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Frack sand producer Hi-Crush Partners reported better than expected fourth quarter earnings Tuesday. $HCLP reported a smaller loss than expected. Revenue and pricing for frac sand has backed off with the Permian bottleneck and decreased well completion activity. 

Fracking Sands Hi Crush

Image: HiCrush Plant

Hi-Crush Partners LP NYSE: HCLP Reported Earnings After Close Tuesday

($0.08) Beat ($0.09) EPS and $162.42M Beat $142.68 Million Revenue Forecast

Earnings

Hi-Crush Partners LP (NYSE:HCLP) reported Q4 GAAP EPS of -$0.08 which beat by $0.01. Revenue of $162.24M (-25.0% Y/Y) beat by $19.74M. Revenues compare to $214.0 million in 3Q 2018 and $216.5 million in 4Q 2017 

The net loss of $(9.9) million in 4Q 2018 vs. net income of $27.1 million in 3Q 2018 and $41.9 million in 4Q 2017. Adjusted EBITDA of $10.2 million in 4Q 2018 vs. $51.3 million in 3Q 2018 and $57.9 million in 4Q 2017. 

Hi-Crush Partners LP NYSE: HCLP

Market Reaction After Hours $4.68 +0.20 (+4.46%)

Highlights

  • Contribution margin per ton of $14.35 in 4Q 2018 vs. $23.92 in 3Q 2018 and $23.46 in 4Q 2017
  • Exited 4Q 2018 with $114.3 million of cash, no borrowings on ABL facility and total liquidity of $172.5 million
  • 51% of 4Q 2018 sales volumes sold to E&Ps; executed additional sand supply and last mile service agreements
  • Completed construction of second Kermit facility; Wyeville expansion remains on target for 1Q 2019

"Contribution margin per ton was in line with previous guidance, reflecting our relentless focus on cost management and efficiency, which offset the lower capacity utilization we experienced," said Ms. Laura C. Fulton, Chief Financial Officer of Hi-Crush. "During the quarter, we turned down orders for volumes that would not have been profitable, and, at the same time, we were successful in expanding our relationships with E&Ps, which accounted for more than half of our sales volumes. This progress, as well as the movement of demand and our business away from sales at the minegate, reinforces the importance of relationships we have cultivated with E&Ps as the foundation of our business going forward."

Outlook

For the first quarter of 2019, the Partnership expects total sales volumes to be in a range of 2.4 to 2.6 million tons. The forecasted sequential increase is due to additional volumes sold from the second Kermit facility as well as increasing Northern White volumes related to the new E&P contracts previously announced.

"The first quarter of 2019 will be very active for Hi-Crush, as our second Kermit facility ramps up, new Northern White E&P contracts begin, existing customers ramp up activity, and the outlook for commodity prices stabilizes," said Ms. Fulton.

"We expect meaningful sequential growth in our sales volumes primarily due to our second Kermit facility. We expect average sand pricing to remain unchanged, despite our expectation for increased activity levels in the first quarter. We are pleased with the operational and financial results from the deployment of our container and silo systems, and see room for further improvement as we continue to enhance and develop the systems to meet the challenging and dynamic needs of our E&P customers. As we progress through the year, we anticipate the expansion of our PropStream service will move in line with the expansion of our E&P customer base, further reinforcing our position as a company built for long-term, structural success." Ms Fulton added

Hi-Crush Partners Q3 Earnings Recap

$0.30 Beat Forecast $0.29 EPS

Earnings

Hi-Crush Partners LP (NYSE:HCLP) reported earnings of $26.5 million, or 30 cents a share, for the third quarter ending Sept. 30. That is down 10.9 percent compared to the $29.8 million, or 33 cents a share, it earned in the same period of 2017. Analysts expected Hi-Crush to earn 29 cents a share for the current quarter. Revenues rose 27.7 percent in the third quarter year-over-year. 

Hi-Crush Partners Q2 earnings were $0.67 EPS, missing the consensus estimate of $0.77. The company had revenue of $248.52 million during the quarter, compared to analysts’ expectations of $250.12 million.

Hi-Crush Partners LP NYSE: HCLP on Friday closed at $8.40 +0.67 (+8.67%) and a 52-wk high of 16.65 and a  52-wk low of 7.35

Hi-Crush Partners LP NYSE: HCLP

Market Reaction After Hours8.07▲ 0.04 (0.50%)

Highlights

  • The company sold nearly 2.8 million tons of sand in the third quarter, an increase of nearly 13 percent compared to the 2.5 million tons it sold in the same period of 2017.
  • Contribution margin per ton of $23.92 in 3Q 2018 vs. $30.94 in 2Q 2018 and $19.39 in 3Q 2017
  • Volumes sold through PropStream® increased to 24% of sales
  • Volumes sold direct to E&Ps increased to 40% of sales

"The third quarter experienced a rapid change in market conditions in the frac sand sector," said Mr. Robert E. Rasmus, Chairman and Chief Executive Officer of Hi-Crush. “This change, attributable to declines in well completion activity and therefore demand for frac sand, impacted the market for Northern White volumes and pricing, which we expect to continue in the fourth quarter. The accelerated pace of slowdown in well completion activity, combined with supply additions and build-up of inventories in-basin, resulted in lower pricing for Northern White sand across all basins. We remain committed to our Mine. Move. Manage. operating strategy and to expanding our frac sand logistics solutions offering. We believe our focus on logistics will differentiate Hi-Crush and continue to benefit unitholders, particularly as the market rebounds in 2019 due to operator budget resets and the alleviation of takeaway capacity constraints in the Permian Basin.”

Hi-Crush Partners Acquires General Partners, Cuts Distribution, Q3 Revenue

On Oct. 22, 2018 Hi-Crush Partners LP (HCLP) announced it would acquire its general partner, cutting its quarterly distribution to $0.225/unit from $0.75/unit and offering preliminary Q3 results.

HCLP says it has acquired its general partner by acquiring Hi-Crush Proppants for 11M newly issued common units, valued at $96.25M based on Friday's closing price of $8.75/unit. HCLP says the deal simplifies its corporate structure; incentive distribution rights are eliminated.

Six members of HCLP's board have resigned, including seats held by Avista Capital Partners and its appointees. Additionally, HCLP forecasts Q3 revenues of $210M-$215M, below $229M analyst consensus estimate, on sales volumes of 2.775M tons.

"The market for frac sand began to soften in early August due to a temporary decrease in completions activity, as reflected by the previously announced reduction in our volume outlook" for Q3, HCLP says. "This temporary weakness accelerated throughout September and continues through today. The decision reached on the distribution by the board reflects these market conditions."

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

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