Frac Sand Demand

[dan_s]

In preparing for tomorrow's EPG luncheon at the Hess Club, I ran across this article on how much frac sand demand there is just in the Permian Basin.
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In just the first three months of 2017, Permian E&Ps filed roughly 1,650 drilling permits in Texas—about 40% of all the permits that were filed in 2016.

Increased drilling in that basin and others is reviving rigs, adding frack crews and requiring supplies, including enormous amounts of proppant. Through each lateral well, sand weighing about the same as a fully-loaded locomotive will be used to open fissures in the shale.

Drilling needs are massive—each month the Permian uses roughly 900,000 tons of proppant, nearly all of it raw sand.

The ramp-up in activity in U.S. shale basins is putting the squeeze on suppliers, many of which are working to add sand production capacity to meet growing demand from E&Ps.

Full article: http://www.epmag.com/pressure-packed-ep ... UXdNIn0%3D

The mega-frack movement, or high-intensity completions, is partly behind the increased demand for sand. The process demands not only more frack sand but more fluid and chemicals to stimulate near-wellbore rock, according to Bush. Most of the completions in the Delaware Basin, for example, used on average 1,990 lbs/ft of frack sand and 1,920 gallons of fluid per lateral foot, according to first-quarter 2017 data from Energent.

While the amount of frack sand varies per basin and depends on the size of the lateral, “it’s not uncommon to see 12 million pounds of sand for one well in the Permian,” Bush said.

[k1f]

<<n just the first three months of 2017, Permian E&Ps filed roughly 1,650 drilling permits in Texas—about 40% of all the permits that were filed in 2016.>>

Those numbers are ominous: roughly a 7% increase yty. The market clearly thinks production and prices will keep E&Ps under stress. It looked like 1Q17 would see a turn in sentiment; now it looks like 4Q17 or even 2018 before equilibrium comes around (?)

[dan_s]

BIG INCREASE in demand coming in Q3 that will more than offset increased U.S. oil production. lack of oilfield services and sand should also slow down U.S. production growth in a few months.

FEAR is driving this. The fear that OPEC will not extend their production agreement. IMO the downside for the cartel members is HUGE if they do not extend it. Russia also cannot stand an extended period of sub-$50 oil.

Tier One areas of the Permian do have very good well level economics at $40 oil because cash lifting costs are so low, sub $5/bbl for most horizontal wells.

[dan_s]

IMO HCLP is a Screaming Buy on dips below $15. They should have some bullish stats to share next week. BTW Hi-Crush is extremely well positioned in the Permian Basin. - Dan
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Hi-Crush Partners LP (HCLP) will release its first quarter 2017 results after market close on Monday, May 1, 2017. This release will be followed by a conference call for investors at 7:30 a.m. Central Time (8:30 a.m. Eastern) on Tuesday, May 2, 2017, to discuss Hi-Crush`s first quarter 2017 results. Hosting the call will be Robert E. Rasmus, Chief Executive Officer and Laura Fulton, Chief Financial Officer.

The call can be accessed live over the telephone by dialing (877) 407-0789, or for international callers, (201) 689-8562. A replay will be available shortly after the call and can be accessed by dialing (844) 512-2921, or for international callers (412) 317-6671. The passcode for the replay is 13660170. The replay will be available until May 16, 2017.

Interested parties may also listen to a simultaneous webcast of the conference call by logging onto Hi-Crush`s website at www.hicrush.com in the Investors-Event Calendar and Presentations section. A replay of the webcast will also be available for approximately 30 days following the call.

The slide presentation to be referenced on the call will also be on Hi-Crush`s website at www.hicrush.com in the Investors-Event Calendar and Presentations section.

About Hi-Crush:

Hi-Crush is an integrated producer, transporter, marketer and distributor of high-quality monocrystalline sand, a specialized mineral that is used as a proppant to enhance the recovery rates of hydrocarbons from oil and natural gas wells. Our reserves, are primarily located in Wisconsin, consisting of "Northern White" raw frac sand, a resource that exists predominately in Wisconsin and limited portions of the upper Midwest region of the United States. In March 2017, we acquired regional raw frac sand reserves located in the Permian Basin and are currently constructing a 3 million ton per year production facility. Once completed, we will own and operate 13.4 million tons per year of frac sand production capacity. Our Wisconsin reserves are strategically located with direct access to major U.S. railroads for efficient distribution to in-basin terminals, while our Texas reserves are positioned within close proximity to significant basin activity for advantaged truck transportation. We own and operate a network of strategically located terminals and an integrated distribution system throughout North America, including our PropStream(TM) integrated logistics solution, which delivers proppant into the blender at the well site. For more information, visit www.hicrush.com.

[dirtdauber]

Check out Slide 6 in the presentation this morning. It shows utilization of their mines by quarter from 3Q16 thru 4Q17. They report only 1 mine fully utilized in 3Q16, growing rapidly (except for a plateau from 4Q16 thru April 17) to their projection that all 5 mines will be fully utilized in 4Q17. They expect that the output from the new mine at Kermit in the Delaware Basin will be fully committed to customers by the time it is finished in 3Q17. They expect that frac sand usage will be limited by available supply by end of year. They also expect to resume paying distributions this year.

I greatly increased my position this morning.

Dan, I heard you.

[dan_s]

Houston, Texas, May 1, 2017 - Hi-Crush Partners LP (HCLP), "Hi-Crush" or the "Partnership", today reported first quarter 2017 results. Revenues for the quarter ended March 31, 2017 totaled $83.4 million on sales of 1,384,887 tons of frac sand. This compares to $67.3 million of revenues on sales of 1,358,511 tons of frac sand in the fourth quarter of 2016. The limited partners` interest in net loss was $(5.4) million for the first quarter of 2017, resulting in basic and diluted loss of $(0.07) per limited partner unit.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") for the first quarter of 2017 was $1.3 million, compared to $(0.3) million for the fourth quarter of 2016. EBITDA adjusted for a loss from our equity method investment ("Adjusted EBITDA") was $1.9 million in the first quarter of 2017. Distributable cash flow attributable to the limited partners for the first quarter of 2017 was $0.1 million. No distributions to unitholders were declared for the first quarter of 2017, as the Partnership continued its distribution suspension. The Partnership stated its intention to resume the distribution as cash flow from operations significantly improves in the latter part of 2017.


They know they need to start making distributions again. When they do, the unit price will ramp up.