(TheNewswire)
-- Sales Volumes Increase by More than 40% from Q12021 --
AUGUST 25, 2021 – TheNewswire - HOUSTON, TX, USA –Select Sands Corp. (“Select Sands” or the “Company”)(TSXV:SNS ) , ( OTC:SLSDF) today announced operationaland financial results for Q2 2021, and the filing of its auditedfinancial statements and associated management’s discussion andanalysis on www.sedar.com . All dollarreferences in this release are in U.S. dollars.
Q2 2021 AND RECENT KEYHIGHLIGHTS
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- Sold 85,242 tons of frac andindustrial sand during Q2 2021, which was 42%higher than 59,970 tons sold in Q1 2021 and 61% higher than 53,009tons sold for Q4 2020. Driving the increased sales volumes for Q2 2021was further expansion in customer activities in response to animproved commodity price environment.
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- Generated revenue of $4.8 million and gross margin of$0.5 million in Q2 2021 – a significant improvement from $3.6million of revenue and a gross loss of $0.04 million in Q1 2021, andsubstantially higher than revenue of $0.04 million and a gross loss of$0.6 million in Q2 2020. As discussed in the Company’s Q1 2021earnings release, Q1 2021 cost of goods sold, excluding depreciationand depletion, included higher expenses for utilities and repairs andmaintenance, as well as costs to restart the Company’s facilities asa result of the severe winter storm in February.
- Reported net income of$0.3 million, or $0.00 per diluted share, in Q2 2021, compared to anet loss of $0.8 million, or $0.01 loss per diluted share, in Q1 2021and a net loss of $1.2 million, or $0.01 loss per diluted share, in Q22020.
- Posted adjusted EBITDA (1) of $0.2million for Q2 2021, versus an adjusted EBITDA loss of $0.3 million inQ1 2020 and an adjusted EBITDA loss of $0.8 million in Q2 2020.
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- As of June 30, 2021, cash and cash equivalents were$0.2 million, accounts receivable was $1.9 million, and inventory was$3.7 million.
- As previously announced, Select Sands recentlysuccessfully negotiated and entered into a new five-year $8.1 millionloan agreement (the “Loan Agreement”) with its bank to restructureits existing loans. Separately, Select Sands received confirmationthat the Company’s second Payroll Protection Program relief loan of$574,990 was forgiven, which was reflected as a one-time gain in Q22021.
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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, “Supported by a substantial increase in sequential salesvolumes driven by a further enhanced industry backdrop, we werepleased to see a meaningful improvement in our operational andfinancial performance for the second quarter. Contributing to ourfinancial results are the permanent cost reductions afforded by ourtargeted Plant Reconfiguration Project that was completed in January.We look forward to further benefiting from our improved expenseprofile. In addition, with the recent execution of our Loan Agreement,we are in a much stronger financial position given the decrease innearer term working capital needs and the lower interest rate we willpay going forward.”
FINANCIAL SUMMARY
The following table includes summarized financialresults for the three months ended June 30, 2021, March 31, 2021, andJune 30, 2020, and for the six months ended June 30, 2021 and June 30,2020:
SALES VOLUMES
For Q3 2021, the Company currently expects salesvolumes of frac and industrial sand of 60,000 to 80,000 tons. Theanticipated decrease from sales volumes levels for Q2 2021 isprimarily associated with the timing of development activities for acertain customer. The Company continues to expect year over year salesvolume growth as the backdrop for oil and gas drilling and completionsactivity continues to improve into 2022.
OPERATIONS UPDATE
As discussed previously, frac and industrial sand salesvolumes increased sequentially by 42% from 59,970 tons in Q1 2021 to85,242 tons in Q2 2021. The year-to-date sales volume of 145,212 tonsmarks a 147% increase from year-to-date volumes of 58,915 tons for thefirst half of 2020. Q2 2021 sales volumes were below the Company’s full shipment capability, which presents theopportunity for continued improvement in sales volumes (and theopportunity to spread fixed costs over a wider base of tons produced)over time.
Supporting the increasing needs of customers in theEagle Ford shale basin in South Texas, the Company’s George Westtransload facility is continuing to operate 24 hours per day and sevendays per week and is also offered to transload for other railshippers. The Eagle Ford basin continues its recovery that started inQ4 2020, and Select Sands continues to see other oilfield servicescompanies increasing their presence in the basin. In addition, duringQ2 2021 the Company increased shipments to customers serving thePermian Basin.
Select Sands continued to see an efficient flow of railtraffic to the George West distribution facility in Q2, even thoughthe Union Pacific Railroad has reported “crew challenges” as wemove into Q3. As in most industries, the persistent truck drivershortage continues to hamper increasing shipments in all areas,including last mile logistics. This situation may actually favorSelect Sands, as the George West distribution facility is closer tomany well sites and therefore increasing the number of turns bytrucker drivers. In short, fewer miles for delivery translates toincreased delivery volumes with fewer drivers, thereby increasing theamount of frac sand being delivered to support increased productivityat the well site versus other sand providers operating in the EagleFord shale basin.
OUTLOOK
Mr. Vitols concluded, “We continue to see an outlookfor further economic expansion and resulting growing global oildemand. We look forward to serving our current and future customers inthe Eagle Ford, Permian and other key oil basins that recognize thesuperior quality characteristics our Northern White Sand offering canprovide in terms of helping to drive higher returns on investment fromtheir capital programs. As important is the cost savings we canprovide as we are located much closer to key oil basins in theSouthern U.S. compared to the majority of other Northern White Sandproducers. By leveraging our unique market position, we look forwardto capitalizing on additional opportunities to prudently expand ourbusiness. We appreciate the continued support of our shareholders aswe further position Select Sands for long-term success.”
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 26, 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: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 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 2021, customer activity levels in the Eagle Ford and othershale basins, and the unique market position of the Company.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.selectsands.com orcontact:
Zigurds Vitols President & CEO Phone 844-806-7313 | W. Joe O’Rourke Vice President Sales & Marketing Phone: (713) 689-8000 Joe.orourke@selectsands.com | Wesley Harris Investor Inquiries Phone: (832) 917-6030 wes@selectsands.com |
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 table for the periodspresented, the Company defines EBITDA as net loss before depreciationand depletion, interest on long-term debt, non-cash share-basedcompensation, and income taxes. The Company defines Adjusted EBITDA asnet loss before depreciation and depletion, interest on long-termdebt, non-cash share-based compensation, income taxes, unrealized gainon investment, gain on disposal of investments, gain on sale ofequipment and gain on settlement of debt. Select Sands uses AdjustedEBITDA as a supplemental financial measure of its operationalperformance. Management believes Adjusted EBITDA to be an importantmeasure as they exclude the effects of items that primarily reflectthe impact of long-term investment and financing decisions, ratherthan the performance of the Company’s day-to-day operations. Ascompared to net income (loss) according to IFRS, this measure islimited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assetsused in generating revenues in the Company's business, the chargesassociated with impairments, termination costs, transaction costs orother items management views as unusual or one-time in nature.Management evaluates such items through other financial measures suchas capital expenditures and cash flow provided by operatingactivities. The Company believes that these measurements are useful tomeasure a company’s ability to service debt and to meet otherpayment 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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