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Hi-Crush Partners' units rise in debut
(Reuters) - Units of Hi-Crush Partners LP (HCLP.N), which makes proppants used in hydraulic fracturing, closed up 18 percent in their market debut on Thursday as investors bet on the growing demand from the oil and gas industry.
The boom in shale drilling has led to high demand for fracking materials such as guar gum and proppants. However, this had led to shortages as proppant makers cannot keep up with rising demand.
Hi-Crush, like several companies that went public in recent weeks, had to price at the low-end of its expected price range to attract investors in a faltering IPO market.
"Underwriters have hurt a lot of people with some of the deals this year and it's refreshing to see a fair-priced range," senior managing partner of IPO Boutique, Scott Sweet said.
Hi-Crush, which caters to oilfield service providers Halliburton Co (HAL.N) and Baker Hughes Inc (BHI.N), opted for a limited partnership structure which is favored by investors as it distributes most of its profit.
"Investors are starved for limited partnerships that pay high returns," Francis Gaskins, editor of IPOdesktop.com.
Hi-Crush operates a processing facility in Wyeville, Wisconsin with an annual capacity of 1.6 million tons per year. For 2012, a majority of this capacity is contracted, Hi-Crush said in a regulatory filing.
The company had pro forma cash and cash equivalents of $3.9 million as of March 31.
"If they want to acquire anything, they have both cash and stock now. They are on a fast-growth trajectory," Gaskins added.
The company's units closed at $20 on Thursday on the New York Stock Exchange.
(Reporting by Divya Lad and Sharanya Hrishikesh; Editing by Supriya Kurane)
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