SNS:CC - Select Sands Reports Results for Fourth Quarter and Full Year 2021
(TheNewswire)
Q4 2021 Highlighted by Continued Growth in SalesVolumes, Revenue and Adjusted EBITDA Supported by Solid IndustryBackdrop
APRIL 29, 2021 - TheNewswire - H ouston , TX, USA – Select Sands Corp. (“Select Sands” or the“Company”) (TSXV:SNS ) ( OTC:SLSDF) today announced operational and financial resultsfor Q4 and full year 2021, and the filing of its financial statementsand associated management’s discussion and analysis on www.sedar.com . All dollarreferences in this release are in U.S. dollars.
Q4 & FULL YEAR 2021 AND RECENTHIGHLIGHTS
- Sold 94,670 tons of frac and industrial sand during Q4 2021 , which was6% higher than 89,096 tons sold in Q3 2021 and 79% higher than 53,009tons sold for Q4 2020. For full year 2021, Select Sands sold 328,978tons of frac and industrial sand, which was more than double than the161,149 tons sold in 2020. Driving the consistent increase inquarterly sales volumes throughout 2021 was higher demand for theCompany’s premium quality product offerings as petroleum pricingremained strong.
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Recorded revenue of $6.1 million and gross margin of$0.7 million in Q4 2021 compared to $5.3 million of revenue and grossmargin of $0.4 million in Q3 2021, and revenue of $3.1 million andgross margin of $1.0 million for Q4 2020. For full year 2021, SelectSands recorded revenue of $19.7 million and gross margin of $1.6million, compared to revenue of $9.7 million and a gross loss of $0.3million for 2020.
- Reported a net lossof $0.8 million, or $0.01 per share, in Q4 2021, compared to a netloss of $0.3 million, or $0.00 per share, in Q3 2021 and net income of$0.4 million, or $0.00 per share, in Q4 2020. For full year 2021, theCompany reported a net loss of $1.7 million, or $0.02 per share,versus a net loss of $2.9 million, or $0.03 per share, in 2020. Theincreasing net loss from Q3 2021 to Q4 2021 was partially impacted byimpairments/loss on sale of assets, and settlement of a disputednatural gas bill as a result of excessively high natural gas pricingdriven by the severe winter storm in February of 2021.
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Generated adjusted EBITDA (1) of $0.5million for Q4 2021 compared to $0.2 million in Q3 2021 and $0.8million for Q4 2020. For full year 2021, Select Sands generatedadjusted EBITDA of $0.5 million versus an adjusted EBITDA loss of $1.4million for 2020.
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As of December 31, 2021, working capital was $1.3million (including cash and cash equivalents of $0.6 million),accounts receivable was $1.1 million, and inventory was $3.9 million.
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For Q1 2022, the Company sold more than 107,000 tons offrac and industrial sand, which was more than 13% higher than Q4 2021.Sales revenue for Q1 2022 will not increase in a correlative manner asover 40% of sales were priced at the mine gate, which excludes anycharges to the customer for rail transportation or other logistics.Mine gate sales were virtually non-existent in Q4 2021.
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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 to report that we ended 2021 with solidfourth quarter results, including continued growth in sales volumes,revenue and adjusted EBITDA. Significantly contributing to ouroutperformance was a steadily improving oil and natural gas priceenvironment that allowed E&P companies to increase their fielddevelopment activities throughout 2021. This drove higher demand for our premium quality Northern WhiteSand and other product offerings, and we are seeing further growth todate in 2022. We are also seeing some customers paying directly forrail, reducing the working capital burden on the Company. I want tothank all of our employees for their continued hard work anddedication, as well as the ongoing support of our shareholders.”
FINANCIAL SUMMARY
The following table includes summarized financialresults for the three months ended December 31, 2021, September 30,2021, and December 31, 2020, and for the twelve months ended December31, 2021 and December 31, 2020:
SALES VOLUMES
As previously discussed, Select Sands sold 94,670 tonsof frac and industrial sand during Q4 2021, which was at the high endof the Company’s sales volumes guidance of 80,000 to 95,000 tonsthat was provided in November 2021. Q4 2021 sales volumes remainedbelow the full shipment capability of Select Sands’ Arkansas’operations (approximately 150,000 tons per quarter), which presentsthe opportunity for continued improvement in sales volumes (and theability to spread fixed costs over a wider base of tons produced) overtime.
For Q1 2022, the Company sold just over 107,000 tons offrac and industrial sand – more than 13% higher than Q4 2021. SelectSands expects sales volumes to further increase in Q2 2022.Underpinning the Company’s outlook is a continued increase in oiland gas field development activities in the U.S. onshore basin playsdriven by outlook for a continued strong hydrocarbon environment forthe remainder of 2022 and into 2023. This includes the Eagle Ford playin South, Texas, where Select Sands transports the majority of itssales volumes through its George West transload facility that islocated in the heart of the Eagle Ford in Live Oak County.
OPERATIONS UPDATE
Spot pricing for frac sand for the oil and gas sectorhas increased steadily since the beginning of 2022. Some customers arenow purchasing at mine gate prices and will subsequently pay directlyfor all transportation costs. Mine gate sales exceeded 40% of totalsales in Q1 2022 as compared to minimal volumes in Q4 2021. As aresult, Q1 2022 revenues will not directly correlate to increasingprices, but gross margin – from a dollars perspective – will beunaffected as any transportation costs incurred on behalf of acustomer is included in the price per ton Select Sands bills itscustomers for value at point of delivery.
Supporting the Company’s positive outlook is BakerHughes’ recently published weekly drilling rig count estimates thatshow a U.S. onshore count of 695 rigs as of April 22, 2022 – a 59%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 look forward to asuccessful year in 2022 highlighted by continued improvement in ouroperating and financial performance as a result of the industry’sstrong fundamentals. Customers continue to recognize the superior quality characteristics of our Northern White Sandand other product offerings that help to drive higher returns oninvestment on their capital spending programs. We are focused onenhancing our margins in 2022 through higher product pricing and thecontinued benefit from the permanent cost reductions afforded by ourplant reconfiguration project that was completed at the beginning of2021. Partially offsetting our expected improved results will behigher logistics and certain other expenses primarily due toinflationary cost pressures. With our location of operations muchcloser to key oil basins in the Southern U.S. compared to the majority of other Northern White Sandproducers, we look forward to supporting the growing needs of ourcustomers. We also remain focused on evaluating and executing ontargeted high rate-of-return opportunities to further expand ourbusiness and drive long-term value for 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/ ) underthe Investors section on Friday, April 29, 2021.
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 ordo differ from those projected in any forward-looking information andstatements herein, whether as a result of new information, futureevents or results, or otherwise, except as required by applicablelaws.
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 beforedepreciation and depletion, interest on long-term debt and non-cashshare-based compensation, and income taxes. The Company definesAdjusted EBITDA as net loss (income) before depreciation anddepletion, interest on long-term debt, non-cash share-basedcompensation, gain on extinguishment of debt, loss (gain) on sale ofinvestments, unrealized (gain) loss on investments, provision forimpairment of property, plant and equipment, loss (gain) on sale ofproperty, plant and equipment, reversal of accrual for repairs andmaintenance in a prior year period, and loss on settlement with gasutility. Select Sands uses Adjusted EBITDA as a supplemental financialmeasure of its operational performance. Management believes AdjustedEBITDA to be an important measure as they exclude the effects of itemsthat 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. TheCompany believes that these measurements are useful to measure acompany’s ability to service debt and to meet other paymentobligations 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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