Atlas Energy Solutions Inc. (NYSE: AESI) announced a definitive agreement to acquire Hi-Crush Inc.’s Permian Basin proppant production assets and North American logistics operations. This $450 million deal solidifies Atlas’ position as a dominant player in the proppant industry and significantly expands its logistics capabilities. The strategic partnership combines two industry leaders, leveraging their respective strengths to create a powerhouse in proppant production and delivery.
Combining Forces: A Strategic Overview of the Hi-Crush Acquisition
The acquisition brings together Atlas’s expertise in proppant production and logistics with Hi-Crush’s extensive network and innovative technologies. The combined entity is projected to have a pro forma production capacity of approximately 28 million tons, with around 80% of the 2024 capacity already under contract. This significant production capacity, coupled with a robust logistics network, positions the new entity for continued growth and market leadership. The transaction is structured with a combination of upfront cash, Atlas common stock, and deferred cash payments.
Financial Implications and Synergies of the Hi-Crush Partnership
The acquisition is expected to be immediately accretive to cash flow per share and earnings per share, generating substantial value for shareholders. Projected Adjusted EBITDA for the acquired assets is estimated at $110-125 million in 2024, representing a compelling valuation multiple. Furthermore, the companies anticipate realizing over $20 million in annual synergies by 2026, driven by operational efficiencies and the integration of complementary resources. The deal also includes Hi-Crush’s Pronghorn, a leading multi-basin provider of proppant logistics and wellsite services, further bolstering Atlas’s capabilities.
Leadership Perspectives on the Hi-Crush and Atlas Merger
Executives from both companies expressed enthusiasm for the strategic partnership. Bud Brigham, Executive Chairman and CEO of Atlas, highlighted the complementary nature of the two businesses and the potential for significant innovation and efficiency gains. Dirk Hallen, CEO of Hi-Crush, emphasized the transformative nature of the combination and the benefits for employees, customers, and shareholders. Colin Leonard, Hi-Crush Board Chairman and Partner at Clearlake Capital Group L.P., praised Hi-Crush’s strategic transformation and expressed confidence in the combined entity’s future success.
Operational Enhancements and Logistics Expansion Through Hi-Crush
The acquisition strengthens Atlas’s presence in the Permian Basin, expanding its logistics offerings and creating a comprehensive network for proppant delivery. The integration of Hi-Crush’s OnCore distributed mining network and Pronghorn logistics platform with Atlas’s existing infrastructure, including the Dune Express system, will enhance operational efficiencies and improve customer service. This comprehensive approach to proppant production and logistics creates a significant competitive advantage in the industry.
2024 Outlook and Growth Projections for Atlas and Hi-Crush
Atlas provided a pro forma 2024 outlook, incorporating the anticipated contribution of Hi-Crush’s assets. With the combined production capacity and strong contracted volumes, the company expects to maintain high utilization rates. Sand prices are projected to average $26-$28 per ton. Adjusted EBITDA for 2024 is estimated to be in the range of $425 to $475 million. Capital expenditures are planned for growth initiatives, including the completion of the Dune Express and further OnCore deployments. These investments position the combined entity for long-term growth and profitability in the proppant market.
Conclusion: A New Era for Proppant Solutions
The acquisition of Hi-Crush by Atlas Energy Solutions represents a significant milestone in the proppant industry. By combining their respective strengths, the two companies have created a leading provider of proppant and logistics solutions, well-positioned to capitalize on the growing demand for energy resources. This strategic partnership promises to drive innovation, enhance efficiency, and deliver exceptional value to customers and shareholders alike. The transaction is expected to close before the end of the first quarter of 2024.
