Emerge Energy Services LP Announces Second Quarter 2013 Results

Southlake, Texas - August 14, 2013 - Emerge Energy Services LP ("Emerge") today announced second quarter 2013 financial and operating results.

Highlights

• Adjusted EBITDA of $17.4 million for the three months ended June 30, 2013. 

• Distributable cash flow of $8.6 million, or $0.37 per unit, for the period beginning May 14, 2013, through June 30, 2013. 

• Full quarter sales of 634,000 tons of sand, over 94% of which was Northern White Sand. 

• Average utilization of over 48% of capacity at our Barron facility. 

Overview

Emerge reported a net loss of $7.3 million, or ($0.32) per unit for the period beginning May 14, 2013, the date Emerge closed its initial public offering (IPO), through June 30, 2013.  For that same period, Emerge reported distributable cash flow of $8.6 million, or $0.37 per unit.  For the full quarter, Emerge reported Adjusted EBITDA of $17.4 million compared to $10.1 million for the same period of the prior year.  Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge uses to assess its performance on an ongoing basis.

Previously, Emerge had declared a prorated distribution of $0.37 per unit for the quarter ended June 30, 2013.  This equates to a full quarter distribution of $0.70 per unit.

"We were very pleased with our results from our first partial quarter as a public company," said Ted Beneski, Chairman of the Board of Directors of the general partner of Emerge.  "Our initial distribution was well ahead of the forecast contained in our prospectus, and we believe we will meet or possibly exceed our distributable cash flow targets in the coming quarters."

"The upside to our earnings was driven by the strong ramp up of operations at our Barron plant, whose capacity utilization is proceeding ahead of schedule," added Rick Shearer, CEO of Emerge.  "New Auburn is still selling all of its production, but Barron has actually surpassed New Auburn in sand production over the past several weeks, and we have already reached a combined run rate of approximately 2.5 million tons per year, versus our initial projection of an average of 2.0 million tons per year for our first twelve months as a public company.  We have been able to expand our customer base, while virtually every one of our existing contract customers is purchasing sand at a rate that well exceeds their contracted minimums.

"In addition, our Dallas-based transmix facility continues to perform as expected, while our Birmingham terminal has outperformed expectations primarily due to improved margins with contract customers, a favorable pricing environment, and our ability to sell RINs, which are currently experiencing a strong pricing environment."

Conference Call

Emerge will host its 2013 second quarter conference call later today, Wednesday, August 14, 2013 at 3 p.m. CDT. Callers may listen to the live presentation, which will be followed by a question and answer segment, by dialing (877) 474-9502 or (857) 244-7555 and entering pass code 63854004. An audio webcast of the call will be available at www.emergelp.com within the Investor Relations portion of the website. A replay will be available by audio webcast and teleconference from 5:00 p.m. CDT on August 14 through 11:59 p.m. CDT on September 14, 2013. The replay teleconference will be available by dialing (888) 286-8010 or (617) 801-6888 and the reservation number 62739784.

Operating Results

The following table summarizes our unaudited consolidated operating results for the three and six months ended June 30, 2013 and 2012 (in thousands).

(a) See section entitled "Adjusted EBITDA and Distributable Cash Flow" that includes a definition of Adjusted EBITDA and provides reconciliation to GAAP-based net income.

Sand Segment

For the full quarter ended June 30, 2013, Emerge sold 634,000 tons of sand, 598,000 of which were sold from its Wisconsin facilities.  The New Auburn facility sold 309,000 tons, compared to 245,000 tons for the same period last year, while the Barron facility, which commenced operations in late December 2012, sold 289,000 tons.  Sand segment income was $14.1 million for the full quarter, compared to $8.9 million for the same quarter in 2012.  This 59% increase in segment income was almost entirely due to the increase in volume and associated gross margin of sand sold, but was partially mitigated by increased SG&A from our Barron facility

Fuel Segment

For the full quarter ended June 30, 2013, Emerge sold over 55 million gallons of refined fuel, compared to 44 million gallons for the same period last year, and had an additional third-party volume of 61 million gallons through its terminals, compared to 48 million gallons for the same period last year.  Transmix production was 18 million gallons for the three months ended June 30, 2013, compared to 6.2 million gallons for the same period last year.  The increase in volumes was primarily because of the acquisition of Direct Fuels, which the Partnership acquired at the close of its IPO May 14, 2013.  Segment income for Fuel was $4.5 million for the full quarter, which only included 48 days of contribution from Direct Fuels, compared to $1.2 million for the comparable quarter in 2012.  This 284% increase in segment income was because of the partial quarter results of operations of Direct Fuels, improved margin performance, and increased gross margin from RINS sales.

Capital Expenditures and Distributable Cash Flow

Excluding the acquisition of Direct Fuels at the close of the IPO, Emerge had $3.0 million of capital expenditures during the three months ended June 30, 2013, including $0.4 million in maintenance capital expenditures, of which $0.3 million was incurred from the period commencing May 14, 2013, through June 30, 2013.

For the period commencing with the close of the IPO on May 14, 2013, through June 30, 2013, Emerge generated $8.6 million in Distributable Cash Flow, or $0.37 per unit.  On July 16, 2013, Emerge declared a distribution of $0.37 per unit, which will be paid August 14, 2013 to common unitholders of record on August 6, 2014.

Forward-Looking Statements

This release contains certain statements that are "forward-looking statements." These statements can be identified by the use of forward-looking terminology including "may," "believe," "will," "expect," "anticipate," or "estimate." These forward-looking statements involve risks and uncertainties, and there can be no assurance that actual results will not differ materially from those expected by management of Emerge Energy Services LP.   When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in the registration statement filed with the SEC in connection with this initial public offering. The risk factors and other factors noted in our prospectus could cause our actual results to differ materially from those contained in any forward-looking statement.  Except as required by law, Emerge Energy Services LP does not undertake any obligation to update or revise such forward-looking statements to reflect events or circumstances that occur after the date hereof.

PRESS CONTACT
Robert Lane
(817) 865-2541

EMERGE ENERGY SERVICES LP
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands except per unit data)

EMERGE ENERGY SERVICES LP
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
($ in thousands)

Adjusted EBITDA and Distributable Cash Flow

We define Adjusted EBITDA generally as: net income (loss) plus interest expense, income tax expense, depreciation, depletion and amortization expense, non-cash charges and selected losses that are unusual or non-recurring less interest income, income tax benefits and selected gains that are unusual or non-recurring. We report Adjusted EBITDA (which as defined includes certain other adjustments, none of which impacted the calculation of Adjusted EBITDA herein) to our lenders under our new credit facility in determining compliance with the interest coverage ratio test and certain senior consolidated indebtedness to Adjusted EBITDA tests thereunder.  Adjusted EBITDA should not be considered as an alternative to net income, operating income, cash flow from operating activities or any other measure of financial performance presented in accordance with GAAP.  The following table (in thousands) reconciles net income (loss) to Adjusted EBITDA.

We define distributable cash flow as net income (loss) plus (i) non-cash net interest expense, (ii) depreciation, depletion and amortization expense, (iii) non-cash charges, and (iv) selected losses that are unusual or non-recurring; less (v) selected principal repayments, (vi) selected gains that are unusual or non-recurring, and (vii) maintenance capital expenditures.  Distributable cash flow does not reflect changes in working capital balances.