U.S. Silica now trading on the “big board”
U.S. Silica started selling stock on the New York Stock Exchange on February 1. The IPO (Initial Public Offering) of 11,764,705 shares of common stock was priced at $17 a share but closed down on the first day of trading to $16 a share.
The stock is currently trading around the $17 mark. U.S. Silica is traded under the stock symbol SLCA.
In a January 31 press release, U.S. Silica Holdings, Inc. said it expected “to receive net proceeds of approximately $42.5 million from the offering and intends to use approximately $34.5 million to fund future capital expenditures for its business.”
Sand for gas and oil wells
Some of those capital expenditures will go for construction of a new resin-coating facility to coat sand for the fracking of gas and oil wells.
Sand is an ingredient in fracking fluid and is used to help fracture the shale and keep the cracks open so gas can escape up the well.
A February 1 Dow Jones Newswires story reported that U.S. Silica is the second largest domestic producer of commercial silica and that “frac sand” accounts for nearly half of its business.
The company claims to be one of the few commercial producers capable of rail delivery of large quantities of sand to each of the major U.S. Marcellus shale basins.
Reached for comment, U.S. Silica spokesman Ted Lowen said, “U.S. Silica is currently in a quiet period which restricts it from making any commentary in advance of its earnings announcement, which will be announced shortly.”
Locations and products
A map at U.S. Silica’s web site lists the plants in Ottawa, Illinois, Pacific, Missouri and Mill Creek, Oklahoma as the sites where sand for gas and oil companies is produced.
The company makes two products for the industry, Ottawa White™ and Shale Frac™.
One product is used as a cement additive to enhance the performance of the cement used in gas and oil well drill casings. The other product is an additive in fracking fluid.
U.S. Silica also makes specialty sand products for glass, chemical, foundry, building products, fillers and extenders, recreation, filtration and treatment, and testing and analysis.
The company employs a workforce of about 685 at 16 locations - 15 spread across the U.S. and one in Shanghai, China.
Gas market shrinking
One of the largest natural gas producers, Chesapeake Energy Corporation, announced in January it was cutting output after natural gas prices dropped to a 10 year low.
In a January 23 Wall Street Journal story, Chesapeake said it will cut spending on gas drilling by more than $2 billion this year and divert that money to more profitable oil, which is trading near $100 a barrel.
Because of a warm winter and gas in storage at a record high, there is no sign the natural gas glut will end anytime soon.
This may not bode well for U.S. Silica stock, at least in the short term.