Q4 2023 Atlas Energy Solutions Inc Earnings Call
Operator: Greetings, and welcome to Atlas Energy Solutions' acquisition of High Crush and 2023 fourth quarter results. At this time, all participants are in a listen-only mode.
Greetings and welcome to Atlas Energy solutions acquisition of Hi, Crush and 2023 fourth quarter results. At this time all participants are in a listen only mode. A question answer session will follow the formal presentation.
Operator: A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to Kyle Turlington, Vice President of Investor Relations. Thank you.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please note. This conference is being recorded I will now turn the conference over to Kyle Turlington, Vice President of Investor Relations. Thank you you may begin.
Kyle Turlington: Hello, and welcome to the Atlas Energy Solutions conference call and webcast for the fourth quarter of 2023. With us today are Bud Brigham, CEO, and John Turner, President and CFO. Bud and John will be sharing their comments on the company's operational financial performance for the fourth quarter and full year 2023 and insights on the acquisition of High Crush that we announced today, after which we will open the call up for Q&A. Before we begin our prepared remarks, I would like to remind everyone that this call will include forward-looking statements as defined in the U.S. securities laws. Such statements are based on current information and managers' expectations as of this statement and are not guarantees of future performance. Forward-looking statements involve certain risks, uncertainties, and assumptions that are difficult to predict. As such, our actual outcomes and results could differ materially.
Hello, and welcome to the Atlas Energy Solutions Conference call and webcast for the fourth quarter of 2023 with US today are Bob bring them CEO and John Turner, President and CFO, Brian and John will be sharing their comments on the company's operational and financial performance for the fourth quarter and full year 2023, and insights on the acquisition of Hi crush.
That we announced today after which we will open the call up for Q&A.
Before we begin our prepared remarks, I would like to remind everyone that this call will include forward looking statements.
Finally in the U S Securities laws, such statements are based on the current information and management's expectations as of this statement and are not guarantees of future performance forward looking statements involve certain risks uncertainties and assumptions that are difficult to predict as such our actual outcomes and results could differ materially you can learn more about these <unk>.
Kyle Turlington: You can learn more about these risks in the perspectives we filed with the SEC on September 12, 2023, in connection with our recent corporate reorganization, our quarterly reports on Form 10-Q, and our other SEC filings. You should not place undue reliance on forward-looking statements, and we undertake no obligation to update these forward-looking statements. We will also make reference to certain non-GAAP financial measures, such as adjusted EBITDA, adjusted free cash flow, and other operating metrics and statistics. You will find the GAAP reconciliation comments and calculations in this morning's press release. With that said, I will turn the call over to Bud Brigham. Thank you, Kyle.
In the prospectus, we filed with the SEC on September 12, 2023 in connection with our recent corporate reorganization and our quarterly reports on Form 10-Q, and our other SEC filings you should not place undue reliance on forward looking statements and we undertake no obligation to update these forward looking.
Statements. We will also make reference to certain non-GAAP financial measures such as adjusted EBITDA adjusted free cash flow and other operating metrics and statistics you will find the GAAP reconciliation comments and calculations in this morning's press release with that said I will turn the call over to buy brands.
Thank you Kal today is an exciting day not only for Atlas, So for hi, crush and our stakeholders, the Permian basin sand and logistics market and our customers.
Bud Brigham: Today is an exciting day, not only for Atlas but for Hyde Crush and their stakeholders, the Permian Basin Sand and Logistics Market, and our customers. Atlas is acquiring High Crush for $450 million, which consists of $175 million in equity, $150 million in cash, and a $125 million deferred cash payment in the form of a seller's note. The acquisition of High Crush further strengthens Atlas' position as a leading provider of oil and gas logistics in the Permian Basin. Our increased scale and enhanced offerings are tailored to meet the needs of our large-scale customers in the Permian Basin. As it relates to the importance of scale and reliability, we recently heard a high-level executive from a leading oil service company coined the phrase, quote, more sand, more barrels. And he is exactly right.
Atlas is acquiring hi, crush for $415 million.
Which consists of $175 million in equity $150 million in cash and $125 million deferred cash payment in the form of a seller's note.
The acquisition of Hi, crush further strengthens <unk> position as a leading provider of proppant and proppant logistics in the Permian Basin.
Our increased scale and enhanced offerings or China to meet the needs of our large scale customers in the Permian basin.
As it relates to the importance of scale and reliability.
We recently hired a high level executive from a leading oil service company coined the phrase quote more sand more barrels unquote and he is exactly right.
Bud Brigham: With surface intensity rising, scale and reliability are paramount today, with the leading-edge frac crews now pumping over 100,000 tons of sand per month. In my opinion, Atlas and Hikrush have been the two most innovative profit companies within the Permian Basin, with the rollout of Hikrush's Encore mobile mines and the development of our Dune Express conveyor system, which remains on time and on budget, coupled with our innovative multi-t These disruptive offerings are currently helping to take trucks off the public roads and make the communities in the heart of the Permian Basin safer places to live and work.
With service intensity rising scale and reliability are paramount to die with the leading edge Frac crews now pumping over 100000 tons of sand per month.
In my opinion, Atlas and Hi, crush had been the two most of the antibody to proppant companies within the Permian basin with the rollout of Hi, crush is oncor mobile mines and the development of our Didnt Express conveyor system, which remains on time and on budget, coupled with our innovative multi trailer delivery solution.
These disruptive offerings are currently helping to take trucks off the public roads and making the communities in the heart of the Permian Basin sniper places to live and work and we anticipate that that Didnt express while further enhancing its benefits.
Bud Brigham: And we anticipate that the Dune Express will further enhance these benefits. We have the utmost respect and appreciation for what the team at High Crush has built, and we are looking forward to combining best practices from our respective organizations to help our customers become even more efficient. The $450 million acquisition of High Crust includes all its Permian Basin operations, consisting of two plants at Kermit, which share the same giant open dune as our existing Kermit facilities. Seven currently deployed Encore mobile mines, of which five are in the Midland Basin and two in the Delaware Basin, with an additional Midland Basin deployment slated for the second quarter of 2024, and a ninth deployment planned for later in 2024.
We have the utmost respect and appreciation for what the team at Hi crush is built.
And we are looking forward to combining best practices from our respective organizations to help our customers become even more efficient.
The $450 million acquisition of Hi, crush and cleared its all its Permian basin operations, consisting of two plants at Kermit will share the same John opened in our existing facilities.
Seven currently deployed on core mobile mines upwards fiber in the Midland Basin and two in the Delaware Basin with an additional Midland basin deployment slated for the second quarter of 2024, and a night deployment planned for later in 2024.
Bud Brigham: Atlas is also acquiring 100% of Pronghorn Energy Services with this acquisition of High Crush, which is the leading provider of damp sand last mile solutions. We are excited to combine Pronghorn's last mile expertise with Atlas's innovative multi-trailer last mile offering. We believe that the brand offering will be well received by our customers. The acquisition of High Crush will add 12 million tons to our production capacity, which consists of 5 million tons of dry sand production at their two permit mines and approximately 7 million tons in the aggregate of wet sand production across their encore mines. In some pro forma scenarios, Atlas will have approximately 21 million tons of dry sand production capacity and around 7 million tons of wet sand production capacity for a total of 28 million tons of overall production capacity. This scale is unmatched in the Permian Basin.
Atlas is also acquiring 100% of Pronghorn energy services with this acquisition of Hi crush.
Which is a leading provider of damp sand last mile solutions.
We are excited to combine pronghorn last mile expertise with Atlas is innovative multi tried their last mile offering.
We believe that the bond offering will be well received by our customers.
The acquisition of Hi, crush will add 12 million tons to our production capacity.
Which consists of 5 million tons of dry sand production up there to comment mines and approximately 7 million tons.
Of wet sand production across our own core mines.
And so on pro forma Atlas will have approximately 21 million tons of dry sand production capacity and around 7 million tons of wet sand production capacity.
For a total of 28 million tons of overall production capacity.
This scale is unmatched in the Permian basin.
Bud Brigham: The merits of this acquisition are numerous. First and foremost, this transaction enhances our geographic footprint and customer base in the Midland Basin, logistically advantaging us to more Midland Basin operators, while also providing a complementary damp sand offering through the Encore MobileMind portfolio. This is a significant improvement in our ability to compete for work in a subset of the market in the Midland Basin. Similarly, there is little customer overlap between the two companies, and High Crush has very strong relationships with certain key operators in the Midland Basin.
The merits of this acquisition are numerous.
First and foremost this transaction enhances our geographic footprint and customer base in the Midland Basin.
Logistically abandoned chicken us to more Midland basin operators.
While also providing a complimentary damp sand offering through the oncor mobile mine portfolio.
This is a significant improvement in our ability to compete for work in a subset of the market in the Midland Basin.
Similarly, there is little customer overlap between the two companies and hi, crush has very strong relationships with certain key operators in the Midland Basin.
Bud Brigham: The broadening of our customer base as a result of the acquisition will be very beneficial, further aligning Atlas with more of the largest operators in the Permian. With the recent consolidation that has taken place in the Permian, size and scale have quickly become an absolute imperative to aptly service the development programs of these large-scale Permian operators and to help drive further efficiencies in the industry. We believe this acquisition pushes us to the forefront of the industry in that regard. This acquisition adds meaningfully to Atlas's competencies, product, and logistics offerings, and makes us a better organization as a whole, more fit to lead the industry from the front. Hycrush and Atlas are two of the lowest cost producers of profit in the Permian Basin.
The broadening of our customer base as a result of the acquisition will be very beneficial further aligning atlas with more of the largest operators in the Permian.
With the recent consolidation that has taken place in the Permian size and scale has quickly become an absolute imperative to actually service. The development programs of these large scale Permian operators and to help drive further efficiencies in the industry.
We believe the acquisition plus yourself to the forefront of the industry in that regard.
This acquisition adds meaningfully to atlas's competencies product and logistics offerings and makes us a better organization as a whole more fit to lead the industry from the front.
Atlas in Hi crush.
Two of the lowest cost producers of proppant in the Permian Basin.
Bud Brigham: This acquisition will provide us with valuable insights for optimization of our production and logistics strategies and methods to lower costs and enhance efficiency. High Crush has been one of the most innovative companies in sand and logistics, and our acquisition of its techniques, processes, and technologies should be exciting for our customers in the Permian. This transaction meaningfully increases the cash flow profile of Atlas Pro Forma for the acquisition and exhibits double-digit accretion across key share metrics. We expect to fully realize $20 million in annualized synergies by 2026. We now have a potential low-cost solution to increase volumes down the Dern Express, and we accomplish this without adding new supply to the market by absorbing high-precious Kermit operations, which sit about two miles from our plants at Kermit, where the Dune Express begins.
This acquisition will provide us with valuable insights for optimization of our production and logistics strategies and methods to lower costs and enhance efficiency.
Hi, crush has been one of the most innovative companies in sand and logistics and our acquisition of its techniques processes and technologies should be exciting to our customers in the Permian.
This transaction meaningfully increase since the cash flow profile of Atlas pro forma for the acquisition and exhibited double digit accretion across key share metrics.
We expect to fully realize $20 million in annualized synergies by 2026.
We now have a potential low cost solution to increase volumes down but didn't express and.
We accomplish this without adding new supply to the market.
By absorbing hi, crush is kind of mid operations, which stay at about two miles from our plants at Kermit weather Didnt Express begins.
Bud Brigham: Finally, with the acquisition of Pronghorn, we will have created the largest logistics and last mile service in the Permian, with the capacity to move more sand on a yearly basis than anyone else that we know of. The acquisition allows us to further leverage our logistics offerings with additional scale, which should also increase efficiencies. Ultimately, our skills should provide even greater growth opportunities with market share expectations that better align with our sand production share. In summary, 2024 is already set up to be a very exciting year for Atlas. First, we are just a few quarters away from the commencement of the Dune Express, which remains on time and on budget and which should have a very positive impact on our cash flows next year.
Finally, with the acquisition of Pronghorn, we will have created the largest logistics and last mile service in the Permian.
With the capacity to move more sand on a yearly basis than anyone else that we know well.
The acquisition allows us to further leverage our logistics offerings with additional scale.
It should also increase efficiencies.
Ultimately our scale should provide even greater growth opportunities with market share expectations that better align with our sand production share.
In summary.
2024 is already set up to be a very exciting year for us.
First we are just a few quarters away from the commencement of the different express which remains on time and on budget and what should have a very positive impact on our cash flows next year.
Second.
Bud Brigham: The highly accretive acquisition of High Crush provides our shareholders with greater visibility for 2024 and beyond due to the heavily contracted nature of our combined production and our more diverse customer base. And third, and partly as a result, Atlas is uniquely positioned to match up with the growing scale of our Permian Basin customers, such that we can uniquely provide the differentiated capacity and throughput, as well as the associated efficiencies and reliability that Permian Basin operators need. Our pro forma production capacity of over 28 million tons following the completion of the acquisition is easily the largest in the Permian and also makes us the largest prop manufacturer in North America. Furthermore, this production is nearly 80% contracted for 2024. I will now turn the call over to our president and CFO, John Turner. Thanks, Bud.
The highly accretive acquisition of Hi, crush provides our shareholders with greater visibility for 2024 and beyond due to the heavily contracted nature of our combined production and a more diverse customer base.
And third and partly as a result.
At least she Atlas is uniquely positioned to match up with the growing scale of our Permian basin customers.
Such that we can uniquely provide the differentiated capacity and throughput as well as the associated efficiencies and reliability the Permian operators need.
Our pro forma production capacity of over 28 million tons. Following the completion of acquisition is easily the largest in the Permian.
It also makes us the largest proppant manufacturer in North America.
Furthermore, this production is nearly 80% contracted for 2024.
I will now turn the call over to our President and CFO John Turner.
But and I also echo your enthusiasm for the <unk> acquisition.
John Turner: And I also echo your enthusiasm for the High Crest acquisition. In addition to providing more color on the transaction, I will also provide some initial commentary on our fourth quarter 2023 standalone results and provide some additional guidance on our outlook for 2024 post-acquisition. As Bud mentioned earlier, following the closing of the acquisition, on a combined basis, we'll have 28 million tons of annualized production capacity, increasing to about 29 million tons in 2025 with a full year's contribution and the benefit of these additional on-court appointments. The effective date of the transaction is February 29, 2024.
In addition to providing more color on the transaction I will also provide some initial commentary on our fourth quarter 2023, Standalone results and provide some initial guidance on our outlook for 2024 post acquisition.
As Bob mentioned earlier following the closing of the acquisition on a combined basis, we will have 28 million tons of annualized production capacity, increasing to about 29 million tons in 2025 with a full year's contribution and the benefit of these additional encore deployments.
The effective date of the transaction as of February 29, 2024.
John Turner: As our contracting volumes and permanent activity levels remain strong, and completion efficiencies continue to compound profit usage, we'd expect to continue to operate at greater than 85 to 90 percent utilization going forward. Taking into account high crush contracts, we expect our sand prices for 2024 to average between $26 and $28 a ton. Assuming just over three quarters of contribution from High Crush, we expect 2024 Adjusted EBITDA to range between $425 to $475 million. We expect total CapEx for 2024 to be between $335 and $360 million. This includes between $285 and $305 million in growth capex, consisting of $220 million for the construction of the Dune Express, between $25 and $45 million on Encore deployment, and another $40 million in other CapEx.
As our contracted volumes and Permian activity levels remained strong and completion efficiencies continue to compound profit usage, we'd expect to continue to operate at greater than 85 to 90, 90% utilization going forward. Thank.
Taking into account hi, crush is contracts, we expect our sand prices for 2024 to average between $26 and $28 a ton.
Assuming just over three quarters of contribution from Hi, crush, we expect 2024, adjusted EBITDA to range between $425 million to $475 million.
We expect total capex for 2024, it should be between 335 and $360 million.
This includes between 285 and $305 million in growth Capex, consisting of $220 million for the construction of the don't express.
I mean, 25 and $45 million on oncor deployments and another $40 million and other capex.
John Turner: We are forecasting maintenance capital expenditures for 2024 to be between $50 and $55 million. The $175 million equity component of the acquisition consideration consists of approximately $9.7 million of newly issued shares of our common stock, which amounts to just under 9% of our outstanding shares on a pro forma basis. The upfront cash portion of the consideration and the near-term capital expenditures of High Crush have been financed with a new $150 million acquisition term loan with Stonebriar Commercial Finance under an amendment to our existing credit facility, and with a draw of $50 million under our amended and upsized ABL facility. The $125 million in deferred cash consideration is secured by a seller's note, which bears interest at either 5% in cash or 7% when paid The maturity of a seller's note is in 2026 but can be paid off at any time prior to that without penalty. The interest rates are net set as of December 31st.
We are forecasting maintenance capex for 2020 for it to be between 50 and $55 million.
The $175 million equity component of the acquisition consideration consist of approximately $9 7 million newly issued shares of our common stock, which amounts to just under 9% of our outstanding shares on a pro forma basis.
The upfront cash portion of the consideration in the near term capital expenditures of Hi, crush had been financed with a new $150 million acquisition term loan with stone buyer commercial finance under an amendment to our existing credit facility.
With a draw at $50 million under our amended and Upsized ABL facility.
$125 million in deferred cash consideration is secured by our sellers.
Which bears interest at either 5% in cash or 7% when paid in kind at our option.
The maturity of the seller's note is in 2020 six but can be paid off at any time prior to that without penalty.
Our net debt as of December 31.
John Turner: In 2023, the pro forma for the acquisition and related financing is approximately $245 million, consisting of $505 million of debt plus $260 million of cash. We will have a modest 0.5 net leverage ratio at closing and plan to methodically pay down debt using a portion of our significant expected free cash flow while also returning capital to shareholders as we have done consistently in the past. Our acquisition of one of the leading profit suppliers in the Permian Basin greatly enhances our ability to increase shareholder returns. As Bud highlighted earlier, our anticipated enhanced cash flows from the acquisition support a 5% increase in our total dividend, which is now $0.21 per share, comprised of a $0.16 per share base dividend and a $0.05 per share variable dividend.
2023 pro forma for the acquisition and related financing is approximately $245 million consisting of $505 million of debt last $260 million of cash we.
We will have a modest five net leverage ratio at closing and plan to methodically pay down debt using a portion of our significant expected free cash flow. While also returning capital to shareholders as we have done consistently in the past.
Our acquisition of one of the leading proppant suppliers in the Permian basin greatly enhances our ability to increase shareholder returns.
As Bob highlighted earlier, our anticipated enhanced cash flows from the acquisition supports a 5% increase in our total dividend, which is now 21 per share comprised of a 16 cents per share base dividend and a five fit for sure variable dividend.
John Turner: Proforma Maintenance CapEx beyond 2024 is expected to be between $50 and $60 million annually, providing Atlas with multiple avenues to further increase shareholders' return once the remaining growth CapEx associated with the Den Express and additional Encore mines subsides. The heavily contracted nature of our operations post-acquisition reduces our cash flow volatility, and with the commissioning of the Dune Express, our ability to increase shareholding returns is strengthened by this transaction. Given the transaction structure, which includes an equity component and a deferred payment, our balance sheet and liquidity will remain healthy.
Pro forma maintenance Capex beyond 2024 is expected to be between 50 and $60 million annually, providing atlas with multiple avenues to further increase shareholder return, what's the remaining growth capex associated with the debt expressed in additional encore mind subsides.
The heavily contracted nature of our operations post acquisition reduces our cash flow volatility and with the commissioning of that Didnt Express our ability to increase shareholder strengthened by this transaction.
Given the transaction structure, which includes an equity component and a deferred payment our balance sheet and liquidity will remain healthy.
John Turner: The acquisition of Hypress sets Atlas up to thrive in tough market conditions and positions Atlas to deliver enhanced returns in a normalized environment. I will now turn my attention to our standalone fourth quarter and full year 2023 results. 2023 was a remarkable year.
Acquisition of Pie Crusts says to Atlas up to thrive in tough market conditions and positions Atlas to deliver enhanced returns in a normalized environment.
I will now turn my attention to our stand alone fourth quarter and full year 2023 results.
23 was a remarkable year, we sold 18 million shares and raised approximately $324 million in gross proceeds and our initial public offering in March.
John Turner: We sold 18 million shares and raised approximately $324 million in gross proceeds in our initial public offering in March. Accounting for our latest dividend amount, we will have paid out $146 million in total dividends and distributions to our investors since inception. We delivered full-year total company revenue of $614 million, an increase of 27% year-over-year. Total company adjusted EBITDA of $330 million, up 25% year-over-year. We achieved our first sand delivery with our assets in January, our first double trailer delivery in March, and our first triple trailer delivery in April. Our logistics revenue was $146 million, up 96% year-over-year.
Accounting for our latest dividend amount, we will have paid out $146 million in total dividends and distributions to our investors since inception, we.
We delivered full year total company revenue of $614 million, an increase of 27% year over year.
Total company adjusted EBITDA was $330 million up 25% year over year.
We achieved our first sand deliveries with our assets in January our first double trailer delivery in March and our first triple trailer delivery at April all.
Logistics revenue was $146 million up 96% year over year.
John Turner: We completed our new Kermit plant facility in December on time and on budget, increasing our standalone production capacity to 16 million tons, up from 10 million tons. In October, we announced a Corporate Reorganization Transaction, or UPC, simplification that enabled us to trade under a single class of common stock. 2024 will be another exciting year as we look forward to the integration of our new operations following the completion of the high-pressure acquisition, the completion of the Dune Express, and the arrival of our two new state-of-the-art dredges. For the fourth quarter of 2023, we reported total sales of $141 million. Our revenue from profit sales was $100 million. However, our profit sales volumes were down more than expected quarter over quarter to 2.6 million tons.
We completed our new carpet plant facility in December on time and on budget, increasing our standalone production capacity to 16 million tons up from 10 million tonnes.
In October we announced a corporate reorganization transaction or Hep C simplification that enabled us to trade under a single class of common stock.
24 will be another exciting year as we look forward to the integration of our new operations. Following the completion of the Hi crush acquisition. The completion of the <unk> Express and the arrival of our two new state of the art dredges or.
For the fourth quarter of 'twenty, three we reported total sales of $141 million or revenue from profit sales was $100 million, our proppant sales volumes were down more than expected quarter over quarter to $2 6 million tonnes aside.
John Turner: Aside from typical holiday and weather slowdowns, we saw our customers taking extended holiday breaks given budget exhaustion driven by efficiency. However, we have seen our customers return to normal activity levels in the first quarter of 44. Our average sales price for the fourth quarter was $39 per ton.
Aside from typical holiday and weather slowdowns, we saw our customers taking extended holiday breaks given budget exhaustion driven by efficiencies. However, we have seen our customers return to normal activity levels in the first quarter of <unk> 44.
Our average sales price for the fourth quarter was $39 per ton moving the service sales, which is revenue generated by our logistics operation, we reported $41 million in revenues for the quarter.
John Turner: Moving to service sales, which is revenue generated by our logistics operation, we reported $41 million in revenues for the quarter. As of February 1st, we have taken delivery of all 120 trucks, which is up from 27 trucks from our third quarter update. In total, cost of sales excluding DDNA for the quarter decreased $5 million to $67 million.
As of February 1st we have taken delivery of all 120 trucks, which is up from 27 trucks from our third quarter update.
Total cost of sales, excluding DD&A for the quarter decreased $5 million to $67 million.
John Turner: For the fourth quarter, our per ton plant operating costs were $10.63 per ton, which is above the prior period driven by lower volume. Furthermore, we expect the delivery of our new specialized dredging equipment in early 2024 to provide incremental improvements in operational performance and further reductions in our mining costs once these assets are fully commissioned by the middle of this year. We're up in expenses for the quarter. We're down 17% to $3 million, due again to lower volume. SG&A expense for the quarter was $14 million. Gross Interest Expense for the quarter was $5 million, which was offset by $3 million of interest income generated during the period, resulting in net interest expense of $2 million.
For the fourth quarter, our parts on plant operating costs were $10 63 per ton.
Which is above the prior period driven by lower volumes.
Further we expect the delivery of our new specialized dredging equipment in early 2024 to provide incremental improvements in operational performance and further reductions in our mining costs. Once these assets are fully commissioned by the middle of this year.
Royalty expenses for the quarter were down 17% to $3 million.
Due again to lower volumes.
SG&A expense for the quarter was $14 million gross interest expense for the quarter was $5 million, which was offset by $3 million of interest income generated during the period, resulting in net interest.
John Turner: We expect our interest income to decline in future quarters as we draw down on our cash reserves to a normalized level as we complete our growth file. Appreciation, depletion, and accretion expense for the quarter was $12 million. We generated net income of $36 million for the quarter, representing a strong net income margin of 26% and earnings per share of 36 cents. Net cash provided by operating activities for the quarter was $86 million compared to $55 million during the third quarter.
We expect our interest income to decline in future quarters, as we draw down on our cash reserves. So the normalized level as we complete our growth projects.
Depreciation depletion and accretion expense for the quarter was $12 million.
We generated net income of $36 million for the quarter, representing a strong net income margin of 26% and earnings per share of 36 cents.
Net cash provided by operating activities for the quarter was $86 million compared to $55 million during the third quarter adjusted.
Bud Brigham: Adjusted EVADOP for the period was $69 million, representing a sequential decrease of 18% and an adjusted EVADOP margin of 49%. Adjusted free cash flow, which we define as adjusted EBITDA, plus maintenance capex for the quarter was $57 million, representing a sequential decrease of 18% and an adjusted free cash flow margin of 40%. Lastly, we spent a total of $106 million on growth projects in the fourth quarter, which included our new Kermit facility, the Dune Express, our well site delivery assets, and production enhancement at our existing facilities. We incurred $12 million of maintenance capital expenditure during the quarter. With that, I will now turn the call back over to Bud. The near-term merits of this acquisition are easy to see, but the real value will be created over the next five years, as the entire basin will benefit from a larger, more innovative, and more reliable profit and logistics provider. We will have the ability to supply incremental sand in a tight market similar to the first half of 2023 and adjust production in periods of low activity, creating a more stable market for our investors and our customers.
Adjusted EBITDA for the period was $69 million, representing a sequential decrease of 18% and an adjusted EBITDA margin of 49%.
Adjusted free cash flow, which we define as adjusted EBITDA less maintenance capex for the quarter was $57 million, representing a sequential decrease of 18% and adjusted free cash flow margin of 40%. Lastly, we spent a total of $106 million on growth projects in the fourth quarter, which includes our new carpet.
Saudi don't express, our well site delivery asset and production enhancement of our existing facilities, we incurred $12 million of maintenance capex during the quarter.
With that I will now turn the call back over to Beth.
The beer term merits of this acquisition are easy to see but the real value will be created over the next five years, that's the entire base and will benefit from a larger more innovative and more reliable proppant and logistics provider.
We will have the ability to supply incremental sand in a tight market.
Similar to the first half of 2023 and adjust production in periods of low activity create.
Creating a more stable market for our investors and our customers.
Bud Brigham: Since our inception, Atlas has looked for ways to bring profit closer to the well site in order to lower costs and reduce traffic on public roads. We are innovators and disruptors. And with this acquisition, we're even better positioned to deliver further innovations and advancements to the most prolific shale basin in the world. That concludes our prepared remarks, and we will now let the operator open the line for questions.
Since our inception Atlas is look for ways to bring proppant closer to the well site.
What are the lower costs and reduced traffic on public roads.
We are innovators and disruptors.
And with this acquisition, we are even better positioned to deliver further innovations and advancements to the most prolific shale basin in the world.
That concludes our prepared remarks, and well now I'll, let the operator open the line for questions.
Operator: Thank you all for joining us on our fourth quarter call. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue, for participants using speaker equipment.
Thank you all for joining us on our fourth quarter call.
At this time well be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
Centumvir indicate your line is in the question queue. You May press star two if he would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys. Please ask one question and one follow up question and re queue for additional questions.
Operator: It may be necessary to pick up your handset before pressing the start button. Please ask one question and one follow-up question and re-queue for additional questions. Our first question is from Don Crist with Johnson Rice.
Our first question is from Don Crist with Johnson Rice. Please proceed.
Don Crist: Morning, gentlemen. You know, I think most of us were pretty surprised by the announcement this morning. But after kind of looking, stepping back and looking at it, the proximity of the current minds and the addition of the wet sand, mobile minds makes a lot of sense. But in your eyes, how does this make Atlas a better company going forward, not only for 24, but you know, 25 and 26 and beyond? Well, thank you.
Good morning, gentlemen.
I think most of us were pretty surprised with the with the announcement this morning, but I'm kind of looking at stepping back and looking at the proximity of the comic minds and the addition of the wet sand mobile mind makes a lot of sense.
In your eyes, how does this make Atlas a better company going forward not only for 'twenty four, but you know 25 and 26 and beyond.
Well thank you.
Bud Brigham: And I will start with that. And John may want to add to it. But you're right.
I will start.
With that and John May want to add to it but but you're right.
Bud Brigham: We've talked about the fact that it's been a high bar for us given our differentiated margins and associated with that low cost structure. But this deal is really special, as you touched on two things. One, an extremely complementary asset base. It's really a one plus one equals three transaction.
We've talked about the fact that it's a it's been a high bar for our for us given our.
Differentiated margins.
Associated with that low cost structure, but this deal is really special.
Touched on.
Two things one extremely complementary asset base.
That's it's really a one plus one equals three.
<unk> action.
Bud Brigham: That combined with the fact guys like us have been the leading innovators, and so we share similar cultures and values, an innovative entrepreneurial environment. So it is going to be more apparent how powerful those synergies play out over the next five years. A couple more specifics.
That combined with the fact these guys like us have been the leading innovators and so we share similar cultures and values.
Entrepreneurial environment. So so it is going to be more apparent how powerful those synergies play out or does it become more evident over the next five years, a couple more specifics in and you've heard us say this over and over that scale is really important I mean operators are demonstrating that.
Bud Brigham: And you've heard us say this over and over that scale is really important. I mean, operators are demonstrating that scale gives you the opportunity to drop down costs, drive up margins, and increase automation. And we need to match up with that. And on profit, it's about throughput and reliability associated with that scale. This gives us more redundancy in the field, more options for the operator so that we can de-bottleneck sand. As we had said, you know, and that ties in with logistics. We want to be logistically advantageous to every single operator in the Permian.
Scale gives you the opportunity to drive down costs drive up margins increase automation.
And we need to match up with that and on proppant, it's about throughput and reliability associated with that scale. This gives us more redundancy in the field more options for the operator, so that we can debottleneck sand.
We had said that it tells him with logistics, we wanted to be logistically advantaged to every single operator in the Permian.
Bud Brigham: This is a big step forward for us in that regard, particularly in the Midland Basin. Associated with that, it's really a complementary customer base because it brings logistically advantaged assets and logistics to the Midland Basin. It brings complementary customers into our portfolio. So that's beneficial to our shareholders. And lastly, John may want to add to this.
So this is a big step forward for us in that regard, particularly in the Midland Basin.
Associated with that it's really a complementary customer base, because because it brings logistically advantaged assets and and logistics in the Midland Basin. It brings complementary customers into our portfolio. So so that's beneficial to our shareholders and and and and last in.
John May want to add to this I mean, this is a very accretive transaction.
Bud Brigham: I mean, this is a very accretive transaction, even before, you know, all the synergies and application of best practices on our respective assets. And so we believe, over time, it's really going to help us to accelerate returning capital to our shareholders. John, do you want to add anything?
Before.
All the synergies and application of best practices on our respective assets and so we believe over time, it's really going to help us to accelerate.
Returning capital to our shareholders John do you want to add anything yet I mean, Dan when we looked at this looked at the acquisition we needed something that was going to meet both our financial and operational goals.
John Turner: Yeah, I mean, Don, when we looked at this, looked at the acquisition, you know, we needed something that was going to meet both our financial and operational goals. You know, like Bud said, it's very complementary on the operational side to what our goals are and what we want to accomplish. You know, on the logistics front, Atlas has quietly become one of the leading logistics providers in the Permian. But when you look at what Pronghorn has as well, they are one of the largest logistics providers in the Permian. So when you look at that, you know, on day one, you're going to have the largest logistics, standard logistics, crack sand provider in the Permian. So, you know, it met on the operational side; there were other things that met.
It's very complementary on that on the on the operational side.
You know what our goals are and what we want to accomplish one is on the logistics front.
Atlas has quietly become one of the leading logistics providers in the Permian, but when you look at what pronghorn has as well they have they are one of the largest logistics providers pardon me so.
When you look at that on day, one youre going to have the largest logistics of sand and logistics.
Frac sand provider in the Permian.
It met on the operational side, there are other things that Matt.
John Turner: And like Bud said, it expands our footprint into the Midland Basin, where we'll have more sand, logistically advantaged, located near well sites. And then also on the Dune Express, I mean, obviously, that there have been some questions about our plant capabilities and, you know, the ability to produce 13 million tons. I mean, the proximity of their termite mines will be very complementary to what's going to happen with the Dune Express.
It expands our footprint into the Midland Basin.
You know, we will have more sand on logistically advantaged located to well sites and then also on that Didnt Express I mean.
Obviously.
There's been some questions about our plant capabilities.
And the.
<unk> to produce 13 million tonnes I mean, the proximity of their term at mines.
Well it will be very complimentary to what's going to happen with the dent expressed and as we as we get the data express up and launched and then also operationally on Opex side, I mean, we're going to.
John Turner: And as we get the Dune Express up and launched, and then also, you know, operationally on the OPEX side, I mean, obviously, there's going to be a lot of synergies on that side. And then on the financial side, I mean, this meets our goals as a company. I mean, it's a very high return rate of return project, internal rate of return project, you know, less than a three-year payback, you know, on heavily contracted volumes. You know, it's going to support any acquisition or anything that we do, any investment that we make in the future, whether it be this one or any other one is going to have to really support our return profile, which includes a significant return of cash to shareholders through And so, you know, this one really supports that.
Obviously, there's going to be a lot of synergies on that side and then on the financial side. I mean this this met our goals as a company. It's a very high return rate of return fraud internal rate of return projects less than a three year payback.
On heavily contracted volumes.
It's got to support any acquisition or anything that we did any investment that we make in the future.
And the other one is going to have to really support our rich. Our return profile that includes a significant return of cash to shareholders through dividends and so you know this one really supports that so looking I mean overall over time it means a larger company.
Don Crist: So, look, and I mean, over time, the larger company, you know, reducing our cost to produce is going to, you know, we're still going to have the leading margins in the industry. And I mean, across all the oil service companies today. So, you know, we think it supports us, our future as a company going forward, our goals, and then also that for our shareholders. I hope that helps, Don.
Well, we don't reduce our cost to produce is going to we're still going to have the leading margins in the industry and across all the oilfield service space.
So yeah, we think that supports us our future as a comp.
Going forward our goals and then also that for our shareholders hope that helps Dan.
Don Crist: Yeah, and just one kind of semi-related follow-up, you know, as you were bringing in the electric dredges this year, we had, as you know, the analysts had your cost coming down quite a bit for 2024. As you roll in the high crush assets, I don't know what their operational costs are today to produce. Can you give us a little bit of guidance around that?
Yeah, and just one kind of semi related follow up you know as you were bringing in the electric dredges. This year, we had as you know.
The analyst and your costs coming down quite a bit.
For 2024 as you roll in the Hi, crush assets I don't know what their operating operational costs started today to produce can you give us a little bit of guidance around that this is going to increase that you know what we had previously.
John Turner: And is this going to increase that, you know, what we had? You know, um... Back in 21, we were at 650 a ton on our when we had 100% dredge feed into our, in our mining process, those numbers come up to 1030 as we increase production, and our dredges couldn't keep up, you know, these two new dredges that that one is already being commissioned out there. And other ones are arriving here shortly. Now, once we get those dredges incorporated into our mining operation, you know, we're expecting our cost is our long-term mining cost is going to be down in the, say, mid sevens, say, mid seventies dollars per ton. That's just for mining, you know, on high crush, you know, their OPEX in 23 was just over $11 a ton. Obviously, that's higher than our seven.
You know.
And back in 'twenty, one we were at $6 50, a ton on our when we had 100% dredge feed into our mining process.
That number has come up too.
And third as we increased production in our drug just couldnt keep up these two new graduate that one has already been commissioned out there in other words there are a lot of it here. Shortly once we get those dredge is incorporated into our mining operation you know we're expecting our cost is our long term mining cost is going to be down in the.
Hey, Mitch.
Mid sevens.
Dollars per ton, that's just for mining.
At Hi, crush you know their opex in 'twenty three.
Just over $11 a ton obviously, that's higher than our seven but we do think theres going to be that way.
John Turner: But we do think there's going to be that we're, I mean, we are optimistic that we're going to be able to get this number down over time, you know, for the future, based on the combined synergies that we've identified through some modeling so far. I mean, we think in 2024, we're going to be around $9 a ton. And then once we've identified the synergies, I mean, there's probably going to be other synergies that we're going to be able to accomplish. So over time, we think we're going to be able to get their cost, the entire company's cost down to around $7 a ton. So when you look at it, I think overall, I didn't incorporate any sort of synergies from GNA or maintenance capex there.
We are optimistic that we're going to be able to get this number down over time.
For the teacher is the combined synergies that we've identified some modeling so far I mean, we've taken.
<unk> 'twenty or we're going to be around $9 a ton and then.
Once we and Thats on the identified synergies I mean, that's probably going to be other synergies that we're going to be able to accomplish and over time, we think we're going to be able to get their cost.
Tire companies cost down to around $7 a ton. So when you look at it I think overall I didn't incorporate any sort of synergies from G&A or maintenance Capex. There I think those costs are going to come down to over time, I think it's going to actually be we're going to be producing stand at a lower cost per ton than we would as a standalone.
John Turner: I think those costs are going to come down. So over time, I think it's going to actually be, we're going to be producing sand at a lower cost per ton than we would as a standalone. I appreciate all the answers; I'll turn it back.
I appreciate all the answers I'll turn it back.
Don Crist: You're welcome. Our next question is from Luke Lemoine with Piper Sandler, please. Hey, good morning.
Youre welcome.
Our next question is from Luke Lemoine with Piper Sandler. Please proceed.
Hey, good morning.
Luke Lemoine: Sean, you kind of loosely alluded to it this morning. But when you're at your current facility, you can see the two high pressure mines right next door. Do you just talk about any plans to tie this into the Dune Express and then you kind of hit on it earlier as well, but then your ability to convert the high crush mine? to dredging from yellow iron.
Sean He's done it loosely alluded to good morning. When you were at your current facility you can see the two hi crush mines right next door.
Can you just talk about any plans to tie this into doing express and then you kind of hit on it earlier as well, but then your ability to convert the hi crush mines.
To dredging from yellow iron.
John Turner: Yeah, that's something, Luke, that we can definitely, like you said, the proximity of those mines is within two miles of our permit mine. You know, that's something that, you know, we haven't fully vetted on what the cost would be, but, you know, it's something that we definitely think will be synergistic from the Dune Express point of view. Obviously, you know, connecting a mine or two mines via a conveyor is going to be less expensive than building, you know, bringing out an additional five to six million tons of capacity.
Yeah, that's something that we can definitely.
Like you said I mean, the proximity of those mines are within two miles of our Kermit mine.
That's something that we haven't fully vetted on what the cost would be but it's something that we definitely think we'll be a synergistic from that Didnt Express point of view.
Yeah, obviously.
Connecting our mind are two minds.
Conveyor is going to be it's going to be less expensive than building, bringing out an additional five to 6 million tons of capacity. So yeah, we obviously see significant.
John Turner: So, yeah, we obviously see significant cost savings there. On the dredging front, that is something that we are investigating. You know, we haven't fully evaluated that, but that's something that we're definitely looking at. And, you know, I do think that, you know, we are going to have an extra dredge here at some point pretty soon, and that's something we may run over there and see if we can then start dredge mining over on their location. They definitely do have water, like we do.
Cost savings there on the dragging front I.
That is something that we are we are we are investigating.
We haven't.
Fully.
We're evaluating that but that's something that we're definitely looking at and I do think that.
We are going to have an extra extra extra drag here at some point here pretty soon and that's something we may.
We may run over there and see if we could see if we can see if we can start to raise money or on their location. They definitely do have water.
John Turner: We just have to figure out, you know, how we're going to, if it's going to work. And, you know, but then there are other things that we may be able to do if we can't fully dredge the mine over there. I mean, the other thing is the dredges that we have arriving on location are going to be, they're going to be able to provide a significant amount of feed into our current mines. You know, there may be ways that we could even feed those dredges up to their mines and then, you know, feed their processes with these dredges as well. So, I guess what I want to say is there's just a lot of things, a lot of opportunity here, a lot of optionality that, you know, we don't have a full handle on, but that's something that we're definitely going to be looking at over here as we progress forward. And then on the Encore mobile mini mines, can you just talk about your opportunity and comfort with wet sand, you know, and maybe, if you see some opportunity, just kind of improve the output. Yeah, this, but I might just start, but John will probably add to it.
Like we did we just have to figure out.
How we're going to if it's going to work and you know, but then theres other things that we may be able to do if we can't fully dredge mind over there I mean, the other thing is as the dredges that we had arriving on location are going to be they're going to be able to provide a significant amount of feed into our into our current mice. There may be ways that we could even be.
Those stretches out over to therapy to their to their minds.
And then feed their process will be stretchers as well so there's a.
I guess, what I want to say is there's just a lot of a lot of things a lot of opportunity here a lot of optionality.
We don't have a full handle on but that's something that we're definitely going to be looking at over here as we as we progress forward.
Okay, and then on the Encore mobile mini mines can you just talk about your opportunity in comfort with wet sand in our mining operations and maybe you can see some opportunities just kind of improve the operations as well.
Yes, but I'm not just start with John John I'll, probably add to it.
Bud Brigham: You know, I think some of you probably heard us early on; we were concerned about the challenges associated with wet sand. And obviously, we've been sold out of dry sand. So, you know, we weren't particularly motivated to move that direction.
You know I think.
Some of you probably heard US early on we were concerned about the challenges associated with wet sand.
And obviously, we've been sold out of dry sand.
So, we werent, particularly motivated to move that direction.
Bud Brigham: It's really a credit to High Crush and their team and again, their culture, their innovative culture, that they've really solved those challenges and are doing a great job with the wet sand. So that, combined with the fact that it's logistically advantaged to operators there over on the east side of the Midland Basin, particularly makes it compelling. And again, credit to those guys, and it's very complementary to what we're doing. John, do you want to add anything to that?
It's really a credit to hi, crush and their team and again their culture their antibody to a culture that they.
Really solve those challenges and doing a great job with the wet sand.
So that's that's combined with.
It's the fact that it's logistically advantaged to operators there over in the east side of the Midland Basin, particularly.
Made it made it compelling and again its credit with those guys and it's very complementary to what we're doing John do you want to add to that.
Bud Brigham: Yeah, I mean, you know, we I do think that I agree with that. I think the High Crush team has done an amazing job on the wet sand front, and I think that and on the logistic side as well. I think that, you know, we're going to as a company, what we're going to do is, you know, we're going to come together and we're going to bring in the best ideas and see if there's anything that they're doing that we can apply within, you know, in our operations, and we're also going to do the same thing or the things that we can do at their operations, like, I said, So I definitely think there's going to be some opportunity there as well. Okay, thanks a bunch and congrats on the deal.
I do think that I agree with but I think the hi crush team has done an amazing job on the wet sand front, I think and on the logistics side as well I think that we're going to as a company what we're going to do.
We're going to come together and we're going to bring in the best ideas and see if theres anything that they're doing that we can apply it in within our operations and we're also going to do the same thing or are there things that we can do at there.
Operations like I said, they're all core mines that we're doing.
Ocean automation and things like that incorporate that yes, I definitely think theres going to be some.
Some opportunity there as well.
Okay.
Congrats on the deal.
Luke Lemoine: Thank you. Our next question is from Jim Rolison with Raymond James. Hey, good morning, guys, and congrats on the transaction. John, maybe you could split out just, you know, obviously, you guys break out the sand side from the logistics side, the way you report financials. Maybe just, I know we don't have all the financial details yet because it's not closed, but I'd love to get just kind of a rough split of maybe revenues and EBITDA from High Crush between their actual Hey, I'm gonna let Brian answer that. Yeah, Jim, it's pretty close to 50-50.
Thank you.
Our next question is from Jim Rollyson with Raymond James. Please proceed.
Hey, good morning, guys and congrats on the on the transaction.
John maybe can you split out just you know obviously you guys breakout the sand side from the logistics side. The way you report financials, maybe just I know, we don't have all the financial details yet because it's not closed but I'd love to get just kind of a rough split of maybe revenues and EBITDA from hi, crush between their actual sand operations versus build.
Logistics, so we can kind.
Kind of think about that from a modeling perspective.
Okay.
Hey, I'm going to let Brian answer that Jim is it it's it's pretty close to 50 50, and they're also very heavily.
Brian: They're also, you know, very heavily weighted in the logistics business, like us. And do you think, Brian, margin wise, is there a logistics business somewhere running close to what you guys have been doing historically? Just kind of trying to ferret that part out to get to the 110 to 125 range of guidance. Yeah, very similar.
Heavily weighted in the logistics business like us.
And do you think Brian margin wise as their logistics business somewhere running close to what you guys have been doing historically.
Just kind of trying to stare at that part out to get to the 1% to 125 of guidance.
Yeah, very similar obviously, we've got a change coming up with the express two to expand our margins, but historically, it's pretty simple.
Brian: Obviously, we've got a change coming up with the Dune Express to expand margins, but historically, it's pretty simple. Yeah, you know, I might add just kind of thematically to help you think about the logistics when you think about, and we talked about this as we were at a conference recently, and the fact that, historically, you know, off x 70% of off x has been labor, you know, man in the sea. And when you look at what we're doing with the Dune Express, we're completely eliminating the man in the sea for that 42 mile haul into the most prolific producing province in the country. They're in the center of the Delaware, in the northern Delaware Basin.
You know I might add just kind of thematic.
Semantically to help you think about the logistics when you when you think about we talked about this at their.
Conference recently, and the fact that historically opex.
70% of Opex has been labor man and the sea and when you look at what we're doing with.
What theyre doing in express.
We're completely eliminating the band in the seat for that 42 mile haul into the most prolific producing province in the country they are into the.
The center of the Delaware, Northern Delaware Basin.
Bud Brigham: And then we've got the last mile from there. But then you look at it so that that's going to be a real leapfrog forward in terms of, obviously, in terms of cost structure and margin capture for us, and we'll be added to 25. And then on top of that, you look at what we're doing with high capacity trucking, double, triple trailering, significantly reducing the cost per ton delivered with that. And then, similarly, in the Midland Basin, what high crush has been doing with the proximal encore mines, taking trucks off the road and reducing drive time.
And then we've got last mile from there, but then you look at so that's going to be real leap forward in terms of obviously in terms of you know.
Cost structure and margin capture for us and will be additive to <unk> 25, and then on top of that you look what we're doing with the higher capacity trucking double triple trial.
Significantly reducing the cost.
Per ton delivered with that and then similarly in the Midland Basin, what hi, crush has been doing with the proximal.
Encore mines, taking trucks off the road and reducing.
Drive time, so so there's real exciting when do you think about over time, what we're gonna be able to do to really.
Bud Brigham: So, it's really exciting when you think about over time what we're going to be able to do to really change the logistics business and really move it more towards when you look at the Dune Express, it really is a midstream enterprise. And so the margin impact over time is really going to be exciting as you go forward. And you look at the margins of this company; we have slide 14 in the investor deck that shows, I mean, nobody has enjoyed the margins that we do.
To change the logistics business and really move that more towards when do you like it or Didnt Express it really is a midstream enterprise and so the margin impact over time is really going to be exciting.
As you go forward in and you look at the margins of this company we have a slide slide 14 in the investor deck that shows.
Nobody has enjoys the margins that we do and and we tried to about half the multiple.
Jim Rolison: And we traded about half the multiple of those companies that approach us, even on the margins. So it's really exciting as you roll forward with this company, at this scale and with the complementary assets we're adding and the innovative culture, we're going to be able to further drop down our cost structure and boost our margins, which are already at very exciting levels. I don't know if you guys want to add to that, but yeah, I think that's well covered. Thanks for that color, bud.
Of those companies approach us even on the margins. So so it's really exciting as you as you roll forward with this company with this scale and with the complementary assets, we're adding an antibody to culture.
We're going to be able to further drive down our cost structure and drop our margins, which are already at very exciting levels of natural gas when I add to that but I think that's it. Thank you.
It's well covered it.
Thanks for that color Budd and then John last thing just on the 26 to $28 a ton.
John Turner: And then John, last thing, just on the 26 to $28 a ton, kind of full year pricing, maybe a little color, you know. We sat here a quarter ago, you guys were kind of talking about the market being in the, you know, mid upper 20s to low 30s. And you were still, you know, about 40% contracted; obviously, on a combined basis, you guys are 80% contracted; maybe some color on how the high crush contracting weights on that versus just new, you know, where the market's been with the weak market we've had going into the back half of the fourth quarter, just kind of how you ended up at this range versus where we had been historically. Yeah, the High Crush was, they had a contract profile, but they were heavily contracted there at a lower price than what we were contracted at. So really, what you're seeing there is an adjustment that is reflective of where their contract position is. I'd say that they're almost 100% contracted on their 24 volumes.
Full year pricing, maybe a little color.
Here a quarter ago, you guys were kind of talking market was in the <unk>.
Mid upper Twenty's to low thirties, and you were still about 40% contracted obviously on a combined basis you guys are 80% contracted maybe how some color on how the hi crush contracting weighed on that versus just knew where the market's bandwidth of weak market we've had.
Back half of the fourth quarter, just kind of how how you ended up at this range versus where we had been historically.
Yeah, Hi crush.
Hi, crush was they have a contract profile that they were heavily contracted there at a more a lower price than what we were contracted at so really what youre seeing there.
Excellent.
Is it reflective of what their where their contract position as you know there I would say that they are almost 100% contracted on their 24 volumes.
And.
And it said, it's at a lower price than where we were where our contract profile is.
Jim Rolison: And it's at a lower price than where we were, where our contract profile is. Got it. Thanks, guys. Thank you. Our next question is from Sean Mitchell with Daniel Energy Partners. Good morning, guys.
Got it thanks guys.
Yeah.
Our next question is from Sean Mitchell with Daniel and their key partners. Please proceed.
Sean Mitchell: Congratulations on the deal, but I think you addressed this a little bit in your opening comments, but can you just talk a little bit about customer overlap, in particular in Kermit, maybe or in Delaware, because obviously the Midland is somewhat new, but what's the overlap and the customer mix here in Kermit? Well, there's not much. It's very complementary in terms of customers. John, I don't know if there's any specific...
Good morning, guys. Congrats on the deal, but I think you addressed this a little bit in your opening comments, but can you just talk a little bit about customer overlap in.
In particular, and Kermit, maybe or in the Delaware, because obviously, the Midland it's somewhat new but what's the overlap in the customer mix here and can't comment.
Well, there's not much.
It's very complementary in terms of customers John I don't know if there's any specific I mean, the fact that there.
Bud Brigham: I mean, the fact that their assets are weighted towards the Midland Basin, and their logistics are weighted towards the Midland Basin, and our logistics, what we've been doing, of course, with the Dune Express and the high-capacity trucking, has really had more impact in the Delaware Basin. So it's kind of been natural, organic, that we have very complementary customer bases. We've been logistically challenged on the far eastern side of the Midland Basin, given the distances to move our profits over there.
Assets are weighted towards the Midland Basin and then.
Logistics is weighted towards the Midland Basin and all it just is what we've been doing of course, what they are doing express in a high capacity trucking has really had more impact on the Delaware basin. So it's kind of been natural organic that we had very complementary customer bases.
Been logistically challenged on the on the far eastern side of the Midland Basin given.
The distances.
Our proppant over there.
Bud Brigham: So it's very beneficial in that regard. Yeah, I mean, like Bud said, I think there's very little overlap. Obviously, some of the largest, most of the largest produce operators in the Permian Basin, you know. I think, you know, they, iGras has done a great job with those customers. And, you know, and those customers value those relationships, just like ours do. And we look forward to, you know, maintaining those relationships going forward and serving those customers. Our entire top-tier customer base looks forward to serving them going forward. I mean, I think part of it is, you know, logistics is so key to your profit sales. And so, it's been natural that even their permit plant has been more weighted to the Midland Basin because that's where their logistics assets are. And we dominate Delaware because our logistic assets are second to none in the state.
So it's just it's a very.
It's very beneficial in that regard.
Like Bob said I think it's there's very little overlap obviously some of the largest.
Most of the largest operators in the Permian basin.
I think <unk> done.
<unk> done a great job with those customers in.
And they those customers value those relationships, just like ours too and we look forward to it.
Maintaining those relationships going forward and certainly those customers our entire top tier customer base look forward to serving that are going forward.
I think part of it is.
Logistics is so key to your to your proppant sales and so it's been natural that even though the Kermit plant.
More weighted to the Midland basin, because that's where the logistics assets are and we dominate the Delaware because all our logistic assets are second to none in the Delaware. So it's it's really worked out well and very complementary.
Sean Mitchell: So it's really worked out well and is very complementary. Bud or John, as you look at the combined assets or the assets of the combined company, where do you guys see maybe an opportunity for growth? I mean, where are you most excited about in terms of silos, boxes, more trailers, and mobile mines? What are you most excited about when you look at the combined assets? Maybe I'll just make a general comment. John may have some specifics.
But John as you look at the combined assets.
Are the assets of the combined company, where do you guys see maybe an opportunity for growth I mean, where are you. Most excited about in terms of silos boxes more trailers mobile mines.
What are you most excited about when you look at the combined assets.
Maybe I'll just make a general comment John May have some specifics.
Bud Brigham: I mean, I just think it's really exciting where Atlas is positioned, particularly after this transaction, that this basin and the oiling of the shale have been a significant evolution. In my view, we're in the mid, early, mid-innings of this evolution to more of a factory-type operation. And so, it's all about scale, and you're seeing that on the operator side. And on the service side, we're uniquely positioned with the scale of logistics and profit to match the scale of the operator. So, there are going to be a lot of opportunities associated with this distribution network to make operators' jobs easier and to eliminate the bottlenecks, particularly on sand in the blender. And we're uniquely positioned to do that. So, I just think we're going to have a lot of opportunities to grow other green shoots that we can't even imagine right now.
I mean I.
It gets really exciting where atlas's position, particularly after this transaction that that debt.
Space and in the all the shale is.
But a significant evolution that might be worth.
The only mitigating some of this evolution to a more more of a factory type operation and so its all about scale and you're seeing that on the operator side and on the service side, we're uniquely positioned with our scale on logistics.
And proppant to match the scale of the operators. So there are going to be a lot of opportunities associated with this distribution network.
To make operators jobs easier and to eliminate the bottlenecks, particularly on <unk>.
Sand into the Blender and we're uniquely positioned to do that so I'll just like we're going to have a lot of opportunities to to to grow other green shoots that we can't even imagine right now John do you want to add.
Bud Brigham: John, do you want to add to that? Yeah, you know, I mean, nothing in particular other than these two companies have been really the only ones that have been investing in the fractional logistics space, you know, significantly. And, you know, as of today, I mean, I don't, we can't necessarily tell you where the future road's going to be.
Nothing in particular, rather than you know.
These two companies have been I've been really the only ones that have been investing in the frac sand and logistics space.
Significantly.
As of today, I mean, I don't we can't necessarily tell you where the future growth is going to be but I think what I can assure you is that we're going to continue making those investments working with our partners our operating partners.
John Turner: But I can assure you that we're going to continue making those investments, working with our partners, operating partners, to make sure that efficiencies on well size continue to improve. And overall, you know, fractionate intensity is going to continue to increase. But I've mentioned that on this call, you know, we're going to be looking at opportunities to help our customers increase that intensity. And Sean, real quick, you talked about growth.
Just to make sure that.
Patient sees all well sized continue.
To improve it.
Overall prostate intensity is going to continue to increase that I've mentioned that on as well on this tour. This fall.
Going to be looking at opportunities to help our customers.
Increased that intensity and Sean real quick you talked about growth I think one thing we're excited about its growth in distributions, which this acquisition certainly enhances that so.
Bud Brigham: I think one thing we're excited about is growth and distribution, which this acquisition certainly enhances. So, absolutely.
Absolutely.
Sean Mitchell: Well, guys, thanks for the time and congrats again on the deal. Thank you; I really appreciate it. We have reached the end of our question and answer session. I would like to turn the conference back over to management for closing comments. Yeah, we want to thank everybody for joining us on this call. This is an exciting and really transformational event in our company's history. We really look forward to following up in subsequent quarters.
Guys. Thanks for the time and congrats again on the deal.
Thank you really appreciate it.
We have reached the end of our question and answer session I would like to turn the conference back over to management for closing comments.
Yes, we want to thank everybody for joining us for this call.
This is an exciting and really transformational.
In our company's history.
We really look forward to following up in subsequent quarters. So thank you all very much and thanks guys.
Bud Brigham: So, thank you all very much. Thank you. This does conclude today's conference. Thank you for your participation. You may now disconnect.
Thank you. This does conclude today's conference. Thank you for your participation you may now disconnect.
Yeah.
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Yeah.
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