U.S. Silica (SLCA) to Divest Transload Assets for $75 Million

An image of multiple stacks of coins Credit: Shutterstock photo

U.S. Silica Holdings, Inc.SLCA has agreed to divest three transload terminals to CIG Logistics for $75 million in cash. The facilities, located in the Permian, Eagle Ford and Appalachian Basins, comprise roughly 70,000 tons of storage capacity. These terminals serve as critical logistics hubs for the oil and gas industry.

The deal is expected to consummate by the end of March 2018, pending financing. Under the agreement, U.S. Silica will continue to service customer requirements through the transloads that CIG Logistics will now own and operate. Simmons & Company International, Energy Specialists of Piper Jaffray, acted as financial advisor to U.S. Silica on the transaction.

U.S. Silica noted that the divestment is a continuation of its strategy to utilize partners such as CIG Logistics to manage its transloading operations. The transloads are expected to serve as the basis for a broader strategic relationship between U.S. Silica and CIG Logistics, under which the latter will serve as the preferred transload provider to U.S. Silica in the Permian Basin and Eagle Ford shale play.

U.S. Silica has underperformed the industry it belongs to for over a year. The company's shares lost around 40.9% over this period, against roughly 19.7% gain recorded by the industry.

U.S. Silica's fourth-quarter earnings missed the Zacks Consensus Estimate while sales beat. The company, in its fourth-quarter call, said that it expects flat pricing and volumes in its Oil & Gas segment in the first quarter of 2018 on a sequential comparison basis. According to the company, severe winter weather has resulted in delay in completion activities and also caused disruptions in the customer supply chain.

Nevertheless, U.S. Silica continues to evaluate opportunities for greenfield expansions in the fast-growing Permian Basin. The purchase of logistics solutions provider, Sandbox Enterprises, has also enabled U.S. Silica to offer customers significantly improved transportation and operating efficiencies and meaningful cost savings relative to the existing delivery systems. The acquisition is expected to make a meaningful contribution in 2018.

U.S. Silica currently carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Better-ranked companies in the basic materials space include Kronos Worldwide, Inc. KRO , LyondellBasell Industries N.V. LYB and Eastman Chemical Company EMN .

Kronos sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 52% over a year. You can see the complete list of today's Zacks #1 Rank stocks here .

LyondellBasell carries a Zacks Rank #1 and has an expected long-term earnings growth rate of 9%. Its shares have gained around 21% over a year.

Eastman Chemical has an expected long-term earnings growth rate of 8.9% and carries a Zacks Rank #2 (Buy). Its shares have rallied around 38% over a year.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Eastman Chemical Company (EMN): Free Stock Analysis Report

Kronos Worldwide Inc (KRO): Free Stock Analysis Report

LyondellBasell Industries N.V. (LYB): Free Stock Analysis Report

U.S. Silica Holdings, Inc. (SLCA): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

More Related Articles

Sign up for Smart Investing to get the latest news, strategies and tips to help you invest smarter.