HCLP's dividend more than TRIPLES

[dan_s]

Hi-Crush Partners LP Announces Distribution of $0.75 per Unit for the Second Quarter of 2018

HOUSTON, July 23, 2018 (GLOBE NEWSWIRE) -- Hi-Crush Partners LP (NYSE:HCLP), or "Hi-Crush" or the "Partnership", announced today that the Board of Directors of its general partner has declared a quarterly cash distribution of $0.75 per unit on all common units, or $3.00 on an annualized basis, for the second quarter of 2018, up from a previous quarterly cash distribution of $0.225 per unit. The distribution will be paid on August 14, 2018, to all common unitholders of record on August 3, 2018.

“We resumed our capital return program in the fourth quarter of 2017 with the announcement of our quarterly distribution and implementation of our unit repurchase program,” said Robert E. Rasmus, Chief Executive Officer of Hi-Crush. “This two-pronged approach was intended to maximize unitholder value, while also providing financial flexibility in how we execute our return initiatives going forward. Our capital return announcement for the second quarter evidences the benefits of this flexibility, significantly increasing our quarterly distribution and allocating capital to execute on a series of exciting and unique, high-return growth opportunities. As we announced earlier today, we are pleased to enter into an agreement to purchase FB Industries, execute an amendment to an existing supply agreement with a supermajor E&P customer operating in the Permian, and announce the related, contract-backed expansion of our Northern White and in-basin Permian capacity.”

The Partnership repurchased no common units in the second quarter of 2018. Since the announcement of the $100 million authorized program in October 2017, Hi-Crush has completed repurchases of 2,783,253 common units, totaling $29.4 million. The repurchase program, which remains in place, does not obligate the Partnership to repurchase any specific dollar amount or number of units, and may be suspended, modified or discontinued by the Board of Directors at any time, in its sole discretion and without notice.

“The strong underlying market fundamentals in the frac sand and logistics market and our outlook for further growth, fueled by the transactions we have announced, support the confidence we have in the future of Hi-Crush,” said Laura C. Fulton, Chief Financial Officer of Hi-Crush. “To enable our unitholders to more fully and directly participate in the strength of our business and the cash flow we are generating, our Board of Directors elected to increase our quarterly distribution to $0.75 per unit for the second quarter of 2018. This distribution meaningfully increases the cash paid directly to unitholders, while also improving our organizational flexibility by allowing for the potential conversion of the Partnership from an MLP to a C-Corporation at some point in the future.

Our partnership agreement includes an IDR reset provision, which requires four consecutive quarters of distributions above $0.7125 per unit, and provides one path of many to a potential conversion to a C-Corporation. The Board maintains significant flexibility with respect to future capital return decisions, and is committed to delivering value to unitholders over the near- and long-term.”

Any decision with respect to distribution amounts will be made by the Partnership’s Board of Directors on a quarterly basis, subject to company performance and market conditions. The evaluation of corporate structure transactions is subject to significant uncertainties, including general industry and market conditions. The Partnership has from time to time considered a number of potential corporate structure changes, such as corporate conversion or the repurchase of the general partner and IDRs. It is not possible, at this time, to determine whether or not any form of a transaction may be consummated, the timing of such a transaction, or the terms such a transaction would include. Any such transaction would require approval of the Partnership’s general partner, and would likely require the consent of Hi-Crush Proppants, as sole member of the general partner, whose consent can be withheld or conditioned in its sole discretion.

[dan_s]

In the last 3 months, 4 ranked analysts set 12-month price targets for HCLP. The average price target among the analysts is $15.33. < NONE of the analysts' price targets include the 7/23 announcements

I have updated my forecast/valuation model for HCLP and posted it to the EPG website. My valuation increases by $4/unit to $26.00

I expect HCLP to bolt out of the gate when the market opens today!

[mkarpoff]

I am wondering about the stock price should hclp go to C corp. Do you know how other companies' stocks did when they converted? I imagine the dist/div would have to go down since it becomes a "qualified" dividend.

[dan_s]

I doubt that the conversion to a C-Corp will happen this year, assuming it does at all. I think they just floated the idea to see what the reaction would be. I'm sure it will be a hot topic on their Q2 conference call.

I think the unit buyback is on hold and the quarterly distributions will remain quite high this year. At $3.00/year the current yield is insane and should draw a lot of attention. I'm sure that was their goal. I can just tell you that based on my conversations with Laura before our last Dallas luncheon, they think their unit price is ridiculously low and so do I.

Conversion to a C-Corp may lower the quarterly dividend to a sustainable level, but will cause a lot more hedge funds to buy HCLP. My guess is that it would move the share price rapidly up toward my valuation.

[ddlopata084]

There was close to 10% of shares short as of this morning. Suspect they'll need to exit pretty rapidly here, so watch for a gradual melt-up during the afternoon, perhaps...