Frack Sand Producer Hi-Crush Partners $HCLP Miss Earnings as Drilling Slows

Frack sand producer Hi-Crush Partners $HCLP reported third quarter earnings with lower earnings and revenue then expected. The demand for frac sand has backed off somewhat as rig counts have fallen. The stock fell 5% immediately after the announcement. 

Frack sand producer Hi-Crush Partners $HCLP reported third quarter earnings with lower earnings and revenue then expected. The demand for frac sand has backed off somewhat as rig counts have fallen. The stock fell 5% immediately after the announcement.  

Fracking Sands Hi Crush

 Drilling companies are using more sand per lateral foot fracking to get more oil than a year ago.

Earnings: Revenue $167.6 million versus I/B/E/S view $172.2 million with Earnings per share $0.32 lower than EPS view $0.37 via Thomson Reuters I/B/E/S

Reaction Hi-Crush Partners LP NYSE: $HCLP $10.10 – .50 -4.72% (After being up 6% ar the close)

Highlights

  • Strong sequential volume growth of 16%, in-line with previously communicated guidance
  • Revenues higher by 24% sequentially, driven by volume expansion and pricing increases
  • Contribution margin improved to $19.39 per ton; impacted by $2.3mm one-time charge related to reclamation of coarse grade sand; production costs improved QoQ despite temporary impact of Kermit start-up
  • Adjusted EBITDA increased 57% sequentially, driven by higher volumes, pricing and margins

• Kermit completion: Completed construction of purpose-built 3mm TPY in-basin Kermit facility two months ahead of schedule and under budget; first delivery in July 2017

• Capacity ramp: Northern White capacity of 10.4mm TPY ramped to ~85% utilization in Q3 2017; near full utilization of 3mm TPY in-basin facility achieved in mid-October 2017

• Attractive mesh mix: Producing 65%+ fine mesh in 2017; up to 75% with minimal increase in production cost; well-positioned to serve growing and evolving demand

Outlook

  • Hi Crush Partners for Q4 of 2017 expects sales volumes to increase to 2.7 to 2.9 million tons​
  • Hi Crush Partners sees ‍total capital expenditures for 2018 to be in range of $35 million to $45 million​ 

 About Hi-Crush

Hi-Crush is an integrated producer, transporter, marketer and distributor of high-quality monocrystalline sand, a specialized mineral that is used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells. Our reserves, which are located in Wisconsin, consist of “Northern White” sand, a resource that exists predominately in Wisconsin and limited portions of the upper Midwest region of the United States. Hi-Crush owns and operates the largest distribution network in the Marcellus and Utica shales, and has distribution capabilities throughout North America.

Source: Hi-Crush http://phx.corporate-ir.net/phoenix.zhtml?c=251388&p=irol-irhome

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