Smart Sand Analyzes Third Quarter; Looks Ahead

Smart Sand Inc. announced results for the third quarter 2020.

Revenues were $23.4 million in the third quarter of 2020, compared to $26.1 million in the second quarter of 2020 and $65.7 million in the third quarter of 2019. Included in revenues were $6.8 million, $14.0 million and $15.6 million of shortfall revenues for each respective period. Revenue in the third quarter of 2020 was negatively impacted by depressed oil prices driven by continued oversupply relative to the decreased demand due to the COVID-19 coronavirus pandemic.

Tons sold were approximately 309,000 in the third quarter of 2020, compared with approximately 208,000 tons in the second quarter of 2020 and 611,000 tons in the third quarter of 2019. Total volumes sold improved sequentially, though they continue to be negatively impacted by depressed oil prices driven by Organization of the Petroleum Exporting Countries (OPEC) oversupply and decreased demand due to the COVID-19 coronavirus pandemic.

Charles Young, Smart Sand’s chief executive officer, stated, “While these continue to be difficult times to operate in, Smart Sand continued to demonstrate its ability to manage successfully through volatile operating cycles for our industry. I want to thank all of our employees for their continued diligence and efforts to support the company through challenging times.”

“We continue to stay focused on enhancing our mine to wellsite solutions capabilities to provide sustainable and efficient sand supply and logistics services to our customers. The acquisition of Eagle Materials’ proppant business is a great example of our strategy to acquire strategically complementary assets at attractive valuations to enhance our capabilities to be a premier, long-term provider of northern white sand in the marketplace.”

On Sept. 18, 2020, the company acquired the Oil and Gas Proppants Segment of Eagle Materials Inc, which includes frac sand mines and related processing facilities in Utica, Ill., and New Auburn, Wis., with approximately 3.5 million tons of total annual processing capacity, 1.6 million tons of which has access to the BNSF Class I rail line through the Peru, Ill., transload facility.

“The transaction is considered a bargain purchase whereby we purchased total net assets with a fair value of $41.9 million for total consideration of $2.1 million, resulting in a bargain purchase gain of $39.9 million, recorded in net income for the three months ended Sept. 30, 2020,” Young stated. “In connection with our acquisition we entered into a Liquidity Support Loan Agreement, whereby we may draw loans in an aggregate amount up to $5.0 million during the twelve month period ending Sept. 18, 2021, and repay those amounts over the subsequent three years.

“We believe this acquisition broadens our mine to wellsite capabilities by adding high quality sand mining and processing assets coupled with enhanced logistics options which provide direct access to an additional Class I rail line,” Young said. “We believe these additional mining and logistics resources help secure our ability to be the preferred provider of Northern White Sand in the proppants market. With this acquisition we believe we will be able to expand our footprint into new basins, gain access to new and enhanced logistics options, broaden our customer base and complement our mine to wellsite supply and logistics capabilities.”

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