One of Wisconsin’s largest sand mining companies plans to file for bankruptcy and says it may be forced to go out of business after losing nearly $147 million in the first three months of 2020 and seeing a sudden and sharp decline in sales with the ensuing pandemic.
Hi-Crush Inc. has shuttered three of its four Wisconsin sand mines amid a recession and glut of imported oil that have eroded demand for its sand, which is used in oil and gas drilling.
The first quarter losses announced Thursday include a $116.6 million write-off of the value of the Hi-Crush facility in Blair and $29 million in impairment of other assets.
Hi-Crush said it has reduced its workforce by about 60% since mid-March and closed mines in Blair and Whitehall. The Hi-Crush mine in Augusta has been closed since Jan. 2019.
The company says it is operating its facility in Wyeville — along with a mine in Texas — at reduced capacity.
In regulatory filings that Hi-Crush said were delayed by the COVID-19 pandemic, the company said it is negotiating with holders of unsecured loans for a prearranged bankruptcy filing; however, Hi-Crush said it expects to file bankruptcy even if no agreement is reached.
In the quarterly report to the Securities Exchange Commission, Hi-Crush said current conditions and events “indicate that there is substantial doubt about the Company’s ability to continue as a going concern” within the next year.
Hi-Crush in November devalued two of its Wisconsin mines by more than $215 million.
Global oil prices plunged in March when the 13-member Organization of Petroleum Exporting Countries flooded the market in a price war with Russia just as the COVID-19 crisis was sending economies into recession, which oilfield supply chain analyst Joseph Triepke called “a two-headed black swan event” for frac sand producers.
Triepke, president of Infill Thinking, said it was “a devastating blow” to an industry already weakened by increased competition and a move toward using cheaper sand mined near oilfields.