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Frac Sand Idea Proposal (HCLP, SLCA)

Frac Sand Idea Proposal (HCLP, SLCA)
 

How will Frac Sand companies be impacted by oil/gas well completion activity now and through 2017?

 

Report Available: December 15, 2016

 

Blueshift’s initial research reveals that oil/gas well completion activity is increasing in some of the domestic plays. Some frac sand mining companies have experienced increased demand and even seen a trend of escalating prices. However, year-to-year proppant consumption is still off 20%, making it unclear whether the spike in demand and pricing is a sign of a turnaround or not.

 

Observations

  1. FMSA, SLCA and HCLP all experienced increased frac sand sales in Q3, leading the companies to add capacity.
  2. Some analysts predict frac sand usage will be the fastest-growing sub-segment of the oil field services market. High intensity well completions using increased sand volumes are expected to drive usage beyond 2014 levels with less than half the rig count by 2018. One report expects the amount of sand used per horizontal well will increase from 8 million pounds today to 11 million pounds in 2017, climbing even higher in 2018.
  3. Rig counts experienced their largest gain in 2.5 years, according to BHI. Rig count was up 20 units to 588 during the week ending Nov. 18. This represents a double-digit increase in the number of active rigs in five of the last eight weeks, adding 184 units since the recent drilling rebound began after May 27. Well drilling is the precursor to well completion where proppants (frac sand) are used. It remains to be seen if this rig count increase results in increased well completion activity, as wells are often drilled and capped to preserve a lease.
  4. Completion Intensity, as reported by the Well Site Market Report, shows Composite Lateral Length (in major shale plays) rose 17% to 8,607 feet year to year, while Proppant per Well increased 36% to 11.04 million lbs. This is reflected in a 17% gain to 1,283 lbs. in Proppant Per Lateral Foot. However, a 41% year-to-year decrease in the total number of completions translates into a 20% decline to 8.12 million tons in industry proppant consumption. Consumption bottomed at 6 million tons in the first quarter of 2016.
  5. Blueshift’s recent primary field interviews in the Permian Basin found that hope for an improvement in fourth-quarter pressure pumping demand faded when the oil pricing started wobbling. However, some sources reported using “brown” sand mined locally in wells they were completing in greater quantities than previously reported.

 

Where do sand mining companies and users think the frac sand market is going in 2017? Is the recent increase in demand for frac sand sustainable through 2017?  What sand grades will be in the highest demand in 2017? What is the status of frac sand inventories? What are frac sand pricing trends and what is expected regarding pricing in 2017? What are the frac sand shipping logistic issues facing the industry in 2017? How will the use of ceramic proppants trend in 2017? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: E&P companies, Fraccing service companies, Rail & logistic companies and Industry specialists.

 

Companies: CARBO Ceramics Inc. (CRR), Emerge Energy Services LP (EMES), Fairmount Santrol Holdings Inc. (FMSA), Hi-Crush Partners LP (HCLP), U.S. Silica Holdings Inc. (SLCA)

 

Research Begins: Nov. 28, 2016