Solaris Oilfield (SOI) -- Growth Trend Intact Despite Lower Rig Counts

[ajootian]

Solaris Oilfield announced 2Q numbers on Thursday and they did not disappoint. They are on track to increase EPS by >40% this year vs. last year. This is a great example of what a small company can do when they design a 'better mousetrap' in a niche market. In SOI's case, their proppant management systems for fracs remain in high demand.

They showed a lot of guts last quarter, borrowing money on their bank line (which charges 8% interest) to buy back some more of their stock, at a price that was about 20% under the current quote. Based on comments in their CC it sounds like they are going to cool their jets on stock buybacks at this point and use free cash flow to pay down their bank line.

The stock remains significantly undervalued, trading at an EPS multiple of around 10 even though it is growing its earnings at a rate that is substantially higher than that.

This Reuters piece has comments from the larger oilfield service companies which make the case that rig counts look to be bottoming this quarter, https://www.reuters.com/markets/commodities/us-oilfield-service-providers-expect-rig-count-recovery-later-this-year-high-2023-07-27/

With this company being able to grow as much as it has been in an environment where rig counts have been going down, it will be really interesting to see how it does with the wind at its back.

Thanks for bringing this stock to my attention Dan.

[dan_s]

Ed;
Good post and thanks for your support of EPG.

SOI has a first class team and they have world class equipment used to complete horizontal wells. It will be generating lots of free cash flow for many years to come.

SOI was brought to my attention at least four years ago by one of professors working with the SMU Energy Club. He also introduced me to the three MBAs (Nataly, Cas and Steven) that still help me with the company profile updates.

I will be updating my forecast for SOI today. My valuation, that was $15.75, will be going up.

[dan_s]

I have updated my forecast/valuation for SOI based on their solid Q2 results (lower revenues, but higher profit margin).
My valuation increases by $3.25 to $19.00/share. < 2024 is setting up to be a VERY GOOD year for this small-cap.

Nice increase in gross profit margin:
“Our strong second quarter results are a testament to the Solaris team’s continued execution on our strategy of growing earnings
per frac crew followed. We grew profitability by deploying more top fill and AutoBlend™ systems and improving ancillary trucking
services margin despite the softening in drilling and completion activity,” Solaris’ Chairman and Chief Executive Officer Bill Zartler
commented."

More free cash flow should result in increased dividends in 2024:
“Since we began returning cash to shareholders in 2018, we have cumulatively returned $148 million through dividends and share
repurchases. We expect to generate meaningful cash flow as our budgeted growth capital spending slows, allowing us to continue
executing on our enhanced shareholder return framework.”

About Solaris Oilfield Infrastructure, Inc.
Solaris Oilfield Infrastructure, Inc. (NYSE:SOI) provides mobile equipment that drives supply chain and execution efficiencies in the
completion of oil and natural gas wells. Solaris’ patented equipment and systems are deployed across oil and natural gas basins in the
United States. Additional information is available on our website, www.solarisoilfield.com.