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How To Collect Your Share of My Million Dollar Giveaway

How To Collect Your Share of My Million Dollar GiveawayWe recently kicked off the most outrageous initiative in the history of investment research. It’s called the Income Millionaire Project. And the goal is simple: create 1,000 income millionaires. That’s a $1 billion goal! No one has ever tried it before, but that doesn’t bother me. I’m so sure you can use this program to make a million bucks… I’ll pay you $1,000 to start your journey. Go here for details.


Surf’s Up for Fracking Sand Suppliers

By Robert Rapier on August 11, 2016

The companies supplying sand for hydraulic fracturing (aka “fracking”) were among the hardest hit by the shale oil bust that began in mid-2014. Fracking involves pumping water, chemicals and (typically) sand under high pressure into an oil or gas well in order to break open channels (fractures), releasing the oil and gas trapped in rock. Oil and gas do not travel easily through these shale formations, which is why they need to be fractured. The sand helps to hold those fractures open, allowing oil and natural gas to flow to the well bore.

Oil and gas producers learned over the past decade that increased use of sand in fractured wells provided a huge return on investment. Thus, not only did the number of fractured stages per well increase, but the amount of sand used per stage also soared. This led to exponential sand consumption growth in drilling operations. In 2014, a major consulting firm projected that, after growing nearly 30% annually in 2012-13, demand would keep increasing 23% annually through at least 2016.

Then the shale bust came along and wrecked almost everything. While even major oil and gas producers saw their market value cut in half, the carnage among the sand providers was even worse. Major suppliers like Emerge Energy Services (NYSE: EMES) and Hi-Crush Partners (NYSE: HCLP) depreciated more than 90% from their 2014 highs. This was the result of the steep decline in rig counts, which undermined demand for sand even as usage per well  continued to grow.

The fracking sand market is highly fragmented, with some 50 producers. Among those that are publicly traded, Fairmount Santrol Holdings (NYSE: FMSA) is the second largest by production volume, but it also has a significant business line supplying sand and its resin-coated derivatives for the foundry, building products, water filtration, glass and recreation markets.

Emerge Energy Services is the 5th-largest producer by volume, and is structured as a master limited partnership (MLP). Until recently it had a fuel business that has now been sold to Sunoco (NYSE: SUN), turning Emerge into a pure-play fracking sand producer.

U.S. Silica Holdings (NYSE: SLCA) is the largest pure-play fracking sand provider, while another MLP, Hi-Crush Partners, is also among the top 10 suppliers.

EOG Resources (NYSE: EOG) is the 4th-largest producer, though it uses all of the sand it mines in its own wells.

Here is how the four major publicly-traded sand producers (excluding EOG) rank on some important financial metrics. Keep in mind that HCLP and EMES are both MLPs:


  • EV – Enterprise value in millions of U.S. dollars, as of Aug. 9
  • EBITDA – Earnings before interest, tax, depreciation and amortization, in millions for the trailing twelve months (TTM)
  • FCF – Levered free cash flow, in millions
  • Debt – Net debt at the end of the most recent fiscal quarter
  • YTD Ret – Total shareholder return, including dividends, thus far in 2016

After a steep decline in late 2014 and last year, the group is up an average of 147.7% thus far in 2016. Of course cash earnings contracted sharply with the collapse in shale drilling, but a recovery in oil prices is expected to knock down those hefty multiples. U.S. Silica appears to be the healthiest of the group given its relatively large size, low debt, and FCF that’s not too deep into the red over the past year.   

But do any of these stocks belong in your portfolio? By now, most of them have run well ahead of their fundamentals. The downside risk is pretty high given my outlook for oil and gas prices over the next 6-12 months. But as that outlook changes, check in with us at The Energy Strategist and MLP Profits to see which of these fracking sand producers we might recommend when the time is right.

(Follow Robert Rapier on Twitter, LinkedIn, or Facebook.)


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Obscure Tax Law Forces This Company to Pay Out 90% of its Profits

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