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Emerge Energy Services LP (NYSE:EMES) announced third quarter 2016 financial and operating results.

Highlights

  • Net income of $5.1 million and Adjusted EBITDA of $(8.1) million for the three months ended September 30, 2016.
  • Full quarter sales of 493,000 tons of sand.
  • Completed the sale of our Fuel business and recorded a gain of $31.7 million during the three months ended September 30, 2016.

Overview

Emerge Energy reported net income of $5.1 million, or $0.21 per diluted unit, for the three months ended September 30, 2016, mainly due to the gain on sale of the Fuel business.  For that same period, Emerge Energy reported Adjusted EBITDA of $(8.1) million and Distributable Cash Flow of $(13.3) million.  Net loss, net loss per unit and Adjusted EBITDA for the three months ended September 30, 2015, were $(11.9) million, $(0.49) per diluted unit and $0.3 million, respectively.  Adjusted EBITDA and Distributable Cash Flow are non-GAAP financial measures that Emerge Energy uses to assess its performance on an ongoing basis.

We completed the sale of our Fuel business to Sunoco LP on August 31, 2016.  Sunoco paid Emerge a purchase price of approximately $167.7 million in cash (subject to certain working capital and other adjustments in accordance with the terms of the Restated Purchase Agreement), of which $14.25 million is placed into several escrow accounts to satisfy potential claims from Sunoco for indemnification under the Restated Purchase Agreement.  Any escrowed funds remaining after certain periods of time set forth in the Restated Purchase Agreement will be released to Emerge, provided that no unsatisfied indemnity claims exist at such time.

The results of operations of the Fuel business have been classified as discontinued operations for all periods presented and we now operate our continuing business in a single sand segment.  Net loss and net loss per diluted unit for continuing operations for the three months ended September 30, 2016 were $(30.0) million and $(1.24) per diluted unit, respectively, compared to net loss and net loss per diluted unit for continuing operations for the three months ended September 30, 2015 of $(6.8) million and $(0.28) per diluted unit, respectively.

As previously announced, on August 8, 2016, we entered into a Securities Purchase Agreement with an institutional investor (the “Purchaser”) to issue and sell to the Purchaser in a private placement an aggregate principal amount of $20 million of our Series A Preferred Units and warrants that may be exercised to purchase common units representing limited partner interests in the Partnership.

We will not make a cash distribution on our common units for the three months ended September 30, 2016 as we are restricted from making distributions to our common unitholders under our amended credit agreement and we did not generate available cash to distribute for the three months ended September 30, 2016.

“We believe that we are in the early stages of a recovery for the oil and gas markets,” said Ted W. Beneski, Chairman of the Board of Directors of the general partner of Emerge Energy.  “We are proud of the progress we have made on our strategic plan laid out at the onset of this downturn.  During the third quarter, we closed the sale of the Fuel business to Sunoco, raised $20 million of equity, and paid down our bank loan to approximately $153 million at quarter end.  We also completed an important amendment with our lenders that resets our covenant package.  As the final step to strengthening our balance sheet, we are actively working on a public unit offering and expect to compete the capital raise soon.” (Original Source)

Shares of Emerge Energy Services are currently trading at $12.17, down 0.57 or -4.47%. EMES has a 1-year high of $15.75 and a 1-year low of $1.97. The stock’s 50-day moving average is $12.87 and its 200-day moving average is $9.56.

On the ratings front, Emerge Energy has been the subject of a number of recent research reports. In a report issued on September 29, Wunderlich Securities analyst Jason Wangler upgraded EMES to Buy, with a price target of $15,00. which implies an upside of 17% from current levels. Separately, on September 8, D.A. Davidson’s Sonny Randhawa reiterated a Sell rating on the stock and has a price target of $4.00.

According to TipRanks.com, which ranks over 7,500 financial analysts and bloggers to gauge the performance of their past recommendations, Jason Wangler and Sonny Randhawa have a yearly average loss of 11.3% and a return of 40.5% respectively. Wangler has a success rate of 33% and is ranked #3995 out of 4173 analysts, while Randhawa has a success rate of 66% and is ranked #28.

Emerge Energy Services LP engages in the ownership, operation, acquisition and development of a diversified portfolio of energy service assets. It operates business through two segments: Sand and Fuel Processing and Distribution. The Sand segment consists of mining, processing and distributing silica sand, which is used in hydraulic fracturing of oil and natural gas wells. The Fuel Processing and Distribution segment consists of acquiring, processing and separating the transportation mixture or transmix.