SNS:CC - Select Sands Reports Results for First Quarter 2022
(TheNewswire)
-- Grew Sequential Sales Volumes by 13% Supportedby Continued Positive Industry Backdrop --
MAY 26, 2022 – TheNewswire - HOUSTON, TX, USA –Select Sands Corp. (“Select Sands” or the “Company”)(TSXV:SNS ) , ( OTC:SLSDF) today announced operationaland financial results for Q1 2022, and the filing of its financialstatements and associated management’s discussion and analysis on www.sedar.com . All dollar references in this release are in U.S.dollars.
KEY HIGHLIGHTS
- Sold 107,428 tons of frac and industrial sand during Q1 2022 , which was13% higher than 94,670 tons sold in Q4 2021 and 79% higher than 59,970tons sold for Q1 2021. Driving the consistent increase in quarterlysales volumes throughout 2021 and into 2022 was higher demand for theCompany’s premium quality product offerings as petroleum pricingremained strong.
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Recorded revenue of $6.2 million and gross margin of$0.7 million in Q1 2022 compared to $6.1 million of revenue and grossmargin of $0.7 million in Q4 2021, and revenue of $3.6 million and agross loss of $0.04 million for Q1 2021.
- Reported a net lossof $0.1 million, or $0.00 per share, in Q1 2022, compared to a netloss of $0.8 million, or $0.01 per share, in Q4 2021 and a net loss of$0.8 million, or $0.01 per share, in Q1 2021.
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Generated adjusted EBITDA (1) of $0.5million for Q1 2022 compared to $0.5 million in Q4 2021 and a loss of$0.3 million for Q1 2021.
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As of March 31, 2022, cash and cash equivalents were$0.1 million, accounts receivable was $2.7 million, inventory was $3.4million and working capital was $1.2 million.
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(1) Adjusted EBITDA is a non-IFRSfinancial measure and is described and reconciled to net (loss) incomein the table later in this release under the section titled“Non-IFRS Financial Measures”.
Zig Vitols, President and Chief Executive Officer,commented, “I am pleased with our start for 2022, including the 13%increase in frac and industrial sales volumes we saw in the firstquarter. During the period, we benefitted from a continued strongoil and natural gas pricing environment, and we expect to see ongoinggrowth in demand for our premium quality Northern White Sand and otherproduct offerings for the remainder of 2022 and into next year. I wantto thank our entire workforce for their continued hard work anddedication.”
Mr. Vitols continued, “During the first quarter of2022, we saw mine gate sales grow to approximately 40% of total salesfrom virtually zero in the fourth quarter of 2021. This impactedrevenue but not gross margin as mine gate sales do not includetransportation charges. Our first quarter sales also reflected anoverall increase in the amount of time it took for customers to returnrail cars, which impacted our ability to fully capitalize on thestrength of the spot sales market. Although the issue of slowreturning of rail cars persisted into the second quarter, we areworking closely with our customers to find a resolution. We expectlate railcar returns to be substantially eliminated by late summer orearly autumn of this year.”
FINANCIAL SUMMARY
The following table includes summarized financialresults for the three months ended March 31, 2022, December 31, 2021,and March 31, 2021:
SALES VOLUMES
Select Sands sold 107,428 tons of frac and industrialsand during Q1 2022, which was below the full shipment capability ofSelect Sands’ Arkansas’ operations (approximately 150,000 tons perquarter), which presents the opportunity for continued improvement insales volumes (and the ability to spread fixed costs over a wider baseof tons produced) over time.
For Q2 2022, the Company expects frac and industrialsand sales volumes of 90,000 to 105,000 tons. Impacting Q2 salesvolumes is the aforementioned delay in the return of rail cars fromcustomers due to slower than expected unloadingschedules. Select Sands expects sales volumes to increase in the thirdand fourth quarters of 2022 as the Company works with its customersover the coming months to substantially eliminate the delayed returnof rail cars.
OPERATIONS UPDATE
Supporting the Company’s positive outlook is BakerHughes’ recently published weekly drilling rig count estimates thatshow a U.S. onshore count of 728 rigs as of May 20, 2022 – a 60%increase from the same time last year. Select Sands expects the U.S.rig count to continue to grow modestly for the remainder of 2022 andremains focused on positioning its operations to capitalize on thistrend by further leveraging its high-quality product offerings.
This includes serving the increasing needs of customersin the Eagle Ford shale basin in South Texas. The Company’s GeorgeWest transload facility continues to operate 24 hours per day andseven days per week and offering transload for other rail shippers.
OUTLOOK
Mr. Vitols concluded, “We have a continued positiveoutlook for strong operating and performance as we move through theremainder of the year. Supporting our view is the increase in oil andgas field development activities in the U.S. onshore basin playsdriven by an expected strong hydrocarbon environment for the remainderof the year and into 2023. We remain uniquely positioned to benefitgiven the superior quality characteristics of our Northern White andother product offerings sourced from operations that are located muchcloser to key oil basins in the Southern U.S. compared to the majorityof other Northern White Sand producers. While the oil and gas industrybackdrop remains positive, the overall economic environment has beenchallenging in terms of continued inflationary cost pressures oninputs such as natural gas, diesel fuel and transport. We have beenfortunate to reasonably adapt pricing and I want to thank our entireteam for their collective success in providing our customers with asuperior product and service offering. Concurrent with these efforts,we remain focused on evaluating and executing on targeted highrate-of-return opportunities to further expand our business for thebenefit of our shareholders.”
Elliott A. Mallard, PG of Kleinfelder is thequalified person as per the NI-43-101 and has reviewed and approvedthe technical contents of this news release.
ADDITIONAL MANAGEMENT COMMENTARY
An audio recording of management’s additionalcomments related to its results and outlook will be posted to theCompany’s website ( https://www.selectsands.com/ ) under the Investors section before the market opens Friday,May 27, 2022.
Select Sands Corporationis an industrial silica product company, which wholly owns a Tier-1(Northern White), silica sands property and related productionfacilities located near Sandtown, Arkansas. Select Sands’ goal is tobecome a key supplier of premium industrial silica sand and frac sandto North American markets. Select Sands’ Arkansas properties have asignificant logistical advantage of being significantly closer to oiland gas markets located in Oklahoma, Texas, Louisiana, and New Mexicothan the majority of sources of similar sands from the Northernmid-west area such as Wisconsin. Select Sands also operates atransload facility in George West, Texas in Live Oak County thatserves customers operating in the Eagle Ford Shale Basin. The facilityhas a capacity for 180 rail cars and is equipped with twooffload/loading stations with dedicated silos for a high throughputcapacity. In addition to transloading Select Sands product, theCompany sells other sand products from this facility and is able tooffer transload services.
The Tier-1 referenceabove is a classification of frac sand developed by PropTester, Inc.,an independent laboratory specializing in the research and testing ofproducts utilized in hydraulic fracturing and cement operations,following ISO 13503-2:2006/API RP19C:2008 standards. Select Sands’Sandtown project has NI 43-101 compliant Indicated Mineral Resourcesof 42.0MM tons (TetraTech Report; February, 2016). The Sandtowndeposit is considered Northern White finer-grade sand deposits of40-70 Mesh and 100 Mesh.
This news release includes forward-looking informationand statements, which may include, but are not limited to, informationand statements regarding or inferring the future business, operations,financial performance, prospects, and other plans, intentions,expectations, estimates, and beliefs of the Company. Information andstatements which are not purely historical fact are forward-lookingstatements. The forward-looking statements in this press releaserelate to comments that include, but are not limited to, statementsrelated to expected current and future state of operations, salesvolumes for 2022, customer activity levels, and the unique marketposition of the Company. Forward-looking information and statementsinvolve and are subject to assumptions and known and unknown risks,uncertainties, and other factors which may cause actual events,results, performance, or achievements of the Company to be materiallydifferent from future events, results, performance, and achievementsexpressed or implied by forward-looking information and statementsherein. Although the Company believes that any forward-lookinginformation and statements herein are reasonable, in light of the useof assumptions and the significant risks and uncertainties inherent insuch information and statements, there can be no assurance that anysuch forward-looking information and statements will prove to beaccurate, and accordingly readers are advised to rely on their ownevaluation of such risks and uncertainties and should not place unduereliance upon such forward-looking information and statements. Anyforward-looking information and statements herein are made as of thedate hereof, and except as required by applicable laws, the Companyassumes no obligation and disclaims any intention to update or reviseany forward-looking information and statements herein or to update thereasons that actual events or results could or do differ from thoseprojected in any forward-looking information and statements herein,whether as a result of new information, future events or results, orotherwise, except as required by applicable laws.
COMPANY CONTACTS
Please visit www.selectsands.com orcontact:
| Zigurds Vitols President & CEO Phone 844-806-7313 |
| W. Joe O’Rourke Vice President Sales & Marketing Phone: (713) 689-8000 |
Neither TSXVenture Exchange nor its Regulation Services Provider (as that term isdefined in the policies of the TSX Venture Exchange) acceptsresponsibility for the adequacy or accuracy of this release.
NON-IFRS FINANCIAL MEASURES
The following information is included for convenience only. Generally,a non-IFRS financial measure is a numerical measure of a company’sperformance, cash flows or financial position that either excludes orincludes amounts that are not normally excluded or included in themost directly comparable measure calculated and presented inaccordance with IFRS. Adjusted EBITDA is not a measure of financialperformance (nor does it have a standardized meanings) under IFRS. Inevaluating non-IFRS financial measures, investors should consider thatthe methodology applied in calculating such measures may differ amongcompanies and analysts.
The Company uses both IFRS and certain non-IFRS measures to assessoperational performance and as a component of employee remuneration.Management believes certain non-IFRS measures provide usefulsupplemental information to investors in order that they may evaluateSelect Sands' financial performance using the same measures asmanagement. Management believes that, as a result, the investor isafforded greater transparency in assessing the financial performanceof the Company. These non-IFRS financial measures should not beconsidered as a substitute for, nor superior to, measures of financialperformance prepared in accordance with IFRS.
As reflected in the above tables for the periodspresented, the Company defines EBITDA as net (loss) income adjustedfor items listed. The Company defines Adjusted EBITDA as net loss(income) adjusted for select items used to estimate EBITDA withadditional adjustments as listed in the above table to estimateAdjusted EBITDA. Select Sands uses Adjusted EBITDA as a supplementalfinancial measure of its operational performance. Management believesAdjusted EBITDA to be an important measure as they exclude the effectsof items that primarily reflect the impact of long-term investment andfinancing decisions, rather than the performance of the Company’sday-to-day operations. As compared to net income (loss) according toIFRS, this measure is limited in that it does not reflect the periodiccosts of certain capitalized tangible and intangible assets used ingenerating revenues in the Company's business, the charges associatedwith impairments, termination costs, transaction costs or other itemsmanagement views as unusual or one-time in nature. Managementevaluates such items through other financial measures such as capitalexpenditures and cash flow provided by operating activities. The Company believes that these measurements areuseful to measure a company’s ability to service debt and to meetother payment obligations or as a valuation measurement.
INDICATED RESOURCES DISCLOSURE
The Company advises thatthe production decision on the Sandtown deposit (the Company’scurrent “Sand Operations”) was not based on a Feasibility Study ofmineral reserves, demonstrating economic and technical viability, and,as a result, there may be an increased uncertainty of achieving anylevel of recovery of minerals or the cost of such recovery, includingincreased risks associated with developing a commercially mineabledeposit. Historically, such projects have a much higher risk ofeconomic and technical failure. There is no guarantee that productionwill occur as anticipated or that anticipated production costs will beachieved.
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