U.S. Silica Holdings Crushes on Volume and Revenue

The company narrowed its 2014 guidance for adjusted EBITDA of $180 million to $200 million to the high end of the range, versus our previous adjusted estimate of $199 million. The company guided capex of $75 million to $85 million last quarter. The company announced it will be bringing its new Utica, Illinois mine online late in the second quarter.

Oil-and-gas volumes were higher than we modeled, up 41% year-over-year, to 1.30 million tons, and up 18.2% sequentially, while ISP volumes were a tad below our expectation, up 1.1% year over- year, to 0.98 million tons, but down 2.5% sequentially. Contribution margin dollars were $54.8 million versus our previous $53 million estimate, with oil and gas above our estimate and ISP below. Contribution margin per ton in oil and gas was not great, driven by, we believe, poor fixed-cost absorption, certain basin activity levels that presented logistical challenges, and a mix headwind from 100 mesh.

The oil-and-gas contribution per ton result will be the key issue for the call as we continue to believe investors are grasping for evidence of price (up or down), transportation efficiencies, and production cost efficiencies; therefore, contribution per ton is the only data point to focus on. Reported EPS included $0.03 in M&A and business development expenses that management called out; we expect most investors will not add back the expense, but regardless of how the issue is treated, upwardly revised guidance commentary accounts for it.




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