US Silica expects frac sand demand to rise further next year

Published: Thursday, 07 December 2017

United States-based sand company US Silica reported record earnings before interest, taxes, depreciation and amortization (Ebitda) of $96.7 million in the third quarter of 2017. The information was published in a report that came out after the close of trading on Monday November 6.

It cited "robust demand" for the company’s frac sand - used in the hydraulic fracturing process to extract oil and gas - as the main reason for the increased earnings, as well as record profitability for industrial silica sand. Third-quarter revenues at the company rose by about 150% year-on-year.

"Robust market demand in our oil and gas business, coupled with record profitability from our Industrial and Specialty Products segment, drove an exceptionally strong performance in the third quarter that led to a record adjusted Ebitda for the total company," president and chief executive officer Bryan Shinn said.

US Silica reported a 15% quarter-on-quarter increase in volumes of frac sand sales, to a record 3.1 million tonnes, with nearly total capacity utilization. Prices rose by 5% month-on-month, the company said, although it did not specify the current or previous price.

Rival frac sand miner Hi-Crush last week reported third-quarter sand prices at $68 per short ton, compared with $43 per ton a year ago. Sand prices are highly dependent on location, however, with much higher prices quoted to Industrial Minerals for cargoes sold close to fracking facilities in western Texas.

US Silica issued an upbeat forecast for future frac sand demand in the fourth quarter, although it warned that the increase would be "restrained by some frac crews extending their holiday time off, plant downtime due to planned maintenance, and brief outages for capacity expansion work at a few mines."

The frac crews are third-party operators so their holidays are beyond US Silica’s influence.

Prices are expected to rise over the October-December period, US Silica said, but again would not give details of what these would be.

And in 2018, total industry frac sand demand is expected to rise to 90-100 million tons, if drilling rig numbers remain steady, thanks to a 15-20% increase in proppant use per well.