What: Despite the weak oil and gas market, shares of U.S. Silica Holdings (NYSE:SLCA) climbed more than 17% on the back of a steady earnings report before the month got started.
So what: The numbers in U.S. Silica's most recent earnings came nowhere close to wowing investors. Operational profits from its oil and gas proppant business declined more than 78% compared to the same quarter last year. Despite that bad news, there was actually something that was promising. One was that the company was able to offset some of these losses with gains from its industrial and specialty products business. Also, as part of the earnings announcement, CEO Bryan Shinn said that the company was actively selling higher volumes of sand to take market share from competitors in a highly fragmented market.
What these moves suggest is that the company is in the best financial shape to handle the market decline, and investors seem to be rewarding U.S. Silica for its prudence.
Now what: Frack sand supplied by U.S. Silica has become a critical component of the oil and gas industry, especially here in the U.S. When oil and gas drilling activity does pick back up again, chances are U.S. Silica will be in the best financial standing of its peers to ramp up production and spending. How long that takes is anyone's guess, but investors looking at U.S. Silica because of its relative strength in this market need to remember that we might still be a ways away from a market rebound.