Proppant

As the oil and natural gas recovery takes hold in North America, proppant operators are seeing better-than-expected demand, which in turn is driving up sand pricing and tightening the transportation market.

U.S. proppant operators, which provide sand and ceramic materials to fracture onshore oil and natural gas wells, began raising prices and pulling railcars out of storage during the third quarter because of increased demand.

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.

Commodity prices may not encourage too many rigs to rise in North America in the near-term, but as oil and gas producers experiment with longer laterals and increased fractures, there’s a bit more optimism among sand operators.

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.

Fairmount Santrol, which provides sand used in hydraulic fracturing operations, said its proppant operations remained challenged in the second quarter, hampered by a substantial sequential decrease in U.S. rig activity. However, market conditions are improving, the company’s CEO said.

Nearly 40% of the proppant capacity in the U.S. drilling industry, an estimated 20 million tons of sand and resin-coated proppants (RCP), have been idled or reduced over the past year, leaving little wiggle room for growth this year, industry suppliers lamented during recent quarterly conference calls.

The pullback in the U.S. onshore has choked demand for all types of services, with proppant volumes declining sharply since the start of the year. Proppant providers are continuing to cut costs and are working with their customers to hold on to market share for the eventual upturn. As to when the market will strengthen, however, it’s anybody’s guess.

Earnings by the North American oilfield services (OFS) operators and producers are coming in as expected, lower sequentially and from a year ago, foreshadowing weakness for the proppant companies as the onshore rig count continues to decline.