Opinions
John Burke
Hi-Crush Partners LP
HCLP-N
COMMENT
Mar 01, 2017
Stock price when the opinion was issued
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They are involved in fracing sand. Over the past five years investors had been disappointed. They recently opened a mine in the Permian – the first operator there. They have locked up capacity on good long-term contracts. They see a 10% dividend increase over the year. They are projecting a 25% increase in frac sand usage. If you want to be in energy this is the one. Yield 7.5%. (Analysts’ price target is $16.36 )
They're in the sand business--fracking. The long-term outlook for fracking is positive. There are more fracks per well, and more sand per frack used. The problem is sand is not gold or copper--there's a lot of it out there. One advantage for HCLP is that only they have permanent sand right in the Permian Basin. At some point there will be consolidation for this industry. You get paid nicely to wait at a 7.5% dividend, which they will likely increase this year. They're starting to generate good cash flow.
This is frac sand. Keep in mind that it is an MLP, which means you are going to get a K-1 and will delay your tax return. The sand they have is the sand that everybody likes, and is crucial in fracing. Thinks their future is good. They pay a very high dividend, which is why he bought it. Had a big run up last year, so he would be a little careful about buying it for any other reason than the dividend. Feels this is the best of the companies.