LONDON, February 28, 2017 /PRNewswire/ --
OilPrice.com Market Commentary: As Saudi Arabia cuts even more oil than promised, U.S. shale production is up by 176,000
barrels per day-but it's the frac sand industry that will feel the real revolution, and micro-cap sand producers who have flown under the radar until
now are about to come up for some very lucrative air. Leaders in the industry include U.S. Silica Holdings, Inc. (NYSE: SLCA),
Emerge Energy Services LP (NYSE: EMES), Hi-Crush Partners LP (NYSE: HCLP), EOG Resources, Inc. (NYSE: EOG) and Chesapeake Energy
Corporation (NYSE: CHK).
But the U.S. shale rebound started even before the historical OPEC deal-so we're already running out of time to get in on the
frac sand euphoria.
Last week, the Saudis said they had cut production to below 10 million barrels per day, which is a two-month low, and lower than the Kingdom had pledged to cut. At the
same time, the Energy Information Administration (EIA) came out with news of a 176,000-barrel-per-day increase in U.S. production
from the previous week-the biggest increase since May 2015.
The shale rebound started when no one expected the OPEC deal to become a reality, and now that it is and the market is
starting to rebalance, things are about to go much further. The EIA sees U.S. production for December coming in at 320,000
barrels per day more for the year, with production reaching 9.22 million barrels per day as of the end of 2016.
And even this is probably conservative.
But it's not just about OPEC-it's about the 'Mega Frac'-the frac of all fracs that requires a ton of sand and is making it
possible for U.S. shale operators to produce in any kind of market.
Hydraulic fracturing involves injecting highly pressurized water and sand into a well, widening the tiny fractures created by
the water and sand blast so that more crude oozes from the shale rock. As U.S. producers create more fractures in rock to get ore
oil and gas out, they need the 'Mega Frac', which requires mega sand to keep the fractures open.
Producers are now using more sand, or proppants, per well than anyone ever imagined, bringing the frac sand sub-sector to the
forefront of oil and gas investing in a very urgent and dramatic way.
So the bottom-line situation is this: While frac sand companies are at the center of the U.S. shale rebound, unique micro-cap
sand miners like Select Sands (SNS.V) (SLSDF) are poised for potentially astounding gains precisely
because as early as mid last year, no one thought frac sand would be a winning bet and only a few months later, it's the biggest
thing on the U.S. oil and gas scene.
Here are 3 reasons to keep a close eye on Select Sand s (SNS.V) (SLSDF) and its substantial permitted quarry in
Arkansas containing a desirable mix of Premium Tier 1 "Ottawa White" high purity 40/70 and 100
mesh silica.
#1 Most Explosive Oil & Gas Sub-Sector
Tudor Pickering
predicts the amount of sand used per horizontal well will jump from 8 million pounds (4,000 tons) today to a staggering 11
million pounds (6,500 tons) already next year, and will continue to break records in the following years.
Credit Suisse predicts a 50 percent increase on 2015 demand and is eyeing 62.8 million tons of frac sand demand in 2018. In
2017, we could be looking at 49.4 million tons.
By 2018, according to Credit Suisse analysts, sand volumes used in fracking will surpass the boom levels of 2014, making frac
sand the "fastest-growing sub-segment" in the oilfield services and equipment market.
It's been great for frac sand stocks, with U . S . Silica (NYSE:SLCA) jumping from
$16 to $40 this year, but from an investment perspective, there aren't many plays to choose from
here. And there's really only one micro-cap listed that is geographically positioned to benefit from this shale efficiency
revolution: Select Sands Corp. Being a micro-cap, Select Sands is
flying under the radar (at least for now) and has no analyst coverage.
# 2 Preparing for ' Mega Demand '
Not only have frac sand stocks had a great few months, but the fundamentals behind that surge are clear and present. Smart
Sand held its IPO in early November in what Reuters called "another sign of industry confidence".
Companies such as U.S. Silica Holdings, Inc. (NYSE: SLCA), Emerge Energy Services LP (NYSE: EMES) and
Hi-Crush Partners LP (NYSE: HCLP) all had saw an increase in business as far back as the third quarter of last year-before
the OPEC deal was even close to being a reality. Texas-based Rangeland Energy LLC says it's
looking to expand its frac sand transport and storage capabilities because volume is soaring enough to double up. Hi Crush is
expecting double-digit volume increases in the fourth quarter. And this is all just a snippet of the bigger picture as we get
into 2017.
And demand is poised for an amazing upward spiral because frac sand is the backbone of shale companies' efforts to cut costs
and improve efficiency by increasing their yields of oil and gas per well.
The more sand used in a well, after the pressurized liquid and sand is injected in the rock, the larger the fractures in the
rock oozing precious oil and gas. Thanks to sand, you get a lot more oil and gas out of a well at no great additional cost.
All the major U.S. shale drillers are ramping up their sand use exponentially. EOG Resources (NYSE: EOG) is now making
700 percent more fractures compared to 2010, and it's using massive volumes of sand to fill them. Likewise, Chesapeake Energy
Corporation (NYSE:CHK) put more than 30 million pounds (15,000 tons) of sand into its Haynesville shale in Louisiana, and plans to test a 50-million-pound load
(25,000 tons) later this year. The company views the amount of sand now being used as unprecedented to the point that it refers
to it as "proppant-geddon".
The Permian Basin is the one of the sweetest spots here because operators just can't get enough sand as drillers narrow in on
this West Texas gem with an acquisition fervor we haven't seen since the start of the shale
boom. Here, proppant demand is expected to increase significantly as the Permian catches up with other basins in terms of frac
sand use.
The bottom line? Demand for sand in 2017, particularly the finer grade (40/70 and 100 mesh) high purity sand contained in
Select Sands' Arkansas quarry, could end up being twice the demand of 2014-at the height of the
shale boom. There may even be a shortage of finer grade frac sand by the first quarter of 2017.
# 3 Purest Sand for Strongest Margin Expansio n
Select Sands (SNS.V) (SLSDF) is right in the middle of what Tudor Pickering views as the oilfield services sector with the
strongest margin expansion-and this expansion is far from over. Tudor Pickering says finer mesh white sand pricing at the
minegate should reach $65 per ton, compared to the current $20 per
ton.
Select Sands mines high-quality Northern White finer grade sand from the Sandtown deposit in Arkansas, with indicated resources of 41.98 million tons as of February this year. The sand is high-purity,
meaning it contains a high purity silica content (exceeding or meeting various industrial and API Tier 1 specifications) with the
right shape and it has high crush resistance. The right shape for good frac sand is as close to round as possible, which enables
more efficient infiltration of rock fractures to keep it open and keep the oil flowing.
Margins are also increased here because Select Sands' Sandtown quarry is located in northeastern Arkansas, in close proximity to the Permian and the Eagle Ford plays in Texas, Haynesville shale in Louisiana and
Fayetteville shale in Arkansas. This means there is a lot to be
saved on transportation costs, compared with the other main source of high-quality (but expensive) frac sand located in
Wisconsin. The Select Sands' quarry also has the added advantage of a developed transport
infrastructure with easy accessibility to both highway and railway that could be used to further improve costs.
And the shift is about more than transportation: It's about the industry's cost-cutting desires to replace the more expensive sand mined in Wisconsin and
Minnesota with regional sands of Texas and Arkansas.
Select Sands recently announced that it bought a wet processing facility that will further reduce costs of production
and make its sand all the more appealing for the frugal oil and gas industry. The Company plans on buying a dry plant and other
facilities as well in the area and is currently considering its options.
There's even more upside:
High-purity finer grade silica sand is not just used for fracking. It's indispensable in ceramics, metal-making, chemical
products, glass, paints, and surfacing materials. In other words, Select Sands, which mined its first silica sand at Sandtown
last year, is successfully providing test samples of its high mesh silica to a host of industrial companies, and has recently
started shipping product to the oil and gas market. Selling high-purity finer mesh white sand to the industrial market has the
advantage of higher margins, although typically smaller volumes, than sales to the oil and gas frac sand market.
At the end of the day, these frac sand producers tend to fly under the radar while everyone pays attention to the most visible
players in the U.S. shale revival. That give companies like Select Sands a major advantage at a time when pure-play sand mining
is a clear winner and frac sand mining is set to explode dramatically and suddenly.
Of the handful of public frac sand producers out there, most are too big to get in on the ground floor-and too expensive.
Select Sands, with a $88MM U.S. market cap, is accessible, cheap, and the timing is brilliant.
By. Joao Piexe of Oilprice.com
Legal Disclaimer/Disclosure from OilPrice.com: This piece is an advertorial and has been paid for. This document is not
and should not be construed as an offer to sell or the solicitation of an offer to purchase or subscribe for any investment. No
information in this Report should be construed as individualized investment advice. A licensed financial advisor should be
consulted prior to making any investment decision. We make no guarantee, representation or warranty and accept no responsibility
or liability as to its accuracy or completeness. Expressions of opinion are those of Oilprice.com only and are subject to change
without notice. Oilprice.com assumes no warranty, liability or guarantee for the current relevance, correctness or completeness
of any information provided within this Report and will not be held liable for the consequence of reliance upon any opinion or
statement contained herein or any omission. Furthermore, we assume no liability for any direct or indirect loss or damage or, in
particular, for lost profit, which you may incur as a result of the use and existence of the information, provided within this
Report.
DISCLAIMER: OilPrice.com is Source of all content listed above. FN Media Group, LLC (FNM), is a third party publisher and news
dissemination service provider, which disseminates electronic information through multiple online media channels. FNM is NOT
affiliated in any manner with OilPrice.com or any company mentioned herein. The commentary, views and opinions expressed in this
release by OilPrice.com are solely those of OilPrice.com and are not shared by and do not reflect in any manner the views or
opinions of FNM. The companies that are discussed herein may or may not have approved the statements made in this release. FNM is
not liable for any investment decisions by its readers or subscribers. FNM and its affiliated companies are a news dissemination
and financial marketing solutions provider and are NOT a registered broker/dealer/analyst/adviser, holds no investment licenses
and may NOT sell, offer to sell or offer to buy any security. FNM was not compensated by any public company mentioned herein to
disseminate this press release.
FNM HOLDS NO SHARES OF ANY COMPANY NAMED IN THIS RELEASE.
This release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E the Securities Exchange Act of 1934, as amended and such forward-looking statements are made pursuant to
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. "Forward-looking statements" describe future
expectations, plans, results, or strategies and are generally preceded by words such as "may", "future", "plan" or "planned",
"will" or "should", "expected," "anticipates", "draft", "eventually" or "projected". You are cautioned that such statements are
subject to a multitude of risks and uncertainties that could cause future circumstances, events, or results to differ materially
from those projected in the forward-looking statements, including the risks that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors, and other risks identified in a company's annual
report on Form 10-K or 10-KSB and other filings made by such company with the Securities and Exchange Commission. You should
consider these factors in evaluating the forward-looking statements included herein, and not place undue reliance on such
statements. The forward-looking statements in this release are made as of the date hereof and FNM undertakes no obligation to
update such statements.
Contact Information:
Media Contact e-mail: editor@financialnewsmedia.com
U.S. Phone: +1-(954)-345-0611
SOURCE OilPrice.com