Form 8-K Hi-Crush Partners LP For: Nov 04
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E-mailUNITED 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):�November 4, 2014
��_______________________________�
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 1550 Houston, Texas | � | 77056 |
(Address of principal executive offices) | � | (Zip Code) |
(713) 960-4777
(Registrants 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 November 4, 2014, Hi-Crush Partners LP (the Partnership ) issued a press release announcing its third quarter 2014 financial results. The Partnership also announced the posting on its website of the presentation slides to be referenced in its November 4, 2014 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 November 4, 2014 announcing third quarter 2014 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: November 4, 2014 | � | � | By: | /s/ Laura C. Fulton | ||
� | � | � | Laura C. Fulton | |||
� | � | � | Chief Financial Officer | |||
INDEX TO EXHIBITS
�
Exhibit Number | �� | Exhibit Description |
99.1 | �� | Press Release dated November 4, 2014 announcing third quarter 2014 financial results |
99.2 | Presentation slides | |
Exhibit 99.1
������������News Release
Hi-Crush Partners LP Reports Record Revenues, Volumes and Earnings For Third Quarter 2014 Results
" | 3Q14 Revenues of $102 million vs. $53 million in 3Q13 |
" | 3Q14 EBITDA of $44 million vs. $20 million in 3Q13 |
" | $1.00 earnings per unit before allocations of income to IDRs; $0.86 basic earnings per unit |
" | Sponsor commenced shipments from its Whitehall, Wisconsin facility |
Houston, Texas, November 4, 2014 - Hi-Crush Partners LP (NYSE: HCLP), Hi-Crush or the Partnership , today reported third quarter results. Net income for the quarter was $37.3 million. The limited partners' interest in net income of $37.0 million for the third quarter of 2014 represents earnings of $1.00 per basic weighted average common and subordinated unit outstanding during the period. For purposes of calculating earnings per unit, $6.9 million of limited partners' interest in net income was allocated to the holder of incentive distribution rights, resulting in reported basic earnings per unit of $0.86 per common and subordinated unit.
The Partnership reported earnings before interest, taxes and depreciation and amortization ( EBITDA ) of $43.9 million for the third quarter of 2014. Distributable cash flow of $32.3 million attributable to the common and subordinated unitholders for the third quarter of 2014 corresponds to distribution coverage of 1.40 times the $23.1 million in distributions to be paid to common and subordinated unitholders on November 14, 2014.
The third quarter was filled with important milestones, as we set records for revenues, sales volumes, EBITDA, earnings and we added production capacity, contracted more committed volumes and expanded silo storage in our distribution network, said Robert E. Rasmus, Co-Chief Executive Officer of Hi-Crush.� Our premium raw white sand, coupled with our extensive logistics offering, continues to drive customers to Hi-Crush as we have positioned ourselves to capture the growth in demand through our Sponsors Whitehall facility and its development of a fourth production facility.
Revenues for the quarter ended September 30, 2014 totaled $102 million on sales of 1.2 million tons of frac sand, which includes volumes sold at production facilities and distribution facilities. Approximately 91% of the volumes sold were under long-term fixed price contracts.
The third quarter was another quarter of strong operational performance, said James M. Whipkey, Co-Chief Executive Officer of Hi-Crush. We shipped the first unit train of sand from our Sponsor's Whitehall facility and announced that our Sponsor is in the permitting process for the development of a fourth Northern White frac sand production facility. We have 6.6 million tons of sand already contracted for 2015, and our operating costs remain the lowest in the sector. Demand for our Northern White sand remains robust and we continue to position ourselves to fulfill the growing needs of our customers.
Production cost for sand produced and delivered from the Wyeville and Augusta facilities was $13.89 per ton during the quarter. Of the 1.2 million tons sold, approximately 1.0 million tons were produced and delivered from the Partnership's facilities, with the remainder being purchased from the Sponsor's Whitehall facility or from third parties.
On October 16, 2014, Hi-Crush declared its third quarter cash distribution of $0.625 per unit for all common and subordinated units, or $2.50 on an annualized basis. This amount corresponds to a 32% increase from the minimum quarterly cash distribution of $0.475 per unit and a 9% increase over the previous quarters distribution. The distribution will be paid on November 14, 2014 to all common and subordinated unitholders of record on October 31, 2014.
Conference Call
A conference call for investors will be held on Tuesday, November 4, 2014 at 9:00 a.m. Central Time (10:00 a.m. Eastern Time) to discuss Hi-Crushs third quarter results and forward outlook. Hosting the call will be Robert E. Rasmus, Co-Chief Executive Officer, James M. Whipkey, Co-Chief Executive Officer and Laura C. Fulton, Chief Financial Officer. The call can be accessed live over the telephone by dialing (877) 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 13593784. The replay will be available until November 18, 2014.
Interested parties may also listen to a simultaneous webcast of the conference call by logging onto Hi-Crushs website at www.hicrushpartners.com in the Investors-Event Calendar and Presentations section. A replay of the webcast will also be available for approximately 30 days following the call.
The slide presentation to be referenced on the call will also be on Hi-Crushs website at www.hicrushpartners.com in the Investors-Event Calendar and Presentations section.
Non-GAAP Financial Measures
This news release and the accompanying schedules include the non-GAAP financial measure of EBITDA, Distributable Cash Flow and Production Costs, which may be used periodically by management when discussing our financial results with investors and analysts. The accompanying schedules of this news release provide reconciliations of these non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with generally accepted accounting principles in the United States of America ( GAAP ). EBITDA, Distributable Cash Flow and Production Costs are presented as management believes the data provides a measure of operating performance that is unaffected by historical cost basis and provides additional information and metrics relative to the performance of our business.
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-Crushs reports filed with the Securities and Exchange Commission ( SEC ), including those described under 1A of Hi-Crushs Form 10-K for the year ended December 31, 2013 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; 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-Crushs 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) 960-4811
Unaudited Condensed Consolidated Statement of Operations
(Amounts in thousands, except tons, units and per unit amounts)
Three Months | |||||||
Ended September 30, | |||||||
� | 2014 | 2013(a) | |||||
Revenues | $ | 102,316 | $ | 53,158 | |||
Cost of goods sold (including depreciation, depletion and amortization) | 55,640 | 31,868 | |||||
Gross profit | 46,676 | 21,290 | |||||
Operating costs and expenses: | |||||||
General and administrative expenses | 6,183 | 5,543 | |||||
Exploration expense | |||||||
Accretion of asset retirement obligation | 61 | 57 | |||||
Income from operations | 40,432 | 15,690 | |||||
Other income (expense): | |||||||
Interest expense | (3,111 | ) | (1,273 | ) | |||
Net income | 37,321 | 14,417 | |||||
Income attributable to non-controlling interest | (292 | ) | (62 | ) | |||
Net income attributable to Hi-Crush Partners LP | $ | 37,029 | $ | 14,355 | |||
Earnings per unit: | |||||||
Common and subordinated units - basic | $ | 0.86 | $ | 0.52 | |||
Common and subordinated units - diluted | $ | 0.83 | $ | 0.52 | |||
(a)�Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC. | |||||||
Unaudited Condensed Consolidated Statement of Operations
(Amounts in thousands, except tons, units and per unit amounts)
Nine Months | |||||||
Ended September 30, | |||||||
� | 2014(a) | 2013(a) | |||||
Revenues | $ | 255,618 | $ | 114,995 | |||
Cost of goods sold (including depreciation, depletion and amortization) | 143,665 | 58,613 | |||||
Gross profit | 111,953 | 56,382 | |||||
Operating costs and expenses: | |||||||
General and administrative expenses | 19,287 | 13,322 | |||||
Exploration expense | 56 | ||||||
Accretion of asset retirement obligation | 184 | 172 | |||||
Income from operations | 92,482 | 42,832 | |||||
Other income (expense): | |||||||
Interest expense | (6,836 | ) | (2,301 | ) | |||
Net income | 85,646 | 40,531 | |||||
Income attributable to non-controlling interest | (704 | ) | (150 | ) | |||
Net income attributable to Hi-Crush Partners LP | $ | 84,942 | $ | 40,381 | |||
Earnings per unit: | |||||||
Common and subordinated units - basic | $ | 2.24 | $ | 1.45 | |||
Common and subordinated units - diluted | $ | 2.15 | $ | 1.45 | |||
(a)�Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC. | |||||||
Unaudited EBITDA and Distributable Cash Flow
Three Months | |||||||
Ended September 30, | |||||||
(in thousands) | 2014 | 2013 | |||||
Reconciliation of distributable cash flow to net income: | |||||||
Net income | $ | 37,321 | $ | 14,417 | |||
Depreciation and depletion expense | 2,677 | 2,189 | |||||
Amortization expense | 781 | 1,662 | |||||
Interest expense | 3,111 | 1,273 | |||||
EBITDA | $ | 43,890 | $ | 19,541 | |||
Less: Cash interest paid | (2,702 | ) | (1,178 | ) | |||
Less: Income attributable to non-controlling interest | (292 | ) | (62 | ) | |||
Less: Maintenance and replacement capital expenditures, including accrual for reserve replacement (1) | (1,387 | ) | (807 | ) | |||
Add: Accretion of asset retirement obligation | 61 | 57 | |||||
Add: Unit based compensation | 569 | ||||||
Distributable cash flow | $ | 40,139 | $ | 17,551 | |||
Adjusted for: Distributable cash flow attributable to Hi-Crush Augusta LLC, net of intercompany eliminations, prior to the Augusta Contribution (2) | 50 | ||||||
Distributable cash flow attributable to Hi-Crush Partners LP | 40,139 | 17,601 | |||||
Less: Distributable cash flow attributable to holders of incentive distribution rights | (7,791 | ) | |||||
Distributable cash flow attributable to common and subordinated unitholders | $ | 32,348 | $ | 17,601 | |||
(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 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. |
(2) | 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"). |
Unaudited EBITDA and Distributable Cash Flow
Nine Months | |||||||
Ended September 30, | |||||||
(in thousands) | 2014 | 2013 | |||||
Reconciliation of distributable cash flow to net income: | |||||||
Net income | $ | 85,646 | $ | 40,531 | |||
Depreciation and depletion expense | 6,581 | 4,259 | |||||
Amortization expense | 4,385 | 2,025 | |||||
Interest expense | 6,836 | 2,301 | |||||
EBITDA | $ | 103,448 | $ | 49,116 | |||
Less: Cash interest paid | (5,984 | ) | (1,854 | ) | |||
Less: Income attributable to non-controlling interest | (704 | ) | (150 | ) | |||
Less: Maintenance and replacement capital expenditures, including accrual for reserve replacement (1) | (3,644 | ) | (2,117 | ) | |||
Add: Accretion of asset retirement obligation | 184 | 172 | |||||
Add: Unit based compensation | 922 | ||||||
Distributable cash flow | $ | 94,222 | $ | 45,167 | |||
Adjusted for: Distributable cash flow attributable to Hi-Crush Augusta LLC, net of intercompany eliminations, prior to the Augusta Contribution (2) | (7,199 | ) | 2,511 | ||||
Distributable cash flow attributable to Hi-Crush Partners LP | 87,023 | 47,678 | |||||
Less: Distributable cash flow attributable to holders of incentive distribution rights | (10,244 | ) | |||||
Distributable cash flow attributable to common and subordinated unitholders | $ | 76,779 | $ | 47,678 | |||
(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 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. |
(2) | 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 Augusta Contribution. |
Unaudited Condensed Consolidated Cash Flow Information
(Amounts in thousands)
Nine Months | Nine Months | ||||||
Ended | Ended | ||||||
September 30, | September 30, | ||||||
2014(a) | 2013(a) | ||||||
Operating activities | $ | 77,838 | $ | 52,279 | |||
Investing activities | (246,571 | ) | (104,163 | ) | |||
Financing activities | 168,750 | 65,540 | |||||
Net increase in cash | $ | 17 | $ | 13,656 | |||
(a)�Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC. | |||||||
Unaudited Condensed Consolidated Balance Sheet
(Amounts in thousands)
September 30, | December 31, | ||||||
2014 | 2013(a) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash | $ | 20,625 | $ | 20,608 | |||
Restricted cash | 690 | 690 | |||||
Accounts receivable | 58,949 | 37,442 | |||||
Inventories | 22,385 | 22,418 | |||||
Prepaid expenses and other current assets | 2,600 | 1,625 | |||||
Total current assets | 105,249 | 82,783 | |||||
Property, plant and equipment, net | 217,324 | 195,834 | |||||
Goodwill and intangible assets, net | 67,551 | 71,936 | |||||
Other assets | 12,596 | 3,808 | |||||
Total assets | $ | 402,720 | $ | 354,361 | |||
Liabilities, Equity and Partners Capital | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 15,850 | $ | 10,108 | |||
Accrued and other current liabilities | 14,800 | 7,669 | |||||
Due to sponsor | 6,712 | 10,352 | |||||
Current portion of long-term debt | 2,000 | ||||||
Total current liabilities | 39,362 | 28,129 | |||||
Long-term debt | 195,118 | 138,250 | |||||
Asset retirement obligation | 4,812 | 4,628 | |||||
Total liabilities | 239,292 | 171,007 | |||||
Commitments and contingencies | |||||||
Equity and Partners capital: | |||||||
General partner interest | |||||||
Limited partner interests, 36,952,426 and 28,865,171 units outstanding, respectively | 161,200 | 138,580 | |||||
Class B units, zero and 3,750,000 units outstanding, respectively | 9,543 | ||||||
Total partners capital | 161,200 | 148,123 | |||||
Non-controlling interest | 2,228 | 35,231 | |||||
Total equity and partners' capital | 163,428 | 183,354 | |||||
Total liabilities, equity and partners capital | $ | 402,720 | $ | 354,361 | |||
(a)�Financial information has been recast to include the financial position and results attributable to Hi-Crush Augusta LLC. | |||||||
Unaudited Per Ton Operating Activity
Three Months | Nine Months | ||||||||||||||
Ended September 30, | Ended September 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Sand sold (in tons) | 1,180,602 | 709,488 | 3,102,897 | 1,706,025 | |||||||||||
Sand produced and delivered (in tons) | 1,027,611 | 597,656 | 2,699,138 | 1,537,720 | |||||||||||
Production costs ($ in thousands) | $ | 14,274 | $ | 11,411 | $ | 42,644 | $ | 29,981 | |||||||
Production costs per ton | $ | 13.89 | $ | 19.09 | $ | 15.80 | $ | 19.50 | |||||||
Unaudited Net Income per Limited Partner Unit
(Amounts in thousands, except units and per unit amounts)
Three Months | Nine Months | ||||||||||
Ended September 30, | Ended September 30, | ||||||||||
Weighted average limited partner units outstanding: | 2014 | 2013 | 2014 | 2013 | |||||||
Common units - basic | 21,437,176 | 15,224,820 | 18,522,412 | 14,293,060 | |||||||
Subordinated units - basic | 13,640,351 | 13,640,351 | 13,640,351 | 13,640,351 | |||||||
Common units - diluted | 23,393,608 | 15,224,820 | 21,721,976 | 14,293,060 | |||||||
Subordinated units - diluted | 13,640,351 | 13,640,351 | 13,640,351 | 13,640,351 | |||||||
Reconciliation of net income and the assumed allocation of net income under the two-class method for purposes of computing earnings per unit:
For the Three Months Ended September 30, 2014 | |||||||||||||||||||
General Partner and IDRs | Common Units | Subordinated Units | Class B Units | Total | |||||||||||||||
Declared distribution | $ | 695 | $ | 14,570 | $ | 8,525 | $ | $ | 23,790 | ||||||||||
Assumed allocation of undistributed net income attributable to the Partnership | 6,164 | 3,868 | 3,207 | 13,239 | |||||||||||||||
Limited partners interest in net income | $ | 6,859 | $ | 18,438 | $ | 11,732 | $ | $ | 37,029 | ||||||||||
Earnings per unit - basic | $ | 0.86 | $ | 0.86 | |||||||||||||||
Earnings per unit - diluted (1) | $ | 0.83 | $ | 0.83 | |||||||||||||||
For the Nine Months Ended September 30, 2014 | |||||||||||||||||||
General Partner and IDRs | Common Units | Subordinated Units | Class B Units | Total | |||||||||||||||
Declared distribution | $ | 863 | $ | 36,049 | $ | 23,529 | $ | 2,156 | $ | 62,597 | |||||||||
Assumed allocation of undistributed net income attributable to the Partnership | 6,906 | 5,351 | 6,959 | 19,216 | |||||||||||||||
Limited partners interest in net income | $ | 7,769 | $ | 41,400 | $ | 30,488 | $ | 2,156 | $ | 81,813 | |||||||||
Recast adjustments to include the results of operations of Hi-Crush Augusta LLC and income attributable to non-controlling interest | 3,129 | ||||||||||||||||||
Net income attributable to Hi-Crush Partners LP | $ | 84,942 | |||||||||||||||||
Earnings per unit - basic | $ | 2.24 | $ | 2.24 | |||||||||||||||
Earnings per unit - diluted (1) | $ | 2.15 | $ | 2.15 | |||||||||||||||
(1) Diluted earnings per unit includes the impact of income allocations attributable to a conversion of the Class B units into common units. | |||||||||||||||||||
3RD QUARTER 2014 EARNINGS RELEASE NOVEMBER 4, 2014
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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 LPs ( Hi-Crush ) reports filed with the Securities and Exchange Commission ( SEC ), including those described under Item 1A, Risk Factors of Hi-Crushs Annual Report on Form 10-K for the fiscal year ended December 31, 2013 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-Crushs 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
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A Portfolio of Opportunity 3 Wisconsin " 7.5 million tons of annual production capacity* " Over 30 years of reserves Marcellus & Utica " Exclusive rail access " Largest distribution network " Further expanding storage capabilities Permian " New facility in Big Spring, TX " Production from Permian expected to increase 20% from 2013-2015 Growth " Permitting underway by our Sponsor for fourth Wisconsin production facility " Expansion of distribution network through additional destination terminals Current Shale Plays Shale Basins Prospective Shale Plays Existing Terminals Planned Terminals * Includes 100 mesh and 2.6mm tons of 20/70 Whitehall capacity held by our Sponsor
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Hi-Crushs Competitive Advantages 4 " Long-Term Contracted Cash Flow " Visible Avenues to Growth " Low-Cost Producer " Long-Lived, High Quality Reserves " Prime Portfolio of Assets " Focused Strategy Focused Priorities Growth Meeting Our Customers Increasing Needs Returns and Value Acceleration
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Delivering Outstanding Results 5 Predictable Cash Flow Visible Growth Best in Class Assets " Completed 2.6 million ton per year Whitehall facility, held by our sponsor " Expansion of distribution and storage capabilities " Developing fourth frac sand processing facility in Wisconsin " Lowest industry production cost per ton " 30+ years of premium Northern White frac sand reserves " 14 destination terminals, expanding to 100,000+ tons of silo storage capacity " 3.8 million tons of frac sand contracted in 2014; increasing to 6.6 million tons in 2015 " Long-term double-digit annual distribution growth
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Our Business Model Q3 2014 Operating Results 6 Sold FOB plant direct to customer (68%) Hi-Crush terminal Freight costs Hi-Crush plants Tons produced and delivered 1,027,611 Production cost/ton $13.89 Sold at the terminal to customer (32%) Sand delivered to Hi-Crush terminal via rail Tons sold 1,180,602 Class-1 and short-line rail Customer truck delivers to well site
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Logistics Flexibility Critical Augusta Facility Wyeville Facility Sandstone Formations " Access to all major U.S. oil and gas basins " Direct loading and unloading of unit trains " In-basin terminals across Marcellus and Utica shales, new location in Permian Basin " 6,000 railcars under management " Taking delivery of 700 additional cars in Q4 2014 " Strong relationships with multiple Class-1 and short-line railroads Current Shale Plays Shale Basins Prospective Shale Plays Existing Terminals Sponsors Whitehall Facility 7 Planned Terminals
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Rail Access Provides Direct Link from Mine to Basin 8 " Class-1 rail lines provide efficient and cost effective access to drilling activity " Majority of sand sold into leading areas of activity Q3 2014 Shipping Destinations by Play/Region $26.9 $15.3 $11.5 $8.5 $6.6 $5.5 $5.4 $3.1 2014 Projected Capex by Play (1) ($ in billions) (1) Source: Wood Mackenzie 46% 39% 8% 5% 2% Permian / Eagle Ford Marcellus / Utica Colorado Oklahoma Other
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Frac Sand Demand Remains Strong & the appetite for more sand is really growing, particularly in the Permian as our customers stay in that experimentation mode& So the trend is there's going to be more sand. Q2 2014 Earnings Call If we look at our 2013 program we had pumped a lot of 40-70 mesh sand in the let's say, 300,000, 400,000 pound range. We've increased our proppant to 30-50 mesh and we've actually done some 20-40 mesh jobs now and we're pumping about 400,000 to 500,000 pounds per stage on those treatments. Q2 2014 Earnings Call You have operators out in the Permian Basin that, on average, spend $1 million more per well, but they're yielding an additional 400,000 barrels in ultimate estimated recovery. For me, that's a no-brainer. Q2 2014 Earnings Call We've seen sand costs generally go up about 10%. We've had 100 mesh go up as much 50% from some suppliers. But 20/40 white that we pump a lot of is really we've seen 5% to 10% increases there, and we've been able to pass those on with really no pushback from our customers. Q2 2014 Earnings Call & on sand where we took some higher costs because there were some significant changes in sand size and volume for several of our customers& we had a very high growth rate and transportation availability became quite tight. Q2 2014 Earnings Call " E&P operators are using fracture stimulation techniques, such as increased proppant per stage and increased frac stages per well, to drive well performance " These activities are driving premium Northern White frac sand demand growth 9 Compared to the prior year&our stage count was up more than 30% and our average sand per well increased by more than 50%. &our customers are experimenting with larger completion volumes in almost every basin. This is a fundamental change in well design that we believe is part of a continuing trend. Q3 2014 Earnings Call
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Core E&P Acreage Offers Attractive Returns 10 " ~85% of our shipments go to basin with IRRs over 35% (1) Source: Credit Suisse Research (October 2014); based on oil and gas strip as of 10/27/14 Basin IRRs(1) 71% 59% 57% 51% 48% 47% 47% 37% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%
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Drilling Activity Supported by Low Breakeven Prices 11 " Q3 sand shipment destinations have breakeven prices well below $70/bbl (1) Source: Credit Suisse Research (October 2014) WTI Oil Breakeven Prices ($/bbl) (1) $36.01 $39.30 $42.77 $50.41 $51.64 $53.71 $53.84 $63.04 $0 $20 $40 $60 $80 $100
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68% 32% Tons Sold FOB Mine During the Quarter 12 FOB Mine Volume (1) Primarily sold in Marcellus and Utica shales (2) Tons sold FOB mine primarily comprised of volumes sold under contract to long-term, take or pay customers (3) FOB mine sales shipped to Marcellus and Utica exclude volumes sold FOB destination at Hi-Crush terminal locations (2) Q3 2014 FOB Mine Sales Volume Sold at Terminals (1) 50% 33% 9% 6% 2% Permian / Eagle Ford Marcellus / Utica Colorado Oklahoma Other (3)
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68% 32% Hi-Crush Terminals Addressing Customer Needs 13 Hi-Crush terminal Freight costs Sand delivered to Hi-Crush terminal via rail Class-1 and short-line rail Customer truck delivers to well site Volume Sold at Terminals Sand sourced from mine 1 1 2 3 4 Sand transported by rail to destination terminal 2 In-basin terminal locations provide convenient customer services 3 Customer trucks deliver sand to well site for completion 4 " Ability to source from Hi-Crush mines, the Sponsors Whitehall facility, and 3rd party suppliers " On-site rail access is significant logistical advantage; rail fleet creates flexibility " Hi-Crush earns margin for alleviating customers logistical challenges " Additional revenue generated via storage and transload services " Unit train capabilities key for asset utilization and inventory management " Mix of contract and spot sales " Terminals transfer product to customer or 3rd party trucking service via silo or portable conveyor Q3 2014 FOB Mine Volume
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Committed to Growing Distribution Long-Term 14 " Pattern of raising distribution with quarterly increases 28% increase from distribution paid Q4 2013 vs paid Q4 2014 " Delivered on guidance at high end of $2.30-$2.50 per unit distribution range " Long-term, double-digit annual distribution growth outlook intact Declared Distributions Per Unit (Annualized) * * $1.90 represents the Minimum Quarterly Distribution per unit at IPO $1.90 $1.96 $2.04 $2.10 $2.30 $2.50 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14
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Strong Coverage Provides Flexibility for Growth 15 " Strong coverage ratio averaging above target coverage of 1.20x Average since 1/1/13 of 1.26x " Coverage supports step-change in distribution growth and organic expansion $0.475 Per Unit $0.475 Per Unit $0.490 Per Unit $0.510 Per Unit $0.525 Per Unit $0.575 Per Unit (1) Actual coverage ratio was 1.0x including $0.525 per unit distribution paid on 4.25 million units issued in April 2014 (2) Excludes impact of the August 15, 2014 conversion of Class B units to common units and related distribution paid upon conversion (3) Excludes the portion of DCF allocable to the Incentive Distribution Rights held by our Sponsor (1) (2) $0.625 Per Unit (3) (3) 1.12x 1.14x 1.24x 1.38x 1.15x 1.35x 1.40x 0.20x 0.40x 0.60x 0.80x 1.00x 1.20x 1.40x 1.60x 1.80x $0 $5 $10 $15 $20 $25 $30 $35 $40 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 $ in M ill io n s Distributions (Total $/Q) Coverage Coverage > 1.2x Target Coverage Ratio
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Positioned to Meet Demand Growth 16 " 3.8 million contracted take-or-pay tons in 2014 " Signed 11 new contracts or amendments to contracts YTD 2014 " 6.6 million contracted take-or-pay tons in 2015 " 88% of production capacity " Sponsors new Whitehall production facility " 2.6 million ton 20/70 annual capacity " Production began August 2014 " Currently cycling weekly unit trains " Permitting in process by our Sponsor for fourth Northern White frac sand processing facility in Wisconsin
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Industry Backdrop
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Proven Production Execution * Includes Augusta 1.0 million ton annual 20/70 capacity expansion to be completed in 2014 ** Whitehall 2.6 million ton annual 20/70 capacity facility held at Sponsor level completed in third quarter 2014 January 2014 April 2014 3rd Quarter 2014 End of Year 2014 18 Wyeville Wyeville + Augusta Wyeville + Augusta + Augusta Expansion* Wyeville + Augusta + Augusta Expansion* + Whitehall** 3.2 MM tons/yr 4.2 MM tons/yr 6.8 MM tons/yr 1.6 MM tons/yr 3.6 MM tons/yr 4.6 MM tons/yr 7.5 MM tons/yr Nameplate capacity of 20/70 sand 100 mesh
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Capacity Increases Driven by Customer Demand YE 2012 YE 2013 November 2014 19 1.2 MM Tons Under Contract 2.4 MM Tons Under Contract 3.8 MM Tons Under Contract 6.6 MM Tons Under Contract 2.8 Year Average Life 4.5 Year Average Life 2.5 Year Average Life 4.2 Year Average Life YE 2014
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Frac Sand Capacity 20 Frac Sand Market Structure (1) Top 10 Producers Hold > 75% of Tier-One Capacity (1) (2) Notes: (1) Based on internal estimated frac sand capacity estimates per 2014 Proppant Market Report, KELRIK LLC and Proptester, Inc. (Hi-Crush capacity includes Sponsor); Excludes sand used for other industrial applications (e.g., glass and foundry sand) (2) Tier One refers to Northern White Sand, specifically St. Peter, Jordan, Wonewoc, Mt. Simon and equivalent sandstones; excluding Canadian sources. (3) Excludes 100 mesh capacity. 15% 13% 11% 10% 10% 5% 3% 3% 3% 3% 24% Company A Hi-Crush Company B Company C Company D Company E Company F Company G Company H Company I All other tier one 6.8 Million Tons 20/70 Capacity (3) 28% 11% 9% 8% 8% 7% 29% 72% Non tier one Company A Hi-Crush Company B Company C Company D All other tier one
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Low Cost Structure Essential 21 Hi-Crush Partners Production Costs per Ton Produced and Delivered Note: Recasted to include Augusta facility tons produced and delivered 200,000 400,000 600,000 800,000 1,000,000 1,200,000 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 Quarterly Production Costs / Ton Quarterly Tons Produced and Delivered
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Levers for Further Performance 22
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Appendix
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Third Quarter 2014 Summary 24 Three Months Three Months Ended Ended September 30, 2014 September 30, 2013 Recasted Revenues $ 102,316 $ 53,158 Cost of goods sold (including depreciation, depletion, and amort.) 55,640 31,868 Gross profit 46,676 21,290 Operating costs and expenses: General and administrative 6,183 5,543 Exploration expense - - Accretion of asset retirement obligation 61 57 Income from operations 40,432 15,690 Other (income) expense: Interest expense 3,111 1,273 Net income 37,321 14,417 Income attributable to non-controlling interest (292) (62) Income attributable to Hi-Crush Partners LP $ 37,029 $ 14,355 Earnings per unit: Common and subordinated units - basic $ 0.86 $ 0.52 Common and subordinated units - diluted $ 0.83 $ 0.52 Weighted average limited partner units outstanding: Common and subordinated units - basic 35,077,527 28,865,171 Common and subordinated units - diluted 37,033,959 28,865,171
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YTD 2014 Summary 25 Nine Months Nine Months Ended Ended September 30, 2014 September 30, 2013 Recasted Recasted Revenues $ 255,618 $ 114,995 Cost of goods sold (including depreciation, depletion, and amort.) 143,665 58,613 Gross profit 111,953 56,382 Operating costs and expenses: General and administrative 19,287 13,322 Exploration expense 56 Accretion of asset retirement obligation 184 172 Income from operations 92,482 42,832 Other (income) expense: Interest expense 6,836 2,301 Net income 85,646 40,531 Income attributable to non-controlling interest (704) (150) Income attributable to Hi-Crush Partners LP $ 84,942 $ 40,381 Earnings per unit: Common and subordinated units - basic $ 2.24 $ 1.45 Common and subordinated units - diluted $ 2.15 $ 1.45 Weighted average limited partner units outstanding: Common and subordinated units - basic 32,162,763 27,933,411 Common and subordinated units - diluted 35,362,327 27,933,411
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Third Quarter 2014 Summary (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 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. (2) 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 Augusta Contribution. 26 Three Months Three Months Ended Ended September 30, 2014 September 30, 2013 Recasted Reconciliation of distributable cash flow to net income: Net income $ 37,321 $ 14,417 Depreciation and depletion 2,677 2,189 Amortization expense 781 1,662 Interest expense 3,111 1,273 EBITDA $ 43,890 $ 19,541 Less: Cash interest paid (2,702) (1,178) Less: Maintenance and replacement capital expenditures, incl. accrual for reserve replacement (1) (1,387) (807) Less: Income attributable to noncontrolling interest (292) (62) Add: Accretion of asset retirement obligation 61 57 Add: Unit based compensation 569 - Distributable cash flow $ 40,139 $ 17,551 Adjusted for: Distributable cash flow attributable to Hi-Crush Augusta LLC, net of intercompany eliminations, prior to the Augusta Contribution (2) - 50 Less: Distributable cash flow attributable to holders of incentive distribution rights (7,791) - Distributable cash flow attributable to Hi-Crush Partners LP $ 32,348 $ 17,601
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YTD 2014 Summary (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 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. (2) 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 Augusta Contribution. 27 Nine Months Nine Months Ended Ended September 30, 2014 September 30, 2013 Recasted Recasted Reconciliation of distributable cash flow to net income: Net income $ 85,646 $ 40,531 Depreciation and depletion 6,581 4,259 Amortization expense 4,385 2,025 Interest expense 6,836 2,301 EBITDA $ 103,448 $ 49,116 Less: Cash interest paid (5,984) (1,854) Less: Maintenance and replacement capital expenditures, incl. accrual for reserve replacement (1) (3,644) (2,117) Less: Income attributable to noncontrolling interest (704) (150) Add: Accretion of asset retirement obligation 184 172 Add: Unit based compensation 922 - Distributable cash flow $ 94,222 $ 45,167 Adjusted for: Distributable cash flow attributable to Hi-Crush Augusta LLC, net of intercompany eliminations, prior to the Augusta Contribution (2) (7,199) 2,511 Less: Distributable cash flow attributable to holders of incentive distribution rights (10,244) - Distributable cash flow attributable to Hi-Crush Partners LP $ 76,779 $ 47,678
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Production Costs per Ton Produced and Sold 28 (1) Recasted to include Augusta facility tons produced and sold Hi-Crush Partners LP (Wyeville & Augusta) (1) Production Cost per Ton Fiscal Quarter 1Q 2013 2Q 2013 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 Tons produced and delivered 382,607 557,457 597,659 703,481 718,166 953,361 1,027,611 Production costs ($ in thousands) 8,355 10,214 11,411 12,017 14,836 13,534 14,274 Production costs per ton $21.84 $18.32 $19.09 $17.08 $20.66 $14.20 $13.89 12 months ended 12 months ended 12 months ended 12 months ended Trailing Twelve Months 12/31/2013 3/31/2014 6/30/2014 9/30/2014 Ton produced and delivered 2,241,204 2,576,763 2,972,667 3,402,619 Production costs ($ in thousands) 41,998 48,479 51,799 54,661 Production costs per ton $18.74 $18.81 $17.43 $16.06
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Balance Sheet is Strong 29 (1) Revolving credit facility: $143.8mm available at L+3.25% ($150mm capacity less $6.2mm of LCs); includes accordion feature to increase to $200mm (2) Senior secured term loan: $200mm face value at L+3.75%; rated B2 and B+ by Moody's and Standard & Poor's, respectively (3) Denominator calculated as annualized recasted EBITDA for the nine months ended September 30, 2014 of $103.4mm As of September 30, 2014: ($ in 000s) Cash 20,625$ $150mm Revolver -$ 1 Term loan 197,118 2 Total debt 197,118$ Net debt 176,493$ Net debt / EBITDA 1.28x 3
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