Emerge Energy Services (fka EMESQ)

[Snackman]

Analyzing Frac Sand Volume Growth for HCLP and EMES

Ruth King
Market RealistSeptember 14, 2017

HCLP, EMES: Are Frac Sand MLPs Currently Attractive? PART 3 OF 9 HCLP’s recent performance Emerge Energy Services (EMES) and Hi-Crush Partners (HCLP) both reported strong 2Q17 results. Hi-Crush Partners sold 2.1 million tons of sand in the quarter, representing a 53.0% rise over the previous quarter. It expects strong results in 3Q17 with a 14.0%–24.0% sequential growth in volumes. The above graph shows Hi-Crush Partners’ volumes sold over the last three years. “Growth in sand demand, combined with increasing prices throughout the quarter, resulted in $23 million of distributable cash flow. Frac sand fundamentals continue to be positive, particularly for fine mesh sand, and execution continues

EMES expects high volume growth
Emerge Energy Services’ frac sand volumes rose 11.3% from 1.3 million tons in 1Q17 to 1.4 million tons in 2Q17. As the above graph shows, EMES projects total volume growth of 93.0% CAGR (compound annual growth rate) over two years.

Strong volume growth contributed to positive DCF (distributable cash flow) for the two MLPs after several quarters of negative flows. Let’s analyze the DCF and capital expenditure trend for Emerge Energy Services and Hi-Crush Partners in the next part of this series.