Smart Sand Inc. announced results for the fourth quarter and full year ended Dec. 31, 2021, and the acquisition of the Hi-Crush Blair, Wis., mining facility.
Revenues were $126.6 million for the full year 2021, compared to $122.3 million for the full year of 2020, an overall increase of 4% as a result of higher total volumes sold. While the company benefited from higher sales volumes in 2021, pricing remained constrained due to oversupplied frac sand for the majority of 2021.
Revenue in 2020 included $23.3 million in shortfall revenue that helped offset low sales volumes and reduced pricing due to depressed continued oversupply relative to the decreased demand for oil and natural gas driven by the COVID-19 pandemic, which led to reduced drilling and completions activity for new oil and gas wells in the United States.
Overall tons sold were 3,189,000 for the full year 2021, compared to full year 2020 volume of 1,886,000 tons, an increase of 69%. Due to the decreased demand from the COVID-19 coronavirus pandemic, sales volumes dropped dramatically beginning in the second quarter of 2020 before rebounding in the fourth quarter of 2020. Sales volumes improved throughout 2021 and resulted in sales volumes getting back to pre-pandemic levels by the end of the year.
Net loss was $50.7 million, or $1.21 per basic and diluted share for the full year 2021, compared with net income of $38.0 million, or $0.94 per basic and diluted share, for the full year 2020. The net loss in 2021 was primarily due to reduced gross profit on sand sales and non-cash bad debt expense of $19.6 million related to a settlement with U.S. Well Services.
Gross profit in 2021 was negatively impacted by higher cost of goods sold due to increased activity from higher sales volumes, higher utility costs from higher natural gas prices, an inventory write off in the fourth quarter and increased incentive compensation. Net income in 2020 was primarily due to shortfall revenue and the gain on bargain purchase related to the acquisition of Eagle Proppants Holdings.
Charles Young, Smart Sand’s chief executive officer, stated, “In the fourth quarter and for the full year 2021, we were able to ramp up our sales volumes leading to our overall sales volumes getting back to pre-pandemic levels by the end of the year. The addition of the Utica, Ill., mining facility allowed us to expand our sales in the Western operating basins of the United States in Colorado and Wyoming, complementing our historically strong market positions in the Bakken and Appalachian basins. Activity levels are showing continued strength and we are seeing higher sales prices and operating margins in 2022.”
Young continued, “We are excited about the start of operations at our new Waynesburg transload facility in southwest Pennsylvania. We believe this terminal positions the company well to compete for growing northern white sand demand in the Appalachian basins. Additionally, our new product and service initiative, Industrial Products Solutions, continues to gain traction. We are seeing good opportunities in the industrial products sector, which will diversify our customer base and should provide improved margins for the business overall.
“2022 will be an important year for our wellsite service product offering,” he continued. “Our proprietary SmartPath wellsite transloading system is ready to be fully and consistently deployed in the market. With this service now fully ready, we will be able to expand our capabilities to provide consistent, efficient and sustainable sand sales and logistics solutions to our customer base.”
Young continued, “Our mine to wellsite services combine high-quality, reliable northern white sand production, unit train-focused logistics, world-class transloads and SmartSystems at the wellsite to support our customers’ ESG goals of reducing trucking miles and carbon emissions, while ensuring the sand is available on-time and in the volumes required.
“We are excited about 2022, we continue to have a strong balance sheet and good liquidity. We believe that we are well positioned to take advantage of the improving market fundamentals for frac sand while expanding our industrial products business. We are focused on executing and delivering improving profitability and returns to our shareholders,” Young said.
“Finally, we are excited to announce that we have acquired Hi-Crush’s northern white sand mine and processing facility in Blair, Wis.,” Young concluded. “This facility is directly on the Canadian National Railroad, allowing us to expand existing markets and compete in new ones in the United States and Canada.”