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Emerge Energy to Build New Facility in the Mid-Continent

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Emerge Energy Services LP EMES recently announced plans to expand its in-basin sand operations with a new mining and processing facility, which is located in the Kingfisher County, OK. Superior Silica Sands, a unit of Emerge Energy, inked a 25-year lease deal to receive the mining rights for 600 acres, which is located around 60 miles (96.6 kilometers) northwest of the Oklahoma city. Moreover, for the construction of wet and dry processing plants in the Mid-continent, the unit agreed to buy 40 acres of land adjoining its leased acreages.

The expansion project is estimated to cost the partnership $15 million, which will be arranged from cash on hand and revolver availability. Notably, it has $75 million in cash and cash equivalents as of Mar 31, 2018. Meanwhile, Emerge Energy does not expect the project to impact this year’s capital expenditure guidance, which is anticipated to lie in the range of $70-$90 million.

The plant in Oklahoma is expected to have a capacity of 1.5 million tons a year. While site construction is anticipated to commence mid-June, production is anticipated to come online by the end of 2018. The leased acres near Oklahoma City are expected to contain reserves of 20 million tons. Superior Silica intends to employ its existing equipment for developing part of its planned dry plant. The site has a highway and railway nearby, which can ease the partnership’s product-shipping worries.

The partnership plans to address the strong demand for fine mesh products through the new plant. It is currently making deals with potential clients for the plant’s capacity and expects to complete the process by the end of this year.

Notably, the new facility marks the partnership’s third in-basin frac sand business. Once output starts, the partnership’s in-basin production capacity is expected to be around 6.1 million tons.

Price Performance

Fort Worth, TX-based Emerge Energy has lost 26.9% in the past year against the 13.1% growth of the industry it belongs to.

Zacks Rank and Stocks to Consider

Currently, Emerge Energy carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Anadarko Petroleum Corporation APC, Delek US Holdings, Inc. DK and HollyFrontier Corporation HFC, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Woodlands, TX-based Anadarko is an exploration and production company. For 2018, its bottom line is likely to be up 239.3%. In the last reported quarter, the company delivered a positive earnings surprise of 20.1%.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 230.2%.

Dallas, TX-based HollyFrontier is an independent refining company. For 2018, its bottom line is likely to be up 118.5%. In the last four reported quarters, the company delivered an average positive earnings surprise of 41.3%.

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