looking statements give our current expectations and may 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 expected results of operations or financial condition or other 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 Partners LP’s (“Hi-Crush”) reports filed with the Securities and Exchange Commission (“SEC”), including those described under Item 1A, “Risk Factors” of Hi-Crush’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and any subsequently filed Quarterly Report on Form 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; 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. 2

 
A Challenging Market with Partial Offsets 3 Partia l O ff s et s C h a lle n g e s • Lower completion activity as E&Ps reduce capex budgets and delay well completions • Decline in frac sand pricing as demand adjusts to lower overall activity • Highly competitive environment with a significant customer focus on cost reductions • Low visibility in near-term demand due to general market uncertainty generated from low commodity prices • Increasing sand intensity as companies pump more sand to generate best well economics in a stressed price environment • HCLP’s market leading low-cost structure and vendor relationships offers flexibility in an increasingly cost-focused industry • Trend of in-basin purchases benefits HCLP’s strategic network of distribution terminals • Vendor rationalization as customers partner with leading sand companies capable of delivering efficiently and reliably

 
Taking Steps to Effectively Manage the Downturn 4 Focusing on Internal Cost Reductions • Temporarily idled Augusta facility to maximize production from our lowest cost plants • Optimizing origin / destination pairings, to minimize freight costs and efficiently managing our railcar fleet • Taking action to ensure a lean cost structure Partnering with Long Term Customers Maintaining Liquidity & Capital Flexibility • Extend previous pricing discounts to contract customers in 2016 as market uncertainty persists • Working with customers to reduce costs along the entire sand supply chain • Building upon our long-term customer relationships to best position HCLP for the eventual market recovery • Temporarily suspended distribution to conserve cash flow • Executed revolver amendment to improve and extend flexibility • Announced capex budget of $15-25 million for highly strategic investments remains flexible based on market conditions

 
Leveraging Our Competitive Advantages 5 1) 20/100 mesh capacity, including Sponsor’s Whitehall facility and Blair facility, expected to start in April 2016. Includes 2.86 mm tons of annual 20/100 mesh capacity at higher cost Augusta facility which is temporarily idled. Factor Our Position The Hi-Crush Advantage Size & Scale 4 facilities, 2 Class-1 rail origins, 10.4 mm1 tons capacity Operational flexibility and ability to meet increasingly dynamic customer needs Low Cost Leading cost structure Meaningful financial and operational advantage in the current price and volume downturn Distribution Network Strategic and expanding distribution terminal network Focused on entire frac sand supply chain to lower total delivered costs, from mine to well site Customer Relationships Strong, long-term relationships Partner closely with key customers, gain share from vendor consolidation and supply attrition Balance Sheet Ample liquidity and significant capital flexibility Ability to navigate the downturn, offering optionality for potential market opportunities Focused Strategy A clear strategy to manage near-term and win long-term Positioned to profitably capture long-term market share when the market turns

 
Credit Facility Amendment Adds Flexibility 6 Metric Amendment Details Commitment Total commitment available of $100 million Covenants Replaces leverage covenant with EBITDA minimum through 3/31/17 (details above) Interest Coverage Minimum of 2.50x beginning 6/30/17 Capex Maximum of $28 million for FY 2016 Distribution 50% of DCF less principal payments available for distribution during the Effective Period1 Asset Coverage2 Minimum of 1.0x as a condition precedent to draw funds during Effective Period1 1) Effective Period commencing December 31, 2015 through June 29, 2017 2) Calculated as: (Fixed assets book value + eligible accounts receivable and inventory) / total funded debt Trailing 6 Month EBITDA Minimum Leverage Ratio Maximum 2.0 5.0 8.0 12.0 12.0 5.0x 4.5x 4.0x 3.5x 0.0x 1.0x 2.0x 3.0x 4.0x 5.0x 6.0x 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18+ Multip le X ( gray bar) $mm (blue bars)

 
1,20 9 TBD TBD TB D 300 600 900 1,200 1,500 1,800 2,100 HCLP FMSA EMES SLCA 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Gaining Market Share and Outperforming 7 HCLP, 21% FMSA, 28% EMES, 20% SLCA, 31% HCLP, 25% FMSA, 27% EMES, 18% SLCA, 30% Quarterly Sand Tons Sold (000s) YTD ‘15 vs. YTD ‘14 % Change2 Quarterly Sand Tons Sold Comparison1 Volume Splits of Public Peers2 22% 0% -9% -4% -20% -10% 0% 10% 20% 30% HCLP FMSA EMES SLCA 9 mos. YTD ‘14 9 mos. YTD ‘15 19% -15% -30% -15% 18% -6% -7% 32% -40% -30% -20% -10% 0% 10% 20% 30% 40% HCLP FMSA EMES SLCA YoY% QoQ% Source: Company filings. 1 YoY%: 3Q15 vs. 3Q14; QoQ%: 3Q15 vs. 2Q15. 2 YTD sand volumes sold through 3Q15 by large public peers; excludes private company sand sales and is not directly indicative of total market share.

 
Strong Frac Sand Fundamentals Unchanged 8 Factors Supporting an Eventual Recovery • Supply reduced as producers idle or shut down operations • Net new sand supply pushed out to 2017 as projects are delayed or cancelled • Sand intensity trends support demand; “super fracs” growing to 15,000+ tons per well • Drilled but uncompleted well (“DUC”) backlog could represent significant pent- up demand Targeting of Shale & Unconventional Increased Horizontal Drilling Longer Laterals Lengths More Stages per Foot More Sand per Stage More Wells Drilled per Rig GREATER FRAC SAND INTENSITY

 
Rig / Completion Rate Impact on Sand Demand1 9 10 rigs 20 days 18 wells 18 wells 180 wells 2,500 tons 450,000 tons Rig Count # of rigs Rig Efficiency Days/Well Drilled Rig Productivity Wells drilled/year/rig Completions Well completions/year/rig Wells Completed Well completions/year Sand Usage Tons/well Company XYZ Demand Tons/year 5 rigs 16 days 22 wells 17 wells 85 wells 4,500 tons 382,500 tons -50% +20% Calculated -25% Calculated +80% -15% Before After Company XYZ 1) Hypothetical example for illustrative purposes only; some results rounded

 
Hi-Crush Operations

 
Our Model – Q4 and FY 2015 Operating Results 11 Sold FOB plant direct to customer Sand delivered to terminal via rail Customer truck delivers to well site Sold at terminal to customer Freight costs Class-1 and short-line rail Tons Sold Q415: 1,209,171 Tons Sold FY15: 5,003,702 Terminal locations Q4 2015 FY 2015 48% 52% FOB Plant In-Basin 49% 51% FOB Plant In-Basin

 
Hi-Crush Ranks Among Largest in Industry 12 #1 in Wisconsin #2 in World Largest production capacity of frac sand in Wisconsin Second largest production capacity of frac sand in the world 10.4 million1 tons capacity 1) 20/100 mesh capacity, including Sponsor’s Whitehall facility and Blair facility, expected to start in April 2016. Includes 2.86 mm tons of annual 20/100 mesh capacity at higher cost Augusta facility which is temporarily idled. Source: Internal estimates

 
Logistics Flexibility Critical 13 Sandstone Formations Sponsor’s Whitehall Facility • Access to all major U.S. oil and gas basins • Direct loading and unloading of unit trains • Multiple in-basin terminals across Marcellus and Utica shales and one located in Permian Basin • Expanding our terminal network in the Permian and DJ Basins for more efficient in-basin deliveries • Strong relationships with multiple Class-1 and short- line railroads HCLP Sand Facilities Sponsor Sand Facility Existing Distribution Terminals Basin Play Terminals Under Development1 1) New Permian Basin and DJ Basin terminals expected to be operational in 2016 Sponsor Sand Facility Under Development

 
Railcar Storage 14 Railcar Fleet 12/31/14 3/31/15 6/30/15 9/30/15 12/31/15 Leased and owned 2,721 2,880 2,898 3,542 3,947 Customer or system 4,500 3,502 2,452 2,191 2,104 Total 7,221 6,382 5,350 5,733 6,051 In Storage - - - 250 1,906 Quarterly Lease Costs (for the quarter ending) $4.0 mm $4.7 mm $5.0 mm $5.9 mm $6.6 mm • Returned system cars, replacing a portion with newer, more efficient leased cars • 1,000 cars currently scheduled to be delivered over next two years • Weighted toward year-end 2016 and 2017 • Quarterly storage costs in 2016 estimated to be $1.0 million to $1.5 million per quarter

 
Financial Results

 
Comparison to Prior Quarters and Prior Year 16 $ in 000s Q4 2015 Q3 2015 Q2 2015 FY 2015 FY 2014 Revenues $72,077 $81,494 $83,958 $339,640 $386,547 Adjusted EBITDA1 $19,699 $13,426 $19,195 $81,901 $148,015 Adjusted EPU (basic)1 $0.36 $0.15 $0.31 $1.42 $3.09 Adjusted EPU (diluted)1 $0.35 $0.15 $0.31 $1.42 $3.00 Sales volumes (tons) 1,209,171 1,409,032 1,190,156 5,003,702 4,584,811 Contribution margin ($/ton)2 $9.66 $14.00 $20.67 $18.28 $37.34 Distributions per unit3 – – $0.475 $1.15 $2.40 1) Adjusted EBITDA and adjusted earnings per unit for Q4 2015, Q3 2015 and FY 2015 include add-backs for one-time expenses related to impairments and restructuring. 2) Contribution margin is defined as total revenues less costs of goods sold excluding depreciation, depletion and amortization. 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. 3) Represents distributions declared for the quarter. • Increasing sand intensity more than offset by lower well completions • Working with customers and vendors to lower delivered cost at terminal locations • Preserving capital and protecting our strong balance sheet for an eventual recovery

 
4th Quarter 2015 Summary 17

 
4th Quarter 2015 Summary – EBITDA & DCF 18 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 during the period. 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.

 
Full-Year 2015 Summary 19 a) Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC.

 
Full-Year 2015 Summary – EBITDA & DCF 20 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 during the period. 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 Augusta for all periods presented. For purposes of calculating distributable cash flow attributable to Hi-Crush Partners LP, the Partnership excludes the incremental amount of recasted distributable cash flow earned during the periods prior to the acquisition by the Partnership on April 28, 2014 of substantially all of the remaining equity interests in Hi-Crush Augusta LLC (the "Augusta Contribution").

 
Reconciliation of Adjusted Net Income & EPU 21

 
Balance Sheet Remains Strong 22 $ in 000s As of December 31, 2015 Cash $ 10,414 Revolver1 $ 52,500 Term loan2 194,971 Other notes payable 6,924 Total debt $ 254,395 Net debt $ 243,981 Net debt / LTM Adj. EBITDA 2.98x Revolver availability (as amended)1 $ 39.8 million 1) Revolving credit agreement: $39.8 mm available at L+4.50% ($100 mm capacity less $52.5 mm of borrowings and $7.7 mm of LCs); includes accordion feature to increase capacity to $150 mm 2) Senior secured term loan: $200 mm original face value at L+3.75%; rated B3 and BB- by Moody’s and Standard & Poor’s, respectively; includes accordion feature to increase capacity to $300 mm Strong liquidity Financial flexibility

 

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