Emerge Energy Services LP: Initiation of Research Coverage

Tuesday, November 26, 2013

William Blair & Company initiated research coverage of Emerge Energy Services LP, which provides high-quality Northern White sand used for hydraulic fracturing in the energy industry, with an Outperform rating and Aggressive Growth company profile.

Emerge Energy, which is structured as a master limited partnership, also provides fuel transmix and terminal services to the transportation and industrial markets. Analyst Brandon Dobell said shares of Emerge Energy currently trade at a yield of 9.9% his 2014 unit distribution estimate of $4.00.

Dobell said that Emerge Energy and its sponsor, Insight Private Equity, “will execute on several initiatives over 2014 and 2015 that will help the market become more comfortable with the predictability of distributions.”

He added, “In our view, the most visible growth drivers through 2014 and 2015 are increasing sales volumes at the underused Barron County, Wisconsin, facility (from 1.2 million tons to 1.9 million tons) and driving higher utilization in the fuel segment (particularly at the Birmingham plant). Capital for new mines and/or sand processing capacity would also improve sentiment, in our view. With no incentive distribution rights in place, any positive changes to distributions or their predictability would, in our view, drive the yield lower and the unit price higher.”

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