Hi-Crush Partners LP (HCLP) Update - Jan 3

[dan_s]

HOUSTON, Jan. 03, 2019 (GLOBE NEWSWIRE) -- Hi-Crush Partners LP (NYSE: HCLP), or “Hi-Crush”, today announced that management will present and meet with investors at the Goldman Sachs Global Energy Conference in Miami, Florida on January 9, 2018.

Hi-Crush’s most recent presentation will be made available on the Investors section of Hi-Crush's website, under the Presentations tab, at www.hicrush.com. Webcast information, if applicable, will be made available on Hi-Crush’s website prior to the event.

Seeking Alpha article by Todd Akin
Deep Value, newsletter provider, portfolio strategy, oil & gas

Summary

•HCLP is expanding Kermit 2 and ramping volumes, but there are other catalysts to look forward to, particularly in their last-mile division.

•The company has added silo capabilities to their suite of last-mile services during the downturn. But, the benefits of their containerized solutions, and how they add value to the company, seem to be underestimated by analysts.

•Because of the way HCLP's last-mile business adds to their company's earnings potential, which we will discuss below, the recent dip in share prices should be viewed as a buy.

Read full article here: https://seekingalpha.com/article/423110 ... t-downturn

[dan_s]

The two most recent analysts' reports submitted to Reuters / First Call rate HCLP a BUY with valuations of $10/unit.

I am updating my forecast/valuation model for Hi-Crush today and it will be posted to EPG website by noon.

[dan_s]

My updated forecast for Hi-Crush has been posted to the EPG website.
I expect Q4 2018 and Q1 2019 to be around breakeven, then profits should ramp up starting in Q2 2019. My current valuation is $9.50/unit.

Hi-Crush is a first class outfit and they will probably gain a lot of market share because soft demand periods like this wipe out lots of the weaker competition. I do expect the share price to move a lot higher after they convert to a C-Corp. My only concern is that they may suspend distributions for a couple of quarters (see row 50 on the spreadsheet). However, they have more than enough liquidity to continue them at $0.225/quarter if they wish.

Doubling of the capacity at Kermit, Texas is a really BIG DEAL.

Hi-Crush is rapidly expanding its "Last Mile Delivery & Well Site Sand Management" services. This could significantly increase the valuation; especially after conversion to a C-Corp.

[mattreue]

"My only concern is that they may suspend distributions for a couple of quarters (see row 50 on the spreadsheet). However, they have more than enough liquidity to continue them at $0.225/quarter if they wish"

After riding down from an average buy price of about $11 to selling at $6.11, I am not sure about what the company will do to support investors. No reasonable person thought there was any promise to continue the .75 distribution past the four quarters mentioned, but cutting that distribution after only one quarter only served to communicate that investors can't trust the company to do anything they say. And it looked desperate.

Even paying the reduced distribution when the distribution is not "covered" for 4Q18 and 1Q19 will lead to moaning that they will have to cut distributions soon since they are not covering them. Suspending distributions will show they are heading to bk. (I know they aren't . Just gives ammo to those saying that).

It is tempting to get back in but it seems such a gamble with the management moves this past year.

[dan_s]

Personally, I would advise them to suspend the dividends until they complete the conversion to a C-Corp. Most of the "yield investors" are already gone.

Frac sand companies are somewhat like the onshore drilling companies (PTEN, HP, etc.). Five onshore drilling companies have about 80% of the rigs. In the down cycles the smaller drilling companies are eliminated and the Big Five regain market share.

Hi-Crush is in no danger of going bankrupt. They are definitely gaining market share in the Permian because of the expansion of Kermit.