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HCLP and EMES: Will US Rig Counts Support Frac Sand MLPs?

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US rig counts

The US crude oil rig count provided by Baker Hughes was 756 for the week ended September 8, 2017. Crude oil rigs hit a low in the last week of May 2016. The US crude oil rig count has been largely on an uptrend since then. However, the counts have fallen in three of the last four weeks, hitting an 11-week low. Since drilling activity directly impacts the demand for frac sand, a slowdown in drilling activity may further hurt frac sand companies’ stocks.

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Steady growth in rig counts

The above graph shows the US crude oil rig counts over the last four years. The steady growth in rig counts from the low of 316 rigs in May 2016 to 756 currently has contributed to an increase in frac sand volumes for Hi-Crush Partners (HCLP) and Emerge Energy Services (EMES) during that period. We’ll look at volume growth in the next part of this series.

Crude oil prices have fallen nearly 10.0% year-to-date. Rig counts tend to follow crude oil prices with a lag. 

Natural gas rigs rose by four to 187 for the week ended September 8, 2017.

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