Capitalizing on compelling industry fundamentals.
We intend to continue to position ourselves as a leading producer of high quality frac sand, as we believe the frac sand market offers attractive growth fundamentals over the long-term. The innovations in horizontal drilling in the various North American shale plays and other unconventional oil and natural gas plays has resulted in greater demand for frac sand per well and per stage. The long-term growth in sand demand is underpinned by continued horizontal drilling, increasing proppant use per well and cost advantages over resin-coated sand and manufactured ceramics. The proppant use per well has continued to increase even in the face of depressed hydrocarbon prices. We believe increases in frac sand supply will be constrained by the difficulty in finding reserves that meet or exceed API technical specifications in contiguous quantities large enough to justify the capital investment required and overcome the challenges associated with successfully obtaining the necessary local, state and federal permits required for operations.
Building on our position as a high-value producer and distributor.
We continually seek to lead and innovate as a premium provider of proppant and logistics services to the North American petroleum industry. Our plant operations have been strategically designed to provide low per-unit production costs with a significant variable component for the excavation and processing of our sand. We will continue to analyze and pursue organic expansion efforts that will similarly allow us to cost-effectively optimize our existing assets. In addition, we seek to identify and evaluate destination terminal sites to expand our geographic footprint, allowing us to enhance our distribution network and ensure that sand is available to meet the in-basin needs of our customers. Through a combination of our low cost production and our network of owned and operated terminals or third-party operated sites, we expect to find ways to reduce our customers’ cost of sand delivered to the well site. We will continue to analyze and pursue third-party acquisition opportunities that would similarly allow us to cost-effectively expand our geographic footprint, optimize our existing assets and meet our customers’ demand for our high quality frac sand.
Focusing on long-term relationships with key customers.
A key component of our business model has been our contracting strategy, which seeks to secure a high percentage of our cash flows under long-term contracts with the major pressure pumping service providers who are our customers. We believe this business model serves as the foundation for our ability to serve our customers, while providing the product that is a critical component to the well completion service. We intend to utilize a substantial majority of our processing capacity to fulfill our customer contracts and continue to serve our customers with frac sand delivered to existing and new customers through our distribution network.
Pursuing accretive acquisitions from our sponsor and third parties.
We have actively pursued strategic acquisitions that we believe will benefit unit holders. On August 10, 2016, Hi-Crush Partners LP entered into a contribution agreement with Hi-Crush Proppants LLC to acquire one hundred percent of the equity interest in the Blair facility. On April 28, 2014, the Partnership entered into a contribution agreement with our sponsor to acquire substantially all of the remaining equity interests in our sponsor’s Augusta facility. On June 10, 2013, we acquired D&I, enabling us to operate through an extensive logistics network of rail-served destination terminals now strategically located throughout Pennsylvania, Ohio, New York and Texas. We expect to continue pursuing accretive acquisitions of frac sand facilities from our sponsor, including the sponsor’s Whitehall facility, as well as third-party frac sand production and/or distribution operations. As we evaluate acquisition opportunities, we intend to remain focused on operations that complement our reserves of premium frac sand and that provide or would accommodate the development and construction of rail or other advantaged logistics and distribution capabilities. We believe these factors are critical to our business model and are important characteristics for any potential acquisitions.
Maintaining financial flexibility and ample liquidity.
We plan to pursue a disciplined financial policy and maintain liquidity aligned with our future debt maturities and financing needs. We believe that our borrowing capacity and ability to access debt and equity capital markets provides us with the financial flexibility necessary to achieve our organic expansion and acquisition strategy.