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GreenHunter Resources, Inc. (NYSEMKT:GRH)

Q1 2014 Earnings Conference Call

May 12, 2014 11:00 AM ET

Executives

Kirk J. Trosclair – Chief Operating Officer

Ronald McClung – Senior Vice President and Chief Financial Officer

Analysts

Brian J. Butler – Wunderlich Securities, Inc.

Evan C. Richert –Sidoti & Co. LLC

James Curran – New Salem Investment Capital LLC

Operator

Good morning, my name is Kelly, and I will be your conference operator today. At this time, I would like to welcome everyone to the GreenHunter Resources First Quarter 2014 Financial and Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions) Thank you, Kirk Trosclair, you may begin your conference.

Kirk J. Trosclair

Thank you. Okay, we’ll get started, with this morning’s first quarter 2014 financial and operating results call. First of all, I just want to apologize to everyone out there, I know you probably not listing to me right now, because you busy reading your press release that finally just hit the Wire. We had a little mix up this morning on the press release going out, and we did receive confirmation that the Wire has gone out – Wire, yes, on the press release and if you don’t have it yet via email at your convenience you can go to our website and it is actually posted on the Web site as well reading.

Okay so, we’ll get started and just sort of go through some of the highlights for the first quarter for the three months ended March 31, 2014 we continue to strengthen our dominant position in the Appalachian region, as one of the largest operators of commercial salt water disposal wells in the Marcellus and Utica Shale plays. And we exit the first quarter 2014 with over 13,900 barrels per day of operating permitted disposal capacity, along with a operating fleet of vacuum trucks capable of transporting brine and condensate.

Total disposal volumes for the Company’s nine Appalachian SWD wells increased quarter-on-quarter 97% in the first quarter 2014, which increased to 927,000 barrels as compared to 471,000 barrels disposed in the first quarter 2013.

We have continued to focus on developing our barge transloading and bulk storage facilities along the Ohio River and continue to make progress in adding/sell our disposal wells. In the first quarter we added one well in the Appalachia division and then as you guys know, sticking with our plan that we had announced previously continue to divest the non-core assets down in South Texas and Oklahoma. And we have finalized those transactions in the South Texas area still working on the Oklahoma deal. But that’s just still happened here in the remaining balance of second quarter hopefully.

We did report positive EBITDA from continuing operations of almost $380,000 for the first quarter of 2014 and the operating revenues from continuing operations were $8.5 million during the first quarter, compared to $4.7 million for the first quarter in 2013 which is an increase of 79%, our loss of 2014 continued operations is 1.3% for fiscal year 2014 compared to loss of 1.7% in 2013, and our net loss per share of operations for both 2014 and 2013 was $0.08 per share basic and diluted.

The continued operations for 2014 was $130,000 basically per common share, basic and diluted, compared to loss of discontinued operations of $5.8 million, which was $0.17 per share for 2013. So the net loss per share both continuing operations and discontinued operations, basic and diluted, was $0.08 compared to $0.25 comparing 2014 and 2013, respectively.

Just to hit a couple of the highlights of how the transactions took place in the first quarter. Late January, we sold the Kenedy Hunter SWD to Sable Environmental for $3.9 million. Total consideration of $1 million in cash and we took a promissory note of approximately $2.9 million with an interest rate of 10% per annum, maturity date was set for January 31, 2016 was received at closing. But as you go through the timeline you’ll see we took payment on the continuing balance here just recently.

Couple of days later in January 31, the Company sold our second MAG Tank had additional revenue of $800,000 related to the sale of this MAG Tank, and why we’re on the MAG Tank we can tell you, we continue to build out our inventory of MAG Tank panels. We have an additional tank mill on the ground in the Appalachia region ready for deployment and which we have the final panels coming out of the fabrication shops both in the Louisiana and in Fort Worth in Texas that will stage a couple of tanks here but probably ship another tank up through the Appalachia region as well.

In early February the legacy operations from the (indiscernible) February 19, we signed the agreement to sell the legacy biomass project to ML Energy Park for $2 million. The closing is actually scheduled for March 15, 2015. But we’re receiving progress payments on that of $50,000 per month until they purchase the property. Those payments are non-refundable. And we have continue to receive those payments on a monthly basis for the first few months of the year.

On February 28, we closed on the private placement for the MAG Tank unsecured term notes due issuance with 100,000 common stock purchase warrants with an exercise price of $2.25. And like I said those funds will use to build-up our inventory on the MAG Tank.

On March 16, the Mills Hunter #2 was put into operation down in Southern Ohio, Meigs County, Ohio. The well after we tested the well it’s got a permitted capacity of above 1,500 barrels per day, which brings that total facility down there to – total daily operated capacity currently today have about 4,000 barrels per day.

And later on in March continuing on the divestiture of the South Texas facilities, we sold the Westhoff Hunter to Clear Water Resources for $3.4 million, $1 million was in cash and then promissory note $2.4 million with an interest rate of 10% per annum, maturity date on that is May 1, 2016 and we have received – we have since received our first payment on that well for the sale of Westhoff Hunter.

Then on May 1, we finalized the deal and sold the Dilley disposal well obviously to Sable Environmental and purchase price on it was $4.7 million. And an as part of the agreement as we discussed earlier, the purchaser paid off the remaining $2.9 million promissory note that was issued in January of this year. Those were pretty much the highlights of all of the transactions that took place in the first quarter 2014, and with that being said, I’ll turn it over to Ron for a second, before we go into our recent investments since third quarter and then let Ron, go over the financials.

Ronald McClung

Thanks Kirk. Kirk has already pointed out to you, what our income expenses are for the first quarter. The biggest thing I’d like to emphasize to you is that, we did subsequent to at the end of the quarter calls on our daily sales, which was a substantial transaction for us and has improved our balance sheet immensely even since the numbers that were released for the quarter and puts us in a position going forward where things are much different than they were prior to that, it basically solved most of our working capital deficit issues. And puts us on a good foot going forward in terms of focusing our attention on the Appalachian region and we are feeling very good about where we are and what’s the prospects are for the rest of the year, and thanks Kirk.

Kirk J. Trosclair

Okay, so continuing on what Ron had said, we’ve done what we said, we were going to do. We’ve focused in this first quarter on truly trying to sure up the sales of the non-core assets down in South Texas and we completed those, and like Ron said, significantly improved our balance sheet going forward. And we are committed to continuing our growth efforts in Appalachian division.

Like I said, we added one well in the first quarter and currently we are working on converting two new wells down at that same Mills Hunter facility, which will significantly increase the volumes in that southern most facility. Those wells are into permit right now, and we should have those converted and online by the end of the second quarter. Just as recently as last week so that’s two additional wells that you can still coming on in the second quarter there.

And then the third one, will be a well that we just signed the lease on as recent as last Thursday. It will be in Belmont County, Ohio and we’re going through the process right now of testing that well, making sure it’s a prime candidate which we think it is, and then we’ll move forward as quickly as possible to get that one turned on and inline hopefully by the first part of the third quarter.

We may be able to get it done quicker and get it in there by the end of the second quarter but it’s going to be tough because this well will require new facility whereas down in Southern Ohio and the Meigs County area we are able to have the offloading facilities and basically you just have to turn a lot well on the line and run the pipeline to the wells.

So those are some of the key things that are going on to give you an update, I guess on the barging proposals, what’s going on there. We’ve had recent meetings again with The United States Coast Guard two weeks ago and we are anticipating final draft of the policy here in the next, we keep saying 30 days. But we really have our hands tied with the Coast Guard and they keep telling us there are going to come-up with the final ruling here in the next 30 days or so.

That’s pretty much where we are with that. The other things we’ve done in the first quarter have launched our division so the recent activities are kind of – made a mentioned, we have it in the press release which will be GreenHunter Environmental Solutions and we’ve made a decision based on the amount of business that we have been referred to locally. We had referred a lot of the business to local environmental services companies and we are determined with the divestiture of the South Texas assets. We had a lot of the equipment already in house.

We already have the expertise with the personnel on hand to start this environmental solutions division and we see this new business segment as a key driver for our total package of services, where we can actually lower our cost internally by doing a lot of these services that we typically had to refer to local third party customers to handle for us. We can do them ourselves, and then also provide the service to other E&P operators which have requested us to handle total fluid water management solutions which goes even a little further to the solid [camp] (ph).

We have already given some of that with our frac cycle and the frac cycle has started to pick up in the Appalachia region, now that we’ve worked all its way out of the system and finally learned exactly, had enough run time to establish a good throughput rate. We are seeing that business pick up as well because that portion of it will just fall underneath the GreenHunter Environmental Solutions Division.

And the main things we will handle with environmental solutions at this point to initially break into the business, will be things like roll of services, transporting of dry and wet materials, clean-up material, construction debris equipment, stuff like that. Sludge boxes, Vacuum boxes, dewatering boxes, things that we typically provide on the drill site on the drill pads.

Vacuum Service of cement, lime, sands and gravel those types of things, then also vessel and tank, and work surface cleaning solutions utilizing the water jet technology, which we already have (indiscernible) and removing scale, hydrocarbons and like that from tanks, so we can use that as a decommissioning service, clean our own frac tanks, as well as other frac tank cleaning services, drilling rig cleaning, mud pits, waste minimization, and then confined space cleaning and rescue, as well, which we have the certifications for in-house.

So you’ll see more about that as we continue to grow that portion of the business. We’ve already started the business, but we’re are in the phase of actively transporting the equipment up there from South Texas, getting the facilities set up to handle more environmental waste and we should go live somewhere around June 2, the first week of June or so with GreenHunter Environmental Solutions.

So that’s going forward here on the second quarter, the main thing is going to be to continue to add wells. I’ve mentioned three of them to you already. We do have others in the pipeline. We are going to add one at our Ritchie County facility in Ellenboro, West Virginia. And then we’ve got several more on path to hit the mark of adding six to nine wells before the end of the year. And we are well on pace to do that.

So with that being said, I think we had a good quarter even a good quarter with a bad month. The month of February was really abnormal for us with the amount of weather and downtime that we had for trucking due to the weather in the Appalachia division, and I know that’s a common occurrence that you’ve heard in a lot of calls recently on first quarter. But it’s just it is what it is. It was that brutal for us in February. So in the month of January and March helped us battle through that and produce some positive EBITDA for the quarter.

So with that being said, I think we’ll, operator I guess we’re ready to start the Q&A session.

Question-and-Answer-Session

Operator

(Operator Instructions) Your first question comes from the line of Michael Hoffman of Wunderlich Securities. Your line is open.

Brian J. Butler – Wunderlich Securities, Inc.

Good morning. This is Bryan Butler in for Michael this morning. Thanks for taking my questions.

Ronald McClung

Hi, Brian.

Brian J. Butler – Wunderlich Securities, Inc.

Just following up on the comment on the bad weather. Is there anyway to quantify that kind of between what was a kind of loss revenues and what was increased cost and then, do you think you’ll recapture any of that in the second quarter?

Kirk J. Trosclair

Yes. There are some ways to quantify it. I mean, we had 10% loss for weather day. And then also, you got a battle in there the 10% fewer days in February. So, the combination of those two really hit us pretty hard. And I don’t know that there’s a way to make up for weather days, but just some nature things that we have to deal with.

Brian J. Butler – Wunderlich Securities, Inc.

So that, last weather days is just lost quick revenues and then I’m guessing were cost materially I mean was that also 10% higher than expected or how to think about the cost side of it?

Kirk J. Trosclair

I mean, when you sit there are and look at it, you had three full days throughout the month of February that we had no trucks on the road. So you still your cost for those operating units and then we have no revenues associated with them.

Brian J. Butler – Wunderlich Securities, Inc.

All right but, when they were on the road even after this, once you got them on there, were cost higher or lower or just those that – once they got road there is really no difference.

Kirk J. Trosclair

We do have some additional operation cost due to weather stuff, because it was so cold up there this winter. You had diesel fuel jellying in the tanks. So we had – and the fuel providers were not ready to handle that. And we do have some higher cost to get some vehicles backup and running and things like that. That has to go for a short of period of time. And so, yes to answer to your question, it did had some operational costs.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. Then on pricing in the quarter, it looks like pricing on the way you did take in look pretty stable. Can you talk about kind of the pricing trend that you seeing in the Appalachian region?

Kirk J. Trosclair

Yes. It is stable. You’re absolutely correct. When we started up in there in 2012, we saw immediate increase in the pricing based on liquids and solids, but that has pretty much stabled in level to self out over the last few quarters. We don’t anticipate anything spiking upwards or downwards at this point. I think, you hit it nail on head, it’s pretty leveled right now.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. And then on the new segment the GIGS, can you talk just maybe the market size in your area and opportunities there and maybe get into some detail on what do you think the organic growth rate is for this market and what you guys might see better than that if you are taking share.

Kirk J. Trosclair

Yes. Obviously we’re in our infancy portion of that business and we’re still studying what the growth rates going to be and what we think the market share is. So I don’t have much to say what the particular market share is, but I can tell you that it’s growing everyday, just on the basis of horizontal shale place in general, you have more drill cuttings coming to the surface that have to be solidified.

Everyone going to close loop systems and that particular essence on the drill pad itself and we’re already in that business with the Frac-Cycle dealing with non-confirming fluids, handling heavy solids. And so it’s just a natural fit for us, we’ve had the pressure wash units down in South Texas. We had super bags in quad, we had a rolled-offs containers which we’ll have to spend a little capital to add some more some more roll-offs and a few different things like that, but we also had some good personal that we already have on staff, that we didn’t have to go outside to hire.

Who have that experience already and we were fortunate enough to be able to just promote those guys from within and utilize their services here. So I’m comfortable at this point projecting revenues for you, I think by the end of the second quarter we’ll have our projections on that and then we can release those to you what we think the company will do on the GreenHunter Environmental Solution side, but right now we are not comfortable to doing that.

Brian J. Butler – Wunderlich Securities, Inc.

Okay on the capital requirement side of is that – did you say that’s small like less than a $1million or is there a larger cost coming on there to get all the equipment in place and the right equipment, purchased?

Kirk J. Trosclair

We’ve got most of it already, so I think we’ll have to add an additional $1 million or so, but most of that stuff is readily available that we can grab pretty quick.

Brian J. Butler – Wunderlich Securities, Inc.

Okay and then I’ll ask one and I’ll get back in the queue here. Just on the wells that you are adding and the two new ones you said by the end of the second quarter, about how big are those wells from a disposal capacity perspective?

Kirk J. Trosclair

They are actually probably in the better, the best of the worlds we’ve seen so far Appalachia. We’ve done our injection test and did our separate test on them and I’m step-out a little bit an tell you it’s a third one at Rasco Mills that we sent on that was in the queue. We told you, it produced 1,500 – it can inject about 1,500 barrels per day. These wells, the two new ones that are coming online will probably do anywhere from 2,200 to 2,400 barrels per day each. So really good wells, some the best we’ve seen in the Appalachia region.

Brian J. Butler – Wunderlich Securities, Inc.

Okay thank you very much. I’ll get back in the queue.

Kirk J. Trosclair

Thanks Brian.

Operator

Your next question comes from the Evan Richert of Sidoti & Company. Your line is open.

Evan C. Richert – Sidoti & Co. LLC

Good morning guys. Sorry if I ask some questions that you’ve already answered kind of trying to read the press release and listening at the same time. Could you just talked about the status of barging and where are you out with that right now?

Kirk J. Trosclair

Yes, as we mentioned little earlier, Evan we are still waiting on a status of the Coast Guard to give the final blessing to go out and start moving product on the waterways. We’ve had meetings with them as recently as two weeks ago and any day now we are waiting on the results for them to publish the guidelines.

Evan C. Richert – Sidoti & Co. LLC

Okay and then as far as...

Kirk J. Trosclair

We've done everything we can from our side and pushed the envelope as hard as we can by providing all the samples and everything that we can due diligence wise by adding professional groups to come up with us and in support of our efforts, but we are kind of held at bay by the Coast Guard.

Evan C. Richert – Sidoti & Co. LLC

Sure, I understand. Do you have a number on mind as far as the spend to get more this facilities going, or are you mostly focused on just adding the wells right now?

Kirk J. Trosclair

We’re always focused on adding new wells, that’s our main objective for the reminder of 2014. obviously adding barging – getting barging online will shift that really quickly, but it’s still I believe is our main focus on adding SWD well. And we’ve got – like I said we’ve got four in the pipeline right now that we are currently in the process of permitting and then we’ve got another three or still that we have our eye on that we know are good candidates geology wise, location wise and then also a couple of them on the acquisition front that we can possibly pickup.

So, yes, adding volume is our – capacity is the key for the remainder of the year for us and we’re still on all the convergence, we are still less than $1 million on the convergence even when it has a new facility. If it’s had an existing facility we are doing less than $0.5 million. So, those things have not changed.

Evan C. Richert - Sidoti & Co. LLC

Okay. That’s helpful. And then as far as the divestiture, I think you sold the Oklahoma one, if you were able to spin that off, is there any cost – are you incurring any cost on that? Or is that just sitting idle right now? Anything you would be able to cut out?

Kirk J. Trosclair

It’s actually not idle the disposal well in Oklahoma is actually operational. The one you are thinking about is probably the one that you refer when we have the lightening strike that we did have in field, so that one yes is sitting idle. But the other well is actually functional, and we still have it operational right now. We are trying to dug us that well and we are in negotiations with a couple of different groups to sell that well here in the near future.

Evan C. Richert - Sidoti & Co. LLC

Okay. Is there anyway of quantifying, what I guess what the per quarter or per year costs would be that you’d be saving, I am not if you’re able to spin that off?

Ronald McClung

Cash flow positive.

Kirk J. Trosclair

Yes, it’s cash flow positive, so…

Evan C. Richert - Sidoti & Co. LLC

Okay.

Ronald McClung

The main thing you will see is basically income coming of about $1.3 million to $1.5 million that would be what we think we can get to those wells.

Evan C. Richert - Sidoti & Co. LLC

Okay. And then I think it’s the last question for now, on the MAG Tank, I don’t know if you disclose the cuts were on that, but could you say if its – is it a magnum affiliate or…

Kirk J. Trosclair

From the sale?

Evan C. Richert - Sidoti & Co. LLC

Yes.

Kirk J. Trosclair

Yes. Yes, that was a trial Hunter.

Evan C. Richert - Sidoti & Co. LLC

That was trial, okay. And then just going forward, I don’t know if you can really answer this yet, but any expectations I know the margins have been improving since you have been doing the divestitures, the volume certainly picking up any kind of outlook you have on the year on what you can do on margins?

Kirk J. Trosclair

Well, the margins are – we’ve increased our margins obviously…

Evan C. Richert - Sidoti & Co. LLC

Yeah.

Kirk J. Trosclair

By noting that and we see those continuing to increase through the remainder of 2014 especially as we continue to build out on the frac cycle portion of it, that’s similar higher margin business for us, and in getting the MAG Tanks deployed that are slowly getting into inventory now as we get those deployed for the remainder of 2014 and then obviously, the bread and butter is adding wells.

So adding the wells, increase the volume and then (indiscernible) will come when we do get the approval to go ahead and barge you will see a significant decrease in our cost on the backside, because we eliminate that trucking that were having to do now from our New Matamoras terminal down to the Meigs facility and to our Hunter disposal facility. That’s the big increase when that goes online.

Evan C. Richert - Sidoti & Co. LLC

All right. Thanks, Kirk, that’s helpful. I will hop back in the queue.

Kirk J. Trosclair

Thanks Evan.

Operator

Your next question comes from the line of Jim Curran from New Salem Investment. Your line is open.

James Curran - New Salem Investment Capital LLC

Thanks. You mentioned six to nine wells trying to come online this year, I guess, I’m a little confused about to what degree have already paid for those versus need to pay for them and to the degree you need to spend capital where all this capital come from?

Kirk J. Trosclair

Good question. We have held back a good bit of capital from our divestiture in South Texas and we held that back obviously for the reasons of exactly what you just said from hoping growth in Appalachia division? So, some of that has already been, spent the prepays on some of the pipelines stuff for those two wells down in Meigs county, we've don’t some of that work already, actually the conversion work other than just the pipeline, its pretty much complete for those two wells, just waiting on the finalized permits to come in hand to put those two wells online.

So, when you look at the conversions, if they are at existing facilities like those two are, typically can put those on for less than a half million bucks. We’re talking 300,000 or so in the conversions and you have those wells online.

And, if we have a new well that has a separate facility down the road like one in Belmont county, which we will have to put in infrastructure with a pump house and bring power and those types of thing, those type of investments – those type of capital needs increased about 750,000 or so at that point, if it’s a conversion, which all of these are conversion we don’t really have any new drills on fab yet.

We possibly have one at the Ritchie, that we’re discussing right now in-house, that we could do a new drill, but still even with that new drill at that location, because we already have the services there, the facility there, we can keep that capital to a minimum.

James Curran – New Salem Investment Capital LLC

So, you’re talking about conversions, does it mean you have already paid for these wells, now just get into the CapEx to covert them or there is some you still are planning to pay for to get the land and well in place?

Kirk J. Trosclair

Typically on those conversions Jim, those are actually leased they are basically on a royalty base so the capital spend upfront, its not we are likely going out and actually purchasing the well, you’re getting the rights from the land owner to convert the well into injection and you pay them a per barrel lease once you start injecting.

James Curran – New Salem Investment Capital LLC

Okay.

Kirk J. Trosclair

So, there is no capital upfront to land owner until you actually start injecting.

James Curran – New Salem Investment Capital LLC

So, can you give us any kind of ballpark all-in on the six to nine wells of what kind of cap they need to spend to get those going this year?

Kirk J. Trosclair

Yes, going to be like $4 million to $5 million.

James Curran – New Salem Investment Capital LLC

Okay and you are saying you have got that in hands from those sale of wells?

Kirk J. Trosclair

We’ve got some of that in hand, and we can fund the rest of operating cash flows.

James Curran – New Salem Investment Capital LLC

I see, I mean the talk was that you were going to pay down a fair amount of debt with the wells you sold in Texas. Have you done…

Kirk J. Trosclair

Yes.

James Curran – New Salem Investment Capital LLC

Okay, so you’ve got all the cash left over?

Kirk J. Trosclair

Yes, we paid down about almost $5 million or so.

James Curran – New Salem Investment Capital LLC

Okay, and can you give us any idea of what kind of margins you are hoping to get on the environmental solutions business along the way?

Kirk J. Trosclair

We know what our wish list is, I mean we would like to have it in high 20s, 20% to 30% range, and that’s what we’re shooting for.

James Curran – New Salem Investment Capital LLC

You’re talking about EBITDA margins?

Kirk J. Trosclair

Yes.

James Curran – New Salem Investment Capital LLC

Okay, and then do you feel like there are some understood pricing out there for the services you’re give that you can have some confidence that?

Kirk J. Trosclair

Yes, right, we do like I said, we’ve been utilizing so many third-party services to coming into our own in-house stuff that we’ve to clean out tanks and van trailers and trucks and frac tanks and things like that inside of our own company that – it’s just a natural fit, when you got to the drill pad and you’re already hauling their brine fluids, you are hauling their condensates to go from the drill, now for the drilling applications side and handle solids and the things that go on in the Environmental Services section. It’s just a really good fit for us.

We’ve been on in that division for quite sometime now, and just by doing some analytics based on I guess sometimes we call it sister company, but on some analytics that we know from the magnum side, knowing how much revenue and what they spend on the cost side by having those services provide to them.

It gave us a really good indication of what those rates are and how much those companies utilize the services and we’ve already had several meetings with the same companies that we handle brine for right now that are super excited about us coming into that market and being able to be true one-stop shop for our entire services section.

James Curran – New Salem Investment Capital LLC

Okay. That’s helpful thanks, just if I could, one more questions you understand from what I believe read. You expect to spend close to $20 million more to fully get your barge system in place of another dock or something. So I mean can you gives us an idea or a timetable for that and funding for that?

Kirk J. Trosclair

Yes. If that number came out there $20 million the spend on the barging side that’s over a several year period, a couple of the facilities that we have right now we own a couple of them and then several of them are leased, so as of right now some of those operating costs are zero, and now the construction of the terminal facilities themselves for the barge dock, the receiving tanks at a couple facilities and things like that, once we get the approval to go from the United States Coast Guard those project would be definitely be fast tracked at that point, and that’s when the capital needs would come to construct those facilities.

James Curran – New Salem Investment Capital LLC

Okay. So that would be – that could a lot this year.

Kirk J. Trosclair

It could, we are hoping it. I would be in static if it was next week.

James Curran – New Salem Investment Capital LLC

Okay. And so I guess can you gives us ballpark of what the size of the capital is where that money will come from?

Kirk J. Trosclair

Initially right out the gate like $3 million.

James Curran – New Salem Investment Capital LLC

Okay. And you, so you’ve –

Kirk J. Trosclair

Now we have the flexibility to move some of those things around, we can – the main adding the wells and then we have also identified some temporary docks, the build-out that dock facility is going to take a year, almost a year nine months to a year, and so initially all you going to have is a temporary offloading facility until we can get the tanks constructed, so its minimal expenses to lease a temporary dock and so we can that going while we’re still handling the capital portion of the capital rates.

James Curran – New Salem Investment Capital LLC

Okay. So I assume you expect to pay for some of them on cash flows, one more time.

Kirk J. Trosclair

Yes.

James Curran – New Salem Investment Capital LLC

Okay. Thanks.

Operator

(Operator Instructions) Your next question comes from the line of Jim Collin, of Portfolio Guru. Your line is open.

Unidentified Analyst

Yes. Thank you, good morning. Three questions really just a follow-up on the other ones. Can you gives us projections for revenues for 2014, and you are looking in $38 million when I saw guys at [OGS] (ph). Secondly CapEx taking into account all the answers to the last question, also for 2014, and then finally how much of the CapEx is depending on financing, are you guys still seeking financing, I think it’s been about six months on that effort at this point.

Kirk J. Trosclair

Okay, Jim so revenue wise, I think we’re still online for those projections anywhere from $36 million to $38 million on projected revenue, so we are still good with that that number and we’re confident we’ll hit that number.

Capital expenditures pretty much just to recap some of the things I just said, we think we’ve got $3 million to $4 million just in new wells, well conversions that we have to put in place to get the SWDs up and running here before the end of the year. And other than that it would be the barging side depending on if we get expedited or not with an approval from the Coast Guard soon.

And cap filling lightly around the opportunity that we have possibly to even barge without their approval, that still up in the air as well, because there is – as it stand right now and where our legal team as we came to the documents we qualify and we think we could do it. We don’t know that’s probably not the politically correct thing to do. So we are trying to avoid that nightmare of dealing with Coast Guard in that manner. So but we think we can do it.

So your total capital there three to four on that and you’ve got to build out all the barge facilities over the course of three or four years obviously you spend $15 billion, $20 billion doing that up and down Ohio River. But initially the remainder of 2014 you probably spend three on barge docks and then, three to four on additional wells.

James Curran - New Salem Investment Capital LLC

Okay. And what’s the maintenance CapEx on the existing wells, I think you’d mentioned $1 million to year on last call, is that still that right, or…

Kirk J. Trosclair

That’s correct. You are still in the ballpark of around $1 million.

James Curran - New Salem Investment Capital LLC

And finally just on the financing, are you guys still actively seeking maybe talk about $25 million, $35 million. How much you think the warrant? Are you still looking for it?

Kirk J. Trosclair

Well, we still think that’s the right number, right. So to help us expedite the process and fund our growth, and if you look at it, we feel confident that the right number to help us facilitate that growth.

How are we going to do it? It’s still up in the air right now. We are waiting on a couple of rulings. It’s no secret out there that you guys know. We’ve really been looking at the MLP route and trying to determine how we can qualify, how best we qualify, how quickly we can get to that status. And then, possibly goes about for the shelf on our actually, we don’t if we do it that way our shelf it wouldn’t really matter, because we could convert the MLP and take off in the rates of except that way.

So, we are still in the process of doing that evaluating how the MLP process will work out for us. And the numbers you just threw out there are still what we need to facilitate that growth. So, yes, the $20 million to $30 million helps us expedite the growth of the company much, much quicker.

James Curran - New Salem Investment Capital LLC

Okay. Thanks a lot, Kirk.

Kirk J. Trosclair

Hi, Jim.

Operator

Your next question comes from the line of Michael Hoffman of Wunderlich Securities. Your line is open.

Brian J. Butler – Wunderlich Securities, Inc.

Hi, thanks. This is Brian again, thanks for taking a couple of follow-ups. On the new GHES segment, how you guys are going to report that once you start booking revenues? Is that just going to be a separate line segment to be reported?

Ronald McClung

Our intention is to report it as part of our Water Management segment.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. And then, on the…

Ronald McClung

I am sorry. We may reconsider that as growth, but right now that’s our plan.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. I’d hope you reconsidering putting a separate line item a personal perspective in modeling. On the cost saving that you get from bargings, you talked about nine to 12 – still got at the new doc, but you said you could have a temporary doc in place. So if and when you get the final approval, how’s fast can you start to see those cost savings. Is that within a quarter or is it still going to be longer getting the temporary docs and everything running?

Kirk J. Trosclair

No, they’re within the quarter. I mean, the chance we get approval. We already have our transloading facility up at [indiscernible] and then the other facility are a little further north along the Ohio River. They’re already permitted for transloading. They are operational docs that we’re just using for throughput and we could start barging them immediately, taking that product – if we get the temporary dock in place it would probably take us four to six weeks to get the doc in place and then get aligned ramp to the disposal facility itself on the barging terminal, but there is the ways we can set up temporary frac tanks to offload from this until the actual permanent tank is constructed on site.

So its four to six week timeframe from when they say you’re approved to go and we can actually start to taking product waters ways.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. Great. And then, if this anticipated 30 days of final – until we get approval on the final draft that’s kind of dragged out to be six months. I mean is there a point in time where you just say, yes we are going to barge it or how long do you wait I guess is I’m asking?

Kirk J. Trosclair

Let’s just say I’m getting very impatient. Yes, if we don’t have something in the next 30 days. We’re getting ready to test the bottoms.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. And then, two quick last ones. Total cash after the daily sale what do you have on the balance sheet now?

Kirk J. Trosclair

2.5. is that right? Yes that’s it.

Ronald McClung

Pro forma as of 331, if we had closed the daily sale we would had over $9.5 million in cash of the bank.

Brian J. Butler – Wunderlich Securities, Inc.

All right, but what do you have in the bank today, I guess.

Kirk J. Trosclair

I don’t have that information [indiscernible], but I think north of $20 million.

Brian J. Butler – Wunderlich Securities, Inc.

Okay. That’s great in the 2.5 that you have at the end of third quarter, you recorded for the end of the third quarter.

Kirk J. Trosclair

Yes.

Brian J. Butler – Wunderlich Securities, Inc.

And then, did I hear correctly that the remaining assets that are for sale somewhere about $1.3 million to $1.5 million in proceeds?

Kirk J. Trosclair

That’s correct at the Oklahoma.

Brian J. Butler – Wunderlich Securities, Inc.

Right, but that’s all the remaining assets that are out there.

Kirk J. Trosclair

That’s correct.

Brian J. Butler – Wunderlich Securities, Inc.

All right and then last one, I apologize I’ll sneak one more on there. On the MLP route, how long does that takes for you guys to come to get this position and where are you in that process?

Gary C. Evans

This is Gary, I will -- able to walk-in, we’ve – I’ll put it this way, we've hired council, we've hired a banker and we are continuing to look at ways obviously as you know the IRS withheld all the revenue drillings for MLP. So we’re hoping that will free up in the next 30 to 60 days, but we’re headed to down the path trying to determine the best legal and the best way to conduct that with respect to how the taxes are handled.

Brian J. Butler – Wunderlich Securities, Inc.

All right great. Thanks again.

Operator

There are no further questions at this time. I turn the call back over the presenters.

Kirk J. Trosclair

Okay. without any further questions, I think we’ll conclude the call. And like we said earlier we’re looking forward to get remaining balance of 2014 with the recent activities of GreenHunter Environmental Solutions and adding – the main focus on adding new disposal wells and that we mentioned to you guys. And we look forward to doing that and talking to you soon. Thanks and have a good day.

Operator

This concludes today’s conference call. You may now disconnect.

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Source: GreenHunter Resources' (GRH) Q1 2014 Results - Earnings Call Transcript
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