Proppant and Frac Sand Producers Under Pressure

U.S. Silica Holdings Inc of Frederick, MD has reported a first quarter net income of US$14.8 million on revenue of US$204.0 million down from US$18.4 million on revenue of US$180.1 million in the first quarter of 2014. The company sold 2.7 million tons of products in the period, a year-over-year increase of 16%. Bryan A Shinn, U.S. Silica’s CEO, said, “I am very proud of our performance in the quarter against the backdrop of rapidly falling oil prices and declining rig count. Our results demonstrate the strength of our business model, assets, team and customer base. However, given the magnitude of the reduction in drilling and completions activity, we expect that volumes and pricing of frac sand will remain under pressure, resulting in lower profitability in the second quarter.” U.S. Silica’s Oil and Gas segment generated first quarter revenue of US$148.8 million, compared with US$130.6 million in the same period of 2014. The segment’s sales volume increased from 1.3 million tons to 1.7 million tons. Of the total sales, 63% were made in basin versus 69% in the first quarter of 2014. U.S. Silica’s Industrial and Specialty Products segment generated first quarter revenue of US$55.2 million compared with US$49.5 million in the prior year period. The segment’s sales volume increased 1% to 1.0 million tons. U.S. Silica’s capital expenditure in the first quarter was US$13.4 million and associated largely with a new frac sand mine and plant located near Fairchild, WI, a new transload facility near Odessa, TX and other maintenance capital projects. Carbo Ceramics Inc of Houston, TX has reported a first quarter net loss of US$28.6 million on revenues of US$74.8 million versus a net income of US$18.4 million on revenues of US$148.6 million in the same period of 2014. The decrease in revenues was mainly attributed to a decrease in ceramic proppant and resin-coated sand sales volumes, partially offset by an increase in Northern White sand sales volumes. Carbo Ceramic’s total proppants sales for the quarter were 529 million lbs, down from 578 million lbs in the first quarter of 2014. Ceramic proppant sales decreased 52.6%, to 177 million lbs; resin-coated sand sales fell from 48 million lbs to 9 million lbs; and Northern White sand sales more than doubled to 343 million lbs. Gary Kolstad, Carbo Ceramics’ CEO, commented, The industry will eventually recover; however, the timing and magnitude of this recovery is uncertain. The typical cost-cutting reaction by E&P operators is underway, as evidenced by the sharp reduction in industry activity during the first quarter of 2015. We are seeing two cost reduction actions by E&P operators that negatively impact our business. First some wells are drilled but not completed and second, some wells are completed with low conductivity proppant. “The impact on the entire ceramic proppant industry has been severe, leading other domestic proppant suppliers to make similar decisions to mothball and idle ceramic proppant manufacturing capacity. While imports have declined significantly compared to the fourth quarter of 2014, inventory levels of low quality imported ceramic proppant still remain a factor in causing the intense price competition that we are currently experiencing.”

Volume 29 issue 9

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