SUMMARY

         This summary provides a brief overview of information contained elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common units. You should read the entire prospectus carefully, including the historical and pro forma financial statements and the notes to those financial statements included in this prospectus. Unless indicated otherwise, the information presented in this prospectus assumes an initial public offering price of $            per common unit (the midpoint of the price range set forth on the cover page of this prospectus) and that the underwriters' option to purchase additional common units is not exercised. You should read "Risk Factors" beginning on page 28 for more information about important risks that you should consider carefully before buying our common units. We include a glossary of some of the terms used in this prospectus as Appendix B.

         References in this prospectus to "Emerge Energy Services," "we," "our," "us," "the Partnership" or like terms refer to Emerge Energy Services LP and its wholly owned subsidiaries after giving effect to the transactions described under "—Partnership Structure and Offering-Related Transactions" beginning on page 14. References in this prospectus to "Emerge GP" refer to Emerge Energy Services GP LLC, our general partner. References in this prospectus to "Insight Equity" refer to Insight Equity Management Company LLC and its affiliated investment funds and its controlling equity owners, Ted W. Beneski and Victor L. Vescovo. References in this prospectus to "Emerge Holdings" refer to Emerge Energy Services Holdings LLC, a Delaware limited liability company owned by Insight Equity that will own our general partner upon the consummation of this offering. We conduct our Sand operations through our subsidiary Superior Silica Sands LLC, or SSS, and our Fuel Processing and Distribution operations through our subsidiaries Allied Energy Company LLC, or AEC, and Insight Equity Acquisition Partners, LP, which we call Direct Fuels. Please read "Certain Definitions" beginning on page v for information on additional defined terms we use in this prospectus.

Overview

        We are a growth-oriented limited partnership recently formed by management and affiliates of Insight Equity to own, operate, acquire and develop a diversified portfolio of energy service assets. We believe this diversification provides a more stable cash flow profile compared to companies with operations in only one business or one location. Our operations are organized into two service oriented business segments:

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Sand, which primarily consists of mining and processing frac sand, a key component used in hydraulic fracturing of oil and natural gas wells; and



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Fuel Processing and Distribution, which primarily consists of acquiring, processing and separating the transportation mixture, or transmix, that results when multiple types of refined petroleum products are transported sequentially through a pipeline.

Our Sand segment is expanding rapidly and we expect it to continue to provide a significant majority of our cash available for distribution in the future.

Summary of Key Strengths

Sand Segment

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Large reserve of high quality coarse frac sand



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Efficient logistics network



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Low cost operating structure



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Significant organic growth capacity

 

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Highly experienced management team

Fuel Processing and Distribution Segment

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Strong regional market position in Dallas-Fort Worth and Birmingham



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Low cost operating structure



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Highly experienced management team

Sand Segment Overview

Market Dynamics

        Advances in unconventional oil and natural gas extraction techniques, such as horizontal drilling and hydraulic fracturing, have allowed for significantly greater extraction of oil and natural gas trapped within unconventional resource basins such as shale rock. In the hydraulic fracturing process, granular material, called proppant, is suspended and transported in the fluid and fills the fracture, "propping" it open once high-pressure pumping stops, allowing for the hydrocarbons to flow freely to the wellhead. Frac sand represents the lowest cost and largest volume of proppant supplied to pressure pumping companies and operators. According to a report by the Freedonia Group dated March 1, 2012, which we refer to as the Freedonia Report, North American raw frac sand demand, by weight, grew 29% per year from 2006 to 2011 and is expected to grow 7.3% per year from 2011 to 2016.

Historical and Projected Proppant Demand and Raw Frac Sand Price

Source: The Freedonia Group

        Frac sand must meet stringent requirements for grain size, crush strength and sphericty in addition to several other important criteria as determined by the American Petroleum Institute, or API. Larger, coarser sand grains (such as 16/30, 20/40 and 30/50 mesh) are typically used in hydraulic fracturing processes targeting oil and liquids-rich natural gas recovery, while smaller, finer grains (such as 40/70 and higher mesh) are used primarily in dry natural gas drilling applications. Deposits of coarse sand that satisfy API standards are predominantly found in the upper Midwest, with the greatest concentration in the state of Wisconsin. Although the exploration and production industry is cyclical and oil prices have historically been volatile, we believe that many of the domestic oil and liquids-rich natural gas plays are economically attractive at prices substantially below the current prevailing prices for oil- and liquids-rich natural gas. We believe this should provide continued and growing opportunities for drilling activity in oil- and liquids-rich natural gas formations and continued growth in demand for coarser frac sands.

 

Facilities

        Our Sand segment consists of facilities in New Auburn, Wisconsin, Barron County, Wisconsin and Kosse, Texas that are optimized to exploit the reserve profile in place at each location and produce high-quality frac sand. Our Wisconsin sand reserves at our New Auburn and Barron facilities provide us access to a wide range of high-quality sand that meets or exceeds all API specifications and includes a significant concentration of 16/30, 20/40 and 30/50 mesh sands, which have become the preferred sand for oil and liquids-rich gas drilling applications. We also believe that our Wisconsin reserves provide us access to a disproportionate amount of coarse sand (16/30, 20/40 and 30/50 mesh sands) compared to other northern Ottawa white deposits located in Wisconsin's Jordan, St. Peter and Wonewoc formations. According to a report published February 6, 2013 by PropTester®, Inc. and KELRIK, LLC, which we refer to as the PropTester® Report, many of the northern Ottawa white deposits in these formations contain less than 30% 40 mesh and coarser substrate. However, our sample boring data has indicated that our Wisconsin reserves contain deposits of nearly 35% 40 mesh or coarser substrate with our Barron reserves being comprised of more than 60% 50 mesh or coarser substrate. We are also one of a select number of mine operators that can offer commercial amounts of 16/30 mesh sand, the coarsest grade of widely-used frac sand on the market, which along with other coarse sands is currently subject to high demand from our customers. The coarseness of our reserves also provides us with a meaningful cost advantage, as companies with a low concentration of coarse sand must expend the resources necessary to mine a large amount of fine grain sand that currently has little commercial value. Further, if demand increases for dry gas drilling applications that utilize fine grain sands, our production costs per ton of sand would improve and we believe that we would be well-positioned to compete in that market.

        Our New Auburn dry plant facility has a rated production capacity of 4,200 tons per day, or roughly 40 rail cars, and has on-site rail car loading facilities capable of loading up to approximately 10,000 tons of frac sand into rail cars per day. We also have 4.5 miles of existing rail track that connects our facility to the Union Pacific rail line and provides us with shipping access to all of the major shale basins in the United States and Canada with direct access to high-activity areas of oil production in Texas, Oklahoma, Colorado and the western United States. Using our existing on-site rail track, we have shipped sand in unit trains, which are dedicated trains (typically 80 to 120 rail cars in length) chartered for a single delivery destination that usually receive priority scheduling and result in a more cost-effective method of shipping than standard rail shipment. Our location in Wisconsin also provides our customers with economical access to barging terminals on the Mississippi River as well as access to Duluth, Minnesota, for loading onto ocean going vessels for international delivery.

        Our Barron facility currently consists of a sand mine and a wet plant on land that we currently lease and a dry plant on land that we own. This facility has a rated production capacity of 8,800 tons per day, or roughly 80 rail cars, and has on-site rail car loading facilities capable of loading up to approximately 10,000 tons of frac sand into rail cars per day. We utilize 3.1 miles of existing rail track that connects our facility to the rail line owned by the Canadian National Railway Company, or Canadian National, making our Barron facility one of only three active Wisconsin-based frac sand mines, and the only one with significant available capacity for future production growth, located on the Canadian National line. Our direct connection to the Canadian National line allows us to offer direct access to the rapidly growing oil and gas shale plays in northwestern Canada and the northeastern United States. In addition, we are currently the only frac sand provider in Wisconsin located on Canadian National's high-capacity rail line designed for rail cars with a 286,000 pound capacity, which will allow us to transport heavier loads and result in reduced transportation costs relative to competitors that only have access to lower capacity infrastructure.

        We expect to construct a second wet plant at our Barron facility in order to increase our production capacity. We currently anticipate that this second wet plant will become operational in the first half of 2014 and will have the capacity to process 1.2 million tons of wet sand per year when

 

completed. We have identified a property suitable for use as the site of the second wet plant, which we expect will provide us access to the same wide range of high-quality sand that we currently have through our existing Wisconsin facilities.

        We also mine frac sand at our facility in Kosse, Texas that is processed into a high-quality, 100 mesh frac sand, generally used in dry gas drilling applications. In favorable pricing markets, washed sand is shipped from our Wisconsin operations in unit trains to Kosse where it is dried, screened and resold to oil field service companies servicing the unconventional resource plays located in south and west Texas. As a result of the quality and diversity of our sand reserves, we have the operational flexibility to alter a portion of our produced sand mix to meet customer needs as the market prices for crude oil and natural gas adjust in the future.

        The following table provides information regarding our current and planned frac sand production facilities as of December 31, 2012.

Mine/Plant Location		Proven Recoverable Reserves (Tons)(1)			Primary Reserve Composition			Depth of Reserves			Lease Expiration Date			Mine Area			Wet Plant Capacity (Tons)			Dry Plant Capacity (Tons)			On-site Rail Infrastructure			Year Ended December 2012 Sales Volume (Tons)			Year Ended December 2012 Production Volume (Tons)
		(millions)						(feet)						(acres)			(thousands)			(thousands)						(thousands)			(thousands)
New Auburn, WI			27.1			14-60 mesh			45-105			March 2036			418	(3)		2,000			1,300			4.5 miles			1,061.2			1,068.0
Barron County, WI			29.8	(2)		14-50 mesh			40-50			July 2037			342	(3)		2,900	(4)		2,400			3.1 miles			11.9			14.5
Kosse, TX			28.3			20-140 mesh			100			N/A	(5)		225			1,500			600			N/A			149.3	(6)		92.8

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(1)

Reserves are estimated as of December 31, 2012 by third-party independent engineering firms based on core drilling results and in accordance with the SEC's definitions of proven recoverable reserves and related rules for companies engaged in significant mining activities.

(2)

Does not include the sand reserves to which we have access pursuant to our ten-year supply agreement with Midwest Frac.

(3)

Consists of five adjacent mineral deposits.

(4)

Consists of two wet plants, one of which is scheduled to be constructed in the first half of 2014, and includes 500,000 tons of wet sand that we have the right to purchase from Midwest Frac.

(5)

We own the mineral rights to at our Kosse mine.

(6)

Includes sales of sand mined in Wisconsin and processed in our Kosse facility and shortfall sales pursuant to our take-or-pay contract with one of our customers. Please see "Business—Our Assets and Operations—Kosse, Texas Operations."

Sand Customers

        The core customers for our Wisconsin facilities are major oilfield services companies engaged in hydraulic fracturing. New Auburn's two largest customers, Schlumberger Technology Corporation, or Schlumberger, and a wholly owned subsidiary of Baker Hughes Oilfield Operations, Inc. or Baker Hughes, together represented approximately 83% of this facility's processed sand volumes in the year ended December 31, 2012. These customers have signed multi-year take-or-pay contracts that include provisions requiring the customer to pay us an amount designed to compensate us, in part, for our lost margins for the applicable contract year in the event the customer does not take delivery of the minimum annual volume of frac sand specified in the contract. Any sales of the shortfall volumes to other customers on the spot market would provide us with additional margin on these volumes.

        As of the date of this prospectus, we had take-or-pay contracts in place for 58% of our 1.3 million tons of annual production capacity at our New Auburn facility. As of December 31, 2012, the product mix-weighted average price of sand sold from our New Auburn facility pursuant to these take-or-pay contracts was $52 per ton and the weighted average remaining duration was approximately 4.9 years, assuming that one of our customers does not exercise its early termination right, which will not occur until October 2014 or later, as described elsewhere in this prospectus. If that customer were to exercise its termination right as soon as it became available, the resulting weighted average duration of our take-or-pay contracts to purchase sand from our New Auburn facility would be approximately 1.3 years as of the date of this prospectus. As of the date of this prospectus, we had take-or-pay or fixed-volume

 

contracts in place for 9% of our 2.4 million tons of annual production capacity at our Barron facility, efforts-based contractual volume in place for 12% of this capacity and tolling agreements in place for another 10% of this capacity. As of the date of this prospectus, the product mix-weighted average price of sand sold from our Barron facility pursuant to these contracts was $55 per ton and the weighted average remaining duration of these contracts was approximately 4.5 years, or 1.8 years if the termination provision described above is exercised as soon as it becomes available. These averages do not include any volumes under our ten year tolling agreement with Midwest Frac. Should market trends continue to develop as we expect, in the event that one or more of our current contract customers decides not to continue purchasing our frac sand following the expiration of its contract with us, we believe that we will be able to sell the volume of sand that they previously purchased to other customers through long-term contracts or sales on the spot market.

        As the frac sand industry has developed in the past few years, major oilfield service and certain oil and gas companies have entered into long-term take-or-pay contracts to secure a dedicated source of frac sand supply for their operations. However, as a result of recent expansions in the supply of frac sand and the possibility of continued expansions, we believe that frac sand customers may be increasingly reluctant to enter into take-or-pay contracts that expose the customer to pre-determined financial liability for failure to take delivery of minimum volumes of frac sand. Customers may increasingly pursue fixed-volume contracts or efforts-based contracts that do not commit the customer to take delivery of specified volumes of frac sand. We also believe customers will be increasingly focused upon the relative quality of sand reserves, logistics capabilities and service level provided by the frac sand provider. Please read "Risk Factors—Risks Related to Our Business—Any material nonpayment or nonperformance by any of our key customers could have a material adverse effect on our business and results of operations and our ability to make cash distributions to our unitholders."

Cost Structure

        Producing dry sand suitable for sale as a proppant involves three distinct operations:

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Mining.   This involves the removal of overburden and the subsequent excavation of reserves to be further processed.



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Wet Processing.   Mined reserves are mixed with water to facilitate movement by pipeline from the mine to the wet plant. At the wet processing facility, the wet sand is screened to eliminate particles that are larger than desired. There is also a gravity separation process that removes fine impurities that have no commercial value. The remaining product is stored in large stockpiles.



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Dry Processing.   Wet sand is transported by truck to the drying facility. Very large dryers remove the moisture after which the dried sand is sorted by size and stored in silos before being loaded onto rail cars or trucks for transportation to customers.

        We believe our cost structure puts us in an attractive position relative to other producers of frac sand. The coarseness of our reserves means that a very large proportion of the sand that we mine ends up as saleable dry sand, which is not possible for producers whose deposits do not have as high a proportion of coarse sand. Our advanced wet and dry plants, including enclosed dry plants in Wisconsin, allow us to efficiently produce frac sand at full run rates throughout the year. The royalties that we paid to the landowners of our mines were less than 1% of our revenues in 2011 and 2.4% in 2012. Additionally, once we have satisfied our minimum purchase obligations, a large proportion of the costs we incur in our Sand segment are only incurred when we produce saleable frac sand. As a result, for certain types of expenses, we incur costs only when we are producing saleable frac sand.

 

Fuel Processing and Distribution Segment Overview

Market Dynamics

        The primary driver of activity and earnings in our Fuel Processing and Distribution segment is our transmix operations. The transmix industry consists of businesses that process and separate transportation mixture, which is the liquid interface, or fuel mixture, that forms when multiple types of petroleum products are transported sequentially through a pipeline. Pipeline operators send large batches of different fuel products (such as gasoline, diesel and jet fuel) through the same pipeline, in sequence, to receiving terminals. Product batches are placed directly against each other, without any practical means of keeping them separated; as a result, some mixing of fuels occurs at the interface of different batches in a pipeline. Transmix must be processed in order to separate it into useable gasoline and diesel fuel that can be used in cars, trucks, locomotives and other similar equipment. The Energy Information Administration estimates that 19.2 million barrels per day of liquid petroleum products were consumed in the United States in 2010 with the vast majority being transported by pipeline. We believe that approximately 0.5% of the petroleum products transported by refined product pipelines becomes transmix and is sold to companies such as ours for refinement, which would imply a transmix market size of approximately 85,000 barrels per day.

Asset Overview

        Our Fuel Processing and Distribution segment consists of our facilities in the Dallas-Fort Worth metropolitan area and in Birmingham, Alabama, which are operated by Direct Fuels and AEC, respectively. In addition to processing transmix and selling the resulting refined products, we provide a suite of complementary fuel products and services, including third-party terminaling services, the selling of wholesale petroleum products, certain reclamation services (which consist primarily of tank cleaning services) and blending of renewable fuels.

        The following table provides information regarding our Fuel Processing and Distribution assets and volumes as of and for the year ended December 31, 2012.

Plant Location		Owned Acreage			Transmix Processing Capacity (Gal./Year)			Fuel From Transmix Sold—Total (Gal./Year)			Wholesale Fuel Volume Sold—Total (Gal./Year)			Terminal Tankage Capacity (Gal.)			Biodiesel Refining Capacity (Gal./Year)
		(in thousands, except acreage data)
Dallas-Fort Worth, TX			20			107,310			94,831			13,347			11,990			N/A
Birmingham, AL			40			76,650			22,502			153,949			21,966			10,000

        While a meaningful portion of our transmix business is conducted on a spot basis, we currently purchase approximately 63% of our supply of transmix pursuant to exclusive contracts having a volume-weighted average remaining duration of 17 months as of December 31, 2012. We also purchase a significant amount of gasoline and diesel in bulk every month as part of our wholesale fuel business, and then sell that fuel to local unbranded customers who value our combination of pricing and convenience. We design the contract structure of both our transmix and wholesale businesses to capture a stable margin, as the price differential between the indices at which we purchase fuel and the sales price of the corresponding refined products tends to be stable.

Financial Overview

        For the year ended December 31, 2012, we generated unaudited pro forma net income and unaudited pro forma Adjusted EBITDA of approximately $31.0 million and $52.3 million, respectively. Our Sand segment comprised 65% of our unaudited pro forma Adjusted EBITDA in this period. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to its most directly comparable financial measures calculated and presented in accordance with generally accepted

 

accounting principles, or GAAP, please read "—Summary Historical and Pro Forma Financial and Operating Data—Non-GAAP Financial Measures" beginning on page 25.

Business Strategies

        The primary components of our business strategy are:

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Focus on Business Results and Total Distributions.   The board of directors of our general partner will adopt a policy under which distributions for each quarter will equal the amount of available cash (as described in "Cash Distribution Policy and Restrictions on Distributions") we generate each quarter. We expect to focus on optimizing our business results and maximizing total distributions, rather than attempting to manage our results with a focus on making minimum distributions. We do not intend to maintain excess distribution coverage in order to stabilize our quarterly distributions or to otherwise reserve cash for future distributions. In addition, our general partner has a non-economic general partner interest and no incentive distribution rights, and, accordingly, our unitholders will receive 100% of our cash distributions. See "Our Cash Distribution Policy and Restrictions on Distributions" beginning on page 65.



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Seek contractual cash flow stability.   In our Sand segment, we intend to generate stable cash flows by continuing to secure long-term contracts with existing and new customers that will cover the substantial majority of our production capacity. A portion of our long-term contracts at our New Auburn and Barron facilities are take-or-pay supply agreements that are designed to compensate us, in part, for our lost margins for the applicable contract year on any unpurchased minimum annual volumes of frac sand thereunder. Subject to market conditions, we will continue to pursue long-term contracts under which our customers commit to take shipments of specified minimum amounts of frac sand to enhance the stability of our cash flows and mitigate our direct exposure to commodity price fluctuations. As of December 31, 2012, our northern Ottawa white sand contracts had a volume-weighted average remaining term of 5.1 years, assuming that one of our customers does not exercise its early termination right described elsewhere in this prospectus, and a volume and product mix-weighted price of $54 per ton. Should the customer exercise its early termination right as soon as it becomes available under the contract, the weighted average remaining duration of the contracts would be 1.7 years. These averages do not include any volumes under our ten year tolling agreement with Midwest Frac.

In our Fuel Processing and Distribution segment, our contract structure is designed to capture a stable margin, as the price differential between the refined products indices at which we purchase transmix and wholesale fuel and the sales price of the refined products fluctuates in a fairly narrow range. In addition, we typically resell our refined products within 7 to 10 days after acquiring our transmix, wholesale fuel and other feedstock supply, which reduces our exposure to fluctuations in the underlying indices. We also enter into financial hedging arrangements in order to limit our direct exposure to commodity price and market index fluctuations.

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Capitalize on organic growth opportunities and optimize existing assets.   We intend to focus on organic growth opportunities that complement our existing asset base or provide attractive returns in new geographic areas or business lines. In our Sand segment, we recently commenced operations at a third frac sand production facility in Barron County, which more than doubled our dry production capacity and the amount of proven recoverable Wisconsin reserves we can access. As of the date of this prospectus, we have contracted to sell approximately 746,500 tons of annual frac sand volume, which accounts for 31% of the plant's 2.4 million ton annual capacity. As of the date of this prospectus, we had take-or-pay and fixed-volume contracts in place for 9% of this capacity, efforts-based contractual volume in place for 12% of this capacity and tolling agreements in place for another 10% of this capacity. We believe our additional frac sand production capacity should provide us with significant opportunities to secure additional

 

long-term contracts or to make spot sales at market prices, which have been higher than long-term contract prices in the recent past. If we are successful in taking advantage of these opportunities, we expect our profitability and cash flows will be positively impacted. In our Fuel Processing and Distribution segment, we believe there are several opportunities to contract additional transmix supplies and increase wholesale volume, which we can process using existing excess capacity.

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Access new and adjacent markets using existing capabilities.   We are exploring and will continue to explore opportunities to expand our businesses into new markets by leveraging our existing operations and our historical experiences. In our Sand segment, we will continue to pursue opportunities created by the demand for our reserves and to use our surplus processing and storage capacity in order to meet the needs of our customers. We also have developed a total supply chain solution for our customers, which we believe will provide them with a streamlined order process and a lower total delivered product cost while generating incremental revenue for us and enabling us to reach a broader set of customers. In our Fuel Processing and Distribution segment, we have started producing biodiesel at our Birmingham, Alabama location using recommissioned assets. Also, we intend to leverage our existing customer relationships to expand our footprint in Dallas-Fort Worth and Birmingham and their adjacent markets.



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Capitalize on compelling industry fundamentals.   We believe the frac sand market offers attractive long-term growth fundamentals, and we expect to continue to position ourselves as a producer of high-quality frac sand. Over the past five years, the demand for frac sand in the United States has grown significantly, primarily as a result of increased horizontal drilling, technological advances that allowed for the development of many unconventional resource formations, increased proppant use per well and cost advantages over other proppants such as resin coated sand and ceramic alternatives. We believe frac sand supply will continue to be constrained by the difficulty in finding reserves suitable for use as frac sand, which are largely limited to select areas of the United States and which must meet the technical specifications of the API, as well as challenges associated with locating contiguous reserves of frac sand large enough to justify the capital investment required to develop a mine and processing plant and securing necessary local, state and federal permits required for operations. From 2011 to 2016, the demand and price of raw frac sand are expected to grow 7.3% and 4.7% annually, respectively, according to the Freedonia Report.



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Grow business through strategic and accretive business or asset acquisitions.   We plan to selectively pursue accretive acquisitions in our areas of operation that we believe will allow us to realize operational efficiencies by capitalizing on our existing infrastructure, personnel and commercial relationships in energy services, and we may also seek acquisitions in new geographic areas or complementary business lines. For example, we have identified several highly attractive frac sand deposits in properties adjacent to or in close proximity to our existing Wisconsin operations, allowing for the opportunity to contract additional reserves. We also believe that we can replicate our transmix, wholesale and terminal business activities successfully in other regions of the United States.



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Maintain financial strength and flexibility.   We intend to maintain financial strength and flexibility to enable us to pursue our growth strategy, including acquisitions, organic growth and asset optimization opportunities as they arise. At the closing of this offering, and after giving effect to the offering-related transactions we describe in this prospectus, we expect to have approximately $             million of cash on hand and $             million of available borrowing capacity under our anticipated new revolving credit facility.

 

Competitive Strengths

        We believe that we will be able to successfully execute our business strategies because of the following competitive strengths:

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High quality, strategically located assets.   We currently operate three scalable frac sand production facilities in New Auburn, Wisconsin, Barron County, Wisconsin and Kosse, Texas. Our facilities in Wisconsin are supported by approximately 56.9 million tons of proven recoverable sand reserves and our facility in Texas is supported by approximately 28.3 million tons of proven recoverable sand reserves. We believe that our Wisconsin reserves provide us access to a disproportionate amount of coarse sand (16/30, 20/40 and 30/50 mesh sands) compared to other northern Ottawa white deposits located in Wisconsin's Jordan, St. Peter and Wonewoc formations. According to the PropTester® Report, many of the northern Ottawa white deposits in these formations contain less than 30% 40 mesh and coarser substrate with our Barron reserves being comprised of more than 60% 50 mesh or coarser substrate. However, our sample boring data has indicated that our Wisconsin reserves contain deposits of nearly 35% 40 mesh or coarser substrate. We are also one of a select number of mine operators that can offer commercial amounts of 16/30 mesh sand, the coarsest grade of widely-used frac sand on the market. Our access to coarse sand provides us with lower processing costs relative to mines with finer sand reserves and enables us to better serve the current levels of high demand for coarse frac sand that is related to increased hydraulic fracturing activities focused on the recovery of oil and liquids-rich gas in the United States.

Our transmix facilities are centrally located in the Dallas-Fort Worth and Birmingham metropolitan areas. The population in these areas is forecasted to increase at a weighted growth rate greater than the national average between 2010 and 2030, which is expected to drive incremental demand for the products and services we offer through our Fuel Processing and Distribution segment. Because pipelines typically represent the most economical means of transporting petroleum products, proximity to refined products pipelines is critical to the economic success of our transmix, wholesale and terminal operations. We are able to receive products via two different pipelines owned by the Explorer Pipeline Company and one owned by a major independent refiner at our facility in the Dallas-Fort Worth metropolitan area and via the Plantation and Colonial pipelines at our Birmingham facility.

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Stable cash flows.   In our Sand segment, we currently sell our products primarily under long-term supply agreements. A portion of our supply agreements are take-or-pay contracts under which the customer will be obligated to pay us an amount designed to compensate us, in part, for our lost margins for the applicable contract year on any minimum annual volumes not purchased by that customer. Any sales of the shortfall volumes to other customers on the spot market would provide us with additional margin on these volumes. Collectively, sales to customers with take-or-pay sales agreements in 2011 and 2012 accounted for approximately 79% and 89% of our total Sand segment sales volumes, respectively.

In our Fuel Processing and Distribution segment, our contract structure is designed to capture a stable margin, as the price differential between the refined products indices at which we purchase transmix and wholesale supply and the sales price of the refined products fluctuate in a fairly narrow range. While a meaningful portion of our transmix business is conducted on a spot basis, we currently purchase approximately 63% of our supply of transmix pursuant to exclusive contracts with terms ranging from 12 to 36 months, with a volume-weighted average remaining duration of 17 months as of December 31, 2012. In addition, we have throughput agreements with major refining and fuel marketing companies with terms of up to 36 months, which provide stable, fee-based revenue.

 

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Intrinsic logistics advantage.   In our Sand segment, the logistics capabilities of our New Auburn and Barron facilities enable us to serve all major United States and Canadian shale basins. Our New Auburn facility has 4.5 miles of on-site rail track that is tied into a rail line owned by Union Pacific and our Barron facility has 3.1 miles of on-site rail track tied into a Canadian National rail line. Our logistics capabilities enable efficient loading of sand and minimize rail car turnaround times and our facilities are able to accommodate unit trains. We believe we are one of a small number of frac sand producers connected to more than one rail line, and this provides us with the capability to serve virtually all North American shale plays economically using a single-line haul, which reduces transit time and freight cost for our customers. Given our multiple railroad and barging logistics capabilities, we have started to explore potential sales opportunities in Central and South American countries. If such opportunities materialize, we would expect to select our customers in those countries by employing the same disciplined financial criteria that we have used with respect to our existing customers.



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Low cost operating structure.   We believe that our operations are characterized by an overall low cost structure, which permits us to capture attractive margins in the industries in which we operate. Our low cost structure is a result of the following key attributes:



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significant coarse mineral reserve composition that minimizes yield loss;



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close proximity of our silica reserves to our processing plants, which reduces operating costs;



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expertise in designing, building, maintaining and operating advanced frac sand processing, storage and loading facilities and transmix processing and storage assets;



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after satisfying our minimum purchase obligations, a large proportion of the costs we incur in our Sand segment are only incurred when we produce saleable frac sand;



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proximity to major sand and fuel logistics infrastructure, minimizing transportation and fuel costs and headcount needs;



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mineral royalties paid that were less than 2.4% of our Sand revenues in 2012;



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enclosed dry plant operations to allow full run rates in winter months, increasing plant utilization; and



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a customer base spread across a variety of markets, allowing us to maximize our asset utilization.



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Significant organic growth capacity.   We believe we have a significant pipeline of attractive sales opportunities for our Barron County facility, which commenced commercial operations in December 2012. As of the date of this prospectus, we have contracted to sell approximately 746,500 tons of annual frac sand volume, which accounts for 31% of the plant's 2.4 million tons annual capacity. As of the date of this prospectus, we had take-or-pay and fixed-volume contracts in place for 9% of this capacity, efforts-based contractual volume in place for 12% of this capacity and tolling agreements in place for another 10% of this capacity. We expect to use this excess capacity to establish new customer relationships through new long-term contracts and to enter into spot sales at market prices, which have been higher than long-term contract prices in the recent past. If we are successful in establishing these relationships or selling into the spot market at favorable prices, we expect to experience a positive impact on our profitability and cash flows. In addition, we believe that this capacity will position us well to attract customers currently relying on other frac sand producers when those customers have the opportunity to renegotiate their sand supply contracts or seek out a new supplier.



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Strong reputation with our customers, suppliers and other constituencies.   Our management and operating teams have developed longstanding relationships with our customers, suppliers and

 

other constituencies. Three of the four largest hydraulic fracturing service providers have committed to multi-year contracts to purchase frac sand from us, including our take-or-pay contracts with Schlumberger and Baker Hughes, and based on our track record of dependability, timely delivery and high-quality products that consistently meet customer specifications, we believe that we are well positioned to secure similar arrangements in the future. In our Fuel Processing and Distribution segment, we have established long-term supply relationships with major refining, midstream and marketing companies that provide us with a steady source of supply at competitive prices.

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Ability to identify and respond to changing market dynamics.   We believe we have designed our assets and business model to permit us to adapt to changing market conditions. For example, at our Wisconsin facilities, we have been able to optimize our production mix so that up to 20% of our production volume can fluctuate between coarse and fine sands without significant impact on our production yields or costs, thereby allowing us the flexibility to respond efficiently to shifts in pricing and customer demand dynamics. We have also identified opportunities to utilize excess dry plant capacity at our Kosse, Texas frac sand processing facility to provide additional product offerings to our customers in the southwestern United States. Finally, we have significant reserves of fine mesh sand and believe that we will be well positioned to capture opportunities created by changing market trends in the relative prices of crude oil and dry natural gas.



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Experienced management team with industry specific operating and technical expertise.   The top three management team members of our Sand segment have more than 75 years of combined industry experience. They have managed numerous frac sand mining and processing plants, successfully led acquisitions in the industry and developed multiple greenfield mining and processing operations. Most recently, this management team identified our existing Wisconsin facilities and designed, permitted and commenced each facility's operations within 12 months. The top five management team members of our Fuel Processing and Distribution segment have significant experience and complementary skills in the areas of transmix processing, acquiring, integrating, financing and managing refined product terminals and biodiesel manufacturing and have in excess of 100 years of combined industry experience.

Our Relationship with Insight Equity

        All of the equity interests in Emerge GP will be owned by Emerge Energy Services Holdings LLC, which is 80% owned by affiliates of Insight Equity Holdings, LLC and 20% owned by Ted W. Beneski. Founded in 2002, Insight Equity makes control investments in strategically viable, middle market, asset-intensive companies across a wide range of industries. Insight Equity has committed approximately $425 million to 12 investments in North America. As the majority owner of our general partner and the direct or indirect owner of approximately        % of our outstanding common units, Insight Equity has a strong incentive to support and promote the successful execution of our business plan.

 

Our Management

        Our general partner has the sole responsibility for conducting our business and for managing our operations and is controlled by Insight Equity. Our general partner will not receive any management fee or other compensation in connection with the management of our business or this offering, but it will be entitled to reimbursement of all direct and indirect expenses incurred on our behalf, which we expect to be approximately $            for the year ending December 31, 2013. Our partnership agreement provides that our general partner will determine in good faith, meaning that it subjectively believes that such determination is in our best interests, the expenses that are allocable to us.

        The board of directors of our general partner will initially be comprised of seven members, all of whom will be designated by Insight Equity and three of whom will be independent. Neither our general partner nor its board of directors will be elected by our unitholders. Insight Equity will have the right to appoint our general partner's entire board of directors, including the independent directors.

Principal Executive Offices and Internet Address

        We were formed as a Delaware limited partnership in April 2012 under the name Emergent Energy Services LP. We subsequently amended our certificate of limited partnership to change our name to Emerge Energy Services LP. Our principal executive offices are located at 1400 Civic Place, Suite 250, Southlake, Texas and our telephone number is (817) 488-7775. Our website is located at                        and will be activated in connection with the closing of this offering. We will make our periodic reports and other information filed with or furnished to the Securities and Exchange Commission, or the SEC, available, free of charge, through our website, as soon as reasonably practicable after those reports and other information are electronically filed with or furnished to the SEC. Information on our website or any other website is not incorporated by reference into this prospectus and does not constitute a part of this prospectus.

Summary of Conflicts of Interest and Duties

        Our general partner has a duty to manage us in a manner it subjectively believes is in our best interests. However, the officers and directors of our general partner also have duties to manage our general partner in a manner beneficial to its majority owner, Insight Equity. Certain of the officers and directors of our general partner are also officers and directors of Insight Equity or its subsidiaries. As a result, conflicts of interest will arise in the future between us and holders of our common units, on the one hand, and Insight Equity and our general partner, on the other hand. For example, our general partner will be entitled to make determinations that affect the amount of distributions we make to the holders of common units.

        Delaware law provides that Delaware limited partnerships may, in their partnership agreements, expand, restrict or eliminate the fiduciary duties owed by the general partner to limited partners and the partnership. Pursuant to these provisions, our partnership agreement contains various provisions replacing the fiduciary duties that would otherwise be owed by our general partner with contractual standards governing the duties of the general partner and the methods of resolving conflicts of interest. The effect of these provisions is to restrict the remedies available to our common unitholders for actions taken by our general partner that might otherwise constitute breaches of fiduciary duty. Our partnership agreement also provides that affiliates of our general partner, including Insight Equity and its subsidiaries and affiliates, are permitted to compete with us. By purchasing a common unit, the purchaser agrees to be bound by the terms of our partnership agreement, and each common unitholder is treated as having consented to various actions and potential conflicts of interest contemplated in the partnership agreement that might otherwise be considered a breach of fiduciary or other duties under applicable state law.

 

        For a more detailed description of the conflicts of interest and the duties of our general partner, please read "Conflicts of Interest and Duties" beginning on page 181.

Implications of Being an Emerging Growth Company

        As a company with less than $1.0 billion in revenue during its last fiscal year, we qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other regulatory requirements for up to five years that are otherwise applicable generally to public companies. These provisions include:

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Exemption from the auditor attestation requirement in the assessment of the emerging growth company's internal control over financial reporting;



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Exemption from the adoption of new or revised financial accounting standards until they would apply to private companies;



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Exemption from compliance with any new requirements adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotation or a supplement to the auditor's report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer; and



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Reduced disclosure about the emerging growth company's executive compensation arrangements.

        We will cease being an emerging growth company if we have more than $1.0 billion in annual revenues, have more than $700 million in market value of our common units held by non-affiliates, or issue more than $1.0 billion of non-convertible debt over a three-year period.

        We have elected to comply with the reduced disclosure requirements described above and we may elect to avail ourselves of other reduced reporting requirements in future filings. As a result of these elections, the information that we provide in this prospectus may be different from the information you may receive from other public companies in which you hold equity interests.