Hi-Crush Partners LP announced its view of proppant trends in its Q1 2015 earnings call on May 6. Key trends include the slowdown in well completions and noted and uptick in new permitting activity. There is a growing inventory of drilled but uncompleted wells. Proppant is only used during the completion (or fracking) of the well. Because of this backlog, when the market turns there is expected to be a rapid increase in proppant demand. According to this story, IHS reported that there were 1,400 uncompleted wells in the Eagle Ford alone.
Some pressure pumpers, the companies who complete the wells, are bidding work at cash cost to maintain market share. These companies continue to consolidate vendors to select partners that are capable of delivering large quantities of proppant efficiently to the basins. Hi-Crush perceives this as favorable as they have 75% of production capacity contracted under supply agreements with an average remaining term of over four years.
The company reported that as of May 1, the US land permit count increased by 30% over the prior week to 225 permits. This may indicate that more drilling and completions will take place in the second half of 2015.
Hi-Crush acknowledged the decline for demand in the first quarter related to reduced rig count and completions. The company remains optimistic to see a return to long-term demand given the fundamentals of the unconventional oil and gas basins. Hi-Crush’s approach is to focus on its customer relationships and to continue to grow its supply network organically.
See the presentation materials at the Hi-Crush Partners LP Investor Relations page.
– Holly Bellmund, President, Proppant Today, LLC