Some very interesting frac sand insights from Tudor Pickering Holt’s “Energy Thoughts” email of July 17, 2017:
“Elaborating on interesting sand dynamics – Multiple examples of why you can’t paint sand with quite as broad a brush as many folks seem to be doing today (OIH $25) – Operators seem to be increasingly open to the idea of using / testing Permian sand in the Delaware and Midland, but the sand tends to be largely 100-mesh so adoption by some players will take time. Some E&Ps are seeking to direct source and possibly take interests in sand mines (i.e. a dash of vertical integration) while others are merely looking for take-or-pay arrangements or for certain grades of sand provided by the OFS players. We also continue to hear about operators who use Brady Brown considering swapping that sand for the Permian silica. And the most interesting data-point our E&P team picked up on, in our view, is one E&P that has actually opted to drop some brown regional sand in favor of white sand due to lower costs (yes, cutting regional volumes and switching to white sand)…this could be partially driven by grade mix but we’d bet trucking is one of the driving factors here. Logistics are pivotal and bottlenecks will arise in this space despite myriad last mile solutions pervading the space today…the road / highway infrastructure is largely unchanged vs. 2014.”
A lot to digest in that summary!