• Sand demand per well still rising – yesterday HAL noted they saw a decline in sand pumped per well q/q Q2’17.  The Q2 proppant data we analyzed begs to differ…indicates (industry-wide) sand/well continues to climb  (OIH $25) – While Q2 U.S. completions data is still incomplete and HAL’s customer mix could have come into play, the basin by basin sand demand data we see indicates proppant/well +5% in the Eagle Ford, +5% in the Midland, +25% in the Bakken (not a typo), and -3% in the Delaware.  Focusing on the top 9 operators in each basin shows proppant demand per well up across all 4 basins mentioned above (generally to a greater degree vs. the overall data). As an example, the top operator data shows Delaware proppant loading up 8% q/q…just a guess but this could indicate smaller players in the historically logistically disadvantaged play could have struggled to get their hands on sand to some degree during the Q while larger players were able to ramp sans issues.  Interesting to note that outside of the Bakken, lateral length appeared to be the main driver of the sequential Q2 proppant/well increase.

• What are the sand stocks pricing in? – they appear to be pricing in $25-30/ton frac sand prices, which is ~40-50% below vs. current minegate price and about the same delta as contracts for Permian frac sand at the mine (OIH $25) – Despite Northern White and regional frac sand players signing long-term sand contracts for ~$45/ton+, sand stocks seems to be baking in a super ugly pricing outlook.  We forecast frac sand prices of ~$53/ton in 2018 and ~$45/ton 2019 given our bullish demand tilt; however, should sand prices end up more in the $35-$40 per ton long-term ballpark, we believe FMSA would be a $6-13/sh stock (at $45-$50 per ton it would be a $10-$19/sh stock), SLCA would be a ~$35-$58/sh stock (at $45-$50 per ton it would be a $45-$75/sh stock), and we think similarly steep upside exists for SND. Feels like we’re banging our heads against the wall at this point, but the stock drubbing feels well overdone in our view, unless we sit in a $40/bbl (or lower) crude oil world going forward.