Shares of fracking sand supplier Hi-Crush Partners (NYSE:HCLP) are down 17.6% as of 10:45 a.m. EDT today, according to S&P Global Market Intelligence. The stock move comes after the company reported earnings after the market closed yesterday. As you might have surmised from the stock drop, Hi-Crush's results didn't meet Wall Street expectations.
Most investors and analysts weren't expecting great things from Hi-Crush for this quarter. Constrained pipeline capacity has put a damper on the number of wells oil and gas producers are completing. That directly affects the total sand volume Hi-Crush and its peers sell as well as the price per ton of sand sold.
Hi-Crush reported a loss of $0.06 per share for the first quarter. That was a slight improvement from the $0.08 per-share loss in the fourth quarter, but it was below analyst expectations of a $0.02 per-share loss.
The other discouraging fact in these results is that management doesn't expect much improvement in the next quarter. Even though management projects a modest uptick in volumes shipped, it believes that sales prices and contribution margins will remain relatively flat for the quarter.
This was a rather bust quarter for Hi-Crush. Aside from the day-to-day business of mining and moving sand to its clients, the company announced two small acquisitions and called for a shareholder vote on May 22nd to convert the business from a master limited partnership to a conventional C-Corp. This is a move management has been planning for some time, so it shouldn't surprise investors that much.
Until that conversion is complete and we see some quarterly results, though, it's probably best to sit on the sidelines for this one. The stock may look incredibly cheap at just two times earnings, but the weak frack sand market and this pending corporate change are enough reason to wait this one out for a bit.