(TheNewswire)
--Continued Increase in Customer Activity and Improved Cost StructureLeads to Material Improvement in Sequential Quarterly Results --
APRIL 29, 2021 – VANCOUVER, BC,CANADA – Select Sands Corp. (“Select Sands” or the“Company”) (TSXV: SNS, OTC: SLSDF) announces operational andfinancial results for Q4 and full year 2020, and the filing of itsaudited financial statements and associated management’s discussionand analysis on www.sedar.com . All dollar references in thisrelease are in U.S. dollars.
FOURTH QUARTER AND FULL YEAR 2020 HIGHLIGHTS
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•. ?? Sold53,009 tons of frac and industrial sandduring Q4 2020, compared to 49,225 tons in Q3 2020. For the full year 2020, the Company sold 161,149tons of frac and industrial sand versus 119,736 tons for the full year2019.
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•. ?? Recorded revenue of $3.1 million and a grossmargin of $1.0 million in Q4 2020, versus $2.9 million of revenue anda gross margin of $0.1 million in Q3 2020. For the full year 2020,Select Sands recorded revenue of $9.7 million and a gross loss of $0.3million, compared to revenue of $4.4 million and a gross loss of $2.2million for the full year 2019.
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•. ?? Reported net income of $0.4 million, or $0.00 perdiluted share in Q4 2020, compared to a net loss of $0.7 million, or$0.01 loss per diluted share, in Q3 2020. For the full year 2020, theCompany reported a net loss of $2.9 million, or $0.03 loss per dilutedshare, versus a net loss of $9.3 million, or $0.10 loss per dilutedshare, for the full year 2019.
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•. ??Generated adjusted EBITDA(1) of $0.8million for Q4 2020, versus an adjusted EBITDA loss of $0.3 million inQ3 2020. For the full year 2020, Select Sands posted an adjustedEBITDA loss of $1.4 million versus an adjusted EBITDA loss of $4.1million for the full year 2019.
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•. ??As of December 31, 2020, cash and cashequivalents were $0.3 million, accounts receivable was $1.6 million,and inventory was $2.9 million.
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•. ??During 2020, the Company started aproject to optimize and consolidate processing assets to improve itscost structure (the “Plant Reconfiguration Project”) that wassubstantially completed by year end. The wet plant and 100 mesh dryplant operated during Q4 2020. The 40/70 line started operation inearly January 2021 in preparation for upcoming sales. Select Sandsalso completed the purchase of the Diaz Rail Loading Facility, locatedin Diaz, Arkansas (the “Diaz Rail Facility”). The PlantReconfiguration Project included installation of dry-process equipmentat the Diaz Rail Facility, which improved process efficiency byreducing inter-plant transportation costs.
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•. ??Select Sands began transloadoperations at an established facility in the Eagle Ford shale basinlocated in George West, Texas in December 2019 and started deliveringin January 2020 under a long-term agreement to a large E&Poperating in the region. In late March to early April 2020, thecustomer curtailed frac operations and halted receipt of sandshipments due to declining oil prices primarily as a result of supplyand demand imbalances associated with the COVID-19 global pandemic.Supported by a higher oil pricing environment, the customer restartedfrac operations and the Company resumed shipping product to thecustomer at the end of the second quarter, with the level of shipmentstrending higher through the remainder of the year and into 2021.
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1. (1) Adjusted EBITDA is anon-IFRS financial measure and is described and reconciled to net lossin the table under “Non-IFRS Financial Measures”.
Zig Vitols, President and Chief Executive Officer, commented, “Wewere pleased with our fourth quarter of 2020 financial performance,which was highlighted by a substantial improvement in earnings andadjusted EBITDA from the third quarter. Contributing to our sequentialquarterly results were higher sales volumes and a lower cost of goodssold per ton as a direct result of our successful PlantReconfiguration Project. We look forward to benefitting from highermargins in 2021 as sales volumes are expected to increase through theremainder of 2021. Our improved fourth quarter 2020 and full year2020 results were also driven by the ongoing efforts of our employeesand contractors. Their ability to perform at a consistent high-levelthroughout the year despite the many challenges faced as a result ofthe COVID-19 pandemic was extremely impressive, and I appreciate theircontinued hard work and dedication.”
FINANCIAL SUMMARY
The following table includes summarized financial results for thethree month periods ended December 31, 2020, September 30, 2020 andDecember 31, 2019, as well as the twelve month period ended December31, 2020 and December 31, 2019:
For Q1 2021, the Company had sales volumes of frac and industrial sandof approximately 60,000 tons. Sales volumes for Q1 2021 wereimpacted by the widespread harsh winter storm in February, duringwhich Select Sands was unable to receive natural gas supply as theregional physical gas and power infrastructure was severely impaired.The combined impact of well-head freeze-offs and the failure of gasprocessing plants and pipelines resulted in more than a week ofdowntime for the Company’s Arkansas production facilities.
OPERATIONS UPDATE
Select Sands substantially completed its Plant Reconfiguration Projectin Arkansas during the fourth quarter of 2020, with the new wet plantlocated at the Sandtown Quarry remaining fully operational for theentire period. The new dry plant at the Diaz Rail Facility iscurrently producing 100 mesh product and the 40/70 mesh product linewas brought online in early January 2021 in preparation for future sales.
The Plant Reconfiguration Project has materially improved theefficiency of Select Sands’ mining, processing and shippingoperations by reducing the number of interplant sites from four to twoand allowing for all truck transport between facilities in open topdump trailers while discontinuing the necessity of interplanttransport in closed hopper trailers. In addition, Select Sands hasincreased the level of its own truck fleet capacity to help lowertransportation costs.
Supporting the increasing needs of the Company’s largest customer inthe Eagle Ford shale basin in South Texas, the George West facility iscontinuing to operate 24 hours per day and seven days per week.
OUTLOOK
Mr. Vitols concluded, “We are seeing an increase in global oildemand the COVID pandemic in the U.S. has been easing and the level ofCOVID-19 vaccinations continues to grow in the U.S. We expect theeconomy to continue to recover and oil demand continue to improve in2021. We have seen oilfield development activity increase steadily inthe U.S. since the beginning of 2021. Based on conversations with ourcurrent and prospective customers, we expect this trend to continue. With Select Sands’ premium Northern White Sand product that isstrategically located much closer to key oil and gas basins in theSouthern U.S. as compared to traditional sources in the Upper Midwest,we believe we are in a solid position for continued growth andsuccess. Combined with our recently announced renewal of our line ofcredit, we continue to pursue additional opportunities for the benefitof our shareholders.”
ElliottA. Mallard, PG of Kleinfelder is the qualified person as per theNI-43-101 and has reviewed and approved the technical contents of thisnews release.
ADDITIONAL MANAGEMENT COMMENTARY
An audio recording of management’s additional comments related toits results and outlook will be posted to the Company’s website ( https://www.selectsands.com/ ) under the Investorssection prior to market open on Friday, April 30, 2021. Investorsinterested in having a follow-up discussion with management areencouraged to arrange a specific time for a call by contacting ArlenHansen at Kin Communications at (604) 684-6730.
SelectSands Corporation is an industrial silica product company, whichwholly owns a Tier-1 (Northern White), silica sands property andrelated production facilities located near Sandtown, Arkansas. SelectSands’ goal is to become a key supplier of premium industrial silicasand and frac sand to North American markets. Select Sands’ Arkansasproperties have a significant logistical advantage of beingsignificantly closer to oil and gas markets located in Oklahoma,Texas, Louisiana, and New Mexico than sources of similar sands fromthe Wisconsin area. Select Sands also operates a transload facility inGeorge West, Texas in Live Oak County that serves customers operatingin the Eagle Ford Shale Basin. The facility has a capacity for 180rail cars and is equipped with two offload/loading stations withdedicated silos for a high throughput capacity.
TheTier-1 reference above is a classification of frac sand developed byPropTester, Inc., an independent laboratory specializing in theresearch and testing of products utilized in hydraulic fracturing andcement operations, following ISO 13503-2:2006/API RP19C:2008standards. Select Sands’ Sandtown project has NI 43-101 compliantIndicated Mineral Resources of 42.0MM tons (TetraTech Report;February, 2016). The Sandtown deposit is considered Northern Whitefiner-grade sand deposits of 40-70 Mesh and 100 Mesh.
This news release includes forward-looking information and statements,which may include, but are not limited to, information and statementsregarding or inferring the future business, operations, financialperformance, prospects, and other plans, intentions, expectations,estimates, and beliefs of the Company. Information and statementswhich are not purely historical fact are forward-looking statements.The forward-looking statements in this press release relate tocomments that include, but are not limited to, statements related toexpected current and future state of operations, sales volumes for2021, the impact of the February 2021 winter storm and the benefitsafforded by the Company’s recent renewal of its line of credit.Forward-looking information and statements involve and are subject toassumptions and known and unknown risks, uncertainties, and otherfactors which may cause actual events, results, performance, orachievements of the Company to be materially different from futureevents, results, performance, and achievements expressed or implied byforward-looking information and statements herein. Although theCompany believes that any forward-looking information and statementsherein are reasonable, in light of the use of assumptions and thesignificant risks and uncertainties inherent in such information andstatements, there can be no assurance that any such forward-lookinginformation and statements will prove to be accurate, and accordinglyreaders are advised to rely on their own evaluation of such risks anduncertainties and should not place undue reliance upon suchforward-looking information and statements. Any forward-lookinginformation and statements herein are made as of the date hereof, andexcept as required by applicable laws, the Company assumes noobligation and disclaims any intention to update or revise anyforward-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 CONTACT
Please visit www.selectsandscorp.com orcall:
Zigurds Vitols
President & CEO
Phone: (844) 806-7313
INVESTOR RELATIONS CONTACT
Arlen Hansen
Phone: (604) 684-6730
Neither TSX Venture Exchange nor its Regulation Services Provider (asthat term is defined in the policies of the TSX Venture Exchange)accepts responsibility 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 table for the periods presented, the Companydefines EBITDA as net loss before depreciation and depletion, intereston long-term debt, non-cash share-based compensation, deferred incometax expense (recovery) and income taxes. The Company defines AdjustedEBITDA as net loss before depreciation and depletion, interest onlong-term debt, non-cash share-based compensation, deferred income taxexpense (recovery), income taxes, gain on extinguishment of debt, gainon return of capital from equity investee, unrealized loss oninvestments, share of loss of equity investee, provision forimpairment of property, plant and equipment, and loss on sale ofproperty, plant and equipment. Select Sands uses Adjusted EBITDA as asupplemental financial measure of its operational performance.Management believes Adjusted EBITDA to be an important measure as theyexclude the effects of items that primarily reflect the impact oflong-term investment and financing decisions, rather than theperformance of the Company’s day-to-day operations. As compared tonet income (loss) according to IFRS, this measure is limited in thatit does not reflect the periodic costs of certain capitalized tangibleand intangible assets used in generating revenues in the Company'sbusiness, the charges associated with impairments, termination costs,transaction costs or other items management views as unusual orone-time in nature. Management evaluates such items through otherfinancial measures such as capital expenditures and cash flow providedby operating activities. The Company believes that these measurementsare useful to measure a company’s ability to service debt and tomeet other payment obligations or as a valuation measurement.
INDICATED RESOURCES DISCLOSURE
TheCompany advises that the production decision on the Sandtown deposit(the Company’s current “Sand Operations”) was not based on aFeasibility Study of mineral reserves, demonstrating economic andtechnical viability, and, as a result, there may be an increaseduncertainty of achieving any level of recovery of minerals or the costof such recovery, including increased risks associated with developinga commercially mineable deposit. Historically, such projects have amuch higher risk of economic and technical failure. There is noguarantee that production will occur as anticipated or thatanticipated production costs will be achieved.
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