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U.S. Silica (SLCA) Scoops Up Mississippi Sand for $95.4M
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U.S. Silica has purchased leading frac sand mining and logistics company, Mississippi Sand, LLC for $95.4 million in cash.
St. Louis-based Mississippi Sand controls more than 30 million tons of high-quality frac sand reserves on 650 acres through a long-term lease agreement. Its distribution network is comprised of five barge terminals and three rail terminals, serving several top basins including the Mid-Continent, Marcellus/Utica, Eagle Ford, Fayetteville, Haynesville, Permian and the DJ basins.
Mississippi Sand’s state-of-the-art plant is located in Festus, MO, and is capable of producing 1.2 million tons of mostly fine grade sand annually, which can be expanded to 1.6 million tons per year with a modest capital investment. The facility leverages some of lowest landed costs in the industry to the Haynesville and the Northeast through highly efficient barging. Roughly 70% of the plant’s volumes are currently being sold into these two basins.
Mississippi Sand also has a strong customer base. It currently has five long-term contracts in place with both Oil Field Service and Exploration and Production companies covering more than 80% of their stated capacity, most of which are take-or-pay agreements and runs through the start of 2020.
The buyout also includes a roughly 1-million ton-per-year dry plant located near Seagraves, TX, which is currently idled but could be used in the future as part of U.S. Silica's in-basin strategy in the Permian.
The acquisition complements U.S. Silica's product offerings from Pacific that has some of the highest quality sand in the company’s portfolio. It will also enable U.S. Silica to double the size of its capacity from the region as well as enhance its competitive position and better serve its customers. The company expects the acquisition to be accretive to its earnings per share in third-quarter 2017.
U.S. Silica has underperformed the industry it belongs to over a year. The company’s shares lost around 40% over this period, compared with roughly 19.7% gain recorded by the industry.
U.S. Silica swung to a profit of $29.5 million or 36 cents per share in the second quarter of 2017 from a loss of $11.8 million or 19 cents per share in the year-ago quarter. Adjusted earnings of 38 cents per share for the quarter beat the Zacks Consensus Estimate of 37 cents. The company gained from strong demand and pricing gains for frac sand and continued strength in the oil & gas market in the quarter.
Revenues for the reported quarter was $290.5 million, a roughly two-and-a-half-fold year over year jump. It, however, missed the Zacks Consensus Estimate of $309.8 million. The company sees higher sand demand in the third quarter and for the remainder of 2017.
U.S. Silica’s healthy balance sheet provides it with ample opportunities for making strategic investments that will ensure its long-term competitive position in the market. U.S. Silica also continues to evaluate opportunities for greenfield expansions in the Permian Basin and is also expanding production capacities and efficiencies across some of its existing facilities.
U.S. Silica currently carries a Zacks Rank #3 (Hold).
Kraton has an expected earnings growth of 4.5% for the current year.
Kronos has an expected long-term earnings growth of 5%.
Akzo Nobel has an expected long-term earnings growth of 11.1%.
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U.S. Silica (SLCA) Scoops Up Mississippi Sand for $95.4M
U.S. Silica has purchased leading frac sand mining and logistics company, Mississippi Sand, LLC for $95.4 million in cash.
St. Louis-based Mississippi Sand controls more than 30 million tons of high-quality frac sand reserves on 650 acres through a long-term lease agreement. Its distribution network is comprised of five barge terminals and three rail terminals, serving several top basins including the Mid-Continent, Marcellus/Utica, Eagle Ford, Fayetteville, Haynesville, Permian and the DJ basins.
Mississippi Sand’s state-of-the-art plant is located in Festus, MO, and is capable of producing 1.2 million tons of mostly fine grade sand annually, which can be expanded to 1.6 million tons per year with a modest capital investment. The facility leverages some of lowest landed costs in the industry to the Haynesville and the Northeast through highly efficient barging. Roughly 70% of the plant’s volumes are currently being sold into these two basins.
Mississippi Sand also has a strong customer base. It currently has five long-term contracts in place with both Oil Field Service and Exploration and Production companies covering more than 80% of their stated capacity, most of which are take-or-pay agreements and runs through the start of 2020.
The buyout also includes a roughly 1-million ton-per-year dry plant located near Seagraves, TX, which is currently idled but could be used in the future as part of U.S. Silica's in-basin strategy in the Permian.
The acquisition complements U.S. Silica's product offerings from Pacific that has some of the highest quality sand in the company’s portfolio. It will also enable U.S. Silica to double the size of its capacity from the region as well as enhance its competitive position and better serve its customers. The company expects the acquisition to be accretive to its earnings per share in third-quarter 2017.
U.S. Silica has underperformed the industry it belongs to over a year. The company’s shares lost around 40% over this period, compared with roughly 19.7% gain recorded by the industry.
U.S. Silica swung to a profit of $29.5 million or 36 cents per share in the second quarter of 2017 from a loss of $11.8 million or 19 cents per share in the year-ago quarter. Adjusted earnings of 38 cents per share for the quarter beat the Zacks Consensus Estimate of 37 cents. The company gained from strong demand and pricing gains for frac sand and continued strength in the oil & gas market in the quarter.
Revenues for the reported quarter was $290.5 million, a roughly two-and-a-half-fold year over year jump. It, however, missed the Zacks Consensus Estimate of $309.8 million. The company sees higher sand demand in the third quarter and for the remainder of 2017.
U.S. Silica’s healthy balance sheet provides it with ample opportunities for making strategic investments that will ensure its long-term competitive position in the market. U.S. Silica also continues to evaluate opportunities for greenfield expansions in the Permian Basin and is also expanding production capacities and efficiencies across some of its existing facilities.
U.S. Silica currently carries a Zacks Rank #3 (Hold).
U.S. Silica Holdings, Inc. Price and Consensus
U.S. Silica Holdings, Inc. Price and Consensus | U.S. Silica Holdings, Inc. Quote
Stocks to Consider
Better-placed companies in the basic materials space include Kraton Corporation , Kronos Worldwide, Inc. (KRO - Free Report) and Akzo Nobel N.V. (AKZOY - Free Report) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kraton has an expected earnings growth of 4.5% for the current year.
Kronos has an expected long-term earnings growth of 5%.
Akzo Nobel has an expected long-term earnings growth of 11.1%.
One Simple Trading Idea
Since 1988, the Zacks system has more than doubled the S&P 500 with an average gain of +25% per year. With compounding, rebalancing, and exclusive of fees, it can turn thousands into millions of dollars.
This proven stock-picking system is grounded on a single big idea that can be fortune shaping and life changing. You can apply it to your portfolio starting today.
Learn more >>