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Tag Archives: Supply Agreement

HCLP Earnings Are Out

I’ve been keeping up on earnings for my companies as they post, but I haven’t quite had the spare time to translate everything I’m thinking into posts. It’s been a rapid series of reports and not quite enough time to write out my thoughts on the subject.

Rest assured, if there had been any big deviations from the plans, I’d tell you.

As HCLP has been a particularly precious position and given how closely I’m tracking, it merits special consideration.

The company guided in on revenues and missed on earnings (depending on who you ask). But neither of that matters. This is what is actually important:

The company continues to see rapid increases in demand for product. Tonight, in addition to reporting earnings, they also announced another amended contract that, and I quote, “…significantly increases the annual committed volumes under the agreement signed in March and extends the term by two more years.”

No, you’re not seeing things. HCLP just amended this same contract two months ago. I guess realities on the ground have already changed so much that they were afforded the luxury of re-renegotiating.

I look at the last press release from March, where they announced the original amendment to the Weatherford contract, which was to be in place for a further three years, at a specified (then higher) volume of sand, for a higher price.

So two months later, that contract has become a five year contract for even higher volumes.

Yes I do like the sound of that. You can bank on these developments flowing through the natural gas producers and well servicing sectors soon enough. High demand for sand means high demand for gas.

Natural gas inventory is at eleven year lows and there is lingering concern that adverse weather this year could put real pressure on refilling storage. This would translate to pressure on users for higher prices and alleviate much of the residual pessimism surrounding natural gas from 2011.

The natural gas game is on.

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HCLP Lands Another Supply Agreement

HCLP announced another 3 year supply agreement after the close yesterday; this time with US Well Services. Like the other, this agreement locks in US Well Services to purchase a minimum amount of frac sand from HCLP each month.

Per the CEO of HCLP:

“We believe that U.S. Well`s commitment underscores the strength of our extensive logistics network of rail-served terminals in the northeast,” said Robert E. Rasmus, Co-Chief Executive Officer of Hi-Crush. “Certainty of supply is critical in today`s market. Our customers need to have access to high-quality frac sand, when and where they need it, and Hi-Crush provides this certainty.”

I spoke with a gentleman in the comments section of another post on this subject just the very day – he had asked why I don’t love SLCA.

Both HCLP and SLCA are laudable enterprises worthy of a look (and probably a buy). But HCLP’s strategy resonates with me. Their insistence on building their business with logistics in mind – as much as supply deposits – is a distinguishing strength which I respond to.

HCLP is up more than 3% today on the news. This is exactly the kind of activity that will lead HCLP to continue to grow revenues at 100% annually. It’s difficult to put a price on this sort of activity – I’m a believer and think a business like HCLP is still advantageously priced for this growth as opposed to, say, a TSLA.

But I’m also sitting on a mid to high- $20’s cost basis, so take that for what it’s worth.

Next stop, $50.00.

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