SOUTHLAKE, Texas and FORT WORTH, Texas – April 20, 2017 – Insight Equity Holdings LLC (“Insight Equity”), a leading middle-market private equity firm, is pleased to announce that its portfolio company, Emerge Energy Services LP (NYSE:EMES), has closed a transaction to acquire Osburn Materials, a local sand producer based outside of San Antonio, Texas, for approximately $20 million. The transaction was funded with a new $40 million term loan and the remaining proceeds, after transaction fees and expenses, were used to repay outstanding borrowings under its revolving credit facility. Houlihan Lokey Capital, Inc. served as exclusive placement agent in connection with the debt financing.
Osburn Materials is located approximately 25 miles south of San Antonio, Texas where it produces and sells sports sands and building products, however it does not yet serve the energy markets. The mine has approximately 80 million tons of sand reserves and Emerge Energy Services LP ("Emerge Energy") will upgrade the existing operations for a conversion into frac sand sales. The sand reserves, which consist mostly of 40/70 and 100 mesh, meet API specifications for all grades.
“This transformative acquisition of a local sands operation accomplishes one of our key strategic goals,” commented Ted W. Beneski, CEO & Managing Partner of Insight Equity and Chairman of the Board of Directors of the general partner of Emerge Energy. “Osburn’s reserves, located near the heart of the Eagle Ford basin, will be highly desirable for frac sand purposes as the sand is high quality and logistically advantaged. Since we funded the acquisition with a new term loan, we avoided further dilution to our unitholders.”
Rick Shearer, CEO of the general partner of Emerge Energy, added "We are very excited about what Osburn Materials will contribute during the next chapter for Emerge Energy. Although not currently selling into the energy markets, Osburn Materials has API-spec, strategic reserves that will bolster our presence in local sands and balance our portfolio of northern white to local sands. Amongst the many competitive advantages that Osburn Materials brings, the logistics component is vitally important. The site will offer direct trucking to the wellsite for Eagle Ford basin demand and onsite rail access to the Union Pacific mainline offers low-cost transportation into the Permian basin."
"Osburn Materials currently has production capacity for 600,000 tons per year of wet sand and 300,000 tons per year of finished dry sand," continued Mr. Shearer. "However, we have created a plan to upgrade the Osburn site into a much larger operation across three phases. With the existing equipment in place, we expect that the dry plant will be able to produce at a rate of 300,000 tons per year once fully staffed for 24/7 operations in less than 30 days. We have initiated the permit amendment process for a phase two expansion to 600,000 tons per year with minimal capital expenditures, and our phase three expansion will consist of a full scale, three million ton per year operation. We are targeting early Q4 for the completion of phase two, and, depending on market conditions, phase three could be completed by mid-2018."
Forward-Looking Statements "Forward-looking 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. When considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in Emerge Energy's Annual Report on Form 10-K filed with the SEC. The risk factors and other factors noted in the Annual Report could cause actual results to differ materially from those contained in any forward-looking statement. Except as required by law, Emerge Energy does not undertake any obligation to update or revise such forward-looking statements to reflect events or circumstances that occur after the date hereof. The internal estimate of Osburn Materials' sand reserves is based on surveying, drill core analysis and other tests performed by Emerge Energy's geology and engineering staff. This estimate has not been reviewed by its independent reserve engineers and may be revised following ownership of the property. By its nature, this estimate is more speculative than proved or probable reserves and subject to greater risk that such reserves will not be realized.
Emerge Energy Services LP (NYSE:EMES) is a growth-oriented limited partnership engaged in the business of mining, producing, and distributing silica sand, a key input for the hydraulic fracturing of oil and natural gas wells, through its subsidiary Superior Silica Sands LLC.
Insight Equity makes control investments in strategically viable, middle-market manufacturing and distribution businesses across a wide range of industries. Leveraging a proven, collaborative value creation model, Insight Equity facilitates operating enhancements and growth. The firm specializes in partnering with companies in complex or challenging situations, including corporate divestitures, management buyouts, aggressive growth opportunities, going-private transactions, restructurings, and transitions from family ownership. Insight Equity’s headquarters is located near the Dallas / Ft. Worth International Airport in Southlake, Texas. The firm also has an office in New York City.