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Frac Sand for Asphalt Producers

Posted on October 16, 2015

Frac sand, a type of proppant used in hydraulic fracturing, is a special type of sand grain that is dried and screened and sold by size for use in the oilfield. Asphalt operators are attuned to screening and drying sand as it is integral to the manufacturing process of hot mix asphalt. Many asphalt producers also mine their own sand and rock as ingredients to the product.

Rotary Drum Dryers, used to produce hot mix asphalt, are also used to dry frac sand — Rotary Drum Dryers, used to produce hot mix asphalt, are also used in frac sand production. (Photo provided by Heyl & Patterson)

Please see Holly Bellmund’s article in Asphalt Pro Magazine to learn how Asphalt producers can user these key capabilities to produce frac sand.

About Proppant Today, LLC

Proppant Today, LLC serves the proppant market by providing deep insights into proppant and frac sand use and demand in the unconventional oil and gas industry. At Proppant Today’s website, read our blog and daily news feed and purchase the US Proppant Market and Forecast Report: 2015 to 2020.

– Holly Bellmund, President, Proppant Today, LLC

www.ProppantToday.com

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Frac Sand for Aggregates Producers

Posted on October 5, 2015

Frac sand is a type of proppant. Proppant is a material consisting of specialized grains used in hydraulic fracturing to prop open hydrocarbon-rich source rock to release oil and gas. Proppant can be made from bauxite, kaolin and other materials, however, about 94% of today’s market is frac sand.

The rise in hydraulic fracturing has driven demand for frac sand from 41 to 54 million tons from 2013 to 2014. The top five frac sand producers are Unimin, U.S. Silica, Fairmount Santrol, Hi-Crush Proppants, and Preferred Sands. Click here to read the full article.

Fairmount Wedron Aug 15 c — Fairmount Santrol’s Wedron Silica Facility Source: Proppant Today, LLC copyright 2015

HowProppantIsUsedProppantToday — Source: Proppant Today, LLC copyright 2015

About Proppant Today, LLC

– Holly Bellmund, President, Proppant Today, LLC

www.ProppantToday.com

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An Interview with Select Sands’ CEO Rasool Mohammad

Posted on October 1, 2015

Proppant Today interviewed Rasool Mohammad, the CEO of Select Sands, to learn more about the Sandtown Project and the steps the company is taking to bring the Arkansas mine on line. The Sandtown Project is located in north central Arkansas, near Cave City.

About Select Sands Corp. TSXV: SNS, OTC: CLICF

Sandtown silica sand Source: www.selectsandscorp.com — Select Sands’ silica sand is 99% quartz (SiO2)
Source: www.selectsandscorp.com

The Sandtown Project’s mining resource is the St Peter Sandstone which outcrops on the site. The St Peter Sandstone is also mined in Missouri, Illinois and Minnesota, often called northern white sand. Sandtown offers a silica sand of 99% purity with a brilliant white color. The purity of the silica and crush strength of the Select Sands resource is comparable with mines to the north. The natural resource offers 100 mesh, 40/70 and 30/50 frac sand products per API specification.

	100 mesh	40/70	30/50
Crush Resistance	10k	9 to 10k	7k
Resource Split	57 to 59%	30 to 33%	11 to 15%

Fourth Quarter Outlook: First Sales from Sandtown

Select Sands is preparing to deliver the first finished product mined from Sandtown in November 2015. As we enter the fourth quarter of 2015, the proppant market continues to experience downward pricing pressure from the oilfield. To remain competitive from the start, the CEO indicated that the company is taking an innovative approach: opening with no capital investment. The sandstone resource is being mined with contractors and frac sand is washed, dried and sized offsite at a contract plant. According to Rasool Mohammad, “Select Sands is committed to hiring locally with 95% of the contractors coming from Arkansas and the remaining 5% from Missouri and elsewhere in the US.”

Looking Ahead: Plant Build Out in 2016

Depending on market conditions, the company intends to build a wash plant at Sandtown in early 2016 and truck washed sand to nearby Batesville where the sand will be dried, sized and loaded into railcars or trucks. The dry plant has access to the Union Pacific railroad with the ability to deliver to the Eagle Ford and Permian basins and also to Houston for export. Zig Vitols, COO and a Director of Select Sands Corp., a former President, Mid-South of Martin Marietta, is overseeing the development of the logistics piece.

Select Sands intends to ship 850,000 tons per year by rail and truck from the Batesville siding. The sweet spot for the Sandtown products are in the Midcontinent: Haynesville, Fayetteville, and the Oklahoma plays. In addition to shipping granular silica to the oil and gas markets, Sandtown’s silica purity is such that it is suitable for glass and well cementing applications.

Select Sand’s Sandtown, Arkansas mine has a logistical advantage to the Midcontinent and Texas tight oil and natural gas plays.

International Market for Frac Sand

Select Sands is keeping an eye on the international market as well; the crush resistance and high purity of the St Peter Sandstone is bar none. Mohammad is developing markets in the Middle East, South America and in the South Asian countries of Pakistan, India and Bangladesh where fracking is active and demand for proppant is being filled with more costly ceramic and resin-coated proppants. According to Mohammad “No natural sand proppant can compete with St Peter sands.”

About Proppant Today, LLC

– Holly Bellmund, President, Proppant Today, LLC

www.ProppantToday.com

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US Oil and Gas Outlook and the Demand for Frac Sand

Posted on September 23, 2015

Proppant Today had the honor of interviewing Dr. Bernard Weinstein of the Maguire Energy Institute and Cox School of Business at Southern Methodist University, who will be speaking on Sheiks vs. Shale: New Economics of Energy & Implications for the Frac Sand Industry at the upcoming 4th Annual Frac Sand Supply & Logistics Conference on September 24 and 25^th in San Antonio.

What is the current outlook for the Frac Sand Market?

Oil prices are down 50% from 2014; the cost of producing oil is down by 30%. Day rates for labor have decreased, trucking rates have come down and the volume and price of supplies including frac sand have decreased as well. As long as WTI remains in the $40s, hydraulic fracturing activity for oil will remain subdued. In oil, we see that hydraulic fracturing activity in 2015 is continuing to decline from 2014, however, a more significant decline is coming in 2016, as much as 20 to 25% from 2015. However in the Marcellus and Utica, operators are selling in the $2 to 3 per mcf range and are continuing to produce.

On the brighter side, there is a greater demand of frac sand per well in both oil and natural gas completions. Up to 20% of the frac fluid is proppant, double what it was in 2014. Drilling has been ongoing while oil prices have been depressed to hold on to leases. If WTI reaches the low to mid $50s, frac sand demand will grow rapidly. There are close to 3,000 drilled but uncompleted wells in the Eagle Ford, the Permian and the Bakken, waiting to be completed at a breakeven price of $50 oil. In the long term, I think the demand for frac sand is robust. If you look at oil futures markets, contracts for delivery are closer to the low $60s for a five-year contract.

What are the impacts of oil in the $40s?

In the past, OPEC managed output so there was never an oversupply of oil. But in 2014, they changed their policy because North America was growing the pool. OPEC, basically Saudi Arabia, assessed that they could cut price, not production, to reduce the volume put out by hydraulic fracturing. Lower prices are causing a ripple effect in terms of restructuring, mergers and acquisitions and asset sales. It’s going to get tougher throughout 2016, especially for small companies, those that are highly leveraged and for manufacturers of drilling equipment.

In Texas, oil and gas is only 15% of the economy, however, we are seeing thousands of layoffs and government revenues will be impacted. At the local level, towns that are more dependent on oil and gas will be harder hit. North Dakota, which has really agriculture and the Bakken, will suffer more, as will West Virginia which has already experienced a decline in coal and is more exposed to the downturn in hydraulic fracturing. State economies that have a manufacturing base, especially those that use petroleum products in their feedstocks like the chemical plants we have in Houston, are benefitting from lower prices for oil and natural gas.

What trends do you see around fracking bans?

Recently the State of Texas said that energy production is in the purview of the state, overriding local authority of municipalities that imposed fracking bans. A similar issue is playing out in Colorado right now. Banning fracking in North Dakota is not an issue, I assure you. New York State is not going to reverse their position on fracking anytime soon, which is fine because supply is adequate out of Pennsylvania, Ohio and West Virginia in the Marcellus and Utica. Overall, the Federal government should stay out of the way, legislation regarding hydraulic fracturing should be left to the states.

Frac Sand & Logistics Conference

Proppant Today appreciates the opportunity to interview Dr. Weinstein about the hydraulic fracturing industry and its impacts on the proppant demand. Hear Dr. Weinstein speak at the 4th Annual Frac Sand Supply & Logistics Conference on September 24 and 25^th in San Antonio.

About Proppant Today, LLC

– Holly Bellmund, President, Proppant Today, LLC

www.ProppantToday.com

Join us at the Frac Sand Supply & Logistics Conference

Posted on September 15, 2015

Proppant Today will be at the 4th Annual Frac Sand Supply & Logistics Conference on September 24 and 25^th in San Antonio. The event, sponsored by Petroleum Connection, features guests and speakers from each part of the frac sand supply chain and from the demand side in the oilfield services sector as well.

The conference has a strong interest in representing innovation in the frac sand supply chain. Frac sand producers and logistics providers are teaming up to share insights on moving frac sand by rail, truck, barge and even by pipeline. GE and Statoil will be sharing the results of their Grand Challenge focused on addressing the use of sand in unconventional operations.

The conference features speakers like Jen Casebier of Downhole Trader who will be providing Update on Frac Sand Industry Trends, and Dr. Bernard “Bud” Weinstein, Maguire Energy Institute and Cox School of Business at Southern Methodist University, who will speak on the Sheiks vs. Shale: New Economics of Energy & Implications for the Frac Sand Industry.

There are additional talks and roundtables on transportation, technology usage, exporting, international supply and demand, importing proppants, health & safety issues, regulatory updates, procurement trends and more.

If you are involved in building a more efficient supply chain for frac sand, please join us.

See you in San Antonio!

– Holly Bellmund, President, Proppant Today, LLC

About Proppant Today, LLC

www.ProppantToday.com

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Proppant Industry Responds to Lower Oil Prices

Posted on August 13, 2015

The unconventional oil and gas industry has grown dramatically over the last decade and the US has grown in importance as an energy producer worldwide. The US is now number one in global oil and gas production. Over one million horizontal wells have been drilled in the US to date. New natural gas production in Tcf/day per rig has increased over 700% from 2007 to 2015 and new oil production in bbl/day per rig has increased 1200%, all due to the increased efficiencies from horizontal drilling and hydraulic fracturing.

E&P companies are continuing to refine and gain further efficiencies even as the oil glut dampens prices. During the first half of 2015 companies such as Pioneer Natural Resources and Noble Energy and a host of others have reduced drilling and completion schedules, focused drilling investment on highest productivity areas, and slashed capital budgets.

The most recent fall in oil prices, with WTI dropping to near $43 per barrel in August and futures indicating further price depression in September, signals that the downturn may be longer lasting than we first thought. World supply concerns and China’s changing growth picture are making a quick recovery less likely. E&P companies are continuing to develop efficiencies and prepare to operate in a lower price environment rather than shutting down more production which some say would hasten the price recovery. New projects are being evaluated at $50 oil rather than $75 oil.

The US rotary rig count is stabilizing. After dropping to a low of 857 on July 17, it has remained in the range of 874 to 884 for the past three weeks. For the week ending August 7, only the Permian saw an increase in rigs, up by six. All other basins had zero or minimal change.

Sand intensity per well is increasing. Sand intensity growth varies by company and by shale play but it is not likely to return to lower levels for those companies that have found greater productivity with more sand. If anything, others will follow as the technology is refined and results are proven. Longer laterals and more stages per lateral is likely to continue.

In this context, what is the outlook for proppant, a key material used in hydraulic fracturing?

Proppant producers are reducing cost by shuttering some locations, reallocating employees, negotiating with suppliers, better matching of origins and destinations, etc. But some consolidation of proppant suppliers will take place as higher cost companies and those that cannot operate within cash flow may be squeezed out. This includes companies whose mines are not located strategically to serve the centers of demand. For example, the vast majority of proppant moving by rail is headed to Texas. For proppant producing sites located in the upper Midwest, serving Texas basins by rail remains a disadvantage if they are not on a Class I rail line.

Proppant companies are developing of higher value added proppants which may be more insulated from price cuts. Preferred Sands has developed a treated proppant designed to reduce silica dust during handling; Emerge Energy on its most recent earnings call announced Superior Silica’s reduced dust proppant to be available in the fourth quarter of 2015, and mentioned a future technology-driven product still in development which they describe as producing greater yield for the customer. Hexion and Fairmount Santrol have both recently developed advanced proppants that they say can impact production results as well.

Proppant companies like E&P companies are adapting to this challenging environment. We expect to see the bulk of the impact in 2016. So far for 2015, the impact of fewer wells drilled and fewer completions more than offset growth in sand usage. Long term, the outlook for growth in the proppant industry is remains positive.

To fully understand this complex market, one needs to understand the type of proppants used and the factors that affect proppant demand, plus the supply chain challenges on moving this heavy material across the country into different oil and gas plays.

US Proppant Market & Forecast Report: 2015 to 2020: Providing deep insights into proppant use and demand in the unconventional oil and gas industry.

Proppant Industry: 3rd Quarter Outlook

Posted on August 6, 2015

The proppant industry continues to struggle as WTI dipped below $45 a barrel on August 5. Proppant plants are operating on a reduced schedule or are being or shut down by producers including in Wisconsin, the number one producing state for frac sand. Despite the bleak news, publicly held producers like US Silica returned a profit in the second quarter through aligning their supply chain with demand from the oilfield. Volatility in oil prices are expected to continue to put pressure on proppant pricing, as major oilfield customers like Baker Hughes described decremental margins — profit lost per dollar of revenue lost — in second quarter earnings. Trends for the third quarter include a shift from receiving proppant at the in-basin transloads to picking up at the mine site, promotion of technologically-advanced coated proppants by Hexion and Fairmount Santrol that improve the yield of oil and gas, and an anticipated increase in mergers and acquisitions among proppant producers and oilfield service companies.

About Proppant Today, LLC

– Holly Bellmund, President, Proppant Today, LLC

www.ProppantToday.com

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Getting Better All the Time: Efficiencies in US oilfields drive global competitiveness

Posted on July 4, 2015

A drilling rig worker. Focus is on the instruments.

Efficiencies in horizontal well completions have accelerated over the past six months driven by the need for E&P companies to preserve return on capital in a low price oil environment. Some exploration and production (E&P) companies are showing significant efficiency and productivity gains. Expectations are that more will be achieved during 2015.

E&P Efficiencies Improving well productivity is a key focus for EOG Resources. EOG reports that well costs and well productivity both are exceeding targets for 2015. The company says that the economics of their business are better at $65 oil today than at $95 oil in 2012. Chesapeake Energy, in a June 23 investor presentation, shows a decrease in average drilling days down to 12 in Q1 2015 from 17 in 2014 and 25 in 2013. Chesapeake Energy reports an average cost of $205 per drilled foot, down almost 7% from $220 in 2014.

EIA Drilling & Productivity Trends This trend is also being reflected in government assumptions regarding productivity and output. The June 2015 EIA Drilling Productivity Report for the Eagle Ford estimates the increase in new (first full month) production per rig for the first half of 2015 to be 17% and 14% for oil and gas respectively. For both oil and gas, the total percent productivity increase for first half 2015 is the same as the full year 2014 increase in productivity. In other words we are producing more, with fewer resources.

Other oilfield plays are showing the same trend. This is in part due to greater efficiencies achieved by the E&P companies, and also likely due to the shuttering of equipment that lacks the capacity to drill and frack longer laterals and conduct enhanced completion techniques. The overall impact is the strengthening of the US position in shale oil and gas.

US Leads the Way In a recent report by Harvard Business School and The Boston Consulting Group, authors Michael E. Porter, David S. Gee, and Gregory J. Pope put forth that the US has a 10 to 15 year lead in commercializing hydraulic fracturing technology and that the industry’s efficiency efforts driven by the oil price decline may extend that advantage.

The report further estimates that “unconventional energy development contributes more than $430 billion to annual U.S. GDP and supports more than 2.7 million American jobs” and the US should make a more coordinated effort to take advantage of this energy opportunity.

Outlook for Proppant Demand The long term expectations for global and US energy demand are strong and proppant will be a necessary component to meeting those needs through fracking in US shale plays. Proppant Today sees a 40% increase in the market for proppant 2014 to 2020.

About Proppant Today, LLC

Proppant Today, LLC serves the proppant market by providing deep insights into proppant and frac sand use and demand in the unconventional oil and gas industry. We provide a daily news update at www.proppanttoday.com. We blog on frac sand, manufactured and coated proppant and its role in the supply chain of the unconventional oil and gas industry. Proppant Today will release the US Proppant Market and Forecast Report: 2015 to 2020 in July 2015.

– Laurie Parker, Senior Analyst, Proppant Today, LLC

www.ProppantToday.com

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South Dakota Proppants: an Interview with Patric Galvin, CEO

Posted on June 30, 2015

Proppant Today caught up with Patric Galvin, CEO of South Dakota Proppants, to learn more about his company and the steps he is taking to open the site.

About South Dakota Proppants, LLC

South Dakota Proppants is developing a frac sand mine and production facility in Pennington County, South Dakota. The site, called the Hill City Silica Mine, is slated to produce one million tons of frac sand per year.

According to Galvin, “From the Hill City Silica Mine we have a logistical advantage to serve the Niobrara in Colorado, the Powder River play in Wyoming and also the Bakken.” Although the site has access to rail, frac sand will primarily be trucked to the shale plays. South Dakota Proppants expects to begin delivering frac sand by the third quarter of 2017. The company plans to employ 320 people including truck drivers who will deliver the frac sand to the unconventional oil and gas plays in the neighboring states.

South Dakota Proppants proximity to Western US oil and gas plays — **South Dakota Proppants: proximity to Western US oil and gas plays***. Image provided by South Dakota Proppants.*

Frac Sand Resource

Galvin located the frac sand resource with the assistance of the USGS and drove to the location to scout it out. Because part of the site had been a historic mine, Galvin was able to view the face of the sandstone and sample it. Following a formal drilling and testing campaign, the company acquired the historic mining leases and added additional acreage, now totaling 1,754 acres. The resource includes both Cambrian and early to late Ordovician deposits in horizons ranging from 65 to 95 ft. The indicated resource is 250 million tons of frac sand which is expected to increase following further drilling and testing.

South Dakota Proppants will offer a 30/50 frac sand with a crush resistance of 7k and a 40/70 frac sand with a crush resistance of 8k. The mine will also yield the larger diameter 16/20 and 20/40 frac sand products.

WSG 40-70 Composite — **40/70 frac sand from the Hill City Silica Mine under development.** *Image provided by South Dakota Proppants.*

Outlook on the Frac Sand Market

The rise in unconventional oil and gas in the US caused an inventory disruption on a global scale. In Galvin’s opinion, the oversupply of oil will be rebalanced as the OPEC member nations adjust their production to return to a stable price of $85 to $90 per barrel. Once the prices lift, according to Galvin, there are 4,000 wells drilled but not completed in the US which will consume ten million tons of sand to complete at the same time that new drilling activities will resume.

According to Galvin, frac sand prices are the lowest they have been in six years. Galvin sees this as an opportunity for frac sand purchasers to enter into contracts with producers either through partnerships or other long-term supply agreements like take or pay agreements or firm fixed contracts. Says Galvin, “In 2015 a lot of Wisconsin frac sand projects have been shelved or cancelled due to lower demand which I see as temporary. I think it’s important for far-sighted exploration and production companies and oilfield service companies to tie up sand supplies while prices are low.”

Current Activities

South Dakota Proppant is actively meeting with frac sand buyers with an intent of pre-selling 50% of its planned capacity. The company is also engaged with community and governmental stakeholders, and conducting site investigation permitting and fundraising activities.

A 2013 study of the economic impact of mining in LaSalle County, Illinois, which includes five frac sand producers, the employment multiplier of mining jobs is 2.4, meaning the site is expected to add more than 750 new jobs to the area. The Hill City Silica Mine will bring full-time and year-round work to an economy largely based on seasonal tourism.

About Proppant Today, LLC

Thanks to Patric Galvin for sharing his vision of South Dakota Proppants and his views on the dynamic frac sand market. For more information, visit the South Dakota Proppants company website.

Proppant Today, LLC serves the proppant market by providing deep insights into proppant and frac sand use and demand in the unconventional oil and gas industry. We provide a daily news update at www.ProppantToday.com. We blog on frac sand, manufactured and coated proppant and its role in the supply chain of the unconventional oil and gas industry. Proppant Today will release the US Proppant Market and Forecast Report: 2015 to 2020 in July 2015.

– Holly Bellmund, President, Proppant Today, LLC

www.ProppantToday.com

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Will Frac Sand Producers Meet Future Demand?

Posted on June 17, 2015

While frac sand reserves in North America are abundant, local community opposition to mining could keep rapid growth in supply in check.

As reported in this article, Husky Energy has withdrawn plans to mine silica sand near Yellowknife, Northwest Territories, based on the response of an environmental review board evaluating the impact to the community.
Yesterday, Saratoga Township, Winona County, Minnesota residents proposed a ban on frac sand mining based on concerns for the environment. The ban was denied.

In the current environment of reduced drilling and frac sand oversupply, shortages are not an issue; however, the market will rebound quickly. Over the long term, companies must plan for expansion and increased community involvement.

– Laurie Parker, Senior Research Analyst, Proppant Today, LLC

www.ProppantToday.com

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What is the current outlook for the Frac Sand Market?

What are the impacts of oil in the $40s?

What trends do you see around fracking bans?

Frac Sand & Logistics Conference

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