Pioneer, US Silica enter sand purchase agreement

By |  September 19, 2018

Pioneer Natural Resources and U.S. SilicaPioneer Natural Resources entered into a long-term sand supply agreement with U.S. Silica, purchasing an interest in U.S. Silica’s sand reserves at its Lamesa, Texas, mine in west Texas.

The agreement secures a long-term supply of sand from the mine for Pioneer, with U.S. Silica processing and supplying sand for 15 years.

“We are pleased to announce our agreement with U.S. Silica that provides Pioneer with low-cost west Texas sand for the foreseeable future,” says Timothy Dove, president and CEO of Pioneer Natural Resources. “Strategically located in close proximity to our Midland Basin acreage, delivered sand from the Lamesa mine will cost approximately half that of our current delivered sand, reducing well costs into 2019 and beyond. The long-term nature of this agreement will benefit both companies.”

According to Pioneer, the Lamesa mine is expected to produce approximately 6 million tons annually of predominantly fine grade 100 mesh and 40/70 mesh sand, with initial production expected in the fourth quarter of 2018. Pioneer also expects to receive its initial sand volumes during the first quarter of 2019, with the supply increasing from approximately 1.4 million tons in 2019 to 2 million tpy in 2020 and beyond.

“This unique, very long-term contract at our new Lamesa site delivers significant value for both companies in the Permian and is clearly aligned with our stated goal of generating sustainable and predictable free cash flow yield from our oil and gas sand mining assets,” says Bryan Shinn, president and CEO of U.S. Silica.

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