SLCA - Earnings call transcript Q3 2019 | U.S. Silica Holdings Inc

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Operator

Greetings, and welcome to the U.S. Silica Third Quarter 2019 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

to conference like host, to now Mr. would turn over the your I President and Investor U.S. Lawson, of Michael Vice Relations Corporate for Communications Silica. Thank you, Mr. Lawson, begin. you may

Michael Lawson

us Chief quarter and morning, U.S. call With Vice today Good everyone, President Shinn, thank Chief and the for Thanks. President Don Bryan and Executive and me on Officer. Silica’s Officer; earnings XXXX joining third are conference Executive call. Financial you for Merril,

forward-looking our I begin, remind like which comments certain today to would include that we Before all risks will to statements, uncertainties. subject are participants and

we a you release of For file discussion these complete documents our read risks with press and Company’s uncertainties, SEC. encourage the the on to and

Please public EBITDA to Additionally, full the EBITDA of measures we adjusted segment adjusted filings reconciliation refer margin. press of and income of non-GAAP segment to release or to contribution for refer today’s this a our contribution definition the may call. net and margin during

limit we wish Finally, to to during who so. session, question a question-and-answer ask all one today’s that a would may your to that plus do questions follow-up ensure you ask

I would to Shinn. the call like CEO, Mr. With that, Bryan to our Bryan? now turn over

Bryan Shinn

execute a the three today gas and I'll third Mike, everyone. headlines on for I'll then begin challenging market. Silica. weakness we're completions given from to my strategic sharing actions Thanks, quarter in taking morning, the the and comments good by oil the U.S. outline priorities

both call highlights. an with financial Merrill for over review Don remarks of CFO, turning operating our to prepared my outlook conclude I'll to segments our Finally, before the quarterly

a by and $XX.X declined quarter. basis, mix the an due manufacturing Adjusted lower million product and million. of and EBITDA was on unfavorable margin mostly industrial for to in year-over-year declined specialty company, XX% driven for Contribution gas costs For third oil the business X% total the revenue sequentially sales. $XXX.X volume, products quarter decline quarter the in X%

slowed exhaustion, E&P mines through quarter. we in Texas demand during reach the West than oversupply. started exacerbating production completion and the At market lower quarter capacity, We same deteriorated new sand pricing midway budget further expected the faster and this markets the pressure. in time, activity, of about Energy as resulting experience full many saw to

Despite oil sequential in volumes with line demand essentially margin gas tons business. the sand prices sequentially, expected, sand and and better held SandBox oil million, the X.X in will SandBox Overall, as market margins and was declined up segment gas but pressure in than our in sales decline. our load were a quarter XX% pricing significantly lower. flat volumes $XX.X overall million and representing the

flow. And of cash growth Next, effectively deploying I'd free priorities are assets the in like and our to gas organic finally discuss business for prioritizing the today. ISP those top and three business, our oil accelerating

ISP we On our priority in growth to our to continue accelerate make business, good progress. organic

and Our focus And yielding offerings mix product our capabilities end to added margins. is is on increasing you specialty let and our some impressive examples. further give in our value optimizing presence initiative me results. maximize developing This product markets,

market and have glass cash time the fold. grown X% our in dollars margins more And our CAGR. extenders building margins cash at six Over products our fillers At four volume same the at margin grown years, last CAGR. XX% have businesses than growth have a product a outpaced

of in cristobalite White end our our are our example, used growth infancy potential, in established heat new these and tremendous product an cool roof opportunities have their run impressive are we just high products up. treated surfaces While granules at ramping many rate, Armor, and for

Millen, grand manufacturing and capability coat very opening the a treat the facility. capabilities. heat brand products. Georgia positive feedback specialty provides facility, our at customer products converted new customers production and Millen's hosted at These and to scaling are team of the receive outstanding recently proppant is We ceramic a us first and governor up two that new we're plant with Millen our on Georgia

also manufacturer. capacity with facility started our expansion to recently earlier five Columbia, a South a year Carolina completed contract our of at global serve month. We in We fine-ground a silica this small fiberglass production

the or Looking other ahead, in business. these substantial the next that annual expect I would be EBITDA and years, add our additional in industrial products able new two we should three to from to company

management. capacity, operating capacity effectively We've capability our supply customers. priority serve on oil optimally to and all for logistics second chain Our and to our deploy year playbook network our been gas is and profitably executing effectively

Over last White X capacity SandBox We're offline of of of the a company plants. leading the for reducing idling of also completely vendor increasingly industry Silica full logistics with service our to through U.S. sand doubling combination a solution sand sales. mile approximately sales with months, sand worked site XX% sand we've past million well direct goal Northern overall to tons coupling taken few and regional hours

reduce to number from further of bid headcount margins. working destination also where costs our a And partnering suppliers we're third levels to SandBox, our loads other and carrier We're party align protect work geographic network and to sand trans in with At we it makes activity and origin to sense standpoint. optimize reduced the pairings. with

business. lot having these all success a winning changes, make we new As of we're

the delivered our quarter, we include XX customers new added of well. SandBox and the and and to customers sand those services six fact, during In gas oil fully

keenly collections cash. working cash and through with terms conserving focus Our spending capital we've on priority additional free implemented And on flow generating vendors. and third We're a is improving CapEx. operating and our extending managing are focused controls

For of the our $XX annual expenditures low the decreased budget XXXX estimate to $XXX below expected XXXX, range CapEx end previous for we've to And million $XX of capital our to we million. of be expect million.

to using completed committed first sheet remain of de-lever we quarter. tranche free flow third the the debt, during further, And long-term of which balance through cash to repurchase our the was the

industrials. starting market let with commentary Now, me with conclude

taken release inventories in or potential of are our material if raw a in their few for customers to real being press in one. noted anticipation today, industrial manage delaying response our business unclear slow we year-end to us to just down a of purchases these slow in preparation down. It's a As actions are

this quarter expected slower, As be typical sequentially. XX% profitability will with decline seasonally to is our fourth approximately

flat of to that global above risk heightened to Looking fueled uncertainty economic industrial up the ahead XXXX profitability our slowdown rising but uncertainty by sales an levels. markets, would level the difficult of in XXXX views slightly tariffs, initial make political it and and be to our forecast,

in be frac pressure. SandBox We XX% the pricing to will see sequentially, gas lower further believe in industry the as driven fourth For third at some oil volumes quarter by SandBox up in pricing rates. Despite least the sand be fewer the expected carrier well case and party And under also down held improved be downward would volumes QX that in with margins third quarter. expect due well. slowdown we to completions we and will to expect pressure QX that pumped seasonal well

to see completions expect as we QX in rebound mid operator reset. XXXX, by oilfield budgets a For

exit also less margins which believe down some should sand helping over rationalize versus that XXXX months, We capable improve the XXXX levels. to competitors in shut coming capacity, may

customer start to opportunities. of XXXX with SandBox pipeline is strong an expecting Finally, new a extensive

And with Don? call turn that, to I'll now Don. the over

Don Merril

our by I'll everyone. morning, begin results. good and Bryan segment operating reviewing Thanks,

X% the oil million, revenue last the with and and year. for quarter specialty revenue of compared decline $XXX.X the same XX% with compared and down was The of was sequentially product XXXX. quarter Third segment gas down industrial quarter million a segment third XX% $XXX.X of

and drove through As sales third starting significant business profitability headwinds gas lower oil and we midway Bryan noted, quarter the segment. encountered in that the property in our

industrial and down On with $XX.XX, a per XX% the quarter specialty for XXXX. ton segment margin of when and the X% basis, sequentially contribution third was compared

an plant right negatively with off of and impacted of $X.X mix third XXXX. A including product combination inventory of costs unfavorable the volume quarter coupled higher million,

decline to Looking ahead quarter, the typical in about of fourth margin ISP contribution expect XX%, represents seasonality the site. we'd the to which the segment

The gas in loads of as compared XXXX. SandBox the pricing were contribution and on ton $XX.XX well for the proppant clear second as with was the Unfavorable both oil businesses during margin the SandBox quarter reduced basis $XX.XX, headwinds a per segment quarter. and

less activity lead SandBox in logistics to our costs. Additionally, business higher

third party However, especially carriers lessened with cost the savings the impact.

recover $X settled during customer quarter. other did fees and an million that in the incremental were we contractual penalties shortfall Finally,

third quarter litigation legal of of second now Let's Selling, and expenses the increase Maryland general in the million administrative Frederick, associated our The results. expenses $XX.X of SandBox represented closing over with SG&A total quarter company to at XXXX. to office. was look increased our expenses the and X% of due in increase an primarily related

We expect SG&A better conditions. to reduce we market X% our current quarter, expected overall fourth as in and decline to about spending manage the expenses

final the capital. X% completions, projects maintenance of totaled Depreciation, stages million, second Texas amortization SandBox quarter ISP West of in third our as both increase depletion segments, driven and our quarter and XXXX as by well $XX.X expense over the our of growth in line the an

be depletion depreciation, the quarter and with compared with fourth expect third We quarter. to amortization the flat

Our tax rate was believes of The benefit full its year XX, will including ended of be benefit a tax the XX%. September effective company for effective a XXXX quarter discrete items. XX%, rate

Turning company from its credit Cash million cash available our $XX.X was debt million, equivalents facilities. our $XX.X $XXX.X facility credit the to under and $X.X in had the operations under and the flow balance during sheet, billion. net million totaled quarter and under cash

of of at a for quarter secured senior retired our to voluntary million credit leverage. the reaffirming commitment previously offer from cash using portion completed As discount reported, flow principal our during we to a the was loan debt of The loan reducing power term operations. repurchase facility, $XX

completion West industrial and Texas products $XX.X the in the next in growth quarter specialty segment. million product and for mainly again expenditures totaled equipment our third our mine of several and Capital for sites, we're SandBox Generation

expectation $XX for range expenditures in million of capital our $XX in XXXX. million. the We is But budget are our to initial still for to be process

flow within next delivering noted past, generating keep on laser flows, in cash our I've focused to intend balance capital sheet free several the operating years. over cash expenditures As the our and our staying we

And with that, I'll back call turn to over Bryan. the

Bryan Shinn

please up Thanks, would open questions? for Don. lines the you Operator,

Operator

conducting ask the to up. question. will from line with and one one a question-and-answer we the Mark follow yourself of your that question please we you question now Please Instructions] session. proceed you, comes In Our [Operator limit with interest Thank first Cowen. be Bianchi time of

Marc Bianchi

you. Thank

our I was comment swag from about margin me mean, to The the the being you in for could I hoping oil you just more you it's detail. maybe at down but if curious that put quarter, ton the the question did sharply, fourth third gas more around first guys. numbers and could contribution XX that First some it per for down quarter XX% some was that. provide

Bryan Shinn

for morning, and Good thanks But the Marc question.

we when close pretty at you're think look I October.

terms we're in QX the margin So about number. down ton of per tracking XX% early indications versus XX% contribution that's show average

close. pretty So is swag your sort of of XX%

Marc Bianchi

And it's pick the flat overhead more doesn't that kind guys significant free level. you the Bryan. there's business some seasonal and or up? that, alternatives for strategic kind of that guess kind I adjusted thanks that based flowing recovery, pull keeps of in but of have opportunities flow cutting doesn't leave you on the EBITDA the cash you kind CapEx around terms to possible we with of maybe of try this some get activity the could lot we maybe stay talking which $XX XXXX. major to Okay, What million if if a G&A, for lower thinking breakeven, cost about we're you're in do margins about to improve of through, back of Appreciate that updated of that whole and

Bryan Shinn

certainly be we're effective hard more gas there. how efficient at our can and we So and oil business and looking

in get things, network. think rationalization and I that pretty of looks think on land now is the off in been We've we're slow, completions mining some sand we capacity. our at of doesn't QX two our quarter which, good up XXXX. looks a XXXX that base the first and North off in a a quarter. in the once in remainder production rhythm as reset look American I now if to and And want then we I industry sort production first again of do that a pick there's years We've I we I way, number like of that row that of in feel good, year. market picks think that we'll rhythm already early our the the drops done And QX for by the budgets optimize up, cases that starts recovery see more hard think

supply certainly by to chain I do necessary. But if and don't four the So have lot that we can be have of that expect XXXX multiply we in a the things QX do outlook.

verbalizing at hard we much we I are also think as as can. of looking our costs

that hauling example, be that do of lot there. moved the – quarters, over by our sand the SandBox, model moved third majority now loads drivers used So a carriers several majority and to party past we our leverage in But had for employees. own we that have of a to of the we've our more our

So we certainly there's that lot can things a of do alternatives of hard we're at different and looking those. all and

place playbook said market, of our comes QX the I to we'll is deal that as think QX. versus in in we year the terms here I whatever where in base improve that things certainly in have but finish the case with

Marc Bianchi

XXX demand could I Bryan, that, if for million just follow guys kind XXX on of of I XXXX. Right, you mentioned industry to up think million total

structure what future, were XXX we and kind of XXXs sort to right said we back now? assuming XXXs to quantify have So level, a XXX XXX is sized – cost is might seasonally, kind you foreseeable in that for of you image opportunity for the demand to mirror there get are your of be? things if Or that like what picking up 'XX, this can we cost world in out

Bryan Shinn

So we've already costs out. taken

have that limiting as in example, our another couple we shifts either for turned hours. shut press capacity handful or of basically that's about offline, and said, facilities X have million tons we release, currently work by down back we of So from reducing capacity that we a

at case up, production whatever to we the the we than think and more lot down, need, this I conditions. in hard we'll or probably facilities although down turn a on that enterprise our look is mining up of within costs across certainly have back either market ability depending

Marc Bianchi

Got it, thanks very much, I'll turn back. it

Bryan Shinn

Thanks, Marc.

Operator

you. Thank

comes – line Gengaro from question proceed the Stephen your Please next Stifel. of question. with Our

Stephen Gengaro

Thank you. Good morning.

Bryan Shinn

Good morning Stephen.

Stephen Gengaro

that two the business competition, think medium think out guess about gas to $XX and what think side I oil I relative cost about have just mean, to the you do your we that and mean, cost the with, plus and or for $X on ton I sort – look still I think without kind when when we like and it's start margin of the you of range of in think a advantage. So look things oil contribution normalized term to purely are SandBox still you could do you gas position some that

Bryan Shinn

our at terms exactly that's nothing's I a take when SandBox that And out bottom are, of it Stephen. cost curve have needs for Yes, on comes And a curve. struggling. just good business are number of very there, the a on gotten loss minute. the coming ton lately. the shut been cost sand will of we see think think let's it is position They're know who folks have to sand those in that per frankly, quite cash our quarters. of come I purely can't that the less believe that to at the capacity it down over high number mines other are cost into A that's, competitors, We continue. just we Texas, We're West where running those the news out that more especially and a think business, curve, I capable out changed and in there lot there's right are I the of of the operators

cost winners, the show stays curve that sure. that's a mining of here some market of over I sand business, the So of with in that for pricing seen position on the ultimately particularly we longer dynamics shakeout long-term themselves going and will if time, the energy pressure by our force of will advantages our be with I on side the discipline, we've to the feel terms one think have and like definitely companies recently lower capital the

Stephen Gengaro

million sort preliminary And the identified the you. in on the you of I see of XXX any unfolds years? have start how the a you've some you period. Thank thoughts updates we couple on look then opportunities five mean, side, impact of When sort some think at on over maybe second bigger pipeline, the that of over ISP on of contribution next I when to you And XXXX. that? gave you the year opportunities have Do margin of

Bryan Shinn

question. we that and it's a opportunities pipeline, really and it's a opportunities new products. set Yeah, robust good in number a have And of business of very

think remarks we'll call. for And front so or the on that I what see prepared in is the talked some products end pipeline of here that the of we this about that

facility of Georgia our things sort in out coming of what some our want of with products the So other do we pipeline. prototype to the Millen, that's with

products, coated of So suite silicon coated our other a and the cristobalite granules, roof whole there. there's things cool

also we and EP Minerals earth. Diatomaceous earth brought diatomaceous think there. all acquisition into there's kinds that coated I mineral opportunities have is we a of our

sort I see of launch some it’s end those We've one over and the physical of begin talked think like manipulating products we'll to to that also products things filtration, minerals blood other XXXX. I biotech, You'll properties launch about ultra-high years. of have, in two grinding we plasma, the next believe those

so And market launch the couple to years, get of of in that hopefully I'm products. a hoping and those new XX and grow. you'll will number next new products products see the then over six

some be families, end that. them we And markets, detail users product get able off in the of more we'll so you'll we as to and branch obviously different to launched see closer as into talk and

Stephen Gengaro

Okay, color. for the thanks

Bryan Shinn

Thank you.

Operator

you. Thank

with question Pickering with Tudor line & comes next question. O'Leary proceed your from Please the Our Holt George Company. of

George O’Leary

morning Good guys. morning, Good Bryan.

Bryan Shinn

morning Good George.

George O’Leary

you could coming CapEx your that to range related budgeting not but million I cut that assume ISP quite Nice guess much side of And of million $XX to $XX outside any but maintenance and see oil where SandBox. allocated is in gas frame side to and the is in what early on I to portion based then the growth XXXX there's guide on the between CapEx? that year-over-year. CapEx growth a is as SandBox,

Bryan Shinn

George. Sure,

the let's I I be kind at that, we're end then million, allocated rest maintenance the million XX expect primarily to with the The and some would of if say million is the CapEx, to about XX XX growth. low XX SandBox. look would going business growth So that million, towards would something be like million, of range, call be at that's that in XX so industrial

but something me, it's have front I exact say roughly, XX% would the growth don't of SandBox, industrials, So that CapEx. of in numbers I XX% like

we probably we to don't by we the asked news think growth investors know the industrial I all. capital by get going this is intensive. opportunities of at I have are we on growth that with will that our we pipeline back Now, not some have the are are cranking good capital. And limiting question ISP that Most big

So central I pipeline our about we that even our with in the CapEx one the think growth fund XXXX, things company. of and the for made we can all programs like I reduced

George O’Leary

of September for like point in helpful your And it October given in Marc's your original very is looks it soft and just answer relatively completions declines that's then question. seems activity color. coming to Great, the in the magnitude

So do the will that down the how sequentially? reflect volume guidance XX% your to frac that given Does Or you of be guys capture activity look share potentially in contemplate believe lower down you that doesn't division cost actually me. market quarter-over-quarter guidance? just bad much

Bryan Shinn

think captured to off, our given that share do on in cost a continue share. we'll as some well that is falls The curve, a the more demand continue I fight said we think capture perspective. you And believe from I as share there's QX. for market issue of position to in that, share. I will the

to down. going prices that's so And drive

tons not our to that. go from manufacturing still think in we the those However, many given profitable I positioned a will cost have and able do again, industry be standpoint, after where to be and ability we're

George O’Leary

right, color All turn the Bryan. it back for I'll over. Thanks

Bryan Shinn

Thanks, George.

Operator

Thank you.

question Please comes Stephens from question. of next the Bank. line your Moll Our with Tommy - proceed

Tommy Moll

my morning, for question. Good thanks and taking

Bryan Shinn

Tommy Good morning,

Tommy Moll

fundamentals mentioned and competitors a that in on seen rebound ton. context gas the number are us pricing out. the reflection if that you with Texas, to And trying is seasonal you've you maybe pricing, Wanted you White capacity people a QX. and give year, anticipate point? some will of we next any think in at at more QX trends you're hope to a then that that really start now versus could that or earlier of cash maybe if of through the doesn't do oil Northern divergence keep the that of mining per a stretch pure the come and/or end utilization of year the seeing loss Should potential on materialize some this actual Or up is are and that of

Bryan Shinn

Thanks for question first question, the Tommy, declines. to pricing and your around

really gone White said in in about Northern our interesting. X% well. We've QX. pretty As prepared sands held we've up And remarks, down only sequentially it's

holding written many believe we've and sand people well sand of some not back White new over and a the Northern I of think it's again, – record market. White in pretty July. in data in all-time quarter XX% demise actually the pretty our we sort of White. the back we've year-to-date and we in our was of saw actually in demand XXXX, but QX. that that over still it looking XX% year-to-date cooled White have of what in I Northern or at XXXX, volume just about for half hit or Northern us over volumes, sold it's at written robust sold the Northern of record off we in And to And things put of sold before a year we're context, the year-to-date

and White we're there's there of to Northern there. successful think to So be extremely lot continue positioned well I a volume out

around your what looks down Texas, question was XX% like It sure. sequentially. price about More pressure there. West for

how look making piling on when And the new the new these I of into some are at have don't that come of I these mines that's losses that trend for it some they operators the competitors, and really So cash see into I think completions it up that's of just were difficult we're here, reasons. the of QX back them of and even even operate. the demand continue frankly, decline in in cash QX variety half that, to obviously operating many a we for seeing before And loss at saw before of a some quite industry.

like that million XX offline. think to mines feel and tons come that there million closed my expectation Texas, couple there's I already over more here. the see is has So seven of there's our I to we'll math to another in that are XX quarters capacity By come out next West come it's

Tommy Moll

Thank you been for then in your end the mentioned of to strategy thinking the some ISP, what and there you to shifting that give you margins or some on markets like? through lift has decline. us actually major two and Can volumes an maybe take that that example are looks of

Bryan Shinn

value having So for strategies the business understand in by the to push to and is the understanding one that price and industrial to our sure have and customer, great I make be a it. And of marketing us direct the volumes value products think by to value customers our and where application really most that able key of our then our is for our products has our done job team, accordingly. team

for it side know the business. and I business. sand it's we those at very for put have every example, the So prices industrial price out all increase our have much on general more the tons industrial years specialty business. behaves And like our And several a think many a last well. a look sure, for year people commoditized stuck non-contract business in across But

price set customers. places the fantastic our our a of has competitors think coin other their finding take is that job and a I wide a of side lot extract that can really industries profitable team and in we get done value we the less have. routinely customers we managing to So the capabilities And allowing where for more across that,

point but a contribution it a our going up just customers a that's the you dollars volume frankly. have quite said is profitable times we've and ago. margin markets, gone our eliminated the we've less In many because couple down, So made of of second

Tommy Moll

I appreciate turn it Great, back. it and will

Bryan Shinn

thanks, Okay, Tommy.

Operator

you. Thank

Bank Chase of proceed question. Please line question your from the America. with of with next comes Our Mulvehill

Chase Mulvehill

Hey, good hit was morning. on was the first guess I thing – to

Bryan Shinn

morning. Good

Chase Mulvehill

get just contribution And EP maybe what to is correct hit gap if basis. on of that's heard I on of me maybe it margin could kind Is I XXXX, seeing growth thought it I'm kind If slightly you guys there morning, you kind you what previously the annual and Good correctly the think – flat could call the up so are CAGR on just what thought had if versus I and was out growth; slower bridge kind of ISP. you if you heard recall, previously want in on will of XX% think I I correctly, of between in wrong, the but more a if the ISP today you kind Minerals XXXX? happen you're what more legacy business? an

Bryan Shinn

manage prepared and are customers like the their to some side that and And landscape. most all trying seems sort trends across we'd up it's our their of I just persisting in tariff more We broader handful in into of So it's cautious industrial Customers part and with the in and than our of next those cash. of that, see and out that orders are anything. as on it's we backdrop, five macroeconomic remarks year. given QX feel manage that the just And really on mentioned unsettling industrial conservatism it’s QX. kind like global US now the started feel macro it's the none of of election per coming agree the se their going that there with right bore things it of Brexit inventory concerned issues on to customers we Chase. on into that's I sort like about out are being the the

think I that. there's of So a lot

that's the we our it's industrial to of in kind slightly said business expect macro of really flat when with sort so to that we backdrop. be comments, the And up,

so lot have is of or global products where scenario of Look, be sort certainly if sort It'd in a markets, opportunities of but be lot different starts that new all we're new so headwind impacted a a hard end recession, the think fight toward many head users and by would coming, the the have to we we many be have. sluggish that. unfolds I to to even things we that we that of about growth economy with there, and excited

specific macro environment things out one really sudden could think of and not very turns of there. and around sentiment of rates interest more industrial it's where some us that just more business. It's So depending macro other we kind line. in a that other disappears, for growth go I to deal a the a that opportunities sort done, a quickly also change some of direction, right you'll in there's the the If now. product the all Look, of lot bullish on trade chance hear the the be a of get

puts we've but in guess last so be I if there a might some some right, recognize that it well other some we is when at where been thing takes X%, of over over might that's you six so said years, north there's up of as and years So XX%, look XX% years to well. CAGR XX%, too be the up the we period we've been time,

Chase Mulvehill

you or the color ISP, the downs, inventory appreciate Minerals think I EP sense. was write guess write we there. in had if ISP? about some makes that And that Okay, I legacy downs

Bryan Shinn

look, this said mine getting that as out was ore as where planning mine thought. plant we ISP originally Now, came of a back to as more site that, not ore, what much uncover us we're legacy and we

of a to issue some down that we had write the geological reserves. was really it So

Chase Mulvehill

you – more one the debt and debt for that asset sales if maybe pay If there Kind pay accelerate about of could there is that we potential that that any quick sense real squeeze I out you in. makes can some you accelerate see could to down, one one think down?

Bryan Shinn

for monetize looking are always else we're be So us. to they that assets opportunities worth more might than to somebody to

I was our that a ago think a couple – for of loads two that's we great right. example million Trans $XX of of years sold

play. things. we we So sell in all Certainly things, buy that is

backlog probably there. opportunities also, think, out I there's legal settlement a of

as percolating others there's outstanding few Arrows about I $XX think we there SandBox large that well. a have everyone's million competitor and aware Up, judgment a from out

company what that define of we're – normal down Chase there's within paying our We're opportunities lots gas said, we where different that's be lot with committed normal and the of kind generate some given operating generate our to some I So that With is in rhythm. viewing extra cash we not to any this sort quarterly debt. de-levering to quarters we're of think cash, a committed oil cash. quarters of not where and there'll we're rhythm might

the so repurchase quarter-by-quarter that think be cash have. And will free activity we depending debt the a I on flow almost

other these we and as that's And that in we're one could are how sales or things net at some so that cash well. certainly asset timers looking us have it windfall certainly mind

Chase Mulvehill

Okay, perfect. Bryan. over. I'll turn Thanks, it back

Bryan Shinn

Okay, thanks, Chase.

Operator

Simmons the Our John line question your Thank with you. of comes [Operator question. from with Watson proceed Company. Instructions] next & Please

John Watson

Good Thank you. morning.

Bryan Shinn

John. morning, Good

John Watson

update you're SandBox the on and the front, Bryan gas regarding there Hey, that share is an you of some exploring? opportunities oil can outside

Bryan Shinn

got talk the we'll that it's about some glad be I great a in we're in months, up. for the it yet. chance you coming for to We've starting lined didn't that SandBox detail. expect to I'm about would talk question. field next able that. And that trials do opportunity more Sure, a brought to have We up.

the doing So markets and So the job next on great sooner, if more that. call, base. so team with could our the We're far, customer stay strong an I across that earnings that, a that, been in end very we'll of different also not else from at for very, as it's said, opportunity pipeline have to by beyond And looking interest about expect users? next I be that. variety opportunity, met talk tuned perhaps SandBox what

sure. I for SandBox today does then think and more opportunities there's it what for

John Watson

Okay, understood.

as to guide within number But in the oil expect front you ton modeling you and understand contribution you're Do per the discussed in XXXX. I with Marc. your you gas Texas declining margin XQ? in rebound lower from QX? to we QX in price $XX decline cited On should moving be that average West expected

Bryan Shinn

QX, the on price. say going as I uptick a move can average believe that's and stabilize think heard actually $XX little see there. we to We QX, it's where done you us into you what then

So starting bottom in Texas. to I think a pricing see of West we're

John Watson

XQ holiday given The is up the margins in the talks it. anomalous, trajectory and given despite got follow loads front. about somewhat release QX and et up different is SandBox then Okay, quick slowdown on about that pressure, And of that Okay, holding cetera. pricing thinking one

Bryan Shinn

again, team into able anticipate we that would they QX. some they but are SandBox QX in that to of in the Yeah, continue look, SandBox, were that and where do seeing about XX% pressure pricing kudos to to price offset of I that decline

Don Merril

that QX there's there the held debate SandBox think per to whether in that market I there and of couple last our think what's different gas how be has any is pressure behaves additional The in containers, on margins to just margins in SandBox it really amongst the bit offset of much, of going able we'll competition as keep leverage and that obviously team to years. a oil to a differently think the that want than happened as are I direction. competitive less the is in our And containers example well. we moving lot much of in to lot When to investors a and ton sand was than less comes sustain SandBox sand QX lot perhaps much it's intensity to And try John, and for pressure get Pricing as there's customers possible. much flat a great QX, I the more been as business. what is and just a see add pricing

positioned quite in to business, sand very are to the be And honestly. we a in maintain different well than so I able way margins the think there we're much in

John Watson

Bryan. that's Don. helpful. Thanks, All Thanks, right,

Bryan Shinn

Yeah.

Don Merril

Thanks, John.

Operator

Thank you.

proceed City. line JB Our comes the next Please question from [ph] with Lau question. your with of

Unidentified Analyst

guys. morning Good

Bryan Shinn

Good morning JB.

Unidentified Analyst

up Just on the discussion. SandBox quick a follow

pull business. I'm I party? think some loads you guess the a Part guess could sense to to trying is is You're the do away take out that of your able to get – running of levers percentage you those costs hauling, a more being third load that more third of that guys I through guys what question take you from base side, some party third you're And completion that's that internally. the to hauling of of kind and how comes keep? are of trying a different expand the move flip that in have on want there Or a you business to internal of is the side? once activity much And guess to party flexibility do back, kind in starts I direction?

Bryan Shinn

the So base willing party XX% we it's are keep to of that that party ourselves, up and bit. question. partners the they're maybe third a work the to team, very that with partners. go profitability picks have have talked with of XX% looking that kind or the and agreement the things tons rest, we a allow think I load also of as then give I would I Certainly, back. a when more good cost third some our And to will they're profitability SandBox And haul we to our tighter, down up market when is expect flow to partners. to that

the I cycle. think everybody happy throughout that keeps

feel good carriers. relationships manage have some our there. the confident just ability fantastic to And there that. at I a really pretty And we does team looking so job over The about

that as I in of it if locally. success our key our to or sort business way. you sort run And look of quotes, SandBox each profitability kind in we each its of other center will terms they of the districts profit profit as that of of districts center, at of is but in our think put own use their the own head

So knows success that specifics costs margins. that district. that they're driving eagle hard eye, And got a district will, you just and if are to in it and make everybody they've on business that the an what works within a

at be us the sauce secret of part that's So SandBox. that's really successful helped

Unidentified Analyst

And that system, more pressure on seeing you're would are that can And color more the areas container any you great? is there provide from geographic of from any be kind silos Thanks. pricing competitor others? helpful. That's segmentation, it there or systems than SandBox given just

Bryan Shinn

pretty to all sort that go tends pressure the more We and come the like that for of pricing political of the we've folks customers after remarked view the be more there tend a amount of basins, because go in a providers but talked and climate competitive guess the where just really and the almost at for than box competitors some really battle competitors. ourselves with before, boxes, in there. the out like to like space, to, same back others we felt the the able to other forth pricing Permian to of like other XX% of it's, those one little lot and prices the would today pressure then bit I it oilfield folk XX% XX% we is as silos been the of the in silo of But folks customers as some I went tend I boxes, probably like middle of when when account, don't hold want dedicated the and is and I middle systems. to silo intensity, silos that And well seems down.

Unidentified Analyst

much, Alright, so what I that's thanks guys. figured. Okay,

Bryan Shinn

Thanks, JB.

Operator

you. Thank

with FBR. comes question. the from your proceed Riley B. Our of Lucas Please Pipes next question line with

Matt Key

the Matt everyone. Good initial here for quick I'm a question asking question for morning, me. just Key Lucas,

Bryan Shinn

Matt. Hi,

Matt Key

be do for across offline How to capacity to you into how industry you. color, begin I much taken your going. frac total needs kind sand would price thank of Hi, stabilize? it’s think appreciate the

Bryan Shinn

Northern we I big really million come to and I tons XX there's Permian So are then XX have of two another think and another of Permian – there's say up. let's to tons out because those sand tighten like need White, Northern to things just well, things White the feel balance million areas.

back the industry in XX tons maybe things balance. So let's XX, across total, to say, into million bring

Matt Key

Permian Got Northern primarily White the would it, Silica And or those make potentially of mentioned cuts a be doesn't you. you be combination that's in it additional Thank if Thanks. very kind curtailments helpful. both? would improve, would or pricing of

Bryan Shinn

mines is are logistics our it's from a and imagine, than where at mine. the of specific and across at about just And have we're transportation what located might system. as more looking you to look complicated sort a taking that really you at base think and each So mine

located to which mine, expense. remember Northern tons rail what White about you a fixed we you are have we which cars have And Northern networks et those when use that lease. think – about And a railroads cetera. think transload have you to White, to pretty if then we So connected on that we that's also much

account take as have that into you well. So to

So it's pretty analysis. complicated

we has where on team to take And that. actions Our do very that is. demand take rubric depending continue we whatever really And we'll to closely. a good to need monitor

Matt Key

Got and forward. best that's luck moving of well, it, very helpful

Bryan Shinn

Matt. Thanks,

Operator

at over further to this turn any no Thank Shinn I remarks. the to questions time. for Bryan back you. are There Mr. closing call would like

Bryan Shinn

talked to focused in like call we're call key reemphasizing namely a that business. Thanks, on today's the accelerating today. growth about ISP organic We priorities, few by that operator. the I'd close on

may The lot to second get is decide close or questions oil may around we and effectively deploying of may gas what we network make. may as we not our a or change not and our and – assets we

flow. third is profitability maximizing So and that's obviously And free for the then important us. cash prioritizing

again debt. recommitted and back balance our we've sheet think I buying to de-levering

have remain company and great excited the both priorities ability important for So the those aspects our day. deliver confident short our key everyone very now. say on company long-term. execute those three the right of for very dialing against Thanks, in is and everyone and prospects are almost a call into about priorities and focused to I our on those have to I'm in that the

Operator

Thank concludes you. This today's teleconference.

lines your your at you a day. have participation wonderful for and Thank this time. disconnect may You

U.S. Silica (SLCA) 29 Oct 192019 Q3 Earnings call transcript