Smart Sand, Inc. Common Stock Lytham Partners Fall 2026 Investor Conference

All right. Hello everyone, and thank you all for continuing to join us throughout the day here at the Lytham Partners Fall 2026 Investor Conference. Again, my name is Robert Blum, managing partner here at Lytham. Up next, Lee Beckelman, Chief Financial Officer at Smart Sand, will be taking us through the company's slide presentation. Lee, thank you so much for your participation today. The floor is all yours.

Thanks, Robert, and thanks everyone for joining us today to learn more about Smart Sand. I'm Lee Beckelman, our CFO. I've been with the company since 2014, and I'm going to tell you about our company today. Smart Sand is a pure play Northern White provider of sand in North America. We have a very high quality reserve base, over 450 million tons of reserves of primarily fine mesh sand, and that's important because in the oil and gas market today, 80%-90% of the demand is fine mesh reserves. We also have a very high quality sand that can help improve and lead to longer reserve lives for companies that use Northern White. In addition to a high quality, large reserve base, we have 10 million tons of operating capacity in three locations, and those locations are all tied to Class 1 rail lines.

Logistics is a very important part of our business because all of our sand gets shipped by rail to our customers, so having a very efficient logistics operation is key to our business. Again, we have 10 million tons of capacity, 5.5 million tons at Oakdale that's connected directly to the Canadian Pacific and Union Pacific railroads. 1.6 million tons of capacity at Ottawa, Illinois, that's connected to the Burlington Northern, and 2.9 million tons in Blair, Wisconsin, that's connected to the Canadian National. Last year we sold about 5.4 million tons. Through the first half of this year, we're on pace to sell north of 6 million tons. While we're operating at high levels, we still have room to grow in our existing capacity. So we have room to grow the business substantially without having to spend a lot of capital to capture that incremental growth.

As I mentioned earlier, sustainable long-term supply and logistics advantage is key to our business. Being able to deliver our sand cost effectively and efficiently in the markets we serve is important. So we've invested in terminals throughout the U.S. in our key basins we serve, and we ship all of our sand, for the most part, by unit train shipments that are very large shipments that allow us to have very efficient and low-cost logistics operations. We're a low-cost operating business. We are in a commodity business. We sell our sand to oil and gas producers, and that is driven by the price of oil and natural gas.

We have to be very competitive throughout the operating cycles in the oil and gas industry. How we operate our plants, which I will touch on in a little bit, is key to us always being a low-cost producer and being able to compete in all operating cycles of the industry. We are very well positioned to take advantage of the rising natural gas demand in the U.S. and in Canada. We will touch on this a little more later in the presentation, but natural gas demand growth is expected to grow dramatically over the next several years. 60%-70% of our volumes today for frac sand go into natural gas markets where they are drilling and completing wells for natural gas. We are very well positioned to grow with that incremental industry growth. At the same time, we have been able to diversify our business.

90%-95% of our business today is selling sand to oil and gas producers to frack oil and gas wells. We have a small but growing business in the industrial product solutions, selling sand to industrial applications, and we continue to grow that and expect that to be a bigger part of our business on a go forward basis. We also have a very prudent capital structure in that we have very low leverage. We have always been one of our core principles is maintain low leverage, and that has allowed us to be able to manage through the ups and downs of the oil and gas industry cycles, and to be able to be well positioned when the cycles return and get strong, we are able to take advantage of that. We have a management team that is very aligned with investors.

Our CEO and founder, Chuck Young, owns 18% of our stock today. Insiders, including myself, other executives, board members, and founders own another 18%, approximately. Together we own 36% of the business. We are aligned with the shareholders in that we are aligned to be long-term as investors in the business and be focused on what the long-term value proposition is for Smart Sand. While we have plenty of room to grow and opportunity to grow within our existing asset base with our large reserve base and our capacity of 10 million tons, we do have opportunities to grow. We also have the ability as we generate free cash flow to give value back to our shareholders. We have been doing that over the last several years. We have delivered over $34 million back to our shareholders since 2023.

We have repurchased about 7 million shares since 2023, and we have been giving value back to our shareholders in a combination of a special dividend and stock buybacks. In terms of the market overall, I think this is key to our growth opportunity for us, and you have seen that in our growth and our volumes in the first half of the year. Currently we expect to continue into the remainder of 2026 and beyond. It is really being driven by natural gas demand in the U.S. These charts represent that incremental growth demand. In the left corner here, you can see that LNG capacity is one of the key drivers for incremental growth demand in the U.S. and in Canada.

Today, we produce about 18 billion to 20 billion cubic feet a day of gas that is going into existing LNG facilities, where that gas gets liquefied and then shipped throughout the world into different international locations. As you can see on this chart, over the next five years, LNG capacity in the U.S. is expected to grow from around 20 BCF a day currently, to 30 BCF to 35 BCF a day. That is an incremental 10 billion to 15 billion cubic feet a day of gas, of demand that needs to be supported by new incremental supply coming on in the U.S. and Canada. Secondly, another key driver for increasing growth and natural gas demand is the exploding power needs to support data centers. A lot of that power that is coming on to support that growth and electrical power to support that data center capacity will be natural gas fired plants.

And with some pushback on actually that power coming from the grid, that is even leading to more and more data centers looking to have behind-the-meter electric plants that just feed electricity directly into their facilities, and a lot of those facilities are going to be fed by natural gas. And that is leading to another potential 5 billion to 7 billion cubic feet a day of incremental demand for gas over the next three to five years. So on a combined basis, you are looking at potentially 20 billion cubic feet a day or more of incremental demand for sand versus what we are producing today. To give you some context, today, the U.S. produces about 110 billion cubic feet a day of gas.

Over the next five years, if this demand all materializes, that production levels need to grow from 110 BCF a day to 120, 125, to potentially 130 BCF a day. That is going to lead to a lot more incremental wells being drilled and completed to support that demand, and that is a key driver that we think will continue to lead to strong demand for Northern White sand. Because again, 70% of our market goes to markets that are serving and drilling natural gas wells.