Stubborn low frac sand prices trigger wave of bankruptcies

By William Clarke
Published: Friday, 16 August 2019

Frac sand miners are struggling in the face of massive oversupply, Fastmarkets IM heard.

A wave of mine closures, bankruptcies and leadership struggles has spread through the United States' frac sand market over the summer, while producers struggle with a glut of oversupply that is keeping prices low.

Frac sand prices nosedived in late 2018 after a huge volume of new supply came online. Prices have remained stagnant since then, even while demand rises.

Fastmarkets’ latest monthly assessment of the price of Northern White frac sand, 40/70 mesh, API, ex-works Wisconsin was $29-34 per short ton on August 15, up from $25-30 per short ton at the start of the year, but below the levels in mid-2018 before Fastmarkets began its assessment.

In July, Emerge Energy Services, which mines frac sand through its subsidiary Superior Silica Sands, filed for Chapter 11 bankruptcy.

According to documents filed at the time, the company has already idled facilities at its Auburn, New Auburn, Arland and LP facilities in Wisconsin. The company has a total frac sand mining and processing capacity of 26 million short tons per year.

A company in Chapter 11 bankruptcy can continue to operate, but must submit a proposal to reorganize and repay its debts, overseen by a bankruptcy court.

In August, another US-based producer Shale Support announced it would also file for Chapter 11. Shale Support has a total frac sand capacity of 5 million short tons and has operations in Oklahoma, West Virginia, Louisiana, Pennsylvania and Ohio.

Also in August, the sand miner and logistics company Hi-Crush announced it was mothballing its production facility in Whitehall, Wisconsin, US, which has 2.8 million short tpy of capacity.

"We are hopeful that the layoff is temporary but the duration is presently unknown," Hi-Crush said, adding that any improvement is not expected in the foreseeable future.

Another US-based miner, Select Sands, had been facing a shareholder rebellion led by its former chief operating officer.

Rasool Mohammed resigned from his COO position in July, claiming that the company, "will run out of money before the year’s end." Mohammed then led a group of shareholders who were demanding a change in the board.

On August 9, Select Sands management countered that, "Current management have significant industry experience and relationships, have been reducing costs during the industry downturn and continue to actively seek opportunities to strengthen the company. Although management recognizes this has been a difficult period given industry-wide conditions, management has a plan for the company and the experience to execute on the plan."

Select Sand management retained control of the board in a shareholder meeting on August 15, with chief executive Zigurds Vitols retaining his seat.

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