Emerge Energy Services LP (EMES)

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Emerge Energy Services LP (EMES)

Q1 2014 Results Conference Call

May 05, 2014 / 4:00 A.M. E.T.


Robert Lane – CFO

Ted Beneski – Chairman of the Board

Rick Shearer – CEO

Warren Bonham – VP, Director


Brandon Dobell – William Blair & Co.

Ethan Bellamy – Robert W. Baird & Co. Inc.

Selman Akyol – Stifel Nicolaus

Matt Conlan – Wells Fargo Securities LLC

Mark Meyer – LPL Financial



Good day ladies and gentlemen, and welcome to the Q1 2014 Emerge Energy Services earnings conference call. My name is Whitley and I'll be your operator for today. (Operator Instructions). As a reminder, this call is being recorded for replay purposes.

I would now like to turn the call over to your host for today Mr. Robert Lane, Chief Financial Officer of Emerge Energy Services. Please proceed sir.

Robert Lane

Thank you, Whitley. Just a quick note before we start. Our discussion today may contain forward-looking statements. These statements may include but are not limited to our estimates of future volumes, operating expenses, and capital expenditures, and may also include statements concerning anticipated cash flow, liquidity, business strategy, distributions and other plans and objectives for future capital expenditures and operations. These statements are based on management's beliefs and assumptions. Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can provide no assurance that such expectations will prove to be correct. These statements are subject to certain risks and uncertainties. If one or more of these risks materialize or should the underlying assumptions prove incorrect. u actual results may vary materially from those expected. These risks are discussed in greater detail in our 10-K filing on file with the Securities and Exchange Commission.

Please also note that, on this call, we may use the terms EBITDA, adjusted EBITDA and distributable cash flow. These are non-GAAP financial measures and we have provided reconciliations to the most direct comparable GAAP measures in our earnings release published this morning.

I would now like to turn the call over to our Chairman, Ted Beneski.

Ted Beneski

Thanks, Rob. Good afternoon and welcome, everyone, to another Emerge Energy Services conference call. Once again, Emerge Energy turned in a record quarter -- record Sand volume sold, record adjusted EBITDA, record distributable cash flow and a record distribution.

Net income for the three months ended March 31, 2014 was $18.5 million, or $0.77 per unit, compared to $9.9 million for the same period in 2013. We reported adjusted EBITDA of $28 million for the first quarter of this year compared to $17.3 million a year ago, an increase of 62%. Our distributable cash flow for the quarter was $25 million, and we were pleased to declare a distribution of $1.13 per unit.

While this quarter was a tough one according to many of our customers and competitors, our team was able to effectively respond to adverse weather and a lack of rail car availability. In fact, as Rick will discuss in more detail later, we turned in our strongest quarterly Sand sales volumes to date. While there certainly has been a healthy increase in overall market demand for high-quality, Northern White silica sand, it was our team's ability to fulfill that demand in the first quarter that really helped set Emerge Energy apart.

Meanwhile, our Fuel division continues to perform better than we had expected in part because of strong margins in our wholesale business, primarily in Birmingham, and also because of transmix volumes being much stronger in both our Euless, Texas facility and our Birmingham facility.

We also want to update our announced capital projects. We are pleased to announce that our LP mine and wet plant are currently up and running and we expect our Thompson Hills mine and wet plant facility to also be fully operational later this year. And of the two announced major new drive plant facilities, we continue to make strong progress with permitting and other necessary preconstruction work and expect both to be operational later this year.

I'd now like to turn the call over to Rick Shearer, our CEO, who will discuss the results of operations in our Sand segment.

Rick Shearer

Thank you, Ted. Once again, we are pleased to announce yet another record-setting quarter for Emerge Energy. The Sand segment's adjusted EBITDA was $22.2 million for the three months ended March 31, 2014 compared to $12.7 million for the same period in 2013, an increase of 76%.

For the three months ended March 31, we sold 882,000 tons of sand, including 353,000 tons from our New Auburn facility, roughly the same as last quarter, and a whopping 490,000 tons from our Barron plant. New Auburn is selling out at its full permitted capacity of 1.4 million tons while Barron is at over 80% capacity.

For those who remember our call back in August of last year, we projected then that we would be at 80% or greater capacity utilization for Barron by mid-August of this year. What was most impressive was that we achieved this goal at our Barron plant in spite of the poor rail service during the quarter. Obviously, our sales and production teams took our 80% goal to heart, and it is gratifying to see them bring in such great numbers ahead of schedule.

Our Kosse, Texas facility has been another great story as of late, turning in 39,000 tons for the quarter, well more than half of which was in the month of March. We expect that our Kosse plant sales will increase significantly next quarter as well and continue to contribute meaningfully to our Sand segment EBITDA for the near future.

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