Slide 1: Smart Sand, Inc. August 2017 Investor Presentation
Smart Sand, Inc. August 2017 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: 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 5: Our Strategy
Our Strategy Increasing capacity utilization and processing capacity at Oakdale Focus on increasing our capacity utilization as we expand annual processing capacity to 5.5 million tons by early 2018 Pursuing strategic long-term opportunities for capacity expansion and geographic diversification
Slide 6: Company Overview
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) Smart Sand owns and operates a Northern White raw frac Hixton, WI – 959 acres 81% Finer Mesh Reserve (Jackson
Slide 7: Oakdale Facility: High Quality Northern White Raw Frac Sand
Oakdale Facility: High Quality Northern White Raw Frac Sand 6
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 Expanding to be a unit-train capable facility Expected to result in incremental sale volumes due to more competitive rail rates Oakdale Oakdale
Slide 11: 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 12: Industry Overview
INDUSTRY OVERVIEW
Slide 13: 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% 30000 1,862 80% 37% 37% 38% 40% 41% 25000 1,500 1,762 49% 44% 1,180 55% 20000 983 1,079 60% 870 1,000 708 15000 40% 63% 63% 62% 60% 59% 10000 500 51% 56% 20% 45% 511 5000 0 –
Slide 14: Market Growth Potential
Market Growth Potential 2016 Average 2017 Average 2018 Average 2014 Peak Rig Count • 484 (-48% y/y) •t 825 (+70% y/y) •t 1,120 (+36% y/y) t • 1,789 Ave Rigs % HZ Rigs • 83% (+344 bps y/y) • 82% (-35 bps y/y) • 82% (↔ y/y) • 71% Horizontal s s s Ave. Rig • 17.3 HZ Wells per • 17.4 HZ Wells per • 17.0
Slide 15: Proppant Industry Outlook
Proppant Industry Outlook Total Market Proppant Demand 25,000 23,674 140 125 20,236 120 113 20,000 Millions of tons of Proppant 16,860 100 New US Horizontal Wells 16,029 85 15,755 15,000 80 12,656 65 74 10,520 60 10,000 58 8,169 54 40 5,000 36 20 0 - 2013 2014 2015 2016 2017 2018 2019 2020 New Hz We
Slide 16: 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 17: 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 18: Financial Information
FINANCIAL INFORMATION
Slide 19: Summary Quarterly Sales Volumes
Summary Quarterly Sales Volumes Quarterly Sales Volumes (thousands of tons) 559 531 274 230 193 129 Q1'16A Q2'16A Q3'16A Q4'16A Q1'17A Q2'17A (1) (1) Approximately 83% of sales volume in Q2’17 were to contracted customers. Approximately 79% of sales volumes were shipped via unit train in Q2’17. 18
Slide 20: Summary Financials
Summary Financials Sales Volumes Revenue (thousands of tons) ($ in millions) 3,300 $59.2 $54.8 2,475 $47.7 1,650 1,089 751 826 2015A (1) 2016A 1H 2017A (2) (3) (4) (5) Sales Volumes Effective Capacity 2015A 2016A 1H 2017A Production Costs Adjusted EBITDA ($ in millions) ($ in millions) $15.9 $37.8 $
Slide 21: Summary Financials Per Ton
Summary Financials Per Ton Revenue (1) Production costs ($ per ton) ($ per ton) $71.71 $63.52 $15.40 $50.34 $14.55 $13.47 2015A 2016A 1H 2017A 2015A 2016A 1H 2017A Adjusted EBITDA (1) ($ per ton) $45.81 $31.82 $9.34 2015A 2016A 1H 2017A On a per ton basis, our financial performance remained strong d
Slide 22: Summary
Summary Significant balance sheet flexibility and liquidity − Minimal debt − Approximately $64 million in cash available to support growth initiatives Efficient management of railcar fleet − 1,010 of 1,798 leased railcars assigned to customers as of July 31, 2017 − Intent to add 750 railcars to
Slide 23: Appendix
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Slide 24: Income Statement
Income Statement For the Year ended Year ended Year ended Six m onths ended Dec 31, 2014 Dec 31, 2015 Dec 31, 2016 Jun 30, 2017 ($ in millio ns) (Audited) (Audited) (Audited) (Unaudited) Revenues (1) $68.2 $47.7 $59.2 54.8 Cost of sales 29.9 21.0 26.6 41.1 Gross profit 38.2 26.7 32.7 13.8 Operating
Slide 25: Balance Sheet
Balance Sheet As of Decem ber 31, 2014 Decem ber 31, 2015 Decem ber 31, 2016 June 30, 2017 ($ in millio ns) (Audited) (Audited) (Audited) (Unaudited) Current assets Cash and cash equivalents $0.8 $3.9 $46.6 $63.8 Accounts receivable 8.6 6.0 5.7 15.0 Inventory – ST 8.6 4.2 10.3 8.8 Prepaid expenses a
Slide 26: Statement of Cash Flows
Statement of Cash Flows For the Year ended Year ended Year ended Six m onths ended Decem ber 31, 2014 Decem ber 31, 2015 Decem ber 31, 2016 June 30, 2017 ($ in millio ns) (Audited) (Audited) (Audited) (Unaudited) Operating activities Net income (loss) $7.6 $5.0 $10.4 $3.6 Adjustments to reconcile ne
Slide 27: EBITDA Reconciliation
EBITDA Reconciliation Six m onths Year ended Decem ber 31, ended June 30, ($ in tho usands) 2014 2015 2016 2017 Net income (loss) $7,556 $4,990 $10,379 $3,600 Depreciation, depletion, accretion and amortization 3,642 5,318 6,445 3,360 Income tax expense (benefit) 9,518 4,129 9,394 1,668 Interest exp
Slide 28: Production Cost Reconciliation
Production Cost Reconciliation Six m onths ended Year ended Decem ber 31, June 30, ($ in tho usands) 2014 2015 2016 2017 Cost of goods sold $29,934 $21,003 $26,569 $41,063 Depreciation, depletion, and accretion of asset retirment obligations (3,481) (4,930) (6,076) (3,166) Freight charges (5,763) (5