SNS:CC - Select Sands Reports Results for Second Quarter 2022

(TheNewswire)

-- Gross Margin and Adjusted EBITDA Increase 42%and 50% from Q1 2022 --

AUGUST 24, 2022 – TheNewswire - HOUSTON, TX, USA –Select Sands Corp. (“Select Sands” or the “Company”)(TSXV:SNS ) , ( OTC:SLSDF) today announced operationaland financial results for Q2 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 83,207 tons of frac and industrial sand during Q2 2022 compared to107,428 tons in Q1 2022 and 85,242 tons in Q2 2021. For the six monthsended June 30, 2022, the Company sold 190,635 tons of frac andindustrial sand – a 31% increase from 145,212 tons sold during thefirst six months of 2021;

• Recorded revenue of $5.3 million and gross margin of$1.0 million in Q2 2022 versus $6.2 million of revenue and grossmargin of $0.7 million in Q1 2022, and revenue of $4.8 million and agross margin of $0.5 million for Q2 2021.  Substantially driving thegross margin per ton increase from Q1 2022 was a higher average perton sales price for Q2 2022;

• Reported net incomeof $0.1 million, or $0.00 per share, in Q2 2022 compared to a net lossof $0.1 million, or $0.00 per share, in Q1 2022 and net income of $0.3million, or $0.00 per share, in Q2 2021;

• Generated adjusted EBITDA (1) ofapproximately $0.7 million for Q2 2022, which was a 50% increase fromapproximately $0.5 million in Q1 2022 and more than 3.5 times higherthan $0.2 million for Q2 2021; and

• As of June 30, 2022, cash and cash equivalents were$0.4 million, accounts receivable was $1.5 million, inventory was $4.2million and working capital was $1.4 million.

1. (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, “Our second quarter results benefitted from a continuedstrong energy commodity price environment, which supported theincrease in our average unit sales price.  As we discussed in ourfirst quarter earnings release, our decrease in second quarter salesvolumes from the first quarter was primarily due to an overallincrease in the amount of time it took for customers to return railcars. This impacted our ability to fully capitalize on the ongoinggrowth in demand for our premium quality Northern White Sand and otherproduct offerings, as well continued strength in the spot salesmarket. Despite lower sales volumes, we generated an increase in grossmargin and adjusted EBITDA of 42% and 50%, respectively, from thisyear’s first quarter. This was a direct result of the efforts of ourdedicated workforce, and I want to thank them once again for theirefforts as we execute on our targeted strategies designed to takeSelect Sands to new heights.”

FINANCIAL SUMMARY

The following table includes summarized financialresults for the three months ended June 30, 2022, March 31, 2022, andJune 30, 2021, and for the first six months of calendar year 2022 and2021:

SALES VOLUMES

Select Sands sold 83,207 tons of frac and industrialsand during Q2 2022, which was below the full shipment capability ofSelect Sands’ Arkansas’ operations (approximately 150,000 tons perquarter). This presents the opportunity for continued improvement insales volumes (and the ability to spread fixed costs over a wider baseof tons produced) over time.  Primarily impacting Q2 sales volumeswas the aforementioned delay in the return of rail cars from customers due to slower thanexpected unloading schedules.

For Q3 2022, the Company expects frac and industrialsand sales volumes of 90,000 to 100,000 tons. Contributing to theanticipated increase from Q2 2022 is Select Sands continued efforts toclosely work with customers to eliminate the delayed return of railcars.

OPERATIONS UPDATE

Supporting the Company’s positive outlook is BakerHughes’ recently published weekly drilling rig count estimates thatshow a U.S. onshore count of 763 rigs as of August 12, 2022 – a 52%increase from the same time last year. Assuming the oil and gaspricing environment remains strong, Select Sands expects the U.S. rigcount to continue to grow modestly for the remainder of 2022, and theCompany remains focused on positioning its operations to capitalize onthis trend by further leveraging its high-quality product offerings.This includes serving the increasing needs of customers in the EagleFord shale basin in South Texas. The Company’s George West transloadfacility continues to operate 24 hours per day and seven days per weekand offering transload for other rail shippers.

OUTLOOK

Mr. Vitols concluded, “Over the past months, we haveworked closely with our customers to decrease rail car return times.We have seen improvement in the third quarter and are targeting tohave late rail car returns substantially resolved by early in thefourth quarter. This will allow to more fully capitalize on theincreased demand for our products and further improve our operatingand financial results in the second half of 2022. As such, we maintainour positive outlook for the remainder of the year and into 2023 asoil and gas operators continue their targeted development activitiessupported by the solid industry backdrop. As in the past, we remainuniquely positioned to benefit from this landscape due to the superiorquality characteristics of our Northern White and other productofferings sourced from operations that are located much closer to keyoil basins in the Southern U.S. compared to the majority of otherNorthern White Sand producers. In addition, wewill continue to evaluate high rate-of-return opportunities that willfurther enhance our position in the marketplace and provide long-termbenefit to 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 opensThursday, August 25, 2022.

ABOUTSELECT SANDS CORP.

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.

FORWARD-LOOKING STATEMENTS

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:

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.

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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.

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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, transactioncosts or other items management views as unusual or one-time innature. Management evaluates such items through other financialmeasures such as capital expenditures and cash flow provided byoperating 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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