Service & Supply | Quarterly / Earnings Reports | Oilfield Services | Third Quarter (3Q) Update

Solaris Oilfield Third Quarter 2019 Results

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Solaris Oilfield Infrastructure, Inc. reported financial results for the third quarter 2019.

Third Quarter 2019 Highlights

• Net income of $19.1 million, or $0.36 per diluted Class A share, for the quarter ended September 30, 2019, which includes a $0.01 per diluted Class A share charge related to severance and loss on disposal of assets
• Adjusted pro forma net income of $17.7 million, or $0.37 per diluted share
• Adjusted EBITDA of $31.2 million for the quarter ended September 30, 2019
• Net cash provided by operating activities of $31.1 million for the quarter ended September 30, 2019
• Positive free cash flow¹ of $26.9 million for the quarter ended September 30, 2019
• Paid a regular quarterly dividend of $0.10 per share on September 26, 2019

Third Quarter 2019 Financial Review

Solaris reported net income of $19.1 million, or $0.36 per diluted Class A share, for third quarter 2019, compared to net income of $22.5 million, or $0.42 per diluted Class A share, in second quarter 2019 and net income of $26.4 million, or $0.49 per diluted Class A share, in third quarter 2018. Adjusted pro forma net income for third quarter 2019 was $17.7 million, or $0.37 per fully diluted share, compared to adjusted pro forma net income in second quarter 2019 of $21.2 million, or $0.44 per fully diluted share, and $24.0 million, or $0.51 per fully diluted share in third quarter 2018. 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 third quarter 2019 was $31.2 million, compared to adjusted EBITDA of $35.2 million in second quarter 2019 and $36.5 million in third quarter 2018. A description of adjusted EBITDA and a reconciliation to net income, its most directly comparable GAAP measure, is provided below.

Revenues were $59.6 million for third quarter 2019, a 7% decrease from second quarter 2019 and a 5% increase compared to third quarter 2018.

Capital Expenditures, Free Cash Flow and Liquidity

The Company invested $4.2 million during third quarter 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 third quarter 2019 was $26.9 million, which represented the third consecutive quarter of positive free cash flow for the Company. Year-to-date 2019, the Company has generated $55.6 million of free cash flow.

As of September 30, 2019, the Company had approximately $51.7 million of cash on the balance sheet, which reflects over $1.00 per fully diluted share of cash. The Company currently has approximately $101.7 million of liquidity, including available cash and $50.0 million of availability under its undrawn credit facility.

Operational Update and Outlook

During the third quarter 2019, an average of 115 mobile proppant management systems were fully utilized, a 7% decrease from the 123 fully utilized systems averaged in the second quarter of 2019, and a 10% decrease compared to third quarter 2018. The sequential decrease in fully utilized systems during the third quarter of 2019 was due to a decline in active hydraulic fracturing crews as oil and gas operators reduced activity primarily to stay within budgets, as well as in response to lower natural gas prices.

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 expects to end 2019 with 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 2019 to be $40.0 million or less, compared to its prior guidance range of $40.0-50.0 million.

“Towards the end of the third quarter, the industry experienced activity softness as operator activity began to reflect completion efficiency gains and commitment to capital discipline,” Solaris’ Chairman and Chief Executive Officer Bill Zartler commented. “We expect this discipline to continue in the fourth quarter, which will likely drive another step down in activity for the near term. Meanwhile, we have slowed our capital spending rate, resulting in significant free cash flow generation, which will provide flexbility for us to continue to innovate and collaborate with our customers to drive additional well site efficiencies in the future.”

Quarterly Cash Dividend

On September 9, 2019, the Company announced that its Board of Directors had declared its fourth consecutive quarterly cash dividend of $0.10 per share of Class A common stock, which was paid on September 26, 2019 to holders of record as of September 19, 2019. A distribution of $0.10 per unit was also approved for holders of units in Solaris Oilfield Infrastructure, LLC (“Solaris LLC”).