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U.S. Silica Seeks to Buy a Texas Sand Producer

On a roll in the proppant industry, which has been expanding rapidly to support the North American shale boom, Frederick, MD-based U.S. Silica Holdings Inc. on Wednesday said it has signed a stock purchase agreement to acquire Voca, TX-based Cadre Services Inc., a regional sand mining company.

The latest move comes within days of U.S. Silica announcing plans to develop a white sand production facility in Wisconsin (see Shale Daily, July 11).

Sands are used, along with ceramics and chemicals, extensively in the hydraulic fracturing (fracking) process that has unlocked the shale oil/natural gas boom. Cadre specializes in hickory, or brown, sand, while the new mine proposed for Wisconsin is supposed to produced northern white.

The Cadre operation sought by U.S. Silica is a single-frack sand mine and plant that has recently expanded its annual capacity to 800,000 tons/year. U.S. Silica described it as a fully automated, state-of-the-art facility that has been operating since 2011.

Cadre holds 65 years of "high-quality" sand reserves, according to U.S. Silica, which said the purchase price is $98 million, minus the net present value of approximately $14 million in deferred tax assets.

"Cadre's regional location allows it to service customers in the fast growing Permian Basin on both a contract and spot basis, with about 40% of customer revenues coming from take-or-pay contracts," U.S. Silica said.

Separately, last month Denver-based South Dakota Proppant LLC (SDP) unveiled plans to develop a new sand mine in western South Dakota even though past analyses by the state indicated the sand quality was lacking for potential proppant use (see Shale Daily, June 6; April 3).

Earlier this year, the South Dakota Department of Environment and Natural Resources released a study by the University of South Dakota concluding that the state's grains don't meet American Petroleum Institute specifications for proppant sand, but SDP officials contend their analysis contradicts the state's findings and they will submit a mining plan in South Dakota to create a $66 million, 1 million ton/year fracking sand mine on 950 acres of public access U.S. Forest Service (USFS) lands that are estimated to have 70 million proven recoverable tons of "high-quality fracking sand."

A national study earlier this year pointed to continued double-digit annual growth in the proppant sector with demand projected to reach 100 billion tons by 2017. The report by Cleveland-based Freedonia Group Inc. concluded that sand would continue to be a basic component for most proppants.

U.S. Silica CEO Bryan Shinn said the accretive acquisition of Cadre supports the company's strategy to increase its market share by expanding its footprint and product offerings in "one of the fastest growing basins in the country." He expects the Cadre product to meet the demands of various Permian oil and gas wells.

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