Hi-Crush Partners LP (NYSE: HCLP) said July 23 it is on the path to becoming the most integrated, mine-to-wellsite supplier of proppant and logistics services following the acquisition of FB Industries Inc. for about $60 million in cash and stock.
Hi-Crush agreed to pay about $45 million cash and $15 million of new common units to acquire FB Industries, a manufacturer and marketer of silo-based frack sand management systems. The terms also include the potential for additional future consideration payments based on the achievement of established performance benchmarks through 2021.
In addition, Hi-Crush said July 23 it executed a new amendment to the existing supply agreement with an undisclosed supermajor E&P customer operating in the Permian, comprising Northern White and in-basin Permian supply and expanded PropStream services.
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The acquisition of FB Industries enhances Hi-Crush’s capabilities in the last-mile transportation and management of frack sand. As a result, Hi‐Crush CEO Robert E. Rasmus said the company will be the only provider of both silo and container solutions in the frack sand logistics industry.
“The differentiated solution developed by FB Industries augments our PropStream last-mile service offering, and provides benefits consistent with our existing container solution, including increased optimization and reduction of trucking costs, efficiency in storage capacity, speed and, most importantly, safety,” Rasmus said in a statement.
FB’s proven silo solution maximizes single-system storage capacity at the wellsite with each system capable of storing 1,680 tons of proppant, or roughly 30% more than competing silo offerings. Hi-Crush will also acquire several lines of complementary logistics equipment solutions applicable to wellsite delivery of proppant, as well as the potential to serve other industries and products.
With the completion of the FB acquisition and execution of the company’s development projects, Hi-Crush will operate 17.3 million tons per year of nameplate frack sand capacity, Rasmus added.
Laura C. Fulton, CFO of Hi-Crush, said the FB acquisition marks the next step in the company’s evolution and extends Hi-Crush’s position as “the most integrated mine to wellsite supplier of frack sand and proppant logistics solutions,” which she said there is a growing need for due to increasing frack sand demand.
Fulton expects demand for frack sand to grow to more than 110 million tons in 2018, with expectations for 2019 demand to be even higher.
“The tightness in reliable sand supply, resulting from this significant demand growth, as well as delays in our competitors’ announced construction projects, puts an even greater emphasis on the need for a fully-integrated frack sand supply and logistics provider,” she said in a statement.
Hi-Crush is planning a strong ramp in the deployment of FB systems in 2018 with expectations of 15 to 20 systems deployed by year-end, Fulton added.
Also, to support the company’s recently amended sand supply agreement, Hi-Crush will expand the Wyeville facility in Wisconsin by 850,000 tons per year for Northern White supply and anchor the development of a second 3 million tons per year Kermit facility for in-basin Permian supply.
The FB acquisition is subject to customary closing conditions and is expected to close third-quarter 2018.
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