Friday, October 24, 2014

Emerge Energy Laying Groundwork For Triple-Digit Earnings Growth

This article was originally published by Seeking Alpha on Oct. 2

Summary: Emerge Energy Services has a solid fuel processing and distribution business and an even better fracking sand segment. Emerge Energy Services is flying high on the back of strong demand of proppants. Here's what Emerge Energy Services is doing to post triple-digit earnings and double-digit revenue growth.

Emerge Energy Services operates in two unrelated segments in the energy space: fracking sand production and fuel processing and distribution. The master limited partnership has been posting robust growth in both of these segments, in terms of volume, revenues and earnings, but it's the relatively smaller sand production business which has got everyone excited.

Why? In terms of operating margins, the sand segment is ten times more profitable than the fuel segment. In the first six months of this year, Emerge Energy reported sand production operating margins of 28.2%, considerably higher than the fuel segment margin of just 2.6%.

In the first six months of this year, Emerge Energy has reported 48.2% growth in revenues of the fuel segment to $430.5 million, which is impressive but is overshadowed by the 113.2% growth in revenues from sand production to $141.8 million.

The sand is used as a proppant by exploration and production companies. With increasing oil and gas production, the demand for proppants from U.S. onshore exploration and production activity is projected to continue growing from less than 60 million tons in 2013 to more than 80 million tons this year to little less than 100 million tons by the end of … read full article at Seeking Alpha.