Shareholders of $SLCA Have Been Placed on the Catherine Wheel

I am surprised this stock hasn’t derailed and plunged into single digits, like their peers FMSA, EMES and HCLP. However, today’s conference call and subsequent remarks are certainly helping their prospects to achieve this unwanted predicament.

Via Briefing.com

• Co said that in spite of all the turmoil caused by lower oil price, U.S. Silica became a safer, stronger and more competitive company in 2015
• Co maintained its strong balance sheet ending the year with almost $350 million in liquidity and generated operating cash in excess of our capital expenditures for the year
• Co also returned a ~$42 million directly to shareholders in 2015 by stock buybacks and dividends
• Co believes that its strong balance sheet will enable it to navigate the current environment, strengthen its market position and ultimately capitalize on the business opportunities its markets present while enabling U.S. Silica to emerge even stronger as a company when oil and gas markets recover
• Clearly, the main point here is, the co believes it will weather storm

• Weaker market conditions and an extremely competitive environment drove lower revenue in Oil and Gas for the quarter as rig count continued to decline and pricing pressure persisted
• As is typical, revenue also declined sequentially for its Industrial and Specialty Products segment in Q4 due to the seasonality of its larger end markets, such as glass and building products
• Sales volumes in oil and gas for the quarter declined just 4% sequentially to 1.55 million tons as co leveraged its low cost operating model and robust distribution network to drive volumes and expand our market position.
• Co’s industrial and speciality product segment had an excellent quarter, which enabled it to complete the best year in its 115 year history
• Contribution margin of $15.2 million grew 13% compared with the prior year and increased 26% on a per ton basis
• New higher margin products and favorable customer and product mix contributed to ISP earnings growth in the fourth quarter and for the full year.

• In the oil and gas segment, co expects the rig count is expected to decline 30-35% from here during 2016
• SLCA says it’s uncertain where rig count will bottom
• Excess rail cars continues to be a significant drag on earnings
• M&A is still in the mix withing their capital allocation plans. However, they will continue to remain cautious while looking
• Co does not see any additional rail cars coming into their fleet in 2016. They will also looking into leasing
• Co has about $5 mln in ‘lazy assets’ referring to its rail cars

• RBC Capital Mkts lowers their SLCA tgt to $16 from $18; they expect SLCA to underperform tomorrow after reporting 4Q EPS well below Street expectations driven by substantially lower O&G contribution margins. Customers continue to buy sand FOB plant vs. in basin — leaving the frac sand industry’s rail capacity significantly underutilized. Frac sand volumes are likely to outperform the well count on the downside but pricing and margins will remain challenged throughout the year.
• Cowen notes O&G volumes held flat sequentially (vs competitor down 14%), however CM/ton was lower than consensus. ISP volumes and margin also below consensus expectations, somewhat concerning as ISP has been an area of stability.

For the quarter, Silica reported a loss of 26 cents, which was 10 cents worse than already guided down estimates, and a stark 45% drop in revenues to $136 million. The market is calling supreme bullshit on any and all positive notes given by management.