Atlas Energy Solutions Inc

Previous wording

health epidemics, such as the ongoing COVID-19 pandemic, natural disasters or inclement or hazardous weather conditions, including but not limited to cold weather, droughts, flooding, tornadoes and the physical impacts of climate change;

Current wording

health epidemics, such as the COVID-19 pandemic, natural disasters or inclement or hazardous weather conditions, including but not limited to cold weather, droughts, flooding, tornadoes and the physical impacts of climate change;

Previous wording

We are a low-cost producer of high-quality, locally sourced 100 mesh and 40/70 sand used as a proppant during the well completion process. Proppant is necessary to facilitate the recovery of hydrocarbons from oil and natural gas wells. One hundred percent of Atlas LLC’s sand reserves are located in Winkler and Ward Counties, Texas, within the Permian Basin, and our operations consist of proppant production and processing facilities, including two facilities near Kermit, Texas (together, the “Kermit facility”) and a third facility near Monahans, Texas (the “Monahans facility”). As part of the Hi-Crush Transaction, defined under “—Recent Developments” below, we acquired additional facilities near Kermit and the OnCore distributed mining network, adding approximately 12 million tons of annual production capacity. As of March 31, 2024, our combined annual production capacity is approximately 28 million tons.

Current wording

We are a low-cost producer of high-quality, locally sourced 100 mesh and 40/70 sand used as a proppant during the well completion process. Proppant is necessary to facilitate the recovery of hydrocarbons from oil and natural gas wells. One hundred percent of Atlas LLC’s sand reserves are located in Texas within the Permian Basin and our operations consist of proppant production and processing facilities, including four facilities near Kermit, Texas (together, the “Kermit facilities”), a fifth facility near Monahans, Texas (the “Monahans facility”), and the OnCore distributed mining network. As of June 30, 2024, our combined annual production capacity is approximately 28 million tons.

Previous wording

We also operate a logistics platform that is designed to increase the efficiency, safety and sustainability of the oil and natural gas industry within the Permian Basin. This includes our fleet of fit-for-purpose trucks and trailers and will include the Dune Express, an overland conveyor infrastructure solution currently under construction. As part of the Hi-Crush Transaction, we expanded our logistics offering through the addition of Pronghorn, a leading multi-basin provider of proppant logistics and wellsite services.

Current wording

We also operate a logistics platform that is designed to increase the efficiency, safety and sustainability of the oil and natural gas industry within the Permian Basin. This includes our fleet of fit-for-purpose trucks and trailers and will include the Dune Express, an overland conveyor infrastructure solution currently under construction.

Previous wording

On March 5, 2024 (the “Closing Date”), the Company consummated the previously announced transaction (the “Hi-Crush Transaction”) pursuant to that certain Agreement and Plan of Merger, dated February 26, 2024 (the “Merger Agreement”), by and among the Company, Atlas LLC, as purchaser, Wyatt Merger Sub 1 Inc., a Delaware corporation and direct, wholly-owned subsidiary of Atlas LLC, Wyatt Merger Sub 2, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Atlas LLC, Hi-Crush, each stockholder that executed the Merger Agreement or a joinder thereto (each a “Hi-Crush Stockholder” and, collectively, the “Hi-Crush Stockholders”), Clearlake Capital Partners V Finance, L.P., solely in its capacity as the Hi-Crush Stockholders’ representative, and HC Minerals Inc., a Delaware corporation (collectively, the “Parties”), pursuant to which the Company acquired Hi-Crush’s Permian Basin proppant production and logistics businesses and operations in exchange for (i) cash consideration of $140.1 million, (ii) 9.7 million shares of the Common Stock (the “Stock Consideration”), issued at the closing of the transaction, and (iii) a secured PIK toggle seller note in an initial aggregate principle amount of $111.8 million with a final maturity date of January 31, 2026 (the “Deferred Cash Consideration Note”). For further discussion, refer to Note 3 - Hi-Crush Transaction of the unaudited condensed consolidated financial statements (the “Financial Statements”) included elsewhere in this Report.

Current wording

On March 5, 2024 (“Closing Date”), the Company completed the acquisition of the Permian Basin proppant production and logistics businesses and operations of Hi-Crush Inc., a Delaware corporation (“Hi-Crush”), in exchange for mixed consideration totaling $455.8 million, subject to customary post-closing adjustments(the “Hi-Crush Transaction”), pursuant to that certain Agreement and Plan of Merger, dated February 26, 2024 (the “Merger Agreement”), by and among the Company, Atlas LLC, Wyatt Merger Sub 1 Inc., a Delaware corporation and direct, wholly-owned subsidiary of Atlas LLC, Wyatt Merger Sub 2, LLC, a Delaware limited liability company and direct, wholly-owned subsidiary of Atlas LLC, Hi-Crush, each stockholder that had executed the Merger Agreement or a joinder thereto (each a “Hi-Crush Stockholder” and, collectively, the “Hi-Crush Stockholders”), Clearlake Capital Partners V Finance, L.P., solely in its capacity as the Hi-Crush Stockholders’ representative and HC Minerals Inc., a Delaware corporation (collectively, the “Parties”). For further discussion, refer to Note 3 - Hi-Crush Transaction of the unaudited condensed consolidated financial statements (the “Financial Statements”) included elsewhere in this Report.

Previous wording

The foregoing description of the Hi-Crush Transaction and the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Report.

Current wording

The foregoing description of the Hi-Crush Transaction and the Merger Agreement does not purport to be complete and is subject to, and qualified in its entirety by, the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2024, filed with the SEC on May 8, 2024.

Previous wording

On April 14, 2024, a mechanical fire occurred at the Company's mine in Kermit, Texas. The fire primarily impacted the “feed system” of the processing facility, which transports sand from the dryers and separators to storage silos. The Company has filed an insurance claim and is currently reviewing available coverage and the financial impact of the incident.

Current wording

On April 14, 2024, a mechanical fire occurred at one of the Company's plants in Kermit, Texas. The fire primarily impacted the feed system of the processing facility, which transports sand from the dryers and separators to storage silos. During the second quarter of 2024, the Company utilized temporary loadout equipment at the plant to continue production. The Company was able to transition to the temporary loadout within 11 days of the fire incident. Reconstruction of the feed system was completed in June 2024 and the plant was operational by June 30, 2024.

Previous wording

In accordance with the Merger Agreement, the Company issued the Deferred Cash Consideration Note, which is subject to customary purchase price adjustments and payable in cash or in kind, at Atlas LLC’s election. The Deferred Cash Consideration Note will mature on January 31, 2026 and bears interest at a rate of 5.00% per annum if paid in cash, or 7.00% per annum if paid in kind. Interest on the Deferred Cash Consideration Note is payable quarterly in arrears beginning March 29, 2024 through maturity. Interest expense associated with the Deferred Cash Consideration Note was $0.4 million for the three months ended March 31, 2024.

Current wording

In accordance with the Merger Agreement, the Company issued a secured PIK toggle seller note in an initial aggregate principle amount of $111.8 million, subject to customary purchase price adjustments, with a final maturity date of January 31, 2026 (the “Deferred Cash Consideration Note”). The Deferred Cash Consideration Note was part of the consideration transferred and valued at fair value at the acquisition date. The Deferred Cash Consideration Note bears interest at a rate of 5.00% per annum if paid in cash, or 7.00% per annum if paid in kind. Interest on the Deferred Cash Consideration Note is payable quarterly in arrears beginning March 29, 2024 through maturity.

Previous wording

The Deferred Cash Consideration Note included $2.6 million of debt discount and approximately $0.1 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were approximately $0.1 million in total for the three months ended March 31, 2024.

Current wording

The Deferred Cash Consideration Note included $4.6 million of debt discount and approximately $0.1 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method.

Previous wording

The Term Loan Amendment provided an additional delayed draw term loan (the “ADDT Loan”), in the aggregate principal amount of $150.0 million with interest (computed on the basis of a 365-day year for the actual number of days elapsed) on the unpaid principal amount thereof from and including the date of amendment until paid in full at the rate of 10.86% per annum. The ADDT Loan is payable in 76 consecutive monthly installments of combined principal and interest, each in the amount of $2.7 million commencing April 1, 2024 and continuing up to and including August 1, 2030. There was interest expense of $1.4 million for the three months ended March 31, 2024.

Current wording

The Term Loan Amendment provided an additional delayed draw term loan (the “ADDT Loan”), in the aggregate principal amount of $150.0 million with interest (computed on the basis of a 365-day year for the actual number of days elapsed) on the unpaid principal amount thereof from and including the date of amendment until paid in full at the rate of 10.86% per annum. The ADDT Loan is payable in 76 consecutive monthly installments of combined principal and interest, each in the amount of $2.7 million commencing April 1, 2024 and continuing up to and including August 1, 2030.

Previous wording

The ADDT Loan included $1.5 million of debt discount $0.2 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were de minimis in total for the three months ended March 31, 2024.

Current wording

The ADDT Loan included $1.5 million of debt discount $0.5 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method.

Previous wording

The ABL Amendment increased the revolving credit commitment to $125.0 million. The existing lenders increased their commitment by $25.0 million which resulted in a debt modification under Accounting Standards Codification (“ASC”) 470, “Debt.” The ABL Amendment also added a new lender with a $25.0 million commitment, thus creating a new debt arrangement under ASC 470, “Debt.” The deferred financing costs and debt issuance cost will be amortized on a prospective basis over the term of the agreement. The maturity date of the ABL Credit Agreement was extended from February 22, 2028 to the earliest of (a) February 26, 2029; (b) the date at that is 91 days prior to the maturity date for any portion of the Term Loan Debt; or (c) any date on which the aggregate Commitments terminate hereunder.

Current wording

The ABL Amendment increased the revolving credit commitment to $125.0 million. The existing lenders increased their commitment by $25.0 million which resulted in a debt modification under Accounting Standards Codification (“ASC”) 470, “Debt.” The ABL Amendment also added a new lender with a $25.0 million commitment, thus creating a new debt arrangement under ASC 470, “Debt.” The deferred financing costs and debt issuance cost will be amortized on a prospective basis over the term of the agreement. The maturity date of the ABL Credit Agreement was extended from February 22, 2028 to the earliest of (a) February 26, 2029; (b) the date that is 91 days prior to the maturity date for any portion of the Term Loan Debt; or (c) any date on which the aggregate Commitments terminate hereunder.

Previous wording

On March 5, 2024, the Company drew down $50.0 million under the 2023 ABL Credit Facility to for general corporate purposes. The draw included $0.3 million in debt issuance costs and $0.2 million in deferred financing costs. These costs are recorded under other long-term assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the life of the agreement. Interest expense associated with the amortization of these costs was de minimis for thethree months ended March 31, 2024.

Current wording

On March 5, 2024, the Company drew down $50.0 million under the 2023 ABL Credit Facility for general corporate purposes. The draw included $0.3 million in debt issuance costs and $0.3 million in deferred financing costs. These costs are recorded under other long-term assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the life of the agreement.

Previous wording

On May 6, 2024, the Company declared a dividend of $0.22 per share (base dividend of $0.16 per share and a variable dividend of $0.06 per share) of Common Stock. The dividend will be payable on May 23, 2024 to holders of record of Common Stock as of the close of business on May 16, 2024.

Current wording

On May 6, 2024, the Company declared a dividend of $0.22 per share (base dividend of $0.16 per share and a variable dividend of $0.06 per share) of Common Stock. The dividend was paid on May 23, 2024 to holders of record of Common Stock as of the close of business on May 16, 2024.

Previous wording

Notwithstanding the volatility in the oil and gas markets, there remain two potential positive long-term trends developing in the market:

Current wording

However, notwithstanding the volatility in the oil and gas markets, there remain three potential positive long-term trends that benefit us:

Previous wording

In addition, we believe our increase in size and enhanced scale and reliability, in part through the acquisition of Hi-Crush, will allow us to meet the growing scale of E&P companies as they continue to consolidate. We believe we are well-positioned to match the growing needs of our high-quality customer base, as E&P companies continue to scale up their operations.

Current wording

We believe our increase in size and enhanced scale and reliability, in part resulting from the acquisition of Hi-Crush, will allow us to meet the growing scale of E&P companies as they continue to consolidate. While the available Permian Basin proppant supply continues to grow, we believe the market has the potential to remain stable during the second half of 2024, and potential to tighten in 2025 as we believe activity levels could increase in the event commodity prices move higher.

Previous wording

We define Adjusted EBITDA as net income before depreciation, depletion and accretion expense, interest expense, income tax expense, stock and unit-based compensation, loss on extinguishment of debt, unrealized commodity derivative gain (loss), and non-recurring transaction costs. Management believes Adjusted EBITDA is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.

Current wording

We define Adjusted EBITDA as net income before depreciation, depletion and accretion expense, interest expense, income tax expense, stock and unit-based compensation, loss on extinguishment of debt, loss on disposal of assets, insurance recovery (gain), unrealized commodity derivative gain (loss), other acquisition related costs, and non-recurring transaction costs. Management believes Adjusted EBITDA is useful because it allows them to more effectively evaluate our operating performance and compare the results of our operations from period to period and against our peers without regard to our financing methods or capital structure. We exclude the items listed above from net income in arriving at Adjusted EBITDA because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.

Previous wording

We define Maintenance Capital Expenditures as capital expenditures excluding growth capital expenditures.

Current wording

We define Maintenance Capital Expenditures as capital expenditures excluding growth capital expenditures and reconstruction of previously incurred growth capital expenditures.

Previous wording

Product Sales. Product sales decreased by $14.7 million to $113.4 million for the three months ended March 31, 2024, as compared to $128.1 million for the three months ended March 31, 2023. Excluding Hi-Crush activity, a decrease in proppant prices between the periods contributed to a $53.3 million decrease in product sales, while an increase in sales volume contributed an offsetting $18.9 million increase in product sales. Hi-Crush activity contributed $19.7 million of product sales over the period.

Current wording

Product Sales. Product sales increased by $3.0 million to $128.2 million for the three months ended June 30, 2024, as compared to $125.2 million for the three months ended June 30, 2023. A decrease in proppant prices between the periods contributed a $89.2 million decrease in product sales, while a increase in sales volume contributed to a $92.2 million increase in product sales.

Previous wording

Service Sales. Services sales, which includes freight for last-mile logistics services, increased by $53.9 million to $79.2 million for the three months ended March 31, 2024, as compared to $25.3 million for the three months ended March 31, 2023. Excluding Hi-Crush activity, the increase in logistics revenue was due to higher sales volumes shipped to last-mile logistics customers. Hi-Crush activity contributed $27.8 million of service sales over the period.

Current wording

Service Sales. Services sales, which includes freight for last-mile logistics services, increased by $122.7 million to $159.3 million for the three months ended June 30, 2024, as compared to $36.6 million for the three months ended June 30, 2023. The increase in logistics revenue was due to higher sales volumes shipped to last-mile logistics customers as well as a full quarter of contribution from Hi-Crush.

Previous wording

Cost of sales (excluding depreciation, depletion and accretion expense). Cost of sales (excluding depreciation, depletion and accretion expense) increased by $44.1 million to $106.7 million for the three months ended March 31, 2024, as compared to $62.6 million for the three months ended March 31, 2023.

Current wording

Cost of sales (excluding depreciation, depletion and accretion expense). Cost of sales (excluding depreciation, depletion and accretion expense) increased by $138.6 million to $202.1 million for the three months ended June 30, 2024, as compared to $63.5 million for the three months ended June 30, 2023.

Previous wording

Cost of sales (excluding depreciation, depletion and accretion expense) related to services increased by $44.4 million to $67.2 million for the three months ended March 31, 2024, as compared to $22.8 million for the three months ended March 31, 2023. Excluding Hi-Crush activity, the increase was due to higher sales volumes shipped to last-mile logistics customers during the period. Hi-Crush activity contributed $23.7 million of cost of sales (excluding depreciation, depletion and accretion) related to service sales over the period.

Current wording

Cost of sales (excluding depreciation, depletion and accretion expense) related to services increased by $102.2 million to $134.1 million for the three months ended June 30, 2024, as compared to $31.9 million for the three months ended June 30, 2023. The increase was due to higher sales volumes shipped to last-mile logistics customers during the period as well as a full quarter of contribution from Hi-Crush.

Previous wording

Depreciation, depletion and accretion expense. Depreciation, depletion and accretion expense increased by $8.7 million to $17.2 million for the three months ended March 31, 2024, as compared to $8.5 million for the three months ended March 31, 2023. Excluding Hi-Crush activity, the $6.0 million increase in depreciation, depletion and accretion expense is due to additional depreciable assets placed into service when compared to the prior period. Hi-Crush activity contributed $2.7 million of depreciation, depletion and accretion expense over the period.

Current wording

Depreciation, depletion and accretion expense. Depreciation, depletion and accretion expense increased by $15.6 million to $25.0 million for the three months ended June 30, 2024, as compared to $9.4 million for the three months ended June 30, 2023, due to additional depreciable assets placed into service when compared to the prior period as well as a full quarter of contribution from Hi-Crush.

Previous wording

Our selling, general and administrative expense includes the non-cash expense for stock-based compensation expense for equity awards granted to our employees. For the three months ended March 31, 2024, stock-based compensation expense was $4.2 million, as compared to $0.6 million of stock and unit-based compensation expense for the three months ended March 31, 2023.

Current wording

Our selling, general and administrative expense includes the non-cash expense for stock-based compensation expense for equity awards granted to our employees. For the three months ended June 30, 2024, stock-based compensation expense was $5.5 million, as compared to $1.6 million of stock-based expense for the three months ended June 30, 2023.

Previous wording

Interest expense, net. Interest expense, net increased by $1.6 million to $5.0 million for the three months ended March 31, 2024, as compared to $3.4 million for the three months ended March 31, 2023. The increase is driven by the Hi-Crush Transaction acquisition financing of the $150.0 million ADDT Loan and $111.8 million Deferred Cash Consideration Note.

Current wording

Interest (expense), net. Interest expense, net increased by $10.0 million to $10.5 million for the three months ended June 30, 2024, as compared to $0.5 million for the three months ended June 30, 2023. The increase is driven by the acquisition financing for the Hi-Crush Transaction, consisting of the $150.0 million ADDT Loan and $111.8 million Deferred Cash Consideration Note.

Previous wording

Income tax expense. Income tax expense increased by $0.2 million to $7.9 million for the three months ended March 31, 2024, as compared to $7.7 million for the three months ended March 31, 2023. The increase is primarily due to additional U.S. federal income taxes subsequent to our Up-C Simplification.

Current wording

Income tax expense. Income tax expense decrease $2.0 million to $3.1 million for the three months ended June 30, 2024, as compared to $5.1 million for the three months ended June 30, 2023. The decrease is primarily due to a decrease in income before income taxes.

Previous wording

Selling, general and administrative expense. Selling, general and administrative expense increased by $20.6 million to $29.1 million for the three months ended March 31, 2024, as compared to $8.5 million for the three months ended March 31, 2023. Excluding Hi-Crush activity, the increase is due to an increase of $4.9 million of employee costs, including an increase of $3.6 million of stock-based compensation expense, $2.8 million of travel, sales and other corporate expenses associated with increased opportunities to conduct commercial business development efforts and incremental costs incurred in conjunction with our transition to a publicly traded company, and $10.4 million for non-recurring transaction costs related to the Hi-Crush Transaction during the three months ended Mach 31, 2024, compared to the three months ended March 31, 2023. Hi-Crush activity contributed $2.5 million of selling, general and administrative expense over the period, including $1.1 million of amortization of trade name and customer relationships intangible assets.

Current wording

Selling, general and administrative expense. Selling, general and administrative expense increased by $34.6 million to $55.3 million for the six months ended June 30, 2024, as compared to $20.7 million for the six months ended June 30, 2023. The increase is due to an increase of $14.0 million of employee costs, including an increase of $7.5 million of stock-based compensation expense, $4.1 million of travel, sales and other corporate expenses associated with incremental costs incurred in conjunction with our acquisition of Hi-Crush, and $16.5 million of non-recurring transaction costs and other acquisition related costs related to the Hi-Crush Transaction during the six months ended June 30, 2024, compared to the six months ended June 30, 2023.

Previous wording

Our primary sources of liquidity to date have been capital contributions from our owners, cash flows from operations, and borrowings under our previous term loan credit facilities, and our previous asset-based loan credit facilities. Going forward, we expect our primary sources of liquidity to be cash flows from operations, the net proceeds retained from the IPO, availability under our 2023 ABL Credit Facility as amended (as defined below under “–Debt Agreements”), borrowings under our 2023 Term Loan Credit Facility as amended (as defined below under –Debt Agreements”), or any other credit facility we enter into in the future and proceeds from any future issuances of debt or equity securities. We expect our primary use of capital will be for payment of any dividends to our stockholders and for investing in our business, specifically for construction of the Dune Express, and acquisition of fit-for-purpose equipment for our trucking fleet used in our logistics platform. In addition, we have routine facility upgrades and additional ancillary capital expenditures associated with, among other things, contractual obligations and working capital obligations.

Current wording

Our primary sources of liquidity to date have been capital contributions from our owners, cash flows from operations, and borrowings under our previous term loan credit facilities, and our previous asset-based loan credit facilities. Going forward, we expect our primary sources of liquidity to be cash flows from operations, availability under our 2023 ABL Credit Facility as amended (as defined below under “–Debt Agreements”), borrowings under our 2023 Term Loan Credit Facility as amended (as defined below under –Debt Agreements”), or any other credit facility we enter into in the future and proceeds from any future issuances of debt or equity securities. We expect our primary use of capital will be for payment of any dividends to our stockholders and for investing in our business, specifically for construction of the Dune Express, and acquisition of fit-for-purpose equipment for our trucking fleet used in our logistics platform. In addition, we have routine facility upgrades and additional ancillary capital expenditures associated with, among other things, contractual obligations and working capital obligations.

Previous wording

As of March 31, 2024, we had working capital, defined as current assets less current liabilities, of $235.4 million, $73.8 million of availability under the 2023 ABL Credit Facility, and $100.0 million of DDT Loans (as defined below under “Debt Agreements). Our cash and cash equivalents totaled $187.1 million.

Current wording

As of June 30, 2024, we had working capital, defined as current assets less current liabilities, of $125.8 million, $74.5 million of availability under the 2023 ABL Credit Facility, and $100.0 million of DDT Loans (as defined below under “Debt Agreements). Our cash and cash equivalents totaled $104.7 million.

Previous wording

Net Cash Used in Investing Activities. Net cash used in investing activities was $237.7 million and $60.9 million for the three months ended March 31, 2024 and 2023, respectively. The increase is primarily attributable to $142.2 million spent on the Hi-Crush Transaction as well as capital spending at the Kermit and Monahans facilities, Dune Express and logistics assets during the three months ended March 31, 2024 when compared to the three months ended March 31, 2023.

Current wording

Net Cash Used in Investing Activities. Net cash used in investing activities was $353.5 million and $146.8 million for the six months ended June 30, 2024 and 2023, respectively. The increase is primarily attributable to $142.2 million spent on the Hi-Crush Transaction as well as capital spending at the Kermit and Monahans facilities, Dune Express and logistics assets during the six months ended June 30, 2024 when compared to the six months ended June 30, 2023.

Previous wording

Net Cash Provided by Financing Activities. Net cash provided by financing activities was $175.1 million and $277.4 million for the three months ended March 31, 2024 and 2023, respectively. This decrease is primarily related to $303.4 million of initial IPO proceeds raised in March 31, 2023 as compared to March 31, 2024. This was offset by an increase of $200.0 million of net proceeds from borrowing related to our acquisition financing during the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

Current wording

Net Cash Provided by Financing Activities. Net cash provided by financing activities was $147.6 million and $248.4 million for the six months ended June 30, 2024 and 2023, respectively. This decrease is primarily related to $303.4 million of initial IPO proceeds raised in June 30, 2023 as compared to June 30, 2024. This was offset by an increase of $201.5 million of net proceeds from borrowing related to our acquisition financing during the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Previous wording

Our primary growth and technology initiatives include continued construction of the Dune Express and acquisition of fit-for-purpose equipment for our trucking fleet. Outside of our growth and technology initiatives, our business is not presently capital intensive in nature and only requires the maintenance of our Kermit and Monahans facilities. In addition to capital expenditures, we have certain contractual long-term capital requirements associated with our lease, royalty payments and debt. See Note 7 - Leases, Note 8 - Debt and Note 9 - Commitments and Contingencies of the Financial Statements included elsewhere in this Report. Our current level of maintenance capital expenditures is expected to remain within our cash on hand and internally generated cash flow.

Current wording

Our primary growth and technology initiatives include continued construction of the Dune Express and acquisition of fit-for-purpose equipment for our trucking fleet. Outside of our growth and technology initiatives, our business is not presently capital intensive in nature and only requires the maintenance of our facilities. In addition to capital expenditures, we have certain contractual long-term capital requirements associated with our lease, royalty payments and debt. See Note 7 - Leases, Note 8 - Debt and Note 9 - Commitments and Contingencies of the Financial Statements included elsewhere in this Report. Our current level of maintenance capital expenditures is expected to remain within our cash on hand and internally generated cash flow.

Previous wording

We expect to use the remaining net proceeds from the IPO to fund construction of the Dune Express over the next approximately 9 months. We intend to fund our other capital requirements through our primary sources of liquidity, which include cash on hand and cash flows from operations and, if needed, availability under our 2023 ABL Credit Facility and borrowings under our 2023 Term Loan Credit Facility.

Current wording

We intend to fund our capital requirements through our primary sources of liquidity, which include cash on hand and cash flows from operations and, if needed, availability under our 2023 ABL Credit Facility and borrowings under our 2023 Term Loan Credit Facility.

Previous wording

In accordance with the Merger Agreement, the Company issued the Deferred Cash Consideration Note in favor of the Hi-Crush Stockholders in the original aggregate principal amount of $111.8 million. The Deferred Cash Consideration Note was part of the consideration transferred and valued at fair value at the acquisition date. The Deferred Cash Consideration Note will mature on January 31, 2026 and will bear interest at a rate of 5.00% per annum if paid in cash, or 7.00% per annum if paid in kind. Interest on the Deferred Cash Consideration Note is payable quarterly in arrears beginning March 29, 2024 through maturity. Interest expense associated with the Deferred Cash Consideration Note was $0.4 million for the three months ended March 31, 2024.

Current wording

In accordance with the Merger Agreement, the Company issued the Deferred Cash Consideration Note in favor of the Hi-Crush Stockholders in the original aggregate principal amount of $111.8 million. The Deferred Cash Consideration Note was part of the consideration transferred and valued at fair value at the acquisition date, which is subject to customary purchase price adjustments and payable in cash or in kind, at Atlas LLC’s election. The Deferred Cash Consideration Note will mature on January 31, 2026 and bears interest at a rate of 5.00% per annum if paid in cash, or 7.00% per annum if paid in kind. Interest on the Deferred Cash Consideration Note is payable quarterly in arrears beginning March 29, 2024 through maturity. Interest expense associated with the Deferred Cash Consideration Note was $1.4 million and $1.8 million for the three and six months ended June 30, 2024, respectively.

Previous wording

The Deferred Cash Consideration Note included $2.6 million of debt discount and approximately $0.1 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were approximately $0.1 million in total for the three months ended March 31, 2024.

Current wording

The Deferred Cash Consideration Note included $4.6 million of debt discount and approximately $0.1 million deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were approximately $0.7 million and $0.8 million in total for the three and six months ended June 30, 2024, respectively.

Previous wording

Each delayed draw term loan (the “DDT Loans”) under the 2023 Term Loan Credit Facility will be payable in equal monthly installments, with the monthly installments comprising 80% of the DDT Loan and a final payment of the remaining 20% of the outstanding principal balance due at maturity, unless earlier prepaid. The DDT Loans will bear interest at a rate equal to the applicable Term SOFR Rate as of each Delayed Draw Funding Date (each as defined in the 2023 Term Loan Credit Agreement) plus 5.95% per annum. All monthly installments with respect to the Initial Term Loan and the DDT Loans payable on or prior to January 1, 2025 will be interest only. Interest expense associated with the debt was $4.3 million for the three months ended March 31, 2024.

Current wording

Each delayed draw term loan (the “DDT Loans”) under the 2023 Term Loan Credit Facility will be payable in equal monthly installments, with the monthly installments comprising 80% of the DDT Loan and a final payment of the remaining 20% of the outstanding principal balance due at maturity, unless earlier prepaid. The DDT Loans will bear interest at a rate equal to the applicable Term Secured Overnight Financing Rate (“SOFR”) Rate as of each Delayed Draw Funding Date (each as defined in the 2023 Term Loan Credit Agreement) plus 5.95% per annum. All monthly installments with respect to the Initial Term Loan and the DDT Loans payable on or prior to January 1, 2025 will be interest only. Interest expense associated with the debt was $4.3 million and $8.6 million for the three and six months ended June 30, 2024, respectively. The interest expense associated with the discount and deferred financing costs were $0.3 million and $0.6 million for the three and six months ended June 30, 2024, respectively.

Previous wording

Proceeds from the 2023 Term Loan Credit Facility were used to repay outstanding indebtedness under our previous 2021 Term Loan Credit Facility with Stonebriar, to repay obligations outstanding under certain equipment lease arrangements with Stonebriar and for general corporate purposes. As of March 31, 2024, Atlas LLC was in compliance with the covenants of the 2023 Term Loan Credit Facility.

Current wording

Proceeds from the 2023 Term Loan Credit Facility were used to repay outstanding indebtedness under our previous credit facility extended pursuant to the Credit Agreement, dated October 20, 2021, between Atlas LLC, as borrower, and Stonebriar, as lender, as amended (collectively, the “2021 Term Loan Credit Facility”). Proceeds were also used to repay obligations outstanding under certain equipment lease arrangements with Stonebriar and for general corporate purposes. As of June 30, 2024, Atlas LLC was in compliance with the covenants of the 2023 Term Loan Credit Facility.

Previous wording

The Term Loan Amendment provided the ADDT Loan in the aggregate principal amount of $150.0 million with interest (computed on the basis of a 365-day year for the actual number of days elapsed) on the unpaid principal amount thereof from and including the date of the amendment until paid in full at the rate per annum equal to 10.86%. The ADDT Loan is payable in 76 consecutive monthly installments of combined principal and interest each in the amount of $2.7 million commencing April 1, 2024 and continuing up to and including August 1, 2030. There was interest expense of $1.4 million for the three months ended March 31, 2024.

Current wording

The Term Loan Amendment provided the ADDT Loan in the aggregate principal amount of $150.0 million with interest (computed on the basis of a 365-day year for the actual number of days elapsed) on the unpaid principal amount thereof from and including the date of the amendment until paid in full at the rate per annum equal to 10.86%. The ADDT Loan is payable in 76 consecutive monthly installments of combined principal and interest each in the amount of $2.7 million commencing April 1, 2024 and continuing up to and including August 1, 2030. There was interest expense of $4.0 million and $5.4 million for the three and six months ended June 30, 2024, respectively.

Previous wording

The ADDT Loan included $1.5 million of debt discount and $0.2 million in deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were de minimis in total for the three months ended March 31, 2024.

Current wording

The ADDT Loan included $1.5 million of debt discount and $0.5 million in deferred financing costs. The discount and deferred financing costs are a direct reduction from the carrying amount of the debt obligation on the Company’s condensed consolidated balance sheets and are amortized to interest expense using the effective interest method. Interest expense associated with the discount and deferred financing costs were $0.1 million and $0.2 million in total for the three and six months ended June 30, 2024, respectively.

Previous wording

Borrowings under the 2023 ABL Credit Facility bear interest, at Atlas LLC’s option, at either a base rate or Term SOFR (as defined in the 2023 ABL Credit Agreement), as applicable, plus an applicable margin based on average availability as set forth in the 2023 ABL Credit Agreement. Term SOFR loans bear interest at Term SOFR for the applicable interest period plus an applicable margin, which ranges from 1.50% to 2.00% per annum based on average availability as set forth in the 2023 ABL Credit Agreement. Base rate loans bear interest at the applicable base rate, plus an applicable margin, which ranges from 0.50% to 1.00% per annum based on average availability as set forth in the 2023 ABL Credit Agreement. In addition to paying interest on outstanding principal under the 2023 ABL Credit Facility, Atlas LLC is required to pay a commitment fee which ranges from 0.375% per annum to 0.500% per annum with respect to the unutilized commitments under the 2023 ABL Credit Facility, based on the average utilization of the 2023 ABL Credit Facility. Atlas LLC is also required to pay customary letter of credit fees, to the extent that one or more letter of credit is outstanding. For the three months ended March 31, 2024 and 2023, we recognized $0.4 million and de minimis of interest expense, unutilized commitment fees and other fees under the 2023 ABL Credit Facility, classified as interest expense, respectively.

Current wording

Borrowings under the 2023 ABL Credit Facility bear interest, at Atlas LLC’s option, at either a base rate or Term SOFR (as defined in the 2023 ABL Credit Agreement), as applicable, plus an applicable margin based on average availability as set forth in the 2023 ABL Credit Agreement. Term SOFR loans bear interest at Term SOFR for the applicable interest period plus an applicable margin, which ranges from 1.50% to 2.00% per annum based on average availability as set forth in the 2023 ABL Credit Agreement. Base rate loans bear interest at the applicable base rate, plus an applicable margin, which ranges from 0.50% to 1.00% per annum based on average availability as set forth in the 2023 ABL Credit Agreement. In addition to paying interest on outstanding principal under the 2023 ABL Credit Facility, Atlas LLC is required to pay a commitment fee which ranges from 0.375% per annum to 0.500% per annum with respect to the unutilized commitments under the 2023 ABL Credit Facility, based on the average utilization of the 2023 ABL Credit Facility. Atlas LLC is also required to pay customary letter of credit fees, to the extent that one or more letter of credit is outstanding. For the three and six months ended June 30, 2024, we recognized $0.1 million and $0.3 million, respectively, of interest expense, unutilized commitment fees and other fees under the 2023 ABL Credit Facility, classified as interest expense. For both the three and six months ended June 30, 2023, we recognized $0.1 million of interest expense.

Previous wording

On March 5, 2024, the Company drew down $50.0 million under the 2023 ABL Credit Facility to for general corporate purposes. The draw included $0.3 million in debt issuance costs and $0.2 million in deferred financing costs. These costs are recorded under other long-term assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the life of the agreement. Interest expense associated with the amortization of these costs was de minimis for thethree months ended March 31, 2024.

Current wording

On March 5, 2024, the Company drew down $50.0 million under the 2023 ABL Credit Facility for general corporate purposes. There was interest expense of $0.9 million and $1.1 million for the three and six months ended June 30, 2024, respectively. The draw included $0.3 million in debt issuance costs and $0.3 million in deferred financing costs. These costs are recorded under other long-term assets on the condensed consolidated balance sheets and are amortized on a straight-line basis over the life of the agreement. Interest expense associated with the amortization of these costs was $0.1 million for thethree and six months ended June 30, 2024, respectively.