This week, frac sand MLP-turned-C-Corp Hi-Crush Inc (OTC: HCRSQ) opened a new chapter in its long slide, filing for Chapter 11 bankruptcy.
It’s been literally years since this company was an Energy and Income Advisor recommendation—or since we’ve rated shares anything but a strong sell. But Hi-Crush’s now total demise does offer us several key lessons, as we build positions in best in class companies to capitalize on an energy sector recovery.
First, this bankruptcy is yet another demonstration that C-Corp conversions of MLPs are no antidote to financial and operating pressures.
When Hi-Crush abandoned MLP structure in May 2019, management claimed it would “enable further diversification, enhance growth potential and expand shareholders’ rights.” Instead, former unitholders got hit with a tax bill and shares dropped another 94 percent.
Second, the days of North American midstream companies being able to survive by offering a single product or service are numbered. Years before going bankrupt, Hi-Crush proved its business model too cyclical to pay reliable dividends, cutting and later eliminating its payout in late 2015. And after briefly restoring a lower payout in late 2017, it repeated the process again a year later.
Your complete guide to energy investing, from growth stocks to high-yielders.
In October 2012, renowned energy expert Elliott Gue launched the Energy & Income Advisor, a twice-monthly investment advisory that's dedicated to unearthing the most profitable opportunities in the sector, from growth stocks to high-yielding utilities, royalty trusts and master limited partnerships.
Elliott and Roger on Oct. 28, 2021
Balanced portfolios of energy stocks for aggressive and conservative investors.
Our take on more than 50 energy-related equities, from upstream to downstream and everything in between.
Our assessment of every energy-related master limited partnership.
Roger Conrad’s coverage of more than 70 dividend-paying energy names.