Two days after Mammoth Energy Services Inc. snapped up key onshore oilfield assets, including a major sand supplier, the Oklahoma City-based company on Thursday picked up substantially all of the assets of Chieftain Sand and Proppant LLC for $35.25 million.
The transaction, secured as high bidder in a bankruptcy court auction, is pending final approval at a court hearing scheduled on Monday (March 27). If approved, the deal is expected to be completed by the end of June.
Denver-based Chieftain's assets include a wet and dry plant in New Auburn, WI on 600 acres, as well as a sand mine with estimated reserves of 30 million tons of northern white sand, specifically Jordan substrate fracture sand, aka “chieftain.”
"This acquisition will grow our total sand processing capacity to nearly 4 million tons/year after giving effect to the pending acquisition of Taylor Frac we announced earlier this week, with a reserve life of more than 20 years," CEO Arty Straehla said. These facilities, adjacent to Union Pacific Railroad has unit train capability on site, "fulfill part of our strategy to have sand mines with low cost transportation options into the most active basins in the country."
Nameplate capacity of the dry plant, which currently is not operating, is 1.8 million tons/year (mtpy), with an expected capacity of 1.5 mtpy once it is operational. Mammoth "intends to evaluate the plant further in the coming months and selectively modernize the facilities to more efficiently process finer grade sands."
Chieftain filed for Chapter 11 in early January in the U.S. Bankruptcy Court for the District of Delaware [No. 17-10064 KG]. Chieftain’s first day declaration said the demand for frack sand had “decreased dramatically” because of the industry recession. Thepetition listed $1-10 million in assets and $50-100 million in liabilities.
Beginning late last year many U.S. proppant providers saw sand demand sharply increasing, and it continues to rise as producers boost lateral lengths and frack stages.
"Through the addition of Chieftain’s assets, we will have direct access to the Appalachian Basin, Midcontinent...Eagle Ford, Permian, Bakken and Denver-Julesburg Basin in addition to the Western Canada markets," Straehla said. "Once operational, the Chieftain mine is expected to directly support the expansion of our pressure pumping fleets," particularly Oklahoma's stacked reservoirs and other markets in West and South Texas.
Mammoth plans to finance the purchase with cash and debt. At the end of December total liquidity was $175 million including cash on hand of $28.6 million and a borrowing base of $146 million.