We are one of the largest domestic producers of commercial silica, a specialized
mineral that is a critical input into a variety of attractive end markets. During
our 116 year history, we have developed core competencies in mining, processing,
logistics and materials science that enable us to produce and cost-effectively
deliver over 240 products to customers across these markets. After our acquisition
of New Birmingham, Inc. ("NBI" or the "NBI Acquisition")
on August 16, 2016, as of December 31, 2016, we operate 18 production facilities
across the United States. Including the purchase of reserves adjacent to our
Ottawa, Illinois, facility in May 2016, we now control 467 million tons of reserves
of commercial silica, which can be processed to make 226 million tons of finished
products that meet American Petroleum Institute ("API") frac sand
specifications. Additionally, on August 22, 2016, we completed the acquisition
of Sandbox Enterprises, LLC ("Sandbox" or the “Sandbox Acquisition”)
as a “last mile” logistics solution for frac sand in the oil and
gas industry. For more information regarding the NBI and Sandbox Acquisitions
We attribute our success to the following strengths:
Large-scale producer with a diverse and high-quality reserve base. Our 18 geographically
dispersed production facilities control 467 million tons of reserves, including
API size frac sand and large quantities of silica with distinct characteristics,
giving us the ability to sell over 240 products to customers in both our Oil
& Gas Proppants segment and Industrial & Specialty Products segment.
Our large-scale production, logistics capabilities and long reserve life make
us a preferred commercial silica supplier to our customers. Our consistent,
reliable supply of large quantities of silica gives our customers the security
to customize their production processes around our commercial silica. Furthermore,
our large scale provides us earnings diversification and a larger addressable
market.
Geographically advantaged footprint with intrinsic transportation advantages.
The strategic location of our facilities and our logistics capabilities enable
us to enjoy high customer retention and a larger addressable market. In 2016,
we acquired NBI, the ultimate parent company of NBR Sand, LLC, a regional sand
producer located near Tyler, Texas. This facility allows customers to ship regional
sand directly to the wellheads in the Texas and Louisiana basins by truck, which
provides us with a delivered cost advantage. In our Oil & Gas Proppants
segment, our network of frac sand production facilities with access to Class
I rail either onsite or by truck and the strategic locations of our transloads
serve to create an addressable market that includes every major U.S. shale basin.
We believe we are one of the few frac sand producers capable of cost-effectively
delivering API grade frac sand to most of the major U.S. shale basins by on-site
rail. Additionally, on August 22, 2016, we completed the acquisition of Sandbox,
a provider of logistics solutions and technology for the transportation of proppant
used in hydraulic fracturing in the oil and gas industry. Sandbox provides “last
mile” logistics to oil and gas companies. Sandbox has operations in Midland/Odessa,
Texas, Morgantown, West Virginia, western North Dakota, northeast of Denver,
Colorado, Oklahoma City, OK and Cambridge, Ohio, where its major customers are
located, which allowed us to expand our frac sand offering directly to customers
wellhead locations.
Additionally, due to the high weight-to-value ratio of many silica products
in our Industrial & Specialty Products segment, the proximity of our facilities
to our customers’ facilities often results in us being their sole supplier.
This advantage has enabled us to enjoy strong customer retention in this segment,
with our top five Industrial & Specialty Products segment customers purchasing
from us for an average of over 50 years.
Low-cost operating structure. We focus on building and operating facilities
with low delivered cost that will allow us to be successful through the cycle.
We believe the combination of the following factors contributes to our low-cost
structure and our high margins:
our ownership of the vast majority of our reserves, resulting in mineral royalty
expense that was less than 0.3% of our sales in 2016;
the close proximity of our mines to their respective processing plants, which
allows for a cost-efficient and highly automated production process;
our processing expertise, which enables us to create over 240 products with
unique characteristics while minimizing waste;
our integrated logistics management expertise and geographically advantaged
facility network, which enables us to reliably ship products by the most cost-effective
method available, whether by truck, rail or barge, to meet the needs of our
customers, whether at in-basin transload locations or directly at wellhead locations
via our Sandbox operations;
our large customer base across numerous end markets, which allows us to maximize
our mining recovery rate and asset utilization; and
our large overall and plant-level operating scale.
Strong reputation with our customers and the communities in which we operate.
We believe that we have built a strong reputation during our 116 year operating
history. Our customers know us for our dependability and our high-quality, innovative
products, as we have a long track record of timely delivery of our products
according to customer specifications. We also have an extensive network of technical
resources, including materials science and petroleum engineering expertise,
which enables us to collaborate with our customers to develop new products and
improve the performance of their existing applications. We are also well known
in the communities in which we operate as a preferred employer and a responsible
corporate citizen, which generally serves us well in hiring new employees and
securing difficult to obtain permits for expansions and new facilities.
Experienced management team. The members of our senior management team bring
significant experience to the dynamic environment in which we operate. Their
expertise covers a range of disciplines, including industry-specific operating
and technical knowledge as well as experience managing high-growth businesses.
We believe we have assembled a flexible, creative and responsive team that can
quickly adapt to the rapidly evolving unconventional oil and natural gas drilling
landscape.
Expand our Oil & Gas Proppants production capacity and product portfolio.
We continue to consider and execute several initiatives to increase our frac
sand production capacity and augment our proppant product portfolio.
While we continue to work on maximizing existing production facility efficiencies,
due to the recent improvements in the oil and gas market, we are also evaluating
production capacity expansion opportunities at existing facilities as well as
Greenfield opportunities.
In order to increase our resin coated product portfolio, during 2015, we announced
the introduction of InnoProp® Python RCS, a new high-performance resin coated
proppant designed to increase the production of oil and gas wells in an economical
and efficient manner. In early 2016, we introduced another new resin coated
product, InnoProp® PLT, which is a curable low-temperature product and can
be used without an activator in oil and gas wells that have bottom-hole static
temperatures down to 70°F.
Increase our presence and product offering in industrial and specialty products
end markets. Our research and business development teams work in tandem with
our customers to develop new products, which we expect will either increase
our presence and market share in certain industrial and specialty products end
markets or allow us to enter new markets. We manage a robust pipeline of new
products in various stages of development. Some of these products have already
come to market, resulting in a positive impact on our financial results. We
continue to work toward offering more value-driven industrial and specialty
products that will enhance the profitability of the business.
Optimize product mix and further develop value-added capabilities to maximize
margins. We continue to actively manage our product mix at each of our plants
to ensure we maximize our profit margins. This requires us to use our proprietary
expertise in balancing key variables, such as mine geology, processing capacities,
transportation availability, customer requirements and pricing. We expect to
continue investing in ways to increase the value we provide to our customers
by expanding our product offerings, improving our supply chain management, upgrading
our information technology, and creating a world class customer service model.
Expand our supply chain network and leverage our logistics capabilities to meet
our customers’ needs in each strategic oil and gas basin. We continue
to expand our logistics network to ensure product is available to meet the in-basin
needs of our customers. This approach allows us to provide strong customer service
and puts us in a position to take advantage of opportunistic spot market sales.
Our plant sites are strategically located to provide access to key Class I railroads,
which enables us to cost effectively send product to each of the strategic basins
in North America. We can ship product by truck, barge and rail with an ability
to connect to short-line railroads as necessary to meet our customers’
evolving in-basin product needs. We believe that our supply chain network and
logistics capabilities are a competitive advantage that enables us to provide
superior service for our customers. We expect to continue to make strategic
investments and develop partnerships with transload operators and transportation
providers that will enhance our portfolio of supply chain services that we can
provide to customers.
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