HCLP and EMES: What Distributable Cash Flow Trends Indicate



EMES and HCLP’s capital expenditures

Hi-Crush Partners’ (HCLP) capital spending in the third quarter of 2017 was $40.2 million, and the company expects to spend $7 million to $17 million on capital projects in the fourth quarter of 2017. Hi-Crush Partners provided 2018 capital expenditures guidance of $35 million to $45 million, related to continued investment in equipment for PropStream, normal maintenance capital expenditures, and discretionary investments in logistics assets. Emerge Energy Services’ (EMES) capital spending in 3Q17 was $2 million.

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Hi-Crush Partners commenced operations on its new Kermit facility on July 31. Volumes sold from Kermit contributed 10% of total sales volumes for the third quarter. Hi-Crush also expects a significant increase in its financial performance from Kermit in the fourth quarter of 2017. The production facility, with a 3-million-ton-per-year production capacity, is expected to reach full capacity in 4Q17.

The above graph compares EMES and HCLP’s DCF (distributable cash flow) and capital expenditures over the last seven quarters.

EMES’s San Antonio plant

In July 2017, Emerge Energy Services started operations at its San Antonio plant, which was acquired in April. EMES received the permit for phase 2 expansion of the plant in July 2017, and it’s currently under construction. With an additional cost of $3 million, this phase is expected to be operational in mid-4Q17.

Phase 3 of the plant’s expansion is expected to be operational by early 2Q18 and cost $60 million–$65 million. An add-on on phase 3 can be developed based on market demand and become operational in 2018 at a minimal cost. The plant’s frac sand production capacity is 4,000,000 tons per year.

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Distributable cash flow

Hi-Crush Partners reported DCF of $37.5 million, whereas Emerge Energy Services generated DCF of $14.1 million in 3Q17. Increased volumes—driven by higher drilling activity, as we discussed in the previous parts of this series—contributed to HCLP and EMES’s DCF for the quarter.


HCLP hadn’t paid any distributions from the second quarter of 2015 to 2Q17. It resumed its distribution in 3Q17 with a quarterly distribution of $0.15 per unit. On October 17, Hi-Crush announced a unit buyback program of up to $100 million. EMES hasn’t paid any distributions since the second quarter of 2015.


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