The oil and gas industry has experienced tremendous growth in recent years, thanks in part to new technologies such as hydraulic fracturing, or fracking. Big Oil companies have benefited significantly from fracking, though there are several smaller players in the industry that have also profited. Companies that produce fracking sand, a key component in the hydraulic fracturing process, have become more popular with investors in recent years [for more commodity news and analysis subscribe to our free newsletter].
For those looking to add exposure to this rapidly growing industry, we highlight one fracking sand company that may be a compelling buy for those willing to stomach the risk.
Fracking Sand in Focus
Emerge Energy Services LP (EMES) is a Texas-based company involved in the production and sale of fracking sand as well as the sale of petroleum products. The demand for fracking sand, in particular, has skyrocketed in recent years as the use of hydraulic fracturing (which requires this sand) has allowed companies to tap into previously hard-to-reach fuel sources [see The Next Big Industry: Sand].
EMES is one of the smaller firms that provides sand to energy companies. Originally, however, the company used to only supply sand to golf courses, but has since expanded after successfully mining silica crystals. The company was founded in 2012, and his since then grown to become an over $3 billion firm.
Emerge’s Superior Silica Sands subsidiary produces the silica sand that is a key input for fracturing. It has sand facilities located in New Auburn, WI, Barron County, WI, and Kosse, TX, with headquarters in Fort Worth, TX.
EMES’s Fundamentals
- Market Cap: $3.07 billion
- Volume: 479,877
- P/E Ratio: 38.5
Emerge Energy Services LP is one of the smallest and youngest companies engaged in the mining of fracking sand. Despite its relatively short history, the stock does see a relatively large average daily trading volume of roughly 480,000. EMES’s P/E ratio is rather high, however, which should make investors cautious. The stock’s forward P/E (1 year) is roughly 17.4 [see 5 Commodity Trading Mistakes You Could Be Making].
- Annual Payout: $3.36
- Dividend Yield: 2.74%
The company’s dividend history, though short, is rather attractive. Since it began paying dividends in 2013, EMES has increased its quarterly payment four times. Currently, the stock pays dividends quarterly at an annualized $3.36 per share. Based on its current price, the stock yields an attractive 2.74%.
Performance History
So far this year, Emerge Energy Services LP shares have gained over 200%. In 2013, when the stock started trading, its price began around $17 per share; by January of 2014, the stock’s price had risen to above $43. Its all-time high was logged in at $145.72 in August of this year. Currently, the stock’s 5-day moving average is around $118 per share.
The Bottom Line
While going through the fundamentals of Emerge Energy Services LP, investors should keep in mind that the stock is still relatively young and is bound to experience volatility in the next year or so. Overall, EMES may be an attractive option for those looking for a growth opportunity in the fracking sand industry.
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Disclosure: No positions at time of writing.
