Hi-Crush Partners LP (ticker: HCLP) reported its Q4 and full year 2017 results. Revenues for the fourth quarter of 2017 totaled $216.5 million on sales of 2,985,115 tons of frac sand. This compares to $167.6 million of revenues on sales of 2,456,195 tons of frac sand in the third quarter of 2017.
“Hi-Crush’s performance in the fourth quarter is the result of a year of strategic planning and focused execution,” said CEO Robert E. Rasmus. “We acted quickly, proactively and also took advantage of an improved environment in the frac sand space. From the first quarter, with our purchase of Whitehall and the development of our Permian Basin Kermit facility, to the fourth quarter, when we achieved full utilization at our Kermit facility, while placing into service our Pecos terminal and our tenth PropStreamTM crew, our team worked tirelessly to get us where we are today.”
Q4 2017
Average sales price was $71 per ton in the fourth quarter of 2017, compared to $68 per ton in the third quarter of 2017 and $49 per ton in the fourth quarter of 2016, as sales prices generally improved due to continued increases in frac sand demand in excess of available supply, particularly for fine mesh sand, Hi-Crush said. Approximately 42% of sales volumes for the fourth quarter of 2017 were sold at the mine, 43% of the volumes were sold at the terminals and 15% of the volumes were sold at the wellsite.
The percentage of volumes sold at each delivery point varies quarter to quarter due to customer mix, Hi-Crush said, however, the percentage of volumes sold at the terminal or the wellsite is expected generally to increase over time as customers prefer landing sand closer to, or at, the wellsite.
“During the fourth quarter, we benefited from continued growth in pricing and contribution margin, full utilization at our Permian Basin Kermit facility since mid-October and ongoing strength in demand for Northern White frac sand,” said CFO Laura C. Fulton.
Hi-Crush Network Ownership, Feb. 2018
Full year 2017
Revenues for the year ended December 31, 2017 totaled $602.6 million on sales of 8,938,713 tons of frac sand, compared to revenues of $204.4 million on sales of 4,253,746 tons of frac sand for the year ended December 31, 2016.
The volume increase for the full year 2017 compared to 2016 is a result of dramatically improved market conditions, Hi-Crush said, in addition to increased production capacity availability following the resumption of operations at the Whitehall facility in March 2017 and commencement of operations at the Kermit facility in July 2017.
For the years ended December 31, 2017 and 2016, volumes sold at the mine were 38% and 46%, respectively, while volumes sold at the wellsite grew to 11% in 2017 from 1% in 2016.
Operational update
Hi-Crush Permian Footprint, Feb. 2018
Hi-Crush commenced operations at its Permian Basin Kermit production facility in July 2017. Kermit completed its utilization ramp in mid-October 2017, recording full utilization on its annualized run rate of 3.0 million tons per year. Kermit has contracted approximately 90% of its nameplate capacity under long-term, fixed-price arrangements with high-quality customers, including large E&P companies.
In October 2017, Hi-Crush commenced operations at its Pecos terminal, and according to the company, it is the industry’s first unit train capable terminal with silo storage in the Southern Delaware Basin. The facility includes 20,000 tons of vertical storage, is unit train capable and offers direct access to Class-1 rail. At the end of 2017, Hi-Crush had 10 PropStream crews in the Permian, Marcellus and Utica.
“We are proud to be the industry’s first mover in the Permian, expanding our service offerings to customers through the start-up of our Kermit facility and Pecos terminal, as well as growth in PropStream crews,” said Rasmus. “Since commencing operations at Kermit in July 2017, more than two months ahead of schedule, our team successfully and efficiently ramped production to full utilization in October, adding attractive contribution margin and representing 22% of our total volumes sold during the fourth quarter.”
Hi-Crush Marcellus-Utica Footprint, Feb. 2018
CapEx
Capital expenditures for the year ended December 31, 2017 totaled $122.0 million. Costs were associated with the construction of the Kermit facility, the Pecos terminal facility, additional equipment to support PropStream growth and overburden removal.
Total capital expenditures for 2018 are expected to be in the range of $35-$45 million. The budget includes continued investment in equipment for PropStream, normal maintenance capital expenditures – this includes overburden removal and discretionary investments in logistics assets.
$100 million buyback program
During the fourth quarter of 2017, Hi-Crush repurchased 2,030,163 common units for a total cost of $20.0 million under the $100 million buyback program. Hi-Crush said it remains committed to the remaining $80 million of repurchases allowed under the program.
2018
For the first quarter of 2018, Hi-Crush expects total sales volumes to be 2.7-2.9 million tons. The sequential decline in forecasted volumes is the result of the temporary impacts from extreme winter weather and ongoing Class-1 railroad service issues, Hi-Crush said.
These issues have escalated in February, reflecting the broader challenges faced by the national rail network, which impacts all railroads and all sectors that transport goods by rail, Hi-Crush said.
Hi-Crush currently expects Class-1 railroad service to improve gradually through the remainder of the quarter and be largely resolved by the end of the first quarter of 2018. Pricing has continued to improve in the first quarter of 2018 and is expected to further increase over the coming months, driven by ongoing tightness in frac sand supply and demand, particularly for fine mesh sand.
“Looking ahead, we expect frac sand demand to continue to rise throughout 2018, totaling approximately 100 million tons,” said Rasmus.
