Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) Q4 2019 Earnings Conference Call - Final Transcript

Feb 19, 2020 • 08:30 am ET


Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) Q4 2019 Earnings Conference Call - Final Transcript


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Good morning and welcome to the Solaris Oilfield Infrastructure Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Yvonne Fletcher, Senior Vice President, Finance and Investor Relations. Please go ahead.

Yvonne Fletcher

Good morning and welcome to the Solaris fourth quarter and full year 2019 earnings conference call. I'm joined today by our Chairman and CEO, Bill Zartler; and our President and CFO, Kyle Ramachandran.

Before we begin, I would like to remind you of our standard cautionary remarks regarding the forward-looking nature of some of the statements that we will make today. Such forward-looking statements may include comments regarding future financial results and reflect a number of known and unknown risks. Please refer to our press release issued yesterday, along with other recent public filings with the Securities and Exchange Commission that outline those risks.

I would also like to point out that our earnings release and today's conference call will contain discussion of non-GAAP financial measures, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. Reconciliations to comparable GAAP measures are available in our earnings release.

I'll now turn the call over to our Chairman and CEO, Bill Zartler.

William A. Zartler

Thank you, Yvonne. I'm pleased to share the results of the strong 2019 delivered by the Solaris team, despite a challenging market backdrop. 2019 was the first year of positive free cash flow for the Company as we began to harvest cash from investments made in prior years.

Solaris generated over $80 million in free cash flow for the year and we returned $23 million of that cash to shareholders in the form of dividends and a share repurchase program. In December, we paid our fifth consecutive quarterly dividend, which, at $0.105 per share, reflected a 5% increase over the previous dividend. We also began buying back stock under the $25 million share buyback program we announced in December. These initiatives reflect the confidence we have in Solaris' ability to continue to generate free cash flow even in a sluggish growth environment.

We generated our 2019 financial results despite unprecedented efficiency gains in horizontal drilling and completion activity in 2019 that caused overall industry frac fleet count to slow in the second half of the year. That trend was exacerbated by multiple factors. First, operators had a continued focus on spending with or below their -- within or below their operating cash flow. Two, weak natural gas prices. Three, weak NGL prices. And fourth, poor well performance in certain place. These factors resulted in many operators slowing or halting their completion activity in the fourth quarter. Our fourth quarter results reflect this slowdown as we averaged 88 fully utilized systems in the quarter, down approximately 23% from the third quarter and in line with our expectations in prior guidance.

So far in the first quarter of 2020, as we've