Fracking Logistics Giant Solaris gears for $175 million IPO
The oil market is an immensely diverse one. It covers Exploration and Production companies which deal in oil and natural gas as well as hydraulic fracking companies. And all the other firms that provide services to such enterprises. To conduct hydraulic fracturing, a person would need experts on the subject, water providers, and moving/ fracking equipment. There’s market for such services and it’s significant if the profitability of companies such as Solaris is any indication.
Solaris Oilfield Infrastructure (Pending: SOI) is a logistics firm that provides hydraulic fracking companies with the equipment they need to go about their business. The services offered by Solaris extend to the loading, storage and delivery of proppant in the wells where mining for oil and natural gas takes place. The Houston-Texas-based firm was established in 2014 and is still dominant in the E&P market.
On Tuesday, Solaris announced that it had filed with the SEC to start trading its stock on the NYSE market. Trading will begin during the week beginning May 8th, 2017. Solaris put up 10.6 million of its common stock shares for sale during the IPO, with the overallotment option of up to 1.59 million Type B shares for insiders. The company expects to make up to $219.42 million on the deal by offering each share for a price of $15 to $18. At the midpoint of this offering, Solaris Oilfield Infrastructure will command a fully diluted market value of $715 million.
The underwriters of the deal are Goldman Sachs, Credit Suisse, Wells Fargo Securities, Simmons & Co., Evercore ISI, Morgan Stanley, Raymond James, Seaport Global Securities, Wunderlich, as well as Tudor, Pickering, Holt & Co.
Solaris Oilfield has things going for it and others against it as it heads for its IPO. One bane that comes with buying the company’s shares would be that you would have to contend with the unstable nature of the oil market and prices at the moment given the oil glut being experienced globally. Similarly, Solaris operates that in a highly competitive market niche. Even if the company keeps up a strong front, it can never rake in as much money as it would have with less competition. Other main contenders in that market bracket include FB Industries and US Silica (NYSE: SLCA). Of course, you could look at it positively; more competition leads to more innovation.
Solaris shares may have their issues with the market, but it also has numerous benefits. For one, the firm makes sales in large volumes, bringing in an average of $18.2 million in revenue in 2016, up from the 1$11.4 million of 2015. Similarly, while the gross profit margin may have dropped from 2015 going on to 2016, the company still has an impressive 35% in the same for the 12 months ending December 31st, 2016. When one compounds these impressive figures with the significant cash flow from the company, Solaris sounds like a good bet for any investor.
Capital from the company has up to this point come from investors such as Yorktown Energy Partners XI and money from operations. Solaris Oilfield Infrastructure intends to use capital from the IPO to purchase all interest in its subsidiary Solaris LLC. The subsidiary can then repay its debts, expand and motivate employees using the capital boost.