Atlas Energy Solutions Inc.

Greetings. 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. 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. You may begin.

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 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 the current information and management 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 risks in the prospectus 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. Today is an exciting day, not only for Atlas, but for High 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 profit and profit 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 coin the phrase, quote, more sand, more barrels, unquote. And he is exactly right. With service intensity rising, scale and reliability are paramount today, with the leading-edge frat crews now pumping over 100,000 tons of sand per month. In my opinion, Atlas and High Crush have been the two most innovative prop and companies within the Permian Basin, with the rollout of High Crush'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-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 safer places to live and work. 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 are 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. 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 broadened 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 permanent mines and approximately 7 million tons in the aggregate of wet sand production across their encore mines. In some 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. 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 complimentary damp sand offering through the Encore 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 High Crush has very strong relationships with certain key operators in the Midland 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 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 the acquisition pushes us to the forefront of 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 and High Crush are two of the lowest cost producers of profit in the Permian Basin. This acquisition will provide us with valuable insights for optimization of our production and logistics strategies and methods to lower costs and enhance efficiency. iCrush 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 increases the cash flow profile of Atlas ProForma 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 Dune Express, and we accomplish this without adding new supply to the market by absorbing High Crush's Kermit operations, which sit about two miles from our plants at Kermit, where the Dune Express begins. 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 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 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. 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 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 profit 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.