Abraham, Fruchter & Twersky, LLP has commenced an investigation concerning possible violations of federal securities laws by Hi-Crush Partners LP (“Hi-Crush Partners” or the “Company”) (NYSE: HCLP).
Hi-Crush Partners, based in Houston, Texas, engages in the mining and processing of raw sands for use in hydraulic fracturing operations in oil and gas wells. On August 16, 2012, Hi-Crush Partners commenced an initial public offering (“IPO”) of 11,250,000 shares at a price of $17 per share for total proceeds of $191.25 million.
In connection with the IPO, the Company filed a Prospectus and Registration Statement with the United States Securities and Exchange Commission disclosing that Baker Hughes, Inc., one of North America’s largest providers of pressure pumping services, is also one of the Company’s largest customers. The filings further indicated that “[s]ubstantially all of our sales are generated under contracts with four customers, and the loss of or reduced purchasing by any of them could adversely affect our results of operations.”
Then on November 13, 2012, Hi-Crush Partners filed its quarterly report disclosing its earnings for the period ended September 30, 2012. The Company also disclosed for the first time that on September 19, 2012, Baker Hughes Oilfield Operations, Inc. provided notice that it was terminating a supply agreement for frac sand with the Company and that after discussions to resolve the conflict had broken down, Hi-Crush Partners filed suit against Baker Hughes in the State District Court of Harris County, Texas, seeking damages for Baker Hughes’ alleged “prior wrongful termination of the supply agreement.”
Hi-Crush Partners also cautioned investors that if it is unsuccessful in its lawsuit against Baker Hughes, or if it is unable to sell the frac sand to existing or new customers on “economically acceptable terms,” the Company’s business, financial condition, and results of operations “could be materially harmed.”