U.S. Silica Holdings Inc. is spending $210 million for an East Texas proppant sand facility to beef up its customer base in the Haynesville and Upper Eagle Ford shales and is eyeing an expansion into Oklahoma’s stacked reservoirs, CEO Bryan Shinn said Tuesday.

The Maryland-based operator agreed to buy New Birmingham Inc.’s NBR Sand unit in Tyler, a single sand mine and plant that has capacity to produce more than 2 million tons/year of fine-grade silica sand used as proppant to fracture wells.

NBR primarily trucks the sand to area customers, but U.S. Silica would revamp the operations and ship via its extensive railcar system across the state and elsewhere.

“In Tyler, NBR is…trucking distance away from the mine site,” Shinn said during a conference call. “We can bring access to our strong customer relationships and powerful logistics network…We think we can open up access to local railroads and expand the reach of the mine site and reach further out into Texas,” with “opportunities” in Oklahoma’s stacked reservoirs as well. “We see big, potential future upside for this business…”

The NBR unit, with an estimated 20-plus years of reserves, produces 40/70 mesh and 100 mesh silica sand. The facility, which sits on about 1,400 acres near Interstate 20, includes 12 storage silos with capacity of more than 10,000 tons and five load-out lanes.

The reason behind the acquisition is simple, Shinn said. It’s all about location, location, location. And for oil and gas operators attempting to keep their costs low, providing supplies regionally is a better way to do business, he said.

“We believe demand for regional sands will continue to grow as a cost effective proppant option for many completions, and this is another important step to position U.S. Silica as a leader in the regional sand market.”

U.S. Silica operates in more than 20 locations across the country and has dozens of transloading facilities in the major onshore oil and gas basins.

Three rail lines already are near NBR’s facility, which would allow U.S. Silica to “plug into our existing network of locations,” with $1-2 million spent at the origin for transloading, Shinn said. “We don’t expect to have to spend substantial capital to make it work.”

In “talking with energy companies, most that we chat with are getting acceptable results with regional sand. It keeps completion costs down…It is surprising how committed they are to keeping completion costs in line…”

The market still may be depressed, but the recovery is in sight, the CEO said.

“We have a strong pipeline of opportunities that will help our customers meet their goals in an environment with potentially surging sand proppant demand as energy markets recover.”

The NBR transaction, set to be completed in August, is to be funded with cash on hand (57%) and restricted stock (43%). Once it is integrated into U.S. Silica’s operating, sales and distribution platforms, the acquisition in 2017 is expected to generate 20-30 cents/share.