Frac sand demand hit bottom in Q3, but the future looks bright for EMES and HCLP. I am talking to Select Sand about hosting a luncheon for us in December.
http://www.marketwatch.com/story/5-ways ... 2015-10-14
EMES and HCLP
EMES and HCLP
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EMES and HCLP
Dan could you be more specific than bright. I reasoned it should be also, and wish I had not gone against the market. Analyst estimates have the stock targeted as low as $2. Such a price point may be overdone, but at the same time it's certainly hard to be optimistic. We know the story: much more sand per well, but fewer wells @ reduced $ to boot. Have they over extended? Some solid data would be much appreciated. Thanks Marty
Re: EMES and HCLP
Log on to the EPG website and click on the MLP tab. You will find my current views for EMES and HCLP there.
I just went to First Call (Reuters) to see recent analysts forecasts for EMES. Seven analysts have submitted forecasts on EMES to First Call. I took the lowest revenue forecasts for Q3, Q4 and 2016 and put them into my forecast model.
The results are cash flow per unit of:
$0.37 for Q3
$0.32 for Q4
$2.09 for 2016
My Fair Value Estimate for EMES changed to $25.42
Here is the deal for EMES and HCLP.
> The only upside we have in this country for oil production is the shale and other tight oil plays. That's all we have left except for deepwater Gulf of Mexico and that is even more expensive.
> The only way to harvest the oil in tight formations is by drilling horizontal wells and fracking the hell out of them with a lot of sand.
> I believe EMES and HCLP will survive and gain market share.
> Q3 and Q4 results won't look good, but cash flows (even at the lowest forecasts) are still decent.
People that invest for yield have very low risk tolerance. They cannot stand to see their principal go down. Keep in mind that these are people who are only in stocks and MLPs because interest rates on CDs totally suck. A lot of this cash has moved out of MLPs and is now sitting in bank savings accounts earning 0.25%.
I just went to First Call (Reuters) to see recent analysts forecasts for EMES. Seven analysts have submitted forecasts on EMES to First Call. I took the lowest revenue forecasts for Q3, Q4 and 2016 and put them into my forecast model.
The results are cash flow per unit of:
$0.37 for Q3
$0.32 for Q4
$2.09 for 2016
My Fair Value Estimate for EMES changed to $25.42
Here is the deal for EMES and HCLP.
> The only upside we have in this country for oil production is the shale and other tight oil plays. That's all we have left except for deepwater Gulf of Mexico and that is even more expensive.
> The only way to harvest the oil in tight formations is by drilling horizontal wells and fracking the hell out of them with a lot of sand.
> I believe EMES and HCLP will survive and gain market share.
> Q3 and Q4 results won't look good, but cash flows (even at the lowest forecasts) are still decent.
People that invest for yield have very low risk tolerance. They cannot stand to see their principal go down. Keep in mind that these are people who are only in stocks and MLPs because interest rates on CDs totally suck. A lot of this cash has moved out of MLPs and is now sitting in bank savings accounts earning 0.25%.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EMES and HCLP
Go to http://finance.yahoo.com/q/ae?s=HCLP%2C+&ql=1
Do those forecasts (even the most bearish) look to you like a company that is in financial trouble?
Do those forecasts (even the most bearish) look to you like a company that is in financial trouble?
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: EMES and HCLP
Dan, regarding HCLP, I just reviewed your excellent 9/22/15 profile. Have events (rig counts, etc.) since you prepared it change your forecast re distributions for Q3 and Q4, and for 2016/2017? Also, your fair value estimate?
Thank for all the info.
Scott
Thank for all the info.
Scott
Re: EMES and HCLP
Not much because I believe there will be a rebound in frac sand demand in 2016. Just for you, let's look at the worst case scenario for HCLP.
Ten analysts have submitted forecasts to First Call. I took the lowest revenue forecast submitted to First Call for Q3, Q4 and 2016 and here is what I get. Keep in mind that I think these revenue forecasts are way too bearish, but here are the results from my model.
Q3: EPS = $0.26, CFPS = $0.42, so distribution might go down to $0.35 [HCLP has a strong balance sheet, so they can keep the distribution above DCF for a couple quarters.]
Q4: EPS = $0.05, CFPS = $0.22
2016: EPS = $0.61, CFPS = $1.35
My Fair Value Estimate goes to $19.25
I think the lowest revenue estimate sent to First Call are way too bearish because HCLP (and EMES) are definitely picking up market share. If the rig count stays around 600 drilling for oil we will see an historic drop in U.S. oil production and oil prices will have to increase or else this world is heading for a MAJOR supply shortage.
Ten analysts have submitted forecasts to First Call. I took the lowest revenue forecast submitted to First Call for Q3, Q4 and 2016 and here is what I get. Keep in mind that I think these revenue forecasts are way too bearish, but here are the results from my model.
Q3: EPS = $0.26, CFPS = $0.42, so distribution might go down to $0.35 [HCLP has a strong balance sheet, so they can keep the distribution above DCF for a couple quarters.]
Q4: EPS = $0.05, CFPS = $0.22
2016: EPS = $0.61, CFPS = $1.35
My Fair Value Estimate goes to $19.25
I think the lowest revenue estimate sent to First Call are way too bearish because HCLP (and EMES) are definitely picking up market share. If the rig count stays around 600 drilling for oil we will see an historic drop in U.S. oil production and oil prices will have to increase or else this world is heading for a MAJOR supply shortage.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group