Slide 1: September 2020 Investor Presentation
September 2020 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 Northern 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 Cl
Slide 5: Market Update
Market Update ▪ E&P spending dropped 50-75% in the second quarter of 2020 and is expected to continue to be at low levels for the remainder of 2020 ▪ However, we are seeing some improvement in market activity from second quarter levels, but activity remains depressed relative to the beginning of the
Slide 6: Well Positioned in Current Market
Well Positioned in Current Market ▪ Sand market in North America under stress ▪ Increased regional capacity financed primarily with debt has led to oversupplied market ▪ Lower current demand due to pandemic created financial stress for many over-levered sand companies leading to several bankruptcies
Slide 7: Eagle Oil and Gas Proppants Segment Acquisition
Eagle Oil and Gas Proppants Segment Acquisition Purchase Price & Liquidity Support ▪ $2M purchase price, consideration paid in 1.5M shares of SND stock (share count based on 20 day VWAP for SND prior to close) ▪ Up to $5M in liquidity support for Eagle operations for 12 months ▪ 6% interest during f
Slide 8: Acquisition Rationale & Plans
Acquisition Rationale & Plans Opportunity to generate better returns under the SND umbrella and be accretive to shareholders ▪ Expect the acquisition to be accretive to cash flow from operations and we currently anticipate only needing to spend minimal maintenance capital to support operations once
Slide 9: Company Overview
Company Overview 8
Slide 10: Smart Sand, Inc. (NASDAQ: SND)
Smart Sand, Inc. (NASDAQ: SND) Overview Wisconsin/Illinois Reserve Locations • Fully integrated provider of high quality Northern White frac sand • Large fine mesh (40/70 and 100 Mesh) Northern White reserve base • Low cost and efficient operations • Cost-efficient provider of mine to wellsite solut
Slide 11: Vertical Integration – A Key Differentiator
Vertical Integration – A Key Differentiator Smart Sand’s Business Offerings Premium Northern White Reserve Gigantic Rail Capacity Terminal & Forward Staging Management Last Mile Logistics Wellsite Storage Solutions Large Finer Mesh Northern White Reserve Class 1 rail (CP, UP, BNSF) Planning ahead re
Slide 12: Insiders own ~50% of Smart Sand Equity
Insiders own ~50% of Smart Sand Equity % Equity Ownership of SND 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Clearlake Capital Partners II Charles E. Young, CEO Other Officers & Directors (Master), L.P. Source: Smart Sand proxy statement 11
Slide 13: Summary Financials
Summary Financials Quarterly Sales Volumes Quarterly Revenue (thousands of tons) ($ in millions) 741 757 $67.9 $65.7 611 $47.7 $47.5 462 $26.1 208 Q2'19A Q3'19A Q4'19A Q1'20A Q2'20A Q2'19A(1) Q3'19A (2) Q4'19A (3) Q1'20A (4) Q2'20A(5) Contribution Margin/Ton Quarterly Adjusted EBITDA ($ in millions)
Slide 14: Industry Overview
Industry Overview 13
Slide 15: Industry Trends Continue to Support Increasing Use of Frac Sand per Well
Industry Trends Continue to Support Increasing Use of Frac Sand per Well Source: Spears and Associates 2Q 2020 Proppant Market Report. 14
Slide 16: Industry Trends Continue to Support Increasing Use of Frac Sand per Well
Industry Trends Continue to Support Increasing Use of Frac Sand per Well Lateral lengths continue to get longer Source: Spears and Associates 2Q 2020 Proppant Market Report. 15
Slide 17: The Value of Northern White Sand
The Value of Northern White Sand ▪ A recent study by Rystad Energy has linked proppant type to decreased production and profitability – while local sand has been cheaper to deliver to the wellsite than northern white sand, the loss in cash flow from lower production as a result of using the inferior
Slide 18: The Value of Northern White Sand (continued)
The Value of Northern White Sand (continued) 17
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 allows access to multiple oil and gas plays, avoids interchange
Slide 24: Van Hook Terminal
Van Hook Terminal ◼ Location: Van Hook, ND ◼ Commenced operations in April 2018 ◼ We shipped 46% of our volumes year to date in 2020 through this terminal as customers recognized the value of Van Hook’s strategic location and efficient logistics solutions Van Hook Terminal 23
Slide 25: SmartSystems Wellsite Storage Solutions
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: SmartPath Proppant Handling System
SmartPathTM Proppant Handling System ▪ SmartPathtm is a patent-pending mobile transloading system, designed to work with bottom dump trailers, featuring a drive over conveyor, surge bin, dust collection system, on-board generator, and redundant conveyance circuits for transferring proppant into Smar
Slide 28: Summary: Smart Sand Long Term Value Drivers
Summary: Smart Sand Long Term Value Drivers Sustainable Operating Model ▪ Large, high quality reserve base ▪ Low cost operations ▪ Efficient and sustainable logistics capabilities with access to all operating basins Prudent Capital Structure ▪ Low leverage levels (0.2x Net Debt / TTM EBITDA) allow C
Slide 29: Appendix
Appendix 28
Slide 30: 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 31: EBITDA Reconciliation
EBITDA Reconciliation Year ended December 31, ($ in thousands) 2015 2016 2017 2018 2019 Net income (loss) $4,990 $10,379 $21,526 $18,688 $31,623 Depreciation, depletion, accretion and amortization 5,318 6,445 7,300 18,165 27,135 Income tax (benefit) expense 4,129 9,394 (2,809) 5,122 7,809 Interest e
Slide 32: EBITDA Reconciliation
EBITDA Reconciliation Quarter ended ($ in thousands) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Net income (loss) $14,276 $10,887 $2,388 ($84) $4,640 Depreciation, depletion, accretion and amortization 6,590 6,992 7,250 5,487 5,450 Income tax expense (benefit) 3,973 2,608 294 165 3,470 Inter
Slide 33: Contribution Margin Reconciliation
Contribution Margin Reconciliation Quarter ended ($ in thousands) 6/30/2019 9/30/2019 12/31/2019 3/31/2020 6/30/2020 Revenue $67,941 $65,690 $47,667 $47,488 $26,106 Cost of goods sold 43,068 38,555 29,793 41,089 11,906 Gross profit 24,873 27,135 17,874 6,399 14,200 Depreciation, depletion, and accre