This presentation was given by Joel Schneyer, Managing Director at Headwaters MB at the Petroleum Connection 5th Annual Frac Sand Supply & Logistics Conference in San Antonio, TX.

1. The Impending Sand Industry Consolidation
Petroleum Connection 5th Annual Sand Supply & Logistics Conference
San Antonio, Texas
Joel Schneyer – Managing Director
jschneyer@headwatersmb.com
303.619.4211
October 13, 2016

2. US Proppant Demand Plummeted But Is Set to Rebound
• Proppant demand fell approximately 20% between 2014 and 2015 and current run rate
for 2016 is in the 25 to 30 million ton range – approximately 35% less than 2015
• Projected rebound to 50 million tons in 2017, Texas leading the way
102.9 billion pounds
(51.5 million tons)
85.4 billion pounds
(42.7 million tons)
26.1 billion pounds – YTD
(13.1 million tons)
Return to 2015
consumption in 2017
( ~ 50 million tons)
Page | 2
ProppantConsumption(billionlbs)
100
75
50
25
0
Source: Energent Group
2016 est. 25 – 30
million tons

3. Source: adapted from NavPort Presentation (April 2015), Canadian Frac Sand Logistics & Market Forecast Summit in Calgary & company websites
Top Sand Producers Embrace The Value of Innovation
Page | 3
PercentofCapacityMarketShare
Chieftain
Badger Mining Corp
EOG
Eagle Materials, Inc.
Hi Crush Partners
Preferred Sands
Superior Silica Sands
Santrol
US Silica
Unimin
50%
60%
70%
40%
30%
20%
10%
0%
• 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

4. Source: Company and Private Equity press releases and websites
Private Equity Continues To Be Active In the Space
Page | 4
Files new S/1 for IPO as an “Inc” Sept 2016
Files new S/1 for IPO as an “Inc” Sept 2016

5. Key Point #1 : Sand Overcapacity & Innovation
Industry can produce in the range of 100
million tons of frac sand annually, with the top
10 sand producers controlling about ~2/3rds of
the market capacity. The industry built big,
efficient mines and distribution hubs in WI, IL,
and MN to meet this growing demand …
… but in 2016 sand consumption is forecast to
be in the range of 25 - 30 million tons with a
rebound to 50 million tons in 2017.
Therefore sand production utilization in 2016 is
a very low 25% - 30% …. with little market
discipline.
Page | 5
At the same time, sand producers have
embraced new products for competitive
advantage and better profitability, to shift
away from commodity products and pricing.

6. Completion Trends Create New Proppant Demand Drivers
Page | 6
Longer
Laterals
MoreStages
Overpacking
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2012 2013 2014 2015
Average Sand per Well
(Permian/ Bakken/ Eagle
Ford)
CloserWell
Spacing
>2xincrease
2016to2018
0
5,000
10,000
15,000
20,000
25,000
2014 2016 2017 2018
# Horizontal Wells
0
200
400
600
800
1,000
1,200
1,400
2014 2016 2017 2018
# Active Horizontal
Rigs
• Increase in frac
sizes per stage
• Increased interest
in utilizing finer
mesh sand (40/70
& 100 mesh) & CRC
Source: Goldman Sachs Global Investment Research (July 2016),
Bloomberg Intelligence 0
500
1,000
1,500
2,000
Permian Williston Eagle
Ford
Pounds Sand Per
Lateral Foot
2012 2016

7. Trend Shows Increasing Proppant Volume Demand Per Well
Page | 7
Source: Energent Group
Industry Average Proppant per Job
EOG Average Proppant per Job
3,000 tons
6,000 tons
TonsTons ~ 75% increase in 18 months

8. 38 Frac Jobs In Last Year Used Greater Than 25 M Lbs. Of Proppant
Page | 8
Note: N = 209 frac jobs between October 1 2015 – October 1 2016
Source: Energent Group
NumberofFracJobs
Proppant Volume Used Per Job (Million Lbs)

9. Key Point #2: Increasing Completion Density Creates Demand
Page | 9
Shale drilling has become more efficient and
the industry can drill more wells in the same
amount of time…
… and average sand use per well has gone up
~40% from 2012, with industry leader EOG
using 2x as much proppant per well as
industry averages
… thus the rig count will not represent the
ongoing demand for sand.

10. Source: C.L. Dake, Univ of Missouri School of Mines & Metallurgy Bul. Tech. Ser., Vol. 6, No. 1 August 1921
Sand Supply - St Peter the Patron Saint of Frac Sand
40/70 & 100 mesh : Southern White
20/40, 40/70 & 100 mesh : Northern White
Page | 10

11. 14% > 40%
share market
$210 million
Brown sand market penetration estimated to have increased from 14% in
2014 to more than 40% currently
U.S. Silica purchased brown-sand miner NBR Sand in July 2016 with plans to
double output near Texas oilfields to 2 million tons/year
Regional Sand A Growing Source of P2P Cost Savings
Page | 11
Major Northern or White
frac sand producing region
Major Texas Brown, Brady
Brown, Hickory, and other
sand types
Sources: Bloomberg Markets “The Next Shale Boom Will Be Built on Sand” (August 3, 2016),
PacWest (2014)

12. Key Point #3: Lower Sand Specifications Drives Local Sourcing
Page | 12
If coarse 20/50 sand is no longer specifically
required for well completions,
… it stands to reason that sand origin points
closer to the end-user, taking advantage of
point-to-point distribution are the low cost
solution.
… and locally sourced Brown or Regional Sand
gain market acceptance,

13. Eagle Ford In-Basin Delivered Cost Estimates
Page | 13
Source: Headwaters MB research
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
$100.00
mining/processing outbound transload barge
rail truck rail line switch
short line inbound transload 3rd party transload fee
CostPerTon
Regional Sand
$45-49/t
Southern
White Sand
$52-58/t
Northern
White Sand
$60-65/t
unit train
& volume
discounts
Northern
White Sand
$65-68/t
unit train
Northern
White Sand
$71-75/t
unit train
& volume
discounts
& rail line
switch
Northern
White Sand
$82-86/t
manifest
Northern
White Sand
$93-99/t
manifest
& rail line switch
Northern White Sand
Southern
White Sand
Regional Sand

14. Airlines Analogy: Hub-and-Spoke Versus Point-to-Point
Page | 14
Minneapolis Hub for Delta Airlines
• Subject to congestion and delays at hubs
• High capital investment to cope with surge hours
P2P Route Map for Spirit Airlines
• Minimizes connections and travel time
• Reduced interdependency of flights
Sources: Company websites

15. Sand producers and independent transload
operators will continue to crowd each other for
the same economic pie...
Key Point #4: Shift To “In Basin” Sales Is Defining Survival
… thus, capturing access to the closest point-to-
point sand supplies and the lowest cost in-
basin terminals (i.e. unit train & dual track
service) is critical for long-term survival.
… and no clear alternatives exist for both to
make profits unless they utilize the lowest cost
logistics chain….
Page | 15

16. Supply Chain Profit Squeeze: Delivering Sand to Well Sites
Page | 16
$15 - $30 / ton
$30 - $60 / ton
$7 - $20 / ton $15 - $50 / ton
In-basin sales of frac sand is a game changer:
The frac sand producer must now work into his economics all the costs of
production and delivery of products through to the “Basin Transload”
Sources: Headwaters MB research

17. Sources: SEC Edgar, Yahoo Finance, Headwaters MB research
Industry Metrics: Transload & Frac Sand Producers
$9.50$10.75$10.50
$17.50$21.75$18.00$17.25
$15.25$14.50
$16.75
$20.75
$19.75
$25.75
$3.75$3.00
$4.00
$10.50$10.00$9.25$7.75$10.00$9.50$10.25$9.50
$13.75$16.75
$54.58
$61.12
$65.35
$69.26
$78.50
$93.99
$99.45$98.86
$93.20$95.25
$87.87
$84.85
$59.64
$63.57
-$9.57-$8.47
$7.23
$8.67
$14.76
$25.28
$31.34
$34.97
$30.14
$27.11$26.22
$28.91
$23.34
$25.94
-$20
$0
$20
$40
$60
$80
$100
$120
2016Q22016Q12015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q42013Q32013Q22013Q1
Transload Revenue / Ton Transload EBITDA / Ton
Frac Sand Producer Revenue / Ton Frac Sand Producer EBITDA / ton
FOB Mine
In Basin Sale
$PerTon
Page | 17

18. Sand Producers Building Out Destination Rail Terminals
Page | 18
Sources: Company websites

19. Key Point #5: Value Seen In Streamlining the Supply Chain
Sand producers are looking to reduce the
overall in-basin delivered cost structure,
… thus,
• sand producers will look to eliminate line
switching from sand origin to destination
wherever possible,
• the use of unit trains will increase, and
• producers will seek to control
(ownership?) the best in-basin terminals.
Page | 19

20. Quarterly US Proppant Demand – Texas Leading the Way
Page | 20
ProppantConsumption(billionlbs)
30
20
10
0
Source: Energent Group

21. Eagle Ford Ranked #1 in Economic Returns by EOG
Page | 21
Source: EOG Presentation at JP Morgan Energy Conference 2016

22. Global Liquid Supply Cost Curve is Dynamic (and Getting Flatter)
Source: modified from Rystad Energy, Investing.com, Headwaters MB research
USD/bbl
Breakeven cost curve
Page | 22
10 Year Bond Yield
Canada = 1.07%
USA = 1.70%
Qatar = 3.06%
Mexico = 6.12%
Columbia = 7.28%
Russia = 8.13%
Turkey = 9.45%
Brazil = 11.63%
Egypt = 17.50%
Venezuela = 21.12%
Onshore
Russia
Extra
Heavy
Oil
Ultra
Deepwater
a

23. Key Point #6: Risk Adjusted Returns Will Drive Drilling Activity
… with some of the best return profiles coming
from the Eagle Ford & Permian basins
Page | 23
Competitive advantages are awarded to assets
that can provide the greatest risk adjusted
returns …
... and the return profile of North American
shale is competitive globally

24. Source: Company and Private Equity press releases and websites
Sand Industry Update – Transactions of Interest
Page | 24
Date Target Description Acquirer
Transaction
Value
Oct-16 Arrows UP Purchase of interest in shipping "box" bulk transport system OmniTrax Equity interest
Sep-16 Sanjel/Terracor Court approved acquisition of three frac sand transload
terminals and undeveloped WI frac sand mine out of CCAA
OmniTrax $19.5 million
Sep-16 Hi-Crush Blair LLC Acquisition of northern white sand mine in Blair, WI with
2.86 million tons of annual capacity
Hi-Crush Partners LP ~ $166 million
Aug-16 Sandbox Enterprises LLC Acquisition of frac sand shipping "box" logistics solutions
provider
US Silica Holdings Inc $218.3 million
Jul-16 NBR Sand LLC Acquisition of regional brown sand mine in Tyler, TX with
T12M sales of 740,000 tons
US Silica Holdings Inc $210 million
Jun-16 Emerge Energy Services
Operating LLC
Sale of Emerge's fuels business the Sunoco Parties $178.5 million
Jan-15 Preferred Sands LLC Acquisition of regional sand producer Hanson Lake in
Saskatoon
Gordon Brothers Group
and Hilco Industrial
~ $30 million
Date Issuer Description Owner IPO Value
Sep-16 Muskie Proppants Portfolio company of PE Wexford Capital and portfolio
partner Gulfport Energy file IPO for energy services rollup
Mammoth Energy Services Inc
PE Wexford Capital ~ $128 million
Sep-16 Smart Sand Inc Portfolio company of PE Clearlake Capital files IPO PE Clearlake Capital $100 million
Date Seller Description Offering Type Gross Proceeds
Aug-16 Emerge Energy Services LP Sold new Series A Preferred Units to institutional investor Unit Offering $20 million
Aug-16 Hi-Crush Partners LP Priced 6.5 million units at $12.35/unit Unit Offering $80.3 million
Jul-16 Fairmont Santrol Priced 25.00 million shares at $5.94/share Share Offering $148.75 million

25. Distance Matters: Estimated Delivered Cost of Sand To Eagle Ford
Page | 25
Source: Headwaters MB research (2016); U.S. EIA based on data from various published studies as of April 2015
Red : > $82/ton manifest
Orange : ~ $60 - $75/ton unit trains
Blue : ~ $52-58/ton rail & barge
Green : ~ $45-49/ton truck
Lower 48 Shale Plays and Major Sand Basins

26. Closing Thoughts ...
The impending sand industry consolidation will be driven by:
Thank you
Headwaters MB named Investment Bank of the Year for the second consecutive year
INVESTMENT
BANK
OF THE YEAR
INVESTMENT
BANK OF THE
YEAR
2015
Page | 26
•Interest in increased
liquidity via:
•Asset sales
•Share offerings
Financial
Health
•Curable resin coatings
•Dust coatings
Innovation
•Terminals
•Unit trains
•“Box logistics”
Logistics
•Acquisition of sand mines
closer to the in-basin sale
(Regional & Southern White
Sand)
Optimized
Sourcing