Higher 3Q17 earnings

Emerge Energy Services (EMES) announced its 3Q17 results on November 1, 2017. The company’s EBITDA (earnings before interest, tax, depreciation, and amortization) for the quarter rose 149% sequentially to $18.7 million. Emerge Energy Services’ 3Q16 EBITDA was -$8.1 million. Its DCF (distributable cash flow) rose to $14.1 million from $2.6 million in 2Q17 due to increased sand volumes sold during the quarter.

Emerge Energy Services: Why Its 3Q17 Earnings Rose

The above graph shows Emerge Energy Services’ DCF and capital expenditures over the last seven quarters. After several quarters of negative DCF, the company posted positive DCF in 2Q17.

Higher volumes, prices drove earnings

Emerge Energy Services’ earnings growth in 3Q17 was driven by higher sand volumes sold. Improved prices also contributed to the earnings for the quarter.

“Pricing increased at a faster rate than we had expected three months ago, and both our total and frac sand volumes increased by 6% in the quarter compared to the second quarter of 2017.  Total cost per ton sold also declined due to operational improvements and higher utilization of our production and logistics assets,” said Ted W. Beneski, chairman of Emerge Energy’s general partner.

According to the company, it’s on track to meet its adjusted EBITDA guidance of $40 million for 2017.

Distributions

Emerge Energy Services didn’t pay a distribution for 3Q17. It’s restricted from making distributions under its credit agreement. Emerge Energy Services hasn’t paid any distributions since 2Q15.

Capital projects

Emerge Energy Services’ capital expenditures for 3Q17 were $2 million. The company started construction work on its San Antonio expansion project in October. The expansion project is expected to become operational in 2Q18.

Hi-Crush Partners (HCLP), which released its 3Q17 results on October 31, also reported strong volumes growth in 3Q17. To learn more, read Hi-Crush Partners’ Earnings Continued to Rise in 3Q17.

In the next part, we’ll discuss analysts’ target price and recommendations for Emerge Energy Services.

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