Market Overview

Select Sands Reports Full Year and Fourth Quarter 2017 Results

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Frac and Industrial Sand Sales Volumes Grew at 71% Quarterly Rate from Q1 to Q4, With Stronger Pricing Seen Throughout the Year

Continued to Generate Positive Net Income and Adjusted EBITDA in the Fourth Quarter

VANCOUVER, British Columbia, April 11, 2018 (GLOBE NEWSWIRE) -- Select Sands Corp. ("Select Sands" or the "Company") (TSXV:SNS) (OTC:SLSDF) today announced operational and financial results for the full year and fourth quarter of 2017 and the filing of its 2017 full year financial statements and associated management's discussion and analysis on www.sedar.com. As previously announced, the Company's financial statements are presented in U.S. dollars to better reflect Select Sands' operations and to improve investors' ability to compare the Company's financial results with other publicly traded silica sand businesses in the United States. Previously, Select Sands' financial statements were reported in Canadian dollars. All amounts in this press release are presented in U.S. dollars.

2017 Full Year and Fourth Quarter Operational Highlights

  • Sold frac sand volumes of more than 300,000 tons during 2017 – a major accomplishment given Select Sands' Sandtown operations in Arkansas, USA and related brownfield upgrade initiatives only began in the first quarter of the year;
  • Made significant and steady improvements at Sandtown to bring the facilities up to operating at the 600,000 tons per year capability, including optimizing processes to reduce waste and upgrading pumps and piping to increase throughput; 
  • Entered into a multi-year frac sand supply agreement with an industry-leading oilfield services provider with commitments through 2019. Initial rail shipments began in the first quarter of 2017;
  • Began barging frac sand in November and expect this will remain an important mode of delivery moving forward;
  • Started construction during the fourth quarter of a private road direct from the Sandtown mining operations to the main highway that was subsequently completed in the first quarter of 2018, reducing transportation costs due to lower mileage to the Company's processing facilities; and
  • Initiated sales of a new 30/50 mesh product in the fourth quarter and continue to evaluate additional opportunities to broaden Select Sands' product mix to satisfy incremental customer demand.

2017 Full Year and Fourth Quarter Financial Highlights

  • Reported full year revenues of $15.1 million and gross profit of $2.9 million, resulting in a 19.2% gross profit margin for 2017;

  • Posted a net loss for the full year of $1.6 million as compared to a net loss of $2.5 million for 2016 – a 36% improvement year-over-year;

  • Increased revenue by 28% to $6.5 million in the fourth quarter of 2017 as compared to $5.1 million in the third quarter 2017. Driving the increase was higher transportation revenue, which is substantially passed through to cost of goods sold, and higher plant gate pricing;  

  • Gross profit for the fourth quarter 2017 was $1.2 million, which was similar to the third quarter. Impacting cost of goods sold in the fourth quarter was revaluation of certain work-in-progress inventories, an accrual adjustment, and higher repair and maintenance expense;

  • Reported net income of $1.3 million for the fourth quarter of 2017, or $0.01 per basic and diluted common share, versus third quarter net income of $0.4 million;

  • Generated adjusted EBITDA(1) of $0.2 million compared to $0.4 million for the third quarter 2017; and

  • As of December 31, 2017, cash and cash equivalents were $2.0 million, inventory on hand was $2.0 million, accounts receivable was $3.4 million, and working capital was $5.3 million. Subsequent to the fourth quarter, Select Sands established a $5 million line of credit with a bank for working capital purposes. This replaces the Company's previously disclosed $2 million line of credit. The current line of credit presently charges 5.50% per annum in floating rate interest on any draws made, must be repaid in full by February 20, 2019, and is secured against the Company's accounts receivable. Select Sands currently has $200,000 drawn on the line of credit.
     
    (1) Adjusted EBITDA is a non-IFRS financial measure and is described and reconciled to net loss in the table under "Non-IFRS Financial Measures".

Zig Vitols, President and Chief Executive Officer, commented, "Given that we only began commercial production at the start of last year, I am very pleased with the progress we made throughout 2017 both operationally and financially.  Significant accomplishments were made on several fronts to get us to where we can now produce at the facilities' current design run rate of 600,000 tons per year, and I want to thank all our employees for their continued tireless efforts. While our fourth quarter financial results included certain items that impacted comparisons to the third quarter, during the period we materially improved our delivery flexibility through the addition of barging and began construction of a direct access road to reduce the number of miles driven to reach the recently rebuilt multi-lane highway. I am happy to report that the construction of our road was recently completed, and we are already seeing the benefits in our cost structure."  

Quarterly Sales Volumes

  • 2017 frac and industrial sales volumes grew at a compound quarterly rate of 71%, from 22,688 tons in the first quarter to 113,123 tons for the fourth quarter.

  • Fourth quarter frac and industrial sales volumes were relatively flat with the third quarter of 2017, primarily due to holiday seasonality and certain congestion at destination transloads that resulted in delays in returning rail cars.
                 
    Q4 2017   Q3 2017   Q2 2017   Q1 2017
  Frac sand 113,123   114,567   52,480   19,968
  Industrial sand -   283   466   2,720
  Frac and Industrial sand 113,123   114,850   52,946   22,688
  Other sand & gravel 4,288   3,632   4,164   6,801
    117,411   118,482   57,110   29,489
                 
  • For the first quarter of 2018, the Company expects frac and industrial sales volumes of approximately 92,000 tons, with the decrease from fourth quarter 2017 levels primarily due to rail associated logistics issues at transload locations, along with flooding on the Mississippi. Select Sands' barge customers were in-line to take additional delivery of product to help offset the temporary rail issues experienced in January.  However, river flooding that crested at over 39 feet above normal levels ceased all loading activities on February 23, with loading operations resuming March 20. By the beginning of March, rail logistics had returned to normal and with the resumption of barge loading, and the Company recorded the second highest level of monthly sales volumes since the start of operations at the beginning of 2017.

  • Partially offsetting the anticipated impact of the sequential quarterly sales volume decline is an expected approximate 15% increase in the average selling pricing for the first quarter of 2018 as compared to the fourth quarter of 2017. The price improvement is primarily due to increases implemented by Select Sands in late December and throughout the first quarter

  • For the second quarter of 2018, the Company expects sales volumes of 120,000 to 140,000 tons.

Expansion Update

  • During the 2017 fourth quarter, Select Sands announced that it had entered into an agreement providing for an option to purchase 223 acres of property in Independence County, Arkansas (the "Independence property"), to serve as a platform to support the Company's near- and long-term operational and capacity expansion initiatives. The Company's press release dated Tuesday April 10, 2018 announced the exercise of the option to purchase the Independence property. (Please refer to the press release for additional details regarding the option.) 

  • Highlights and features of the Independence property include:

    ° Sufficient acreage to complete the current expansion, with additional acreage available for future expansion of a new-build facility;
    ° Well suited for a future potential build of a 110-150 railcar loop track for efficient and economical loading of finished products;
    ° Elevated above the floodplain allowing for uninterrupted operations;
    ° Access to natural gas, three-phase electricity and water; and
    ° Located next to a large coal power plant and adjacent to a state highway.
  • The Company plans to immediately build a new stand-alone 400,000 ton per annum production facility comprising of both wet and dry processing capability to be located on the Independence Property (the "expansion project"). Completion is projected to be in the second half of 2018. The expansion project estimated cost of $4.0 million to $4.5 million is anticipated to be funded through bank financing and is expected to significantly reduce production costs primarily through interplant transport savings. The decision to build a new 400,000-ton facility is a change in the Company's plans. Originally, Select Sands had planned to simply increase the existing 600,000-ton facility to 1 million tons. The Company determined that building a new stand-alone 400,000-ton facility with the additional greenfield startup tasks will be more cost effective and profitable but will delay ramping up production to 1 million tons per annum by one or two quarters from its original plan.   

Financial Summary

The following table includes summarized financial results for the three months ended December 31, 2017, September 30, 2017, June 30, 2017 and March 31, 2017:

           
Select Sands Corp.        
Summarized Consolidated Statements of Operations and Comprehensive Income (Loss)  
(Expressed in United States Dollars)        
(Unaudited)        
    Three Three Three Three
    months ended months ended months ended months ended
    December 31, September 30, June 30, March 31,
    2017 2017 (1) 2017 (1) 2017 (1)
           
Revenue $    6,548,099   $    5,100,250   $    2,374,243   $    1,123,173  
Cost of Goods Sold (excluding depreciation and depletion)     5,342,336       3,907,081       1,629,846       1,360,023  
Gross Profit (Loss) $    1,205,763   $    1,193,170   $    744,397   $    (236,850 )
General and Administrative ("G&A") Expenses (2)     906,651       181,811       961,857       2,067,057  
Depreciation and depletion     237,954       145,688       145,885       93,400  
Interest on long-term debt     61,940       -        -        -   
Operating (Loss) Income  $    (782 ) $    865,671   $    (363,344 ) $    (2,397,306 )
Interest income     2,542       2,841       6,195       8,027<
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