|Emerge Energy Services Announces Third Quarter 2017 Results|
Fort Worth, Texas - November 1, 2017 - Emerge Energy Services LP ("Emerge Energy") today announced third quarter 2017 financial and operating results.
· Net income of $5.0 million and diluted earnings per unit of $0.16 for the third quarter.
· Adjusted EBITDA improved 149% or $11.2 million sequentially to $18.7 million for the third quarter.
· Total volumes sold increased 6.3% sequentially to 1,480 thousand tons in the third quarter.
Emerge Energy reported net income of $5.0 million, or $0.16 per diluted unit, for the three months ended September 30, 2017. For the three months ended September 30, 2016, net income was $5.1 million, or $0.21 per diluted unit, mainly due to a $31.7 million gain on sale of the Fuel business last year. Adjusted EBITDA was $18.7 million for the three months ended September 30, 2017 compared to $(8.1) million for the three months ended September 30, 2016. Emerge Energy generated Distributable Cash Flow of $14.1 million for the three months ended September 30, 2017. Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge Energy uses to assess its performance on an ongoing basis.
Emerge Energy will not make a cash distribution on its common units for the three months ended September 30, 2017 as the board of directors of its general partner did not approve a cash distribution and it is restricted from making distributions to its common unitholders under its amended credit agreement.
The results of operations of the Fuel business have been classified as discontinued operations for all periods presented and we now operate our continuing business in a single sand segment.
"The business performed at a high level during the third quarter, and we are proud of our many accomplishments," noted Ted W. Beneski, Chairman of the board of directors of the general partner of Emerge Energy. "During the third quarter, we achieved positive net income from continuing operations for the first quarter in over two years, and our revenue and profitability grew substantially over the second quarter. Pricing increased at a faster rate than we had expected three months ago, and both our total and frac sand volumes increased by 6% in the quarter compared to the second quarter of 2017. Total cost per ton sold also declined due to operational improvements and higher utilization of our production and logistics assets. As a result, net income (loss) from continuing operations and Adjusted EBITDA increased by nearly 260% and 150% sequentially to $5.5 million and $18.7 million, respectively, for the third quarter. We are well on track to meet or exceed our previously announced guidance of $40 million in Adjusted EBITDA for 2017. Additionally, we are continuing to make progress on our debt capital raise that will refinance our revolving credit facility and provide growth capital for the build out of our San Antonio operation. We broke ground on construction of the phase three expansion last week, and we remain on track to have the expansion operational by early second quarter next year. As we look out to the rest of 2017 and into 2018, we believe that the business will continue to post strong results based on sustained high demand for frac sand and continued execution of our strategic initiatives."
Emerge Energy will host its 2017 third quarter results conference call on Wednesday, November 1, 2017 at 3:00 p.m. CT. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (855) 850-4275 or (720) 634-2898 and entering pass code 93023127. An audio webcast of the call will be available at www.emergelp.com within the Investor Relations portion of the website under the Webcasts & Presentations section. A replay will be available by audio webcast and teleconference for seven days following the conclusion of the call. The replay teleconference will be available by dialing (855) 859-2056 or (404) 537-3406 and the reservation number 93023127.
The following table summarizes Emerge Energy's consolidated operating results for the three and nine months ended September 30, 2017 and 2016 and three months ended June 30, 2017:
(a) See section entitled "Adjusted EBITDA and Distributable Cash Flow" that includes a definition of Adjusted EBITDA and provides reconciliation to GAAP net income and cash flows.
(b) Emerge Energy commenced frac sand production at the San Antonio facility in July 2017.
Net income (loss) improved $8.9 million and Adjusted EBITDA improved $11.2 million in the third quarter of 2017, compared to the second quarter of 2017. This improvement was due to an increase in total volumes sold, higher sales prices and lower production costs on a per-ton basis. Volumes sold through our terminals totaled 45% of volume in the third quarter of 2017 compared to 39% in the second quarter of 2017.
Net income (loss) improved $35.4 million and Adjusted EBITDA improved $29.6 million for the third quarter of 2017, compared to same quarter in 2016, mainly due to an increase in total volumes sold, higher prices, and lower production costs on a per-ton basis. This was offset by higher selling, general and administrative expenses in 2017 due to higher employee-related expenses for increased staffing levels and bonus accruals.
Emerge Energy completed the sale of its Fuel business on August 31, 2016 and thus did not have any operations for the Fuel business in 2017.
During the three months ended September 30, 2017, Emerge Energy wrote off an estimated $0.5 million of the hydrotreator escrow receivables relating to completion delays and cost overruns.
For the three months ended September 30, 2017, Emerge Energy's capital expenditures totaled $2.0 million. This includes approximately $124 thousand of maintenance capital expenditures.
About Emerge Energy Services LP
Emerge Energy Services LP (NYSE: EMES) is a growth-oriented limited partnership engaged in the businesses of mining, producing, and distributing silica sand, a key input for the hydraulic fracturing of oil and natural gas wells. Emerge Energy operates its Sand business through its subsidiary Superior Silica Sands LLC. Emerge Energy also processed transmix, distributed refined motor fuels, operated bulk motor fuel storage terminals, and provided complementary fuel services through its fuel division which was sold on August 31, 2016.
This release contains certain statements that are "forward-looking statements." These statements can be identified by the use of forward-looking terminology including "may," "believe," "will," "expect," "anticipate," or "estimate." These forward-looking statements involve risks and uncertainties, and there can be no assurance that actual results will not differ materially from those expected by management of Emerge Energy Services LP. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Emerge Energy's Annual Report on Form 10-K filed with the SEC. The risk factors and other factors noted in the Annual Report could cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, Emerge Energy Services LP does not undertake any obligation to update or revise such forward-looking statements to reflect events or circumstances that occur after the date hereof.
EMERGE ENERGY SERVICES LP
Adjusted EBITDA and Distributable Cash Flow
We calculate Adjusted EBITDA, a non-GAAP measure, in accordance with our current Credit Agreement as: net income (loss) plus consolidated interest expense (net of interest income), income tax expense, depreciation, depletion and amortization expense, non-cash charges and losses that are unusual or non-recurring less income tax benefits and gains that are unusual or non-recurring and other adjustments allowable under our existing credit agreement. We report Adjusted EBITDA to our lenders under our revolving credit facility in determining our compliance with certain financial covenants. Adjusted EBITDA should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP. Moreover, our Adjusted EBITDA as presented may not be comparable to similarly titled measures of other companies. The following tables reconciles net income (loss) to Adjusted EBITDA for the three months ended September 30, 2017, June 30, 2017 and September 30, 2016:
The following tables reconciles net income (loss) to Adjusted EBITDA for the nine months ended September 30, 2017 and 2016:
(a) Consolidated numbers for Interest expense, net, Provision for income taxes, Depreciation, depletion and amortization, Equity-based compensation expense, Provision for doubtful accounts and Loss (gain) on disposal of assets include discontinued operations.
The following table reconciles Consolidated Adjusted EBITDA to our operating cash flows for the three and nine months ended September 30, 2017 and 2016, and June 30, 2017:
We define Distributable Cash Flow generally as net income plus (i) non-cash net interest expense, (ii) depreciation, depletion and amortization expense, (iii) non-cash charges, and (iv) selected losses that are unusual or non-recurring; less (v) selected principal repayments, (vi) selected gains that are unusual or non-recurring, and (vii) maintenance capital expenditures. In addition, our Board of Directors utilizes reserves for future capital expenditures, compliance with law or debt agreements, and to provide funds for distributions to unitholders in respect to any one or more of the next four quarters. Distributable Cash Flow does not reflect changes in working capital balances. The following table (in thousands) reconciles net income to Distributable Cash Flow:
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