Entering text into the input field will update the search result below

Proppant Industry Stress Test Part 1: U.S. Silica

Mar. 03, 2020 1:21 PM ETU.S. Silica Holdings, Inc. (SLCA)37 Comments
SeattliteTrader profile picture


  • Q4 2019 revealed the depths of proppant pricing destruction and O&G segment contribution margin despair.
  • The proppant industry isn’t dead.
  • U.S. Silica remains a leader with free-cash-flow-positive operations.


Amidst all the doom and gloom of the overall equity and bond markets, this article continues a set of informative pieces related to U.S. Silica (NYSE:SLCA) and contains information related to the O&G proppant space overall.

Please see my first article for a company overview and introduction to some key terms if you are unfamiliar with this industry or would simply like a refresher.

Several months ago, a frequent Seeking Alpha commenter posited that a series of “stress test” articles would help our online community better understand how companies that serve the proppant market might fare in the coming quarters and years. To that end, I will attempt to elucidate a stress test scenario for U.S. Silica and discuss the future of the company.

The remainder of this stress test series will review company fundamentals, performance and provide a viability prognosis of U.S. Silica's publicly-traded industry peers including Covia (CVIA), Hi-Crush (HCR), and Smart Sand (SND).

(U.S. Silica Logo, Trademark U.S. Silica)

Significant Updates From Q4 2019

U.S. Silica reported Q4 2019 earnings and provided their 2019 Annual Report a few days ago with nearly every metric down on a quarterly and/or annual basis. The fourth quarter of each year has proven to be seasonally slow for both the O&G and ISP segments across the industry, so those of you who follow this space were likely expecting mediocre numbers at best. As of December 31, 2019, U.S. Silica’s term loan due May 1, 2025 had $1.248B outstanding. Market interest rate decreases reduced the realized rate to 5.81% vs. 6.56% a year earlier. Should interest rates remain depressed, the company could realize an annual interest reduction benefit of approximately $9.3MM in 2020 vs. the year earlier period.

Disciplined capital spending of $20.455MM and a realized $52.3MM customer shortfall penalty (of $70.6MM total 2019 shortfall

This article was written by

SeattliteTrader profile picture
Leveraging the stock market to live my best life, one tick at a time.

Analyst’s Disclosure: I am/we are long SLCA, HCR, CVIA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author may frequently trade both equities and options in the energy sector long and short.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.