Rock Products

OCT 2018

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www.rockproducts.com ROCK products • October 2018 • 21 FRAC SAND INSIDER many producers to maintain produc- tion levels, and in some cases to boost production, so cost-saving efforts drove innovation that has now become the preferred completion model," Savisky said. "However, most Permian opera- tors are still tweaking their completion designs as they search for an inflection point to identify any points of diminish- ing returns." "Capital efficiency has improved dramatically since 2014. However, expected well-cost increases should result in reduced capital efficiency across all plays during 2018," Savisky said. "Although cost reflation hurts the Permian Basin during 2018, continued well productivity improvements, as well as abundant core inventory, suggest that capital efficiency will gradually improve in subsequent years, which is good news for the sector as a whole." Supply Chain Costly supply chain constraints, partic- ularly in the Permian Basin, have been such an ongoing issue that operators are actively working with vendors across their supply chains to address bottle- necks and drive down costs, the IHS Markit report said. In the sand market, it said investments are being made in self-sourcing, where oil and gas opera- tors actually own the mine, or through partnerships or direct sourcing, where sand-mining companies purchase the storage and transportation assets to ensure greater efficiency and cost con- tainment from the mine to the wellhead. "Transportation costs continue to comprise more than 65 percent of sand costs, so reducing those costs and securing supply are very valuable to operators," Savisky said. "The cost (of sand) landed at the well site is heavily weighted on the logistics premiums, so transportation, coupled with proxim- ity of supply and storage, is valuable to operators trying to manage both cost and supply chain risk." IHS Markit said that regional and Texas brown sands have a surge in investment capacity being built or announced; however, challenges related to infra- structure and water availability will continue to plague the sector. Overall, IHS Markit anticipates the pric- ing for both NWS and regional sands to continue to be relatively flat with small short-term spot-market fluctuations for the remainder of 2018. IHS Markit said the sand market is currently slightly to moderately over-supplied, with opera- tors still demanding NWS. For more information on the report, go to www.ihsmarkit.com.

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