Select Sands Corp. provided an update on its corporate activities for the first quarter of 2021. The company sold 53,009 tons of frac and industrial sand during the fourth quarter of 2020, compared to 49,248 tons in the third quarter.
Based on current and expected market conditions, the company anticipates sales volumes of frac and industrial sand of between 55,000 to 65,000 tons for the first quarter of 2021.
The company has successfully renewed its $5 million line of credit loan agreement with repayment to now occur on Feb. 20, 2022. Interest payable on the line of credit will be fixed at 4.75% for the new term. The company currently owes 4.4 million on the line of credit.
The company announced that due to the recent winter storm in February, it has received an unusually large invoice for its February natural gas consumption. The company has a supply agreement with a natural gas company for the supply of natural gas to its sand processing plants in Arkansas. The supply agreement stipulates that the company will be charged for a minimum usage at market rates each billing period, even if the company does not consume the minimum usage.
During the month of February, the company’s operations in Arkansas where hit by a severe winter storm. During this time, the company was forced to cease operations. As a result of the storm and the extended period of extremely low temperatures, physical gas and power infrastructure was severely impaired.
Specifically, well-head freeze-offs occurred, and gas processing plants and pipelines failed. This resulted in reduced natural gas supply and limited the ability to distribute and deliver natural gas on the system. At the same time, demand for natural gas was higher than normal due to increased heating demand during the extremely cold weather. This considerable increase in demand, coupled with a severe reduction in supply, resulted in extremely high natural gas market prices during the period of the storm.
As a result of this winter storm event, the company received a bill for its February natural gas consumption of $373,043 where the bill was only $49,548 in February 2020. The company did not consume any natural gas during the winter storm, because it was unable to operate due to the storm. Furthermore, the company received a notice to curtail its natural gas consumption from its natural gas supplier during this same period and yet was still charged for the minimum monthly usage. As a result of the foregoing, the company is disputing the amount of the February invoice. The natural gas supplier has agreed not to interrupt supply while the company goes through the dispute process. The company is currently seeking legal advice with respect to this matter.
The company also advises that the February winter storm has delayed its year-end audit and the company will be releasing it 2020 year-end audited consolidated financial statements towards the end of April 2021. The company’s filing deadline for its financial statements is April 30.