Bank Of America Downgrades Hi-Crush Partners, Prefers Emerge Energy

In a report published Thursday, BofA Merrill Lynch analysts downgraded the rating on

from Buy to Neutral, while reducing the price objective from $45 to $35. The analysts expect Hi-Crush Partners to generate EBITDA of $19mn in 2Q15 and $91mn in 2015, significantly short of the current consensus estimates. "We estimate HCLP will have to take on more than $30mn of additional debt to fund distributions over the remainder of 2015, which would bring the annualized debt to EBITDA ratio to 3.0x by 3Q15," the analysts said. The company may generate higher volumes and gross margins in 4Q15 and though 2016. In the report BofA Merrill Lynch noted, "With share outperformance and some stiffening potential headwinds for US onshore stocks, we believe the relative reward-risk profile is increasingly attractive for lagging subsea equipment stocks." The analysts mention that they have a "strong preference" for

. "Units of frac sand provider EMES are down 33% this year driven by sharply lower distribution guidance. While painful, we believe the risks are now skewed to the upside for the units. In contrast, units of HCLP are up 2% on the year, supported by unchanged distribution guidance. However, we see the risks skewed to the downside relative to expectations, particularly for volumes," the analysts explained. BofA Merrill Lynch maintained a Buy rating on EMES, while reducing the price objective from $50 to $45.