Hi-Crush (HCLP) Q4 Earnings Miss, Revenues Beat Estimates

Hi-Crush Partners LP (NYSE:HCLP) incurred net loss of $9.9 million or 8 cents per share in fourth-quarter 2018, against net income of $41.9 million or 47 cents in the year-ago quarter. The figure was wider than the Zacks Consensus Estimate of a loss of 6 cents.

Revenues plunged roughly 25% year over year to $162.2 million. Nevertheless, the figure surpassed the Zacks Consensus Estimate of $149.3 million. Lower pricing and reduced volumes are attributable to decline in revenues.

Notably, lower pricing was the result of the slowdown in demand for frac sand that started during the third quarter and continued into the fourth quarter, due to reduced well completion activity.

Total frac sand sold during the quarter was 1,976,805 tons, down 33.8% year over year. Contribution margin per ton sold was down 38.8% year over year to $14.35. Average sales price was $58 per ton, down 18.3% year over year.

Sales volumes to E&Ps contributed 51% to total sales, compared with 40% in the third quarter of 2018. Also, 36% of the total sales volumes were sold at the wellsite through PropStream compared with 24% in the third quarter.

2018 Highlights

In 2018, revenues jumped around 39.9% year over year to $842.8 million. The partnership generated a net income of $137.6 million or $1.42 per share, up from $76.2 million or 96 cents a year ago.

Total frac sand sold in 2018 was 10,407,296 tons, up 16.4% year over year. Contribution margin per ton sold rose 38.5% on a year-over-year basis to $25.45.

Operational Update

As of Dec 31, 2018, the partnership had 16 PropStream container crews in the Permian Basin and Marcellus/Utica. Also, it had 8 FB silo systems operating in the Permian. During the fourth quarter, the deployment of PropStream crews was affected by delays in contract start-ups due to budget timing considerations of customers. Hi-Crush successfully completed field testing for the new FB Atlas top-fill conveyor system with an existing E&P customer in the Permian.

Construction of the second Kermit facility was completed during the quarter, marking an increase in capacity to 6 million tons per annum. The partnership expects to reach full run-rate on the second Kermit facility in March 2019.

Financial Position

As of Dec 31, 2018, the partnership had $114.3 million in cash and $58.2 million in available capacity under the revolving credit facility.

Hi-Crush had outstanding long-term debt of roughly $445.5 million as of Dec 31, up from $197.4 million a year ago.

Distribution

On Jan 7, the partnership’s board decided to suspend quarterly distribution considering the challenging environment.

Outlook

The partnership expects total sales volumes for the first quarter in the range of 2.4-2.6 million tons. Notably, the projections reflect a sequential increase driven by additional volumes sold from the second Kermit facility along with increasing Northern White volumes associated with the new E&P contracts.

Moreover, the partnership expects average sand pricing to remain unchanged in the first quarter, irrespective of higher activity levels.

Price Performance

Hi-Crush’s shares have plunged 63.4% in the past year compared with the industry’s 4.4% decline.

Zacks Rank & Stocks to Consider

Hi-Crush currently carries a Zacks Rank #5 (Strong Sell).

A few better-ranked stocks in the basic materials space include Rio Tinto (LON:RIO) plc (NYSE:RIO) , Cameco Corporation (NYSE:CCJ) and Israel Chemicals Ltd (NYSE:ICL) . While Rio Tinto currently sports a Zacks Rank #1 (Strong Buy), Cameco and Israel Chemicals carry Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rio Tinto has an expected earnings growth rate of 8.4% for 2019. The company’s shares have moved up 1.9% in the past year.

Israel Chemicals has an expected earnings growth rate of 11.1% for 2019. Its shares have rallied 45.5% in a year’s time.

Cameco has an expected earnings growth rate of 18.5% for 2019. Its shares have surged 39.7% in a year’s time.

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