Market Overview

Stifel Upgrades Emerge Energy Services: Here's Why

  • The share price of Emerge Energy Services LP (NYSE: EMES) has appreciated 20.96 percent over the past month, from $4.635 on October 26.
  • Stifel’s Selman Akyol has upgraded the rating on the company from Sell to Hold.
  • The company announced an amended credit facility agreement after market close on November 20. The agreement allows covenant relief through June 2017.

Analyst Selman Akyol believes that there is limited downside to the stock, given that “the partnership's banking group allows EMES to operate through the current environment.”

Akyol also mentioned that the amended agreement focused on EBITDA creation rather than debt reduction, while enabling growth capital spending of more than $30 million over the next three quarters. This spending is expected to be “partially funded through credit revolver borrowings.”

Although production in the US is expected to remain low in the near term, Akyol believes that both activity and production would grow over the longer term, with growth in demand and resolution of supply issues.

“Given sand's core role in the fracking process, we believe with a long enough time horizon EMES will return to generating EBITDA to support the debt on its balance sheet,” Akyol said.

The amended credit agreement, however, restricts the ability of the partnership to pay distributions and to borrow capital. The agreement also requires the company to maintain $25 million on its revolver, while “total capacity is reduced by any debt termed out by the partnership via a note offering.”

The agreement also requires the partnership to drive quarterly EBITDA growth through March 2018. Starting from 4Q15, the partnership needs to generate $2 million in EBITDA.

Latest Ratings for EMES

Sep 2018MaintainsNeutralNeutral
Aug 2018MaintainsNeutralNeutral
May 2018DowngradesBuyNeutral

View More Analyst Ratings for EMES
View the Latest Analyst Ratings

Posted-In: Selman Akyol StifelAnalyst Color Upgrades Analyst Ratings


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