(TheNewswire)
-- Improved Industry Backdrop Drives Higher SalesVolumes, Revenue and Adjusted EBITDA --
HOUSTON, TX, USA – TheNewswire - NOVEMBER 18, 2021 – Select Sands Corp. (“Select Sands” or the“Company”) (TSXV:SNS ) ( OTC:SLSDF) today announced operationaland financial results for Q3 2021, 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.
Q3 2021 HIGHLIGHTS
- Sold 89,096 tons of frac and industrial sand during Q3 2021 , which was5% higher than 85,242 tons sold in Q2 2021 and 81% higher than 49,105tons sold for Q3 2020. Driving the increased sales volumes for Q3 2021from Q2 2021 was higher demand for the Company’s premium qualityproduct offerings as petroleum prices stay at higher levels.
- Recorded revenue of $5.3 million and gross margin of$0.4 million in Q3 2021 compared to $4.8 million of revenue and grossmargin of $0.5 million in Q2 2021, and revenue of $2.9 million andgross margin of $0.1 million for Q3 2020.
- Reported a net loss of$0.3 million, or $0.00 per diluted share, in Q3 2021, compared to netincome of $0.3 million, or $0.00 per diluted share, in Q2 2021.Included in Q2 2021 was an approximate $575,000 pre-tax non-cash gainto reflect forgiveness of the Company’s second Payroll ProtectionProgram relief loan. For Q3 2020, the Company reported a net loss of$0.7 million, or $0.01 per diluted share.
- Generated adjusted EBITDA (1) of $0.2million for Q3 2021, which was slightly higher than Q2 2021 and amaterial improvement from an adjusted EBITDA loss of $0.2 million forQ3 2020.
- As of September 30, 2021, cash and cash equivalentswere $0.1 million, accounts receivable was $2.6 million, and inventorywas $3.9 million. As of November 17, 2021, the Company had receivedpayment on more than $2.3 million included in its accounts receivablebalance at the end of Q3 2021.
- As announced on August 9, 2021, Select Sandssuccessfully negotiated and entered into a new five-year $8.1 millionloan agreement (the “Loan Agreement”) with its bank to refinanceits existing loans. With the execution of the Loan agreement, theCompany is benefiting from a reduction in nearer term working capitalneeds and a lower interest rate for payments on borrowings.
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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, “During this year’s third quarter, we saw a continuedimprovement in industry fundamentals as E&P companies increasetheir field development activities in response to the outlook forcontinued strong oil and natural gas prices. This drove higher demandfor our premium quality Northern White Sand and other productofferings that resulted in higher sales volumes compared to the secondquarter. Our topline for the third quarter also benefitted from higherproduct pricing, while gross margin was somewhat impacted by inflationin some of our product costs, including natural gas andtransportation. I want to thank our entire employee team for theircontinued hard work and dedication during the third quarter, and lookforward to collaborating closely with them as we capitalize onopportunities to further grow our business moving forward.”
FINANCIAL SUMMARY
The following table includes summarized financialresults for the three months ended September 30, 2021, June 30, 2021,and September 30, 2020, and for the nine months ended September 30,2021 and September 30, 2020:
SALES VOLUMES
As previously discussed, Select Sands sold 89,096 tonsof frac and industrial sand during Q3 2021, which was 27% higher thanthe midpoint of the Company’s sales volumes guidance of 60,000 to80,000 tons. Q3 2021 sales volumes were below the Company’s fullshipment capability of its Arkansas’ operations (approximately150,000 tons per quarter), which presents the opportunity forcontinued improvement in sales volumes (and the ability to spreadfixed costs over a wider base of tons produced) over time. For thenine months ended September 30, 2021, Select Sands sold 234,308 tonsof frac and industrial sand, which was 117% higher than the similarperiod for 2020.
For Q4 2021, Select Sands currently expects salesvolumes of frac and industrial sand of 80,000 to 95,000 tons. Whilethe Company currently does not see an indication of a broad slowdownduring the holiday season, Select Sands’ Q4 2021 sales volumesguidance is tempered by some potential effect on its customer’sactivity levels. As it relates to product mix,the Company’s 40/70 mesh product has generatedgreater demand as the quarter has developed. This increased demand isexpected to continue, at least to the end of the year, therebydecreasing existing 40/70 inventory levels.
OPERATIONS UPDATE
During October 2021, Select Sands recorded the highestlevel of monthly sales volumes for the year and expects Q4 2021 spotpricing levels to increase from Q3 2021 and carry into Q1 2022.Supporting the Company’s positive outlook is the increase in U.S.E&P well development activity levels, which have almost doubledfrom the same time last year. As reported by the U.S. EnergyInformation Administration on October 29, 2021, average rig count inthe U.S. for October 2021 was 508 versus 257 for October 2020. SelectSands expects the U.S. rig count to continue to grow modestly for theremainder of this year and into 2022 and remains focused onpositioning its operations to capitalize on this trend by furtherleveraging its high-quality product offerings.
This includes supporting the increasing needs ofcustomers in the Eagle Ford shale basin in South Texas. TheCompany’s George West transload facility continues to operate 24hours per day and seven days per week and offering transload for otherrail shippers. In Q3 2021, while Select Sands saw an overall efficientflow of rail traffic to the George West distribution facility, theUnion Pacific Railroad continued to report “crew challenges” thatimpacted product movements and the Company’s sales volumes duringthe period.
OUTLOOK
Mr. Vitols concluded, “I am pleased to report that todate for the fourth quarter we have seen a continued increase in salesvolumes levels and look forward to capturing incremental margins inthe spot sales market, which has seen price increases that we believewill carry into next year’s first quarter. We will also continue tobenefit from the permanent cost reductions afforded by our targetedplant reconfiguration project that was completed in January. As wehave discussed in the past, we believe our customers recognize thesuperior quality characteristics of our Northern White Sand and otherproduct offerings provide in terms of helping to drive higher returnson investment from their capital programs. With our location ofoperations much closer to key oil basins in the Southern U.S. comparedto the majority of other Northern White Sand producers, we lookforward to supporting the growing needs of our customers and expandingour business as we move into what we expect will be an even strongeroperating environment in 2022. We appreciate the ongoing support ofour shareholders, and look forward to keeping everyone apprised of ourprogress.”
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,November 19, 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 throughput capacity. In addition to transloading Select Sandsproduct, the Company sells other sand products from this facility andis able to offer 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 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 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 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 sale of investments, gain (loss) 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 certaincapitalized tangible and intangible assets used in generating revenuesin 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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