After the close yesterday, recent oil & gas IPO Solaris Oilfield Infrastructure (SOI) issued its Q1 results, its first quarterly results since going public on May 12, 2017. As we discuss in more detail below, the results came in at the high end of the guidance range it provided in its last IPO prospectus. Heading into the report, the stock popped by 4.5% yesterday as investors anticipated solid results. SOI was in need of some good news, too. Prior to yesterday's spike higher, shares had sank by 16% versus its $12 IPO price -- the dive in crude oil prices being the primary culprit. While the stock still has a ways to go to reclaim its offering price, the action yesterday was encouraging, signaling that a possible bottom has been put in.
Before drilling down on its Q1 results, we wanted to provide some background on the company for those unfamiliar with it. SOI is a developer of proppant management systems that improve the efficiency of proppant logistics for its customers, which are primarily oil & gas drillers. SOI’s patented systems typically provide 2.5 million pounds of proppant storage capacity in a footprint that is considerably smaller than traditional well site proppant storage equipment. Solaris' six-silo system contains 3x the on-site sand storage capacity in half the space of a conventional SandKing system. SOI’s systems have the ability to unload up to 24 pneumatic proppant trailers simultaneously.
Since commencing operations in April 2014, SOI has grown its fleet from two systems to 41 systems. Its systems are deployed in many of the most active oil & gas basins in the US, including the Permian Basin, the Eagle Ford Shale and the SCOOP/STACK formation. Customers include oil & gas exploration companies such as EOG Resources, Devon Energy and Apache, as well as oilfield service companies, such as ProPetro Services.
Circling back to its Q1 results, SOI reported net income of $4.8 million compared to a loss of ($0.1) million in the year ago quarter. In the aforementioned prospectus, SOI forecasted net income of $4.6-$4.8 million. Revenue surged by 228% year/year to $10.3 million, also towards the high end of its guidance of $10.0-$10.4 million. The increase in revenue was driven by stronger customer demand for its systems, as well as higher well completion activity, leading to higher proppant usage per well.
To put the heightened demand into perspective, during Q1, it generated 2,627 revenue days (combined number of days its systems earn revenue), up 138% year/year and up 23% from 4Q16.
The company did not provide any specific financial guidance in its press release, but, it did comment that it expects to deliver four systems to the rental fleet in June and to end 2Q17 with 44 systems in the fleet. It currently has 41 active systems. SOI also invested $7.6 million in capital equipment during Q1, to construct new proppant systems and develop enhancements to its systems' capabilities. Based on that information, it seems fair to say that SOI isn't expecting much of a slowdown at all, despite the lower crude oil prices.
*Shares of SOI were trading higher by 1.5% in pre-market action.