U.S. Silica’s Shinn: Market May Hit 100 Million Tons in 2018

U.S. Silica Holdings Inc. announced net income of $41.3 million or $0.51per basic share, or $0.50 per diluted share, for the third quarter ended Sept. 30, 2017 compared with a net loss of $11.3 million or $(0.17) per basic and diluted share for the third quarter of 2016.

• Revenue totaled $345 million compared with $137.7 million for the same period last year, an increase of 151 percent on a year-over-year basis and an increase of 19 percent sequentially over the second quarter of 2017.
• Overall tons sold totaled 4.075 million, up 63 percent compared to 2.493 million tons sold in the third quarter of 2016 and an increase of 12 percent sequentially over the second quarter of 2017

“Robust market demand in our Oil and Gas business, coupled with record profitability from our Industrial and Specialty Products segment drove an exceptionally strong performance in the third quarter that led to a record Adjusted EBITDA for the total company,” said Bryan Shinn, president and chief executive officer. “In Oil and Gas, volumes were up 15 percent sequentially to a record 3.1 million tons, with capacity utilization running at nearly 100 percent. Pricing was up over 5 percent sequentially and our contribution margin per ton in Oil and Gas was $30.54. Our Sandbox unit had a very strong performance as well, exiting the quarter fully utilized with 52 crews online. Additionally, we signed five new long-term supply agreements during the quarter for both Northern White and local and regional sand, many of which included capacity reservation fees.

“Our ISP segment had record contribution margin during the quarter of $24 million, driven by a combination of strategic price increases and a better mix of higher margin products sold during the quarter,” Shinn said. “For the fourth quarter, we expect that sand volumes will be up in oil and gas but perhaps restrained by some frac crews extending their holiday time off, plant down time due to planned maintenance and brief outages for capacity expansion work at a few mines. We do expect to see continued pricing upside in oil and gas during the fourth quarter. Contract interest is at an all-time high and we will continue to prioritize customers with capacity reservation fee contracts and long-term partners in this tight market. For Sandbox, we expect strong growth and plan to increase from the 52 crews online at the end of the third quarter to 70 active crews by year-end.”

For 2018, the company expects another strong year, driven by record demand for frac sand, increased opportunities for Sandbox and increased market penetration for some of ISP’s new, higher margin products. “We are forecasting total industry demand for frac sand to be in the range of 90 million to 100 million tons, assuming a rig count that is essentially flat with today’s levels and proppant per well up 15-20 percent year-over-year,” Shinn predicted. “Additionally, the company expects to invest significantly in Sandbox and is targeting to have more than 100 crews online exiting 2018. Finally, ISP, which has grown contribution margin at a 10 percent CAGR for the last five years, is expected to continue this trend in 2018 with increased market penetration of new, higher margin products like our cool roof granules and by the introduction of additional attractive new products.”

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