Yesterday's judgment follows a July 2018 jury verdict that was in favor in U.S. Silica.
After considering the parties' post-verdict briefing, the Court entered final judgment in SandBox's favor on October 2, requiring Arrows Up to pay SandBox $49.2 mln in damages. SandBox Logistics, operating in the area of proppant storage, handling, and well-site delivery, is U.S. Silica’s wholly-owned subsidiary.
The judgment also declared that all frac sand shipping containers that Arrows Up has manufactured, sold or leased since January 2015 are actually "owned solely and exclusively" by SandBox under the terms of the parties' Confidentiality and Non-Disclosure Agreement.
The judgment awarded SandBox title to and possession of Arrows Up's frac sand shipping containers. It also sets up a schedule by which Arrows Up is to deliver those containers to SandBox.
Clearly, U.S. Silica is pleased with the outcome.
Separately, the company provided some color on its third quarter performance, noting that it grew sand proppant sales volumes 10% sequentially in the third quarter, which is down from its previously given guidance.
On July 31, when the company reported its second quarter results, U.S. Silica had reported that it expected that, courtesy of the company’s ramp of its new capacity in West Texas and its work in bringing its Brownfield expansion projects fully online, volumes in Oil & Gas to be up in the range of 20-25%.
Given the slowdown in well completions in the back half of the third quarter and the continued growth of in-basin sand capacity, the company expects to see its Northern White proppant pricing down sequentially. However, West Texas volumes and pricing held up well during the quarter, despite the more than 12 mln tons of high cost competitor Northern White capacity that came off line.
We already knew volumes and completions were likely going to be off. Maybe that's why shares of SLCA are only moderately lower today rather than down more sharply. The most recent industry color on the subject came on September 27 when Hi-Crush Partners (HCLP) reported that it had temporarily idled its Whitehall facility, noting recent, temporary softness in completions activity as the cause. Later in the same day, Covia Holdings (CVIA) reported that it has reduced proppant capacity by 3.3 mln tons in response to changes in market demand.
Separately, the EIA has been recently reporting on wells that have been drilled but uncompleted (DUC). DUCs have shown a climb recently. In the most recent month, the EIA reported that DUCs rose by 238 wells to 8,269 DUC wells in the U.S. So, we just want to note that the news out of SLCA should not come as a huge surprise.
Peers of SLCA include HCLP, CVIA, EMES, SND and CRR.