The following presentation was given by Joel Schneyer, Managing Director at Headwaters MB at the Frac Sand Insider 2016 Conference & Exhibition in La Crosse, WI.

1. Frac Sand Outlook & Perspectives
Frac Sand Insider 2016 Conference & Exhibition
La Crosse, WI
Joel Schneyer – Managing Director
jschneyer@headwatersmb.com
303.619.4211
May 10, 2016

2. Source: Board of Governors of Federal Reserve System & Stewart
2
Cheap Loans, Excess Liquidity, and High Oil Prices
. . . fueled a shale boom

3. Source: World Bank Group & Bloomberg
3
However, the World Economy Is Stuck in Slow Gear
. . . seven years after the global recession

4. Source: World Bank Group & Bloomberg
4
Shale Manufacturing Has Had Enormous Success
. . . which has resulted in a oil supply surplus

5. 5
Key Point #1
• First of a kind projects
(e.g. deep offshore oil
plays) consistently exhibit
>30% construction cost
overruns versus feasibility
estimates
• Repetitive drilling &
completion of
unconventional shale has
evolved into a
manufacturing process

6. Source: The Wall Street Journal
6
The Effects of the Oil Oversupply
. . . can be felt in the hinterlands from Alaska . . .

7. Source: Company announcements
7
The Effects of the Oil Oversupply
. . . to Wisconsin
May 2015 “US Silica announced it plans to let go 30 workers at its Sparta
location”
August 2015 “Superior Silica Sands closing Chippewa County Mine, 58 workers
will a laid off”
October 2015 “Hi-Crush Services announced that it planned to lay off 27
workers and suspend production at its frac sand plant in Augusta” “US Silica
announced will layoff an additional 16 workers at its Sparta processing plant”
December 2015 “Chieftain Sand announced that 63 people from it Chetek and
New Auburn facilities have lost their jobs, permanently”
March 2016 “Chippewa Sand Transport announced plans to lay off 55
employees because of the decreased demand for sand” “Unimin announced it
was closing its frac sand mining facility in Tunnel City eliminating 65 positions”
“Superior Silica Sands announced the permanent layoff of 69 employees,
including some who were already laid off temporarily at their facilities in
Barron, Prairie Farms, Chetek and New Auburn, as well as three facilities in
Clayton”

8. 8
State
Q2 ‘15
Mine Count
Market
Share %
WI 54 32%
TX 38 23%
MO 16 10%
IL 11 7%
OK 9 5%
MN 8 5%
Rest 31 19%
Sand Supply - Origin Locations

9. Note - Active proppant mines are defined as sand mine locations reported to MSHA with active operating
hours. If no hours are reported for the quarter, then the mine is deemed as not active for the time period.
9
109
118
122
125
132
150
154 155
149
167
0
20
40
60
80
100
120
140
160
180
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015
CountofMineswithActiveOperatingHours
Sand Supply – Active Proppant Mines

10. 10
Source: adapted from NavPort Presentation (April 2015), Canadian Frac Sand Logistics & Market Forecast Summit in
Calgary & company websites
Pushing the Technology Envelope and Expanding
Product Line
. . . resin coated sand and dust suppressants
• Atlas Resin PRC & CRC
• Refugio, Texas resin coating plant
• Polymeric Proppant Line, DustPro, FloPRO PTT
Proppant Transport Technology
• SandGuard & SandMaxx
• Propel SSP transport technology, Curable RCS,
Precured RCS
• InnoProp PLT, InnoProp Python
• Unifrac RCS and DustShield

11. 1
1
Source: Company and
Private Equity press
releases and websites
Notable Private Equity Activity In the Frac Sand Space Since
2010

12. 1
2
Sources: NavPort Presentation (April 2015), Canadian Frac Sand Logistics & Market Forecast Summit in Calgary
Years 2015 & 2106 IHS/PacWest website published Dec 11, 2015
Demand – Forecast by Basin
Concurrent with the drop in oil price in 2015, proppant demand fell from
110.1 billion pounds (55.1 million tons) consumed in 2014 to an estimated
79.6 to 85.2 billion pounds (39.8 to 42.6 million tons) in 2015

13. 1
3
Key Point #2
• There are ~ 175 sand origin supply
points that can produce in the range of
100 million tons of frac sand annually,
with the 10 sand producers controlling
about 2/3rd of the market capacity
• In 2016 sand consumption is forecast
to be in the range of 35 million tons
• Sand production utilization is therefore
a very low +/- 35% . . . with no market
discipline
• Private Equity has been a big investor
in frac sand space

14. Proppant demand is expected to increase over the next decade
because:
1
4
Secular Demand Drivers for Proppant
……. also there seems to be more interest in utilizing finer mesh sand
(40/70 & 100 mesh) & CRC
• Operators are using longer laterals
• Overall increase in frac sizes per
stage
• Increased number of frac stages per
well
• More sand per stage (overpacking),
and
• Closer well spacing

15. Source: C.L. Dake, Univ of Missouri School of Mines & Metallurgy Bul. Tech. Ser., Vol. 6, No. 1 August 1921
1
5
40/70 & 100 mesh
20/40, 40/70 & 100 mesh
Sand Supply - St Peter the Patron Saint of Frac Sand

16. Bakken Lateral Lengths have Stabilized Around
10,000’
1
6
Source: EIA “Trends in US Oil and Natural Gas Upstream Costs” March 2016, IHS Oil and Gas Upstream Cost Study Co

17. But, Bakken Proppant Rates Per Well Are Still
Increasing
1
7
Source: EIA “Trends in US Oil and Natural Gas Upstream Costs” March 2016, IHS Oil and Gas Upstream Cost Study Co

18. North American Historical Completion Trends
1
8
Source: EIA “Trends in US Oil and Natural Gas Upstream Costs” March 2016, IHS Oil and Gas Upstream Cost Study Co

19. Upside in Proppant Mass Per Well
1
9
Source: Petroleum Connection (Jan. 5, 2016) & Primary Vision, Inc.

20. 2
0
Key Point #3
• Since 2012, North American rig
count down ~75% (1900 in Q1
2014 to 450 Q1 2016), but
shale drilling has become
more efficient and can drill
more wells in the same
amount of time
• Since 2012, average sand use
per well has gone up ~40%
• The upside is that industry
leader EOG uses 2x as much
proppant per well as industry
averages

21. • Revenue per ton for resin coated (Fairmont Santrol) peaked in Q3 2014
• Revenue does not equal profitability and does not tell the full story!
2
1
Sources: SEC Edgar, Yahoo Finance, US Energy Information Administration
$41.95$46.42
$57.85
$48.54
$73.16
$97.78$103.35$98.75$97.34
$105.84
$94.10
$94.34
$0
$20
$40
$60
$80
$100
$120
$140
$160
2015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q42013Q32013Q22013Q1
Revenue / Ton of Sand Sold
Hi-Crush Emerge US Silica Fairmount Santrol WTI (average)
Sand Supplier - Revenue

22. Sand Supplier – EBITDA Margins
Sources: SEC Edgar, Yahoo Finance
• Increasing amounts of sand coupled with lower demand has reduced sand
margins
• EBITDA margins down 80% from “peak” $35/t in Q3 2014 to $7/t Q4 2015
2
2
$6.85
$8.67
$14.73
$24.83
$31.34$34.97$30.14$27.11$26.22$28.91$23.34$25.94
$41.95$46.42
$57.85
$48.54
$73.16
$97.78
$103.35
$98.75$97.34
$105.84
$94.10
$94.34
$0
$20
$40
$60
$80
$100
$120
2015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q42013Q32013Q22013Q1
Adjusted EBITDA / Ton of Sand Sold
Hi-Crush Emerge US Silica Fairmount Santrol EBITDA / Ton Sold (average) WTI (average)

23. FOB MINE
Q3 2014 = $35 EBITDA/t
Sand
Producer
2
3
Source: modified from Raymond James, Global Research Report, August 2014
IN BASIN SALE
Q4 2015 = $7
EBITDA/t
Frac Sand Delivered Cost to Well Site

24. 2
4
Sand Suppliers Building Out Destination Rail Terminals

25. 2
5
Diaz,
UP/BNSF
$58/ton
Lacrosse
CP/BNSF
$62/ton
Mankato
UP
$52/ton
Lacrosse
CP/BNSF/+
$62/ton
$66/ton
$69/ton
Shift in Sales From FOB Mine to “In Basin” Sale is Defining
Moment

26. 2
6
Key Point #4
• If coarse 20/50 sand is no
longer specifically designated
for well completions,
• And locally sourced Brown
Sands are also gaining
market acceptance,
• It stands to reason that sand
origin points closer to in-
basin delivery points are the
low cost suppliers going
forward

27. 2
7
Sector Focus # Companies TEV /LTM EBITDA
E&P Companies 7.3 – 8.6x
Large Cap Integrated Field Services 4 11.6x
Small / Mid Cap Integrated Field Services 10 7.3x
Contract Drillers 7 5.1x
Oilfield Equipment Manufacturers 9 7.7x
Sand & Proppant Producers 5 10.2x
Basin TEV /LTM EBITDA Daily BOE Production
Bakken 12 7.3x $34,118
Eagle Ford 15 7.9x $30,557
Marcellus 14 7.9x $34,243
Niobrara 17 6.8x $28,356
Permian 16 8.6x $28,582
Utica 14 7.8x $29,025
Notes: valuation date March 10, 2016
Source: TEV / EBITDA from Cap IQ
Oilfield Trading Metrics - Median TEV / EBITDA Multiples

28. • TEV multiples have dropped 75% from 23.4x “peak” in Q2 2014 to
5.8x “trough” in Q3 2015
• The TEV multiple in Q4 2015 stands at 9.0x
2
8
Sources: SEC Edgar, Yahoo Finance
9.0
5.86.1
8.1
8.7
13.2
23.4
18.4
15.5
0
5
10
15
20
25
30
35
2015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q4
TEV / LTM (Adjusted) EBITDA
Hi-Crush Emerge US Silica Fairmount Santrol TEV / LTM (adjusted) EBITDA Multiple
Sand Producer - Trading Multiples

29. • The Implied Frac Sand Industry TEV has dropped 87% from $33.0
billion “peak” in Q2 2014 to $4.2 billion “trough” in Q3 2015
• The Implied Frac Sand Industry TEV in Q4 2015 stands at $4.4 billion
2
9
Sources: SEC Edgar, Yahoo Finance
9.0
5.86.18.18.7
13.2
23.4
18.4
15.5
$4.4$4.2
$6.6
$13.4
$17.1
$25.4
$33.0
$21.1
$15.6
$6.85
$8.67
$14.73
$24.83
$31.34
$34.97
$30.14
$27.11$26.22
0
5
10
15
20
25
30
35
40
2015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q4
TEV / LTM (adjusted) EBITDA Multiple Implied Frac Sand Industry TEV (USD Billions) EBITDA / Ton Sold (average)
Sand Producer - Metrics

30. Source: Private Equity Analyst as cited in Probitas Partners - Private Equity Forecast & Desk Book for 2015
3
0
Commitments to U.S. Private Equity Partnerships by
Sector

31. 3
1
Fundraising reached record level in 2015, with 62 funds raising a total of
$62.6 bn
Sources: Preqin Natural Resources Online
Annual Natural Resources Fundraising

32. 3
2
Energy-focused funds continue to be the main driver of fundraising
with 76% of all funds closed (47) and 91% of total aggregate capital
raised
Sources: Preqin Natural Resources Online
Breakdown of Natural Resource Fundraising in 2015 by
Strategy

33. 3
3
Key Point #5
• $243 billion committed to
US equity partnerships in
2014
• ~ $60 billion/yr or 25%
committed to the
“alternative natural
resource space”
• 90% of the money
committed to the
alternative natural resource
space is to the “energy
sector”, less than 1% to
“metals & mining”

34. 3
4
Valuation-to-EBITDA multiples at very high level
M&A Transaction Multiples (All Industries)

35. 3
5
Source: GF Data
The so-called “size premium” the reward given to larger businesses over
comparable smaller ones remains high
5.0
5.5
6.0
6.5
7.0
7.5
8.0
8.5
9.0
9.5
2011 2012 2013 2014 2015
TEV 10-25 TEV 25-50 TEV 50-100 TEV 100-250
Valuation Overview – The Size Premium

36. 3
6
Source: GF Data
• Buyers continue to place premiums on size, on above average
financial performance, and on institutional ownership prior to
purchase
• The reward is much greater though for larger business (at $100-250
mm TEV 24% pickup in valuation 9.0x to 11.2x)
Valuation Drilldown - 2015

37. 3
7
Key Point #6
• M&A levels are high with slight
upward bias at ~ 9.0x TEV to
EBITDA
• There is a size premium built into
valuation multiples, 5.9x $10-
25mm TEV versus 9.0x $100-
250mm TEV
• Buyers continue to place
premiums on above average
financial performance, and on
institutional ownership prior to
purchase. The reward is much
greater though for larger business
(at $100-250mm TEV 24% pickup
in valuation 9.0x to 11.2x)

38. In response to the oil downturn . . .
Final Observations
38
Sand producers (and Oil Producers) have
idled their high cost production
Transportation costs have been reduced by utilizing
“plus size” unit trains
Sand Producers have and are developing in-
basin terminal distribution networks
Sand Producers and Stimulation Companies have pushed
the technology envelope and expanded their product
platforms
Head counts and $ flowing to the hinterlands are down, well
costs are down & type curves continue to show incremental
improvements

39. Rig Count Down, Head Count Down
3
9
Source: Bureau of Labor Statistics & Bloomberg “Shale Rebound Work in Progress” April 1, 2016
Note: US oil & gas sector payrolls and rigs in operation, indexed
• Rig count more volatile than head count
• One thing that sets this downturn apart is length of time before bottoming

40. Layoffs in the Hinterlands
4
0
Source: Bureau of Labor Statistics & Bloomberg “Shale Rebound Work in Progress” April 1, 2016
• 8 out of every 10 layoffs have been on support side (rig workers,
drill operators and supervisors out in the field)
• Not as many layoffs as the petroleum engineers, geoscientists
and others classified by BLS as extraction workers
10
%
29
%

41. Average Drilling and Completion Costs Have Declined
Since 2012
4
1
Source: EIA “Trends in US Oil and Natural Gas Upstream Costs” March 2016, IHS Oil and Gas Upstream Cost Study Co
~ 30%

42. Average Drilling & Completion Cost Drivers for US
Onshore
4
2
Source: EIA “Trends in US Oil and Natural Gas Upstream Costs” March 2016, IHS Oil and Gas Upstream Cost Study Co
23%
11%
14%
12%
15%
24%
Other
Casing and Cement
Proppant
Completion Fluids, Flow
Back
Rig and Drilling Fluids
Frac Pumps, Equipment

43. Bakken Type Curve Productivity Increases
4
3
Source: March 22, 2016 Fed Notes of Board of Governors of the Federal Reserve System

44. Breakeven Oil Prices (WTI $/Bbl): US Onshore
4
4
Source: Company Reports, Raymond James research

45. Breakeven Oil Prices (WTI $/Bbl): Areas Outside US
Onshore
4
5
Source: Company Reports, Raymond James research

46. Global Liquid Supply Cost Curve is Dynamic (and
Getting Flatter)
4
6
Source: modified from Rystad Energy
USD/bbl cost curve

47. Price Required to Achieve 10% A-Tax ROR
4
7
Source: EOG Resources Q1 2016 Investor Presentation

48. Headwaters MB named Investment Bank of the Year for the second
consecutive year
Closing Thoughts
• Shift in sales from “FOB mine” to “In-Basin” alters the Sand
Supply Cost Curve
• The E &P and Oilfield Services sectors are already into a major
period of restructuring, the “right sizing” of the Sand sector has
just begun
• Size (>$100 mm TEV) and quality do matter and are rewarded
M&A premiums
• Core areas of onshore US shale plays are competitively globally
INVESTMENT
BANK
OF THE YEAR
INVESTMENT
BANK OF THE
YEAR
2015