U.S. Lime & Minerals (USLM 0.84%) continues to benefit from a rebound in oil and gas prices. Not only is it fueling demand for its lime and limestone products, but those higher prices are also providing a boost to the profitability of its natural gas interests.
US Lime results: The raw numbers
|
Metric |
Q2 2017 |
Q2 2016 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$36.5 million |
$32.9 million |
11.1% |
|
Net income |
$5.3 million |
$3.7 million |
43.2% |
|
EPS |
$0.94 |
$0.66 |
42.4% |
Data source: U.S. Lime & Minerals.
Image source: Getty Images.
What happened with U.S. Lime this quarter?
Demand picked up in the second quarter:
- Revenue from the company's lime and limestone operations jumped 11.1% to $36 million thanks to a rebound in sales to both construction and oil and gas services customers. However, one of the drivers of the year-over-year improvement in demand from construction customers is that heavy rain negatively affected last year's second quarter. The company also benefited from slightly higher realized prices for its lime and limestone products.
- Higher natural gas prices drove a 9.7% increase in revenue from its natural gas interests. Overall, the company realized 21.2% more for its gas in the quarter, which enabled it to overcome a 9.6% drop in volumes resulting from the natural decline of production.
- Those dual fuels helped drive profit growth for the company. Overall, its lime and limestone operations reported $8.7 million in gross profit for the quarter, up from $7.2 million in the year-ago period. Meanwhile, gross profit in its natural gas interests rose to $0.1 million, which reversed a year-ago loss of $0.04 million.
What management had to say
CEO Timothy Byrne commented on the company's second-quarter results:
We are pleased that our second-quarter 2017 revenues and operating results improved over last year's second quarter as our lime and limestone operations continued to see a rebound in demand from our oil and gas services customers, as well as increased demand from our construction customers.
Last year at this time, the company's customers were battling heavy rain and weak oil and gas prices, which muted demand. However, with those headwinds abating this year, customers were able to get back to work, which drove up demand for U.S. Lime's products.
Looking forward
Despite the good news, the improving demand in the oil patch might start fading later this year because of the slump in oil prices over the past few months. In fact, according to leading oil-field service company Halliburton (HAL 1.60%), U.S. drillers are already "tapping on the brakes." While Halliburton doesn't expect drilling activities to decline, it does see the rig count "showing signs of plateauing." That suggests that U.S. Lime's ability to capture higher volumes and prices might not continue in the coming quarters.
