Smart Sand, Inc. · NASDAQ:SND
Smart Sand — Investor Presentation (November 2019)
31 slides from Smart Sand's investor presentation, November 2019
Slide 1: November 2019 Investor Presentation
November 2019 Investor Presentation
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: Company Highlights
Company Highlights The Right Operating Model ▪ Oakdale is one of the largest single operating North White raw frac mines in United States ▪ 300+ million tons of high quality fine mesh reserves with 5.5 million tons current operating capacity ▪ 14+ miles of rail track servicing Oakdale from two Class
Slide 5: Vertical Integration – A Key Differentiator
Vertical Integration – A Key Differentiator Smart Sand’s Business Offerings Premium Northern White Reserve Gigantic Rail Capacity Terminal & Forward Staging Management Last Mile Logistics Wellsite Storage Solutions Large Finer Mesh Northern White Reserve Dual-served (CP & UP) Planning ahead reduces
Slide 6: Summary Financials
Summary Financials Quarterly Sales Volumes Quarterly Revenue (thousands of tons) ($ in millions) 823 $67.9 $65.7 $63.1 741 648 $52.2 $51.8 610 611 Q3'18A Q4'18A Q1'19A Q2'19A Q3'19A Q3'18A(1) Q4'18A (2) Q1'19A (3) Q2'19A (4) Q3'19A(5) Contribution Margin/Ton Quarterly Adjusted EBITDA ($ in millions)
Slide 7: Insiders own ~48% of Smart Sand Equity
Insiders own ~48% of Smart Sand Equity % Equity Ownership of SND 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Clearlake Capital Partners II (Master), L.P. Charles E. Young, CEO Other Officers & Directors Source: Smart Sand proxy statement 6
Slide 8: Peer Leverage Comparison Net Debt / 2020E EBITDA
Peer Leverage Comparison Net Debt / 2020E EBITDA 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x CVIA SLCA HCR SND Source: Net debt numbers are actuals from Q3 2019 public company filings. Ebitda estimates are analyst averages from Nasdaq IR Insight as of 11/1119. 7
Slide 9: Industry Overview
Industry Overview 8
Slide 10: Industry Trends Continue to Support Increasing Use of Frac Sand per Well
Industry Trends Continue to Support Increasing Use of Frac Sand per Well Proppant per lateral foot continues to increase Proppant Pounds per Lateral Foot (US) 1,800 1,600 1,400 1,200 1,000 Sand pumped per foot will have doubled in 5 years, driving sand demand up 800 600 400 200 0 Q1 14 Q2 14 Q3 14 Q
Slide 11: Industry Trends Continue to Support Increasing Use of Frac Sand per Well
Industry Trends Continue to Support Increasing Use of Frac Sand per Well Horizontal well lateral lengths continue to get longer Quarterly Horizontal Wells by Lateral Length <6000' 6000-8000 Extended Reach 2500 2000 1500 1000 500 0 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2
Slide 12: Increasing Use of Sand per Well Leading to Continued Expected Growth in Frac Sand Demand
Increasing Use of Sand per Well Leading to Continued Expected Growth in Frac Sand Demand (Millions of Tons) 140 120 100 80 60 40 20 0 2014 2015 2016 2017 2018 2019 2020 Proppant (M Tons) 69 55 43 80 106 112 118 Source: Spears and Associates 3Q 2019 Proppant Market Report. 11
Slide 13: Our Strongest Markets, the Bakken and Eastern Basins, Expected to Continue Strong Demand
Our Strongest Markets, the Bakken and Eastern Basins, are Expected to Continue to have Strong Demand Eastern U.S. Demand projected to Bakken Demand projected to increase slightly in 2020 increase slightly in 2020 Millions of Tons of Proppant Millions of Tons of Proppant 14 14 12 12 10 10 8 8 6 6 4 4
Slide 14: Finer Sand is the Standard
Finer Sand is the Standard Mesh Sizes Market Outlook for Fine Sand ◼ Proppant size is characterized by mesh size, ◼ According to Kelrik LLC, a notable driver which is determined by sieving the proppant impacting demand for fine mesh sand is through mesh screens increased proppant loadings, specifica
Slide 15: Proppant Characteristics Matter
Proppant Characteristics Matter West Texas (“WTX”) Sand is a lower quality proppant vs. Northern White • Lower Crush Strength: • Crushing of proppant creates fines, these fines will migrate and pack rearrangement occurs • Fines decrease fracture width • This a roadblock for permeability which result
Slide 16: Proppant Strength Matters
Proppant Strength Matters (WTX vs. Northern White) A significant DELTA exists between Northern White and Texas Permian Sand. Source: Management elaboration on independent studies. 15
Slide 17: Company Overview
Company Overview 16
Slide 18: Smart Sand, Inc. (NASDAQ: SND)
Smart Sand, Inc. (NASDAQ: SND) Overview Reserve Locations Oakdale, WI – 1,256 acres (Monroe County, WI) • Fully integrated provider of high quality Hixton, WI – 959 acres 81% Finer Mesh Reserve Northern White frac sand (Jackson County, WI) (40/70, 100 mesh) • Large fine mesh (40/70 and 100 Mesh) Nor
Slide 19: Mining and Production
Mining and Production 18
Slide 20: Cost-Effective, Differentiated Process
Cost-Effective, Differentiated Process On-site Mining / Excavation Conveyer Belt to On-site Wet Plant Wet Plant Cleans and Sorts Product Dry Plant Dries and Sorts Product Unit Trains Deliver Dry Sand to Basins ◼ Low Cost Structure Due to Several Key Attributes: − Low royalty rates ($0.50 per ton sol
Slide 21: Oakdale Facility: High Quality Northern White Raw Frac Sand in an Efficient Configuration
Oakdale Facility: High Quality Northern White Raw Frac Sand in an Efficient Configuration 20
Slide 22: Logistics and Wellsite Solutions
Logistics and Wellsite Solutions 21
Slide 23: Expansive Logistics Capabilities
Expansive Logistics Capabilities Key Logistical Advantages Highly Competitive Delivery Capabilities ◼ Dual Served Class I Rail Access – onsite service on Canadian Pacific rail line coupled with nearby terminal on Union Pacific rail line Van Hook allows access to multiple oil and gas plays, avoids in
Slide 24: Van Hook Terminal
Van Hook Terminal ◼ Location: Van Hook, ND ◼ Commenced operations in April 2018 ◼ Signed long-term take-or-pay contract with an anchor customer at in-basin pricing ◼ $15.5 million paid consideration ◼ We shipped 41% of our volumes YTD in 2019 to the Bakken as customers recognized the value of Van Ho
Slide 25: SmartSystems Wellsite Storage Solutions Features
SmartSystemsTM Wellsite Storage Solutions Features • Transported using specialized trailer for unassisted setup in five minutes. • Tri-axle trailer design with reinforced steel frame and remote control operation. • Direct to blender delivery, controls dust, stops and starts proppant flow. • Passive
Slide 26: Our SmartSystems Storage vs. the Competition
Our SmartSystemsTM Storage vs. the Competition Competitive Options SmartSystemsTM Storage Equipment Smart Sand: Silos: • Multiple Size Options With Custom • Belts Required, No Direct To Configurations Blender Offload • Engineered and Designed Specifically • Dust Can Be a Concern For Sand Storage on
Slide 27: Appendix
Appendix 26
Slide 28: Committed to Highest Corporate Standards
Committed to Highest Corporate Standards ◼ Management maintains close dialogue with customers regarding the oil and gas industry’s rigorous regulatory environment Legal & ◼ ISO registered Quality System and Environmental Management System in Regulatory place ◼ Minimal environmental and community imp
Slide 29: EBITDA Reconciliation
EBITDA Reconciliation Year ended December 31, ($ in thousands) 2015 2016 2017 2018 Net income (loss) $4,990 $10,379 $21,526 $18,688 Depreciation, depletion, accretion and amortization 5,318 6,445 7,300 18,165 Income tax (benefit) expense 4,129 9,394 (2,809) 5,122 Interest expense 7,826 8,436 700 2,3
Slide 30: EBITDA Reconciliation
EBITDA Reconciliation Quarter ended ($ in tho usands) 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Net income (loss) $12,125 ($4,433) $4,033 $14,276 $10,887 Depreciation, depletion, accretion and amortization 4,929 5,780 6,303 6,590 6,992 Income tax expense (benefit) 4,612 (2,135) 974 3,973 2,
Slide 31: Contribution Margin Reconciliation
Contribution Margin Reconciliation Quarter ended ($ in tho usands) 9/30/2018 12/31/2018 3/31/2019 6/30/2019 9/30/2019 Revenue $63,146 $52,248 $51,775 $67,941 $65,690 Cost of goods sold 40,595 34,217 40,605 43,068 38,555 Gross profit 22,551 18,031 11,170 24,873 27,135 Depreciation, depletion, and acc