Rising frac sand prices boost producer earnings in Q1 results

Published: Friday, 09 June 2017

US Silica running “flat out”, says CEO; Growth in Fairmount Santrol coarser sand; Northern White demand up says Smart Sand

Frac sand producers reported surging sales and prices in the latest round of company results, driven by increased activity as well as a trend toward higher proppant densities. 

Over the first three months of 2017, US Silica reported sales of frac sand at 2.5m short tons, up 79% year-on-year, and an increase of 22% from the last quarter of 2016. 

Revenues from the company’s proppant segment rose by 161% year-on-year, to $193m.

The company’s chief executive, Bryan Shinn, told investors that "our markets are expected to stay very tight". 

"Most of the major sand suppliers, including US Silica, are running flat out today," Mr Shinn said. 

"Demand is expected to continue growing faster than supply for the foreseeable future, and as such, we expect to continue pricing recovery and improving margins in our sand sales."

Across the whole company, revenues rose 100% year-on-year, to $244.8m.

The company reported a net profit of $2.5m in the first quarter, compared to a loss of $11.0m over the same period a year ago. 

Fairmount Santrol meanwhile reported raw frac sand sales volumes in the first quarter of 2017 at 1.9m s.tons. 

This is a rise of 36% year-on-year, and a 10% increase on the previous quarter. 

"Most volume growth in the quarter came from increased demand for coarser-grade raw sand, as finer-grade demand consistently approached or exceeded available capacity," said Fairmount Santrol. 

"Average raw proppant sand pricing in first-quarter 2017 increased over $4/s.ton as compared to fourth-quarter 2016," the company said.  

Fairmount Santrol CEO Jennifer Deckard forecast market conditions to "remain strong" in the second quarter, with the company ready to "take advantage of increased market demand".

First-quarter 2017 revenues were reported at $172.6m, up 19% from $145.5m over the same period a year ago. 

The company reported a net loss of $11.6m, compared to a loss of $11.8m a year earlier. 

Smart Sand reported sales of its fine mesh Northern White raw frac sand up 332% year-on-year, at 558,500 tonnes.

"We believe this shows activity in the oil and gas industry is continuing to improve and demand for frac sand is clearly increasing," said Charles Young, Smart Sand’s chief executive. 

Company revenues were reported at some $25m over the first quarter, up 141% year-on-year. 

"The increase in revenues was primarily due to increased sales volumes," Smart Sand said.

The company reported a net income of $1m, compared to $400,000 a year ago.  

Hi-Crush reported flat volumes, as production remains restricted. The company sold 1.4m s.tons of frac sand in the first quarter of 2017.

But revenues were supported by rising prices, which Hi-Crush reported at $60/s.ton, up from $54 a year ago, "reflecting a higher pricing environment, particularly during the second half of the first quarter of 2017". 

Hi-Crush reported company revenues of $83.4m, compared to $52.1m a year ago. 

The company made a net loss of $6.8m, compared to a loss of $52.5m a year ago. 

And the company expects sales volumes to surge next year, rising by 50-60% sequentially in the next quarter. 

Hi-Crush also forecast further price increases to come "driven by supply and demand imbalances, particularly for fine mesh sizes of sand". 

Carbo Ceramics reported rising revenues from frac sand sales. 

"Our frac sand revenues grew sequentially as a result of ramping plant production and utilising third party suppliers," said Carbo chief executive Gary Kolstad. 

"Frac sand sales provide multiple benefits including producing positive cash, generating revenue from idle rail cars under lease, and increasing client contact which increases sales opportunities for other products."

Across the company, revenues were reported at $34.6m in the first quarter of 2017, compared to $33.1m a year ago. 

The company reported a loss of $30.3m, compared to $36.1m over the same period a year ago. 

Emerge Energy reported rising frac sand volumes and sales prices. 

Frac sand volumes sold increased to 1.25m s.tons in the first quarter of 2017, compared to just 439,000 s.tons over the same period a year ago. 

"Completion activity for the onshore oil and gas markets continues to strengthen across North America," said Ted Beneski, the chairman of Emerge Energy. 

"Supply and demand tightened quickly, allowing prices to rise back towards more sustainable levels, and prices are continuing to rise in the second quarter," Beneski said. 

The company reported a net loss of $11.4m, compared to a loss of $34.2 over the same period a year ago.