Q1 2020 U.S. Silica Holdings Inc Earnings Name

Frederick, Could 30, 2020 (Thomson StreetEvents) — Edited Transcript of U.S. Silica Holdings Inc earnings convention name or presentation Friday, Could 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. – Government VP & CFO

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

Stifel, Nicolaus & Firm, Included, 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’d now like to show the convention over to your host, Mr. Arjun Sreekumar, Supervisor of Treasury and Investor Relations for U.S. Silica. Thanks. Chances are you’ll 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 Government Officer; and Don Merril, Government Vice President and Chief Monetary Officer.

Earlier than we start, I want to remind all contributors 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 could discuss with the non-GAAP measures of adjusted EBITDA and section contribution margin throughout this name.

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

And with that, I’d 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 will start immediately’s name with an replace on our response to the COVID-19 pandemic, which was targeted on making certain the security and well being of our workers whereas minimizing disruptions to our operations and monetary efficiency. I will then focus on how we’re responding to the present oil macro atmosphere. Subsequent, I will overview our strong first quarter efficiency intimately. And at last, I will 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 will then flip the decision over to Don Merril, who will overview key monetary metrics earlier than opening the decision for questions.

I am happy to report that we have skilled minimal operational disruptions to date on account of the COVID-19 pandemic. Following the steerage offered by the CDC and federal, state and native authorities, nearly all of our company workers began to work remotely in late March, and we have promptly carried out quite a few social distancing finest practices all through our complete operations community to guard the well being and security of our colleagues.

We additionally fashioned a COVID-19 motion group that gives workers with common communications, together with industry-specific finest practices, correct cleansing, disinfecting and hygiene practices and operational modifications to reduce publicity danger.

I might like to specific my deep gratitude to all of our colleagues for his or her unbelievable dedication throughout these difficult instances. We are going to proceed to intently monitor the state of affairs and make selections based mostly on tips from related authorities.

Wanting forward, we count on that ISP section gross sales volumes will typically observe GDP traits, a couple of end-use markets for industrial sand, equivalent to constructing merchandise and automotive will seemingly 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 predicted 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 worldwide storage capability has resulted in a pointy decline in crude oil costs. Accordingly, expectations are for not less than a 50% decline in North American upstream spending this 12 months and an analogous decline in completions exercise. We count on that volumes and masses in our Oil & Gasoline section will directionally observe completions exercise. However as with the 2015 oilfield downturn, we count on to realize market share this 12 months on account of 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 & Gasoline provide chain footprint. Over the previous few quarters, we have idled 7 manufacturing services and lowered shifts at 6 different mines, thereby lowering our staffed annual Oil & Gasoline manufacturing capability from 24 million tons to six million tons.

We have additionally heat stacked some Sandbox gear and moved different gear to areas of upper demand. Drawing on our roots in steady enchancment and lean manufacturing, our operations groups are pursuing roughly $25 million in extra 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 price going ahead. We’re unhappy to lose so a lot of our valued colleagues, however took this tough step for the general well being of the corporate.

Now let’s transfer on to our strong 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 masses and volumes in our Oil & Gasoline 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 enhance in our Oil & Gasoline 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 atmosphere. Demand for filtration from meals and beverage producers was sturdy within the first quarter and is predicted to stay strong within the close to time period. In our Oil & Gasoline section, we offered 3.2 million tons of sand within the first quarter, a 5% decline sequentially. SandBox masses 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 & Gasoline section, contribution margin {dollars} really doubled sequentially when excluding the fourth quarter shortfall penalty, due to the aforementioned price chopping 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 part of U.S. Silica and to have one other dynamic providing in our portfolio.

Closing out my commentary on Q1, I might wish 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 atmosphere. I might additionally wish to take the chance immediately to remind everybody that whereas we’re typically painted with an oilfield companies brush, our enterprise is more and more levered to industrial end-markets which are largely unaffected by the turbulence within the Power area. In actual fact, 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 obstacles to entry, stickier buyer relationships, greater margins and powerful progress prospects. Even inside our Industrial section, our focus is not solely 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 move.

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 at last, immediately, let’s focus on the market outlook for our working segments. Our underlying assumption for the rest of 2020 is that we are going to function in an atmosphere 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 Power enterprise, we consider that properly completions and sand demand will decline within the coming quarters, and many shoppers could sluggish 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 supply particular EBITDA steerage given all of the shifting elements, I do consider that the present 2020 avenue consensus of lower than $80 million of EBITDA may be very conservative given our strong first quarter outcomes and the soundness of our industrial enterprise.

And at last, we’re very targeted on money move, as you may think, and our aim 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 move in additional element in only a minute throughout his remarks.

For me, the underside line is that I consider we’ve the best 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 will now flip the decision over to Don. Don?

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

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

Shifting 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 & Gasoline 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 complete grain silica elevated at a sooner tempo than our higher-margin specialty merchandise. As Bryan acknowledged, we anticipate that our ISP enterprise will show resilient and observe the GDP curve as our prospects navigate the approaching quarters. The Oil & Gasoline section contribution margin on a per ton foundation was $10.27 in comparison with $20.22 for the fourth quarter of 2019, largely because of the aforementioned buyer shortfall penalty acknowledged within the fourth quarter.

Nonetheless, you will need to point out the price focus of the corporate, leading to a decline of price of products offered pushed by the idling of services, 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 & Gasoline section volumes to say no within the second quarter, consistent with expectations for a extreme discount in completions exercise. We are going to proceed to problem our group to ship the bottom price doable whereas offering the most effective service within the {industry}.

Let’s now take a look at complete firm outcomes. Promoting, common 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 pressure. We now count on SG&A expense in 2020 to lower to a run price of roughly $85 million by the tip 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 because of the idled vegetation and the following asset impairment.

Our efficient tax price for the quarter ended March 31, 2020, was a good thing about 33%.

Shifting 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. Throughout the first quarter, we drew $25 million on our revolving credit score facility as a precautionary measure in response to the financial uncertainties attributable to 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 had been primarily associated to the fee of CapEx accrued in 2019, and enhancements in expansions at our high-margin industrial services in Millen, Georgia and Columbia, South Carolina.

We at the moment are anticipating our 2020 capital expenditures to be roughly $30 million on the low finish of our earlier steerage 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 direction of progress initiatives in our Industrial enterprise.

I might now wish 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 because of the current discount in LIBOR charges and the termination of our curiosity swap settlement.

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

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

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

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

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Questions and Solutions

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Operator [1]

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

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

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So I suppose two issues. One, I might begin with on the Oil & Gasoline contribution market facet, 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 for those who might quantify that in any respect.

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

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Sure. It was accretive. I’d say it was minimal {dollars} right here in Q1, nevertheless it was accretive, for certain.

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

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

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

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Nice. After which as you concentrate on the Oil & Gasoline contribution margin per ton as we glance forward, are you — given the cost-cutting that has been in place to date, do you suppose that contribution margin in Oil & Gasoline stays barely constructive over the following quarter or 2? Or do you suppose it might go destructive given how sharply we’re seeing volumes contract? Simply — it is arduous to gauge form of a 12 months in the past, you eliminated prices relative to that.

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

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Sure. I will possibly provide the begin of a solution. And I feel Don most likely can articulate some extra particulars. One of many issues that I feel is misunderstood a bit about our Oil & Gasoline 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, people 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 by way of prices, nevertheless it’s fairly shut. Don, I do not know, what would you add to that?

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

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

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

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Only one remaining, 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?

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

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

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Operator [10]

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

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

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I hope all people in your loved ones is wholesome.

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

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Effectively, similar to you. Thanks.

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

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

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

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Thanks.

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

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So sure, certain. So I feel the primary query I’ve then can be on the commercial facet of the enterprise, proper? And Bryan indicated that, that may observe GDP fairly intently. You bought a few your companies which are holding up actually, rather well. However once we take a look at a number of the GDP knowledge are available to the four right here for the second quarter, particularly and doubtlessly form of spilling over into the third quarter, there’s some knowledge factors on the market that recommend GDP might be dropping 10%, 15%, 20% on a year-on-year annualized run price. So ought to we use that as our marker once we form of take into consideration the amount dynamics on ISP or there sufficient offsets with the diatomaceous earth and the clay merchandise that possibly form of dampens that dynamic?

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

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Positive, Kurt. So an excellent query. And I feel, as I discussed in my ready remarks, the commercial enterprise is maybe a bit underappreciated. And I feel 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 point throughout the financial system in Q2 and Q3 for certain. And doubtless for us particularly, the place we’ll see that weak point 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 a number of the constructing merchandise have positively gone gentle. The excellent news is we’ve the offsets and the issues that you just talked about, meals and beverage and different specialty merchandise. So whenever you take a look at all that in complete, I feel 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 form of GDP numbers that you just had been speaking about of being down 30% or 40%. So I feel our group’s carried out a very good job of establishing that enterprise. And we’re doing quite a lot of work with prospects proper now to attempt to determine what they’re seeing on the market. And we do have plenty 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 huge prospects and customers of our merchandise. So we’re considerably hopeful that as we get a couple of months out right here, we’d begin to see some rebound there. However total, our present forecast is down about 10% to 15% in contribution margin {dollars} for 2020 within the industrial enterprise.

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

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Okay. That is nice shade. I respect that. After which simply my follow-up to return again round to the Oil & Gasoline facet 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 might the decremental margin be like 40% to 50%? I am simply making an attempt to gauge form of relative magnitudes. Any assistance on that may be nice.

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

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Positive.

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

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Sure. Look, I feel it is the latter a part of that. I feel your decrementals are most likely within the 40% to 50% vary, as we undergo the second quarter. We have carried out quite a lot of heavy lifting going into this quarter. And as Bryan talked about, look, April was a superb month, proper? So we have got a bit bit extra work to do right here as we rightsize the group by way of Could and June. However look, it is going to be in that vary. However like we stated earlier, on the finish of the day, from an Oil & Gasoline perspective, I do consider contribution margin goes to stay constructive.

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Operator [20]

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

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

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I simply had 1 fast 1 on the Oil &Gasoline section. I hoped simply form of qualitatively, might you possibly discuss your technique going to the downturn and talked about taking market share, the place possibly you suppose the most effective place to realize some share? After which to the extent that you could — you have got any visibility into it, as we come out of the downturn, do you suppose contribution margin per ton might get again to that mid- to excessive teenagers stage and as we come out of this or nonetheless early to inform?

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

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Thanks for the query, Cameron, and essential gadgets that you just introduced up. So by way of the share, first, I suppose possibly to begin with the issues we’re not going to do to realize share, and that is lowered pricing. So this is not about taking pricing all the way down to get share. I feel our share goes to return due to our energetic place on a value curve of favorable logistics that we’ve and the status that we’ve available in the market. 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 feel that speaks to how we’re positioned available in the market, not simply by way of our price, but in addition the status and the standard and the service that we offer. So I really feel like that is a technique that we’ll achieve share. The opposite approach is simply the monetary power that we’ve. I really feel actually good about our liquidity. We’re not nervous like others are about restructuring at this level and having to take a few of these actions and creating quite a lot 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 feel that actually helps us. When it comes to how issues get well right here, I’d return and take a look at a number of the earlier downturns, 2008, 2009, ’15, ’16. What we sometimes see popping out of that’s that there is a few people like us who can flip up capability in a short time. We have been operating the entire time and we’ll be the preliminary beneficiaries of that upturn. And I’d count on that margins would surge as they’ve in earlier recoveries. So precisely what quantity it will get to, I am unsure. However I can keep in mind a number of the previous recoveries, the margins doubled, tripled, it went up rather a lot, not less than initially. Clearly, that may calm down a bit over time, however I feel there are some doubtlessly very massive beneficial properties that we will have as issues flip round right here.

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Operator [23]

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

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

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Bryan, typically — 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 packages. And so I am curious, for patrons you have got which have contracted volumes throughout this era, as an instance, by way of 2020, what sort of conversations are you having with them immediately? Or are any of them come to you trying to mix and prolong a few of their volumes additional out to the best? Or how are these form of conversations going immediately?

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

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So we’ve plenty of contracts, over 20 contracts out within the oilfield space proper now, and I feel buyer conversations are everywhere in the map. The excellent news is that quite a lot of these contracts are our next-gen contract, the place prospects mainly 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 inside the contract to do 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 is not like the purchasers are selecting to go to purchase from another person as an alternative of U.S. Silica. For instance, they simply do not want the sand at this 10 seconds, provided that a lot 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 significantly better place regardless of that the character of the contracts than we have been in earlier downturns.

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

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Okay. Understood. And once more, I realizes it is a fluid atmosphere. However from a pricing perspective, might you possibly body the place pricing in Oil & Gasoline 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 possibly someplace round that?

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

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So I’d say that the pricing in Q1, how the height was within the mid-20s by way of {dollars} per ton, April has held up okay. It is most likely nearer to $20 a ton, I’d say. However I’d count on that issues will fall off right here in Could and June as exercise goes down. I haven’t got a particular quantity for you for Could and June, as a result of its nonetheless, as you stated, a fairly fluid state of affairs. However I feel it has been fairly broadly 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 all the things 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 Could and June by way of completions exercise.

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Operator [28]

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

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

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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 exterior of Power which are holding up properly within the present financial circumstances. And likewise, we proceed our sturdy give attention to controlling prices and maximizing profitability and free money move.

The underside line for me is that I consider we’ve the best 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.

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Operator [30]

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Thanks. This concludes immediately’s convention. Chances are you’ll disconnect your traces at the moment. Thanks to your participation.



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