Smart Sand, Inc. · NASDAQ:SND
Smart Sand — Jefferies 2016 Energy Conference
32 slides from Smart Sand's conference presentation, November 2016
Slide 1: Smart Sand, Inc. Jefferies 2016 Energy Conference
CONFIDENTIAL | November 2016 Smart Sand, Inc. Jefferies 2016 Energy Conference
Slide 2: Disclaimer
Disclaimer Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the federal securities laws. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include the words “believe,” “expect,” “anticipate
Slide 3: Disclaimer (cont'd)
Disclaimer (cont’d) Reserves Mineral resources and reserves are typically classified by confidence (reliability) levels based on the level of exploration, consistency and assurance of geologic knowledge of the deposit. This classification system considers different levels of geoscientific knowledge
Slide 4: Management Presenters
Management Presenters Chuck Young, Founder & CEO Over 20 years of executive and entrepreneurial experience in the high-technology, telecommunications, and renewable energy industries He previously served as the President and Founder of Premier Building Systems from 2006 to 2011 B.A. in Politic
Slide 5: Smart Sand Key Highlights
Smart Sand Key Highlights Long-lived, strategically located, high-quality reserve base Intrinsic logistics advantage Significant organic growth potential Focus on safety and environmental stewardship Experienced management team Strong industry fundamentals Strong balance sheet and financial flexibil
Slide 6: Smart Sand Company Overview
Smart Sand Company Overview Company Overview Reserve Locations Smart Sand is a pure-play, low-cost producer of high-quality Oakdale, WI – 1,196 acres Northern White raw frac sand (Monroe County, WI) The Company owns and operates a Northern White raw frac Hixton, WI – 959 acres (Jackson County, WI)
Slide 7: Oakdale Facility: High Quality Northern White Raw Frac Sand
Oakdale Facility: High Quality Northern White Raw Frac Sand 1,196 contiguous acres with 244 million tons of proven reserves and 92 million tons of probable reserves(1) − As of July 31, 2016, we have utilized 135 acres for facilities and mining operations, only 11.3% of total acreage Integrated f
Slide 8: Cost-Effective, Differentiated Process
Cost-Effective, Differentiated Process Onsite Mining / Excavation Conveyer Belt to Onsite Wet Plant Wet Plant Cleans and Sorts Dry Plant Dries and Sorts Product Unit Trains Deliver Dry Sand to Basin Low cost operating structure results from a number of key attributes: − Low royalty rates ($0.50 pe
Slide 9: Expansive Logistics Capabilities
Expansive Logistics Capabilities Key Logistical Advantages Highly Competitive Delivery Capabilities On-site rail – eliminates trucking to a rail load-out facility and associated costs Class I access – current location on Canadian Pacific rail line provides direct access to multiple high-growth p
Slide 10: Significant Organic Growth Potential
Significant Organic Growth Potential UP Rail Siding (Byron, WI) Commenced operations in June 2016 Dual-serve rail origination capability at Oakdale Ability to expand into a unit train capable facility Expected to result in incremental sale volumes due to more competitive rail rates Near-term
Slide 11: Hixton Facility Opportunity
Hixton Facility Opportunity Hixton Site Highlights Hixton Reserve Mix In addition to our Oakdale facility, we own a second site comprising 959 acres in Jackson County, Wisconsin 100 Mesh situated adjacent to a Class I rail line, the Canadian 28% National Site consists of ~100 million tons of pro
Slide 12: Committed to Highest Corporate Standards
Committed to Highest Corporate Standards Management maintains close dialogue with its customers regarding the oil and gas industry’s rigorous regulatory environment Legal & ISO registered Quality System and Environmental Management System in Regulatory place Minimal environmental and community
Slide 13: Our Strategy
Our Strategy Focusing on increasing capacity utilization and processing capacity Continue to position ourselves as a pure play producer of high-quality Northern White raw frac sand Continue to evaluate economically attractive facility enhancement opportunities Optimizing logistics infrastructure
Slide 14: Industry Overview
INDUSTRY OVERVIEW
Slide 15: Industry Trends Driving Growth in Sand Demand
Industry Trends Driving Growth in Sand Demand Average Active U.S. Rig Count U.S. Horizontal vs. Vertical Well Mix 2,000 100% 30,000 1,862 80% 36% 37% 37% 38% 38% 25,000 1,500 1,762 48% 42% 55% 1,089 20,000 983 1,047 60% 1,000 830 15,000 683 40% 64% 63% 63% 62% 62% 10,000 500 52% 58% 20% 45% 501 5,00
Slide 16: Industry Trends Driving Growth in Sand Demand (cont'd)
Industry Trends Driving Growth in Sand Demand (cont’d) Improved drilling rig productivity x Completion of drilled but uncompleted wells x Increase in percentage of rigs drilling horizontal wells x Increase in length of horizontal wellbores x Increase in frac stages per well x Increase in proppant pe
Slide 17: Proppant Industry Outlook
Proppant Industry Outlook Total Market Proppant Demand (millions of tons) 25,000 23,674 85 90 78 80 20,236 20,000 70 73 Millions of tons of Proppant 59 16,860 New US Horizontal Wells 16,029 16,286 60 15,000 55 45 13,236 50 53 11,115 40 10,000 8,331 30 30 20 5,000 10 0 - 2013 2014 2015 2016 2017 2018
Slide 18: Raw Sand Established as Proppant of Choice
Raw Sand Established as Proppant of Choice Comparison of Key Proppant Characteristics Brown Raw Frac Sand Northern White Raw Frac Sand Resin-coated Ceramics Product and Natural resource Natural resource Raw frac sand substrate with Manufactured product Characteristics Quality of sand varie
Slide 19: Growing Demand for Fine Sand
Growing Demand for Fine Sand Mesh Sizes Market Outlook for Fine Sand Proppant size is characterized by mesh size which is According to Kelrik LLC, a notable driver impacting determined by sieving the proppant through mesh demand for fine mesh sand is increased proppant screens loadings, specific
Slide 20: Financial Information
FINANCIAL INFORMATION
Slide 21: IPO Summary and Pro Forma Capitalization
IPO Summary and Pro Forma Capitalization Sources ($ in millio ns) As of 6/30/16 Adjustments Pro forma ($ in millio ns) Cash $1.9 $24.1 $26.0 Net proceeds from IPO $119.2 Revolving credit facility $57.2 ($57.2) – Total $119.2 Series A Preferred Stock 37.9 (37.9) – Uses ($ in millio ns) Equipment leas
Slide 22: Summary Financials
Summary Financials Sales Volumes Revenue (thousands of tons) ($ in millions) $68.2 2,475 (3) $47.7 1,558 1,650 1,255 751 $18.9 322 2014A(1) 2015A(2) 1H 2016 2014A 2015A 1H 2016 Sales Volumes Effective Capacity Adjusted EBITDA Production costs ($ in millions) ($ in millions) $33.3 $20.7 $23.9 $10.1 $
Slide 23: Summary Financials Per Ton
Summary Financials Per Ton Revenue Adjusted EBITDA ($ per ton) ($ per ton) $31.82 $63.52 $26.53 $58.70 $19.88 $54.34 2014A 2015A 1H 2016 2014A 2015A 1H 2016 Production costs ($ per ton) $17.56 $16.48 $13.47 2014A 2015A 1H 2016 On a per ton basis, our financial performance has remained strong despite
Slide 24: Summary Financials
Summary Financials Year ended December 31, Six months ended June 30, ($ in thousands, except per share data) 2015 2014 2016 2015 Statement of operations data: (unaudited) (unaudited) Revenues $47,698 $68,170 $18,853 $23,525 Gross profit 26,695 38,236 6,984 11,237 Operating income (loss) 16,583 25,76
Slide 25: Financial Highlights
Financial Highlights Significant balance sheet flexibility and liquidity post IPO − Debt free − Approximately $22 million in cash available to support growth initiatives Minimal unused railcar exposure − 710 of 855 leased railcars assigned to customers Contract structure provides ongoing cash
Slide 26: Summary of Smart Sand's Strategic Assets
Summary of Smart Sand’s Strategic Assets Oakdale (Existing Operation) Hixton (Potential Future Development) Location Monroe County, WI Jackson County, WI Mine – Processing Facility – Rail Loading Facility – Proven Reserves(1) 244mm tons (73 year life) 100mm tons Probable Reserves(1) 92mm tons
Slide 27: Smart Sand Key Highlights
Smart Sand Key Highlights Long-lived, strategically located, high-quality reserve base Intrinsic logistics advantage Significant organic growth potential Focus on safety and environmental stewardship Experienced management team Strong industry fundamentals Strong balance sheet and financial flexibil
Slide 28: Appendix
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Slide 29: Income Statement
Income Statement For the Year ended Year ended 6 months ended Dec 31, 2014 Dec 31, 2015 June 30, 2016 ($ in millions) (Audited) (Audited) (Unaudited) (1) Revenues $68.2 $47.7 $18.9 Cost of sales 29.9 21.0 11.9 Gross profit 38.2 26.7 7.0 Operating expenses Salaries, benefits and payroll taxes 5.1 5.1
Slide 30: Balance Sheet
Balance Sheet As of December 31, 2014 December 31, 2015 June 30, 2016 ($ in millions) (Audited) (Audited) (Unaudited) Current assets Cash and cash equivalents $0.8 $3.9 $1.9 Accounts receivable 8.6 6.0 2.6 Inventory – ST 8.6 4.2 4.3 Prepaid expenses and other assets 4.1 1.5 0.9 Total current assets
Slide 31: Statement of Cash Flows
Statement of Cash Flows For the Year ended Year ended 6 months ended December 31, 2014 December 31, 2015 June 30, 2016 ($ in millions) (Audited) (Audited) (Unaudited) Operating activities Net income (loss) $7.6 $5.0 ($2.0) Adjustments to reconcile net income (loss) to net cash provided by operating
Slide 32: EBITDA Reconciliation
EBITDA Reconciliation Year ended December 31, Six months ended June 30, ($ in thousands) 2014 2015 2015 2016 LTM June 30, 2016 Net income (loss) $7,556 $4,990 $929 ($1,967) $2,094 Depreciation, depletion, accretion and amortization 3,642 5,318 2,342 3,209 6,185 Income tax expense (benefit) 9,518 4,1