America’s Best Small Companies
U.S. Silica Holdings (SLCA) recently was named by Forbes as the eighth best small company (revenue under $1 billion) in America. Thanks in large part to the huge growth in fracking and horizontal drilling, U.S. Silica has become the largest domestic producer of silica sand — a main ingredient along with water in the drilling of shale formations across the U.S. Although fracking has been around since the 1940s, only in recent years has it become commonplace.
The U.S. Geological Survey indicates that frac sand revenues are growing tremendously. In 2001, 5% of silica sand was used for fracking; in 2012, that number was up to 41%. Between 30 million and 40 million metric tons of frac sand will be mined in 2013, with some analysts suggesting that figure could double in 2014.
U.S. Silica’s second-quarter revenue from oil & gas proppants grew 42.5% to $77.7 million with a volume increase of 303,000 tons. If not for a slight decline in the price of some grades of frac sand, the revenue increase would have been even higher. More important, the oil & gas proppants account for 59% of revenue and 70% of its profit. CEO Bryan Shinn is certainly bullish: “For the Company as a whole, the bottom line is that our business is very strong, and we expect robust second-half performance, driven by record oil and gas demand and continued margin expansion in our industrials business.”
U.S. Silica’s been a public company for 21 months. In that time its stock has gained 106.3% through Oct. 21, 68 percentage points greater than the SPDR S&P 500 (SPY). Although analysts are mixed about its ability to continue generating market-beating results, I can’t see things slowing down given America’s move toward energy independence. Its stock might not double in the next 21 months, but I think it will do just fine heading into 2014.