U.S. Silica Holdings Announces Fourth Quarter and Full Year 2023 Results

Source: www.gulfoilandgas.com 2/27/2024, Location: North America

U.S. Silica Holdings, Inc. (NYSE: SLCA) (the "Company"), a diversified industrial minerals company and the leading last-mile logistics provider to the oil and gas industry, today announced its fourth quarter and full year results for the period ended December 31, 2023.

"During the fourth quarter, we continued to strengthen our financial foundation and advance our growth strategy while closing out an exceptionally strong and historic year for the company," said Bryan Shinn, U.S. Silica's Chief Executive Officer. "In 2023, we delivered on our guidance of approximately 25% year-over-year improvement in Adjusted EBITDA, generated another year of robust cash flow from operations of $264 million, managed an 88% increase in annual net income, and improved our total company contribution margin by 16% year-over-year. These impressive annual results were driven by healthy customer demand, disciplined pricing in our Oil and Gas segment, and increased pricing and improved product mix for our Industrial and Specialty Products segment, all of which was supported by our optimized and lean cost structure. Furthermore, in the fourth quarter, we repurchased and extinguished an additional $25 million of debt, improving our balance sheet and maintaining a low net leverage ratio of 1.4x.

"In our Oil and Gas segment, thanks to our disciplined pricing approach, coupled with our variable cost reduction initiatives, we delivered a strong segment contribution margin of 35% for the quarter despite the demand impact of lower drilling and completions activity due to weather and fourth-quarter seasonality. In the fourth quarter, we signed four customer contract amendments and extensions, reflecting our stellar market reputation for reliability and ability to deliver proppant at scale. Additionally, our new, patent-pending Guardian frac fluid filtration system continues to perform well and gain momentum in the market, and we expect to add several incremental systems to the fleet in 2024.

"In our Industrial and Specialty Products segment, we benefited from ongoing structural cost reductions, price increases, and greater sales from advanced materials, resulting in improved profitability with a 27% increase in contribution margin on a per ton basis when compared to the prior year quarter. As expected, however, our fourth quarter volumes declined on a year-over-year basis, due to a combination of normal reduced seasonal demand, customer facility maintenance, and customer year-end inventory management.

"Looking ahead, 2024 is shaping up to be another strong year of operating cash flow generation. Our Oil and Gas segment is well positioned in active well completion basins, with strong customer commitments that provide cash flow visibility. In our Industrial segment, customer demand remains strong overall, and we anticipate year-over-year improvements as we realize a full quarter of price increases."

Fourth Quarter 2023 Highlights

Net income for the fourth quarter ended December 31, 2023 was $29.1 million, or $0.37 per diluted share. The fourth quarter results were impacted by $9.1 million pre-tax, or $0.09 per diluted share after-tax, of gains primarily related to asset sales, partially offset by facility closure costs, business optimization, and the loss on extinguishment of debt, resulting in adjusted EPS (a non-GAAP measure) of $0.28 per diluted share.

These results compared with net income of $26.9 million, or $0.34 per diluted share, for the third quarter of 2023, which was impacted by $3.8 million pre-tax, or $0.04 per diluted share after-tax, of charges primarily related to a non-recurring adjustment to depreciation and the loss on extinguishment of debt, resulting in adjusted EPS (a non-GAAP measure) of $0.38 per diluted share.

In the fourth quarter of 2023, the Company completed a $25 million voluntary term loan principal repayment, extinguishing the debt at par using excess cash on hand.

Capital Update

As of December 31, 2023, the Company had $245.7 million in cash and cash equivalents and total debt was $840.0 million. The Company's $150.0 million Revolver had zero drawn, with $15.3 million allocated for letters of credit, and availability of $134.7 million. Capital expenditures in 2023 totaled $65.2 million and were primarily related to growth projects, facility improvements, and maintenance projects. During 2023, the Company generated $263.9 million in cash flow from operations.

Reclassification of Northern White Sand Offerings

After careful consideration, the Company is reallocating its Northern White Sand offerings from the Oil and Gas business segment to the Industrial and Specialty Products segment beginning with first quarter 2024 results. Given how the Northern White Sand business has evolved over the years, the Company believes that it is better positioned today as an offering within ISP. This change will streamline U.S. Silica's business operations and allow the Company to maximize value as it will now have all Northern White Sand based offerings in one business unit. Management will discuss this reclassification further on its first-quarter 2024 earnings call and offer historical examples to bridge prior quarter results to the new reporting design.

Outlook and Guidance

"Looking ahead to the first quarter of 2024, our two business segments remain well positioned in their respective markets," said Shinn. "U.S. Silica has a strong portfolio of industrial and specialty products that serve numerous essential, high-growth and attractive end markets, supported by a robust pipeline of new products under development. We expect growth in our underlying base business, coupled with pricing increases and total addressable market expansions.

"The oil and gas industry continues to progress through a multi-year growth cycle. Constructive through-cycle commodity prices coupled with improved well completion efficiencies and intensity are supportive of an active environment over the next few years, and we have strong contractual commitments for our sand production capacity for the year.

"We remain focused on generating cash flow from operations and de-levering the balance sheet. We expect to produce robust operating cash flow in 2024, while investing approximately $60 million for capital expenditures for the year."

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