[Editor's note: This story was updated at 1:33 p.m. CDT Oct. 29.]
U.S. Silica Holdings Inc. shares plunged 33% after the frac sand miner said it expects demand to slow in the fourth quarter and reported a bigger-than-expected quarterly loss on Oct. 29, weighed down by lower prices.
Prices for the proppant used to crack the ground and extract oil have dropped in North America as oil producers drill and complete fewer wells under investor pressure to spend less, and as the market struggles with an oversupply in the aftermath of the shale boom.
"Energy markets deteriorated further and faster than expected during the quarter as E&P budget exhaustion slowed completion activity, resulting in lower demand and pricing pressure," CEO Bryan Shinn said on a post-earnings call with analysts.
While sand sales to oil and gas customers fell 1% sequentially, pricing was "significantly lower" with new mines coming online in West Texas and overcrowding the market, the company said.
Volumes in the current quarter are expected to decline at least 10% sequentially, while prices are expected to fall further, it added.
However, Shinn expects to see a rebound in oil field completions by the middle of the first quarter next year, as oil and gas producers reset their budgets.
The company also forecast net sales and profits in its industrial business, which supplies sand to construction companies and glass manufacturers, to stay flat or rise marginally in 2020, hurt by trade tariffs and fears of a global slowdown.
U.S. Silica reported a net loss of $23 million, or 31 cents per share, for the quarter ended Sept. 30, compared with a profit of $6.3 million, or 8 cents per share, a year earlier.
Excluding items, loss of 17 cents per share missed analysts' average estimate of 3 cents, according to Refinitiv IBES data.
Revenue fell 14.5% to $361.8 million, also missing estimate of $395.5 million.
The company now expects 2019 spending to be less than $125 million it had forecast earlier, and plans to spend between $40 million and $60 million next year.
The spending forecast was the only "break in the clouds... but that's unlikely to save the stock today given the magnitude of the miss," said George O'Leary, managing director of equity research at Tudor, Pickering, Holt & Co.
Shares of the company were trading at a record low of $5.11.
Recommended Reading
Delek Logistics Closes Acquisition of Permian’s H2O Midstream
2024-09-12 - Delek Logistics closed a $230 million deal to expand its water midstream service in the Permian Basin with the acquisition of H2O Midstream, which overlaps with Delek's Midland Basin footprint.
Diamondback, Kinetik Boost Stake in Permian EPIC Crude Pipeline
2024-09-24 - Diamondback Energy, in partnership with Kinetik, is boosting its takeaway capacity and ownership stake in the EPIC Crude pipeline after closing a $26 billion Permian Basin acquisition.
Electricity and LNG Drive Midstream Growth as M&A Looms
2024-09-26 - The midstream sector sees surging global and domestic demand with fewer players left to offer ‘wellhead to water’ services.
Energy Transfer Leads the Midstream Consolidation Flow
2024-10-01 - Energy Transfer co-CEOs discuss pipeline pain points, needed M&A, regulatory woes and much more in this Midstream Business exclusive.
Waha’s Negative Gas Prices Set an Unwelcome, Painful Record
2024-09-03 - Analysts: Gas producers are weathering nearly a month of negative natural gas prices thanks to hedging, but they can’t hold out indefinitely.