“Headwinds are real for potential in-basin Permian sand miners –~50-60mmtpa sits in the Permian sand mine permitting queue; however, not all will get built on time and some won’t get built at all in our view – (OIH $22) – On the heels of recent visits to two sand mines (one N. White and one in Texas) and discussions with other players, we’re increasingly convinced project delays and cancellations will occur as we progress into 2018; our estimate that 30-40mmtpa of in-basin sand could come online over the next ~18 months will likely prove lofty. Air permits (PBR, NSR), water table issues, labor constraints, sand quality, E&C delays, customer preferences, and logistics are some of the more prominent hurdles but both access to capital and speculators applying for permit (but really just hoping to be acquired) should also be factored in to folks’ thinking. While we’re far from environmental / wildlife experts and we don’t plan to directly weigh in on the potential issue, the Sagebrush lizard is also a potential roadblock that continues to rear its ugly head and this week the Texas Comptroller weighed in…he seems pretty fired up (link). We continue to believe elevated trucking rates may actually push Permian customers (E&Ps and OFS companies) to shift to low-cost Northern White and Permian in-basin sands and away from other regional supplies.”
Editors note: Hear from Tudor Pickering Holts’ George O’Leary at the 6th Annual Frac Sand Supply & Logistics Conference in Houston on September 29!