U.S. Silica cuts 10% of workforce as frac sand demand wanes

(Reuters) – U.S. Silica Holdings Inc said on Friday it had cut about 230 jobs, or 10% of its workforce, as demand for its frac sand comes under pressure from oil and gas producers reducing drilling in the backdrop of volatile prices.

The job cuts included employees impacted by idling of its two mines in Utica, Illinois and Tyler, Texas, the company said, adding that it expects to incur about $1.7 million in related severance costs in the fourth quarter of 2019.

Last month, U.S. Silica said it expects demand to slow down in the fourth quarter and reported a bigger-than-expected quarterly loss weighed down by lower prices.

Prices for the proppant used to crack the ground and extract oil have dropped in North America, as low oil prices and demands for higher investor returns stunted drilling activity.

The company had also forecast net sales and profits in its industrial business, which supplies sand to construction companies and glass manufacturers, to stay flat or rise marginally in 2020, hurt by trade tariffs and fears of a global slowdown.

“The difficult decisions announced today are an important element of our plan to protect margins and generate free cash flow in an increasingly competitive oil and gas completions market,” Chief Executive Officer Bryan Shinn said on Friday.

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