Hi-Crush Partners, formed to mine and sell sand used in hydraulic fracturing, reported net income of $9.4 million for the fourth quarter of 2012 Friday, up from $6.1 million for the same quarter of 2011.
The partnership already had declared a fourth-quarter cash distribution of 47.5 cents per unit for all common and subordinated units.
It also announced the acquisition of a second sand operation for $37.5 million in cash and 3.75 million newly issued convertible Class B units of Hi-Crush.
Quarterly distributions from the new operation, a 1,000-acre facility in Augusta, Wis., are expected to replace money lost when Baker Hughes terminated a long-term contract with Hi-Crush last year, co-CEO Robert Rasmus told analysts during a conference call Friday morning.
The company is a master limited partnership, formed through an initial public offering in August. Its unit price was up more than 6 percent by mid-day Friday, to $18.
That was still below last year’s high of $23.78.
Rasmus and fellow co-CEO James Whipkey declined to say much about the split with Baker Hughes, which had held one of four long-term contracts with Hi-Crush from its first sand operation at Wyeville, Wis.
Hi-Crush has sued Baker Hughes in Texas district court; the partnership in turn has been sued by shareholders in federal court in New York.
“We continue to believe Baker Hughes wrongfully terminated and believe the shareholders suits are without merit,” Whipkey said.
Drillers engaged in hydraulic fracturing use water, chemicals and sand or a man-made version — the general term is proppant — to fracture the dense shale rock formations and release oil and natural gas.
Whipkey said that an industry slowdown, along with the loss of the Baker Hughes contract, contributed to a drop in sales.
And although Hi-Crush has entered the spot market, he said it remains committed to long-term contracts as a core business strategy.
“Pressure pumpers can’t expand without the certainty of supply that long-term contracts provide,” he said.