Top Picks 2018: Solaris Oilfield Infrastructure (SOI)

01/08/2018 5:00 am EST

Focus: ENERGY

Tom Bishop

Founder, BI Research

For my 2018 favorite I am going to pick a stock from our stable with the highest BI Rank; in our proprietary ranking system, anything over 10 is very good and Solaris Oilfield Infrastructure (SOI) ranks at 12.9, notes Tom Bishop, editor of BI Research.

Solaris Oilfield Infrastructure makes and supplies portable silo systems that can be delivered on a truck to an oil/gas well site and raised into a vertical position in sets of three silos. 

These silo systems each hold 1.25 million pounds of proppant (usually sand) which is used in the stimulation of almost every oil and gas well in America to increase flow rates. 

These silo systems have so many advantages over the existing method (for example speed of delivery of sand to the well bore, less well site congestion, less silicon dust in the air…), that the Company cannot keep up with demand.  

It just raised manufacturing capacity from 3-4 systems a month to 6.  And these systems don’t just operate in sets of 3 silos. Many use 2 systems (6 silos, 2.5 million pounds of sand) and there is an increasing trend to employ 4 systems at a well site (12 solos). 

So not only is there an increasing trend of frack crews adopting the use of Solaris silos, but there is an increasing trend of how many silos are being used by each crew. I like the math. It is not uncommon for a single well stimulation/fracking to use 10-12 million pounds of sand … or more. 

The company is also moving further upstream completing a transload facility (a central place where sand can be delivered by the trainload within an oil basin for transport to nearby wells) to be operational early in 2018. 

The EPS expectation for 2017 has been climbing steadily, to $0.54 currently. Ninety days ago the EPS expectation for 2018 was $1.32; 30 days ago it was $1.46; and today it is $1.54. I like the trend.

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