Preferred Sands Signs Financing Deal with KKR

KKR of New York, NY and Preferred Sands LLC of Radnor, PA have signed definitive agreements under which KKR, in conjunction with Jefferies LLC, has committed to provide a comprehensive financing solution to refinance the company’’s entire capital structure. Under the agreement, KKR is providing a comprehensive capital solution including debt and equity of more than US$680 million. KKR is making a significant investment primarily from the firm’s global Special Situations fund, and KKR Capital Markets and an affiliate of Jefferies LLC jointly underwrote a new first lien credit facility. Over the past seven years, Preferred Sands has built a network of sand mines, processing locations and innovative products to support oil and gas development. Today, its network of mines in Arizona, Minnesota, Nebraska, and Wisconsin has the capacity to produce more than nine billion pounds of sand annually and currently distributes sand to all of the major basins in the U.S. and Canada. Early last month, Preferred Sands announced plans to open an additional Northern White sand plant that will expand its frac sand production capacity by more than four billion pounds annually. Michael O’Neill, Preferred’s CEO, said, “This is a long-term plan that enables us to further grow our industry-leading platform of products and services. We deeply appreciate that KKR worked with us in an expedited time frame to create a tailored solution to meet our immediate needs, with the flexibility to focus on our future growth plans and other opportunities.” U.S. Silica Holdings Inc of Frederick, MD has reported a second quarter net income of US$28.7 million on revenue of US$205.8 million up from US$20.2 million on revenue of US$129.8 million in the second quarter of 2013. The company sold 2.6 million tons of product in the period, a year-over-year increase of 27%. Bryan A Shinn, U.S. Silica’s CEO, said, “I’m extremely pleased with the performance of our oil and gas and industrial businesses. The robust demand we continue to see in oil and gas drove higher pricing and margins for both of our operating units during the quarter. We’re moving quickly to add more capacity through both Greenfield developments and M&A to assure adequate supply for our customers going forward.” U.S. Silica’s Oil and Gas segment generated second quarter revenue of US$149.3 million, nearly double the US$77.7 million generated in the same period of 2013. The segment’s sales volume increased 52% to 1.5 million tons. The company’’s Industrial and Specialty Products segment’s revenue increased 8% to US$56.5 million and sales volume increased 3% to 1.095 million tons. U.S. Silica’s capital expenditure in the second quarter was US$7.4 million, primarily associated with a new frac sand mine and plant near Utica, NY and a new transload facility under construction in Odessa, TX. Carbo Ceramics Inc of Houston, TX has reported a second quarter net income of US$23.0 million on sales revenue of US$176.6 million compared with US$16.3 million on sales revenue of US$153.7 million in the second quarter of 2013. The higher revenue is attributed to an increase in ceramic proppant sales volumes from 457 million lbs to 768 million lbs. The growth was led by a jump in sales of Northern White sand from 11 million lbs to 271 million lbs and sales of ceramic proppants that increased 20% from 378 million lbs to 454 million lbs. Sales of the company’’s resin-coated sand fell 37% to 43 million lbs. Gary Kolstad, Carbo’s CEO, said, “Ceramic proppant sales volumes increased sequentially, as fracturing activity rebounded from first quarter’s harsh weather conditions and rail-related logistical challenges. Ceramic proppant demand exceeded our second quarter capacity which necessitated our dipping into finished goods inventory. We have also continued to see growth from clients that have become more aware of the negative impact that low quality, Chinese ceramic proppant can have on their well production. Pricing for Carbo ceramic proppant was relatively stable during the quarter.” “Millen Line 1 production is ramping up, and we expect to be at full rate by the end of the third quarter of 2014. Construction on Millen Line 2 and the retrofit of an existing plant to produce Kryptosphere LD are proceeding well, and both are expected to be completed by the end of the second quarter of 2015. The completion of Millen Line 2 will take our total annual ceramic proppant capacity to 2.25 billion lbs and, in combination with Millen Line 1, will result in an increase to our ceramic proppant capacity of 29% in approximately one year. We continue to believe there is increasing demand for high quality, high conductivity ceramic proppant, which provides us with confidence in bringing on additional ceramic proppant capacity.” Emerge Energy Services LP of Southlake, TX has reported a second quarter net income of US$20.1 million on revenues of US$298.3 million compared with a net loss of US$4.1 million on revenue of US$204.9 million in the same period of 2013. The company’’s Sand segment generated an income of US$20.5 million on revenues of US$77.5 million compared with US$11.6 million on revenues of US$34.5 million in the second quarter of 2013. Rick Shearer, Emerge’s CEO, said, “We are sold out at our existing facilities, and are pleased to announce the construction of our Arland plant is on schedule for startup in the fourth quarter of this year. Construction at our Thompson Hills mine and wet plant is also proceeding, and we expect that facility to start generating wet feed that should lower our costs later this year as well. We are also pleased to announce that we have purchased substantially all of the assets of MidWest Frac and Sand LLC, which has been a supplier of some of our higher quality wet feed. As we near the finish line on our permitting process with our second proposed plant, we plan to break ground on that facility in the coming weeks and expect to be shipping sand sometime in the first quarter of 2015. “Over the past several weeks, we have signed five new multi-year contracts for a total of 1.9 million tons. We now have 7.4 million tons under long-term contract with a weighted average contract life of 4.4 years. Spot sales to customers remain strong, and we continue to enjoy strong results from Kosse as well.” Emerge sold 1.045 million tons of sand in the latest quarter compared with 634,000 tons in the same period of 2013. The company’’s Barron, WI facility sold 522,000 tons compared with 289,000 tons; the New Auburn, WI facility sold 432,000 tons compared with 309,000 tons; the Kosse, TX facility sold 91,000 tons versus 36,000 tons. Hi-Crush Partners LP of Houston, TX has reported EBITDA of US$36 million on revenues of US$83 million compared with US$17 million on revenues of US$38 million for the second quarter of 2013. The company sold 1.024 million tons of frac sand in the latest quarter versus 0.614 million tons in the same period of 2013. Production costs were US$14.20/ton versus US$18.32/ton. Heemskirk Canada Ltd of Calgary, AB is completing detailed engineering for its Moberly, BC frac sand project to take it to “shovel ready” status. The company is also evaluating funding proposals for the CDN$26 million, 300,000 tons/year project. Heemskirk reported industrial minerals production for the quarter ended June 30, 2014 of 322 tonnes compared with 11,960 tonnes in the corresponding quarter of fiscal 2013. Following the sale of its Lethbridge plant, the company’’s remaining production, a variety of silica products, comes from Moberly. Athabasca Minerals Inc of Edmonton, AB has retained Apex Geoscience, to complete a NI 43-101 report, and Norwest Corp to complete a preliminary economic assessment for its Firebag frac sand project near Fort McMurray, AB. The company generated revenue of CDN$3.5 million in the three months ended May 31, 2014 versus CDN$6.3 million in the same period of 2013. Total aggregates sales were 1.42 million tonnes compared with 2.36 million tonnes in the prior year period.

Volume 28 issue 15

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