Intrepid Back in Black for 4Q, Year; Water Sales, Higher Fertilizer Prices Credited

Denver-based Intrepid Potash Inc.’s net income pulled into the plus column for both the fourth quarter and year ending Dec. 31, 2018, compared to year-ago losses. Fourth-quarter net income was $7.6 million ($0.06 per diluted share) on sales of $54.4 million, versus the year-ago loss of $1.6 million ($0.01 per share) and $42.6 million, respectively. Full-year net income was $11.8 million ($0.09 per share) on sales of $208.3 million, up from 2017’s loss of $22.6 million ($0.20 per share) and $177.9 million.

“Fourth-quarter results benefited from strong potash sales, higher market prices for potash and Trio^®, and another quarter of solid demand for oilfield solutions,” said Intrepid Executive Chairman, President, and CEO Bob Jornayvaz. “The fourth quarter also marks the first quarter of positive gross margin for our Trio^® segment since 2016, as we saw the benefits of a focused international strategy and increased byproduct sales. Price increases announced in January for both potash and Trio^® provide stability heading into the spring selling season, and we believe Intrepid is well-positioned for another year of strong cash flow generation in 2019.”

The company said fourth-quarter and full-year potash results benefited from increased industrial demand. The company said it produced 6 percent less potash in the fourth quarter than the year-ago period due to a decrease in run time at its Moab and HB facilities. It expects 2019 production to be up due to good solar evaporation in 2018. The company expects to benefit from recent price increases and increased spring truck sales, which it said generally carry lower freight costs. It expects a $15-$20/st increase in first-quarter average net realized sales prices when compared to year-ago levels.

Trio margins were up due to higher prices, increased sales, and fewer international sales, which normally reflect lower prices, though the company continues to eye higher-priced offshore markets. Fourth-quarter production was up 10 percent due to better ore grades, while full-year was off due to a reduced production schedule begun in second-half 2017.

Intrepid, noting its services to the oil and gas industry, including water sales, has announced the creation of a new segment – Oilfield Solutions. The recent purchase of a 51 percent stake in the Dinwiddie Jal Ranch in southeastern New Mexico is a part of the expanding segment (GM Feb. 15, p. 23).

“The acquisition of this property and the associated water rights will increase our footprint in the prolific Delaware Basin and allow us to offer a more complete midstream infrastructure system and additional supply to our water partners in the region,” said Jornayvaz. “For the full-year 2019, we expect cash received from our total company water sales, including byproducts but excluding the pending acquisition, of between $25 and $35 million, and revenue of between $20 and $30 million.”

Total cash received for water in 2018 was $30.2 million.

Jornayvaz told analysts that EOG Resources Inc., Houston, has waived its right of first refusal on the ranch, and as a result, closing on the property is expected this month. Going forward, it will operate as Intrepid South Ranch.

Fourth-quarter adjusted EPS of $0.06 per share exceeded analyst estimates, which averaged $0.03 per share, according to Bloomberg. The EPS compares to the year-ago negative $0.03. Full-year EPS was $0.09 up from 2017’s negative ($0.18 per share).