Emerge Energy Services vs. Hi-Crush Partners
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Emerge Energy Services vs. Hi-Crush Partners

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Which frac sand manufacturer is best: Emerge Energy Services or Hi-Crush Partners?

Which frac sand manufacturer is best: Emerge Energy Services or Hi-Crush Partners?

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  • 1. EMES vs. HCLP
  • 2. Buy Battle Determining which MLP to buy will come down to a few key metrics, management’s guidance for the future, and how these MLPs are working to execute their growth plan.
  • 3. Yield Let’s begin with our first metric: Yield.
  • 4. Yield 3.9%4.6%
  • 5. Yield Historically, BOTH of these yields would be considered AVERAGE or LOW. Given many MLPs are sporting even lower yields right now, these two look good comparatively. Winner: EMES Let’s move on to the next metric.
  • 6. MRQ Distribution coverage An MLPs distribution coverage ratio should always be greater than 1.0 times distributions paid. Credit rating agencies like Standard & Poor’s don’t give “bonus points” for higher coverage, but that could let investors know how much breathing room an MLP could have for distribution growth.
  • 7. MRQ Distribution coverage 1.18x coverage Q1 DCF $17.4 million 1.1x coverage Q1 DCF $26.2 million
  • 8. MRQ Distribution coverage This factor is a bit of a wash, both MLPs have adequate coverage. In theory, because $EMES is a variable rate MLP, it should never (ever) miss on coverage. Let’s move on to management’s guidance
  • 9. Management guidance • Distributable cash flow: N/A • 2014 Distribution guidance: $3.80 to $4.00 • Distributable cash flow ~$100 million to $130 million • Distribution guidance: $2.30 to $2.50
  • 10. Actual growth story: Emerge • 1 new mine coming online in 2014, in the permitting stage for two other new mines expected online late 2014 to early 2015 • Recently secured 4 new contracts, existing customer contracts continue to grow Quarter-over-Quarter* • Net income +32% • Distributable cash flow +13% • Distribution +13% *EMES does not have YOY data available for all metrics.
  • 11. Actual growth story: Hi-Crush • Recent contract with C&J Energy Services, five- year supply agreement. • Recent contract with Halliburton, new long- term supply agreement that increases min. volume commitment. Year-over-Year • Net income +32% • Distributable cash flow +20% • Distribution +11%
  • 12. Key takeaways • Metrics at both of these MLPs are in good shape by MLP standards • Growth is quite visible at both MLPs, and accelerating quickly BUT • Neither of these MLPs offers an impressive yield. If you need better income-generating ideas, grab the free report on the next page
  • 13. Here are your better ideas