Q1 2020 U.S. Silica Holdings Inc Earnings Name

Frederick, Might 23, 2020 (Thomson StreetEvents) — Edited Transcript of U.S. Silica Holdings Inc earnings convention name or presentation Friday, Might 1, 2020 at 12:30:00pm GMT

* Bryan A. Shinn

U.S. Silica Holdings, Inc. – CEO & Director

* Donald A. Merril

U.S. Silica Holdings, Inc. – Govt VP & CFO

RBC Capital Markets, Analysis Division – Co-Head of World Vitality Analysis & Analyst

Stifel, Nicolaus & Firm, Integrated, Analysis Division – MD & Senior Analyst

Tudor, Pickering, Holt & Co. Securities, Inc., Analysis Division – Director of Oil Service Analysis

Greetings, and welcome to the U.S. Silica First Quarter 2020 Earnings Convention Name. (Operator Directions)

As a reminder, this convention is being recorded. I might now like to show the convention over to your host, Mr. Arjun Sreekumar, Supervisor of Treasury and Investor Relations for U.S. Silica. Thanks. You might start.

Thanks. Good morning, everybody, and thanks for becoming a member of us for U.S. Silica’s First Quarter 2020 Earnings Convention Name.

With me on the decision immediately are Bryan Shinn, Chief Govt Officer; and Don Merril, Govt Vice President and Chief Monetary Officer.

Earlier than we start, I want to remind all members that our feedback immediately will embody forward-looking statements, that are topic to sure dangers and uncertainties. For a whole dialogue of those dangers and uncertainties, we encourage you to learn the corporate’s press launch and our paperwork on file with the SEC.

Moreover, we might consult with the non-GAAP measures of adjusted EBITDA and section contribution margin throughout this name.

Please consult with immediately’s press launch or our public filings for a full reconciliation of adjusted EBITDA to internet revenue and the definition of section contribution margin. (Operator Directions)

And with that, I might now like to show the decision over to our CEO, Mr. Bryan Shinn. Bryan?

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [3]

Thanks, Arjun, and good morning, everybody. I am going to start immediately’s name with an replace on our response to the COVID-19 pandemic, which was centered on guaranteeing the protection and well being of our staff whereas minimizing disruptions to our operations and monetary efficiency. I am going to then focus on how we’re responding to the present oil macro surroundings. Subsequent, I am going to evaluate our stable first quarter efficiency intimately. And eventually, I am going to conclude with market outlook ideas for each of our working segments and focus on the quite a few price discount measures that we’ve instituted. I am going to then flip the decision over to Don Merrill, who will evaluate key monetary metrics earlier than opening the decision for questions.

I am happy to report that we have skilled minimal operational disruptions so far because of the COVID-19 pandemic. Following the steering offered by the CDC and federal, state and native authorities, the vast majority of our company staff began to work remotely in late March, and we have promptly applied quite a few social distancing greatest practices all through our total operations community to guard the well being and security of our colleagues.

We additionally shaped a COVID-19 motion group that gives staff with common communications, together with industry-specific greatest practices, correct cleansing, disinfecting and hygiene practices and operational modifications to reduce publicity threat.

I might like to precise my deep gratitude to all of our colleagues for his or her unbelievable dedication throughout these difficult instances. We’ll proceed to intently monitor the state of affairs and make choices based mostly on pointers from related authorities.

Wanting forward, we count on that ISP section gross sales volumes will usually comply with GDP developments, just a few end-use markets for industrial sand, equivalent to constructing merchandise and automotive will doubtless expertise weaker buyer demand, whereas demand for different ISP merchandise, together with diatomaceous earth and specialty clays used for the filtration of meals and drinks and specialty sand utilized in container glass manufacturing is anticipated to stay strong.

In our power section, the oil demand declined ensuing from the COVID-19, coupled with an insufficient provide response after which exacerbated by the dearth of world storage capability has resulted in a pointy decline in crude oil costs. Accordingly, expectations are for at the least a 50% decline in North American upstream spending this 12 months and the same decline in completions exercise. We count on that volumes and hundreds in our Oil & Fuel section will directionally monitor completions exercise. However as with the 2015 oilfield downturn, we count on to achieve market share this 12 months attributable to our enticing low-cost choices.

In response to the anticipated sharp contraction in properly completions, we have taken swift and aggressive actions to rightsize our price and Oil & Fuel provide chain footprint. Over the previous few quarters, we have idled 7 manufacturing amenities and lowered shifts at 6 different mines, thereby decreasing our staffed annual Oil & Fuel manufacturing capability from 24 million tons to six million tons.

We have additionally heat stacked some Sandbox tools and moved different tools to areas of upper demand. Drawing on our roots in steady enchancment and lean manufacturing, our operations groups are pursuing roughly $25 million in further plant price financial savings and provider contract renegotiations.

As well as, we have taken vital actions to scale back the SG&A bills. Over the past 5 months, we have eradicated roughly 250 positions throughout the corporate and lowered different prices, leading to an anticipated 40% lower in our SG&A run charge going ahead. We’re unhappy to lose so lots of our valued colleagues, however took this tough step for the general well being of the corporate.

Now let’s transfer on to our stable first quarter outcomes. For the entire firm, first quarter income of $269.6 million, decreased 20% sequentially. Nonetheless, excluding a onetime buyer shortfall penalty acknowledged within the fourth quarter, complete firm income declined roughly 5%, pushed by decrease hundreds and volumes in our Oil & Fuel section. Adjusted EBITDA for the primary quarter of $48.2 million was down 34% sequentially. Nonetheless, excluding that very same buyer shortfall penalty, adjusted EBITDA greater than doubled sequentially pushed by a considerable improve in our Oil & Fuel section contribution margin {dollars}. Our Industrial & Specialty Merchandise section had an incredible quarter, with income up 9% sequentially and complete section contribution margin up 11%, pushed by greater gross sales volumes and elevated gross sales of higher-margin Specialty Merchandise. Our EP Minerals product portfolio continues to carry out properly regardless of the difficult macro surroundings. Demand for filtration from meals and beverage producers was robust within the first quarter and is anticipated to stay strong within the close to time period. In our Oil & Fuel section, we offered 3.2 million tons of sand within the first quarter, a 5% decline sequentially. SandBox hundreds decreased by about 14% from This autumn, however we nonetheless had nearly 70 crudes producing income in the course of the quarter. For the Oil & Fuel section, contribution margin {dollars} really doubled sequentially when excluding the fourth quarter shortfall penalty, due to the aforementioned price slicing efforts. Our negotiated settlement acquisition of Arrows Up additionally closed within the first quarter, and the combination has been seamless. We’re very excited to have Arrows Up group be a part of U.S. Silica and to have one other dynamic providing in our portfolio.

Closing out my commentary on Q1, I might prefer to say once more how proud I’m of the work that our group did and the outcomes that we delivered in an unprecedented and difficult macro surroundings. I might additionally prefer to take the chance immediately to remind everybody that whereas we’re usually painted with an oilfield providers brush, our enterprise is more and more levered to industrial end-markets which are largely unaffected by the turbulence within the Vitality area. Actually, the current volatility in crude oil costs illustrates exactly why we diversified our operations by investing in and rising our industrial companies, which have greater boundaries to entry, stickier buyer relationships, greater margins and robust progress prospects. Even inside our Industrial section, our focus is not completely on silica merchandise anymore. We additionally produce diatomaceous earth, specialty clays and perlite, all higher-margin choices with completely different finish customers and demand drivers in comparison with a few of our silica merchandise.

In 2020, for instance, we count on that greater than 40% of our firm contribution margin will come from non-sand merchandise. This diversification is not accidentally, it is by design. And in tough instances like these, when the U.S. shale market and our frac sand friends are retrenching, our investments in ISP are actually paying off by offering much less volatility and extra dependable money circulation.

In 2019, our industrial section accounted for almost 50% of our complete contribution margin {dollars} when backing out the onetime buyer shortfall penalty from 4Q 2019. In 2020, we count on ISP to represent about 70% of our firm contribution margin {dollars}.

And eventually, immediately, let’s focus on the market outlook for our working segments. Our underlying assumption for the rest of 2020 is that we’ll function in an surroundings of excessive uncertainty pushed by the COVID-19 virus and decrease extremely risky oil costs. On condition that, we are going to proceed to give attention to what we will management and be sure that our prices keep aligned with enterprise affordability. We count on that our ISP enterprise will maintain up properly and that gross sales volumes will align with U.S. GDP, given the character of our end-use markets, numerous buyer base and quite a few specialty and area of interest merchandise.

In our Vitality enterprise, we consider that properly completions and sand demand will decline within the coming quarters, and many shoppers might gradual or pause exercise in response to low WTI pricing. Nonetheless, our prices on this section are extremely variable and we’ll proceed to rightsize operations accordingly.

Sadly, whereas we’re not able immediately to offer particular EBITDA steering given all of the shifting elements, I do consider that the present 2020 avenue consensus of lower than $80 million of EBITDA could be very conservative given our stable first quarter outcomes and the soundness of our industrial enterprise.

And eventually, we’re very centered on money circulation, as you may think, and our purpose is to finish 2020 with roughly the identical amount of money on our steadiness sheet as in comparison with the fourth quarter of 2019. Don will focus on money circulation in additional element in only a minute throughout his remarks.

For me, the underside line is that I consider we’ve the appropriate plan and a dedicated group to maximise our enterprise leads to 2020, and to even be able to capitalize when the inevitable rebound happens within the coming quarters.

And with that, I am going to now flip the decision over to Don. Don?

——————————————————————————–

Donald A. Merril, U.S. Silica Holdings, Inc. – Govt VP & CFO [4]

——————————————————————————–

Thanks, Brian, and good morning, everybody. First, I want to reiterate Brian’s feedback on the corporate delivering a powerful first quarter and producing $48.2 million of adjusted EBITDA regardless of the apparent and well-known macro challenges.

Transferring on to the outcomes of our 2 working segments. First, quarter income for the Industrial & Specialty Merchandise section was $113.9 million, up 9% from the fourth quarter of 2019. The Oil & Fuel section income was $155.7 million, down 34% from fourth quarter of 2019, due primarily to the popularity of a buyer shortfall penalty within the fourth quarter in addition to a 5% sequential lower in tons offered.

On a per ton foundation, contribution margin for the ISP section of $45.20 represents an approximate 3% lower from the fourth quarter. The lower was due primarily to a change in combine, as gross sales of entire grain silica elevated at a quicker tempo than our higher-margin specialty merchandise. As Brian acknowledged, we anticipate that our ISP enterprise will show resilient and comply with the GDP curve as our prospects navigate the approaching quarters. The Oil & Fuel section contribution margin on a per ton foundation was $10.27 in comparison with $20.22 for the fourth quarter of 2019, largely as a result of aforementioned buyer shortfall penalty acknowledged within the fourth quarter.

Nonetheless, you will need to point out the fee focus of the corporate, leading to a decline of price of products offered pushed by the idling of amenities, continued efficiencies at our West Texas operations and a decline in our logistics prices and a results of the optimization of our transload community.

Sadly, we count on the Oil & Fuel section volumes to say no within the second quarter, in step with expectations for a extreme discount in completions exercise. We’ll proceed to problem our group to ship the bottom price potential whereas offering the very best service within the {industry}.

Let’s now have a look at complete firm outcomes. Promoting, basic and administrative bills within the first quarter totaled $30.1 million, representing a lower of 19% from the fourth quarter of 2019. The substantial lower was pushed largely by lowered worker prices and related spendings with the beforehand introduced and unlucky reductions in drive. We now count on SG&A expense in 2020 to lower to a run charge of roughly $85 million by the top of the 12 months.

Depreciation, depletion and amortization expense within the first quarter totaled $38.four million, a discount of 10% in contrast with fourth quarter of 2019. The discount was pushed by a lower in complete depreciable property as a result of idled vegetation and the next asset impairment.

Our efficient tax charge for the quarter ended March 31, 2020, was a advantage of 33%.

Transferring on to the steadiness sheet. Money and money equivalents, as of March 31, 2020, was $144.7 million. And liquidity, together with the revolving credit score facility, was $213.2 million. In the course of the first quarter, we drew $25 million on our revolving credit score facility as a precautionary measure in response to the financial uncertainties brought on by COVID-19. The discount in money was anticipated and was largely pushed by front-end loading capital expenditures and dealing capital wants. Capital expenditures in the course of the quarter totaled $16.1 million and have been primarily associated to the cost of CapEx accrued in 2019, and enhancements in expansions at our high-margin industrial amenities in Millen, Georgia and Columbia, South Carolina.

We are actually anticipating our 2020 capital expenditures to be roughly $30 million on the low finish of our earlier steering of $30 million to $40 million and down roughly 75% final 12 months. Of that $30 million, roughly $15 million is earmarked for upkeep spend, whereas the remaining $15 million will probably be allotted in the direction of progress tasks in our Industrial enterprise.

I might now prefer to give attention to our money and liquidity place. As a reminder, we’ve no near-term obligations are available due as our time period mortgage does not mature till 2025 and our revolving credit score facility expires in 2023.

Additional, we count on our time period mortgage curiosity and swap funds to say no considerably in 2020 as a result of current discount in LIBOR charges and the termination of our curiosity swap settlement.

Moreover, we’ve recognized refunds of $16 million of different minimal tax credit and $39 million associated to internet working loss carrybacks attributable to the CARES Act provision that we count on to get better in 2020. This $55 million of money will definitely assist help our money circulation objectives for 2020.

And with that, I am going to flip the decision again over to Bryan.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [5]

——————————————————————————–

Thanks, Don. Operator, would you please open the traces for questions?

================================================================================

Questions and Solutions

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Directions) Our first query comes from the road Stephen Gengaro with Stifel.

——————————————————————————–

Stephen David Gengaro, Stifel, Nicolaus & Firm, Integrated, Analysis Division – MD & Senior Analyst [2]

——————————————————————————–

So I assume two issues. One, I might begin with on the Oil & Fuel contribution market aspect, so we will get a way wanting forward. Did Arrows Up contribute a lot within the first quarter? You talked about it was accretive. I used to be simply curious when you may quantify that in any respect.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [3]

——————————————————————————–

Sure. It was accretive. I might say it was minimal {dollars} right here in Q1, nevertheless it was accretive, for positive.

——————————————————————————–

Donald A. Merril, U.S. Silica Holdings, Inc. – Govt VP & CFO [4]

——————————————————————————–

We closed that fairly late within the quarter. So it actually did not have a lot runway to contribute, Stephen.

——————————————————————————–

Stephen David Gengaro, Stifel, Nicolaus & Firm, Integrated, Analysis Division – MD & Senior Analyst [5]

——————————————————————————–

Nice. After which as you concentrate on the Oil & Fuel contribution margin per ton as we glance forward, are you — given the cost-cutting that has been in place so far, do you assume that contribution margin in Oil & Fuel stays barely optimistic over the following quarter or 2? Or do you assume it may go unfavorable given how sharply we’re seeing volumes contract? Simply — it is onerous to gauge type of a 12 months in the past, you eliminated prices relative to that.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [6]

——————————————————————————–

Sure. I am going to perhaps provide the begin of a solution. And I believe Don in all probability can articulate some extra particulars. One of many issues that I believe is misunderstood a bit about our Oil & Fuel sand enterprise is that the prices are extremely variable. So we have been in a position to take out numerous prices, significantly because it pertains to the native mines, those who do not want rail. So we do have a little bit of an overhang from railcars related to our Northern White enterprise. However I would not say the native sand is 100% variable when it comes to prices, however its fairly shut. Don, I do not know, what would you add to that?

——————————————————————————–

Donald A. Merril, U.S. Silica Holdings, Inc. – Govt VP & CFO [7]

——————————————————————————–

Effectively, I might agree. Look, we have confirmed that we’re in a position to take out prices as volumes and demand drop on our aspect, and that is why we noticed such a superb quarter. We have been in a position to save on the fee aspect. We have been in a position to save considerably on the freight aspect as we have been rightsizing our transload community. And look, we will proceed to try this. We’ll proceed to problem our of us to maintain contribution margin optimistic the remainder of the 12 months.

——————————————————————————–

Stephen David Gengaro, Stifel, Nicolaus & Firm, Integrated, Analysis Division – MD & Senior Analyst [8]

——————————————————————————–

Only one last, on the steadiness sheet, receivables jumped within the quarter. I simply wished to get a deal with on the drivers of that. And can we — ought to we take into consideration that as being a supply of money as we undergo 2020 from right here?

——————————————————————————–

Donald A. Merril, U.S. Silica Holdings, Inc. – Govt VP & CFO [9]

——————————————————————————–

Sure. Look, the large bounce in receivables just isn’t solely commerce receivables, it is different receivables as properly. And in my remarks, we talked about tax refunds, and there is $44 million value of tax refunds which are sitting in that quantity. So sure, I anticipate that to be a giant supply of money by the top of the 12 months.

——————————————————————————–

Operator [10]

——————————————————————————–

Our subsequent query comes from the road of Kurt Hallead with RBC Capital Markets.

——————————————————————————–

Kurt Kevin Hallead, RBC Capital Markets, Analysis Division – Co-Head of World Vitality Analysis & Analyst [11]

——————————————————————————–

I hope everyone in your loved ones is wholesome.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [12]

——————————————————————————–

Effectively, similar to you. Thanks.

——————————————————————————–

Kurt Kevin Hallead, RBC Capital Markets, Analysis Division – Co-Head of World Vitality Analysis & Analyst [13]

——————————————————————————–

And completely phenomenal job right here for the contribution margins within the Oil & Fuel section within the first quarter. So kudos to the efforts you guys received occurring there.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [14]

——————————————————————————–

Thanks.

——————————————————————————–

Kurt Kevin Hallead, RBC Capital Markets, Analysis Division – Co-Head of World Vitality Analysis & Analyst [15]

——————————————————————————–

So sure, positive. So I believe the primary query I’ve then could be on the commercial aspect of the enterprise, proper? And Brian indicated that, that may monitor GDP fairly intently. You bought a few your companies which are holding up actually, rather well. However after we have a look at among the GDP knowledge are available to the four right here for the second quarter, particularly and doubtlessly type of spilling over into the third quarter, there’s some knowledge factors on the market that recommend GDP could possibly be dropping 10%, 15%, 20% on a year-on-year annualized run charge. So ought to we use that as our marker after we type of take into consideration the quantity dynamics on ISP or there sufficient offsets with the diatomaceous earth and the clay merchandise that perhaps type of dampens that dynamic?

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [16]

——————————————————————————–

Positive, Kurt. So an excellent query. And I believe, as I discussed in my ready remarks, the commercial enterprise is probably a bit underappreciated. And I believe it is precisely in instances like these the place the commercial enterprise will definitely shine. Our expectation normally, as you stated a second in the past, is that we’ll see additional weak spot throughout the economic system in Q2 and Q3 for positive. And possibly for us particularly, the place we’ll see that weak spot is in prospects within the constructing merchandise and glass manufacturing sector. So for instance, glass for vehicles, there’s not a lot of that occuring proper now. And among the constructing merchandise have undoubtedly gone smooth. The excellent news is we’ve the offsets and the issues that you simply talked about, meals and beverage and different specialty merchandise. So while you have a look at all that in complete, I believe we’ll do higher than the GDP numbers. And the present base forecast that we’ve for the 12 months would have us down solely about 10% to 15% in contribution margin within the industrial enterprise for the 12 months versus the type of GDP numbers that you simply have been speaking about of being down 30% or 40%. So I believe our group’s achieved a extremely good job of developing that enterprise. And we’re doing plenty of work with prospects proper now to attempt to determine what they’re seeing on the market. And we do have a lot of prospects which are telling us that they are anticipating someplace round mid-third quarter to have the ability to restart a few their closed vegetation which are massive prospects and shoppers of our merchandise. So we’re considerably hopeful that as we get just a few months out right here, we would begin to see some rebound there. However general, our present forecast is down about 10% to 15% in contribution margin {dollars} for 2020 within the industrial enterprise.

——————————————————————————–

Kurt Kevin Hallead, RBC Capital Markets, Analysis Division – Co-Head of World Vitality Analysis & Analyst [17]

——————————————————————————–

Okay. That is nice colour. I admire that. After which simply my follow-up to come back again round to the the Oil & Fuel aspect of the enterprise, when you concentrate on the potential decline in volumes which are going to be coming right here, particularly within the second quarter. You talked a couple of excessive variable price element. So when — I have a tendency to consider these dynamics, strive to consider the decremental margin on the greenback. Would that decremental margin going to be like 20% to 25% or may the decremental margin be like 40% to 50%? I am simply making an attempt to gauge type of relative magnitudes. Any assistance on that may be nice.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [18]

——————————————————————————–

Positive.

——————————————————————————–

Donald A. Merril, U.S. Silica Holdings, Inc. – Govt VP & CFO [19]

——————————————————————————–

Sure. Look, I believe it is the latter a part of that. I believe your decrementals are in all probability within the 40% to 50% vary, as we undergo the second quarter. We have achieved plenty of heavy lifting going into this quarter. And as Brian talked about, look, April was a superb month, proper? So we have got slightly bit extra work to do right here as we rightsize the group by way of Might and June. However look, it will be in that vary. However like we stated earlier, on the finish of the day, from an Oil & Fuel perspective, I do consider contribution margin goes to stay optimistic.

——————————————————————————–

Operator [20]

——————————————————————————–

Our subsequent query comes from the road of Cameron Lochridge with Stephens Inc.

——————————————————————————–

Cameron James Lochridge, Stephens Inc., Analysis Division – Analysis Affiliate [21]

——————————————————————————–

I simply had 1 fast 1 on the Oil &Fuel section. I hoped simply type of qualitatively, may you perhaps discuss your technique going to the downturn and talked about taking market share, the place perhaps you assume the very best place to achieve some share? After which to the extent which you can — you may have any visibility into it, as we come out of the downturn, do you assume contribution margin per ton may get again to that mid- to excessive teenagers stage and as we come out of this or nonetheless early to inform?

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [22]

——————————————————————————–

Thanks for the query, Cameron, and crucial gadgets that you simply introduced up. So when it comes to the share, first, I assume perhaps to start out with the issues we’re not going to do to achieve share, and that is lowered pricing. So this is not about taking pricing right down to get share. I believe our share goes to come back due to our lively place on a price curve of favorable logistics that we’ve and the repute that we’ve out there. What we’re seeing, and we already begin to see this, in Q1, and we’re seeing it extra as we get into Q2 right here, the purchasers who’re nonetheless working on the market and so they’re nonetheless finishing wells are searching for high-quality companions to work with, individuals who’re going to be round long-term. And we have seen a few of our prospects really consolidate all their demand to U.S. Silica. So I believe that speaks to how we’re positioned out there, not simply when it comes to our price, but in addition the repute and the standard and the service that we offer. So I really feel like that is a method that we will acquire share. The opposite method is simply the monetary energy that we’ve. I really feel actually good about our liquidity. We’re not fearful like others are about restructuring at this level and having to take a few of these actions and creating plenty of doubt in our buyer’s thoughts. So I really feel like we’ll be one of many ones on the market standing all through this. And I believe that definitely helps us. When it comes to how issues get better right here, I might return and have a look at among the earlier downturns, 2008, 2009, ’15, ’16. What we sometimes see popping out of that’s that there is a few of us like us who can flip up capability in a short time. We have been working the entire time and we will be the preliminary beneficiaries of that upturn. And I might count on that margins would surge as they’ve in earlier recoveries. So precisely what quantity it will get to, I am undecided. However I can bear in mind among the previous recoveries, the margins doubled, tripled, it went up quite a bit, at the least initially. Clearly, that may cool down a bit over time, however I believe there are some doubtlessly very giant positive aspects that we will have as issues flip round right here.

——————————————————————————–

Operator [23]

——————————————————————————–

(Operator Directions) Our subsequent query comes from the road of Taylor Zurcher with Tudor, Pickering, Holt.

——————————————————————————–

Taylor Zurcher, Tudor, Pickering, Holt & Co. Securities, Inc., Analysis Division – Director of Oil Service Analysis [24]

——————————————————————————–

Bryan, usually — clearly, completions exercise in Q2 is getting fairly ugly. And as you stated, prospects are slowing, if not, outright pausing a few of their deliberate completion applications. And so I am curious, for purchasers you may have which have contracted volumes throughout this era, as an example, by way of 2020, what sort of conversations are you having with them immediately? Or are any of them come to you seeking to mix and prolong a few of their volumes additional out to the appropriate? Or how are these type of conversations going immediately?

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [25]

——————————————————————————–

So we’ve a lot of contracts, over 20 contracts out within the oilfield space proper now, and I believe buyer conversations are all around the map. The excellent news is that plenty of these contracts are our next-gen contract, the place prospects principally paid us charges up entrance for capability reservation, and we needed to earn these charges on a professional rata foundation on a quarterly over the lifetime of the contract. So we’ve the rights throughout the contract to try this, and we have already got that money on our steadiness sheet. So that provides us a fairly good negotiating place. With that stated, we wish to be a provider long-term to our prospects. And we acknowledge that that is an uncommon state of affairs, and it isn’t like the purchasers are selecting to go to purchase from another person as a substitute of U.S. Silica. For instance, they only do not want the sand at this 10 seconds, provided that lots of them, as you stated, are turning down completions actions for some time. So we’ll be sensible and smart about how we try this. However I like the truth that we’re in a a lot better place regardless of that the character of the contracts than we have been in earlier downturns.

——————————————————————————–

Taylor Zurcher, Tudor, Pickering, Holt & Co. Securities, Inc., Analysis Division – Director of Oil Service Analysis [26]

——————————————————————————–

Okay. Understood. And once more, I realizes it is a fluid surroundings. However from a pricing perspective, may you perhaps body the place pricing in Oil & Fuel peaked in Q1? And on a modern foundation, are we already again under the lows that we noticed in This autumn of final 12 months or perhaps someplace round that?

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [27]

——————————————————————————–

So I might say that the pricing in Q1, how the height was within the mid-20s when it comes to {dollars} per ton, April has held up okay. It is in all probability nearer to $20 a ton, I might say. However I might count on that issues will fall off right here in Might and June as exercise goes down. I haven’t got a particular quantity for you for Might and June, as a result of its nonetheless, as you stated, a fairly fluid state of affairs. However I believe it has been fairly extensively reported that upstream spending goes to be down 50% or extra as we get into Q2 right here. And we’re additionally listening to from some prospects that they are making selections as to whether or not they drill and full, whether or not they simply drill or whether or not they cease every thing altogether. So we’re ready to see how a few of these issues play out. That stated, we do count on fairly dramatic decreases in Might and June when it comes to completions exercise.

——————————————————————————–

Operator [28]

——————————————————————————–

This concludes our question-and-answer session. I am going to flip the ground again to Mr. Shinn for any last feedback.

——————————————————————————–

Bryan A. Shinn, U.S. Silica Holdings, Inc. – CEO & Director [29]

——————————————————————————–

Okay. Thanks very a lot, operator. I might like to shut immediately’s name by reemphasizing that we’ve a diversified enterprise portfolio with quite a few industrial markets outdoors of Vitality which are holding up properly within the present financial circumstances. And in addition, we proceed our robust give attention to controlling prices and maximizing profitability and free money circulation.

The underside line for me is that I consider we’ve the appropriate plan and a dedicated group to maximise our enterprise outcomes right here in 2020, and we’re additionally able to capitalize when the inevitable rebound happens within the coming quarters. Thanks for dialing into our name, and have an incredible day, everybody.

——————————————————————————–

Operator [30]

——————————————————————————–

Thanks. This concludes immediately’s convention. You might disconnect your traces at the moment. Thanks on your participation.



Supply hyperlink

Welcome my dear !
Do you want listen a brand new SAD LOVE SONG ?