Q3 2017 Earnings Conference Call

Emerge Energy Services LP (NYSE:EMES)

Q3 2017 Earnings Conference Call

November 1, 2017 4:00 PM ET

Executives

Deb Deibert – Chief Financial Officer

Ted Beneski – Chairman

Rick Shearer – Chief Executive Officer

Analysts

John Watson – Simmons & Company

Selman Akyol – Stifel

Waqar Syed – Goldman Sachs

Samantha Hoh – Evercore ISI

Akil Marsh – Janney

Operator

Good day, ladies and gentlemen, and welcome to the Q3 2017 Emerge Energy Services Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s conference Deb Deibert. Ms. Deibert, you may begin.

Deb Deibert

Thank you, operator, and welcome, everyone, to the Emerge Energy Services LP third quarter 2017 conference call. 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 volume, operating expenses, and capital expenditures. They 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 materialize or should the underlying assumptions prove incorrect, our actual results may vary materially from those expected.

These risks are discussed in greater detail in our annual report on Form 10-K on file with the Securities and Exchange Commission.

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

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

Ted Beneski

Good afternoon, everyone and thank you for joining us to review another quarter for Emerge Energy Services. We are very proud of our accomplishments in the third quarter, highlighted by positive net income from continuing operations for the first quarter in over two years.

We also achieved substantial revenue and adjusted EBITDA growth, driven by significant price increases, volume increases and a further reduction in cost per ton. We continue to work diligently on executing our San Antonio expansion plan, in an effort to be the leading in-basin sand producer for the Eagle Ford.

Our early marketing efforts with new customers in the area have unquestionably proved that demand for our product is highly desired. During the third quarter, we produced frac sand from the existing equipment that was included with the purchase of the site. As you may recall, the initial production from the site represents small quantities relative to the full build-out of the project.

Rick will have more detail on the full size of the ultimate plan in his section, but we are excited about partnering with several leading operators and service companies in the area. We have made considerable progress on raising new debt capital to refinance our revolving credit facility, and to provide new capital for the full San Antonio expansion.

We have chosen our lending partners, who are currently completing business and due diligence. Although there is some difficulty in predicting exact timing of these transactions, we do expect to close by the end of November or at the latest early December. Meanwhile, we broke ground on the construction of the Phase 3 expansion last week. We are currently financing the project within our internal capital allotments and through vendor financing from trusted partners. This has allowed the project to remain on schedule with an estimated operational date of early Q2 next year.