US Silica Holdings to buy Sandbox Enterprises despite second quarter profit loss

Sand
Source: DollarPhotoClub

US Silica Holdings, Inc. (NYSE: SLCA) announced yesterday that it has entered into a definitive agreement to acquire Sandbox Enterprises LLC, a leading provider of innovative logistics solutions and technology for the transportation of proppant used in hydraulic fracturing in the oil and gas industry. The transaction will be financed using a combination of $75 million of cash on hand and approximately 4.2 million U.S. Silica common shares.  Based on the US Silica closing price on Aug. 2, 2016 the transaction is valued at $218.3 million.

The acquisition is expected to be modestly accretive to 2016 EPS and generate EPS accretion of $0.20 to $0.30 in 2017. The transaction is expected to close later this month, subject to receiving certain regulatory approvals.

”This transformative acquisition enables us to offer customers significantly improved transportation and operating efficiencies, a safer work environment and significant cost savings relative to current proppant delivery systems,” said Bryan Shinn, US Silica president and chief executive officer. “Sandbox’s proprietary delivery solution is critical to addressing the growing logistical challenges our customers face as E&P operators continue to increase the amount of proppant they use per well.”

Sandbox utilizes specially designed, patent-protected equipment and processes to service wellsite operations. In addition, the company provides field personnel for installation, training and operation as required. The typical Sandbox system includes:

  • Steel, weatherproof Sandbox containers, which can hold up to 22.5 tons of sand and are gravity fed to reduce silica dust. They can be stacked nine high empty or two high full, offering a reduced footprint relative to competing products and can be easily stacked at nearby locations to provide additional storage for remote wellsite operations. Sandbox containers can also serve as mobile transloading facilities.
  • Specially designed truck chassis, which offer highly efficient delivery and represent a 60% lower investment than pneumatic equipment. Each chassis holds one full or two empty Sandbox containers, allowing efficient transportation of mass quantities of sand. The chassis are an effective replacement for pneumatic trailers, which require expensive power take-off units, blowers and related equipment and cause congestion at the wellsite due to long unloading times.
  • Customized conveyor cradles, which deliver proppant directly into the blender hopper. Each conveyor can hold four Sandbox containers. The containers are lifted by forklift onto the conveyor cradle, which has a maximum throughput of 25,000 lbs. per minute. The ability to continuously feed proppant to the conveyor enables maximum sand volumes to be pumped downhole.

US Silica Executive Vice President and Chief Commercial Officer Brad Casper said, ”The acquisition of Sandbox aligns with our strategy of managing the entire supply chain of frac sand from the mine to the well site. Containerized delivery increases transportation efficiency and lowers delivered costs through faster truck turns and reduced jobsite congestion.”

Casper added, “We believe Sandbox has significant runway to grow its existing markets through partnerships with leading service companies, while at the same time making U.S. Silica’s logistics network even more efficient with capabilities for mobile transloading and in-basin proppant staging.”

The Company also noted it expects to achieve other potential synergies through direct loading of sand into containers from the Company’s Oklahoma and Texas-based regional sand mines for truck distribution to the wells and the ability to transload from any rail spur in the country.

Also yesterday, US Silica Holdings disclosed a net loss of $12.0 million or $(0.19) per basic and diluted share for the second quarter ending June 30, 2016 compared with net income of $10.0 million or $0.19 per basic share and $0.18 per diluted share for the second quarter of 2015. According to the company statement, the second quarter results were negatively impacted by $1.1 million in restructuring costs for actions designed to help bring the business more in line with current market conditions and $0.9 million of business development-related expense.  Excluding these expenses, EPS was$(0.17) per basic share for the quarter.

 

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