Emerge Energy Services LP said Monday it plans to expand a sand facility south of San Antonio, TX, to serve proppant needs of oil and gas customers in the Eagle Ford Shale and Permian Basin.
In a $20 million transaction, the Fort Worth, TX-based operator said it is buying Osburn Materials, which sells its sand to golf resorts, baseball fields and building contractors. The deal would give Emerge subsidiary Superior Silica Sands LLC another 80 million tons-plus of reserves to serve the energy industry, mostly 40/70 and 100 mesh sand. During 1Q2017, Superior’s fracture (frack) sand volumes totaled about 1.251 million tons.
“This transformative acquisition of a local sands operation accomplishes one of our key strategic goals,” said Emerge’s Ted W. Beneski, who chairs the the general partner. “Osburn’s reserves, located near the heart of the Eagle Ford basin, will be highly desirable for frack sand purposes, as the sand is high quality and logistically-advantaged…”
The strategic reserves “will bolster our presence in local sands and balance our portfolio of northern white to local sands,” said CEO Rick Shearer. “Amongst the many competitive advantages that Osburn Materials brings, the logistics component is vitally important. The site will offer direct trucking to the wellsite for Eagle Ford basin demand, and on site rail access to the Union Pacific mainline offers low-cost transportation into the Permian Basin.”
Osburn “currently has production capacity for 600,000 tons per year of wet sand and 300,000 tons per year of finished dry sand,” Shearer said. “However, we have created a plan to upgrade the Osburn site into a much larger operation across three phases.
“With the existing equipment in place, we expect that the dry plant will be able to produce at a rate of 300,000 tons per year once we are fully staffed for 24/7 operations in less than 30 days. We have initiated the permit amendment process for a Phase Two expansion to 600,000 tons/year with minimal capital expenditures, and our phase three expansion will consist of a full scale 3 million ton per year operation.
“We are targeting early fourth quarter for the completion of Phase Two, and, depending on market conditions, Phase Three could be completed by mid-2018.”
During a conference call last fall to discuss third quarter results, Shearer said Emerge was “very bullish, going forward, that our volumes and our pricing will continue to build.”
Emerge’s sand volumes of 493,000 tons in the third quarter increased by 24% sequentially, which outpaced the average U.S. onshore rig count growth of 16%, he noted at the time.
“We are now at a point in our industry where average sand consumption per horizontal well has tripled since early 2013, and our customers believe there is still room for more growth through longer laterals and greater loadings per lateral foot,” Shearer said.
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