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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Basic Energy Services, one of my most favorite positions, is reporting Q1 earnings after the close.

The stock is up ~80% since the start of the year. Accordingly, it is being afforded a little break today, while longs lock in some gains.

Cain Hammond Thaler will not be among the profiteers, as he is resting self-assuredly in his 9th floor office, indifferent to the prospect of a BAS sell off. Cocky, even.

Natural gas spot pricing is back to $4.70. That is a huge rebound from the mighty flush out that first put the natural gas sector on ice. Since which time, BAS and strengthened their corporate entity, engaging in buy outs and solidifying the balance sheet.

Let’s see what they can do.

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HCLP just amended another supply agreement to jack up the amount of sand one of their customers is obligated to buy every month. This is the third one this year.

Per MarketWatch:

Houston, Texas – April 8, 2014 – Hi-Crush Partners LP (NYSE: HCLP), or Hi-Crush, today announced the entry into of an amendment to the supply agreement between Hi-Crush Operating LLC, a subsidiary of Hi-Crush, and FTS International, LLC, or FTSI, a leading provider of well completion services. The amendment significantly increases the number of committed volumes under the agreement, extends the term of the supply agreement and requires FTSI to pay a specified price for a specified minimum volume of frac sand each month. “Hi-Crush is excited to further extend and strengthen our relationship with FTSI by entering into this amendment,” said James M. Whipkey, Co-Chief Executive Officer of Hi-Crush. “We consider FTSI a valuable partner as we continue to expand our market presence, and fulfilling our customers’ needs is a top priority for Hi-Crush.”

And when they say “requires FTSI to pay a specified price for a specified minimum volume of frac sand each month.”…question? Do you suppose that would mean a higher “specified price”?

I would suppose it would.

This follows the news yesterday that HCLP was going to have themselves an offering to completely buy out any competing interests in their Augusta facility.

Read here:

Houston, Texas – April 8, 2014 – Hi-Crush Partners LP HCLP +2.31% (“Hi-Crush” or the “Partnership”) announced today that it has entered into a contribution agreement with Hi-Crush Proppants LLC (the “Sponsor”) to acquire certain equity interests in Hi-Crush Augusta LLC (“Augusta”), the entity that owns the Sponsor’s raw frac sand processing facility located in Augusta, Wisconsin. As previously announced, Hi-Crush acquired a preferred interest in Augusta on January 31, 2013.

“We are delighted to announce this acquisition, which we expect to be immediately accretive,” said Robert E. Rasmus, Co-Chief Executive Officer of Hi-Crush. “With this transaction, we will double the Partnership’s production capacity to 3.2 million tons per year. The Augusta plant has a current capacity of 1.6 million tons of coarse Northern White frac sand per year. Beyond that, we have the capability to expand the Augusta plant by an additional 800,000 tons per year and have started the process to obtain the permits required for this expansion. The expansion will bring total rated capacity at the Partnership to 4 million tons per year. We expect the expanded capacity to come on-line in the second half of 2014.”

Under the terms of the transaction, the Partnership will pay cash consideration of $224.25 million. At the closing of the acquisition, the Partnership’s preferred equity interest in Augusta (currently providing $3.75 million in distributions per quarter) will be converted into common equity interests in Augusta, and the Partnership will own 98% of Augusta’s common equity interests. “We expect that the acquisition of common equity interests in Augusta will contribute more than $30 million of incremental annual EBITDA to the Partnership, before any expansion to the Augusta plant,” said Mr. Rasmus. The acquisition is expected to close by mid-May 2014, subject to regulatory approvals and other closing conditions. In connection with the acquisition, Hi-Crush expects to refinance its existing revolving credit facility.

We need to follow the sand. Where the sand goes, the profits will go also. No buyouts – if these guys enter into a cash offer for my units on my behalf, I’m going to blow a gasket.

These moves are going to double HCLP’s revenue immediately. That will play into the hand of existing investors as bigger operations allow the executives of HCLP to leverage their logistics operations and gain market share.

I’m not even going to look to see if HCLP is paying top dollar premium on this deal – I’ll spare you the time, the answer is “I don’t care.”

This trend in the economy is only growing. These guys survived Aubrey McClendon blowing up the natural gas sector, and together with targeted well services like BAS, they’re going to dominate.

The shares aren’t even phased at the announced dilution yesterday to pay for the acquisition. Have a look.

Here’s the tagline:

HCLP – This Shit Is Going Higher

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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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Check out Basic Energy Services, up another 4.5%, flirting with $27.00 as it steadily pounds its way to $30.00.

HCLP is playfully tagging along, after the doldrums took it down back below $40.00 this week. And well it should – they’re in the same industry after all. What’s good for BAS is great for HCLP.

Uranium is slack and UEC is dying (very small position). CCJ is back to it’s old range, and I am saddened by that.

But this is a buying opportunity make no mistake of that.

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I usually am a little skeptical about the usefulness of guidance. Executive guidance can be some of the worst – people who are intimately wrapped up in a business tend to have a hard time knowing when to say “yeah, this ship is going down.” In fact, business school strictly forbids it.

But the most recent guidance from BAS, for whatever it’s worth, beat expectations. December was supposed to be a heinous month. Instead, it was merely a horrid month. Take that with a grain of salt.

Well rig service hours were unchanged, at about 61%. My long term thesis involves that number catapulting back to 80%+ eventually, which is why I own the name.

Fluid service truck count is up to 1,003 units. Fluid service truck hours are up 8% this year.

The company saw surprise strength in December (which is really just less flaccid weakness, pretending). Instead of the forecasted 7-8% drop in revenues that were expected, they anticipate they only saw a 6-7% drop.

This is all good and well and hearsay. What caught my eye was that they are also reporting their customers are reporting increases in 2014 spending. Now that’s useful to me.

The natural gas/well servicing industry was more or less crushed in 2011 thanks to generally bad dealings by one Aubrey McClendon. That and a half dozen other idiotic moves saddled CHK investors with 60% equity losses, taking the company to par with the lows set in 2009 (which is saying something).

This left most small well servicing firms in quite a predicament. You see, as a group they were pretty much a “no cash on hand” industry. There were only a few, like BAS, that had adequate financing to weather the storm.

A sea of mergers and acquisitions later (not to mention a few major bankruptcies; looking your way PSN.TO) and we may be ready to get back to fair weather. The natural gas spot price has largely recovered. And now BAS is reporting that client spending is looking up.

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