Emerge Energy Services LP Investor Presentation April 1, 2014 www.emergelp.com PAGE 1
Table of Contents Introduction Ted Beneski, Founder of Insight Equity and Chairman of the Board of EMES Sand Segment Overview Rick Shearer, CEO of EMES and CEO & President of Superior Silica Sands Sand Markets Justin Renfro, Vice…
Introduction Ted Beneski Founder, Insight Equity Chairman of the Board, EMES www.emergelp.com PAGE 4
The Emerge Team Ted Beneski Rick Shearer Founder of Insight Equity CEO of EMES Chairman of EMES CEO & President of SSS Warren Bonham Robert Lane VP, Fuel and Director, EMES CFO of EMES Dick DeShazo Jim Walker CAO of EMES COO of…
Partnership Overview Sand Fuel Leading manufacturer of Northern Primarily consists of processing & White silica sand, 99% sold as a selling transportation mixture proppant for hydraulic fracturing (transmix) Diversified customer…
Our MLP Structure We have a simplified MLP structure All units are Common Units Non-economic General Partner No Incentive Distribution Rights (IDRs) No Minimum Quarterly Distributions (MQD) Our Sponsor, Insight Equity, which owns…
Our Sponsor and Organization Formed in 2002 Over 1.3 billion of capital under management Currently deploying Fund III Strong track record of delivering investor returns Invests in middle market companies in asset intensive…
Investment Considerations High Quality, Stable Strategically Cash Flow Located Assets Significant Intrinsic Organic Logistics Growth Advantages Capacity Strong Reputation w/ Low Cost Customers and Operating…
Our Business Objective And Strategies Our primary business objective is to generate cash flow that is predictable and steadily grows over time Sand segment has long-term contracts and solid relationships with creditworthy counterparties…
SAND SEGMENT www.emergelp.com PAGE 11
Sand Segment Overview Rick Shearer CEO of EMES CEO & President of Superior Silica Sands www.emergelp.com PAGE 12
Proppants & Hydraulic Fracturing Frac sand, or proppant, is used to prop open fissures in hydraulic fracturing Demand expected to continue its strong growth into the near future Hydraulic Fracturing 2013 US Land Proppant…
Sand Market Overview As a top Tier 1 supplier, SSS is well-positioned in todays market Demand is increasing faster than high quality supply Major Dynamics Logistics capabilities are no longer a competitive advantage but a necessity…
Proppant Market Differentiation EMES mines and processes industry-leading frac sand There are significant variations in sand characteristics and quality OIL / LIQUIDS DRY GAS (Coarser Sand) (Finer Sand) 16-30 Mesh 20-40 Mesh…
Our Assets An Overview 80.2 million tons of Northern White silica sand Ideal for crude oil and liquids-rich natural gas extraction from unconventional plays High Quality Proved reserves of 65-mesh or larger Additional 70 to 100-mesh…
Sand Markets Justin Renfro Vice President of Sales and Marketing Superior Silica Sands www.emergelp.com PAGE 17
Diversified Sales Portfolio Sales by Basin Sales by Customer Eagle Ford Canada Marcellus Bakken Cust A Cust B Cust C Cust D Permian Barnett Rockies Monterey Cust E Cust F Cust G Cust H Haynesville MidCon Other Cust I Cust J Cust K…
Sand Contracts Our Sand Division provides high customer service to complement the strength of our contract mix Contracted fixed minimum volume Take Or Pay Specified price, delivery point, payment terms, and quality specifications…
North American Sand Markets EMES sand facilities are strategically located to provide customers with direct rail access to every major basin in North America National Network BNSF CN/GTW CP/SOO CSX /NS KCS/KSCSM UP Source:…
North American Sand Markets New Auburn, positioned on the UP, gives EMES access to all major plays in Texas and Oklahoma National Network UP All Others Basin Highest Quality Sand Mine Locations SSS Transload Sites…
North American Sand Markets Barron loads directly onto the CN, giving one-line access to the Marcellus, Utica, WCSB, and Tuscaloosa Marine Shales, plus and access to Latin America via the Port of New Orleans National Network…
New Sexsmith MegaCentre Operated by Baillys Transport Serviced by the Canadian National 5 days a week 6 dedicated 2,000 ton silos for a total of 12,000 metric tons 45 car spot for unloading in to silos Phase I opening March…
Sand Operations Josh Clements General Manager, Superior Silica Sands www.emergelp.com PAGE 24
Not All Sands Are Created Equal Native Angular Sand Northern White Sand Glass Shards and Little Rocks from Barron Uncultured Pearls www.emergelp.com PAGE 25
Sand Operations Process Flow FLS/Arland Thompson Hills Auburn LP Mine Barron New Auburn Midwest Frac (third party provider) Proposed A Proposed A Proposed B Proposed B www.emergelp.com PAGE 26
Sand Asset Summary Proven Primary Reserve Depth of Lease Expiration Mine Area Plant Capacity Wet Plant Location (1) Recoverable Composition Reserve (Feet) Date (Acres) (Thousands of Reserves (2) Tons) New Auburn, WI 20.0 mm tons 14-60…
Mining FLS/Arland Mine New Auburn Overburden New Aubrun Mineface FLS/Arland Reclamation www.emergelp.com PAGE 28
Wet Plant Operations Wet Processing Plant Screener Stockpile Area Loading for Transport to Dry Plant www.emergelp.com PAGE 29
Dry Plant Operations Sand Delivered from Wet Plant Transferred to Dryer From Screener to Silo Rail Loadout www.emergelp.com PAGE 30
Sand Operation Economics Mine / Wet Plant Costs Mining 6.00 8.00 per ton Royalties 1.00 1.50 per ton Freight 3.00 7.00 per ton Total - 10.00 16.50 per ton Purchased Sand: 15.00 - 22.00 per ton Dry Plant Production Costs Natural…
Sand Segment Strategy Rick Shearer CEO of EMES CEO & President of Superior Silica Sands www.emergelp.com PAGE 32
Competitive Advantages Emerge sand exceeds API and customer specs Over 60% of Emerges Northern White sand is a mesh size of 50 or larger Quality of Sand One of only four companies with commercial quantities of 16/30 sand Fully…
Sand Segment Growth Opportunities Recently secured new 5-year, 240,000 tpy contract at New Auburn Contracts and In negotiations for additional tons through multi-year, fixed Customers price/volume contracts Expanding and extending…
Proposed Facilities Two new world-class Northern White silica sand facilities in Wisconsin Permitting and construction expected to be complete by end of 2014 Total projected capital cost of 110 million Potential to be on BNSF,…
FUEL SEGMENT www.emergelp.com PAGE 36
Fuel Segment Overview Warren Bonham Vice President, Fuel and Director of EMES www.emergelp.com PAGE 37
Fuel Segment Operations Fuel Segment provides a stable base with meaningful growth opportunities Transmix Fuel from Terminal Wholesale Biodiesel Pipeline Processing Transmix Sold Tankage Fuel Sold in Refining Connectivity (millions…
Overview of Fuel Segment Business Fuel segment revenue comes from a diverse mix of stable margin and fixed-fee activities Product Source EMES Consumer Wholesale and Terminal Gasoline Vapor Recovery Unit Diesel Truck Pipeline…
Refined Product Pipelines in the US Transmix facilities are primarily located along major refined products pipelines Direct AEC Fuels Refined Products Pipeline Transmix Facilities EMES FP&D Facilities www.emergelp.com PAGE…
Per Gallon Fuel Margins Fuel margins have improved primarily on base margin strength Aggregate per Gallon Fuel Margin 0.250 0.200 0.150 0.100 0.050 (0.050) (0.100) Q1 12 Q2 12 Q3 12 Q4 12 Q1 13 Q2 13 Q3 13 Q4…
Fuel Segment Growth Opportunities Leverage strong relationships and existing pipeline connectivity Transmix and Expand into adjacent geographies Throughput Birmingham facility has significant unused capacity Biodiesel facility…
Financial Overview And Guidance Robert Lane Chief Financial Officer of EMES www.emergelp.com PAGE 43
Recent Financial Results Unaudited Financial Results for Emerge Three Months Three Months Three Months Three Months Ended March 31, Ended June 30, Ended Sept 30, Ended Dec 31, 2013 2013 2013 2013 Revenue 152,005 204,929 270,241…
Selected Historical Performance Metrics Pro Forma for DF Acquisition / Sand in Tons / Fuel in Thousands of Gallons 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2012 2012 2012 2012 2013 2013 2013 2013 Sand Sales 11,903 188,064 288,560 344,700 384,338…
Pro Forma Capitalization EMES has a 200 million revolver with an undrawn revolver capacity of 90.3 million EMES Capitalization as of 12/31/13 ( in millions) Cash (Unrestricted) 2.2 Revolving Line of Credit 93.8 Other Long-Term…
2014 Guidance Low High Net Income (1) 58.5 63.5 Add: Interest Expense 6.0 5.0 Add: DD&A and Other NonCash Charges 34.0 34.0 Adjusted EBITDA 98.5 102.5 Less: Interest Expense (6.0) (5.0) Less: Maintenance Capital (2.5) (2.5)…
Closing Thoughts Ted Beneski Founder, Insight Equity Chairman of the Board, EMES www.emergelp.com PAGE 48
Key Investment Highlights High Quality, Coarse reserves, state of the art facilities, and prime access to multiple Class One railways Strategically Flexible logistics network of transload sites in key basins Located Assets Fuel assets…
Q&A www.emergelp.com PAGE 50
APPENDIX www.emergelp.com PAGE 51
Management and Board of Directors Years of Industry Name Title Experience Senior Management Team Rick Shearer Chief Executive Officer; CEO of SSS (Sand Division) 40 Warren B. Bonham Vice President, Fuel; President, Direct Fuels 29…
Unit Price Performance From the EMES IPO on May 8, 2013, through the close of the market on March 28, 2014 EMES Sand AMZ S&P VR MLP * Consists of market cap weighted share prices of eight comparable variable rate…
Non-GAAP Reconciliation The following table presents a reconciliation of Adjusted EBITDA to the most directly comparable GAAP financial measures for each of the periods indicated. Three Months Three Months Twelve Months Twelve Months…
Emerge Energy Services LP Investor Presentation April 1, 2014 www.emergelp.com PAGE 55
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