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What changed in Smart Sand, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Smart Sand, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+483 added−439 removedSource: 10-K (2024-03-11) vs 10-K (2023-02-28)

Top changes in Smart Sand, Inc.'s 2023 10-K

483 paragraphs added · 439 removed · 322 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

108 edited+20 added−30 removed112 unchanged
Biggest changeIn 2020, as part of our acquisition of the Utica, Illinois mining facility, we obtained rights to use a rail terminal located in El Reno, Oklahoma. In January 2022, we began operations at an additional unit train capable transloading terminal in Waynesburg, Pennsylvania to service the Appalachian Basin, including the Marcellus and Utica Formations.
Biggest changeWe operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. The Van Hook terminal became operational in April 2018. In 2020, as part of our acquisition of the Utica, Illinois mining facility, we obtained rights to use a rail terminal located in El Reno, Oklahoma.
We produce low-cost, high quality Northern White sand, which is a premium sand used as proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications.
We produce low-cost, high quality Northern White sand, which is a premium sand used as a proppant to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications.
To address the hazards inherent in our business, we maintain insurance coverage that includes physical damage coverage, third-party general liability insurance, employer’s liability, business interruption, environmental and pollution and other coverage, although coverage for 15 environmental and pollution-related losses is subject to significant limitations.
To address the hazards inherent in our business, we maintain insurance coverage that includes physical damage coverage, third-party general liability 15 insurance, employer’s liability, business interruption, environmental and pollution and other coverage, although coverage for environmental and pollution-related losses is subject to significant limitations.
We do not believe that compliance by us with federal, state, local or international environmental laws and regulations will have a material adverse effect on our business, financial position or results of operations or cash flows.
We do not believe that compliance by us with federal, state, local or international environmental laws and regulations will have a material adverse effect on our business, financial position or our results of operations or cash flows.
The following is a discussion of material environmental and worker health and safety laws, as amended from time to time that relate to our operations or those of our customers that could have a material adverse effect on our business.
The following is a discussion of environmental and worker health and safety laws, as amended from time to time that relate to our operations or those of our customers that could have a material adverse effect on our business.
The adoption of new laws or regulations at the federal or state levels imposing reporting obligations on, or otherwise limiting or delaying, the hydraulic fracturing process could make it more difficult to complete natural gas wells, increase our customers’ costs of compliance and doing business, and otherwise adversely affect the hydraulic fracturing services they perform, which could negatively impact demand for our frac sand.
The adoption of new laws or regulations at the federal or state levels imposing reporting obligations on, or otherwise limiting or delaying, the hydraulic fracturing process could make it more difficult to complete natural gas wells, increase our customers’ costs of compliance and doing business, and adversely affect the hydraulic fracturing services they perform, which could negatively impact demand for our frac sand.
The USFWS issued a second Enhancement of Survival Permit for operations in West Texas that may affect the dunes sagebrush lizard in January 2021.
In January 2021, the USFWS issued a second Enhancement of Survival Permit for operations in West Texas that may affect the dunes sagebrush lizard.
In January 2020, the White House Council on Environmental Quality (“CEQ”) published a Notice of Proposed Rulemaking that would revise NEPA’s implementing regulations, with the stated purpose of facilitating more efficient and timely NEPA reviews. In July 2020, CEQ issued a final rule implementing the January 2020 proposal. However, several states and environmental groups 19 filed challenges to this rulemaking.
In January 2020, the White House Council on Environmental Quality (“CEQ”) published a Notice of Proposed Rulemaking that would revise NEPA’s implementing regulations, with the stated purpose of facilitating more efficient and timely NEPA reviews. In July 2020, CEQ issued a final rule implementing the January 2020 proposal. However, several states and environmental groups filed challenges to this rulemaking.
Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and detach from the wellsite equipment, which allows for removal from the wellsite during operation. We have also developed a proprietary software program, the SmartSystem Tracker™, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory.
Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and detach from the wellsite equipment, which allows for removal from the wellsite during operation. We have also developed 8 a proprietary software program, the SmartSystem Tracker™, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory.
Wisconsin has specific permitting and review processes for commercial silica mining operations, and state agencies may impose different or additional monitoring or mitigation requirements than federal agencies. The development of new sites and our existing operations also are subject to a variety of local environmental and regulatory requirements, including land use, zoning, building, and transportation requirements.
Wisconsin has specific permitting and review processes for commercial silica mining operations, and state agencies may impose different or additional monitoring or mitigation requirements than 19 federal agencies. The development of new sites and our existing operations also are subject to a variety of local environmental and regulatory requirements, including land use, zoning, building, and transportation requirements.
Since 2016, Smart Sand has maintained International Organization for Standardization (“ISO”) ISO 9001 and ISO 14001 registrations for our quality management system and environmental management system programs, respectively, for our Oakdale facility. We earned initial ISO 9001 registration for our Utica, IL facility in 2022. We also have attained Green Professional status in Wisconsin’s Green Master sustainability recognition program.
Since 2016, Smart Sand has maintained International Organization for Standardization (“ISO”) ISO 9001 and ISO 14001 registrations for our quality management system and environmental management system programs, respectively, for our Oakdale facility. We earned initial ISO 9001 registration for our Utica, IL facility in 12 2022. We also have attained Green Professional status in Wisconsin’s Green Master sustainability recognition program.
We are one of a select group of companies who are members of the Wisconsin Industrial Sand Association, which promotes safe and environmentally responsible sand mining standards. 12 Our Customers Our core customers are oil and natural gas exploration and production and oilfield service companies. In late 2021, we began diversifying our sand sales to include IPS to customers.
We are one of a select group of companies who are members of the Wisconsin Industrial Sand Association, which promotes safe and environmentally responsible sand mining standards. Our Customers Our core customers are oil and natural gas exploration and production and oilfield service companies. In late 2021, we began diversifying our sand sales to include IPS to customers.
During most of 2020, demand for frac sand declined significantly as a result of decreased demand for oil and natural gas as a result of the ongoing effects of the coronavirus (“COVID-19”) pandemic, which caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide.
During most of 2020, demand for frac sand declined significantly as a result of decreased demand for oil and natural gas as a result of the effects of the coronavirus (“COVID-19”) pandemic, which caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide.
We believe that by executing these business strategies, we will be able to increase long-term stockholder value. We expect to achieve this objective through the following business strategies: • Diversifying our customer base to include Industrial Product Solutions. In late 2021, we expanded our product offering to provide IPS for industrial customers.
We believe that by 9 executing these business strategies, we will be able to increase long-term stockholder value. We expect to achieve this objective through the following business strategies: • Diversifying our customer base to include Industrial Product Solutions. In late 2021, we expanded our product offering to provide IPS for industrial customers.
We have the ability to simultaneously accommodate multiple unit trains on-site with the Canadian Pacific rail network while also having the ability to ship our frac sand directly to our customers on a second Class I rail carrier through our transloading facility located on the Union Pacific rail network approximately three miles from our Oakdale facility.
We have the ability to simultaneously accommodate multiple unit trains on-site with the Canadian Pacific rail network while also having the ability to ship our frac sand directly to our customers on a second Class I rail carrier through our transloading facility located on the Union Pacific rail network approximately three miles from our Oakdale operations.
Young is the brother of William John Young, our Chief Operating Officer, and James D. Young, our Executive Vice President, General Counsel and Secretary. We believe that Mr. Young’s industry experience and deep knowledge of our business makes him well suited to serve as Chief Executive Officer and Director. 20 Lee E. Beckelman Lee E.
Young is the brother of William John Young, our Chief Operating Officer, and James D. Young, our Executive Vice President, General Counsel and Secretary. We believe that Mr. Young’s industry experience and deep knowledge of our business makes him well suited to serve as Chief Executive Officer and Director. Lee E. Beckelman Lee E.
The permits cover incidental “take” of the dunes sagebrush lizard associated with oil and gas exploration and development, sand mining, renewable energy development and operations, pipeline construction and operations, local government activities, agricultural activities, and general construction activities within the permit area that could affect suitable habitat.
These permits cover incidental “take” of the habitat of the dunes sagebrush lizard associated with oil and gas exploration and development, sand mining, renewable energy development and operations, pipeline construction and operations, local government activities, agricultural activities, and general construction activities within the permit area that could affect suitable habitat.
Young was a Director of Sales for Comcast Corporation from 2002 to 2011. Mr. Young brings over 25 years of experience in the mining, commercial telecommunications and broadband industries. Mr. Young received a BSc in Biology from Dalhousie University. Mr. Young is the brother of Charles E.
Young was a Director of Sales for Comcast Corporation from 2002 to 2011. Mr. Young brings over 25 years of experience in the mining, commercial telecommunications and broadband industries. Mr. Young received a BSc in Biology from Dalhousie 20 University. Mr. Young is the brother of Charles E.
This terminal has allowed us to expand our customer base and to offer more efficient delivery options to customers operating in the Bakken Formation in the Williston Basin. In January 2022 we began operating the terminal in Waynesburg, Pennsylvania to service the Appalachian Basin, including the Marcellus and Utica Formation.
This terminal has allowed us to expand our customer base and to offer more efficient delivery options to customers operating in the Bakken Formation in the Williston Basin. In January 2022 we began operating the terminal in Waynesburg, Pennsylvania to service the Appalachian Basin, including the Marcellus and Utica Formations.
For the year ended December 31, 2022, Equitable Gas Corporation, Halliburton Energy Services, Encino Energy, and Liberty Oilfield Services accounted for 22.3%, 15.4%, 14.4%, and 13.7%, respectively, of total revenue, and the remainder of our revenues were from 63 customers.
For the year ended December 31, 2022, Equitable Gas Corporation, Halliburton Energy Services, Encino Energy, and Liberty Oilfield Services accounted for 22.3%, 15.4%, 14.4%, and 13.7% respectively, of our total revenues, and the remainder of our revenues were from 63 customers.
In the course of our operations, we generate waste that is regulated as non-hazardous wastes and hazardous wastes, obligating us to comply with applicable standards relating to the management and disposal of such wastes.
In the course of our operations, we generate waste that is regulated as non-hazardous waste and hazardous waste, obligating us to comply with applicable standards relating to the management and disposal of such waste.
Additionally, having a presence in-basin gives us an opportunity to have a base of operations from which to market and support our SmartSystems wellsite proppant storage solutions.
Additionally, having a presence in-basin gives us an opportunity to have a base of operations from which to market and support our SmartSystems wellsite storage and proppant management solutions.
In June 2022, the MSHA launched a new enforcement initiative to better protect U.S. miners from health hazards resulting from repeated overexposure to respirable crystalline silica.
Additionally, in June 2022, the MSHA launched a new enforcement initiative to better protect U.S. miners from health hazards resulting from repeated overexposure to respirable crystalline silica.
The SEC also maintains a website that contains reports, proxy and 21 information statements and other information statements and other information regarding issuers who file electronically with the SEC. The SEC’s website address is www.sec.gov .
The SEC also maintains a website that contains reports, proxy and information statements and other information statements and other information regarding issuers who file electronically with the SEC. The SEC’s website address is www.sec.gov .
We intend to continue pursuing opportunities to maximize the value and the utilization of our Oakdale and Utica facilities through the addition of new customers and increased sales volumes.
We intend to continue pursuing opportunities to maximize the value and the utilization of our Oakdale, Utica, and Blair facilities through the addition of new customers and increased sales volumes.
However, it is possible that certain oil and natural gas drilling and production wastes now classified as non-hazardous could be classified as hazardous wastes in the future.
However, it is possible that certain oil and natural gas drilling and production wastes now classified as non-hazardous could be classified as hazardous waste in the future.
Should our customer base continue to limit their exposure to longer term contracts, we will continue to focus on shorter term contracts and increasing sales in the spot market. Customers renting SmartSystems are able to tailor the contract, including adjusting the number of SmartDepot silos and SmartPath transloaders to be supplied, to meet their short-term and long-term needs.
Should our customer base continue to limit their exposure to longer term contracts, we will continue to focus on shorter term contracts and increasing sales in the spot market. Customers renting SmartSystems are able to tailor the contract, including adjusting the number of SmartDepot silos, SmartPath transloaders and SmartBelt conveyors to be supplied, to meet their short-term and long-term needs.
Activity in the oil and gas industry began to rebound in the fourth quarter of 2020 and through 2021 as the global distribution of COVID-19 vaccines ramped up and travel restrictions lessened. However, the prices of frac sand remained depressed during 2021 as supply remained out of balance with demand even though market activity was improving.
Activity in the oil and gas industry began to rebound in the fourth quarter of 2020 and continued to improve through 2021 as the global distribution of COVID-19 vaccines ramped up and travel restrictions lessened. However, the prices of frac sand remained depressed during 2021 as supply remained out of balance with demand even though market activity was improving.
We also believe that having our mine, processing facilities and primary rail loading facilities in close proximity provides us with an overall low-cost structure, which enables us to compete effectively for sales of Northern White frac sand and to achieve attractive operating margins. • Intrinsic logistics advantage.
We also believe that having our mines, processing facilities and primary rail loading facilities in close proximity provides us with an overall low-cost structure, which enables us to compete effectively for sales of Northern White frac sand and to achieve attractive operating margins. • Intrinsic logistics advantage.
In addition to documenting seven years of compliant operations, we have worked on, among other things, protecting wetlands, reducing usage and impact of heavy equipment, reducing fuel usage of equipment and vehicles and defining best practices for onsite water management. We are also a member of Wisconsin’s sustainability initiative, Green Masters.
In addition to documenting 11 years of compliant operations, we have worked on, among other things, protecting wetlands, reducing usage and impact of heavy equipment, reducing fuel usage of equipment and vehicles and defining best practices for onsite water management. We are also a member of Wisconsin’s sustainability initiative, Green Masters.
Depending on the particular program, we could be required to control GHG emissions or to purchase and surrender allowances for GHG emissions resulting from our operations. Independent of Congress, the U.S. Environmental Protection Agency (“EPA”) has adopted regulations controlling GHG emissions under its existing authority.
Depending on the particular program, we could be required to monitor, report, or control GHG emissions or to purchase and surrender allowances for GHG emissions resulting from our operations. Independent of Congress, the U.S. Environmental Protection Agency (“EPA”) has adopted regulations controlling GHG emissions under its existing authority.
We have direct access to four Class I rail lines in North America and indirect access to all Class I rail lines, which gives us superior advantage over many of our competitors by allowing us to offer more competitive pricing and delivery options to our customers. • Sufficient liquidity and financial flexibility.
We have direct access to four Class I rail lines in North America and indirect access to all Class I rail lines, which gives us an advantage over many of our competitors by allowing us to offer more competitive pricing and delivery options to our customers. • Sufficient liquidity and financial flexibility.
A loss of the RCRA exclusion for drilling fluids, produced 17 waters and related wastes could result in an increase in our customers’ costs to manage and dispose of generated wastes and a corresponding decrease in their drilling operations, which developments could have a material adverse effect on our business.
A loss of the RCRA exclusion for drilling fluids, produced waters and related waste could result in an increase in our customers’ costs to manage and dispose of generated wastes and a corresponding decrease in their drilling operations, which developments could have a material adverse effect on our business.
As part of this program, we have completed a detailed survey of our sustainability and social responsibility activities and started the process of a complete carbon inventory. As a mining company, we invest and plan for reclamation, ensuring that the land is returned to beneficial use.
As part of this program, we have completed a detailed survey of our sustainability and social responsibility activities and started the process of completing carbon inventory. As a mining company, we invest and plan for reclamation, ensuring that the land is returned to beneficial use.
We believe that, among other things, the size and favorable geologic characteristics of our sand reserves, the strategic location and logistical advantages of our facilities, our proprietary SmartDepot TM portable wellsite proppant storage silos, SmartPath TM transloader, access to all Class I rail lines, and the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.
We believe that, among other things, the size and favorable geologic characteristics of our sand reserves, the strategic location and logistical advantages of our facilities, our proprietary SmartDepot TM portable wellsite proppant storage silos, our proprietary SmartPath ® transloader, our proprietary SmartBelt TM conveyor system, access to all Class I rail lines, and the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.
While we continue to look for long-term contract opportunities, we intend to increase focus on shorter term contracts and increase sales in the spot market given the reluctance of our customers to enter into long-term take-or-pay contracts in the current market environment.
While we continue to look for long-term contract opportunities, we intend to continue to focus on shorter term contracts and increase sales in the spot market given the reluctance of many customers to enter into long-term take-or-pay contracts in the current market environment.
Our first priority is keeping our employees safe, which we accomplish through daily training and inspections. Our business supports hundreds of families and we are proud to offer rewarding and interesting work with competitive compensation and benefits.
Our first priority is keeping our employees safe, which we implement through daily training and inspections. Our business supports hundreds of families and we are proud to offer rewarding and interesting work with competitive compensation and benefits.
We market our products and services to oil and natural gas exploration and production companies, oilfield service companies and industrial manufacturers. We sell our sand through long-term contracts or spot sales in the open market. We provide wellsite proppant storage solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers.
We market our products and services to oil and natural gas exploration and production companies, oilfield service companies and industrial manufacturers. We sell our sand through short-term and long-term contracts or spot sales in the open market. We provide wellsite proppant handling solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers.
This capability creates efficiencies, flexibility, enhanced safety and reliability for customers. Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, SmartPath transloader, and our rapid deployment trailers. Our SmartDepot 8 silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation.
This capability creates efficiencies, flexibility, enhanced safety and reliability for customers. Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, the SmartBelt conveyor, SmartPath transloader, and our rapid deployment trailers. Our SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation.
Finally, we believe that the adoption of our SmartSystems provides improved efficiencies in shipping and storing sand at the wellsite through reduced trucking requirements, which removes traffic from the roads, lowers diesel fuel consumption, thereby providing incremental value to our customers by reducing their carbon emissions and meeting their ESG initiatives.
Finally, we believe that the adoption of our SmartSystems provides improved efficiencies in shipping and storing sand at the wellsite through reduced trucking requirements, which removes traffic from the roads and lowers diesel fuel consumption, thereby providing incremental value to our customers by reducing their carbon emissions.
For the year ended December 31, 2021, Equitable Gas Corporation, Halliburton Energy Services, and Liberty Oilfield Services accounted for 24.3%, 18.3%, and 14.8%, respectively, of our total revenues, and the remainder of our revenues were from 20 customers. For the year ended December 31, 2020, Equitable Gas Corporation, Liberty Oilfield Services, and U.S.
For the year ended December 31, 2021, Equitable Gas Corporation, Halliburton Energy Services, and Liberty Oilfield Services accounted for 24.3%, 18.3% and, 14.8%, respectively, of our total revenues, and the remainder of our revenues were from 20 customers.
We believe that demand for our products will remain strong in basins where regional sand is not an attractive alternative due to the logistics and performance advantages of Northern White Sand, such as the Bakken in North Dakota, and the Marcellus and Utica formations in the Northeast region of the United States.
We believe that demand for our products will remain strong in basins where regional sand is not an attractive alternative due to the logistics and performance advantages of Northern White Sand, such as the Bakken in North Dakota, the Marcellus and Utica formations in the Appalachian Basin of the Northeast region of the United States, and shale basins in Canada.
We believe our three frac sand mines in Oakdale, Wisconsin, Utica, Illinois and Blair, Wisconsin have a uniquely desirable combination of a large high-quality reserves of fine mesh sand that is contiguous to their production with either on-site or close proximity to primary rail loading facilities.
We believe our three sand mines in Oakdale, Wisconsin, Utica, Illinois and Blair, Wisconsin have a uniquely desirable combination of large high-quality reserves of fine mesh sand that is contiguous to their production and have primary rail loading facilities that are either on site or are in close proximity to the mines.
Specifically, the silica enforcement initiative will include: • Spot inspections at mines with a history of repeated silica overexposures to closely monitor and evaluate health and safety conditions. • Increased oversight and enforcement of known silica hazards at mines with previous citations for exposing miners to silica dust levels over the existing permissible exposure limit of 100 micrograms.
Specifically, the silica enforcement initiative includes: 18 • Spot inspections at mines with a history of repeated silica overexposures to closely monitor and evaluate health and safety conditions. • Increased oversight and enforcement of known silica hazards at mines with previous citations for exposing miners to silica dust levels over the existing permissible exposure limit of 100 micrograms.
We cannot ensure that existing environmental laws and regulations will not be reinterpreted 14 or revised or that new environmental laws and regulations will not be adopted or become applicable to us. Revised or additional environmental requirements that result in increased compliance costs or additional operating restrictions could have a material adverse effect on our business.
We cannot ensure that existing environmental, health and safety (“EHS”) laws and regulations will not be reinterpreted or revised or that new EHS laws and regulations will not be adopted or become applicable 14 to us. Revised or additional EHS requirements that result in increased compliance costs or additional operating restrictions could have a material adverse effect on our business.
In particular, we currently believe that Northern White frac sand has logistical advantages in the Marcellus, Bakken, and Canada basins.
In particular, we currently believe that Northern White frac sand has logistical advantages in the Marcellus, Utica, Bakken, and shale basins in Canada.
We are a Tier 1 participant in The Wisconsin Department of Natural Resources’ Green Tier program, which encourages, recognizes and rewards companies for voluntarily exceeding environmental, health and safety legal requirements.
We are a Tier 1 participant in The Wisconsin Department of Natural Resources’ Green Tier program, which encourages, recognizes and rewards companies for voluntarily exceeding environmental, health and safety standards.
We expect to continue to capitalize on our Oakdale facility’s ability to ship on two Class I rail carriers to maximize our product shipment rates, increase our railcar utilization and lower our transportation costs.
We expect to continue to capitalize on our Oakdale facility’s ability to ship on two Class I rail carriers to maximize our product shipments, increase our railcar utilization and lower our transportation costs.
We believe the ability to obtain large contiguous reserves in these areas is a key constraint and can be an important supply consideration when assessing the economic viability of a potential frac sand processing facility.
We believe the ability to obtain large contiguous reserves in these areas is a key constraint for potential new Northern White frac sand supply and can be an important supply consideration when assessing the economic viability of a potential frac sand processing facility.
While we anticipate that regional sand will continue to affect the demand for Northern White sand in some of the oil and natural gas producing basins in which we operate, we believe there will continue to be demand for our high-quality Northern White frac sand.
While we anticipate that regional sand will continue to affect the demand for Northern White sand in some of the oil and natural gas producing basins in which we market our products. However, we believe there will continue to be demand for our high-quality Northern White frac sand.
If the dunes sagebrush lizard is listed as an endangered or threatened species, our operations and the operations of our customers in any area that is designated as the dunes sagebrush lizard’s habitat may be limited, delayed or, in some circumstances, prohibited, and our customers could be required to comply with expensive conservation measures intended to protect the dunes sagebrush lizard and its habitat.
In turn, if the dunes sagebrush lizard is listed, our operations and the operations of our customers in any area that is designated as the dunes sagebrush lizard’s habitat may be limited, delayed or, in some circumstances, prohibited, and our customers could be required to comply with expensive conservation measures intended to protect the dunes sagebrush lizard and its habitat.
We have also developed a proprietary software program, the SmartSystem Tracker, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory. We are capable of delivering sand to any onshore operating basin in the United States and Canada.
We have also developed a proprietary software program, the SmartSystem Tracker, which allows our SmartSystems customers to monitor silo-specific information, including location, proppant type and proppant inventory. We are capable of delivering sand to substantially all onshore operating basins in the United States and Canada.
While we are not aware of any misstatements regarding the proppant industry data presented herein, estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors.” Demand Trends According to Spears, the North American proppant market, including frac sand, ceramic and resin-coated proppant, was approximately 128 million tons in 2022, which is approximately a 25% increase from the 102 million tons Spears reported for 2021.
While we are not aware of any misstatements regarding the proppant industry data presented herein, estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors.” Demand Trends According to Spears, the North American proppant market, including frac sand, ceramic and resin-coated proppant, was approximately 132 million tons in 2023, which is approximately a 5% increase from the 127 million tons Spears reported for 2022.
Additionally, continued high inflation and other economic factors could lead to a global economic recession that could have a negative impact on global oil and natural gas demand, which may lead to continued volatility in the oil field service sector. We cannot predict if positive pricing trends will continue or if sand prices will increase, decrease or stabilize.
Additionally, other economic factors, including continued high inflation and other economic factors could lead to a global economic recession that could have a negative impact on global oil and natural gas demand, which may lead to continued volatility in the oil field service sector. We cannot predict if frac sand prices will increase, decrease or stabilize.
The listed territory of the Southern DPS could overlap with the operating areas of some of our customers. 18 To the extent species are listed under the ESA or similar state laws, or are protected under the MBTA, or previously unprotected species are designated as threatened or endangered in areas where we or our customers operate, we could experience increased costs arising from species protection measures and delays or limitations in our or our customers’ performance of operations, which could adversely affect or reduce demand for our frac sand.
To the extent species are listed under the ESA or similar state laws, or are protected under the MBTA, or previously unprotected species are designated as threatened or endangered in areas where we or our customers operate, we could experience increased costs arising from species protection measures and delays or limitations in our or our customers’ performance of operations, which could adversely affect or reduce demand for our frac sand.
The ABL Credit Facility matures on December 13, 2024. Our total available liquidity among cash and available borrowings was $24.5 million as of December 31, 2022. • Experienced management team. The members of our senior management team bring significant experience to the market environment in which we operate.
The ABL Credit Facility matures on December 13, 2024. Our total available liquidity among cash and available borrowings was $18.1 million as of December 31, 2023. • Experienced management team. The members of our senior management team bring significant experience to the market environment in which we operate.
Further, we have a $20 million senior secured asset-based lending credit facility with Jefferies Finance LLC, under which we had undrawn availability of $19.0 million as of December 31, 2022 and no outstanding borrowings. The available borrowing amount under the ABL Credit Facility is based on the Company’s eligible accounts receivable and inventory.
Further, we have a $20.0 million senior secured asset-based lending credit facility with Jefferies Finance LLC, under which we had undrawn availability of $12.0 million as of December 31, 2023 and $8.0 million in outstanding borrowings. The available borrowing amount under the ABL Credit Facility is based on the Company’s eligible accounts receivable and inventory.
We are committed to maintaining a culture that prioritizes safety, the environment and our relationship with the communities in which we operate, actions we believe are critical to the success of our business.
We aim to maintain a culture that prioritizes safety, the environment and our relationship with the communities in which we operate, actions we believe are critical to the success of our business.
We believe that coupling our premium proppant with long-term sustainable logistics supply services may mitigate the potential cost savings of using regional sand. Demand for frac sand increased during 2022, from the all-time lows in 2020, following the decline in demand for oil driven primarily by reduced demand as a result of the COVID-19 pandemic.
We believe that coupling our premium proppant with long-term sustainable logistics supply services may mitigate the potential cost savings of using regional sand. 10 Demand for frac sand has continued to increase during 2023, from the all-time lows in 2020, following the decline in demand for oil driven primarily by reduced demand as a result of the COVID-19 pandemic.
While we are still in the early stages of this business, we believe that as it grows, it will provide us with the ability to diversify our sales into more stable, consumer-driven products to help mitigate price volatility in the oil and gas industry.
We believe that as this business grows, it will provide us with the ability to diversify some of our sales into more stable, consumer-driven products to help mitigate the price volatility that we are exposed to in the oil and gas industry.
We believe we have sufficient liquidity to support our operations and pursue our growth initiatives. As of December 31, 2022, we had cash on hand of $5.5 million.
We believe we have sufficient liquidity to support our operations and pursue our growth initiatives. As of December 31, 2023, we had cash on hand of $6.1 million.
While sales of IPS to customers were a small portion of our overall sand sales in 2022, we intend to increase our focus on IPS in 2023 and going forward.
While sales of IPS to customers were a small portion of our overall sand sales in 2023, we intend to continue increasing our focus on IPS in 2024 and going forward.
Please read “Risk Factors—Risks Inherent in Our Business—A substantial majority of our revenues have been generated under contracts with a limited number of customers, and the loss of, material nonpayment or nonperformance by or significant reduction in purchases by any of them could adversely affect our business, results of operations and financial condition.” Capital Plans We expect 2023 capital expenditures to be between $20.0 million and $25.0 million, consisting primarily of capital for efficiency projects at Oakdale, Utica and our in-basin terminals, investments in our facilities to support incremental IPS activity and capital to bring the Blair mine and processing facility online over the course of the year.
Please read “Risk Factors—Risks Inherent in Our Business—A substantial majority of our revenues have been generated under contracts with a limited number of customers, and the loss of, material nonpayment or nonperformance by or significant reduction in purchases by any of them could adversely affect our business, results of operations and financial condition.” Capital Plans We expect 2024 capital expenditures to be between $19.0 million and $23.0 million, consisting primarily of capital for efficiency projects at our mine and processing facilities and our in-basin terminals, along with investments in our facilities to support incremental IPS activity.
In 2014, we joined the Wisconsin Green Tier program, a marquee public/private partnership, under which the Wisconsin Department of Natural Resources worked with us on a plan to meet applicable legal requirements and to improve our facility from an environmental perspective.
Environmental, Social & Governance Smart Sand already has a strong record of environmental performance. In 2014, we joined the Wisconsin Green Tier program, a marquee public/private partnership, under which the Wisconsin Department of Natural Resources worked with us on a plan to meet applicable legal requirements and to improve our facility from an environmental perspective.
We are in the early stages of the industrial sand business and expect 9 to expand and diversify to serve the vital industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more. • Expanding and optimizing our existing logistics infrastructure and developing additional origination and destination points.
We are still in the early stages of the industrial sand business, but this business has incrementally grown since its inception and we and expect to continue to expand and diversify to serve the vital industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more. • Expanding and optimizing our existing logistics infrastructure and developing additional origination and destination points.
In 2022, the ongoing conflict in Ukraine and economic actions taken by the United States and other countries in connection with such conflict have contributed to dramatic swings in oil and natural gas prices and significant volatility in the oilfield service sector.
The ongoing conflict in Ukraine and recent developments in the Middle East, as well as economic actions taken by the United States and other countries in connection with such conflicts, have contributed to dramatic swings in oil and natural gas prices and significant volatility in the oilfield service sector.
We operate a multi-unit train capable transloading terminal in Van Hook, North Dakota, which we believe allows us to be one of the most efficient and low-cost sources of frac sand in the Bakken Formation in the Williston Basin.
We also operate several terminals throughout the United States, including a multiple unit train capable transloading terminal in Van Hook, North Dakota, which we believe allows us to be one of the most efficient and low-cost sources of frac sand in the Bakken Formation in the Williston Basin.
President Biden and the Democratic Party, have identified climate change as a priority, and it is likely that new executive orders, regulatory action, and/or legislation targeting GHG emissions, or prohibiting, delaying or restricting oil and gas development activities in certain areas, will be proposed and/or promulgated during the Biden Administration.
President Biden has identified climate change as a priority, and executive orders, regulatory action, and/or legislation targeting GHG emissions, or prohibiting, delaying or restricting oil and gas development activities in certain areas, have been proposed and/or promulgated during the Biden Administration.
We believe that we are one of the few frac sand producers with a facility custom-designed for the specific purpose of delivering frac sand to all of the major U.S. oil and natural gas producing basins by an on-site rail facility that can simultaneously accommodate multiple unit trains.
We believe that we are one of the few frac sand producers with a network of facilities custom-designed for the specific purpose of delivering frac sand to all of the major U.S. oil and natural gas producing basins by having rail facilities that can simultaneously accommodate multiple unit trains on site or in close proximity to our mining and processing operations.
As of December 31, 2022, we have an estimated life of mine of approximately 62 years at Oakdale, 107 years at Utica, and 46 years at Blair, based on our current expected sales volumes.
As of December 31, 2023, we have an estimated life of mine of approximately 61 years at Oakdale, 106 years at Utica, and 45 years at Blair, based on our current expected sales volumes.
Industry Trends Impacting Our Business Unless otherwise indicated, the information set forth under this section, including all statistical data and related forecasts, is derived from Spears’ “Proppant Market Report with Frac Market Overview - Q4 2022” published in the first quarter of 2023.
Industry Trends Impacting Our Business Unless otherwise indicated, the information set forth under this section, including all statistical data and related forecasts, is derived from Spears’ “Hydraulic Fracturing Market - Q4 2023” published in the first quarter of 2024.
Smart Sand has held ISO 9001/14001-2015 environmental and quality management systems for the past five years. Smart Sand is also a member of the Wisconsin Industrial Sand Association, a select group of mining companies focused on safety, environmental and public policy. One of the goals of the United Nations’ Paris Agreement is a carbon neutral world by the year 2050.
Smart Sand has held ISO 9001/14001-2015 environmental and quality management systems for the past nine years. Smart Sand is also a member of the Wisconsin Industrial Sand Association, a select group of mining companies focused on safety, environmental and public policy.
Our second mine at Utica, Illinois and related transloading terminal in Peru, Illinois added new origination and destination points to our existing capabilities and offers additional capability to ship products on a third Class I rail carrier, the BNSF.
Our mine at Utica, Illinois and related transloading terminal in Peru, Illinois added new origination and destination points to our existing capabilities and offers additional capability to ship products on a third Class I rail carrier, the BNSF. Our Blair, Wisconsin mine with onsite rail infrastructure provides us with direct access to the Class 1 Canadian National Railway.
In addition, where contamination may be present, it is not uncommon for the neighboring landowners and other third parties to file claims for personal injury, property damage and recovery of response costs. We have not received notification that we may be potentially responsible for cleanup costs under CERCLA at any site.
In addition, where contamination may be present, it is not uncommon for the neighboring landowners and other third parties to file claims for personal injury, property damage and recovery of response costs.
Our most recent annual report required under the Tier 1 protocol was submitted to the Green Tier Program contact on August 1, 2019. Employees As of December 31, 2022, we employed 328 people, of which 54 were employed under collective bargaining agreements.
Our most recent annual report required under the Tier 1 protocol was submitted to the Green Tier Program contact on March 2023. Employees As of December 31, 2023, we employed 378 people, of which 42 were employed under collective bargaining agreements. The current collective bargaining agreements expire April 30, 2024.
We recognize revenue in our results of operations in the period in which the obligation becomes due. In the current market, many of our customers are disinclined to enter into long-term contracts for their frac sand supply and have instead purchased their frac sand supply in the spot market or under short-term contractual arrangements at market prices.
We recognize revenue in our results of operations in the period in which the obligation becomes due. While we have increased our long term take-or-pay contracts over the past year, currently many customers prefer to source their frac sand supply in the spot market or under short-term contractual arrangements at market prices.
With this acquisition, we now have direct access to four Class I rail lines and the ability to access all Class 1 rail lines within the United States and Canada. We believe the Blair facility will be operational in the second quarter of 2023.
We now have access to all Class 1 rail lines within the United States and Canada. The Blair facility began operations in the second quarter of 2023.
The climate change executive order also directed the federal government to identify “fossil fuel subsidies” to take steps to ensure that, to the extent consistent with applicable law, federal funding is not directly subsidizing fossil fuels. Legal challenges to the executive order have been filed.
The climate change executive order also directed the federal government to identify “fossil fuel subsidies” to take steps to ensure that, to the extent consistent with applicable law, federal funding is not directly subsidizing fossil fuels. On January 26, 2024, the Biden Administration implemented a temporary pause on the U.S.
We incorporated in Delaware in July 2011 and began operations at our Oakdale, Wisconsin facility with 1.1 million tons of annual processing capacity in July 2012. Through multiple expansions at Oakdale and the acquisition of the Utica, Illinois facility in September 2020, the Company has current annual processing capacity of approximately 7.1 million tons.
We incorporated in Delaware in July 2011 and began operations at our Oakdale, Wisconsin facility in July 2012 with 1.1 million tons of annual processing capacity. After several expansions our current annual processing capacity at our Oakdale facility is approximately 5.5 million tons.
We know that energy consumption is only one part of ethical operations and we will continue to work to manage our carbon footprint in an efficient and responsible manner.
One of the goals of the United Nations’ Paris Agreement is for the world to become carbon neutral by the year 2050. We know that energy consumption is only one part of ethical operations, and we plan to continue to work to manage our carbon footprint in an efficient and responsible manner.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeFurthermore, the borrowing base under our ABL Credit Facility is recalculated from time to time based on our eligible accounts receivable and inventory. Decreases in our eligible accounts receivable and inventory may limit our available borrowing levels and may require us to comply with certain financial ratios. We face distribution and logistical challenges in our business.
Biggest changeDecreases in our eligible accounts receivable and inventory may limit our available borrowing levels and may require us to comply with certain financial ratios. We may not be able to renew the ABL Credit Facility or secure a new credit facility on favorable terms, or at all, which would adversely affect our business, financial condition and/or cash flows.
Our operations are exposed to potential natural disasters, including blizzards, tornadoes, storms, floods, other adverse weather conditions and earthquakes. In addition, our employees could be subject to a COVID-19 outbreak at one or more of our facilities.
Our operations are exposed to potential natural disasters, including blizzards, tornadoes, storms, floods, other adverse weather conditions and earthquakes. In addition, our employees could be subject to a COVID-19 or other outbreak at one or more of our facilities.
As a result of market conditions, premiums and deductibles for certain of our insurance policies have increased and could escalate further. In addition, sub-limits have been imposed for certain risks. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage.
As a result of market conditions, premiums and deductibles for some of our insurance policies have increased and could escalate further. In addition, sub-limits have been imposed for certain risks. In some instances, certain insurance could become unavailable or available only for reduced amounts of coverage.
Aside from state laws, local land use restrictions may restrict drilling in general or hydraulic fracturing in particular. Municipalities may adopt local ordinances attempting to prohibit hydraulic fracturing altogether or, at a minimum, allow such fracturing processes within their jurisdictions to proceed but regulating the time, place and manner of those processes.
Aside from state laws, local land use restrictions may restrict drilling in general or hydraulic fracturing in particular. Municipalities may adopt local ordinances attempting to prohibit hydraulic fracturing altogether or, at a minimum, to allow such fracturing processes within their jurisdictions to proceed but regulating the time, place and manner of those processes.
In addition to the risks described in this section, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: • our operating and financial performance; • quarterly variations in the rate of growth of our financial indicators, such as revenues, EBITDA, Adjusted EBITDA, contribution margin, free cash flow, net income, and net income per share; • the public reaction to our press releases, our other public announcements, and our filings with the SEC; • strategic actions by our competitors; • our failure to meet revenue or earnings estimates by research analysts or other investors; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • the failure of research analysts to cover our common stock; • sales of our common stock by us or our stockholders, or the perception that such sales may occur; • changes in accounting principles, policies, guidance, interpretations, or standards; • additions or departures of key management personnel; • actions by our stockholders; 36 • general market conditions, including fluctuations in commodity prices, sand-based proppants, or industrial and recreational sand-based products; • domestic and international economic, legal and regulatory factors unrelated to our performance; and • the realization of any risks described under this “Risk Factors” section.
In addition to the risks described in this section, the market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including: • our operating and financial performance; • quarterly variations in the rate of growth of our financial indicators, such as revenues, EBITDA, Adjusted EBITDA, contribution margin, free cash flow, net income, and net income per share; • the public reaction to our press releases, our other public announcements, and our filings with the SEC; • strategic actions by our competitors; • our failure to meet revenue or earnings estimates by research analysts or other investors; • changes in revenue or earnings estimates, or changes in recommendations or withdrawal of research coverage, by equity research analysts; • speculation in the press or investment community; • the failure of research analysts to cover our common stock; 36 • sales of our common stock by us or our stockholders, or the perception that such sales may occur; • changes in accounting principles, policies, guidance, interpretations, or standards; • additions or departures of key management personnel; • actions by our stockholders; • general market conditions, including fluctuations in commodity prices, sand-based proppants, or industrial and recreational sand-based products; • domestic and international economic, legal and regulatory factors unrelated to our performance; and • the realization of any risks described under this “Risk Factors” section.
In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including: • advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; • provisions that divide our board of directors into three classes of directors, with the classes to be as nearly equal in number as possible; • provisions that prohibit stockholder action by written consent after the date on which our Principal Stockholders collectively cease to beneficially own at least 50% of the voting power of the outstanding shares of our stock entitled to vote; • provisions that provide that special meetings of stockholders may be called only by the board of directors or, for so long as a Principal Stockholder continues to beneficially own at least 20% of the voting power of the outstanding shares of our stock; • provisions that provide that our stockholders may only amend our certificate of incorporation or bylaws with the approval of at least 66 2/3% of the voting power of the outstanding shares of our stock entitled to vote, or for so long as our Principal Stockholders collectively continue to beneficially own at least 50% of the voting power of the outstanding shares of our stock entitled to vote, with the approval of a majority of the voting power of the outstanding shares of our stock entitled to vote; • provisions that provide that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and 38 • provisions that establish advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
In addition, some provisions of our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for a third party to acquire control of us, even if the change of control would be beneficial to our stockholders, including: • advance notice provisions for stockholder proposals and nominations for elections to the board of directors to be acted upon at meetings of stockholders; • provisions that divide our board of directors into three classes of directors, with the classes to be as nearly equal in number as possible; • provisions that prohibit stockholder action by written consent after the date on which our Principal Stockholders collectively cease to beneficially own at least 50% of the voting power of the outstanding shares of our stock entitled to vote; • provisions that provide that special meetings of stockholders may be called only by the board of directors or, for so long as a Principal Stockholder continues to beneficially own at least 20% of the voting power of the outstanding shares of our stock; • provisions that provide that our stockholders may only amend our certificate of incorporation or bylaws with the approval of at least 66 2/3% of the voting power of the outstanding shares of our stock entitled to vote, or for so long as our Principal Stockholders collectively continue to beneficially own at least 50% of the voting power of the outstanding shares of our stock entitled to vote, with the approval of a majority of the voting power of the outstanding shares of our stock entitled to vote; • provisions that provide that the board of directors is expressly authorized to adopt, or to alter or repeal our bylaws; and • provisions that establish advance notice and certain information requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
Any acquisition involves potential risks, some of which are beyond our control, including, among other things: • mistaken assumptions about revenues and costs, including synergies; • inability to integrate successfully the businesses we acquire; • inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets; • the assumption of unknown liabilities; • limitations on rights to indemnity from the seller; • mistaken assumptions about the overall costs of equity or debt; • diversion of management’s attention from other business concerns; • unforeseen difficulties operating in new product areas or new geographic areas; and 24 • customer or key employee losses at the acquired businesses.
Any acquisition involves potential risks, some of which are beyond our control, including, among other things: • mistaken assumptions about revenues and costs, including synergies; • inability to integrate successfully the businesses we acquire; • inability to hire, train or retain qualified personnel to manage and operate our business and newly acquired assets; • the assumption of unknown liabilities; • limitations on rights to indemnity from the seller; • mistaken assumptions about the overall costs of equity or debt; • diversion of management’s attention from other business concerns; • unforeseen difficulties operating in new product areas or new geographic areas; and • customer or key employee losses at the acquired businesses.
Estimates of economically recoverable frac sand 23 reserves necessarily depend on a number of factors and assumptions, all of which may vary considerably from actual results, such as: • geological and mining conditions and/or effects from prior mining that may not be fully identified by available data or that may differ from experience; • assumptions concerning future prices of frac sand, operating costs, mining technology improvements, development costs and reclamation costs; and • assumptions concerning future effects of regulation, including wetland mitigation requirements, the issuance of required permits and the assessment of taxes by governmental agencies.
Estimates of economically recoverable frac sand reserves necessarily depend on a number of factors and assumptions, all of which may vary considerably from actual results, such as: • geological and mining conditions and/or effects from prior mining that may not be fully identified by available data or that may differ from experience; • assumptions concerning future prices of frac sand, operating costs, mining technology improvements, development costs and reclamation costs; and • assumptions concerning future effects of regulation, including wetland mitigation requirements, the issuance of required permits and the assessment of taxes by governmental agencies.
For our extraction and processing in Wisconsin and Illinois, we must obtain permits from various federal, state and local authorities. For example, at the federal level, a Mine Identification Request (MSHA Form 7000-51) must be filed and obtained before mining commences. If wetlands are impacted, a permit from the U.S. Army Corps of Engineers is required.
For our extraction and processing in Wisconsin and Illinois, we must obtain permits from various federal, tribal, state and local authorities. For example, at the federal level, a Mine Identification Request (MSHA Form 7000-51) must be filed and obtained before mining commences. If wetlands are impacted, a permit from the U.S. Army Corps of Engineers is required.
If we fail to adequately assess the creditworthiness of 22 existing or future customers or unanticipated deterioration in their creditworthiness, any resulting increase in nonpayment or nonperformance by them and our inability to re-market or otherwise use the production could have a material adverse effect on our business, results of operations and financial condition.
If we fail to adequately assess the creditworthiness of existing or future customers or unanticipated deterioration in their creditworthiness, any resulting increase in nonpayment or nonperformance by them and our inability to re-market or otherwise use the production could have a material adverse effect on our business, results of operations and financial condition.
We cannot predict what additional legislative or regulatory requirements may result from these developments. COP26 concluded with the 34 finalization of the Glasgow Climate Pact, which stated long-term global goals (including those in the Paris Agreement) aimed at limiting the increase in the global average temperature and reducing GHG emissions.
We cannot predict what additional legislative or regulatory requirements may result from these developments. COP26 concluded with the finalization of the Glasgow Climate Pact, which stated long-term global goals (including those in the Paris Agreement) aimed at limiting the increase in the global average temperature and reducing GHG emissions.
A significant shift in demand from frac sand to other proppants, or the development of new processes to make hydraulic fracturing more efficient could replace it altogether, could cause a decline in the demand for the frac sand we produce and result in a material adverse effect on our business, results of operations and financial condition.
A significant shift in demand from frac sand to other proppants, or the development of new processes to make hydraulic fracturing more efficient that could replace it altogether, could cause a decline in the demand for the frac sand we produce and result in a material adverse effect on our business, results of operations and financial condition.
These new supplies have had a negative impact on our ability to sell our Northern White Sand in the Permian Basin or other markets in close proximity to these regional mines. Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured.
These new supplies have had a negative impact on our ability to sell our Northern White Sand in the Permian Basin or other markets in close proximity to these regional mines. 25 Our operations are subject to operational hazards and unforeseen interruptions for which we may not be adequately insured.
If either of these events were to occur, there could be an adverse impact on our business, results of operations and financial condition. 27 Our business may suffer if we lose, or are unable to attract and retain, key personnel. We depend to a large extent on the services of our senior management team and other key personnel.
If either of these events were to occur, there could be an adverse impact on our business, results of operations and financial condition. Our business may suffer if we lose, or are unable to attract and retain, key personnel. We depend to a large extent on the services of our senior management team and other key personnel.
Any adverse development at these facilities, our rail terminals, or on any of the rail lines we use to deliver our sand due to catastrophic events or weather, or any other event that would cause us to curtail, suspend or terminate operations at such facilities or terminals, could result in us being unable to meet our contracted sand deliveries.
Any adverse development at these facilities, 23 our rail terminals, or on any of the rail lines we use to deliver our sand due to catastrophic events, weather, or any other event that would cause us to curtail, suspend or terminate operations at such facilities or terminals, could result in us being unable to meet our contracted sand deliveries.
We maintain what we believe is customary and reasonable insurance to protect our business against these potential losses, but such insurance may not be adequate to cover our liabilities, and we are not fully insured against all risks. A financial downturn could negatively affect our business, results of operations, financial condition and liquidity.
We maintain 30 what we believe is customary and reasonable insurance to protect our business against these potential losses, but such insurance may not be adequate to cover our liabilities, and we are not fully insured against all risks. A financial downturn could negatively affect our business, results of operations, financial condition and liquidity.
Global and domestic terrorist activities and the threat of potential terrorist activities and any resulting physical damage and economic downturn could adversely affect our results of operations, impair our ability to raise capital or otherwise adversely impact our ability to realize certain business strategies. Diminished access to water may adversely affect our operations or the operations of our customers.
Global and domestic terrorist activities and the threat of potential terrorist activities and any resulting physical damage and economic downturn could adversely affect our results of operations, impair our ability to raise capital or otherwise adversely impact our ability to realize certain business strategies. 28 Diminished access to water may adversely affect our operations or the operations of our customers.
Certain approval procedures may require preparation of archaeological surveys, endangered species studies, and other studies to assess the environmental impact of new sites or the 33 expansion of existing sites. Compliance with these regulatory requirements is expensive and significantly lengthens the time needed to develop a site.
Certain approval procedures may require preparation of archaeological surveys, endangered species studies, and other studies to assess the environmental impact of new sites or the expansion of existing sites. Compliance with these regulatory requirements is expensive and significantly lengthens the time needed to develop a site.
There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price that you previously paid. Future sales of our common stock in the public market could reduce our stock price, and the sale or issuance of equity or convertible securities may dilute your ownership in us.
There is no guarantee that the price of our common stock that will prevail in the market will ever exceed the price that you previously paid. 38 Future sales of our common stock in the public market could reduce our stock price, and the sale or issuance of equity or convertible securities may dilute your ownership in us.
As we focus on growing our business, particularly as it relates to our SmartSystems offerings, our business may become increasingly subject to inherent risks that can cause personal injury or loss of life, damage to or destruction of property, 30 equipment or the environment or the suspension of our operations.
As we focus on growing our business, particularly as it relates to our SmartSystems offerings, our business may become increasingly subject to inherent risks that can cause personal injury or loss of life, damage to or destruction of property, equipment or the environment or the suspension of our operations.
Our operations are dependent on earth moving equipment, locomotives and tractor trailers, and diesel fuel costs are a significant component of the operating expense of these 26 vehicles. Accordingly, increased diesel fuel costs could have an adverse effect on our business, results of operations and financial condition.
Our operations are dependent on earth moving equipment, locomotives and tractor trailers, and diesel fuel costs are a significant component of the operating expense of these vehicles. Accordingly, increased diesel fuel costs could have an adverse effect on our business, results of operations and financial condition.
We supply frac sand to hydraulic fracturing operators in the oil and natural gas industry. Hydraulic fracturing is an important practice that is used to stimulate production of oil and natural gas from low permeability hydrocarbon bearing subsurface rock formations.
We supply frac sand to hydraulic fracturing operators in the oil and natural gas industry. Hydraulic fracturing is an important practice that is used to stimulate production of oil and natural gas from low permeability hydrocarbon bearing 31 subsurface rock formations.
Significant opposition to a permit by neighboring property owners, members of the public, or other third parties, or delay in the environmental review and permitting process also could delay or impair our ability to develop or expand a site.
Significant opposition to a permit by neighboring property owners, members of the public, or other third parties, or delay in the 33 environmental review and permitting process, also could delay or impair our ability to develop or expand a site.
However, third parties may knowingly or unknowingly infringe our patent or other proprietary rights, or challenge patents or proprietary 29 rights held by us, and pending and future trademark and patent applications may not be approved.
However, third parties may knowingly or unknowingly infringe our patent or other proprietary rights, or challenge patents or proprietary rights held by us, and pending and future trademark and patent applications may not be approved.
Voluntary disclosures regarding ESG matters, as well as any ESG disclosures mandated by law, could result in private litigation or government investigation or enforcement action regarding the sufficiency or validity of such disclosures.
Voluntary disclosures regarding ESG matters, as well as any ESG 35 disclosures mandated by law, could result in private litigation or government investigation or enforcement action regarding the sufficiency or validity of such disclosures.
In addition, certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and development may be eliminated.
In addition, certain U.S. federal income tax deductions currently available with respect to oil and natural gas exploration and development 21 may be eliminated.
However, these measures carry risk (including nonperformance by counterparties) and do not in any event entirely eliminate the risk of decreased margins as a result of propane or natural gas price increases. We further attempt to mitigate these risks by including in our sales contracts fuel surcharges based on natural gas prices exceeding certain benchmarks.
However, these measures carry risk (including nonperformance by counterparties) and do not in any event entirely eliminate the risk of decreased margins as a result natural gas price increases. We further attempt to mitigate these risks by including in our sales contracts fuel surcharges based on natural gas prices exceeding certain benchmarks.
Frac sand is the most commonly used proppant and is 25 less expensive than other proppants, such as resin-coated sand and manufactured ceramics.
Frac sand is the most commonly used proppant and is less expensive than other proppants, such as resin-coated sand and manufactured ceramics.
Additionally, we are party to a stockholders’ agreement pursuant to which, so long as either Principal Stockholder maintains certain beneficial ownership levels of our common stock, each Principal Stockholder will have certain rights, including board of directors and committee designation rights and consent rights, including the right to consent to change in control transactions.
Additionally, we are party to a stockholders’ agreement pursuant to which, so long as the Principal Stockholder maintains certain beneficial ownership levels of our common stock, the Principal Stockholder will have certain rights, including board of directors and committee designation rights and consent rights, including the right to consent to change in control transactions.
At the state level, a series of permits are required related to air quality, wetlands, water quality (waste water, storm water), grading permits, endangered species, archeological assessments and high capacity wells in addition to others depending upon site specific factors and operational detail.
At the state level, a series of permits are required related to air quality, wetlands, water quality (waste water, storm water), grading permits, protected species, archeological assessments and high capacity wells in addition to others depending upon site specific factors and operational detail.
Because we have not contracted for the provision of all of our natural gas usage on a fixed-price basis, our costs and profitability will be impacted by fluctuations in prices for natural gas.
Because we have not contracted for all of our natural gas usage on a fixed-price basis, our costs and profitability will be impacted by fluctuations in prices for natural gas.
An increase in the price or a significant interruption in the supply of these or any other energy sources could have a material adverse effect on our business, results of operations and financial condition. Energy costs, primarily natural gas and electricity, represented approximately 8.4% of our total cost of goods sold for the year ended December 31, 2022.
An increase in the price or a significant interruption in the supply of these or any other energy sources could have a material adverse effect on our business, results of operations and financial condition. Energy costs, primarily natural gas and electricity, represented approximately 6.4% of our total cost of goods sold for the year ended December 31, 2023.
The price and supply of natural gas is unpredictable and can fluctuate significantly based on international, political and economic circumstances, as well as other events outside our control, such as changes in supply and demand due to weather conditions, actions by OPEC, governmental sanctions, and other oil and natural gas producers, regional production patterns, security threats and environmental concerns.
The price and supply of natural gas is unpredictable and can fluctuate significantly based on domestic, international, political and economic circumstances, as well as other events outside our control, such as changes in supply and demand due to weather conditions, actions by OPEC, governmental regulations and sanctions, regional production patterns, security threats and environmental concerns.
In November 2021, the international community gathered again in Glasgow at the 26th Conference to the Parties on the UN Framework Convention on Climate Change (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-CO2 GHGs.
In November 2021, the international community gathered again in Glasgow at the 26th Conference to the Parties on the UN Framework Convention on Climate Change (“COP26”), during which multiple announcements were made, including a call for parties to eliminate certain fossil fuel subsidies and pursue further action on non-carbon dioxide (“CO2”) GHGs.
As of December 31, 2022, we had several patents related to our SmartSystems, including patents related to our silo storage system and patents related to lifting and lowering our storage silos.
As of December 31, 2023, we had several patents related to our SmartSystems, including patents related to our silo storage system and patents related to lifting and lowering our storage silos.
President Biden has issued several executive orders focused on addressing climate change, including items that may impact our customers’ costs to produce, or demand for, oil and natural gas.
The Biden Administration has issued several executive orders focused on addressing climate change, including items that may impact our customers’ costs to produce, or demand for, oil and natural gas.
Our sand is currently generated at two facilities and our sales are dependent on delivery by railroads. Any adverse developments at our production facilities, rail terminals, or on any rail line could have a material adverse effect on our business, financial condition and results of operations.
Our sand is currently produced at three facilities and our sales are dependent on delivery by railroads. Any adverse developments at our production facilities, rail terminals, or on any rail line could have a material adverse effect on our business, financial condition and results of operations.
It is not possible at this time to predict the timing and effects of climate change or to predict the timing or effect of rejoining the Paris Agreement or whether additional climate-related legislation, regulations or other measures will be adopted at the local, state, regional, national and international levels.
It is not possible at this time to predict the timing and effects of climate change or whether additional climate-related legislation, regulations or other measures will be adopted at the local, state, regional, national and international levels.
Any renegotiation on less favorable terms or inability to enter into new leases on economically acceptable terms upon the expiration, termination or other lapse of our current leases or rights-of-way could cause us to cease operations on the affected land, increase costs related to continuing operations elsewhere and have a material adverse effect on our business, financial condition and results of operations. 28 A terrorist attack or armed conflict could harm our business.
Any renegotiation on less favorable terms or inability to enter into new leases on economically acceptable terms upon the expiration, termination or other lapse of our current leases or rights-of-way could cause us to cease operations on the affected land, increase costs related to continuing operations elsewhere and have a material adverse effect on our business, financial condition and results of operations.
In addition, federal agencies have started to assert regulatory authority over the process and various studies have been conducted or are currently underway by the EPA, and other federal agencies concerning the potential environmental impacts of hydraulic fracturing activities.
In addition, federal agencies have started to assert regulatory authority over the process and various studies have been conducted by the EPA, and other federal agencies concerning the potential environmental impacts of hydraulic fracturing activities.
As of December 31, 2022, there were 28,543,283 publicly traded shares of common stock held by our public common stockholders. Although our common stock is listed on the NASDAQ, we do not know whether an active trading market will continue to develop or how liquid that market might be.
As of December 31, 2023, there were 28,390,059 publicly traded shares of common stock held by our public common stockholders. Although our common stock is listed on the NASDAQ, we do not know whether an active trading market will continue to develop or how liquid that market might be.
Some of our competitors have greater financial and natural other resources than we do. Also, certain of our competitors have recently emerged from bankruptcy and may be able to offer more attractive pricing as a result of lower debt obligations.
Some of our competitors have greater financial and other resources than we do. Also, certain of our competitors have emerged from bankruptcy in recent years and may be able to offer more attractive pricing as a result of lower debt obligations.
On March 4, 2022, we entered into the Purchase Agreement with HCR and Blair, pursuant to which we acquired all of the issued and outstanding limited liability company interests of Blair from HCR for aggregate cash consideration of approximately $6.5 million, subject to customary purchase price adjustments as set forth in the Purchase Agreement.
On March 4, 2022, we entered into the Purchase Agreement with Hi-Crush Inc., a Delaware corporation (“HCR”) and Blair, pursuant to which we acquired all of the issued and outstanding limited liability company interests of Blair from HCR for aggregate cash consideration of approximately $6.5 million, subject to customary purchase price adjustments as set forth in the Purchase Agreement.
If we are unable to renegotiate acceptable collective bargaining agreements with these employees in the future, we could experience, among other things, strikes, work stoppages or other slowdowns by our workers and increased operating costs as a result of higher wages, health care costs or benefits paid to our employees.
While we intend to renew the collective bargaining agreement, if we 27 are unable to renegotiate acceptable terms with these employees in the future, we could experience, among other things, strikes, work stoppages or other slowdowns by our workers and increased operating costs as a result of higher wages, health care costs or benefits paid to our employees.
A failure to manage our growth effectively could materially and adversely affect our profitability. 31 Risks Related to Environmental, Mining and Other Regulation Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing and the potential for related litigation could result in increased costs, additional operating restrictions or delays for our customers, which could cause a decline in the demand for our frac sand and negatively impact our business, results of operations and financial condition.
Risks Related to Environmental, Mining and Other Regulation Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing and the potential for related litigation could result in increased costs, additional operating restrictions or delays for our customers, which could cause a decline in the demand for our frac sand and negatively impact our business, results of operations and financial condition.
Our success is dependent on our ability to continue to attract, employ and retain highly skilled personnel. Our profitability could be negatively affected if we fail to maintain satisfactory labor relations. As of December 31, 2022, 54 employees in our Illinois facility operated under a collective bargaining agreement.
Our success is dependent on our ability to continue to attract, employ and retain highly skilled personnel. Our profitability could be negatively affected if we fail to maintain satisfactory labor relations. As of December 31, 2023, 42 employees in our Illinois facility operated under a collective bargaining agreement. Our collective bargaining agreement expires April 30, 2024.
For example, certain of our existing contracts were adjusted in 2020 resulting in a combination of reduced average selling prices per ton, adjustments to take-or-pay volumes and length of contract.
For example, certain of our existing contracts were adjusted in 2020 due to effects of the COVID-19 pandemic, resulting in a combination of reduced average selling prices per ton, adjustments to take-or-pay volumes and length of contract.
For example, our ABL Credit Facility restricts or limits our ability to: • grant liens; • incur additional indebtedness; • engage in a merger, consolidation or dissolution; • enter into transactions with affiliates; • sell or otherwise dispose of assets, businesses and operations; • materially alter the character of our business as conducted at the time of filing of this annual report; and • make acquisitions, investments and capital expenditures.
For example, our ABL Credit Facility restricts or limits our ability to: • grant liens; • incur additional indebtedness; • engage in a merger, consolidation or dissolution; • enter into transactions with affiliates; • sell or otherwise dispose of assets, businesses and operations; • materially alter the character of our business as conducted at the time of filing of this annual report; and • make acquisitions, investments and capital expenditures. 24 Furthermore, the borrowing base under our ABL Credit Facility is recalculated from time to time based on our eligible accounts receivable and inventory.
All of our sand sales are currently derived from our facilities near Oakdale, Wisconsin and Utica, Illinois. We also ship a substantial portion of our sand through our rail terminals.
All of our sand sales are currently produced at our facilities near Oakdale, Wisconsin, Utica, Illinois and Blair, Wisconsin. We ship a substantial portion of our sand through our rail terminals.
We do not own the land on which our Van Hook, North Dakota and Waynesburg, Pennsylvania transload terminals are located, which could disrupt our operations. We do not own the land on which our Van Hook, North Dakota and Waynesburg, Pennsylvania terminals are located and instead own a leasehold interest and right-of-way for the operation of these facilities.
We do not own the land on which our in-basin transload terminals are located, which could disrupt our operations. We do not own the land on which our in-basin transload terminals are located and instead own a leasehold interest and right-of-way for the operation of these facilities.
With completion of the Blair acquisition and the acquisition of the Waynesburg terminal, our operations and the size of our business has expanded.
With completion of the Blair acquisition and the recent acquisition of the Waynesburg and Ohio terminals, our operations and the size of our business has expanded.
Consequently, Clearlake and our Chief Executive Officer (each of whom we sometimes refer to as a “Principal Stockholder”) will continue to have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.
Consequently, our Chief Executive Officer is considered a (“Principal Stockholder”) and will continue to have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.
Global and domestic terrorist activities, anti-terrorist efforts and other armed conflicts could adversely affect the U.S. and global economies and could prevent us from meeting financial and other obligations.
A terrorist attack or armed conflict could harm our business. Global and domestic terrorist activities, anti-terrorist efforts and other armed conflicts could adversely affect the U.S. and global economies and could prevent us from meeting financial and other obligations.
This concentration of ownership and the rights of our Principal Stockholders under the stockholders agreement, will limit your ability to influence corporate matters, and as a result, actions may be taken that you may not view as beneficial.
This concentration of ownership and the rights of Principal Stockholders under the stockholders agreement, will limit your ability to influence corporate matters, and as a result, actions may be taken that you may not view as beneficial. The price of our common stock may fluctuate significantly, and you could lose all or part of your investment.
Since then, other regional frac sand mines have opened in or near additional basins where we sell sand. Regional frac sand has had a negative impact on our ability to sell our Northern White Sand in the Permian Basin or other markets in close proximity to these regional mines.
Regional frac sand has had a negative impact on our ability to sell our Northern White Sand in the Permian Basin or other markets in close proximity to these regional mines.
Similarly, the repurchase or redemption rights or liquidation preferences we might assign to holders of preferred stock could affect the residual value of the common stock. 39 Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
At the local level, zoning, building, storm water, erosion control, wellhead protection, road usage and access are all regulated and require permitting to some degree. A non-metallic mining reclamation permit is required.
At the local level, zoning, building, storm water, erosion control, wellhead protection, road usage and access are all regulated and require permitting to some degree. A non-metallic mining reclamation permit is required. Certain permits or approvals may also require consultation with federal, state, tribal, or local authorities.
We are currently assessing this rule but at this time we cannot predict the ultimate impact of the rule on our business or those of our customers. The SEC originally planned to issue a final rule by October 2022, but most commentators now expect a final rule to be issued in early 2023.
We are currently assessing this rule but at this time we cannot predict the ultimate impact of the rule on our business or those of our customers. The SEC originally planned to issue a final rule by October 2022, but according to the SEC’s updated rulemaking agenda, a final rule is now expected to be issued in spring 2024.
Any failure by us to comply with applicable environmental laws and regulations may cause governmental authorities to take actions that could adversely impact our operations and financial condition, including: • issuance of administrative, civil, or criminal penalties; • denial, modification, or revocation of permits or other authorizations; 32 • occurrence of delays in permitting or performance of projects; • imposition of injunctive obligations or other limitations on our operations, including cessation of operations; and • requirements to perform site investigatory, remedial, or other corrective actions.
Any failure by us to comply with applicable environmental laws and regulations may cause governmental authorities to take actions that could adversely impact our operations and financial condition, including: • issuance of administrative, civil, or criminal penalties; • denial, modification, or revocation of permits or other authorizations; • occurrence of delays in permitting or performance of projects; • imposition of injunctive obligations or other limitations on our operations, including cessation of operations; and • requirements to perform site investigatory, remedial, or other corrective actions. 32 Any such regulations could require us to modify existing permits or obtain new permits, implement additional pollution control technology, curtail operations, significantly increase our operating costs, or impose additional operating restrictions among our customers that reduce demand for our services.
Entities affiliated with Clearlake, who collectively own approximately 11.3% of the Company’s outstanding common stock as of December 31, 2022, also own a significant portion of the outstanding common stock of HCR, and representatives of Clearlake serve on our board of directors and HCR’s board of directors.
Entities affiliated with Clearlake, who collectively owned approximately 11.3% of the Company’s outstanding common stock at the time of the purchase, also owned a significant portion of the outstanding common stock of HCR, and representatives of Clearlake served on our board of directors and HCR’s board of directors.
The concentration of our capital stock ownership among our largest stockholders and their affiliates will limit your ability to influence corporate matters. As of December 31, 2022, Clearlake beneficially owns approximately 11.3% of our outstanding common stock and our Chief Executive Officer beneficially owns approximately 15.1% of our outstanding common stock.
The concentration of our capital stock ownership by our largest stockholders and its affiliates will limit your ability to influence corporate matters. As of December 31, 2023, our Chief Executive Officer beneficially owns approximately 17.2% of our outstanding common stock.
If our accruals for expected reclamation and other costs associated with facility closures for which we will be responsible were later determined to be insufficient, our business, results of operations and financial condition may be adversely affected.
The establishment of the final mine closure reclamation liability is based on estimated costs and requires various estimates and assumptions. If our accruals for expected reclamation and other costs associated with facility closures for which we will be responsible were later determined to be insufficient, our business, results of operations and financial condition may be adversely affected.
More specifically, the demand for the proppants we produce and our wellsite storage solutions is closely related to the number of oil and natural gas wells completed in geological formations where sand-based proppants are used in fracturing activities. These activity levels are affected by both short- and long-term trends in oil and natural gas prices, among other factors.
More specifically, the demand for the proppants we produce and our wellsite storage and proppant management solutions is closely related to the number of oil and natural gas wells completed in geological formations where sand-based proppants are used in fracturing activities.
If we were to reduce the estimated life of our operating facilities, the fixed facility closure costs would be applied to a shorter period of production, which would increase the cost of production per ton produced and could materially and adversely affect our business, results of operations and financial condition.
If we were to reduce the estimated life of our operating facilities, the fixed facility closure costs would be applied to a shorter period of production, which would increase the cost of production per ton produced and could materially and adversely affect our business, results of operations and financial condition. 26 Applicable statutes and regulations require that mining property be reclaimed following a mine closure in accordance with specified standards and an approved reclamation plan.
We cannot assure you that we will be successful or that we will realize the expected operating efficiencies, cost savings, and other benefits from the acquisition that we currently anticipate.
We cannot assure you that we will be successful or that we will realize the expected operating efficiencies, cost savings, and other benefits from the acquisition that we currently anticipate. A failure to manage our growth effectively could materially and adversely affect our profitability.
While our sales and finished product production levels are contracted evenly throughout the year, our mining and wet sand processing activities are reduced during winter months. As a consequence, we experience lower cash costs in the first and fourth quarter of each calendar year.
While our sales and finished product production levels are contracted evenly throughout the year, our mining and wet sand processing activities are reduced during winter months.
Policing unauthorized use of intellectual property rights can be difficult and expensive, and adequate remedies may not be available. We may be adversely affected by disputes regarding intellectual property rights of third parties. Third parties from time to time may initiate litigation against us by asserting that the conduct of our business infringes, misappropriates or otherwise violates intellectual property rights.
Third parties from time to time may initiate litigation against us by asserting that the conduct of our business infringes, misappropriates or otherwise violates intellectual property rights.
In addition, increased competition in the proppant industry could have an adverse impact on our ability to enter into long-term contracts or to enter into contracts on favorable terms. For example, supplies of regional frac sand from our competitors became available in 2018, primarily in the Permian Basin of West Texas.
In addition, increased competition in the proppant industry could have an adverse impact on our ability to enter into long-term contracts or to enter into contracts on favorable terms.
In addition, failure or a perception (whether or not valid) of failure to implement ESG strategies or achieve ESG goals or commitments, including any GHG reduction or neutralization goals or commitments, could result in governmental investigations or enforcement, private litigation and damage our reputation, cause our investors or consumers to lose confidence in our Company, and negatively impact our operations. 35 Moreover, while we may create and publish disclosures regarding ESG matters, many of the statements in those disclosures may be on hypothetical expectations and assumptions that may or may not be representative of current or actual risks or events or forecasts of expected risks or events, including the costs associated therewith.
In addition, failure or a perception (whether or not valid) of failure to implement ESG strategies or achieve ESG goals or commitments, including any GHG reduction goals or commitments, could result in governmental investigations or enforcement, private litigation and damage our reputation, cause our investors or consumers to lose confidence in our Company, and negatively impact our operations.
These goals were reaffirmed at the November 2022 UN Climate Change Conference of Parties (“COP27”). Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.
COP28 also resulted in an agreement among 200 nations to take more decisive climate action, including commitments to reduce reliance on fossil fuels. Several states and geographic regions in the United States have also adopted legislation and regulations to reduce emissions of GHGs, including cap and trade regimes and commitments to contribute to meeting the goals of the Paris Agreement.
The Paris Agreement entered into force in November 2016 after more than 170 nations, including the United States, ratified or otherwise indicated their intent to be bound by the agreement. The United States withdrew from this agreement under the Trump Administration, but reentered shortly after President Biden took office in January 2021.
The Paris Agreement entered into force in November 2016 after more than 170 nations, including the United States, ratified or otherwise indicated their intent to be bound by the agreement. In April 2021, President Biden announced a goal of reducing the United States’ emissions by 50-52% below 2005 levels by 2030.
We may sell additional shares of common stock in subsequent public offerings. We may also issue additional shares of common stock or convertible securities. As of December 31, 2022, we have outstanding 45,818,584 shares of common stock.
We may sell additional shares of common stock in subsequent public offerings. We may also issue additional shares of common stock or convertible securities. As of December 31, 2023, we have outstanding 41,117,111 shares of common stock. Our Chief Executive Officer beneficially owns 7,076,340 shares of our common stock, or approximately 17.2% of our total outstanding shares.
Applicable statutes and regulations require that mining property be reclaimed following a mine closure in accordance with specified standards and an approved reclamation plan. The plan addresses matters such as removal of facilities and equipment, regrading, prevention of erosion and other forms of water pollution, re-vegetation and post-mining land use.
The plan addresses matters such as removal of facilities and equipment, regrading, prevention of erosion and other forms of water pollution, re-vegetation and post-mining land use. We may be required to post a surety bond or other form of financial assurance equal to the cost of reclamation as set forth in the approved reclamation plan.
Oil and natural gas prices and, therefore, the level of exploration, development and production activity, experienced a high level of volatility leading to sustained declines from the highs in the latter half of 2014 to the lows experienced in 2020.
These activity levels are affected by both short- and long-term trends in oil and natural gas prices, among other factors. Oil and natural gas prices and, therefore, the level of exploration, development and production activity, experienced a high level of volatility in recent years.
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Oil and natural gas prices improved in 2021 and 2022 leading to increased drilling and completions activity over the last two years.
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For example, supplies of regional frac sand from our competitors became 22 available in 2018, starting in the Permian Basin of West Texas, and have continued to expand to certain other basins in or near where we sell sand.
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We may be required to post a surety bond or other form of financial assurance equal to the cost of reclamation as set forth in the approved reclamation plan. The establishment of the final mine closure reclamation liability is based on estimated costs and requires various estimates and assumptions.
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We have historically relied on third-party financing to meet our seasonal cash flow requirements. Our ABL Credit Facility is set to expire on December 13, 2024.
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Any such regulations could require us to modify existing permits or obtain new permits, implement additional pollution control technology, curtail operations, significantly increase our operating costs, or impose additional operating restrictions among our customers that reduce demand for our services.
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If we are unable to renew our ABL Credit Facility or secure a new credit facility on favorable terms, or at all, our ability to fund our operations would be impaired, which would have a material adverse effect on our business, financial condition and/or cash flows. We face distribution and logistical challenges in our business.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. — PROPERTIES As of December 31, 2022, our operating facilities include two frac sand mines and related processing facilities in Oakdale, Wisconsin and Utica, Illinois.
Biggest changeITEM 2. — PROPERTIES Overview of our Properties and Logistics As of December 31, 2023, we owned and operated three frac sand mines and related processing facilities in Oakdale, Wisconsin; Utica, Illinois; and Blair, Wisconsin. Also, in addition to the onsite transloading capabilities at our Oakdale and Blair mines, we own nearby transloading facilities in Byron, Wisconsin and Peru, Illinois.
We have no immediate plans to resume processing frac sand operations at this facility, though its administrative facilities and proximity to our Oakdale facility allow us to utilize the property to create synergies with our existing operations in Wisconsin. We also own approximately 959 acres in Jackson County, Wisconsin (“Hixton”).
We do not consider this site to be a mining property as we have no immediate plans to resume processing frac sand operations at this facility, though its administrative facilities and proximity to our Oakdale facility allow us to utilize the property to create synergies with our existing operations in Wisconsin.
Boyd further assumed that if our revenue per ton remained relatively constant over the life of the reserves, our current operating margins are sufficient to expect continued profitability throughout the life of our reserves.
Boyd concluded that it is reasonable to assume that we will operate under a similar cost structure over the remaining life of our reserves. John T. Boyd further assumed that if our revenue per ton remained relatively constant over the life of the reserves, our current operating margins are sufficient to expect continued profitability throughout the life of our reserves.
Royalties $1.75 per ton with certain annual minimum payments. 41 In addition to these currently operating facilities, we also acquired an idled mine and processing facility in New Auburn, Wisconsin as part of the Eagle Proppants Holdings acquisition in 2020, which contains a higher concentration of coarser sand deposits.
In addition to these currently operating facilities, we also acquired an idled mine and processing facility in New Auburn, Wisconsin as part of our acquisition of Eagle Oil and Gas Proppants Holdings, LLC, a Delaware limited liability company (“Eagle Proppants Holdings”), in 2020, which contains a higher concentration of coarser sand deposits.
We lease a 56,000 square foot facility in Saskatoon, Saskatchewan, Canada where we manufacture our SmartSystems wellsite proppant storage solutions. Our Reserves We believe that our strategically-located mining sites provide us with a large and high-quality mineral reserves base.
We lease a 56,000 square foot facility in Saskatoon, Saskatchewan, Canada where we manufacture our SmartSystems wellsite proppant storage solutions. 41 The map below shows the locations of our mine sites, rail terminals and transload facilities, manufacturing facilities and administrative facilities.
The Hixton site is fully permitted to initiate operations and is available for future development. As of December 31, 2022, our Hixton site had approximately 141 million tons of measured resources. We have no immediate plans to further develop this site.
We also own approximately 959 acres in Jackson County, Wisconsin (“Hixton”). The Hixton site is fully permitted to initiate operations and is available for future development. Based on our preliminary testing, we believe there are sufficient quantities on these sites to establish reserves in the future. We have no immediate plans to further develop this site.
Annual processing capacity 1.6 million tons Logistics capabilities Unit train capable transload facility located approximately seven miles from the Utica facility in Peru, Illinois that provides access to the BNSF rail network. Royalties None We expect to bring on the Blair facility in the second quarter of 2023.
The Blair facility has approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway. We began operating the Blair mine in the second quarter of 2023.
Based on their review of our cost structure and their extensive experience with similar operations, John T. Boyd concluded that it is reasonable to assume that we will operate under a similar cost structure over the remaining life of our reserves. John T.
Risks inherent in overestimated reserves can impact financial performance when revealed, such as changes in amortization that are based on life of mine estimates. Based on their review of our cost structure and their extensive experience with similar operations, John T.
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Also, in addition to the onsite transloading capabilities at our Oakdale mine, we have nearby transloading facilities to each of our mines and three in-basin transload facilities in Van Hook, North Dakota, Waynesburg, Pennsylvania, and El Reno, Oklahoma. 40 The following table provides key characteristics of our Oakdale, Wisconsin facility as of December 31, 2022: Facility Characteristic Description Site geography Approximately 1,256 contiguous acres, with on-site processing and rail loading facilities.
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We also operate in-basin transloading facilities under long-term lease agreements in Van Hook, North Dakota, Waynesburg, Pennsylvania, and El Reno, Oklahoma. In December 2023, we Company acquired the rights to operate a unit train capable transloading terminal in Minerva, Ohio. We expect this terminal to become operational in the second quarter of 2024.
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Proven and probable recoverable reserves 247 million tons. Deposits Sand reserves of up to 200 feet; grade mesh sizes 20/40, 30/50, 40/70 and 100 mesh. Proven reserve mix Approximately 19% of 20/40 and coarser substrate, 41% of finer 40/70 mesh substrate and approximately 40% of fine 100 mesh substrate.
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In January 2024, we acquired the rights to operate a unit train capable transloading terminal in Dennison, Ohio. We expect this terminal to become operational in the second quarter of 2024. In March 2022, acquired the Blair, Wisconsin mine and processing facility.
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Our 30/50 gradation is a derivative of the 20/40 and 40/70 blends. Excavation technique Generally shallow overburden allowing for surface excavation. Annual processing capacity 5.5 million tons. Logistics capabilities Dual served rail line logistics capabilities. On-site transportation infrastructure capable of simultaneously accommodating multiple unit trains and connected to the Canadian Pacific rail network.
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Summary Overview of Mining Operations Information concerning our material mining properties in this Annual Report on Form 10-K has been prepared in accordance with the requirements of subpart 1300 of Regulation S-K, which first became applicable to us for the fiscal year ended December 31, 2021.
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Additional unit train capable transload facility located approximately three miles from the Oakdale facility in Byron Township that provides access to the Union Pacific rail network. Royalties $0.50 per ton sold of 70 mesh and coarser substrate.
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As used in this Annual Report on Form 10-K, the terms “mineral resource”, “mineral reserve”, “proven mineral reserve” and “probable mineral reserve” are defined and used in accordance with subpart 1300 of Regulation S-K.
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The following table provides key characteristics of our Utica, Illinois facility as of December 31, 2022: Facility Characteristic Description Site geography Approximately 1,176 acres, with on-site processing and truck loadout facilities. Proven and probable recoverable reserves 128 million tons. Deposits Sand reserves of up to 100 feet; grade mesh sizes 20/40, 30/50, 40/70 and 100 mesh.
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As of December 31, 2023, our individually material mining properties, as determined in accordance with subpart 1300 of Regulation S-K, were the Oakdale, Wisconsin mine and processing facility (“Oakdale”), Utica, Illinois mine and processing facility (“Utica”), and the currently idle Blair, Wisconsin facility (“Blair”).
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Proven and probable reserve mix Approximately 29% of 20/40 and coarser substrate, 58% of finer 40/70 mesh substrate and approximately 13% of fine 70/100 mesh substrate. Our 30/50 gradation is a derivative of the 20/40 and 40/70 blends. Excavation technique Average overburden of approximately 66ft allowing for surface excavation.
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The information that follows related to the Oakdale, Utica and Blair facilities is derived, for the most part from, and in some instances is an extract from, the technical report summaries (“TRSs”) related to such properties prepared in compliance with the Item 601(b)(96) and subpart 1300 of Regulation S-K.
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The following table provides key characteristics of our Blair, Wisconsin facility as of December 31, 2022: Facility Characteristic Description Site geography Approximately 1,285 acres, with on-site processing and rail loading facilities Proven and probable recoverable reserves 115 million tons. Deposits Average thickness 106 feet; grade mesh sizes 20/40, 30/50, 40/70, 50/140, and 100 mesh.
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Portions of the following information are based on assumptions, qualifications and procedures that are not fully described herein. Reference should be made to the full text of the TRSs, filed as exhibits to this Annual Report on 10-K.
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Proven and probable reserve mix Approximately 35% of 20/40 and coarser substrate with the remainder a finer substrate. Excavation technique Average overburden of approximately 18ft allowing for surface excavation. Annual processing capacity 2.9 million tons Logistics capabilities Unit train capable transload facility with more than 8 miles of track and located on-site with access to the Canadian National Railway.
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As of December 31, 2023, we had three operating mines and related processing facilities. 42 Oakdale, Wisconsin We, through Smart Sand, Inc. and SSI Oakdale, LLC, its wholly-owned subsidiary, operate a surface mine and silica sand processing plant near Oakdale, Wisconsin. The Oakdale mine includes a total of 1,256 acres that are owned outright by Smart Sand, Inc.
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Mineral resources and reserves are typically classified by confidence (reliability) levels based on the level of exploration, consistency and assurance of geologic knowledge of the deposit. This classification system considers different levels of geoscientific knowledge and varying degrees of technical and economic evaluation.
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This ownership includes subsurface mineral and water rights. The site has no leased property. Royalties are paid in the amount of $0.50 per ton of 70-mesh and coarser substrate. Our Oakdale facility is a surface mining operation involving heavy equipment and the hydraulic transfer of material to the processing plant.
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Mineral reserves are derived from in situ resources through application of modifying factors, such as mining, analytical, economic, marketing, legal, environmental, social and governmental factors, relative to mining methods, processing techniques, economics and markets.
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The processing plant uses natural gas, propane, and electricity to produce various grades of high-quality Northern White Sand.
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In estimating our reserves, we do not classify a resource as a reserve unless that resource can be demonstrated to have reasonable certainty to be recovered economically in accordance with the modifying factors listed above.
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Our premium sand is used as proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, and recreation.
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“Reserves” are defined by SEC Industry Guide 7 as that part of a mineral deposit that could be economically and legally extracted or produced at the time of the reserve determination.
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The Oakdale facility operations are predominantly regulated by Monroe County, Wisconsin through the non-metallic mining and reclamation permit. Air emissions are regulated by the Wisconsin Department of Natural Resources, Bureau of Air Management. All required permits are secured, and the site is operating in full compliance.
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Industry Guide 7 defines “proven (measured) reserves” as reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
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Utica, Illinois We, through Northern White Sand LLC, a wholly-owned subsidiary of Smart Sand, Inc., operate a surface mine and a silica sand processing plant near Utica, Illinois. The Utica mine includes a total of 819 acres that are owned outright by Smart Sand, Inc. This ownership includes subsurface mineral and water rights. The site has no leased property.
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Industry Guide 7 defines “probable (indicated) reserves” as reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; grade and/or quality are computed from the results of detailed sampling and (b) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
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There are no royalties associated with this property. Our Utica facility is a surface mining operation involving heavy equipment and the hydraulic transfer of material to the processing plant. The processing plant uses natural gas, propane, and electricity to produce various grades of high-quality Northern White Sand.
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In estimating our reserves, as listed in the tables above, we categorize our reserves as proven or probable recoverable in accordance with these SEC definitions. The quantity and nature of the sand reserves at our mining locations were estimated by third-party geologists and mining engineers for the year ended December 31, 2022.
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Our premium sand is used as proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, and recreation.
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Our Oakdale reserves are located on 1,256 contiguous acres in Monroe County, Wisconsin. We own our Monroe County acreage in fee and acquired surface and mineral rights on all of such acreage from multiple landowners in separate transactions.
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The Utica facility is regulated by the Illinois Department of Natural Resources, which requires a Surface Mining Permit and Reclamation Plan. The mine reclamation plan is submitted to both the LaSalle County, Illinois and Village of Utica, Illinois Boards. Air emissions are regulated by the Illinois Environmental Protection Agency.
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Our mineral rights are subject to an aggregate non-participating royalty interest of $0.50 per ton sold of coarser than 70 mesh, which we believe is significantly lower than many of our competitors. Our Hixton site is on approximately 959 acres in Jackson County, Wisconsin. The Hixton site is fully permitted and available for future development.
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All required permits are secured, and the site is operating in full compliance. Blair Wisconsin We began operating the Blair mine in the second quarter of 2023. It is an idle silica surface mine and processing plant in Blair, Wisconsin.
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We own our Jackson County acreage in fee and acquired surface and mineral rights on all of such acreage from multiple landowners in separate transactions. Our mineral rights are subject to an aggregate non-participating royalty interest of $0.50 per ton sold of coarser than 70 mesh, which we believe is significantly lower than many of our competitors.
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The Blair mine includes a total of 1,285 acres that are owned outright by Smart Sand Blair, a wholly-owned subsidiary of Smart Sand, Inc. This ownership includes subsurface mineral and water rights. The site has no leased property. Royalties are estimated to be paid on certain grades of silica sand in the amount of $1.75/ton with certain minimum annual payments.
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Our Utica mine is approximately 1,400 acres in LaSalle County, Illinois. The Utica site is a fully owned including all mineral rights and we are not subject to any royalty interest at this site. Our Blair mine is approximately 1,285 acres in Trempealeau and Jackson County, Wisconsin.
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Our Blair facility uses a surface mining technique to produce high-quality Northern White Sand. The processing plant uses natural gas, propane, and electricity to make various grades of high-quality Northern White Sand.
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We own our Blair mine property in fee and acquired surface and mineral rights on all rights.
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Our premium sand is used as proppant used to enhance hydrocarbon recovery rates in the hydraulic fracturing of oil and natural gas wells and for a variety of industrial applications, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, and recreation.
Removed
There are currently royalties of $1.75 per ton sold, subject to certain annual minimum annual royalties. 42 To opine as to the economic viability of our reserves, independent experts reviewed our financial cost and revenue per ton data at the time of the reserve determination.
Added
The Blair facility has several active permits including air quality, construction, operations, groundwater extraction, and non-metallic mining and reclamation, which are administered by the Wisconsin Department of Natural Resources. Land use agreements are active for the Cities of Springfield and Preston regarding the hours of operations, blasting, groundwater assurance, noise and traffic.
Removed
Historical mineral prices are considered in the context of market supply and demand dynamics to further assess the long-term economic viability of the mineral reserve assets that were evaluated over a thirty year measurement period. A range of average sales price assumptions was considered to estimate proven reserves in accordance with the Commission’s definitions.
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Conditional use permits are active for both Jackson County, Wisconsin and the City of Blair, Wisconsin for the mining and processing of material at the site Blair site.
Removed
For our Oakdale location, the assumed average sales price was $20 per ton for the life of mine over 62 years. For our Utica location, the assumed average sales price was $20 per ton for the life of mine over 107 years.
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All required permits are secured, and the site is operating in full compliance. 43 Summary of Annual Production The table below shows annual dry tons produced at our mining properties for the years ended December 31, 2023, 2022 and 2021.
Removed
For our Blair location, the assumed average sales price was $36 per ton for the life of mine over 46 years. The reserve estimates are updated annually based on a variety of factors, including sales, changes to mineral properties, changes in mine plan, current pricing forecasts and other business strategies.
Added
This table does not include mining activity prior to our acquisition of the Blair mine. 2023 2022 2021 (millions of tons) Silica Sand Oakdale mine 4.6 4.9 2.6 Utica mine 0.9 1.1 0.8 Blair mine 0.6 0.0 0.0 6.1 6.0 3.4 Summary of Mineral Reserves and Resources Supplies of high-quality Northern White frac sand are limited to select areas, predominantly in western Wisconsin and limited areas of Minnesota and Illinois.
Removed
The recovery percentage following processing is also an important criterion in determining economic viability of our mineral reserves. An estimated average processing recovery of approximately 82% was used for our Oakdale and Hixton locations, 81% for our Utica location AND 75% for our Blair location.
Added
All of our sand mines are located in this geographic area.
Added
The following table summarizes our mineral reserves as of December 31, 2023: Total Saleable Reserves Proven Reserves Probable Reserves (millions of tons) Silica Sand Oakdale mine (1) 243 138 105 Utica mine (2) 127 95 32 Blair mine (3) 114 114 0 Total Reserves 484 347 137 (1) Economic evaluation for Oakdale is based on $20.00/ton average minegate pricing as of September 2021, with no escalation.
Added
(2) Economic evaluation for Utica is based on $20.00/ton average minegate pricing as of September 2021, with no escalation. (3) Economic evaluation for Blair is based on $36.00/ton average minegate pricing, based on 2023 forecast, with no escalation.
Added
We have no inferred resources. 44 Material Mine Site Descriptions Oakdale, Wisconsin The Oakdale site is a surface proppant sand mining and processing operation located approximately 1 mile southwest of the town of Oakdale, Wisconsin in Monroe County, Wisconsin. Geographically, the Oakdale site is located at approximately 43° 57’06.1” N latitude and 90° 24’13.0” W longitude.
Added
The Oakdale site includes approximately 1,256 acres that we own outright. Royalties are paid in the amount of $0.50 per ton of 70-mesh and coarser substrate. Operations began at our Oakdale site in July 2012 with 1.1 million tons of annual processing capacity.
Added
Through multiple expansions, the Oakdale facility currently has an annual processing capacity of 5.5 million tons. 45 The site is accessible by public roads and a Canadian Pacific railroad spur. Our Oakdale site has an extensive rail-car loading, storage, and handling facility. The Oakdale site is connected to the local electrical and natural gas distribution systems.
Added
All water onsite is provided through private wells and ponds supplied with recycled process water and groundwater pumped from the active mine. The site has offices holding administrative, engineering, and operations staff. In addition, there are several buildings that house the processing facilities, plant maintenance and support facilities.
Added
We acquired the land and developed the site as a purpose-built silica mine to serve frac sand customers. Since acquiring the facility, we renovated and upgraded its processing capabilities to enable it to produce multiple products through various processing methods, including washing, hydraulic sizing and screening.
Added
These techniques allow the Oakdale site to meet a variety of focused specifications on product composition from customers. As such, the Oakdale site services multiple end markets, such as glass, building products, foundry, fillers and extenders, chemicals and oil and gas proppants. We believe that the Oakdale facility and its operating equipment are maintained in good working condition.
Added
The total net book value of the Oakdale facility’s real property and tangible assets as of December 31, 2023 was $125.8 million. Current mining at the Oakdale facility is excavated using conventional surface mining methods. The first step in the mining process is the removal of the overburden from the sandstone layer.
Added
This is completed either in-house or by third-party contractors using heavy equipment including excavators, dozers and haul trucks. Next, a third-party contractor is used to drill and blast the sandstone. Heavy equipment, conveyors and pumps are used to transfer the blasted material to the processing plant.
Added
At the processing plant, the sand slurry is fed to a surge tank where ultrafine material is removed from the product then pumped to hydrosizers that further separate the sand into coarse and fine particle size fractions. The separated streams are either placed in respective piles, stored on a dewatering slab, or sent to waste depending on product mix desired.
Added
The decanted sand is then fed by conveyor or loader to the five available fluidized bed dryers. The dry sand is then classified into final grades using screening units and stored in dedicated silos. A system of conveyors then move sand to a loadout for railcars and trucks. Railcars are on a railspur connected to the Canadian Pacific railroad.
Added
Trucking to our Byron transload facility provides access to the Union Pacific railroad. Several natural and man-made features have been identified in and around the Oakdale site which may limit the mineable areas of the property. These features include setbacks from neighboring properties, right of ways, creeks and wetlands.
Added
To operate active mining operations on the property, the Monroe County, Wisconsin non-metallic reclamation permit requires annual reports to be submitted with information on the reclamation status and to pay annual fees based on disturbed acres. A significant portion of the probable reserves underly current wetland areas. These areas will require mitigation as designated wetlands prior to mining.
Added
These reserves are not in our current five-year plan. Air emissions are regulated by the Wisconsin Department of Natural Resources, Bureau of Air Management. We monitor air emissions and have all required permits. The operation also has developed an Environmental Management System and Quality Management System.
Added
We have successfully completed the annual outside surveillance audit of our Environmental Management System to the ISO 14001:2015. The Oakdale site has secured necessary permits and is operating in compliance with all required licenses, registrations, and permits. A summary of Oakdale’s mineral resources and reserves as of December 31, 2023 and 2022 is shown below.
Added
Year Ended December 31, Change 2023 2022 Volumes Percentage (millions of tons) Proven 138 142 -4 (3) % Probable 105 105 0 — % Saleable 243 247 -4 (2) % When estimating mineral reserves, silica product pricing was assumed at $20/ton. Only one commodity (silica sand) is mined, processed and sold at the Oakdale site.
Added
Production of silica sand is driven by market demand, and production can be modified in response to that demand. As such, the application of minimum mining thicknesses, maximum stripping ratios (the ratio of waste to sand excavated), or cut-off grades is not generally considered in the estimation of silica sand resources for the Oakdale site.
Added
The decrease in reserves from 2022 to 2023 is primarily attributable to excavation and mining activity in 2023. For more information on our resources and reserves, please refer to Exhibit 10.24, the Technical Report Summary for our Oakdale site.
Added
Key assumptions and parameters relating to the mineral reserves at the Oakdale site are discussed in Sections 11.0 and 12.0, respectively, of the Oakdale TRS.
Added
Only material that can be economically, safely, and legally extracted is contained in these ore reserve estimates. 46 Utica, Illinois The Utica site is a surface proppant sand mining and processing operation located approximately three miles east of the town of Utica, Illinois in LaSalle County, Illinois.
Added
Geographically, the Utica site is located at approximately 41° 20’48.6” N latitude and 88° 57’18.9” W longitude. The Utica site includes approximately 819 acres that we own outright. The mine site was initially developed in 2014 by Eagle Materials Inc., a Delaware corporation (“Eagle”), as a wash plant that railed wet sand to Corpus Christi, TX.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeNote 17 - Commitments and Contingencies - Litigation of the notes to the consolidated financial statements in this Form 10-K for the year ended December 31, 2022.
Biggest changeNote 16 - Commitments and Contingencies - Litigation of the notes to the consolidated financial statements in this Form 10-K for the year ended December 31, 2023.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeAirborne respirable silica is associated with work areas at our site and is monitored closely through routine testing and MSHA inspection. If the workplace exposure limit is lowered significantly, we may be required to incur certain capital expenditures for equipment to reduce this exposure.
Biggest changeIn 2023, MSHA proposed similar rules, which would, among other updates, reduce the exposure limits, require immediate corrective actions if exposure limits are exceeded, require exposure sampling and no-cost medical surveillance, and update respiratory protection requirements. Airborne respirable silica is associated with work areas at our site and is monitored closely through routine testing and MSHA inspection.
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Report. 43 PART II
Information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K (17 CFR 229.104) is included in Exhibit 95.1 to this Report. 52 PART II
We also adhere to NISA’s respiratory protection program, and ensures that workers are provided with fitted respirators and ongoing radiological monitoring.
If the workplace exposure limit is lowered significantly, we may be required to incur certain capital expenditures for equipment to reduce this exposure. We also adhere to NISA’s respiratory protection program, and ensures that workers are provided with fitted respirators and ongoing radiological monitoring.
Occupational Safety and Health Administration (“OSHA”) which has promulgated rules for workplace exposure to respirable silica for several other industries. Respirable silica is a known health hazard for workers exposed over long periods. MSHA is expected to adopt similar rules as part of its “Long Term Items” for rulemaking.
As part of MSHA’s oversight, representatives perform at least two unannounced inspections annually for each above-ground facility. We are also subject to regulations by the U.S. Occupational Safety and Health Administration (“OSHA”) which has promulgated rules for workplace exposure to respirable silica for several other industries. Respirable silica is a known health hazard for workers exposed over long periods.
The mission of MSHA is to administer the provisions of the Federal Mine Safety and Health Act of 1977 and to enforce compliance with mandatory miner safety and health standards. As part of MSHA’s oversight, representatives perform at least two unannounced inspections annually for each above-ground facility. We are also subject to regulations by the U.S.
The mission of MSHA is to administer the provisions of the Federal Mine Safety and Health Act of 1977 as amended by the Mine Improvement and 51 New Emergency Response (MINER) Act of 2006 and to enforce compliance with mandatory miner safety and health standards.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeComparative Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act.
Biggest changeComparative Stock Performance Graph section shall not be deemed to be “soliciting material” or “filed” or incorporated by reference in future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that we specifically incorporate it by reference into a document filed under the Securities Act or the Exchange Act. 53 Unregistered Sales of Equity Securities and Use of Proceeds During the year ended December 31, 2023, no shares were sold by the Company without registration under the Securities Act of 1933.
The graph assumes $100 was invested on December 31, 2016, in our common stock, the Russell 3000, and the Standard and Poor’s Small Cap 600 GICS Oil & Gas Equipment & Services Sub-Industry Index. The cumulative total return assumes the reinvestment of all dividends. 44 The information contained in this Smart Sand, Inc.
The graph assumes $100 was invested on December 31, 2018, in our common stock, the Russell 3000, and the Standard and Poor’s Small Cap 600 GICS Oil & Gas Equipment & Services Sub-Industry Index. The cumulative total return assumes the reinvestment of all dividends. The information contained in this Smart Sand, Inc.
Prior to that date, there was no public market for our stock. Holders of Record On February 21, 2023, there were 45,831,269 shares of our common stock outstanding, which were held by approximately 31 stockholders of record.
Prior to that date, there was no public market for our stock. Holders of Record On March 4, 2024, there were 43,008,960 shares of our common stock outstanding, which were held by approximately 31 stockholders of record.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds On November 14, 2022, we issued an aggregate of 300,000 shares of our common stock to certain royalty holders in connection with a renegotiation of the royalty rates payable at our recently acquired Blair, Wisconsin mine and processing facility.
Removed
The shares of common stock were issued in a private placement transaction pursuant to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, without general solicitation or advertising of any kind and without payment of placement agent or brokerage fees to any person.
Removed
Other than the foregoing, during the year ended December 31, 2022, no shares were sold by the Company without registration under the Securities Act of 1933.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeBlair, Wisconsin Our Blair facility also has a large high-quality reserve base of primarily fine-mesh sand that is contiguous to the production facility and located on the Canadian National railway. We have approximately 115 million tons of proven and probable reserves, which gives us an estimated life of mine of approximately 46 years, based on expected sales volumes.
Biggest changeAdditionally, the CSX and BNSF rail lines, as well as industrial manufacturers in the greater Chicago area and other Midwestern metropolitan markets are within short trucking distances. Blair, Wisconsin Our Blair facility also has a large high-quality reserve base of primarily fine-mesh sand that is contiguous to the production facility and significant logistics assets located on the Canadian National railway.
In 2020, we developed a self-contained SmartPath transloader, which is a mobile sand transloading system designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system, and we believe the system has the ability to keep up with any hydraulic fracturing operation.
In 2020, we developed a self-contained SmartPath transloader, which is a mobile sand transloading system designed to work with bottom dump trailers and features a drive over conveyor, surge bin, and dust collection system. We believe the system has the ability to keep up with any hydraulic fracturing operation.
Other Income (Expense) We qualified for federal government assistance through employee retention credit provisions of the Consolidated Appropriations Act of 2021. During the year ended December 31, 2021, we recorded $5.0 million of employee retention credits. The calculation of the credit is based on employees continued employment and represents a portion of the wages paid to them.
Other Income We qualified for federal government assistance through employee retention credit provisions of the Consolidated Appropriations Act of 2021. During the year ended December 31, 2021, we recorded $5.0 million of employee retention credits. The calculation of the credit is based on employees continued employment and represents a portion of the wages paid to them.
During most of 2020, demand for frac sand declined significantly due to decreased demand for oil and natural gas as a result of the ongoing effects of the COVID-19 pandemic, which caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide.
During most of 2020, demand for frac sand declined significantly due to decreased demand for oil and natural gas as a result of the effects of the COVID-19 pandemic, which caused a global decrease in all means of travel, the closure of borders between countries and a general slowing of economic activity worldwide.
We have recorded a liability of $2.2 million for uncertain tax positions included in deferred tax liabilities, long-term, net on our consolidated balance sheet as of December 31, 2022, related to our depletion deduction methodology, and a corresponding increase to the income tax expense on our consolidated statements of operations.
We have recorded a liability of $2.2 million for uncertain tax positions included in deferred tax liabilities, long-term, net on our consolidated balance sheet as of December 31, 2023 and 2022, related to our depletion deduction methodology, and a corresponding increase to the income tax expense on our consolidated statements of operations.
Unlike some of our competitors, our primary processing and rail loading facilities are located in close proximity to the mine site, which limits the need for us to truck sand on public roads between the mine and the production facility or between wet and dry processing facilities.
Unlike some of our competitors, our primary processing and rail loading facilities are located in close proximity to the mine site, which limits the need for us to truck sand on public roads between the mine and the production facility, between wet and dry processing facilities, or from the processing facility to rail loading facilities.
We incur utility costs in connection with the operation of our processing and logistics facilities, primarily electricity and natural gas, which are both susceptible to market fluctuations. We lease equipment in many areas of our operations including our mining and hauling equipment and logistics services.
We incur utility costs in connection with the operation of our processing and logistics facilities, primarily electricity and natural gas, which are both susceptible to market fluctuations. We lease equipment in many areas of our operations including some of our mining and hauling equipment and logistics services.
In 2021, we recorded $19.6 million as non-cash bad debt expense, which is the difference between the $54.6 million accounts receivable balance that was subject to litigation and the $35.0 million cash payment received under a settlement agreement.
In 2021, we recorded $19.6 million in non-cash bad debt expense, which is the difference between the $54.6 million accounts receivable balance that was subject to litigation and the $35.0 million cash payment received under a settlement agreement.
For income tax purposes, the credit will result in decreased expense related to the wages it offsets in the period received. Interest Expense We incurred $1.6 million and $2.0 million of net interest expense for the years ended December 31, 2022 and 2021, respectively. In 2022, we continued to reduce debt levels and decrease interest expense through scheduled amortization payments.
For income tax purposes, the credit will result in decreased expense related to the wages it offsets in the period received. Interest Expense We incurred $1.6 million and $2.0 million of net interest expense for the years ended December 31, 2022 and 2021, respectively. In 2022, we continued to reduce debt levels and decrease interest expense through scheduled amortizing payments.
Through our SmartSystems offering, we have the technology, production capacity and management team to compete further in the frac sand supply chain for our customers by offering logistics services from the mine all the way to the wellsite. Our SmartSystems consist of our SmartDepot proppant storage silos, our SmartPath transloader and our rapid deployment trailer system.
Through our SmartSystems offering, we have the technology, production capacity and management team to compete further in the frac sand supply chain for our customers by offering logistics services from the mine all the way to the wellsite. Our SmartSystems consist of our SmartDepot proppant storage silos, our SmartPath transloader, our SmartBelt conveyor and our rapid deployment trailer system.
While sales of IPS to customers were a small portion of our overall sand sales in 2022, we expect to expand and diversify to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more in 2023.
While sales of IPS to customers were a small portion of our overall sand sales in 2022 and 2023, we expect to continue to expand and diversify to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail, recreation and more in 2024.
Historically, much of the capital investment in Northern White frac sand mines was used for the development of coarser deposits in western Wisconsin, which is inconsistent with the increasing demand for finer mesh frac sand in recent years. As such, we’ve seen competitors in the Northern White frac sand market 50 SMART SAND, INC.
Historically, much of the capital investment in Northern White frac sand mines was used for the development of coarser deposits in western Wisconsin, which is inconsistent with the increasing demand for finer mesh frac sand in recent years. As such, we’ve seen competitors in the Northern White frac sand market 59 SMART SAND, INC.
The computation of the effective tax rate for the years ended December 31, 2022 and 2021 included modifications from the statutory rate such as income tax credits, depletion deductions, carrybacks as a result of the Coronavirus Aid, Relief and Economic Security Act, and state apportionment changes, among other items.
The computation of the effective tax rate for the years ended December 31, 2023 and 2022 included modifications from the statutory rate such as income tax credits, depletion deductions, carrybacks as a result of the Coronavirus Aid, Relief and Economic Security Act, and state apportionment changes, among other items.
The key factors contributing to the increase in revenues for the year ended December 31, 2022 as compared to the year ended December 31, 2021 were as follows: • Sand sales revenue increased from $117.4 million for the year ended December 31, 2021 to $243.2 million for the year ended December 31, 2022, as a result of higher total volumes sold.
The key factors contributing to the increase in revenues for the year ended December 31, 2022 as compared to the year ended December 31, 2021 were as follows. • Sand sales revenue increased from $117.4 million for the year ended December 31, 2021 to $243.2 million for the year ended December 31, 2022, as a result of higher total volumes sold and higher sand prices.
Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess: • the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets; • the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; • our ability to incur and service debt and fund capital expenditures; • our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and • our debt covenant compliance, as Adjusted EBITDA is a key component of critical covenants to the ABL Credit Facility. 57 SMART SAND, INC.
Adjusted EBITDA is used as a supplemental financial measure by management and by external users of our financial statements, such as investors and commercial banks, to assess: • the financial performance of our assets without regard to the impact of financing methods, capital structure or historical cost basis of our assets; • the viability of capital expenditure projects and the overall rates of return on alternative investment opportunities; • our ability to incur and service debt and fund capital expenditures; • our operating performance as compared to those of other companies in our industry without regard to the impact of financing methods or capital structure; and • our debt covenant compliance, as Adjusted EBITDA is a key component of critical covenants to the ABL Credit Facility.
We believe that this mix of coarse and fine sand reserves, combined with contractual demand for our products across a range of mesh sizes, provides us with relatively higher mining yields and lower processing costs than frac sand mines with predominantly coarse sand reserves.
We believe this mix of coarse and fine sand reserves, combined with demand for our products across a range of mesh sizes, provides us with relatively higher mining yields and lower processing costs than frac sand mines with predominantly coarse sand reserves.
We recognize rental revenue when the equipment is made available for the customer to use or other obligations in the contract are met. In the fourth quarter of 2021, we expanded our product line to begin offering sand through IPS.
We recognize rental revenue when the equipment is made available for the customer to use, services are provided, or other obligations in the contract are met. In the fourth quarter of 2021, we expanded our product line to begin offering sand through IPS.
Customer Concentration For the year ended December 31, 2022, Equitable Gas Corporation, Halliburton Energy Services, Encino Energy, and Liberty Oilfield Services accounted for 22.3%, 15.4%, 14.4%, and 13.7% respectively, of total revenue. For the year ended December 31, 2021, Equitable Gas Corporation, Halliburton Energy Services, and Liberty Oilfield Services accounted for 24.3%, 18.3%, and 14.8%, respectively, of total revenue.
For the year ended December 31, 2022, Equitable Gas Corporation, Halliburton Energy Services, Encino Energy, and Liberty Oilfield Services accounted for 22.3%, 15.4%, 14.4%, and 13.7%, respectively, of total revenue. For the year ended December 31, 2021, Equitable Gas Corporation, Halliburton Energy Services, and Liberty Oilfield Services accounted for 24.3%, 18.3%, and 14.8%, respectively, of total revenue.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) reduce their capacity by shuttering or idling operations as the shift to finer sands in hydraulic fracturing of oil and natural gas wells and to lower cost regional sand sources has eroded the ongoing economic viability of mines with coarser reserve deposits and inefficient mining and logistics facilities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) reduce their capacity by shuttering or idling operations due to the shift to finer sands in hydraulic fracturing of oil and natural gas wells and due to lower cost regional sand sources that has eroded the ongoing economic viability of mines with coarser reserve deposits and inefficient mining and logistics facilities.
Beginning in 2021 and continuing throughout 2022, exploration and production companies have moved to a more disciplined approach to new drilling activity leading to less volatility in supply relative to demand and subsequently higher overall oil and natural gas prices.
Beginning in 2021 and continuing throughout 2023, exploration and production companies have moved to a more disciplined approach to new drilling activity leading to less volatility in supply relative to demand and subsequently higher overall oil and natural gas prices.
We generally expect the level of drilling to correlate with long-term trends in commodity prices. Similarly, oil and natural gas production levels nationally and regionally generally tend to correlate with drilling activity. 51 SMART SAND, INC.
We generally expect the level of drilling to correlate with long-term trends in commodity prices. Similarly, oil and natural gas production levels nationally and regionally generally tend to correlate with drilling activity. 60 SMART SAND, INC.
We expect the Bakken and Marcellus formations to continue to be key markets for us and we look to expand our market share in these key areas through our current strategic initiatives. The industry trends continue towards drilling and completing wells with longer laterals and more frac stages per lateral foot drilled.
We expect the Bakken and Marcellus formations as well as the Canada markets to continue to be key markets for us and we look to expand our market share in these key areas through our current strategic initiatives. The industry trends continue towards drilling and completing wells with longer laterals and more frac stages per lateral foot drilled.
The decrease in net loss is attributable to an increase in total volumes sold and higher average sale prices of our sand in addition to non-cash bad debt expense recorded in the prior year against the residual balance of accounts receivable that were previously the subject of litigation in the prior year. 53 SMART SAND, INC.
The decrease in net loss is attributable to an increase in total volumes sold and higher average sale prices of our sand in addition to non-cash bad debt expense recorded in the prior year against the residual balance of accounts receivable that were previously the subject of litigation in the prior year.
We sell our sand through long-term contracts or spot sales in the open market. We provide wellsite proppant storage solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers.
We sell our sand through long-term contracts, short-term supply agreements or spot sales in the open market. We provide wellsite proppant storage solutions services and equipment under flexible contract terms custom tailored to meet the needs of our customers.
We believe that we are the only sand facility in Wisconsin that has dual served rail capabilities, which should create competition among our rail carriers and allow us to provide more competitive logistics options for our customers.
We believe that we are the only sand facility in Wisconsin that has dual served rail capabilities, which should create competition among our rail carriers and allow us to provide more competitive logistics options for our customers. 57 SMART SAND, INC.
The increase in logistics revenue was due to higher utilization of our SmartSystems equipment. 52 SMART SAND, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Cost of Goods Sold Cost of goods sold was $226.1 million and $140.4 million, for the years ended December 31, 2022 and December 31, 2021, respectively.
The $2.7 million increase in logistics revenue was due to higher utilization of our SmartSystems equipment. 63 SMART SAND, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Cost of Goods Sold Cost of goods sold was $226.1 million and $140.4 million, for the years ended December 31, 2022 and December 31, 2021, respectively.
We define Adjusted EBITDA as EBITDA, plus: (i) gain or loss on sale of fixed assets or discontinued operations; (ii) integration and transition costs associated with specified transactions; (iii) equity compensation; (iv) acquisition and development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions; (vi) earn-out, contingent consideration obligations and other acquisition and development costs; and (vii) non-cash charges and unusual or non-recurring charges.
We define Adjusted EBITDA as EBITDA, plus: (i) gain or loss on sale of fixed assets or discontinued operations; (ii) integration and transition costs associated with specified transactions; (iii) equity compensation; (iv) acquisition and development costs; (v) non-recurring cash charges related to restructuring, retention and other similar actions; (vi) earn-out, contingent consideration obligations and other acquisition and development costs; and (vii) 65 SMART SAND, INC.
Free Cash Flow Free cash flow, which we define as net cash provided by operating activities less purchases of property, plant and equipment, is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors and commercial banks, to measure the liquidity of our business. 58 SMART SAND, INC.
Free Cash Flow Free cash flow, which we define as net cash provided by operating activities less purchases of property, plant and equipment, is used as a supplemental financial measure by our management and by external users of our financial statements, such as investors and commercial banks, to measure the liquidity of our business.
Sand volumes increased by 36% from 2021 to 2022, additionally sand prices have increased due to a shift in supply and demand, which we believe is driven by increased prices in oil and natural gas leading to increased completion activity of new oil and natural gas wells. • We had $5.0 million of contractual shortfall revenue for the year ended December 31, 2022 and $4.4 million for the year ended December 31, 2021, respectively.
Additionally sand prices have increased due to a shift in supply and demand, which we believe was driven by increased prices in oil and natural gas leading to increased completion activity of new oil and natural gas wells. • We had $5.0 million of contractual shortfall revenue for the year ended December 31, 2022 and $4.4 million for the year ended December 31, 2021, respectively.
We believe that, among other things, the size and favorable geologic characteristics of our sand reserves, the strategic location and logistical advantages of our facilities, our proprietary SmartDepot TM portable wellsite storage silos and SmartPath TM transloader, access to all Class I rail lines, and the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.
We believe that, among other things: (i) the size and favorable geologic characteristics of our sand reserves; (ii) the strategic location and logistical advantages of our facilities; (iii) our proprietary SmartDepot TM portable wellsite storage silos, SmartPath ® transloader and SmartBelt TM conveyor; (iv), access to all Class I rail lines; and (v) the industry experience of our senior management team make us as a highly attractive provider of sand and logistics services.
We have indoor wet processing facilities at each of our plant locations which allow us to produce wet sand inventory year-round to support a portion of our dry sand processing capacity, which may reduce certain of the effects of this seasonality.
We have indoor wet processing facilities at our Oakdale and Utica plant locations which allow us to produce wet sand inventory year-round to support a portion of our dry sand processing capacity, which may reduce certain of the effects of this seasonality.
We recognize revenue to the extent of the unfulfilled minimum contracted quantity at the shortfall price per ton as stated in the contract. • Logistics revenue, which includes freight for certain mine gate sand sales, logistics services and SmartSystems rentals, was $7.6 million for the year ended December 31, 2022, an increase of $2.7 million when compared to logistics revenue of $4.8 million for the year ended December 31, 2021.
We recognize revenue to the extent of the unfulfilled minimum contracted quantity at the shortfall price per ton as stated in the contract. • Logistics revenue, which includes freight for certain mine gate sand sales, railcar usage, logistics services and SmartSystems rentals, was $7.6 million for the year ended December 31, 2022, compared to logistics revenue of $4.8 million for the year ended December 31, 2021.
Salaries, benefits and payroll taxes increased to $14.9 million for the year ended December 31, 2022, as compared to $11.3 million for the year ended December 31, 2021, due primarily to increased bonuses as management has reinstated a formal employee bonus plan based on company performance for 2022 and increased staffing to support our IPS business.
Salaries, benefits and payroll taxes increased to $13.5 million for the year ended December 31, 2022, as compared to $11.3 million for the year ended December 31, 2021, due primarily to increased bonuses as management reinstated a formal employee bonus plan based on company performance for 2022 and increased staffing to support our IPS business.
If we determine it is more likely than not that we will not be able to realize the benefits of the deductible temporary differences, we would record a valuation allowance against the net deferred tax asset. 61 SMART SAND, INC.
If we determine it is more likely than not that we will not be able to realize the benefits of the deductible temporary differences, we would record a valuation allowance against the net deferred tax asset.
Our unit train capable transload facility approximately three miles from the Oakdale facility in Byron Township, Wisconsin, provides us with the ability to ship sand to our customers on the Union Pacific rail network.
Additionally, we have our unit train capable transload facility approximately three miles from the Oakdale facility in Byron Township, Wisconsin, which provides us with the ability to ship sand to our customers on the Union Pacific rail network.
Costs of Conducting Our Business The principal direct costs involved in operating our business are freight charges, which consist of transportation, railcar rental and storage, and production costs, which consists of labor, maintenance, utilities, equipment, excavation and depreciation of our property, plant and equipment.
Costs of Conducting Our Business The principal direct costs involved in operating our business are freight charges, which include transportation and railcar rental expenses, and production costs, which consists of labor, maintenance, utilities, equipment, excavation and depreciation of our property, plant and equipment.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) GAAP Results of Operations Year Ended December 31, 2022 compared to the Year Ended December 31, 2021: Year Ended December 31, Change 2022 2021 Dollars Percentage (in thousands, except percentage change) Revenues: Sand sales revenue $ 243,162 $ 117,402 $ 125,760 107 % Shortfall revenue 5,010 4,421 589 13 % Logistics revenue 7,568 4,825 2,743 57 % Total revenue 255,740 126,648 129,092 102 % Cost of goods sold 226,149 140,384 85,765 61 % Inventory impairment loss — 2,170 (2,170) (100) % Gross profit 29,591 (15,906) 45,497 286 % Operating expenses: Salaries, benefits and payroll taxes 14,942 11,258 3,684 33 % Depreciation and amortization 2,244 1,980 264 13 % Selling, general and administrative 15,532 14,749 783 5 % Bad debt expense 1 19,592 (19,591) (100) % Total operating expenses 32,719 47,579 (14,860) (31) % Operating loss (3,128) (63,485) 60,357 95 % Other (expenses) income: Interest expense, net (1,608) (1,979) 371 (19) % Other income 828 5,773 (4,945) (86) % Total other (expenses) income, net (780) 3,794 (4,574) (121) % (Loss) income before income tax (benefit) expense (3,908) (59,691) 55,783 93 % Income tax benefit (3,205) (9,017) 5,812 64 % Net (loss) income $ (703) $ (50,674) $ 49,971 99 % Revenue Revenue was $255.7 million for the year ended December 31, 2022, during which we sold approximately 4,333,000 tons of sand.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021: Year Ended December 31, Change 2022 2021 Dollars Percentage (in thousands, except percentage change) Revenues: Sand sales revenue $ 243,162 $ 117,402 $ 125,760 107 % Shortfall revenue 5,010 4,421 589 13 % Logistics revenue 7,568 4,825 2,743 57 % Total revenue 255,740 126,648 129,092 102 % Cost of goods sold 226,149 140,384 85,765 61 % Inventory impairment loss — 2,170 (2,170) (100) % Gross profit 29,591 (15,906) 45,497 (286) % Operating expenses: Salaries, benefits and payroll taxes 13,480 11,258 2,222 20 % Depreciation and amortization 2,244 1,980 264 13 % Selling, general and administrative 17,288 14,194 3,094 22 % Loss (gain) on disposal of fixed assets, net (294) 555 (849) (153) % Bad debt expense 1 19,592 (19,591) (100) % Total operating expenses 32,719 47,579 (14,860) (31) % Operating loss (3,128) (63,485) 60,357 (95) % Other (expenses) income: Interest expense, net (1,608) (1,979) 371 (19) % Other income 828 5,773 (4,945) (86) % Total other (expenses) income, net (780) 3,794 (4,574) (121) % Loss before income tax benefit (3,908) (59,691) 55,783 (93) % Income tax benefit (3,205) (9,017) 5,812 (64) % Net income (loss) $ (703) $ (50,674) $ 49,971 (99) % Revenue Revenue was $255.7 million for the year ended December 31, 2022, during which we sold approximately 4,333,000 tons of sand.
Revenue is generally recognized as products are delivered to customers in accordance with the contract. We generate revenue on our SmartSystems by renting equipment to our customers under contract terms tailored to meet their short-term or long-term needs with any number of SmartDepots, SmartPaths or trailers they require.
Revenue is generally recognized as products are delivered to customers in accordance with the contract. We generate revenue from our SmartSystems by renting equipment and providing services to our customers under contract terms tailored to meet their short-term or long-term needs with any number of SmartDepots, SmartPaths, SmartBelts or trailers they require.
The increase was primarily due to higher volumes sold and the related increase in production costs and freight costs that accompany higher volumes, along with higher labor, maintenance and utilities costs in 2022. Gross Profit Gross profit was $29.6 million and $(15.9) million for the years ended December 31, 2022 and December 31, 2021, respectively.
The increase was primarily due to higher volumes sold and the related increase in production costs and freight costs that accompany higher volumes. Gross Profit Gross profit was $29.6 million and $(15.9) million for the years ended December 31, 2022 and 2021, respectively.
Depreciation and amortization increased slightly from 2022 as compared to 2021. Selling, general and administrative expenses increased from $14.7 million for the year ended December 31, 2021 to $15.5 million for the year ended December 31, 2022, primarily driven by development costs, royalty payments and other costs related to our Blair facility and our Waynesburg terminal.
Depreciation and amortization increased slightly from 2022 as compared to 2021. Selling, general and administrative expenses increased from $14.2 million for the year ended December 31, 2021 to $17.3 million for the year ended December 31, 2022, primarily driven by development costs, royalty payments and other costs related to our Blair facility and our Waynesburg terminal.
As a consequence, we have experienced lower cash operating costs in the first and fourth quarter of each calendar year, and higher cash operating costs in the second and third quarter of each calendar year when we overproduced to meet demand in the winter months.
As a consequence, we have experienced lower cash operating costs in the first and fourth quarter of each calendar year, and higher cash operating costs in the second and third quarter of each calendar year when we overproduce wet sand to meet dry sand demand in the winter months.
ITEM 7. — MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements The following discussion and analysis of our financial condition and results of operations should be read together with Item 1, “Business,” and the Consolidated Financial Statements and the related notes in Item 8 of this Annual Report on Form 10-K.
ITEM 7. — MANAGEMENT’S DISCUSSION AND ANALYSIS FINANCIAL CONDITION AND RESULTS OF OPERATIONS Forward-Looking Statements The following discussion and analysis of our financial condition and results of operations should be read together with Item 1, “Business,” and Item 8, "Financial Statements and Supplementary Data,” of this Annual Report on Form 10-K.
Logistics Through our transloading terminal in Van Hook, North Dakota, we provide one of the most efficient and lowest-cost sources of Northern White sand in-basin to customers operating in the Bakken Formation in the Williston Basin.
Logistics Through our transloading terminal in Van Hook, North Dakota, we provide one of the most efficient and lowest-cost sources of Northern White sand in-basin to customers operating in the Bakken Formation in the Williston Basin. In 2021, we acquired the right to operate the Waynesburg, Pennsylvania terminal.
Demand for both frac sand and our SmartSystems is influenced by the volume of oil and natural gas well drilling and completion activity, as well as the types of wells that are completed.
Demand for both frac sand and our SmartSystems is influenced by the volume of oil and natural gas wells being drilled and completed, as well as the types of wells that are completed.
The continued volatility in oil and natural gas demand and potential for increased supplies of sand has led to continued reluctance by our customers to enter into long-term contracts as customers have instead trended toward purchasing their frac sand supply in the spot market at current market prices.
The continued volatility in oil and natural gas demand and potential for increased supplies of sand has led to continued reluctance by many customers to enter into long-term contracts. As such, customers have instead trended toward purchasing their frac sand supply in the spot market or under short term supply agreements at current market prices. • Litigation settlement.
The increase in Adjusted EBITDA for the year ended December 31, 2022, as compared to the prior year, was primarily due to a decrease in net loss for the year ended December 31, 2022 as a result of higher sales volumes and higher average selling prices of our sand.
The increase in Adjusted EBITDA for the year ended December 31, 2022, as compared to the prior year, was primarily due to a decrease in net loss for the year ended December 31, 2022 as a result of higher sales volumes and 66 SMART SAND, INC.
Utica & Peru, Illinois Our Utica facility also has a large high-quality reserve base of primarily fine-mesh sand that is contiguous to the production facility and in close proximity to our Peru transload facility located on the BNSF railway.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Utica & Peru, Illinois Our Utica facility also has a large high-quality reserve base of primarily fine-mesh sand that is contiguous to the production facility and in close proximity to our Peru transload facility located on the BNSF railway.
Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, SmartPath transloader, and our rapid deployment trailers. Our SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation.
This capability creates efficiencies, flexibility, enhanced safety and reliability for customers. Through our SmartSystems wellsite proppant storage solutions, we offer the SmartDepot and SmartDepotXL™ silo systems, SmartPath transloader SmartBelt conveyor, and our rapid deployment trailers. Our SmartDepot silos include passive and active dust suppression technology, along with the capability of a gravity-fed operation.
As of December 31, 2022, we determined it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a valuation allowance against the deferred tax liabilities, long-term, net on our consolidated balance sheet in the amount of $1.6 million, and an immaterial corresponding increase to the income tax expense of on our consolidated statements of operations. 62
As of December 31, 2023, we determined it is more likely than not that we will not be able to fully realize the benefits of certain existing deductible temporary differences and have recorded a valuation allowance against the deferred tax liabilities, long-term, net on our consolidated balance sheet in the amount of $0.9 million.
Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 5,420 $ 32,438 $ 25,541 Acquisition of Blair facility (6,547) — — Purchases of property, plant and equipment (12,731) (11,220) (8,620) Free cash flow $ (13,858) $ 21,218 $ 16,921 Free cash flow was $(13.9) million for the year ended December 31, 2022.
Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 30,991 $ 5,420 $ 32,438 Acquisition of Blair facility — (6,547) — Purchases of property, plant and equipment (23,031) (12,731) (11,220) Free cash flow $ 7,960 $ (13,858) $ 21,218 Free cash flow was $8.0 million for the year ended December 31, 2023.
We directly control three in-basin transloading facilities and have access to third party transloading terminals in all operating basins. We operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin.
We directly control five in-basin transloading facilities and have access to third party transloading terminals in all operating basins. We operate a unit train capable transloading terminal in Van Hook, North Dakota to service the Bakken Formation in the Williston Basin. We operate this terminal under a long-term agreement with Canadian Pacific Railway.
With this acquisition, we now have direct access to four Class I rail lines and the ability to access all Class 1 rail lines within the United States and Canada.
We now have direct access to four Class I rail lines and the ability to access all Class 1 rail lines within the United States and Canada. 58 SMART SAND, INC.
Environmental Matters We are subject to various federal, state and local laws and regulations governing, among other things, hazardous materials, air and water emissions, environmental contamination and reclamation and the protection of the environment and natural resources.
These performance bonds assure our performance under our reclamation plan, maintenance and restoration of public roadways. Environmental Matters We are subject to various federal, state and local laws and regulations governing, among other things, hazardous materials, air and water emissions, environmental contamination and reclamation and the protection of the environment and natural resources.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) Net cash provided by operating activities is the GAAP measure most directly comparable to free cash flows. Free cash flows should not be considered an alternative to net cash provided by operating activities presented in accordance with GAAP.
Net cash provided by operating activities is the GAAP measure most directly comparable to free cash flows. Free cash flows should not be considered an alternative to net cash provided by operating activities presented in accordance with GAAP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) We recognize the impact of uncertain tax positions at the largest amount that, in our judgment, is more-likely-than-not to be required to be recognized upon examination by a taxing authority.
We recognize uncertain tax positions at the largest amount that, in our judgment, is more-likely-than-not to be required to be recognized upon examination by a taxing authority.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) We believe that our presentation of EBITDA and Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA.
We believe that our presentation of EBITDA and Adjusted EBITDA will provide useful information to investors in assessing our financial condition and results of operations. Net income is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP.
For the years ended December 31, 2021 and 2020, our effective tax rate was approximately 15.1% and (52.0)%, respectively, based on the annual effective tax rate net of discrete federal and state taxes.
For the years ended December 31, 2023 and 2022, our effective tax rate was approximately 306.4% and 82.0%, respectively, based on the annual effective tax rate net of discrete federal and state taxes.
The key factors contributing to the decrease in revenues for the year ended December 31, 2021 as compared to the year ended December 31, 2020 were as follows. • Sand sales revenue increased from $70.9 million for the year ended December 31, 2020 to $117.4 million for the year ended December 31, 2021, as a result of higher total volumes sold.
The key factors contributing to the increase in revenues for the year ended December 31, 2023 as compared to the year ended December 31, 2022 were as follows: • Sand sales revenue increased from $243.2 million for the year ended December 31, 2022 to $283.2 million for the year ended December 31, 2023, as a result of higher total volumes sold.
Year Ended December 31, 2022 2021 2020 (in thousands) Net (loss) income $ (703) $ (50,674) $ 37,954 Depreciation, depletion and amortization 26,521 25,495 22,536 Income tax benefit (3,205) (9,017) (12,980) Interest expense 1,661 2,014 2,129 Franchise taxes 353 290 275 EBITDA $ 24,627 $ (31,892) $ 49,914 (Gain) loss on sale of fixed assets (294) 555 237 Equity compensation 2,729 2,933 3,431 Royalty stock issuance 639 — — Employee retention credit — (5,026) — Acquisition and development costs (1) 675 28 (369) Gain on bargain purchase — — (39,600) Non-cash impairments (2) — 2,170 5,115 Cash charges related to restructuring and retention 137 9 82 Accretion of asset retirement obligations 758 740 396 Sales tax audit settlement $ — $ — $ 1,250 Adjusted EBITDA $ 29,271 $ (30,483) $ 20,456 (1) Represents costs incurred related to the business combinations and current development project activities.
Year Ended December 31, 2023 2022 2021 (in thousands) Net income (loss) $ 4,649 $ (703) $ (50,674) Depreciation, depletion and amortization 27,363 26,521 25,495 Income tax benefit (6,901) (3,205) (9,017) Interest expense 1,532 1,661 2,014 Franchise taxes 804 353 290 EBITDA $ 27,447 $ 24,627 $ (31,892) (Gain) loss on sale of fixed assets 1,802 (294) 555 Equity compensation 3,391 2,729 2,933 Royalty stock issuance — 639 — Employee retention credit — — (5,026) Acquisition and development costs (1) 545 675 28 Non-cash impairments (2) — — 2,170 Cash charges related to restructuring and retention 32 137 9 Accretion of asset retirement obligations 904 758 740 Adjusted EBITDA $ 34,121 $ 29,271 $ (30,483) (1) Represents costs incurred related to the business combinations and current development project activities.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) How We Generate Revenue We generate revenue by excavating and processing frac sand, which we sell to our customers under long-term price agreements or as spot sales at prevailing market rates. For in-basin sales, revenues also include a charge for transportation services provided to customers.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) How We Generate Revenue We generate revenue by excavating and processing frac sand, which we sell to our customers in the oil and gas industry under short and long-term contracts agreements or as spot sales at prevailing market rates.
Year Ended December 31, 2022 2021 2020 (in thousands) Revenue $ 255,740 $ 126,648 $ 122,340 Cost of goods sold 226,149 140,384 104,221 Gross profit 29,591 (13,736) 18,119 Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold 25,038 24,258 21,022 Contribution margin $ 54,629 $ 10,522 $ 39,141 Contribution margin per ton $ 12.61 $ 3.30 $ 20.75 Total tons sold 4,333 3,189 1,886 Contribution margin was $54.6 million, or $12.61 per ton sold, for the year ended December 31, 2022 compared to $10.5 million, or $3.30 per ton sold, for the year ended December 31, 2021.
Year Ended December 31, 2023 2022 2021 (in thousands) Revenue $ 295,973 $ 255,740 $ 126,648 Cost of goods sold 254,418 226,149 140,384 Gross profit 41,555 29,591 (13,736) Depreciation, depletion, and accretion of asset retirement obligations included in cost of goods sold 25,469 25,038 24,258 Contribution margin $ 67,024 $ 54,629 $ 10,522 Contribution margin per ton $ 14.85 $ 12.61 $ 3.30 Total tons sold 4,514 4,333 3,189 Contribution margin was $67.0 million, or $14.85 per ton sold, for the year ended December 31, 2023 compared to $54.6 million, or $12.61 per ton sold, for the year ended December 31, 2022.
Contribution margin was $10.5 million, or $3.30 per ton sold, for the year ended December 31, 2021 compared to $39.1 million, or $20.75 per ton sold, for the year ended December 31, 2020.
Contribution margin was $54.6 million, or $12.61 per ton sold, for the year ended December 31, 2022 compared to $10.5 million, or $3.30 per ton sold, for the year ended December 31, 2021.
We entered into a settlement agreement related to previous litigation which we collected a $35.0 million cash payment to settle $54.6 million of outstanding accounts receivable. • Impairment loss. As of December 31, 2022, we have not recorded any impairment loss.
In 2021, we recorded bad debt of approximately $19.6 million. We entered into a settlement agreement related to previous litigation in which we collected a $35.0 million cash payment to settle $54.6 million of outstanding accounts receivable. • Impairment loss.
Activity in the oil and gas industry began to rebound in the fourth quarter of 2020 and throughout 2021 as the global distribution of COVID-19 vaccines ramped up and travel restrictions lessened.
Activity in the oil and gas industry began to rebound in the fourth quarter of 2020 and throughout 2021 as the global distribution of COVID-19 vaccines ramped up and travel restrictions lessened. This improvement in oil and natural gas activity continued in 2022 and 2023 as oil and gas production increased worldwide due to demand relative to supply.
Based on our balance sheet, cash flows, current market conditions, and information available to us at this time, we believe that we have sufficient liquidity and other available capital resources, to meet our cash needs for the next twelve months, including continued investment in our SmartSystems wellsite proppant storage solutions and other capital projects.
Based on our balance sheet, cash flows, current market conditions, and information available to us at this time, we believe that we have sufficient liquidity and other available capital resources, to meet our cash needs for the next twelve months, including continued investment in efficiency projects at Oakdale, Blair and Utica facilities, as well as expansion and customization of our newly acquired Ohio terminals.
When this facility opens in the second quarter of 2023, we will have direct access to four Class I rail lines and the ability to access all Class 1 rail lines within the United States and Canada.
In the second quarter of 2023, we commenced operations at the Blair facility; which gave us direct access to four Class I rail lines and the ability to access all Class 1 rail lines within the United States and Canada.
Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and they detach from the wellsite equipment, which allows for removal from the wellsite during operation.
Our SmartBelt conveyor is designed to work with our SmartPath transloader to directly feed sand into the blender. Our rapid deployment trailers are designed for quick setup, takedown and transportation of the entire SmartSystem, and they detach from the wellsite equipment, which allows for removal from the wellsite during operation.
We evaluate these estimates and assumptions on an ongoing basis and base our estimates on historical experience, current 60 SMART SAND, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (UNAUDITED) conditions and various other assumptions that we believe to be reasonable under the circumstances.
We evaluate these estimates and assumptions on an ongoing basis and base our estimates on historical experience, current conditions and various other assumptions that we believe to be reasonable under the circumstances.
The primary assets of Blair consist of an idle frac sand mine and related processing facility located in Blair, Wisconsin. The Blair facility has approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway.
This facility has approximately 2.9 million tons of total annual sand processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway. We commenced operations at the Blair facility in the second quarter of 2023.
Overall Trends and Outlook Demand Trends According to Spears, the North American proppant market, including frac sand, ceramic and resin-coated proppant, was approximately 128 million tons in 2022, which is approximately 25% increase from the 102 million tons Spears reported for 2021. Spears estimates that 2023 demand will increase to 154 million tons, which is approximately 21% increase over 2022.
Overall Trends and Outlook Demand Trends According to Spears, the North American proppant market, including frac sand, ceramic and resin-coated proppant, was approximately 132 million tons in 2023, an approximate 5% increase from the 127 million tons Spears reported for 2022. Spears estimates that 2024 demand will remain similar to 2023.
The computation of the effective tax rate for the year ended December 31, 2021 and 2020 included modifications from the statutory rate such as income tax credits, depletion deductions, carrybacks as a result of the Coronavirus Aid, Relief and 55 SMART SAND, INC.
The computation of the effective tax rate for the year ended December 31, 2022 and 2021 included modifications from the statutory rate such as income tax credits, depletion deductions, carrybacks as a result of the Coronavirus Aid, Relief and Economic Security Act, and state apportionment changes, among other items.
The decline in gross profit for the year ended December 31, 2021 was primarily due to decreased shortfall revenue and low average sales price of our sand relative to the cost to produce and deliver products to our customers.
The increase in gross profit for the year ended December 31, 2023 was primarily due to higher sales volumes and higher average sale prices of our sand relative to the cost to produce and deliver products to our customers.
Since then, we have worked to expand and diversify our customer base to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail and recreation.
Since then, we have worked to expand and diversify our customer base to serve the major industrial markets throughout North America, including glass, foundry, building products, filtration, geothermal, renewables, ceramics, turf & landscape, retail and recreation. Our IPS business, while a small part of our overall sales, has continued to grow and we are investing to support this growth potential.
The primary assets of Blair consist of a frac sand mine and related processing facility located in Blair, Wisconsin, which has approximately 2.9 million tons of total annual processing capacity and contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway.
We also increased our production capacity with our acquisition of the Blair, Wisconsin mine and processing facility in 2022. This facility, which has approximately 2.9 million tons of total annual sand processing capacity, contains an onsite, unit train capable rail terminal with access to the Class 1 Canadian National Railway and became operational in the second quarter of 2023.
Revenue for the year ended December 31, 2020 was $122.3 million, during which we sold approximately 1,886,000 tons of sand.
Revenue for the year ended December 31, 2022 was $255.7 million, during which we sold approximately 4,333,000 tons of sand.
We expect to fund these capital expenditures with existing cash, cash generated from operations, borrowings under the ABL Credit Facility or other financing sources, such as equipment finance providers. Indebtedness We have several debt facilities including the Oakdale Equipment Financing, various notes payable and our ABL Credit Facility.
We expect to fund these capital expenditures with existing cash, cash generated from operations, borrowings under the ABL Credit Facility or other financing sources, such as equipment finance providers. 67 SMART SAND, INC.
During the year ended December 31, 2022, positive cash flow from operating activities came late in the year as cash collections caught up with increased working capital requirements due to significant increase in sales volumes. The acquisition of the Blair facility and planned capital expenditures more than offset the cash provided by operating activities.
Free cash flow was $(13.9) million for the year ended December 31, 2022. During the year ended December 31, 2022, positive cash flow from operating activities came late in the year as cash collections caught up with increased working capital requirements due to significant increase in sales volumes.
Income Tax Benefit Income tax benefit was $9.0 million for the year ended December 31, 2021 compared to income tax benefit of $13.0 million for the year ended December 31, 2020.
Income Tax Benefit Income tax benefit was $6.9 million for the year ended December 31, 2023 compared to income tax benefit of $3.2 million for the year ended December 31, 2022.
EBITDA and Adjusted EBITDA should not be considered alternatives to net income presented in accordance with GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.
Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies, thereby diminishing their utility. The following table presents a reconciliation of EBITDA and Adjusted EBITDA to net income for each of the periods indicated.
Our Oakdale Equipment Financing is secured by substantially all of the assets at our Oakdale facility. The balance on this facility as of December 31, 2022 was $11.8 million. Minimum cash payments on this facility in 2023 are $4.6 million. Our various notes payable are primarily secured by our manufactured SmartSystems equipment.
The balance on our Oakdale Equipment Financing as of December 31, 2023 was $7.9 million. Minimum cash payments on this facility in 2024 are $6.8 million. Our various notes payable are primarily secured by our manufactured SmartSystems equipment and other purchased heavy equipment. Total debt under these notes payable as of December 31, 2023 was $2.5 million.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+1 added−0 removed6 unchanged
Biggest changeBorrowings under the ABL Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either a LIBOR rate or an alternate base rate (“ABR”). The applicable margin is 2.00% for LIBOR loans and 1.00% for ABR loans. There was no balance on our ABL Credit Facility as of December 31, 2022.
Biggest changeInterest Rate Risk The majority of our debt is financed under fixed interest rates. Borrowings under the ABL Credit Facility bear interest at a rate per annum equal to an applicable margin, plus, at our option, either a LIBOR rate or an alternate base rate (“ABR”). The applicable margin is 2.00% for LIBOR loans and 1.00% for ABR loans.
Thus, revenues, operating expenses, the results of operations, assets and liabilities may be impacted to the extent that they are not hedged by the rise and fall of the relative value of the United States dollar to the Canada dollar.
Thus, revenues, operating expenses, the results of operations, assets and liabilities may be affected to the extent that they are not hedged by the rise and fall of the relative value of the United States dollar to the Canada dollar.
During the years ended December 31, 2022, 2021 and 2020, revenue, expenses, assets and liabilities transacted in Canada dollars were immaterial to the results of operations. 63
During the years ended December 31, 2023, 2022 and 2021, revenue, expenses, assets and liabilities transacted in Canada dollars were immaterial to the results of operations. 71
We do not believe this represents a material interest rate risk. Credit Risk This concentration of counterparties operating in a single industry may increase our overall exposure to credit risk, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.
Credit Risk This concentration of counterparties operating in a single industry may increase our overall exposure to credit risk, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions.
Additionally the price fluctuations of natural gas, electricity, as well as diesel prices impact the overall cost of conducting our business. We currently hedge our indirect exposure to commodity price risk by entering into fixed price contracts for natural gas, propane and electricity. Interest Rate Risk The majority of our debt is financed under fixed interest rates.
Additionally the price fluctuations of natural gas, electricity, as well as diesel prices impact the overall cost of conducting our business. At times, we hedge a portion of our estimated indirect exposure to commodity price risk by entering into fixed price contracts for natural gas, propane and electricity.
Added
There was a balance of $8.0 million our ABL Credit Facility as of December 31, 2023. We do not believe this represents a material interest rate risk.

Other SND 10-K year-over-year comparisons