October 03, 2017

6th Annual Frac Sand Supply & Logistics Conference

By Kellen Ferris
The potential size of the West Texas sand market continues to grow, but questions on its eventual size remain and new, potentially disruptive last-mile solutions continue to roll out.


OTR Global attended the 6th Annual Frac Sand Supply & Logistics Conference held in Houston Sept. 28-29. Attendance at this year’s conference was the largest by a large margin. Discussions focused heavily on the development of a story OTR has been following since February: West Texas and the growing in-basin sand movement. Other topics discussed at length included new developments in last-mile logistics, sand truck capacity and how a tight labor market is showing up in the truck, sand mine and services markets.

From the Podium
The development of sand mines in West Texas continues to push forward, with speakers highlighting roughly a dozen mines currently under construction and the potential for a total of 19 mines with a projected nameplate capacity of roughly 70 million tons. Presenters had varying opinions on how much capacity will be in the market by the end of 2018, but consensus estimates are between 35-45 million tons. In July, when OTR last spoke with our frac sand supply chain sources and nameplate capacity was roughly 40-50 million tons, sources estimated between 20-22 million tons would be online by the end of 2018. A multi-basin E&P source we spoke with on the conference floor currently thinks 35-40 million tons should “easily” be online by the end of the year. At 40 million tons, Black Mountain Sand LLC estimates most of the sand coming from outside the Permian will be displaced. However, big projections don’t come without risk. There seems to be some underlying speculation that the Dune Sagebrush Lizard could be listed as an endangered species and while the impact of that change on capacity numbers is unknown, one panelist thought it could be highly disruptive. In a few conversations on the floor, attendees noted Hi-Crush Partners LP’s mine and potentially U.S. Silica Holdings Inc.’s first mine could be affected if the lizard is listed. An E&P source OTR spoke with said he met with Atlas Sand Co. and was told there would be “no issues and they had an environmental plan in place and two days later their permit was declined and he wasn’t expecting any issues.”

Trucks and Last-Mile Solutions
Tightness in the truck market and last-mile solutions were also major discussion points, but the big topic was bottom- (or belly) dump trucks being eyed as a replacement for traditional pneumatic sand haulers combined with more onsite silo storage. Speaking about trucks, Black Mountain Sand highlighted bottom-dump trucks, and their belief is it’s a better solution than traditional pneumatics, especially when combined with newly developed integrated conveyor and silo storage systems from FB Industries Inc. Belly dumps, long-used in the agriculture industry and some Canadian operators, can hold about 4,000-5,000 pounds more sand and can be emptied in five to 10 minutes, compared with pneumatics, which take 30-40 minutes. OTR Global heard on the Expo floor that bottom-dump trailers could be 10%-20% more efficient than U.S. Silica's Sandbox solution and is in direct competition with Solaris Oilfield Infrastructure Inc., among other silo storage providers.

Frac Sand Pricing
Fine mesh sand markets remain very tight with multiple mines reportedly sold out. OTR spoke with a few local mine sources who confirm pricing is holding in the $40-$50 range and one mine has firm multiyear contracts in hand above $50 with a price floor of $50 depending on a few factors. However, a source in OTR Global's Oct. 3 PPC report said, “I think you can get into the low $30s per ton now for some sizable volume.”

OTR Global also heard discussions on the potential that Hi-Crush Partners is eyeing a second location while Black Mountain could be eyeing a location in the Andrews, Texas, area which is closer to activity in the Midland. Getting closer to activity is important given the trucking constraint and the efficiency loss once you get outside 75 miles. One mine operator told OTR that if the West Texas market has excess capacity, mines could look to add rail and connect with a Class-I railroad to rail sand in from Colorado, a shorter route than current mines in the upper Midwest.

What: 6th Annual Frac Sand Supply & Logistics Conference
When: Sept. 28-29
Where: Houston, Texas
Who: More than 500 attendees at this year’s Frac Sand Logistics conference included some of the top frac sand mines and direct source E&Ps among numerous trucking companies, transload terminal operators, and one major service group and other material and service providers to the North American shale oil and gas market.