Frac sand market: Conflicting reports

Will the drop in oil prices affect the frac sand market in 2015? Optimists say no, but the impact may already be happening.

A number of sources are reporting it’s business-as-usual for frac-sand operations despite the price of oil. An industry consultant told Pit & Quarry last month that he doesn’t expect any effect on frac-sand suppliers this year, and I’ve been reading similar opinions online.

Further support for that argument comes from BusinessNorth.com, which reports that Superior Silica, a Texas company, has plans to open its fourth Wisconsin frac-sand operation. The story quotes Superior Silica’s President and CEO Rick Shearer as saying the company will likely be the largest frac-sand supplier in the industry. And Superior Silica is considering a fifth Wisconsin plant, which would add 2.5 million tons additional capacity in early 2016.

The Leader-Telegram of Eau Claire, Wis., reports, “Officials in three of the area counties with the most sand-mining activity said they have seen no evidence of cutbacks yet in either production or new mine development.” At least 63 sand mines and 45 processing plants have been developed within a 60-mile radius of Eau Claire, the newspaper says.

However, in reality, oil prices are already having an impact.

The same Leader-Telegram article reports, “As the worldwide price of oil plummets, analysts say it can’t help but have an impact on the nation’s burgeoning shale oil industry and, further down the supply chain, the Wisconsin sand that has become a key ingredient in America’s recipe for domestic oil.”

The article cites Ethan Bellamy, a senior energy-industry analyst, as saying demand for [frac] sand should decline substantially in 2015.

Stock prices of some major sand companies have already taken a hit. Emerge Energy traded at $145 a share in August but closed at $55 on Friday. The stock of FMSA Holdings, the holding company of sand supplier Fairmount Santrol, has fallen by two-thirds since it went public in October.

And, in the North Dakota shale region, some layoffs are already being reported.

So while many of the frac-sand operations continue to produce at full capacity, the affect of oil prices has already hit others, and may have an effect across the board in 2015.