Rock Products

SEP 2015

Rock Products is the aggregates industry's leading source for market analysis and technology solutions, delivering critical content focusing on aggregates-processing equipment; operational efficiencies; management best practices; comprehensive market

Issue link: https://rock.epubxp.com/i/566624

Contents of this Issue

Navigation

Page 13 of 65

12 • ROCK products • September 2015 www.rockproducts.com FRAC SAND INSIDER Headwaters MB released its mid-year 2015 Oilfield Ser- vices Outlook. The report notes that 2015 has thus far been a retrenchment year, with the number of land-based drilling rigs dropping by approximately 50 percent since November 2014 and companies in the oil services sector reacting to the new oil price deck reality. In the proppant section, the report states that while increased demand for proppants over the last several years was driven by the growth in hydraulic fracturing, concurrent with the drop in oil prices, proppant demand is projected to drop from 110.1 billion lb. (55.1 million tons) consumed in 2014 to 79.6 billion lb. (39.8 million tons) in 2015. Those basins forecast to be affected most are the Eagle Ford and the Bakken, the Perm- ian and Marcellus forecast to be least affected. In 2014, 91.7 percent of the proppant mass consumed (101.0 billion lb.) was sand, which represents 65 percent capacity utilization based on current estimates of 85 million tons of sand currently available. Note that 66 percent of the available sand capacity is held by the top 10 sand suppliers. Unimin, holding the largest market share of capacity represents 12.6 percent of the total market, while U.S. Silica has recently sur- passed Fairmount Santrol to represent 11.0 percent of the total market. Private equity continues to have a high interest as investors and drivers in the frac sand space. Of the top 10 sand suppli- ers, six of these have ties to private equity (Chieftain, Hi-Crush, Preferred, Superior, Fairmount Santrol, U.S. Silica). E&P; com- panies, in partnership with oilfield service companies, con- tinue to refine their well design and hydraulic fracturing tech- niques to maximize hydrocarbon recovery from each well. These techniques vary based on formation and well geology, but some of the more pervasive recent trends include longer lateral drilling lengths coupled with an increased number of hydraulic fracturing stages per well. E&P; and oilfield service companies have also been increasing the amount of prop- pant used per frac stage and, together, these techniques have greatly increased the volume of proppant used in the com- pletion of each well, which the company expects will posi- tively impact sand volumes sold. Coupled with pad drilling (and closer well spacing) and the potential re-fracking of old wells, proppant demand is expected to increase over the long term. Smaller grained sand is also increasing in use, with 40/70 and 100 mesh product increasingly mined, particularly from Missouri and Arkansas which is closer to the Eagle Ford and Permian end markets and has a delivered cost advantage to Texas over Wisconsin and Minnesota sourced sand. While the long term looks promising, in the near term frac sand miners are feeling the pinch. Spot sand is currently sell- ing for $35 to $40 per ton FOB Wisconsin, down from $50 to $60 per ton less than a year ago. EBITDA margins continue to drop, we estimate average EBITDA per ton of sand sold for Q2 2015 to be in the $20 per ton range. To download the full report, go to http://info.headwatersmb. com/oilfield-services-outlook. Headwaters Report Predicts Long-Term Proppant Growth Brilliant Sands Inc. has received extremely positive results from the continuous exploration program at its McClelland Lake sand property in Alberta, Canada. The results confirm initial test results indicating the presence of high-quality proppant sand deposits at the property. An extensive surface sampling and near-surface geophysical survey was conducted. Initial results suggest the potential for at least two sizable deposits. The samples in the most recent studies are visually consistent with those collected during 2014 and reaffirm the potential for high crush and high purity silica. The findings from Alberta, Canada-based Loring Labs' analysis of the samples in 2014 confirmed sil- ica contents up to 98 percent and exhibited high degrees of both roundness and sphericity. As such, the development potential of these silica-rich sands for high-quality prop- pants is excellent. The most recent samples and survey data are under further analysis to better determine silica sand distribution, quality and potential deposit size. The results will be used to plan the next phase of the property's exploration, which will include deeper mechanized drilling and backhoe test pitting. That phase will focus on resource delineation in at least two areas with potential for mine development. Permit applica- tions for this next phase of exploration are in preparation. Marc J. Andrews, president and chief executive officer of Brilliant Sands, said, "These test results further evi- dence the abundant existence of high quality proppants at McClelland Lake property and confirm our initial find- ings. The initial results have shown the potential for high crush and high purity silica and multiple options for via- ble frac and silica sand mining sites within the Brilliant Sands land holdings." Brilliant Sands Touts McClelland Lake Project

Articles in this issue

Links on this page

Archives of this issue

view archives of Rock Products - SEP 2015