Select Sands Reports Results for the Third Quarter of 2019
Sale of Non-Core Asset in October Provides for Additional Liquidity and Debt Reduction
Vancouver, BC – Select Sands Corp. (TSX-V:SNS | OTCQX: SLSDF) (the “Company”) announces operational and financial results for Q2 2019, and the filing of its financial statements and associated management’s discussion and analysis on www.sedar.com. All dollar references in this release are in U.S. dollars. The Company will host a conference call on Thursday, November 21 at 10:00 A.M. Central to discuss its Q3 2019 results (see “Conference Call Information” later in this release for access information).
Third Quarter and Recent Highlights
- Sold 39,669 tons of frac and industrial sand during Q3 2019, compared to 30,068 tons in Q2 2019;
- Generated revenue of $1.1 million and a gross loss of $0.8 million in Q3 2019, versus $1.4 million of revenue and a gross loss of $0.1 million in the preceding quarter;
- Reported a Q3 2019 net loss of $2.0 million, or $0.02 loss per diluted share. The Company reported a net loss of $3.1 million, or $0.03 loss per diluted share, in Q2 2019;
- Posted an adjusted EBITDA(1) loss of $1.6 million for Q3 2019, compared to a loss of $0.6 million in Q2 2019;
- As of September 30, 2019, cash and cash equivalents were $1.3 million, inventory on hand was $2.1 million, accounts receivable was $0.6 million and working capital was $1.6 million. This is compared to cash and cash equivalents of $1.9 million, inventory on hand of $2.7 million, accounts receivable of $0.9 million and working capital of $3.3 million as of June 30, 2019; and
- Select Sands previously announced on October 17, 2019 the recent sale of its Bell Farm property for $700,000 subject to a 20-year deed restriction to any sand mining on the property. The sale proceeds were used to paydown approximately $252,000 in Company debt, with the balance of the net proceeds used to strengthen Select Sands balance sheet and fund its operations. The 457-acre Bell Farm property was not being developed or mined by the Company and was considered a non-core and non-essential asset.
- Adjusted EBITDA is a non-IFRS financial measure and is described and reconciled to net loss in the table under “Non-IFRS Financial Measures”.
Zig Vitols, President and Chief Executive Officer, commented, “While we saw a 32% increase in sequential quarterly sales volumes, the third quarter continued the slow-paced trend from the first half of the year that we discussed when we reported second quarter results. During the third quarter, pricing for our 100 mesh product saw the most pressure while 40/70 remained at more reasonable levels. Consistent with what other sand producers and other OFS providers have reported during this earnings season, we expect U.S. onshore drilling and completion activity for the remainder of the fourth quarter to be impacted by typical holiday seasonality and E&P budget exhaustion. As such, we do not expect any notable recovery until early next year once operators’ have recharged their capital spending budgets to allow for increased well completions and related fracking activities. Importantly, there are ample enough discussions with operators to give us the understanding that a niche continues to exist for Northern White Sand. In the meantime, we will continue to take actions to increase efficiencies and control costs given the current environment.”
The following table includes summarized financial results for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018:
For Q4 2019, the Company expects sales volumes of frac and industrial sand to remain at or slightly below Q3 levels.
Mr. Vitols concluded, “While frac sand demand has been affected by the softness being experienced in the current market, we continue to expect growing demand as we look out over the longer term. Some operators are accommodating bids for both Northern White Sands and In-Basin offerings as they strike a balance between economics and performance in customizing recipes in the various basins in which they operate. This provides a clear advantage for Select Sands given our premium Northern White product offering that is located in Arkansas, which is much closer to key oil and gas basins in the U.S. compared to traditional sources in the Upper Midwest.
“We are currently focused on acquiring supply agreements for 2020 and beyond, and discussions with both oilfield services companies and operators have been positive to date. We also remain keenly focused on cost containment, driving increased operational enhancements and further strengthening our balance sheet. These efforts are multi-faceted and include our recent sale of the non-core Bell Farm property, which provided the Company with additional liquidity to reduce debt and support our ongoing operations. We also recently announced realignment of our operating footprint to further minimize inter-plant transportation and improve cost efficiencies. I want to thank all of our employees for their continued hard work and dedication in these efforts, which we believe will place the Company in a much stronger position as the market improves over time.”
Elliott A. Mallard, PG of Kleinfelder is the qualified person as per the NI-43-101 and has reviewed and approved the technical contents of this news release.
Conference Call Information
The Company will host a conference call on Thursday, November 21, 2019 at 10:00 a.m. Central (CDT) to discuss Q2 2019 results. To access the conference call, callers in North America may dial toll free 1-844-750-4869 and callers outside North America may dial 1-412-317-5277. Please call ten minutes ahead of the scheduled start time to ensure a proper connection and ask to be joined into the Select Sands call.
A playback of the conference call will be available in MP3 format by contacting investor relations below.
About Select Sands Corp.
Select Sands Corporation is an industrial silica product company, which owns properties in Arkansas and is currently in production at its 100% owned, Tier-1 (Northern White), silica sands property located near Sandtown, Arkansas, U.S.A. Select Sands’ goal is to become a key supplier of premium industrial silica sand and frac sand to North American markets. Select Sands’ Arkansas properties have a significant logistical advantage of being significantly closer to oil and gas markets located in Oklahoma, Texas and Louisiana than sources of similar sands from the Wisconsin area. The Tier-1 reference above is a classification of frac sand developed by PropTester, Inc., an independent laboratory specializing in the research and testing of products utilized in hydraulic fracturing & cement operations, following ISO 13503-2:2006/API RP19C:2008 standards.
Select Sands’ Sandtown project has NI 43-101 compliant Indicated Mineral Resources of 42.0MM tons (TetraTech Report; February, 2016) The Sandtown deposit is considered Northern White finer-grade sand deposits of 40-70 Mesh and 100 Mesh.
This news release includes forward-looking information and statements, which may include, but are not limited to, information and statements regarding or inferring the future business, operations, financial performance, prospects, and other plans, intentions, expectations, estimates, and beliefs of the Company. Information and statements which are not purely historical fact are forward-looking statements. The forward-looking statements in this press release relate to comments that include, but are not limited to Q3 sales volumes, improved customer demand for frac sand, the potential for new supply agreements, longer-term utility of in-basin and Northern White sands and strategic location as compared to traditional Northern White sand producers in the Upper Midwest, the Company’s M&A activity. Forward-looking information and statements involve and are subject to assumptions and known and unknown risks, uncertainties, and other factors which may cause actual events, results, performance, or achievements of the Company to be materially different from future events, results, performance, and achievements expressed or implied by forward-looking information and statements herein. Although the Company believes that any forward-looking information and statements herein are reasonable, in light of the use of assumptions and the significant risks and uncertainties inherent in such information and statements, there can be no assurance that any such forward-looking information and statements will prove to be accurate, and accordingly readers are advised to rely on their own evaluation of such risks and uncertainties and should not place undue reliance upon such forward-looking information and statements. Any forward-looking information and statements herein are made as of the date hereof, and except as required by applicable laws, the Company assumes no obligation and disclaims any intention to update or revise any forward-looking information and statements herein or to update the reasons that actual events or results could or do differ from those projected in any forward-looking information and statements herein, whether as a result of new information, future events or results, or otherwise, except as required by applicable laws.
Please visit www.selectsandscorp.com or call:
President & CEO
Phone: (844) 806-7313
Investor Relations Contact
Phone: (604) 684-6730
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility 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’s performance, cash flows or financial position that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with IFRS. Adjusted EBITDA is not a measure of financial performance (nor does it have a standardized meanings) under IFRS. In evaluating non-IFRS financial measures, investors should consider that the methodology applied in calculating such measures may differ among companies and analysts.
The Company uses both IFRS and certain non-IFRS measures to assess operational performance and as a component of employee remuneration. Management believes certain non-IFRS measures provide useful supplemental information to investors in order that they may evaluate Select Sands’ financial performance using the same measures as management. Management believes that, as a result, the investor is afforded greater transparency in assessing the financial performance of the Company. These non-IFRS financial measures should not be considered as a substitute for, nor superior to, measures of financial performance prepared in accordance with IFRS.
The Company defines Adjusted EBITDA as net (loss) income before depreciation and amortization, non-cash share-based compensation, finance costs, income taxes, share of loss of equity investee and gain on extinguishment of debt. Select Sands uses Adjusted EBITDA as a supplemental financial measure of its operational performance. Management believes Adjusted EBITDA to be an important measure as they exclude the effects of items that primarily reflect the impact of long-term investment and financing decisions, rather than the performance of the Company’s day-to-day operations. As compared to net income according to IFRS, this measure is limited in that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in the Company’s business, the charges associated with impairments, termination costs or Proposed Transaction costs. Management evaluates such items through other financial measures such as capital expenditures and cash flow provided by operating activities. The Company believes that these measurements are useful to measure a company’s ability to service debt and to meet other payment obligations or as a valuation measurement.
Indicated Resources Disclosure
The Company advises that the production decision on the Sandtown deposit (the Company’s current “Sand Operations”) was not based on a Feasibility Study of mineral reserves, demonstrating economic and technical viability, and, as a result, there may be an increased uncertainty of achieving any level of recovery of minerals or the cost of such recovery, including increased risks associated with developing a commercially mineable deposit. Historically, such projects have a much higher risk of economic and technical failure. There is no guarantee that production will occur as anticipated or that anticipated production costs will be achieved.