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Oddball V-MLPs

By Elliott H. Gue on Jun. 25, 2014

Emerge Energy Services operates two business segments: fuel and sand.

In 2013, the latter accounted for about 80 percent of the V-MLP’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA). This business line remains the firm’s most important growth driver.

Like Hi-Crush Partners LP (NYSE: HCLP), Emerge Energy Services produces crush-resistant silica sand that oil and producers use in hydraulic fracturing.

This process, which has enabled the US shale oil and gas revolution, involves pumping huge volumes of fluid into the play until the reservoir rock cracks. The fissures created by this pressure facilitate the flow of hydrocarbons into the well.

When the pressure from the hydraulic-fracturing process abates, these fissures’ natural tendency is to close. However, the silica sand produced by Hi-Crush Partners, Emerge Energy Services and other suppliers remains stuck in the cracks, propping them open and ensuring that hydrocarbons continue to flow into the well. In the industry, the silica sand and ceramic beads that perform this function are called proppant.

This slide from Emerge Energy Services’ presentation at the National Association of Publicly Traded Partnerships’ recent MLP investor day illustrates how this process works.


Source: Emerge Energy Services LP

Thirteen months ago, we covered this niche industry at length when we highlighted Hi-Crush Partners as one of our top picks from the National Association of Publicly Traded Partnerships’ MLP investor conference.

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