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Hi-Crush Revenues Rise in Fourth Quarter, Full Year


Hi-Crush Partners LP reported fourth-quarter and full-year 2018 results.

  • Revenues for the fourth quarter of 2018 totaled $162.2 million on sales of 1,976,805 tons of frac sand. This compares to $214.0 million of revenues on sales of 2,775,360 tons of frac sand in the third quarter of 2018.
  • Revenues for the year ended Dec. 31, 2018, totaled $842.8 million, compared to revenues of $602.6 million in 2017.

"During the fourth quarter, we made significant progress in furthering our relationships with E&Ps and contracting our last mile solutions, while also completing construction on our customer-supported second Kermit facility, on time and under budget," said Robert E. Rasmus, chairman and chief executive officer of Hi-Crush. "The demand environment for frac sand remained challenging in the fourth quarter due to lower completion activity, along with competitive pressures from additional in-basin supply coming online. Our financial results for the fourth quarter reflect this weak market environment experienced across the industry. Despite these market headwinds, the steps we have taken under our Mine. Move. Manage. strategy to expand our customer base and execute on growing our integrated last mile solutions have continued the transformation of Hi-Crush to a more logistics-focused service company. We will continue to transform our business through further expansion of our E&P customer base, additional deployment of container crews and silo systems, and our strategic conversion to the C-Corp structure."

Contribution margin was $14.35 per ton in the fourth quarter of 2018, compared to $23.92 per ton in the third quarter of 2018. The sequential decrease in contribution margin per ton primarily resulted from lower sales prices on Northern White volumes as well as increased per ton production costs due to lower capacity utilization resulting from reduced sales volumes.

"Contribution margin per ton was in line with previous guidance, reflecting our relentless focus on cost management and efficiency, which offset the lower capacity utilization we experienced," said Laura C. Fulton, chief financial officer of Hi-Crush. "During the quarter, we turned down orders for volumes that would not have been profitable, and, at the same time, we were successful in expanding our relationships with E&Ps, which accounted for more than half of our sales volumes. This progress, as well as the movement of demand and our business away from sales at the mine gate, reinforces the importance of relationships we have cultivated with E&Ps as the foundation of our business going forward."

Revenues for the year ended Dec. 31, 2018, totaled $842.8 million on sales of 10,407,296 tons of frac sand, compared to revenues of $602.6 million on sales of 8,938,713 tons of frac sand in 2017. Contribution margin averaged $25.45 per ton in 2018, compared to $18.38 per ton in 2017. The increase in annual volumes sold is a result of improved market conditions during the first half of 2018, in addition to increased production capacity from commencement of operations at the Kermit facility in July 2017.

Average sales price per ton was $67 for each of the years ended Dec. 31, 2018, and 2017. While average sales pricing generally increased throughout the entirety of 2017, prices increased during the first half of 2018 as the industry struggled to deliver enough volumes to keep pace with surging demand. These increases were followed by a steep decline in pricing during the second half of 2018 due to a large increase in supply from newly constructed in-basin Permian production facilities, a slowdown in completions activity driven by E&P budget exhaustion and pipeline capacity constraints.

At the end of the fourth quarter of 2018, Hi-Crush had 16 PropStream container crews in the Permian Basin and Marcellus/Utica plays, and eight FB silo systems operating in the Permian.

During the fourth quarter, the partnership also completed successful field-testing for the new FB Atlas top-fill conveyor system with an existing E&P customer in the Permian. This new technology utilizes hopper bottom trailers capable of delivering 27 tons of frac sand per truckload to the wellsite, greatly improving the efficiency of transportation through more tons per truckload, as well as quicker turnaround times at the wellsite. The FB Atlas is capable of unloading hopper bottom trailers in significantly less time than any other solution, maximizing the utilization of trucking assets.

"Our deployment of PropStream crews in the fourth quarter was impacted by delays in contract start-ups due to budget timing considerations of our customers," Rasmus continued. "We ended the year with 16 container crews, and eight FB silo systems deployed, representing significant progress given the slowdown in activity facing the industry, particularly in the fourth quarter. We have contracted additional PropStream crews and systems in the fourth quarter and over the past several weeks, which will be deployed in the first quarter, leading to incremental growth in PropStream contribution to our bottom line. In addition, the completion of field testing of the FB Atlas top-fill conveyor system further differentiates Hi-Crush’s last mile offering versus those services reliant on pneumatic fill solutions.

"We were also pleased to complete construction on our second Kermit facility during the fourth quarter, representing an increase in capacity at our Kermit complex in West Texas to 6.0 million tons per year,” Rasmus said. “We are now serving an increasing base of customer activity, as demand for frac sand in the Permian remains strong. We are quickly ramping up our production capacity during the first quarter, and we expect to reach full run-rate on the second Kermit facility in March, with similar production cost per ton as the first Kermit facility for the remainder of 2019."

Hi-Crush