This presentation was given by Joel Schneyer, Managing Director at Headwaters MB at The North American Frac Sand Exhibition & Conference in Houston, TX.

1. Will Point-To-Point Distribution Drive
Sand Industry Consolidation?
The North American Frac Sand Exhibition & Conference 2017
Houston, Texas
Joel Schneyer – Managing Director
jschneyer@headwatersmb.com
303.619.4211
February 22, 2017

2. It Feels Like the Industry Is Off The Bottom
Page | 2
Rig counts, company budgets, and frac sand forecasts have turned a corner…
and there are a number of positive developments in the marketplace

3. Drilling Activity Is On The Upswing
Page | 3
0
500
1,000
1,500
2,000
2,500
2/4/2011
4/4/2011
6/4/2011
8/4/2011
10/4/2011
12/4/2011
2/4/2012
4/4/2012
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12/4/2015
2/4/2016
4/4/2016
6/4/2016
8/4/2016
10/4/2016
12/4/2016
TotalNumberofRigs(Oil+Gas)
Weekly Rig Count by Basin
Others Fayetteville Granite Wash Haynesville Mississippian
Barnett Utica Cana Woodford Arkoma Woodford Ardmore Woodford
DJ-Niobrara Eagle Ford Marcellus Permian Williston
Source: Baker Hughes, North America Rotary Rig Count Current Week Data, as of January 13, 2017

4. … Driven by Horizontal Wells
Page | 4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100% 2/4/2011
4/4/2011
6/4/2011
8/4/2011
10/4/2011
12/4/2011
2/4/2012
4/4/2012
6/4/2012
8/4/2012
10/4/2012
12/4/2012
2/4/2013
4/4/2013
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8/4/2015
10/4/2015
12/4/2015
2/4/2016
4/4/2016
6/4/2016
8/4/2016
10/4/2016
12/4/2016
Proportion of Active Rigs by Trajectory
Horizontal Directional Vertical
> 90% Horizontal &
Directional Wells
as of January 2017
….
Source: Baker Hughes, North America Rotary Rig Count Current Week Data, as of January 13, 2017

5. Completion Trends Create New Proppant Demand Drivers
Page | 5
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

6. Trend Shows Increasing Proppant Volume Demand Per Well
Page | 6
Source: Energent Group
Industry Average Proppant per Job
EOG Average Proppant per Job
3,210 tons
N = 8451
6,450 tons
N = 366
TonsTons

7. But Things Are Different Now…
Page | 7
WE A
Operators are using more sand, and are finding finer and lower-quality sand fits the
needs as well as their tight budgets

8. Source: C.L. Dake, Univ of Missouri School of Mines & Metallurgy Bul. Tech. Ser., Vol. 6, No. 1 August 1921
Sand Supply - No Shortage of Frac Sand Deposits
40/70 & 100 mesh: Southern White
20/40, 40/70 & 100 mesh: Northern White
Page | 8

9. 14% 40%
share market
Regional sand
$210 million
Regional Sand is No Longer Shunned
Page | 9
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)
• Trend toward “In-Basin” sales versus FOB Mine
• Use of finer grain sizes
• Acceptance of lower quality “Brown” or “Regional Sand”
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

10. Page | 10
Texas Regional “Brown” or “Hickory” Sand Northern White Sand
Regional Sand Seems to Be Good Enough

11. Source: Energent Frac Report data & company SEC disclosures
Large Overhang Of Capacity Has Been Sitting On The Sidelines
• ~ 108 million tons of industry capacity equates to 27 million tons per quarter of sand
available for sale
• 4 public companies provide ~ 60% of the industry’s current sand demands
Page | 11
0
2
4
6
8
10
12
14
16
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
2013Q2
2013Q1
ProppantSold(MMtons)
Other Companies Hi-Crush Emerge US Silica
Fairmount Santrol Smart Sand Eagle Materials Muskie Proppants

12. US Proppant Demand Is Set For A Rebound
Page | 12
Source: Smart Sand Inc. S/1 dated September 16, 2016 filed on Edgar
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
-
5,000
10,000
15,000
20,000
25,000
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
New Horizontal Wells Proppant Demand (Million Tons)
New Horizontal Wells 20,236 23,674 16,029 8,331 11,115 13,236 16,286 16,860
Proppant Demand 55.0 72.5 52.5 30.0 45.0 59.0 77.5 85.0
Tons Proppant / Well 2,718 3,062 3,275 3,601 4,049 4,458 4,759 5,042
NewUSHorizontalWells
ProppantDemanded(milliontons)

13. There Will Be Winners and Losers
Page | 13
Someone must receive the smaller slice of the economic pie

14. Supply Chain Profit Squeeze: Delivering Sand to Well Sites
Page | 14
$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

15. Eagle Ford In-Basin Delivered Cost Estimates
Page | 15
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

16. Distance Matters: Estimated Delivered Cost of Sand To Eagle Ford
Page | 16
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

17. Airlines Analogy: Hub-and-Spoke Versus Point-to-Point
Page | 17
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

18. The Frac Sand Industry Scorecard
Page | 18
WINNERS
“Point-to-Point”
Regional Sand Suppliers
(lowest cost
substitute)
Southern White Sand
Mines located in
Missouri and Arkansas
(proximity to highest
demand growth)
Regional Truckers
(replacement of long-
distance railcar supply)
Mixed
Big “Hub & Spoke”
Northern White Mines
Short-line Railroads
LOSERS
×Marginal Northern
White Mines
×(need to truck to
outbound transload)
Class I Railroads
(reduced carload
volumes)



×
×

19. What is the New Paradigm?
Page | 19
Follow the supply chain

20. Sand Producers Building Out Destination Rail Terminals
Page | 20
Sources: Company websites

21. What Are the Sand Companies Doing To Respond?
Page | 21
• Expanding their product lines into
resin coated sands to get out of
commodity space
• Increasing their product lines to
include regional sands
Diversifying
Product Lines
• Building out or partnering with
transload operators
• Looking at “shipping box” and
providing the last mile solution
Squeezing
Value
from
Logistics

22. Expect Sand Prices to Rise
Page | 22
The market expects sand companies to make money too

23. Sources: SEC Edgar, Yahoo Finance, Headwaters MB research
The Market Is Expecting Higher Volumes and Better Margins
Page | 23
86.7
58.5
23.6
9.1
5.86.18.08.5
12.6
21.2
16.9
14.3
0
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60
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100
2016Q32016Q22016Q12015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q4
TEV / LTM (Adjusted) EBITDA
Hi-Crush Emerge US Silica Fairmount Santrol Average

24. Sources: SEC Edgar, Yahoo Finance, Headwaters MB research
EBITDA Margins Already Up $7 - 10/Ton (Q1 2017 over Q3 2016)
$PerTon
Page | 24
-$50
-$40
-$30
-$20
-$10
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
2013Q2
2013Q1 Adjusted EBITDA US $ / Ton Sold
Hi-Crush P Emerge P US Silica P Fairmount Santrol P US Silica IS Fairmount Santrol IS WTI Ave Price

25. This Is The End To Growth At Any Cost
Page | 25
Customers are now more focused on making money

26. Breakeven* Oil Price in Key Worldwide Basins
Page | 26
Notes: * Price required to achieve 10% Direct ATROR
Source: EOG Presentation at Bank of America Merrill Lynch Global Energy Conference November 2016

27. Strong Regional Variation in Proppant Demand Exists…
• Proppant demand fell 17% between 2014 (52 mm tons) and 2015 (43 mm tons) and
current run rate for 2016 was ~ 30 million tons, about 25% less than 2015
• Permian Basin forecast to be most active…because it has the best economics
Page | 27
Source: Energent Frac Report, data as of January 2017
-
1
2
3
4
5
6
Proppant(MMtons)
Other Williston Granite Wash Mississippian Fayetteville Woodford
DJ-Niobrara Barnett Eagle Ford Utica Marcellus Permian

28. … But, Overall Proppant Demand Whips Behind Oil Price Changes
Page | 28
Sources: Energent Frac Report, data as of January 2017; Energy Information Administration, Cushing, OK WTI Spot Price FOB (USD per Barrel) as of Dec 2016
$0
$20
$40
$60
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$120
0
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Jan-13
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Nov-16
OilPrice(WTI,USD/barrel)
Proppant(MMtons)
Total US - Proppant Spot Price Oil
• Proppant demand covaries with oil price with approximately a 6 month lag

29. While A Future Proppant Demand Boom is Widely Acknowledged
• Projected proppant rebound to ~ 55 MM tons in 2017, followed by ~ 73 MM tons in 2018
• Oil price trajectory suggests proppant markets may be optimistic
Page | 29
$0
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$70
$80
$90
$100
-
10
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40
50
60
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90
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
OilPrice(WTI,USD/barrel)
Proppant(MMtons)
Energent - actuals Superior Silica - Consensus Smart Sand S/1
"Tudor Pickering & Holt" Jeffries Goldman Sachs
Wells Fargo RBC Oil Price - EIA
Sources:
• Smart Sand Inc. S/1 dated September 16, 2016 filed on Edgar
• Rich Shearer (President & CEO) Superior Silica Sand presentation at the Industrial Minerals 4th Frac Frac Sand Conference in Minneapolis Sept 13, 2016
• Wells Fargo, Oil Service Statistics and Valuation Handbook, January 6, 2017
• RBC Capital, Frac Sand Supply Demand Update, December 5, 2016
• Energy Information Administration, Short-Term Energy Outlook, as of January 10, 2017, and Annual Energy Outlook, Table: Petroleum and Other Liquids Prices

30. CLOSING THOUGHTS – Check the Numbers
Page | 30
• US proppant demand is set for a rebound… but the proppant forecasts seem too
optimistic and do not appear to reflect the oil price, supply-demand feedback loop
Sources:
• Energy Information Administration, Short-Term Energy Outlook, as of January 10, 2017, and Annual Energy Outlook, Table: Petroleum and Other Liquids Prices
• Headwaters MB research, correlation of historical proppant, oil price, and production
• Energent, Frac Report data as of January 2017
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10
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60
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80
90 2013
2014
2015
2016E
2017E
2018E
2019E
2020E
MMBOE/dayProduction
Proppant(MMtons)
Proppant - actual reported
Proppant - Mean Analyst Forecast
Oil&Gas Production - Most Likely -
EIA
Oil&Gas Production, with Low Oil
Price - EIA
Oil&Gas Production - actual
reported
Oil&Gas Production - Inferred from
Proppant Correlation
Continental Onshore USA
Tight Oil & Gas Production