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Hi-Crush Unveils Proppant Sand Delivery System, Re-Ups Halliburton Contract

Houston-based Hi-Crush Partners LP, which provides northern white sand to pressure pumpers across North America, has secured partners to help fund an innovative logistics company for the proppant industry.

Proppant Express Investments LLC (PropX) was created to develop critical last-mile logistics equipment for the proppant industry, CEO Robert Rasmus said. The business would cover the full spectrum, from manufacturing containers, or pods, and a proprietary PropBeast conveyor system used in Hi-Crush's newly launched PropStream integrated delivery solution. PropStream is designed to transfer proppant from in-basin terminals to the well site for hydraulic fracturing (fracking) operations, while minimizing fugitive dust.

Hi-Crush committed up to $17.4 million over the next 12 to 18 months to manufacture the PropX system. It did not disclose its financial partners.

"The launch of PropStream and our investment in PropX mark critical next steps in Hi-Crush's evolution as a leading provider of frack sand and logistics services to the oil and gas industry," said Rasmus. "The design of this purpose-built equipment and delivery process has been in development over the past year. It is a result of in-depth discussions with our customers, intended to best understand and serve their needs, and looking ahead to the industry's next phase of opportunity.

"Our ability to expand the reach and delivery of frack sand directly to our customers' usage points elevates our value proposition, grows our potential customer base, and positions us deeper into the sand supply chain. It also complements our industry-leading transportation network and rounds out the logistics strategy we have been developing over the last several years."

The new company was launched following a successful pilot of the service in the Permian Basin for an undisclosed pressure pumper. The PropStream system loads frack sand at Hi-Crush in-basin terminals into the PropX pods before they are transported by truck. The pods use intermodal container chassis or standard flatbeds for transportation, which Hi-Crush said reduces supply chain related congestion at well sites and lowers the number of trucks required per job. At the well site, the PropBeast conveyor system uses two enclosed conveyor units to reduce noise and dust emission.

By reducing particulate matter emissions from sand operations at the well site by more than 90% versus the pneumatic alternative, PropStream offers a "viable solution" to meet upcoming federal standards, according to the company. U.S. Occupational Safety and Health Administration regulations for respirable crystalline silica standards take effect in 2018, and the system also meets engineering control obligations set to become effective in 2021.

"The benefits of PropStream are significant and ultimately lead to greater efficiency for our customers," said Hi-Crush CFO Laura Fulton. "By moving into the last-mile and developing proficiency and repeatability into the delivery of frack sand at the well site, and even further to the blender, we extend and enhance our ability to provide value to our customers.  By developing a purpose-built solution to simplify and streamline the supply chain, we're able to capture synergies and scale, while significantly minimizing the capital commitments required behind these capability enhancements."

In related news, Halliburton Co., which is the largest pressure pumper in North America, renegotiated its proppant supply contract with Hi-Crush, which proves the OFS giant "with pricing discounts and a reduced term in exchange for increased volume requirements during an interim term," according to a filing on Monday with the U.S. Securities and Exchange Commission.

With the contract, Hi-Crush said it would reopen a sand mine in Augusta, WI, to meet growing sand demand. The mine has nameplate capacity of 2.86 million metric tons/year of northern white sand. Hi-Crush and Halliburton have partnered on sand volumes for more than two years (see Shale DailyOct. 14, 2014).

"While there has been demand for certain grades of sand that would have fit the Augusta product mix and rail origin, order visibility was low and demand was below levels needed to justify producing from that facility," Rasmus said. "The contract amendment we announced...provides the visibility and sustainability of demand to enable us to operate at the efficiencies and cost structure we require."

Hi-Crush produces, transports, markets and distributes monocrystalline sand, a specialized mineral used as a proppant in oil and gas wells. Its northern white sand reserves are in Wisconsin, and it has a distribution network across North America.

Also on Wednesday, CIG Logistics said it has partnered with Ameripointe Logistics hub to operate and jointly market frack sand transloading and storage services at the newly constructed logistics terminal in Ardmore, OK. The Ardmore development is between the South Central Oklahoma Oil Province, or SCOOP, and the Sooner Trend in the Anadarko Basin, mostly in Canadian and Kingfisher counties, aka the STACK.

The hub is able to accommodate more than 200 loaded rail cars with more than 1,500 acres of industrial development land and direct access to the Burlington Northern Santa Fe (BNSF) railway and Interstate 35 corridor.

"As the energy, construction and retail markets in the region advance, companies are in need of more efficient and affordable transportation, transloading and storage solutions for critical supplies," said CIG's Michael Collins, vice president of Business Development. "The Ameripointe Logistics Hub will employ dozens of skilled workers, including railroad engineers, conductors and bulk terminal operators."

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