Signal Peak Silica faces mechanics lien claims

Signal Peak Silica (SPS), a supplier of frac sand used in fracking, currently owes at least $2.1M in unpaid construction bills. The outstanding invoices have piled up since May for work completed at the company’s Poteet, Texas facility, according to multiple lien affidavits.

As of May, at least four different contractors have filed claims pursuant to Texas’ mechanics lien laws against Signal Peak Silica, which is headquartered in Houston, TX. Beyond the SPS plant in Poteet, the company also has frac sand facilities in Monahans, TX and Oakwood, Oklahoma. The company’s in-basin frac sand supply and logistics services support the oil and gas industry, which is also suffering financially due to the COVID-19 pandemic.

Amid the facility’s construction debt, SPS has laid off over 150 employees across their plants in Oklahoma and in Texas due to financial constraints caused by the coronavirus outbreak, according to the Houston Chronicle.

At Least 4 Liens Filed Against Signal Peak Silica Facility in Poteet

Industrial Accessories Company, the prime contractor that serviced the facility located at 16760 N. State Highway 16, Poteet, TX, filed the largest mechanics lien claim against SPS. According to Industrial Accessories Company’s lien filing, the prime contractor claims they are owed $1.3M in unpaid work.

The lien affidavit was filed with the county clerk in Bexar County, even though Poteet is located in Atascosa County. However, according to the affidavit filed by Industrial Accessories Company, the Signal Peak Silica property spans 4,047 acres and is located in both Atascosa County and Bexar County.

The lien was affirmed on May 18, 2020, and states that Industrial Accessories Company began work on February 25th and completed its services on April 20th.

The lien affidavit further states that Industrial Accessories Company furnished all labor and materials to SPS when installing weatherization protection and for completing repairs to the sand mining, loading, and storage facilities.

“The problem with Signal Peak Silica is that the oil industry is down,” said a spokesman from Industrial Accessories Company. “Their cash flow is down, and they’re not receiving payments from what they previously have done. They’re having trouble matching their inflows with their outflows. If they can’t collect their receivables they can’t pay their payables. [The frac sand industry] is extremely depressed at this time.”

Subcontractor Tarmac International, Inc. also affirmed their mechanics lien claim on May 18th but instead with the Atascosa County clerk’s office. Tarmac International claims they are owed approximately $536,777.98 from SPS after servicing the facility’s drying plant feature.

On June 12th, subcontractor F.S. Sperry Co., Inc. affirmed their mechanics lien with the Atascosa County clerk’s office against SPS, claiming they are owed $200.3k in unpaid construction work. According to the lien affidavit, F.S. Sperry Co., Inc. contributed to the facility’s dryer combustion chamber. The subcontractor worked on the job site from December of 2019 until February 2020.

The fourth lien filed in connection to SPS was processed by Sunbelt Rentals, Inc., which was an equipment lessor working under subcontractor Site Development Group. According to the lien affidavit filed with Bexar County clerk’s office, Sunbelt Rentals, Inc. is still owed $14.3k after servicing the SPS job site between March 6th and April 17th. The lien was affirmed on June 12, 2020.

Aside from Sunbelt Rentals’ lien filed against a fellow subcontractor, Signal Peak Silica owes approximately $2,101,332.68 in mechanics lien claims as of May 2020.

Between the two frac sand facilities in Texas and one located in Oklahoma, the SPS facilities account “for over 70% of the 110-plus million tons of the estimated frac sand demand in the United States in 2019,” according to Signal Peak Silica.

Coronavirus Impact on Signal Peak Silica

In a report released by the Houston Chronicle in early May, Signal Peak Silica laid off approximately 152 employees at their facilities in Oakwood, Okla. and in Poteet, TX.

The San Antonio Business Journal also reported in May that Signal Peak Silica may be shutting down their Poteet plant amid the COVID-19 outbreak.

According to the San Antonio Business Journal, a spokesman from SPS told the Texas Workforce Commission in April of 2020 that their company layoffs were caused by the “sudden, dramatic, and unprecedented fall of crude oil prices to a negative number.”

Frac-sand supplier Covia Holdings Corp. is also feeling the financial hardships of coronavirus, as the company filed for Chapter 11 bankruptcy in federal court in the Southern District of Texas on June 29th, according to Bloomberg.