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Executives

Brandi Piacente – Investor Relations

Dick Heckmann – Executive Chairman

Mark D. Johnsrud – Chief Executive Officer

Jay Parkinson – Executive Vice President and Chief Financial Officer

Analysts

Flavio Cotti – Credit Suisse

R. Scott Graham – Jefferies & Company

Micheal E. Hoffman – Wunderlich Securities

Evan Templeton – Jefferies & Company

Brian W. Post – ROTH Capital Partners

Eric Stine – Craig-Hallum

Brian Uhlmer – Global Hunter Securities

Spencer Joyce – Hilliard Lyons

Scott Graham – Jefferies & Company

Heckmann Corporation (HEK) Q1 2013 Earnings Call May 8, 2013 4:30 PM ET

Operator

Good day ladies and gentlemen. Thank you for standing by. Welcome to the Heckmann Corporation First Quarter 2013 Earnings Call. (Operator Instructions) This conference is being recorded today May 8, 2013. I would now like to turn the conference over to. Brandi Piacente, Investor Relations. Please go ahead.

Brandi Piacente

Thank you, operator. Good afternoon everyone, and thank you for joining us to discuss Heckmann Corporation’s 2013 first quarter financial and operating results. Some of the comments we will make today are forward-looking. Generally, the words aim, anticipate, believe, could, estimate, expect, intend, may, plan, project, should, will be, will continue, will likely result, would and similar expressions identify forward-looking statements.

These statements involve a number of other risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks and uncertainties include a variety of factors, some of which are beyond our control. These forward-looking statements speak as of today, and you should not rely on them as representing our views in the future. We undertake no obligation to update these statements after this call.

For a more detailed description of risk factors, please refer to our filings with the United States Securities and Exchange Commission, including our Annual Report on Form 10-K, as well as on our current report on Form 8-K and any amendments to these filings, as well as our earnings release posted on the Heckmann Corporation website, for a more detailed description of the risk factors that may affect our results.

Copies of these documents may be obtained from the SEC or by visiting the Investor Relations section of our website, www.heckmanncorp.com. Also, please note that certain financial measures we may use on this call, such as adjusted EBITDA, earnings before interest, tax, depreciation and amortization, are non-GAAP measures. Please see our press release for a reconciliation of these non-GAAP measures to GAAP.

Joining us on the call today from Heckmann Corporation are Dick Heckmann, Executive Chairman; Mark Johnsrud, Chief Executive Officer; Jay Parkinson, Chief Financial Officer. And with that, I would now like to turn the call over to Dick Heckmann.

Dick Heckmann

Thanks Brandi. And welcome everybody, thanks for joining us again today. As you can see by our release, we had a very strong quarter in the phase of fairly tough weather tripling our revenues and tripling our adjusted EBITDA year-over-year. And we continue to drive the integration of our nationwide platform. But before I turn the call over to Mark and Dave for the operational details, I really want to be sure that I call attention to what I think will make the difference in the coming quarters and years.

With the merger of Power Fuels and Heckmann, we now have in place a senior team skilled and immersed in our country’s shale basins and the environmental issues around the massive logistics challenges regarding the water. With Mark’s experience and the seasoned management team he is attracting to our enterprise, coupled with the talented legacy Heckmann executives, I really believe our team tells a story that’s really more important than any other.

We are impressed with the customers across the key shale basins offering our services and solutions in a unified and consistent manner daily, which is unparallel. And we are now beginning to see the results. Our revenue and EBITDA growth have been every bit is hold in managing the growth and the expansion that will be required by our customers remains the key to the future of our business. And I need to tell you that we all get that.

So having said that, I’m going to turn the call over now to Mark and Jay to cover the operational details and then as always after Jay’s presentation, we will open the floor for questions. Mark.

Mark D. Johnsrud

Thanks Dick, and thank you everyone for joining us on the call. Revenues for the quarter were up 40% sequentially and 190% year-over-year. With approximately 82% of our revenue was generated from what we are now calling our Shale Solutions segment. This segment encompasses Power Fuels and the legacy HWR. In a short time since our last call we made tremendous progress. We are very encouraged by our first quarter results and we’re on schedule to meet our financial guidance for the year.

Our irrigation process is going well and we believe the steps to, part of the steps to cross sell our product which will be instrumental in accelerating our revenues for the year. Simultaneously, we’re focused on improving operating margins which I will talk about in more detail in a moment.

Without question weather was a big factor for the first quarter, as we saw unusually harsh conditions in the Bakken which impacted approximately 13 days of work or almost 15% of the quarter. Additional to that is we lost approximately 5 days of work in the Marcellus due to inclement weather. As I said, we are off to a good start and we’re seeing signs for increasing activity in some of the shale areas, as well as price stability and we are very comfortable that we’re going to meet our guidance for the year.

Similar to what we’ve been doing in the Bakken, we believe we can replicate this model in other shale areas. To this point, we have spent a great deal of time training managers from a legacy HWR business to cross sell products for their customers. We are growing our capabilities in legacy HWR basins to expand our solution based on the company’s one-stop-shopping platform that we built in the Bakken.

Addition to this, we have added to our team and continue to strengthen our leadership in the company. We’ve recently hired two regional managers in Texas and each have over 20 years of industry experience as well as a business development manager in the Eagle Ford Shale area. Another area that I think we made a meaningful impact in terms of growth and margin expansion is to increase our asset utilization and use our expertise to address new opportunities for our customers.

As we move through the year, we will also continue to find ways to expand our reuse and recycling divisions to provide additional services so we can build around our existing logistics management expertise. We are working to build a platform to expand our presence in the solid business because we believe that the regulation is rapidly changing in the industry and we want to be a (inaudible). Our focus for the future continues to be a full-cycle provider in liquids and solids and continue to build both of these businesses. We can use this foundation by building our business both organically and through acquisitions.

With that, I would like to turn the call over to Jay, for a review of our financial performance and then we’ll open the call for questions.

Jay Parkinson

Thank you. Before we start here, I want to jump into summary of comments on the first quarter. The result as Mark mentioned were largely in line with our expectations and the industry is really ramping up after a very slow second half of 2012 and we saw that activity start to pick up in the quarter. However, weather did have a significant impact on our activity in the first quarter.

In the Bakken, nearly half a month of work was impacted by the weather. In the Marcellus, there was significant amount of snow that impacted activity as well. Weather actually carried into April of this year, it’s somewhat unusual from that standpoint.

The other summary comment I’d like to make is, we are neither focused on margin with the management team. We had some success this quarter on that. We took cost out of the business. I want to say we’re going to continue to be very focused on this, we really are just getting started on this front, I think there is a lot of opportunity here.

Next, let’s dig into the results. On the income statement, revenue came in for the quarter at $159.5 million, adjusted EBITDA of $32.1 million. During the quarter, there were $5.5 million adjustment which included transaction and integration expenses around $1.7 million. We have a settlement of the derivative lawsuit we disclosed previously that was $2.4 million adjustment; environmental cleanup at CFI which was $700,000 and stock based comp of $800,000. The adjusted EBITDA margin for quarter was 20.1% that was up from the fourth quarter of 2012. Net loss per share during the quarter of $0.05, around $0.04 when you add back number is unusual non-recurring items.

The business commentary on the quarter, I want to mention again the weather impact of it, almost half a month of work in the Bakken and as I said meaningful loss time in the Marcellus as well. The other issue during the quarter is significant customer in the Bakken at a large equipment failure during the quarter which delays in [fracs] and that impacted our activity out there as well.

An important point that I want to focus on here is, we saw significant margin improvement in our shale business, over 300 basis points of pro forma adjusted EBITDA margin increased in the first quarter sequentially over the fourth quarter. Several factors contributed to that, the first better pricing discipline particularly in the legacy HWR basin. Second, that our asset utilization, we saw activity pickup in the Marcellus despite the weather impact. And thirdly cost, we had a lot of success in the quarter taking cost out of this business. This is a big opportunity for us going forward.

Turning to TFI, it normally the first quarter is the weakest quarter during the year, collections in revenue were in line with our expectation, bottom line was impacted though by higher – low cost, and also logistics cost that’s up to the bottom line as well. By and large, we are seeing generally weak as an industry wide phenomenon, weak industrial demand from Asphalt market. What that does the equipment product to review refinery end market and that result in more logistics thoughts, which expect to bottom line.

Turning now to cash flow and the balance sheet, we continue to build cash, we exited March 31, $18.3 million in cash, net CapEx for the quarter was $14.7 million that was just primarily of the pipeline upgrade increased capacity in our pipeline system, from water transfer investment in the Eagle Ford and then the maintenance CapEx number was around $5 million for the quarter. We continue to see very big on the capital deployment, we are very focused on improving our return profile and generating more with our existing assets and to that end, we’re really watching the CapEx investments.

Net operating working capital for the quarter was a little north of $85 million up slightly sequentially somewhat I would like to make the leading their way to optimize our credit cycle and take them past out of the working capital price, this is a very key focus of our integration initiatives and something we’re going to be very focused on going forward.

On the balance sheet, we have $400 million of senior notes, $20.9 million of capital leases and $147 million drawn on our $325 million facility. Ample liquidity in the business, we think it’s a very strong capital structure to allow us to continue to grow the business.

Turning now to business outlook, we’re on track to meet our full year guidance which is $750 million to $825 million in revenues, $200 million to $220 million in adjusted EBITDA and $90 to $110 million CapEx. The weather impact in the first quarter, we anticipated that almost as I mentioned significant in the Bakken and the Marcellus it did carry somewhat into April and we think we’re still on track for the full-year guidance projections.

We’re seeing our customer ramp up activity as planned there was a slow start for 2013 due to the weather and also I would say – little bit more disciplined growth trajectory than we have seen in past year. That was our objectives in our full year guidance. We’re very end up discussing with our customers who – very large company and the plans for year and this is really what drives our outlook for the rest of the year.

Looking forward and thinking industry specific items, I think you can expect SG&A at normalized level there at around $13 million for quarter, amortization of $9 million to $10 million for quarter, depreciation in the range of $22 million to $25 million per quarter and a GAAP tax rate of around 40%. Of that cap rate we can defer about $10 million to $15 million per year of cash taxes with our NOLs position.

Turning now to the M&A front, we’re very focused on transactions that allows to expand our treatment, recycling, and disposal network. This is really consistent with our strategy of leveraging our cancer patient network and providing an end-to-end solution to our customers. We believe this is a highly differentiating value proposition, and will server us well in meeting our strategy.

The other point I’d say is, we think there may be some consolidating transactions that can occur as well. Having a national footprint, as we’ve talked about before is very key to our strategy, our customers operate nationally and need solutions, and are based on operating, so there maybe some opportunities on that front. Going there asset dialog in total now in four smaller deals, all of which I believe could potentially close this quarter.

Before we end, I want to briefly talk about our name change. We’re changing our name to Nuverra Environmental Solutions. That will allow us to build a market as one company with one brand that really matches the national footprint that we’ve developed.

Stockholders are voting on the name change on Thursday May 16, 2013. If it’s approved as we fully anticipate, we will start trading under our new ticker symbol NEF on Monday morning, May 20. We’re very excited about this opportunity and this new start for the company.

With that operator, I’d like to open the line up for up for questions.

Question-and-Answer Session

Operator

(Operator Instructions) And our first question comes from the line of Hamzah Mazari with Credit Suisse. Please go ahead

Flavio Cotti – Credit Suisse

Hi guys, this is Flavio coming in for Hamzah. Great quarter guys, just put it – may be if you guys could provide some more color on the integration between Power Flues and Heckmann especially on the systems and processes front and how that that could translate in better margins and into that cost cutting that you provided a little bit in this quarter.

Jay Parkinson

Yeah hey Flavio it’s Jay. We always just saying a lot of time on the integration; we think that, we are going to move to a common system here and a common process, which is really what we are often thing about taking some capital out of the trade cycle. I’d say additionally from an operational standpoint, we continue to look at best practices in terms of overtime issues like that as well as various operational issues that allowed us to take some expense out of the business and I think that shows up in the sequential increase in the margin profile on the share business.

Flavio Cotti – Credit Suisse

Great, Jay. Thank you for the colors and just a follow up of different questions, just very quickly on the TFI side, especially after some leadership changes, why would James definitely leaving. Can you give us an update over there and how that business fits with the shale, if the shale business from now on

Mark D. Johnsrud

Good afternoon Flavio this is Mark. What we were doing is, we are making sure that we are not looking at necessarily running those businesses as an integrated platform. We have a lot of work that we can do in with those some commonality on customers but ultimately the end customers are different in the EMP business versus the TFI customers. And so what we are doing is we are making sure that the guys of TFI of that business are going to stay focused on what they are doing and doing well. And the same is in the E&P side. We want to make sure that we’re keeping everybody focused on what they do well.

Flavio Cotti – Credit Suisse

Great, well, that’s great to hear as well. I will just hop back into the queue and approximately first question. I take bigger your time and great quarter guys.

Mark D. Johnsrud

Thanks. Okay. Thank you.

Operator

Thank you. Our next question is from the line of Scott Graham with Jefferies & Company. Please go ahead.

R. Scott Graham – Jefferies & Company

Hi, good afternoon.

Mark D. Johnsrud

Hey, Scott.

R. Scott Graham – Jefferies & Company

So, I have two questions for you. You guys indicated that you are looking to replicate the power, fuels mile onto the Heckmann business. And I am just curious as to what you mean by that. The Power Fuels business in the Bakken kind of a very unique almost having a mode around it situation and with different pricing dynamics for the end product and what have you so, I am kind of wondering what specifically you mean by that?

Mark D. Johnsrud

Scott, what we’re trying, what I mean by that is the goal will be, if so that we can start to sell multiple products or provide multiple products to our customers. And while the Bakken has some uniqueness to it, but there is also quite a bit of expense associated with that also. So, we think that by adding some more rental equipment, providing and doing more on the drilling side, completion side, in addition to the production fees, it provides more touch points to the customer and ultimately there is pieces to that that we believe that there is more margin available in it. And then on top of that, as we take a look at the rental business, we know that is the higher margin business that complements that one-stop-shopping that we’ve been talking about.

Jay Parkinson

Scott, I’d also throw in the fact that Mark has trailer and trailer construction and trailer usage that he has experimented with that’s different from what we’ve used in some of our shales and we’re expanding that to move equipment around where we can get better utilization on it. And as Mark said in a lot of places, we didn’t think much about rental.

Mark D. Johnsrud

I think with that point Dick to is, just take a look at some of the equipment. We can find by applying the right equipment in certain basins. We can end up with 10% to 20% more product haul at the same cost.

R. Scott Graham – Jefferies & Company

Got it, thank you. My other question is about pricing them. You guys mentioned price stability and strictly that’s like all the first time we’ve heard that in shale in a couple of quarters. And including your competitors and I mean even piping companies are talking about heavy and that might be related to steel, that’s fine, but it’s still part of the overall shale services market and will have you. So I’m just curious as to where you saw pricing may be stabilize and if you can maybe differentiate for us between the transportation vehicles and the driver, versus the frack rental?

Mark D. Johnsrud

That’s a good question Scott, I guess. First of all I think what we’re seeing is that we’re not seeing a continued deployment price. And I think that’s been represented by our numbers for the quarter. That other thing that we’re seeing is that within the pressure-pumping business if there has been significant or appears to be an oversupply. And we know that prices have been impacted. Versus a year ago, we all know that there’s been a – somewhat of a decline in just the total volume of work that’s been out there. But I think that that after a while just rationalize itself for equipment.

R. Scott Graham – Jefferies & Company

Okay, all right. So then, one of the things that people were attributing the pricing decline to in addition to more slack activity, which I think we won’t believe is going to increase at some point hopefully in the second half. But people will also point to the drilling be much more efficient on – it’s certainly more fracking stages but even doing that more efficiently how does that impact your business line?

Mark D. Johnsrud

It really – it impacts our business to some degree, because we’re not moving equipment as often when there’s a multi-level path. But at the same time when we look at a multi-well pad that there’s two wells to eight wells is still picks the same volume of fluid in order to go and frack each one of the wells with the same amount of [water] that ultimately comes out of the wells. So we really see over a given period of time probably not a lot of difference in the total volume that we’re moving.

Jay Parkinson

Scott I think, this is Jay. I think the one other point I’d make you about – we’ve always have seen pretty steep decline in – as Mark mentioned pressure pumping and drilling rigs, none of which we do, but one thing that does – did impact our business is that reduced the total well cost for our customer, which makes the well more economic, which is actually a big plus for our business. Yes that’s one thing that does that – it doesn’t impact positive impact for our business

R. Scott Graham – Jefferies & Company

So even though this year our – more holes per pad, I would have felt that, that would have affected the driver miles.

Mark D. Johnsrud

Mp because what we’ve – what you really see is the same amount of volume that is required for each well and the same amount of flow back of each well and just because there in a small geographical in one pad versus spread over several miles, the same volume is required.

R. Scott Graham – Jefferies & Company

Okay, got it. So thank you, nice quarter.

Mark D. Johnsrud

Thanks, Scott.

Jay Parkinson

Thanks, Scott.

Operator

Thank you. Our next question is from the line of Micheal Hoffman with Wunderlich. Please go ahead.

Micheal E. Hoffman – Wunderlich Securities

Hi good afternoon. Thank you for taking my call. Can you help us little bit on how you’re comfortable with your guidance, what is that you are seeing in the upstream capital spending cycle or trends that give you that comfort and particularly given what companies are around you that earn in your business but are in services to the industry keep talking down activity. What are you seeing comfort about the upstream sample spending cycle ramping up?

Jay Parkinson

Yeah I think Michael this is Jay. Obviously when we think just from a higher level, we think about our full year guidance. It is really driven primarily by the discussions we have. And starting last year frankly with some of the larger customers in terms of what the activity outlook is going to look like and what are the things that was very obvious to us this year was that the ramp up in activity was going to be sequential throughout 2013. That was probably a function of weather in the first quarter but it was also a function of people were would just going to still ramp up activity. So that is really what drives out how we think about the business and while we have comfort in what we are putting for.

Micheal E. Hoffman – Wunderlich Securities

Okay. And then with regards to capacity utilization you serviced, you have alluded to it in your commentary and the prepared remarks, could you share us or split it between what was the utilization of your disposal side of your business and then what’s the utilization on the transportation side?

Unidentified Company Representative

Yeah, we don’t give specific mathematical utilization on the fleet, I would say that sequentially we saw pricing in utilization pretty stable, I would say the basin where we saw an increase in utilization specifically in the Marcellus utilization picked up. So we saw some slight in pickup I think part of that that’s the function of being more disciplined and some of the work that we took on particularly in the Eagle Ford.

I say in the Bakken things by and large very stable on both fronts. And then I think the other thing that impacted results is I mentioned earlier with that same level of work you’re able to take cost out of the business as we integrated the companies and got more efficient with our asset base.

Micheal E. Hoffman – Wunderlich Securities

Okay. And then how would you think about your refiners run rate profitability exiting the quarter versus the actual results in that quarter June 20.1 sort of the –how did you end the quarter?

Unidentified Company Representative

The quarter ended, I’m not going to give anything specific on that, but I would say the quarter ended significantly stronger than the quarter began. Just is the weather, it’s worked through the weather number one, but it wasn’t full of weather.

The results are just as we expected, activity ramping up to the year kind of like that presentation, we put out we showed the horizontal footage drills pickup throughout the year, I think that’s pretty consistent with how we think about it and I think it’s very consistent with what we saw into the quarter in 1Q.

Micheal E. Hoffman – Wunderlich Securities

Okay. So let me try and frame it slightly different did you – would you think about Q2 being 10s of basis points on margins or whole 100s of basis points?

Unidentified Company Representative

I think you could see, you could probably see a couple of hundred basis points improvement.

Micheal E. Hoffman – Wunderlich Securities

Okay great, that’s terrific. And then last a question on deals. Based on your comments, I will conclude that the new forecast that’s whether it maybe interesting necessarily attracted to you at this juncture given the direction you’ll be focusing on deals?

Unidentified Company Representative

We look at – we’re not going to comment anything specific. We obviously saw the release on that. We’re obviously looking at deals that meet our strategic objectives around environmental solution and I guess what I was referencing in the prepared remarks, I think there is several deals that we think might be executable around that space. We certainly are looking at the space pretty keenly.

Micheal E. Hoffman – Wunderlich Securities

Thank you very much for taking my questions.

Unidentified Company Representative

Yeah, thanks Michael. I appreciate it.

Operator

Thank you. Our next question comes from the line of Evan Templeton with Jefferies & Company. Please go ahead.

Evan Templeton – Jefferies & Company

Hi, thanks. Thanks first of all for the color here, just very helpful. Second, just regarding the (inaudible) expansion into the solid business, as you look at those opportunities, can you give us an idea of you think it would largely be the acquisition. If so what is the numbers on those or do you think you would be able to accomplish that organically?

Unidentified Company Representative

I think Evan this is something that we would probably look at more in an acquisition front, because I think we want to accelerate the time. And when I say the acquisition front that isn’t necessarily something that’s often currently running and maybe something where you could cut some of the permitting time out and get closer to the – very closer to the cash flow. We see some opportunities out there like that, which could be interesting.

Evan Templeton – Jefferies & Company

And what’s the general budget in some of those acquisitions. Is there any existing scale or is that something that you really look to build out?

Unidentified Company Representative

It really depends on how much capital has been deployed i.e. how far they are into the permitting process. I think that its something we could certainly accomplish within our CapEx range, certainly get a good start within our CapEx range.

Evan Templeton – Jefferies & Company

Great. Thank you.

Mark D. Johnsrud

Thank you

Operator

Thank you. Our next question is from the line of Brian Post with ROTH Capital Partners. Please go ahead

Brian W. Post – ROTH Capital Partners

I think most of my questions have been asked and answered, but I guess just looking at the growth in the different shales and maybe some of the emerging shale. Can you give us any additional commentary about any early success in place like Tuscaloosa Marine, Mississippi Lime and then maybe progress on something little more developing the Eagle Ford?

Mark D. Johnsrud

I guess maybe, we probably started in the Utica and the Marcellus. Marcellus to all of us with a couple of our larger customers that seems to be where pricing has come back somewhat in the gap. We do see a lot of increase as far as activity and what they are asking is to do. And it appears as far as a new growth area that Utica has some very interesting space in there that the results seem to be very promising.

And then also from a transportation standpoint, the oil has produced its rate very transportation friendly through our refiners. When you look at – even we are starting to see some activity back in the Haynesville or visiting with customers that are talking about bringing some activity back and then there is also some sparks there that they are finding some I guess, there is some real liquid or it’s a good liquid area, some of the gas area also has liquid in it. Then I guess the Eagle Ford, we just see that basin continuing to grow and we are trying to grow our platform to keep up with our customers’ demands.

Brian W. Post – ROTH Capital Partners

All right. And then I guess switching gears to the TFI side, with some of the end markets being weaker, are you guys in a position to make changes and shift to your cost structure? That would assume may be more of a re-refinery driven market to help recover some of those margins and have gone away over the last past couple of quarters?

Mark D. Johnsrud

Yeah, what we are doing is, what we do very well in that business is, we are very good at collection. And we are looking to evaluating all options whether or not new partner or whether or not we do something with re-refinery business itself or if we just trying to push more and more into the asphalt market, is that all possible. We are starting to see some increase in the asphalt market, but we know that there is going to be more and more going to the re-refining business. But at this point, we just think that we are going to remain strong on the collection piece. And then we will evaluate options as we see them.

Brian W. Post – ROTH Capital Partners

Great. Thanks.

Mark D. Johnsrud

Thanks, Brian.

Operator

Thank you. Our next question is from the line of Eric Stine with Craig-Hallum. Please go ahead.

Eric Stine – Craig-Hallum

Hi, everyone. Thanks for taking the question. I apologize if this is in the there, but with the new reporting methodology. Can you breakout just the margins either growth or EBITDA by the two new segments, shale and industrial?

Mark D. Johnsrud

Yeah. We are working through all of that in this quarter, the solidification and some requirements to go backwards. So what we’ve done in the Q which I am sure you can at the end – we broken out the revenue by oil and gas shale. We are not breaking up the margins. We are going to continue to look at that and make sure that we meet all the requirements if we make that change. But certainly we are going to move in that direction.

Eric Stine – Craig-Hallum

Okay. Just to kind of give us a general sense I mean where – TFI, I mean were TFI margins dramatically different from what they typically have been just to give a high level sense?

Mark D. Johnsrud

Yeah, I think the TFI margins were lower than they have been, part of that the function of just seasonality in the business, but as we’ve talked about in the release, you also had a lot of incremental cost sitting that just as the industry is changing, and industry reference, collections were and revenue were actually above estimates, but then you saw some margin erosion, but again part of that just the time of year and part of that its really more business specific. So you probably – you saw something the magnitude of a couple of hundred basis points of erosion there.

Eric Stine – Craig-Hallum

Okay, all right. So its about something, you might do it at some point, but not now.

Mark D. Johnsrud

Yeah that was driven by again there are specific requirements as you break this out historically. So we are going to move in that direction.

Eric Stine – Craig-Hallum

Got it. And then just this is the first question of this new methodology, I mean any thoughts or anything you can provide color wise on Power Fuels, I mean whether its revenues, margins and that would be helpful as well?

Mark D. Johnsrud

Yeah we are actually, this is the first quarter we have the business totally integrated, so we are not going to report geographically, incentive that become part of the data comparative analysis to because of big references at the beginning of the call, we are moving assets around, we are moving people around. So we are not, this is not something we are going forward (inaudible) report Power Fuels sales region. This is not how we manage the business anymore.

Eric Stine – Craig-Hallum

Okay. But I mean as far as just from high level maybe not exact, I mean margins there you had a few competitors specifically referenced that Bakken is being pretty tough would you view that as kind of a low point for margins this year or leaping along those lines?

Unidentified Company Representative

Yeah we did not experience the same, I think I know who you’re referencing, I would say, I want it is up there in the first quarter where it is little bit different in some of your very negative commentary that come on that space, some of the very negative commentary that people have talked about in that space were frankly and very dose specific forms of and people up there that’s a big competitive advantage for us, and we were very pleased with the quarter that produce that debt, immediately we plan to this and we came out with the guidance.

I said if you look at purely on a margin obviously when you’re working less, you have fixed cost that can impact your margin but by and large if you get qualitatively I’ll take on the quarter it was not at all consistent. Not at all consistent with some of the other commentary that we’re seeing out there, we were very pleased with the activity.

Eric Stine – Craig-Hallum

Okay, that’s helpful. Maybe just turning to guidance and you did cuts on this, but just how we should think about the magnitude of the pickup in Q2, I mean is this something where assets stands right now and it’s the persistent level than get you to guidance or I mean does that really need, I mean activities got a pickup a fair amount from here, how should we think about?

Unidentified Company Representative

I think we’re on track with the level of pickup than we anticipated in late March and into April even with some weather activity like the impact in April as well.

Eric Stine – Craig-Hallum

Okay, So I mean if it stays like this, that is kind of what gets you to your margin, I mean is that how we should take it or now your margins or guidance?

Unidentified Company Representative

Yes.

Eric Stine – Craig-Hallum

Okay.

Unidentified Company Representative

And obviously the business, but obviously we referenced versus the last quarters call that our forecast in terms of sequential activity growth, we obviously will need to see sequential activity growth through the year I guess what I am trying to say is you’ll consider to be. We are seeing that activity grow consistent with our trend currently.

Eric Stine – Craig-Hallum

Okay, you’re seeing it, you need to see more of it – the trend is good?

Mark D. Johnsrud

We need to see what we’re expecting and what our customers are telling if they ramping up to…

Eric Stine – Craig-Hallum

Yeah. Got it. Okay. And then one last question, you did talk about solids business but just on the recycling and disposal billing out that network, I mean how should we think about that or what type of investment maybe by basin do you envision that, that would entail. Thank you.

Mark D. Johnsrud

What we think we will be doing in that space is going to vary basin by basin, and so there maybe some that we’re going to own, some of it that we’re going to joint venture of it because some places, it just doesn’t makes sense with the basic business that’s there that we’ll be able to continue. But then we move into certain basins and we’ll be owning it is what we anticipate. And from a CapEx standpoint, there is going to be a wide variety of what the cost will be and I guess as we get those put together we’ll be able to give you some more clarity.

Eric Stine – Craig-Hallum

Okay. Thanks a lot.

Mark D. Johnsrud

Thanks.

Operator

Thank you. Our next question is from the line of Brian Uhlmer with Global Hunter. Please go ahead.

Brian Uhlmer – Global Hunter Securities

Hi, good afternoon.

Mark D. Johnsrud

Hi, Brain.

Brian Uhlmer – Global Hunter Securities

Hi, how are you? I have couple of quick easy one for you. First half, on the environmental fee, that’s about $700,000. So if you can find sort of if you configure exactly what that relates to it and what are others going to be an ongoing type of expense or not?

Mark D. Johnsrud

We would not anticipate that, that would continue, that was a situation from a collection standpoint, we ended up with some PCB oil that we collected in the Northwest and we test all of our loads and so we took a charge because we ended up having to candlewax oil on a special basis and a special way.

Brian Uhlmer – Global Hunter Securities

But it’s been remediated?

Unidentified Company Representative

Yeah, it’s been.

Unidentified Company Representative

Remediated near, it is not some thing, we’re going to worry about on a go forward basis, it is always taking care.

Brian Uhlmer – Global Hunter Securities

Okay, and that’s fair. That is all I needed. And the second thing is, here you compare and talk more – talk about rationalizing assets out there and a business units out there. Is that something there is going to be material benefit to you in Q2 or Q3 or Q4, how do you see things playing out there and you see some major issues will take competitors out there?

Unidentified Company Representative

I guess that in Bakken, we think that competition is I mean there is a lot of competition out there. But we have some very strong competitor advantages. And the one is housing, we really think that makes out a material difference. We have long-term play or a long-term group that’s invested in these communities out if you bring people in, it’s harder for them because first of all they have hard time finding close or at least affordable places for people to work.

And I think the other part is that we’re doing an excellent job for our customers. And so we have a good long-term – we have a long-term plan. We’d work with these customers long time. So we don’t – we see the competition coming in. But it’s not always just 100% of our price. It’s also about service and delivery and making sure that you can provide a broad range of services for your customers.

Brian Uhlmer – Global Hunter Securities

Now these kind of market moving towards and more per barrel type environment versus an average truck rate and a frac tank, the (inaudible) rate et cetera, it’s been all in the barrel type environment and how is that going to end up impacting and benefiting you folks?

Mark D. Johnsrud

You know I do see in some pieces in the – definitely in production when you’re hauling the salt water production water, though lot of that will turn into by the barrel. On frac water, I would say 50-50, and on the drilling component we see that staying on an hourly basis.

Brian Uhlmer – Global Hunter Securities

So.

Mark D. Johnsrud

All over I think what’s it’s doing is it’s some other companies are pushing that responsibility onto our shoulders and we have very good system, very good information so that we can be very good as far as putting information and in using that information to come up with realistic and rational pricing.

Brian Uhlmer – Global Hunter Securities

Okay. Now Jay moving back to your comments on TFI or industrial you were saying down a couple hundred bips, are you’re talking on sequential, but in the last quarter you had some rail issues and some other issues that I heard, that was better going to recognize the benefit from that, are you talking year-on-year basis or sequentially it was down I misunderstand what you were saying there.

Jay Parkinson

Now sequentially it’s down, just we continue to have issues with the rails and the logistics costs.

Brian Uhlmer – Global Hunter Securities

Okay, so about cost…

Jay Parkinson

Yeah this is an industrywide phenomena and its, we’re spending time I think someone asked earlier. We need to continue to look at optimizing our logistics and supply chain to try to eliminate as much as possible, having to move this oil around to the refined market. Now part of that will be alleviated as we get into the fall season that is just something that is changing in the industry that we need to continue to work on.

Operator

Thank you. Our next question is from the line of Spencer Joyce with Hilliard Lyons. Please go ahead.

Spencer Joyce – Hilliard Lyons

Good afternoon guys. Thanks for taking my call, I’ll try to keep it pretty quick for you. First, just wanted to touch on weather again, the 15 days you referenced in the Bakken and 5 in the Marcellus. Can you add just a little color there, should we think of those as total loss days or would those just particularly difficult, I’m sure there is some grey area there, can you explain just a little bit?

Unidentified Company Representative

There is some days that there was an complete loss, two days that were shortened some significantly and some part days. As we want to make sure as safety is number one piece that we’re really focused on, so if it rains in January out there which they had problems with rain and snow, we had to pull trucks off the road sometime and it was really hard to tell in some cases, for the full day but we know that we had 15 days that we’re partially to fully impacted.

Spencer Joyce – Hilliard Lyons

Okay gotcha and with the first quarter, the rental revenue that we’ve reported is that all still in the Bakken or from the Bakken?

Unidentified Company Representative

It’s across the basin and obviously the majority of it’s in Bakken but we’re standing out across the platform.

Spencer Joyce – Hilliard Lyons

Okay and then so some of this year’s full year CapEx guidance would be towards potentially expanding that rental fleet, maybe getting it into a few of the other basins?

Unidentified Company Representative

Yeah that’s correct.

Spencer Joyce – Hilliard Lyons

Okay one final thing, I know Dick mentioned, are you guys are still shifting assets a bit from time-to-time between basins. Are you weren’t currently in any basins that you may ultimately look to exit or are you confident that all of them can be ultimately operated either profitability or at least at an acceptable margin level?

Jay Parkinson

We haven’t really see any of the exception with the exception of the impact that natural gas prices had on some of the gas basin. So you saw curtailment of activity, but certainly in the oil basin, pretty much across the Board. They’re all growing and the Marcellus is growing and we as Mark said we see the Haynesville starting to wear its head. So I would say it shifting assets where we may have too many frac tanks in one area, moving some frac tanks from another area, but there is none that we are exiting.

Spencer Joyce – Hilliard Lyons

Okay, it sounds good. Thanks a lot guys.

Jay Parkinson

Thanks.

Spencer Joyce – Hilliard Lyons

Thank you.

Operator

Thank you. Our next question comes from the line of [Roman Gustavo with Giggs capital]. Please go ahead.

Unidentified Analyst

Hi, it’s actually Jeff. So can you give us pro forma sales in EBITDA for the whole company and for segments for the first quarter?

Mark D. Johnsrud

Yeah, the pro forma sales for the first quarter were $159.5 million and the adjusted EBITDA…

Jay Parkinson

No, versus last year?

Unidentified Analyst

Yeah, let me – let me pull that up.

Mark D. Johnsrud

Maybe to the off-line.

Unidentified Analyst

Sure.

Mark D. Johnsrud

What’s your next question? I can pull that up and give you Paul that’s okay.

Unidentified Analyst

I trying to understand the pro forma sales and EBITDA by segment for this quarter versus last year?

Mark D. Johnsrud

We’re not leasing for this quarter the pro forma, we are not leasing the stagnant information. Is that what you are asking?

Unidentified Analyst

So how do you expect people to understand the earnings power of the company?

Jay Parkinson

I think by the information we released in, we addressed, we are not releasing with policyholders, the CFI, we are just releasing it on a go forward basis for the company.

Unidentified Analyst

Okay. So we should discount everything, you told us in the Road Show from the prior numbers.

Jay Parkinson

Yes.

Mark D. Johnsrud

I think you gave us pro forma of 2011 and 2012, I think for the consolidated companies correct.

Jay Parkinson

Yeah. I would close this conversation by saying what we have released, shows the picture of what the company looks like today. We don’t see any value at all and trying to go back and put together financials from companies that want together had no synergies, weren’t managed the same way and in many cases were in different businesses. We are not required to do all, we are not going to do it, and what we are doing is giving a picture of how the company is operating going forward as a unified business. So that is what we are going to do.

Next question?

Operator

Thank you. Our next question is a follow up from Scott Graham with Jefferies & Company. Please go ahead.

Scott Graham – Jefferies & Company

Yes I’m unfortunately that was my question as well, the pro forma sales, but maybe we can – maybe we can turn to cash flow little bit from if you are seeing an improvement towards the end of the quarter and you are managing you feel that you are comfortably on top of the working capital board that you were three and six months ago? Is there now potentially some upsights of the free cash flow that you guys have kind of mapped out here on the guidance?

Unidentified Company Representative

I think there is, I think the other thing we’ve talked about a lot of the CapEx so far end way, I think we will continue to be very vigilant on the CapEx number, and I do think you can see the free cash flow profile until we get to the year. Obviously that could be impacted by M&A activity.

Scott Graham – Jefferies & Company

Okay. I think the only other question I wanted to ask was kind of within the primary shales that you’re operating and the oil versus liquids versus dry areas that’s important information, good information. I’m just kind of wondering though, you’re starting to see a little bit of a starting in the Haynesville which I believe that still you’re largest shale and correct me if I’m wrong and…

Unidentified Company Representative

Right.

Scott Graham – Jefferies & Company

Other than the Bakken?

Unidentified Company Representative

Other than the Bakken?

Scott Graham – Jefferies & Company

Yeah. Well is in the Bakken and then of course and then followed by the Marecellus and then followed by Eagle Ford, is that still fair?

Unidentified Company Representative

That’s correct. And again the Bakken being the largest that’s after that, that is the right gradation.

Scott Graham – Jefferies & Company

Right. So then Haynesville was still pretty good in the first quarter of last year and if that’s your largest non- Power Fuels region and we know that the quarter got started off slowly. And I’m hoping that you will at least give some type of a nod to this thinking, we would assume that your revenues kind of started the quarter maybe in the down 10 to down 20 territory and then kind of ended the quarter for less down than that. Is that a reasonable kind of schedule? What happened?

Mark D. Johnsrud

Are you talking about in the company wide or in the Haynesville?

Scott Graham – Jefferies & Company

I’m talking about company-wide, because again you had a very difficult comparison in the Haynesville, correct me if I’m wrong, but your volumes, your sales last year was 51% organically, a lot of that came out of the Haynesville and the Thermo Fluids number was actually higher than what I was expecting.

When you sit here and do the math, you’re kind of coming up with my number of releases an organic of about minus 20, which suggest that the first, maybe two months were pretty difficult and then the third month is maybe closer to a minus five. Is that a in line.

Jay Parkinson

Mark, maybe I could just try that, I think that Scott I agree the first month, frankly the first couple of months in a quarter primarily because of really some tough whether clearly impacted activity. I think generally the market activity was higher in the first quarter. I think pricing utilization fund adjust out the weather side where as I said earlier we’re stable, in some areas they were up, and then we saw activity continue to ramp up throughout the quarter.

Scott Graham – Jefferies & Company

Okay. But the first thing you said Jay it was that you saw activity higher in the quarter?

Jay Parkinson

Yes, activity, I’d say that broadly speaking Scott, activity levels in the first quarter in terms of the industry we try to adjust out for the weather. The activity was higher this quarter then it was last quarter. Again, the weather has an impact on that so, when you get an impact, for this our strongest basins, which is the Bakken and the Marcellus.

Scott Graham – Jefferies & Company

Okay. All right I’ll go with that. Thank you.

Operator

Thank you and we have no further questions at this time. I will turn it back to management for any closing remarks.

Mark D. Johnsrud

Okay, thank you everybody for your help and for your questions. As obvious, as always we are around to answer specific questions you have. We are very, very happy with the quarter, happy with the way the business is ramping up and we believe that everything that we are seeing about to happen in the businesses, about to happen. So thanks for joining us and talking to another quarter.

Operator

Ladies and gentlemen, this concludes the Heckmann Corporation first quarter 2013 earnings conference all. I like to thank you for your participation. You may now disconnect.

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