The sand manufacturer U.S. Silica Holdings Inc. has some excellent news for its investors

Shares of U.S. Silica (SLCA) have risen by more than 20% as of 11 a.m. today. ET. The sand producer's strong second quarter earnings and upbeat outlook propelled the stock's rise.
 
WAN CHAI, Hong Kong - Sept. 5, 2022 - PRLog -- Revenue at SLCA increased by 22% year on year to $388.5 million, surpassing analyst's estimates by $43.5 million. Meanwhile, adjusted profits per share were $0.32, also surpassing the analyst's consensus expectation by $0.23 per share.

SLCA sold over 4.7 million tons of sand during the quarter, a 13% increase over the previous quarter and year. The firm benefited from robust demand in the oil and gas industry, which helped produce a 73% increase in the contribution margin for that segment. Meanwhile, demand for industrial and specialty products was also robust, powering a 21% improvement in that segment's contribution margin.

The business stated that the demand for sand used in fracking oil and gas wells is still high. Customers are signing multiyear contracts to ensure sand supply because they expect energy prices to stay high for several years, according to the company.

Because of the favourable market conditions, SLCA will create a large amount of free cash flow. This enabled the business to buy $100 million of debt at a discount in Q2, assisting in the deleveraging of its balance sheet. It plans to generate cash and use that cash to decrease debt in the future quarters.

High oil and gas prices are encouraging oil and gas companies to increase drilling activity. This is prompting them to secure sand supplies in order to build further wells in the future. These favourable market circumstances bode well for the SLCA, which is capitalizing on that demand to decrease debt. If demand stays strong, the company's stock may be able to continue rising in future quarters.

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