U.S. Silica Holdings Inc. said April 24 its top executives and board will take temporary pay reductions in response to the COVID-19 pandemic and expected lower oilfield well completion activity.
The salary reductions come roughly a month after the Katy, Texas-based company slashed its dividend and unveiled plans to trim $20 million in selling, general and administrative expenses for the year. This included idling its Northern White frac sand mine in Sparta, Wis.
In March, analysts with Tudor, Pickering, Holt & Co. (TPH) expected capex cuts to be on the drawing board for U.S. Silica as well given the company’s “hefty net debt load.”
“These are painful but necessary moves given the magnitude of the activity cuts on deck,” the TPH analysts wrote in a March 25 research note.
In response to a plunge in oil prices, oil and gas producers have had to cut spending and halt some drilling and completion activity, which has, as a result, crushing demand for oilfield services and equipment. On April 23, fellow oilfield service firm Patterson-UTI Energy Inc. warned investors it would see a 60% decline in activity this year as shale companies slash spending and halt activity amid the unprecedented decline in oil prices.
U.S. Silica, which produces commercial silica used in a wide range of industrial applications and in the oil and gas industry, said its CEO, Bryan Shinn, members of the board of directors and company officers have volunteered to take up to a 20% temporary base salary reduction in order to rein in costs.
In a statement commenting on the salary reductions, Shinn said: “We continue to make difficult but necessary decisions to right-size our costs and believe that we need to lead by example. ... I expect that with our balanced business portfolio we will continue to outperform our competition and emerge from the economic downturn in a strong position.”
The duration of the salary reductions will be dictated by market conditions, according to a company release from U.S. Silica.