Fairmont Santrol Enjoys Improved Fourth Quarter


Fairmount announced results for the fourth quarter and full year ended Dec. 31, 2016. Fourth-quarter 2016 revenues were $140.5 million, up 4 percent from $134.8 million in the third quarter of 2016 and up 4 percent from $134.9 million in the fourth quarter of 2015. Overall volumes sold were 2.4 million tons for the quarter, similar to the third quarter of 2016 and an increase of 26 percent from 1.9 million tons in the fourth quarter of 2015.

Full-year 2016 revenues were $535 million, compared with $828.7 million in 2015. Overall volumes sold in 2016 were 8.9 million tons, compared with 8.5 million tons in 2015. The reduction in revenues was due mainly to lower pricing and a mix shift within Proppant Solutions from coated proppants to raw frac sand.

“Market conditions improved in the fourth quarter, and we were pleased to see volume growth continue in our Proppant Solutions segment. We were particularly encouraged by the increase in demand for our value-added coated products,” said Jenniffer Deckard, president and chief executive officer. “Another positive trend was our ability to sustain price increases both in the fourth quarter of 2016 and at the beginning of 2017. Yet we believe proppant pricing remains at unsustainably low levels. As demand increases to more closely align with supply, particularly for finer grades, we expect to continue to raise prices.”

Deckard added, “2016 presented challenging market conditions, but the entire Fairmount Santrol team continued to execute, innovate and take actions throughout the year to enable us to manage through the downturn. We are encouraged by recent improvements in the energy markets we serve, even though some uncertainty still exists. We are very confident that the actions we have taken – to improve our cost structure and balance sheet, to strengthen and broaden our innovative product portfolio, and to enhance our extensive production and logistics network – have positioned the company to perform well as the market recovers.”

For the fourth quarter of 2016, Proppant Solutions volumes were 1.8 million tons, an increase of 5 percent compared with the third quarter of 2016 and up 35 percent compared with the prior-year period. Raw frac sand volumes were 1.7 million tons, a 5 percent sequential increase and a 39 percent increase compared with the same period a year ago. Coated proppant volumes were 101,400 tons, a 5 percent increase compared with the third quarter of 2016 and an 11 percent decrease from the prior-year period.

Proppant Solutions revenues were $113.4 million in fourth-quarter 2016, a 10 percent increase compared with $103.1 million in the third quarter of 2016 and a 6 percent increase compared with $107.5 million in the fourth quarter a year ago. During the fourth quarter, average product price per ton across Proppant Solutions was 5 percent above third-quarter average product price levels, and was positively impacted by price increases that were initiated during the fourth quarter.

Proppant Solutions gross profit increased to $17.1 million, or 15.1 percent of sales, in the fourth quarter of 2016 compared to $6.4 million, or 6.2 percent of sales, in the third quarter of 2016. Gross profit for the segment in the fourth quarter of 2015 was $14.7 million, or 13.7 percent of sales.

In response to increased customer demand, the company recently reopened its previously idled facilities in Maiden Rock, Wis., and Brewer, Mo. The Maiden Rock facility has a stated annual capacity of over 1.2 million tons of Northern White sand and is located adjacent to Class 1 rail lines with unit train capabilities. The Brewer facility has a stated annual capacity of approximately 1.0 million tons of Northern White sand and has nearby access to a transload facility that is also unit train capable. Following the reactivation of these two facilities, the company’s total active stated annual frac sand capacity is approximately 11.9 million tons.

The company also reopened its coating facility in Cutler, Ill., during the first quarter of 2017, to meet increased customer demand for resin-coated products.