Wrap – Week Ended 01/19/18



The ZLT was down 2.5% on the week and is up 2.5% on the year. 

There were several trades in the ZLT last week.

Cash and cash equivalents at ~ 20% of the portfolio. 

The Blotter is updated.

Questions and comments under The Wrap will be addressed in the Monday post. 

2 Responses to “Wrap – Week Ended 01/19/18”

  1. 1
    tomdavis12 Says:

    Z:  Do you think there is a possibility that with VZ owing China many $Billions that they would have to sell some of there oil producing properties and that China would put money into increasing global production. Increased production from those assets not in the market.

  2. 2
    Mark Chikalla Says:

    From Scott Black in Barrons yesterday.   Black has a good record (I made a killing on his DR Horton recommendation last year).  Endorsement of fracking sand plays:


    Hi-Crush Partners [HCLP] mines fracking sand [used in the process of hydraulic fracturing of shale energy formations]. The stock fetched $11.40 on Friday. There are 92 million fully diluted shares outstanding, and the market cap is $1.05 billion. The company pays a 60-cent dividend per share and yields 5.3%. It is a limited partnership. Earnings are rising, and you get paid while you wait.

    Hi-Crush mines sand in Wisconsin and at its new Kermit facility in the Permian Basin. It is the industry leader. Last year. it mined 8.8 million tons, or 11% of the industry total. This year, it will have a 13% share. Revenue could total $878 million. We calculate operating income of $191 million, interest expense of $11 million, and profit before taxes of $180 million. Our earnings estimate for the year is roughly two bucks. The Street is higher at $2.28.

    Gabelli: Scott, are there significant capex charges associated with the mines?

    Black: No, that’s behind them. The stock trades for 5.7 times this year’s expected earnings. The company could earn about 21% on book value, and maintenance capital spending is only about $17 million. Two of Hi-Crush’s biggest customers are Schlumberger [SLB] and Halliburton [HAL]. Each has an annual contract with the company. Based on my analysis, free cash flow will total $140 million this year.

    Show Everyone's Picks 

    Oil prices have gone up a lot in recent months. The rig count is up 25% from a year ago. There are 22,600 oil and gas wells operating in the U.S., up from 16,950 a year ago. Natural gas is trading at about $2.80 per thousand cubic feet. It is still economical to drill at that level. Primary demand [for energy] is driving demand for sand. Hi-Crush produces several types of sand. Fine sand, put through a mesh, is 75% of the mix. Coarser sand is 25%.

    On the financials, debt is 1.5 times Ebitda. Net debt is 0.22 times equity. Tangible book value is $8.53 a share. The stock is trading for 1.34 times tangible book.


    Why are you recommending Hi-Crush, and not another sand company?

    Black: Hi-Crush has better economics than competitors. We looked at Smart Sand [SND], but it isn’t as good a company. Hi-Crush has the dominant position in the market and excellent logistics. It has good relationships with the railroads, including Union Pacific [UNP] and Canadian Pacific Railway [CP], and has built its own infrastructure and terminals down in the Permian Basin. It offers a good yield and a good opportunity for growth.


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