Fort Worth, Texas - June 5, 2018 - Emerge Energy Services LP ("Emerge Energy") today announced an expansion of its in-basin sand presence by commencing the development of a new mining and processing operation located in Kingfisher County, Oklahoma. Emerge Energy's subsidiary, Superior Silica Sands ("Superior"), signed a 25-year lease agreement that encompasses mining rights on 600 acres of land located approximately 60 miles northwest of Oklahoma City, Oklahoma. Superior has also agreed to purchase 40 acres of adjoining land on which the new wet and dry processing plants will be constructed. Closing of the land purchase is subject to customary due diligence.
The Oklahoma plant will have a nameplate capacity of 1.5 million tons per year; production is projected to start by year end 2018.
The 600-acre mine site has an estimated 20 million tons of reserves, according to internal analysis; a third-party engineering group will conduct an independent reserves analysis.
Approximately 65% of the deposit consists of 100 mesh sand while the remaining 35% consists of 40/70; both products meet API specifications for crush strength, according to third-party test results - the 100 mesh product exhibits crush strength of 8,000 psi and 40/70 exhibits 5,000 psi.
The total project is expected to cost $15 million; Superior will use existing equipment on hand for a portion of the dry plant.
The project will be funded with the company's current cash on hand and revolver availability; the project does not change Emerge Energy's previously announced full year 2018 capital expenditures guidance of $70 million to $90 million.
Air and water permits will be filed with the state of Oklahoma in the coming weeks; site construction is expected to start by mid-June.
The property is located less than two miles from US 81, a four-lane highway serving the Mid-Continent basin.
Rail service is available less than three miles from the plant; Superior is evaluating nearby transload opportunities to bundle northern white with local sand.
Long-lead time equipment has been ordered.
"We are excited to announce our third in-basin frac sand operation with the addition of our new Oklahoma facility," noted Rick Shearer, Chief Executive Officer of the general partner of Emerge Energy. "Once the plant begins production, we will have approximately 6.1 million tons per year of in-basin production capacity, or 49% of our new 12.4 million tons per year total capacity."
"Demand for in-basin fine mesh product is strong, and we have validated the appetite for local Oklahoma sand with several key customers operating in the Mid-Continent basin. We are in the process of signing up customers under contract for the new plant's capacity, and we expect to fully contract the plant's capacity by year end. The Oklahoma market represents an under-served basin for us currently, so there is little risk of displacing our existing volume. In fact, potential new customers are interested in bundling northern white 30/50 with the finer mesh local sand. This works to our advantaged model as we are a leading producer of both high quality northern white product and lower-cost in-basin sand."
"The Mid-Continent basin continues to show impressive growth during the current upswing in drilling and completion activity. Third party research firms estimate that frac sand demand for the basin will total over eight million tons in 2018 and over 10 million tons in 2019. The multiple oil-producing layers of the SCOOP/STACK region make the Mid-Continent basin one of the leading shale plays in the country. Of the 142 currently active drilling rigs in the state of Oklahoma, approximately half are located within a 75-mile radius of our property. Our site also has advantaged logistics with close proximity to a major four-lane US highway, and rail service is less than three miles from our property. This gives us the flexibility of transloading our northern white sand to a nearby terminal and bundling it with in-basin product."
"We are proud of our efforts to transform Emerge Energy from a northern white producer into a diversified frac sand supplier of northern white and in-basin sand. Once again, we have demonstrated our ability to develop highly attractive in-basin projects with a budget that is often much smaller than our competitors'. The new Oklahoma operation, the continued ramp up of our San Antonio plant, and the sustained high interest in northern white sand have us very excited about capitalizing on the strong demand for all types of frac sand in this growth market."
About Emerge Energy Services LP
Emerge Energy Services LP (NYSE: EMES) is a growth-oriented limited partnership engaged in the business of mining, producing, and distributing silica sand, a key input for the hydraulic fracturing of oil and natural gas wells, through its subsidiary Superior Silica Sands LLC.
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Source: Emerge Energy Services LP via Globenewswire