How Come Nobody is Talking About Sand? These U.S Analysts are, so pay attention.

Considering how well frac sand equities, as an asset class has performed as a whole over the last year, it is hard to fathom why so few investors are talking about it or even remotely familiar with it. Sand has quickly become the commodity of choice used by frac oil producers as a ‘proppant’ in order to expand the fractures that are created in wells. Over the past year, the stocks of frac sand producers have seen an incredible turn-around. From large to small cap, these companies have seen their market values increase by over 300% on average over the last year.

Here are a few quotes from some of the smartest analysts in the space.

“We presently model the U.S. annualized frac sand demand at 35-40M tons. We believe that 2017 demand will increase to 60-65M tons”- Simmons and Co.

“It is now estimated that the amount of frac sand used to complete a typical horizontal well has increased 80% to 120% since 2014.  Several of our Sweet 16 upstream companies are now using 20 million pounds of sand to complete a single well. EOG has identified more than 6,000 horizontal well locations that will generate “premium” returns at $50 oil. EOG will need 120 Billion pounds of sand to complete these wells.” Energy Prospectus Group, Houston, TX.

This increase in value comes as the US oil industry looks to rebound off it’s 2014 all-time lows, and the stars are really starting to line up. With the Trump administration pushing for energy independence along with a new OPEC agreement that limits offshore production, US shale plays are posed for a big comeback. And that looks good for the producers of frac sand. Goldman Sachs expects to see the demand for sand to increase by 80% in 2017, and many other analysts have noted a shifting preference to the finer grains of sand due to its increased effectiveness in extracting resources from fractures.

 “…the frac sand industry, where we expect demand to grow by 80% in 2017 – may be the highest growth among all oil services sub-sectors.” Goldman Sachs

It is hard to imagine another commodity sector that could have a similar comeback like frac sand producers have had and be so unnoticed by the general investing public. For Canadian investors who are looking to get a piece of the action, there is only one publicly-traded Canadian sand company and they have some major advantages over their competition. Select Sands Corporation (TSXv:SNS) are currently in production at their Arkansas sand deposit. Their deposit holds a high proportion of the finer mesh sands and has a logistical advantage over other major producers since they are close to 650 rail miles closer to the Permian basin and Texas shale operations. This logistical advantage shaves off significant production costs and positions the company to be a regional disruptor in the sand market.

Analysts continue to be extremely bullish on the sand industry, and rightfully so. Changing well technologies along with the proliferation of ‘mega-frac’ wells call for massive amounts of sand use per lateral foot. Some wells now require over 25,00 tons of sand, and that is just for one well! The increase is exponential.. from 800lbs per lateral foot 2 years ago, to an estimated 2,500lbs in 2016. Anyone looking for a niche sector in a growing energy market should at the very least keep sand on their radar as the sandstorm continues to brew.

 “Regional sands in high demand due to large cost advantage. Operators continue to look for ways to save on well costs, which has boosted demand for regional sand.”- RBC Capital Markets, Sept. 2016

“We (as well as many others) have long been highlighting the improving fundamentals of the U.S. frac sand industry. But discussions during the past week point to materially better industry conditions even from early December” Simmons and Co.


Just because the world isn’t talking about how bullish they are on sands. Doesn’t mean you shouldn’t be paying very close attention. #fr

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