Slide 1: Mine to Wellsite Solutions: March 2019 Investor Presentation
Mine to Wellsite Solutions March 2019 Investor Presentation March 14, 2019 0
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: What is Smart Sand
What is Smart Sand 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) Northern White
Slide 5: West Texas Mine Options (Permian Basin)
West Texas Mine Options (Permian Basin) 4,219 acres under lease in Winkler and Crane counties in the Permian Basin Total upfront consideration paid <$5 million 20 year leases with the option to renew for an additional 20 years Low minimum royalty Provides Smart Sand with ability to provide
Slide 6: It’s a one-stop shop
Why is Smart Sand Different? It’s a one-stop shop 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 re
Slide 7: Quality.
Product and Service Quality Matter Long Term Feedback from our customer base: • Delivering high quality proppant to the wellhead in the large volumes needed • Reliable long-term production from their wells • Cost—both long-term and short-term It’s not about the price per ton, it’s about the Quality.
Slide 8: 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 9: 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. 8
Slide 10: Mining and Production
Mining and Production 9
Slide 11: 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 10
Slide 12: Byron Transload: Provides Optionality on Rail Delivery
Byron Transload: Provides Optionality on Rail Delivery 11
Slide 13: 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 Basin Low Cost Structure Due to Several Key Attributes: − Low royalty rates ($0.50 per ton on 2
Slide 14: Logistics and Wellsite Solutions
Logistics and Wellsite Solutions 13
Slide 15: 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 allows Van Hook access to multiple oil and gas plays, avoids interchange
Slide 16: 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 For 2018, we shipped 430,000 tons through our Van Hook terminal, increasing our sales volume into t
Slide 17: Wellsite Storage Solutions Features
Wellsite Storage Solutions Features • Transported using Quickstand Trailer for unassisted setup in 5 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 & Active onboard po
Slide 18: System Layouts
System Layouts ▪ Flexible layout options as demonstrated below with our QS4400XR silo Single Blender Layout Dual Blender Layout 1,050 Ton 1,320 Ton Layout Layout 17
Slide 19: Our Wellsite Storage vs. the Competition
Our Wellsite Storage vs. the Competition Competitive Options Smart Sand’s Wellsite 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 20: Industry Overview
Industry Overview 19
Slide 21: 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 Proppant per lateral foot continues continue to get longer to increase Source: Spears and Associates 4Q 2018 Proppant Market Report. 20
Slide 22: 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 Source: Spears and Associates 4Q 2018 Proppant Market Report. 21
Slide 23: Our Strongest Markets, the Bakken and Eastern Basins, are Expected to have Growing Frac Sand Demand
Our Strongest Markets, the Bakken and Eastern Basins, are Expected to have Growing Frac Sand Demand Eastern U.S. Demand projected to Bakken Demand projected to grow grow ~ 13% per year in 2019 and by ~ 8% per year in 2019 and 2020 2020 Source: Spears and Associates 4Q 2018 Proppant Market Report. 22
Slide 24: 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, specifical
Slide 25: Financial Overview
Financial Overview 24
Slide 26: Summary Financials
Summary Financials Quarterly Sales Volumes Quarterly Revenue (thousands of tons) ($ in millions) $63.1 839 823 $54.4 $52.2 706 723 610 $43.0 $42.6 Q4'17A Q1'18A Q2'18A Q3'18A Q4'18A Q4'17A Q1'18A Q2'18A (1) Q3'18A (2) Q4'18A (3) Contribution Margin/Ton Quarterly Adjusted EBITDA ($ in millions) $37.3
Slide 27: Why Smart Sand?
Why Smart Sand? A Full Service and Cost Effective One Stop Solution Large reserve base of high quality finer mesh Northern White Frac Large, efficient sand at Oakdale available to support market demand reserve base, Substantial production capacity (5.5mm tons) ready to meet market production nee
Slide 28: Appendix
Appendix 27
Slide 29: Committed to Highest Corporate Standards
APPENDIX Committed to Highest Corporate Standards Management maintains close dialogue with customers regarding the oil and gas industry’s rigorous regulatory environment Legal & ISO registered Quality System and Environmental Management System in Regulatory place Minimal environmental and comm
Slide 30: Income Statement
APPENDIX Income Statement For the Year ended Year ended Year ended Year ended Dec 31, 2015 Dec 31, 2016 Dec 31, 2017 Dec 31, 2018 ($ in millio ns) (audited) (audited) (audited) (audited) Revenues (1) $47.7 $59.2 $137.2 $212.5 Cost of sales 21.0 26.6 100.3 144.9 Gross profit 26.7 32.7 36.9 67.6 Opera
Slide 31: Balance Sheet
APPENDIX Balance Sheet Dec 31, 2015 Dec 31, 2016 As of Dec 31, 2017 Dec 31, 2018 ($ in millio ns) (audited) (audited) (audited) (audited) Current assets Cash and cash equivalents $3.9 $47.5 $35.2 $1.5 Accounts receivable 6.0 5.7 24.6 26.8 Inventory – ST 4.2 10.3 9.1 18.6 Prepaid expenses and other a
Slide 32: Statement of Cash Flows
APPENDIX Statement of Cash Flows Year ended Year ended Year ended Year ended Dec 31, 2015 Dec 31, 2016 Dec 31, 2017 Dec 31, 2018 ($ in millio ns) (audited) (audited) (audited) (audited) Operating activities Net income (loss) $5.0 $10.4 $21.5 $18.7 Adjustments to reconcile net income (loss) to net ca
Slide 33: EBITDA Reconciliation
APPENDIX EBITDA Reconciliation Year ended Decem ber 31, ($ in tho usands) 2015 2016 2017 2018 Net income (loss) $4,990 $10,379 $21,526 $18,688 Depreciation, depletion, accretion and amortization 5,318 6,445 7,300 18,165 Income tax (benefit) expense 4,129 9,394 (2,809) 5,122 Interest expense 7,826 8,
Slide 34: EBITDA Reconciliation
APPENDIX EBITDA Reconciliation Quarter ended ($ in tho usands) 12/31/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 Net income (loss) $10,886 $975 $10,021 $12,125 ($4,433) Depreciation, depletion, accretion and amortization 2,184 3,160 4,296 4,929 5,780 Income tax expense (benefit) (6,165) 232 2,413
Slide 35: Contribution Margin Reconciliation
APPENDIX Contribution Margin Reconciliation Quarter ended ($ in tho usands) 12/30/2017 3/31/2018 6/30/2018 9/30/2018 12/31/2018 Revenue $43,037 $42,628 $54,448 $63,146 $52,248 Cost of goods sold 32,938 35,413 34,678 40,595 34,217 Gross profit 10,099 7,215 19,770 22,551 18,031 Depreciation, depletion
Slide 36: Contribution Margin Reconciliation
APPENDIX Contribution Margin Reconciliation Year ended ($ in tho usands) 2016 2017 2018 Revenue $59,231 $137,212 $212,470 Cost of goods sold 26,569 100,304 144,903 Gross profit 32,662 36,908 67,567 Depreciation, depletion, and accretion of asset retirment obligations 6,076 7,289 16,297 Contribution