Hi-Crush Partners LP (HCLP)

[dan_s]

I have updated my profile and forecast model for Hi-Crush Partners LP (HCLP). You can download them from the EPG website.

Demand for frac sand is going through the roof and Hi-Crush is one of the top companies in the space.
Hi-Crush is an MLP and, based on my forecast, it should be able to re-instate cash distributions to unit holders later this year.

2015 & 2016 were rough years for the frac sand companies, but the tide has turned. Horizontal wells in the shales and other tight formations are now being completed with a lot more sand than upstream companies were using in 2014. Frac sand demand is expected to be much higher in 2017 than it was in 2014.

In addition to being the low cost producer of Northern White sand, Hi-Crush has the best distribution network.

Go to the last page and look at Cash Flow From Operations at the bottom of the forecast model. If Hi-Crush's actual results are close to my forecast, the unit price should be a lot higher a year from now. First Call's price target is $26.44.

For those of you that do not like owning MLP's (don't like getting K-1s). Hi-Crush has actively trade options.

[cmm3rd]

Seeking Alpha has a very readable transcript of yesterday's conference call, in which a lot of color was given in prepared remarks about what they have done to "position" themselves coming out of the downturn.

If I understood correctly, they believe demand will continue to exceed supply so that sand prices will continue to increase going forward this year. Also, it sounded as though they are locking up contracts, as well as positioning to be able to deliver the types and quantities of sand, at the specific times needed by customers.

CFO commented that they expect to reinstate distributions in the latter part of the year. While their report was described as a slight miss on both top and bottom line, their remarks were persuasively positive.

Market, so far, seems to be saying "show me."

[dan_s]

Houston, Texas, May 1, 2017 - Hi-Crush Partners LP (HCLP), "Hi-Crush" or the "Partnership", today reported first quarter 2017 results. Revenues for the quarter ended March 31, 2017 totaled $83.4 million on sales of 1,384,887 tons of frac sand. This compares to $67.3 million of revenues on sales of 1,358,511 tons of frac sand in the fourth quarter of 2016. The limited partners` interest in net loss was $(5.4) million for the first quarter of 2017, resulting in basic and diluted loss of $(0.07) per limited partner unit.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter of 2017 was $1.3 million, compared to $(0.3) million for the fourth quarter of 2016. EBITDA adjusted for a loss from our equity method investment ("Adjusted EBITDA") was $1.9 million in the first quarter of 2017. Distributable cash flow attributable to the limited partners for the first quarter of 2017 was $0.1 million. No distributions to unitholders were declared for the first quarter of 2017, as the Partnership continued its distribution suspension. The Partnership stated its intention to resume the distribution as cash flow from operations significantly improves in the latter part of 2017.

[wilmawatts]

In the Hi Crush sand proppant earnings call yesterday a few interesting points were made in the commentary and questions:

1. Logistics will be critical to get the sand from the mine to the wellhead in the volumes needed. An average well now in the Permian is using a unit train of sand, and the drilling pace is picking up as well as the sand intensity. Sand is sourced from different transload locations in many cases to meet demand for different grades and sizes for a well completion program. Costs are roughly 1/3 mining, 1/3 rail, 1/3 last mile in many cases.

2. Containerized solutions to the last mile issue are becoming more popular, and help reduce silica dust. This will be more important as OSHA silica emissions are regulated starting next year.

3. Supply and demand for frac sand remain tight. Nameplate capacity is roughly 115 million tons per year in theory but in reality only 95 million tons per year is available. Two thirds of that is Northern While and one-third local sands. The difference between nameplate and actual capacity is due to logistics and maintenance issues.

4. Demand for finer sand is accelerating much more than for course sands. The supply and demand balance is also impacted by the product mix, with the finer sands seeing more demand and prices have responded. Demand for coarse sand has also improved, but not to the extent of the finer sands.

5. While supply of sand will be effectively 85-95 million tons per year demand for 2018 will be a consensus 100 million tons, up from a peak of 65 million tons in 2014. If 900 rigs are running the demand for sand will be 95 million tons – and we are nearly at 900 rigs now. The market remains robust for the product, and trends will continue, the concerns about oversupply and new mines is overblown for the next few years. Permitting has become much more difficult for new mines.

6. Average selling prices for sand will continue to rise into the year as supply and demand push prices upward. Roughly $30 per ton at the mine is what prices were exiting the quarter, up from $20 a ton or so in January, so the pace of price acceleration has been impressive.

[dan_s]

I am travelling back to Houston today. I will have an updated forecast model for it posted to the EPG website late today (5/3).