As we enter 2025, we’d like to share our perspective for the industry trends that will shape 2025’s frac sand market.
- Flat overall. Overall, we believe that activity will be mostly flat on account of many E&Ps being privatized and “capital discipline” is the name of the game instead of production. Additionally, even if oil prices climb, the amount of OPEC+ idled capacity would likely come online to offset any gains (particularly in Saudi Arabia). Also, since we believe the demand for OFS will remain more or less flat in an oversupplied market, prices will be mostly flat as well. Although… we are watching the Canadian frac sand markets closely though. With LNG ports preparing to come online and Pierre Poilievre leading to take on the prime minister role, we see the strong potential for this market to increase. However, this will take significant financial investment/commitments to build out the supply-chain infrastructure. We remain optimistic.
- M&A in OFS. In 2024, there were some big OFS deals: Atlas/Hi-Crush, Apollo/US Silica, Covia/Black Mountain, ProPetro/Aqua Prop, PropX/Taylor, and more. We think the market needs more consolidation, but deals will be very strategic. In this oversupplied market, we anticipate that any deals will be to increase scale (thereby reducing costs), increase geographic footprint (reducing customer’s logistics costs), or to vertically integrate (increasing bottom line by taking on the profit margin in that link). As E&P customers get larger, this condition traditionally tends to favor larger suppliers.
- US total frac sand mine count increases slightly but at a decelerated rate. For the past two years, we’ve thought that the market conditions would steer folks away from entering the frac sand supply-chain. However, clearly many sand miners think differently (as we highlighted in November’s panel discussion). That conversation has helped us see another perspective in which we are expecting that we will see a few more mines come online this year. Not to mention folks at November’s conference telling us they plan to do so. Given the comparable pricing between damp sand and dry sand though in the Permian, we anticipate that new mine entrants will be slightly lower than the average for the past few years.
- Cost Innovations to Increase Bottom Line. Our industry is nothing if not innovative. Engineers and entrepreneurs collaborate together to make the frac sand supply chain more and more efficient every single day. Since we’re in a down cycle and it’s hard to increase profits by growing revenue, we see the focus shifting to finding innovative ways to reduce costs. From conveyors, slurry lines, autonomous trucking, AI in supply-chain software, and so much more, we are bullish on our industry’s ability to find new pathways forward.
Agree or disagree? Let us know.
Disclaimer: our thoughts are purely speculative and should not serve as financial advice or forecasts.