Solaris Oilfield Infrastructure (SOI), which made its IPO debut in May 2017, reported Q2 earnings this morning. In terms of background, SOI is a manufacturer of mobile proppant management systems that unload, store and deliver proppant at oil & gas well sites. Its systems improve the efficiency of proppant logistics for its customers, which are primarily oil & gas drillers. Since commencing operations in April 2014, SOI has grown its fleet from two systems to 49 systems currently and expects to end 2017 with 68-72 systems (this guidance was raised from 60-64 in August 2017).
Frac sand (proppant) is used by drillers to help extract oil & gas from the well. Frac sand is mixed with high volumes of water and chemicals and forced into the shale, where it holds open fissures allowing the oil or gas to be extracted. SOI's 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.
Its mobile proppant system is designed to address the challenges associated with transferring large quantities of proppant to the well site. Today's horizontal well completion designs require between 400 and 1,000 truckloads of proppant delivered to the well site per well which creates bottlenecks in the storage, handling and delivery of proppant.
SOI's system allows up to 24 frac sand trucks to simultaneously unload proppant into six silos. Greater unloading capacity means customers never have to shut down operations to wait on sand. Increased storage capacity enables customers to pump more proppant per stage and complete approximately 50% more frac stages per day. SOI' system was designed to be highly mobile and easy to rig up and down on site. Silos are erected and lowered using patented transport trailers. The standard system includes six sand silos, two base units and a central conveyor.
Turning to the Q2 earnings, SOI is profitable and reported GAAP EPS of $0.01. This included some one-time items, meaning the non-GAAP number would have been higher but we do not see where the company provides the non-GAAP EPS figure. Revenue rose 350% YoY to $13.4 mln, which was better than market expectations.
Solaris currently has 49 systems in its rental fleet, all of which are deployed with customers. Over 90% of its systems are deployed to customers with multiple systems. SOI expects to deliver 14 systems to the rental fleet in Q3, for a total of 58 systems in place by the end of September. On August 2, Solaris had upped its year-end guidance to 68-72 systems from 60-64 and the company is reiterating that guidance today.
SOI says it's working hard to meet market demand for next generation proppant handling systems. In fact, SOI is building a new high-capacity transload facility in Kingfisher, Oklahoma. It will be located central to the STACK/SCOOP plays and will be the first independent, unit-train capable, high speed transload facility in Oklahoma. The Kingfisher Facility will help operators and service companies reduce logistics costs by virtue of its high-volume capacity and proximity to well sites.
In sum, the stock has not traded much in the pre-market so it's difficult to get a sense for how the market is interpreting SOI's Q2 results. However, they look pretty decent. While the overall energy market is still difficult, SOI's systems appear to be in high demand as they really do make proppant use much more efficient at the well site. Its IPO priced at $12, which was below its expected range of $15-18, and that's about where it's trading now. As such, the stock has not done much but it's a name worth keeping on the radar.