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Solaris Oilfield Fourth Quarter 2019 Results

Share Print Bookmark    |    Tuesday,February 18,2020

Solaris Oilfield Infrastructure, Inc. reported financial results for the fourth quarter and full year 2019.

Highlights:

• Net income of $90.4 million, or $1.69 per diluted Class A share, for the full year ended December 31, 2019; adjusted pro forma net income of $62.7 million, or $1.32 per diluted share for the year ended December 31, 2019 (see below for a reconciliation of adjusted pro forma net income to net income attributable to Solaris)

• Net income of $25.3 million, or $0.48 per diluted Class A share, for the quarter ended December 31, 2019; Adjusted pro forma net income of $9.7 million, or $0.20 per diluted share for the quarter ended December 31, 2019

• Adjusted EBITDA of $112.9 million and $20.9 million for the year and quarter ended December 31, 2019, respectively

• Net cash provided by operating activities of $114.9 million and $26.3 million for the year and quarter ended December 31, 2019, respectively

• Positive free cash flow of $80.0 million and $24.4 million for the year and quarter ended December 31, 2019, respectively

• Raised the regular quarterly dividend 5% in December 2019 and paid the new regular quarterly dividend of $0.105 per share on December 26, 2019

• Announced a $25 million share repurchase program in December 2019 of which approximately $3.3 million was spent in 2019 to repurchase approximately 0.3 million shares; an additional $14.4 million spent in 2020 to purchase an additional 1.2 million shares through February 14, 2020, leaving approximately $7.3 million of repurchase authorization

Operational Update and Outlook

During the fourth quarter 2019, an average of 88 mobile proppant management systems were fully utilized, a 23% decrease from the 115 fully utilized systems averaged in the third quarter of 2019, and a 27% decrease compared to fourth quarter 2018. The sequential decrease in fully utilized systems during the fourth quarter of 2019 was primarily due to a decline in active hydraulic fracturing crews as oil and gas operators reduced activity to stay within budgets. For full year 2019, an average 110 mobile proppant management systems were fully utilized, which was essentially flat from the 111 fully utilized systems averaged in 2018.

Based on current industry activity levels, the Company believes it has approximately one third of overall U.S. wellsite proppant storage market share, which continues to represent the leading share.

The Company continues to maintain 166 mobile proppant management systems in its rental fleet, unchanged from the third quarter, and will continue to incorporate field learnings into its fleet of 14 mobile chemical management systems. The Company expects capital expenditures for the full year 2020 to be $20.0-40.0 million, unchanged from prior guidance.

CEO Bill Zartler said: “I’m pleased that the Solaris team delivered another solid year of performance, despite a challenging macro environment. In 2019, we began generating meaningful operating cash flow, which we have used to both return capital to our shareholders in the form of dividends and share repurchases, and also continue to invest in value-add new technology. Despite early indications for another decline in industry capital spending levels in 2020, our strong balance sheet and cash generation should allow us to continue driving innovation for our customers while maximizing value for shareholders.”

Full Year 2019 Financial Review

Solaris reported net income of $90.4 million, or $1.69 per diluted Class A share, for full year 2019, compared to full year 2018 net income of $86.0 million, or $1.59 per diluted Class A share. Adjusted pro forma net income for full year 2019 was $62.7 million, or $1.32 per fully diluted share, compared to full year 2018 adjusted pro forma net income of $79.2 million, or $1.68 per fully diluted share. A description of adjusted pro forma net income and a reconciliation to net income attributable to Solaris, its most directly comparable generally accepted accounting principles (“GAAP”) measure, and the computation of adjusted pro forma earnings per fully diluted share are provided below.

Adjusted EBITDA for full year 2019 was $112.9 million, compared to full year 2018 adjusted EBITDA of $122.8 million. A description of adjusted EBITDA and a reconciliation to net income, its most directly comparable GAAP measure, is provided below.

Fourth Quarter 2019 Financial Review

Solaris reported net income of $25.3 million, or $0.48 per diluted Class A share, for fourth quarter 2019, compared to net income of $19.1 million, or $0.36 per diluted Class A share, in third quarter 2019 and net income of $24.7 million, or $0.47 per diluted Class A share, in fourth quarter 2018. Fourth quarter 2019 included a $17.6 million, or $0.37 per diluted Class A share, benefit for deferred revenue recognition that resulted from a contract termination at the Company’s Kingfisher transload facility. Adjusted pro forma net income for fourth quarter 2019 was $9.7 million, or $0.20 per fully diluted share, compared to adjusted pro forma net income in third quarter 2019 of $15.2 million, or $0.32 per fully diluted share, and $21.2 million, or $0.44 per fully diluted share in fourth quarter 2018.

Adjusted EBITDA for fourth quarter 2019 was $20.9 million, compared to adjusted EBITDA of $28.0 million in third quarter 2019 and $34.4 million in fourth quarter 2018.

Revenues were $62.9 million for fourth quarter 2019, which were up 5% from third quarter 2019 and up 10% compared to fourth quarter 2018. Excluding the impact of deferred revenue, fourth quarter 2019 revenues declined 20% from third quarter 2019 and decreased 20% compared to fourth quarter 2018.

Capital Expenditures, Free Cash Flow and Liquidity

The Company invested $1.9 million during fourth quarter 2019 and $34.9 million for full year 2019, which included investments in its mobile proppant and chemical management systems.

Free cash flow (defined as net cash provided by operating activities less investment in property, plant and equipment) during fourth quarter 2019 was $24.4 million, which represented the fourth consecutive quarter of positive free cash flow for the Company. For full year 2019, the Company generated $80.0 million of free cash flow.

As of December 31, 2019, the Company had approximately $66.9 million of cash on the balance sheet, which reflects over $1.40 per fully diluted share of available cash. The Company’s $50.0 million credit facility remains undrawn.

Shareholder Returns

On December 3, 2019, the Company announced that its Board of Directors had declared a cash dividend of $0.105 per share of Class A common stock, which represented a 5% increase over the prior quarterly dividend and was paid on December 26, 2019 to holders of record as of December 16, 2019. A distribution of $0.105 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”). Since initiating the dividend in December 2018, the Company has paid 5 consecutive quarterly dividends, returning a total of nearly $24 million in cash to shareholders.

During the fourth quarter of 2019, Solaris repurchased approximately 0.3 million shares for a total of $3.2 million. Since announcing the share repurchase program in December 2019, Solaris has repurchased a total of approximately 1.4 million shares, or approximately 5% of its fully diluted shares outstanding, at a weighted-average share price of $12.40 for a total of $17.7 million. The Company currently has $7.3 million remaining of its original $25 million share repurchase authorization.