U.S. Silica: The Likely Winner In The Frac Sand Cycle
Richard Zeits • 11 Comments
Richard Zeits • 11 Comments
U.S. Silica Holdings: Competitive Pressures May Threaten Future Margins
Richard Zeits • 20 Comments
Richard Zeits • 20 Comments
U.S. Silica Holdings: Severe Overcapacity To Cripple The Frac Sand Market
Stanislav Ermilov • 41 Comments
Stanislav Ermilov • 41 Comments
Fri, Jul. 15, 12:59 PM
- Fairmount Santrol (FMSA -19.8%) is nearly 20% lower after preliminary Q2 earnings, revenues and adjusted EBITDA all miss estimates, but analysts sees potential weakness in shares.
- Tudor Pickering analysts say the results should not be too surprising given that the U.S. onshore rig count is down 25%-30% Q/Q, and the firm says it retains its Buy rating for FMSA as a preferred oil service name for an "impending” energy market upturn.
- RBC, which rates FMSA at Outperform, still likes the company for strong forecasted volume growth driven by increasing proppant intensity, and sees potential for pricing power, share gains, potential capital structure M&A as the energy cycle matures.
- Jefferies rates FMSA only at Hold, saying the revenue miss may suggest some combination of greater pricing pressure, “negative mix shift” in which the firm sees “less resin coated proppant and a lower percentage of in-basin sales.”
- Also: SLCA -2.5%, HCLP -4.5%, EMES -5.9%, CRR -1.1%.
Thu, Jul. 14, 6:28 PM
- Frac sand producers are lower AH after Fairmount Santrol (NYSE:FMSA) pre-announces larger than expected Q2 losses and weaker than expected revenue.
- FMSA forecasts a Q2 EPS loss of $0.56-$0.58 on revenue of $113M-$115M, vs. analyst consensus for a $0.12/share loss on $136.7M in revenue.
- FMSA sees overall volumes sold during Q2 of 1.9M-2M tons vs. 2.1M tons in Q1 and 2.2M tons in the year-ago quarter, due to "increased pressures" on all proppant volumes, particularly within its coated proppant offerings.
- FMSA -12.5% AH, EMES -4.3%, HCLP -2.5%, SLCA -1%.
Wed, Jun. 15, 2:17 PM
- Hi-Crush Partners (HCLP -4.1%) is lower after upsizing and pricing a public offering of 4.5M units - up from a previously announced offering size of 3M units - at $10.80 each for total gross proceeds of $48.6M.
- Meanwhile, Raymond James upgrades HCLP by two notches to Strong Buy from Market Perform with a $17 price target, saying the latest stock offering along with two other equity offerings in the past three months has significantly reduced balance sheet risk.
- The firm predicts frac sand volumes will jump 91% in 2017 to record levels and surge another 41% in 2018, and "conservatively" estimates that HCLP's volumes will rise by 66% in 2017 and 25% in 2018.
- Earlier this week, DA Davidson downgraded HCLP as well as U.S. Silica (SLCA +1.9%), Emerge Energy (EMES +10%) and Fairmount Santrol (FMSA +4.2%), saying current estimates and valuations for the group are "devoid of reality."
Tue, Jun. 14, 12:49 PM
- Emerge Energy Services (EMES -5%) extends yesterday's pullback after shares more than doubled since the beginning of the month, but today's results are mixed for its frac sand peers.
- Wunderlich raises its price target for EMES to $9 from $4, saying investors are growing more comfortable with the stabilization and a potential recovery in the space; with the large number of drilled uncompleted wells in the U.S., the firm believes it makes sense that completion and sand companies would be the first incremental beneficiaries of an uptick in activity, but adds the initial upticks still have not been noticed by EMES or in the field (Briefing.com).
- The firm also raises its price target for Hi-Crush Partners (HCLP -0.6%) to $11 from $6, believing the recent equity raise made sense as it focuses on debt reduction and improving its financial position both for the downturn and an eventual recovery.
- Also: SLCA -0.7%, FMSA +2.2%.
Mon, Jun. 13, 9:53 AM
- Emerge Energy Services (EMES -8.3%) opens sharply lower as DA Davidson downgrades shares to Underperform from Buy with a $5 price target, saying frac sand names are trading "well ahead of fundamentals for a growing industry that is still in flux."
- The firm views the recent surge in valuations (I, II) and estimates for the frac sand group as "devoid of reality," citing sell-side inconsistencies about the space including assuming anything is normalized in an industry that is relatively new and never been in a steady state and assuming peak margins do not equate to painfully compressed multiples.
- Davidson also downgrades U.S. Silica (SLCA -3.5%) to Neutral from Buy, as well as Hi-Crush Partners (HCLP -5.4) and Fairmount Santrol (FMSA -4.8%) to Underperform from Buy.
Thu, Jun. 9, 3:59 PM
- Emerge Energy Services (EMES +30.2%) surges ~30% on 10x the normal trading volume to reach its highest level since September.
- Bloomberg speculates that the move may be a delayed reaction to Goldman Sachs analyst Waqar Syed's note earlier this week that said the key to EMES improving its balance sheet is selling its fuels business, which could fetch $50M and possibly more, given the current "buyer’s market.”
- Syed estimates that at peak Ebitda, EMES distributable cash flow may be as high as $1.53/unit; if EMES is paying that level of distribution, the unit may be priced “significantly” above where it currently trades.
- Frac sand peers also are higher: SLCA +2.8%, HCLP +2%, FMSA +1.8%.
Thu, May 26, 2:59 PM
- Fairmount Santrol (FMSA +10.5%) is upgraded to Overweight from Equal Weight with a $9 price target at Morgan Stanley, which praises the company's elimination of its debt overhang to 2018-19 vs. 2017.
- The firm thinks a refinancing is still required for FMSA, but it sees reason to believe in a much more favorable capital market environment in 2017-18 vs. today.
- Stanley reiterates its Overweight rating for U.S. Silica (SLCA +0.8%) while upping its stock price target to $37 from $33, which sees the company as a potential industry consolidator given its recent equity raise and clean balance sheet, so accretive M&As could lend near-term upside to shares.
- FMSA, which was upgraded earlier in the week at RBC Capital, has climbed 40% this week.
Mon, May 23, 11:58 AM
- U.S. Silica (SLCA +1.6%) is upgraded to Outperform from Sector Perform with a $33 price target, raised from $27, at RBC Capital, which thinks shares have significant potential upside based on its estimate of mid-cycle earnings power, which is not being fully discounted by investors.
- The firm raises its 2017 EPS estimate to $0.25 from $0.10 and introduces a 2018 estimates EPS of $0.90 on expected higher frac sand volumes and higher contribution margins in the proppant solutions segment due to improved fixed cost absorption.
- RBC assumes frac sand vols rise 30% Y/Y in 2018, with proppant solutions' contribution margin of 28%.
Wed, Apr. 27, 2:43 PM
- U.S. Silica (SLCA +4.1%) is higher after reporting a Q1 loss that came in above expectations despite continued pressure on both volumes and pricing in its oil and gas segment.
- SLCA says it sold 2.3M total tons during Q1, down 15% from 2.7M tons sold in the year-ago quarter and down 8% Q/Q; Q1's contribution margin was $17.7M, down 74% Y/Y and 20% Q/Q.
- SLCA says the capital raise during Q1 strengthens its balance sheet, which it says is a key strategic advantage over most in the frac sand industry and "puts us in the best position to drive industry consolidation."
- Says it will continue to refrain from providing guidance for adjusted EBITDA because of the current lack of visibility in its oil and gas business, but it expects FY 2016 capex of $15M-$20M.
- Now read U.S. Silica: The likely winner in the frac sand cycle
Fri, Mar. 18, 12:24 PM
- Patterson-UTI (PTEN -5.4%), Superior Energy Services (SPN -6.5%) and Forum Energy Tech (FET -3.3%) are downgraded to Neutral from Buy at Citigroup, which believes the market may have gotten ahead of itself for the stocks.
- “For those already reflecting recovery multiples, we expect oil betas to begin diminishing or the stocks to simply take a pause in the absence of additional catalysts near term," Citi analyst Scott Gruber writes.
- The firm maintains its Buy ratings on Halliburton (HAL -1.1%) and U.S. Silica (SLCA -3.5%), saying the consensus 2018 recovery earnings estimates for the two high-quality companies remain too low.
Thu, Mar. 17, 3:57 PM
- U.S. Silica (SLCA +8.4%) is maintained with an Outperform rating at Cowen following its upsized 8.7M-share offering expected to raise $174M, which the firm views as an opportunistic offering in light of an open equity issuance window and a growing list of M&A opportunities, although nothing specific appears to be identified for the proceeds.
- Although SLCA’s near-term acquisition plans could include “non-traditional frac sands, logistics assets, or something within ISP,” over the long-term, the company is committed to making a transformation acquisition, Cowen says.
- SLCA will have $470M cash and cash equivalents following their offering, and net debt should be reduced to $20M.
Wed, Mar. 16, 4:33 PM
- U.S. Silica (NYSE:SLCA) -2.3% AH after announcing a public offering of 8M common shares, with an underwriters option to purchase up to an additional 1.2M shares.
- SLCA says it plans to use the proceeds for general corporate purposes including the potential acquisition of complementary businesses or assets.
Mon, Feb. 29, 3:30 PM
- U.S. Silica (SLCA +6.6%) is initiated with a Buy rating and $25 price target at Citi, which calls SLCA its top small- and mid-cap pick and the strongest secular growth story of any company in its coverage.
- Citi likes SLCA's significant operating leverage, manageable balance sheet risk and a modest valuation, and forecasts a doubling of revenues over 2016-18 and EBITDA eclipsing the 2014 peak.
- The firm notes that while SLCA has a large amount of fixed costs, it also has the potential to take significant market share and achieve high profitability due to economies of scale; also, while cash flows are expected to decline in 2016, Citi notes the company has a large enough cash balance to fund itself through 2018.
- SLCA also is Cowen's lone Outperform rating within the proppant group, while the firm lowers ratings for Hi-Crush Partners (HCLP -4.4%), Emerge Energy (EMES +3.3%) and Fairmount Santrol (FMSA -1.2%) to Market Perform from Outperform, driven by expected lower rig counts, continued price pressure, adverse fixed cost absorption and lower than expected profitability in Q4.
Wed, Feb. 24, 10:24 AM
- U.S. Silica (SLCA -13.3%) is sharply lower in early trading after reporting a steeper than expected Q4 loss driven by substantially lower oil and gas contribution margins.
- SLCA says overall tons sold during Q4 were 2.5M tons, down 18% from the 3M tons sold in the year-ago quarter of 2014, with 54% of tons sold in basin vs. 66% a year ago.
- Q4 oil and gas revenue totaled $88.8M vs. $196M a year ago; segment contribution margin was $7M vs. $80.4M in Q4 2014.
- SLCA says it will continue to refrain from providing EBITDA guidance until it can gain clarity into customer business activity levels and the associated demand for its products.
Tue, Feb. 23, 5:41 PM
Dec. 28, 2015, 11:45 AM
- WTI crude is down 3.2% to $36.90/barrel, and Brent crude down 2.5% to $36.95/barrel, leaving prices close to 11-year lows. Energy industry firms are among the biggest decliners on a day the S&P is down 0.6%.
- Fears about excess supply appear to be weighing once more. OPEC figures point to a global oil supply glut of more than 2M barrels (over 2% of global demand); a smaller glut is expected next year. Meanwhile, Japanese government data indicates the country's oil product sales fell to a 46-year low in November, and European data suggests the continent's oil product demand growth turned negative in October.
- The biggest casualties include Whiting Petroleum (WLL -9.9%), Oasis Petroleum (OAS -8.2%), Vanguard Natural Resources (VNR -12.5%), Denbury Resources (DNR -8%), SandRidge Energy (SD -8.1%), SandRidge Permian Trust (PER -10.9%), SandRidge Mississippian Trust (SDT -7.5%), U.S. Silica (SLCA -6.2%), Marathon Oil (MRO -6.7%), C&J Energy Services (CJES -8.1%), MV Oil Trust (MVO -9.2%), Bonanza Creek (BCEI -6.4%), Parker Drilling (PKD -7.9%), and Continental Resources (CLR -5.9%).
- Other notable decliners include Kinder Morgan (KMI -5%), Williams Partners (WPZ -4.4%), EOG Resources (EOG -3.4%), Cheniere Energy (CQP -3.6%), SeaDrill (SDRL -3.5%), Encana (ECA -2.8%), Devon Energy (DVN -2.7%), Ensco (ESV -3.8%), Hercules Offshore (HERO -4.7%), Atwood Oceanics (ATW -4.9%), Helmerich & Payne (HP -3.8%), and Pioneer Natural (PXD -2.6%).
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U.S. Silica Holdings, Inc. is a producer of commercial silica, a specialized mineral that is a critical input into the oil and gas proppants end market and a variety of attractive industrial and specialty products end markets. It produces industrial minerals, including sand proppants, whole... More
Sector: Basic Materials
Industry: Industrial Metals & Minerals
Country: United States
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