EMERGE ENERGY SERVICES Analyst and Investor Day San Antonio, TX May 2017 www.emergelp.com PAGE 1
Presentation Agenda Rick Shearer, Robby Myers, I. Strategic Initiatives Update President & CEO Vice President of Finance Rick Shearer, II. Osburn Transaction Recap President & CEO Josh Clements, Sharon Masek, Griff Ruppel, III.…
Agenda I. Strategic Initiatives Update II. Osburn Transaction Recap III. San Antonio Operations IV. Appendix www.emergelp.com PAGE 4
Competitive Strengths High Quality, Technology Strategically Driven New Located Assets Products Diversified Intrinsic Product Logistics Offering Advantages Trusted Reputation w/ Low Cost Customers and Operating…
Accomplishing Our Strategic Initiatives Reduced Costs Expanded 1 3 Sold Fuel Business 5 During Downturn Footprint Implemented lower Received an attractive Osburn Materials cost mining methods valuation offers high quality…
Expanding Footprint with Local Sands - Osburn Materials Local & regional sands have proved effective for certain completion designs and are now approximately 3035% of the frac sand market Delivered cost of sand to the Eagle Ford…
Introducing Technology-Driven Proppants We are excited about our two technology-driven proppant products: our self-suspending sand SandMaxXTM and our dustless proppant SandGuardTM. . These products have unique properties compared to…
Building Out a Comprehensive Logistics Platform Our sand facilities have direct access to four Class One rail lines and can reach all major shale plays in North America on single-line hauls. Logistics Highlights Wide Geographic…
Regaining Market Share We have experienced rapid growth in volume over the last several quarters relative to our competitors, and we are expecting further market share gains with the addition of the San Antonio plant expansion.…
Deleveraging Our Balance Sheet We have taken drastic measures to lower our debt burden and improve our liquidity, which have positioned us well for the current recovery in the market. Change in ABL Balance ( in mm) Change in Debt…
Obtained Attractive Acquisition Financing Financed acquisition with a new 40mm second Transaction Sources and Uses lien term loan issued in April Sources of Capital in mm's Uses of Capital in mm's Second lien priority on all…
Financial Performance Estimates During the downturn, we undertook substantial corrective actions to improve the competitive positioning of our business. Now we are estimating significant improvements in volume and Adjusted EBITDA for…
Capitalizing on a Strong End Market: Increasing Proppant Usage Total industry proppant consumption started to recover in the third quarter of 2016 across the major US basins, and the amount of proppant used per horizontal well has…
Capitalizing on a Strong End Market: Robust Demand Projections Estimates from Wall Street analysts indicate 2017 sand demand could surpass historical peak levels. The current recovery in the sand market is being driven by increased…
Agenda I. Strategic Initiatives Update II. Osburn Transaction Recap III. San Antonio Operations IV. Appendix www.emergelp.com PAGE 16
Introduction to Osburn Materials Located 25 miles south of San Antonio, TX 650 total owned acres (surface and sand mineral Property Details rights) Estimated over 80 million(1) tons of reserves as of the acquisition date Wet…
San Antonio Plant: Best in Class Business Model High quality reserves Large property and deposit In-basin location Dual rail service Minimal overburden All production operations located on site (avoids trucking) Owned reserves…
Growing Demand for Frac Sand in Eagle Ford Basin While the Permian basin receives most of the attention, activity in the Eagle Ford basin, the second most active shale play, is gaining momentum with several notable operators in the…
Industrial Sands End Market Central Texas (San Antonio and Austin metro areas) is one of the fastest growing regions in the country Approximately 4.5 million residents estimated as of 2016 Our San Antonio plant currently…
Attractive Valuation for Local Sands Acquisition ( in mm's, except per EMES San ton metrics) Competitor A Competitor B Antonio Site (1) Announced Purchase Price 20 275 214 (2) (3) Est. Capex for Plant Expansion 53 48 n/a Total…
Expanded Footprint and Balanced Mix The San Antonio site provides a more balanced footprint with a diversified mix of northern white and local sands. Before Acquisition After Acquisition Reserves(1) Local 26% Northern…
Agenda I. Strategic Initiatives Update II. Osburn Transaction Recap III. San Antonio Operations IV. Appendix www.emergelp.com PAGE 23
Site Layout Highlights 650 total acres 150 acres not pictured across Pleasanton road Mined out 30 acres Sand depth down to 105 feet UP rail line onsite Property road that connects to US Highway 281 No water limits,…
Existing Wash Plant Highlights Phase 1 capacity of 800k tons per year total washed material Phase 2: Amending air permit to 1.2mm tpy washed material Permit amendment is separate from Phase 3 permit Adding new mud…
Existing Dry Plant Highlights Phase 1 capacity of 400k tons per year total material 300k tons for frac sand 100k tons for industrial Phase 2: Amending air permit to double output to 800k total tpy (600k frac; 200k…
San Antonio Plant Expansion Plan Phase 1 Phase 2 Phase 3 3,700 Frac Sand Production Cumulative Capacity (000 tons per year) 600 300 Timing Fully permitted Permit amendment in Secure contracts & financing…
Phase Three Plant Layout Designs www.emergelp.com PAGE 28
Phase Three Truck Loadout Design www.emergelp.com PAGE 29
Phase Three Rail Track www.emergelp.com PAGE 30
San Antonio Plants Strategic Location Major drilling activity is clustered in South and West Texas Overview Most of the Eagle Ford activity is within 40100 miles of the Osburn site for direct to wellhead trucking Closest…
Rail Service The plant will be primarily served by onsite access to the UP mainline, which runs alongside our property. The UP has prime access to all major Texas and Oklahoma basins. Osburn www.emergelp.com PAGE 32
BNSF Origin To access the BNSF railroad, our Elmendorf, TX terminal is located approximately 15 miles from our San Antonio plant. We have the ability to store 36,000 tons between two buildings. www.emergelp.com PAGE 33
BNSF Texas Destinations The BNSF railroad offers extensive service throughout Texas. Once originating at our Elmendorf, TX terminal, we will be able to access the Delaware basin via Loving, NM and the Midland Basin via Big Lake, TX and…
Agenda I. Strategic Initiatives Update II. Osburn Transaction Recap III. San Antonio Operations IV. Appendix www.emergelp.com PAGE 35
Summary Quarterly Performance in thousands, except per ton 2017 2016 2015 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Continuing Operations: Tons Sold (tons in 000's) 1,251 826 493 399 439 581 799 861 1,151 Revenue 75,344 42,619 31,285 24,825 29,670…
Oil Price Breakevens by Basin Breakeven oil prices for most US shale plays are below the current WTI price. Several plays including areas in the Permian basin, Eagle Ford, and MidCon remain viable with WTI in the mid to high 30s.…
Management and Board of Directors Years of Name Title Professional Experience Senior Management Team Rick Shearer Chief Executive Officer of EMES; CEO of SSS 43 Warren B. Bonham Vice President of EMES 32 Deborah Deibert Chief…
From Mine to Railcar 1) Extract 2) Wash 3) Dry 4) Ship www.emergelp.com PAGE 40
Asset Summary Wet Plant Location Proven Recoverable Primary Reserve Plant Capacity 2016 Production Reserves (1) Composition (Thousands of Tons) (Thousands of Tons) New Auburn, WI 15.5 mm tons 14-60 mesh 2,000 - Thompson Hills, WI…
North American Sand Markets We have single-line access to four Class One railroads, which provide direct rail access to every major basin in North America National Network BNSF CN/GTW CP/SOO CSX /NS KCS/KSCSM UP Basin…
Consolidated Net Income to Adjusted EBITDA Reconciliation in thousands 2017 2016 2015 Q1 Q4 Q3 Q2 Q1 Q4 Q3 Q2 Q1 Net income (11,390) (20,775) 5,117 (22,897) (34,215) (9,888) (11,898) 2,884 9,491 Depreciation, depletion and…
Guidance: Net Income to Consolidated Adjusted EBITDA ( in millions) Full Year 2017 2018 Low 2018 High Net Income (13.0) 97.0 115.0 Interest expense, net 17.0 18.0 19.0 Depreciation, depletion and amortization 23.0 23.0 24.0…
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