3 Reasons Why Hi-Crush Partners LP Crashed 49% in September

There was no good news to help prop up Hi-Crush Partners LP last month.

Matthew DiLallo
Matthew DiLallo
Oct 2, 2015 at 10:18AM
Energy, Materials, and Utilities

What: September was a brutal month for proppant producers, but it was especially so for Hi-Crush Partners LP (NYSE:HCLP). A trio of news items sent units down a jaw-dropping 49% last month. Here's what happened.

So what: One of the main catalysts putting pressure on Hi-Crush Partners' unit price was the continued weakness in the oil market. The price of oil was down 8.5% during the month, which is keeping a lid on oil and gas activity and therefore proppant demand.

That dour outlook led one of its frack sand MLP peers to announce at the end of the month that it was withdrawing its distribution guidance for the balance of the year. That news sent the entire group lower, with Hi-Crush's unit price getting hit hard that day as well as it suggests that Hi-Crush's distribution could get crushed.

HCLP Chart

HCLP data by YCharts

Meanwhile, analysts piled on the pressure by issuing a slew of downgrades across the sector that day, only adding to the selling pressure in Hi-Crush and its peers.

Also contributing to poor performances was the fact that Hi-Crush Partners was dropped from the Alerian MLP index, which tracks the top 50 MLPs. Given that a lot of funds match that index, it led to some additional selling pressure last month.

Now what: It's a rough time to be a frack sand producer these days as the energy industry slowdown has hurt demand for sand and pricing. There are few signs on the horizon that conditions are improving, and even when they do, it could be a long time before activity is as robust as it was before the peak because debt fueled a lot of that growth. In other words, investors could be in for a long and bumpy ride.