Atlas Energy Solutions (US:AESI)2024-08-06 20:49Acquisition and Integration - The company completed the acquisition of Hi-Crush Inc. for a total consideration of $455.8 million on March 5, 2024[205]. - The company is focused on integrating the Hi-Crush business to enhance its operational capabilities and market position[196]. - The Hi-Crush acquisition on March 5, 2024, involved cash consideration of $140.1 million and 9.7 million shares of common stock[244]. Production and Capacity - As of June 30, 2024, the company's combined annual production capacity is approximately 28 million tons of proppant[200]. - The company’s proppant production and processing facilities are located entirely in Texas within the Permian Basin[200]. - The company operates a logistics platform to enhance efficiency and sustainability in the Permian Basin, including the Dune Express project currently under construction[201]. Financial Performance - Net income for Q2 2024 was $14,837,000, a decrease of 79.1% compared to $71,211,000 in Q2 2023[237]. - Adjusted EBITDA for Q2 2024 was $72,045,000, down 22.5% from $92,846,000 in Q2 2023[239]. - Adjusted Free Cash Flow for Q2 2024 was $66,627,000, a decline of 23.2% from $86,821,000 in Q2 2023[238]. - Total sales reached $287.5 million for the three months ended June 30, 2024, compared to $161.8 million for the same period in 2023, marking a significant increase[250]. - Net cash provided by operating activities for Q2 2024 was $60,856,000, a decrease of 41.4% from $103,883,000 in Q2 2023[239]. Expenses and Costs - Cost of sales (excluding depreciation, depletion, and accretion expense) rose by $138.6 million to $202.1 million for the three months ended June 30, 2024, compared to $63.5 million for the same period in 2023[254]. - Selling, general and administrative expenses increased by $15.1 million to $27.3 million for the three months ended June 30, 2024, compared to $12.2 million for the same period in 2023, largely due to employee costs and acquisition-related expenses[258]. - The company reported a loss on disposal of assets amounting to $11,098,000 in Q2 2024[237]. Debt and Financing - A secured PIK toggle seller note was issued with an initial aggregate principal amount of $111.8 million, maturing on January 31, 2026, bearing interest rates of 5.00% or 7.00%[209]. - The company entered into a Term Loan Amendment providing an additional delayed draw term loan of $150.0 million with an interest rate of 10.86% per annum[213]. - Total debt as of June 30, 2024, was $478,003,000, with net debt at $392,787,000[243]. - The ABL Amendment increased the revolving credit commitment to $125.0 million, with existing lenders increasing their commitment by $25.0 million and a new lender adding another $25.0 million[216]. Market Conditions - The price for West Texas Intermediate (WTI) crude oil ended Q2 2024 at $82.69 per barrel, a 2% increase from $81.28 per barrel in Q1 2024[222]. - The Permian Basin drilling rig count declined by eight active rigs quarter-over-quarter, ending at 308 active rigs, indicating a decrease in oilfield activity levels[223]. - The Company expects the proppant market to remain stable in the second half of 2024, with potential tightening in 2025 as activity levels may increase if commodity prices rise[224]. Cash Flow and Investments - Net cash provided by operating activities was $100.4 million for the six months ended June 30, 2024, down from $158.1 million in 2023, attributed to increased cost of sales and higher selling, general, and administrative expenses[281]. - Net cash used in investing activities increased to $353.5 million for the six months ended June 30, 2024, compared to $146.8 million in 2023, primarily due to expenditures related to the Hi-Crush Transaction[282]. - The company intends to fund capital requirements through cash on hand, cash flows from operations, and availability under the 2023 ABL Credit Facility and 2023 Term Loan Credit Facility[285]. Tax and Insurance - The company recorded a deferred tax liability of approximately $62.7 million on October 2, 2023, associated with the exchange of redeemable noncontrolling interest for shares of common stock[249]. - The company recorded $10.0 million of insurance recovery related to the Kermit facility fire, deemed collectable as of June 30, 2024[208]. - Insurance recovery increased by $10.0 million to $10.0 million for the three months ended June 30, 2024, due to an insurance claim related to a mechanical fire being deemed collectible[262]. Regulatory and Compliance - The company is classified as an "emerging growth company" under the JOBS Act, allowing for extended transition periods for compliance with new accounting standards[318]. - The company is permitted to make dividend payments under certain conditions, including maintaining liquidity above $30.0 million[307][312].