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Frac Sand companies


bz1516
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Anyone have any positions in frac sand companies?  They have done quite well in the last year.  Its the only commodity i can think of that could experience a significant supply shortfall over the next several years. 

 

I like both EMES and SLCA of the 3 public companies in the space.  The investment thesis is based on increasing intensity of sand use in fraccing, both longer laterals and more sand per lateral foot.  Of course this is just my opinion, but these stocks still look cheap based on 2015 forecasts.

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I own ABM - Athabasca Minerals on the venture exchange. They are awaiting their frac sand permit from the Alberta Government.

 

if I'm not mistaken, isn't ABM a logistical play in frac sand?  if so, that's not where the action is. 

 

There are very few places in North America that have the Northern white sand that meets API standards for fraccing.  The best sand in the continent comes from a several county area of Wisconsin that extends into Minn and Illinois.

 

There was a mining company that was in a v good spot to provide frac sand. It was highly rated and posted on VIC a while back, but I cannot find it anymore. Was suposed to be very very cheap. Illiquid microcap tho.

 

I would not be surprised if the company you are referring to is the same one 50centdollars owns.

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what do you mean logistical play on frac sand?

 

You can own the sand pit or the mine so to speak.  You can own the plant that processes and washes the sand, and you can own the transloading facility.  The transloading facility is purely logistical.  The majors own all three, but the big profit comes from owning the sand pits. 

 

Victory and Athabasca clearly own or are developing the transloading facilities and Victory may own or be developing a processing plant, but that is not where I would be investing in a prospectively developing commodity play.  The money is in the mine as it is in every commodity play. 

 

Victory says they have a report that says they have a fraccing sand deposit.  i would discount that the same as I would discount the thousands of reports out there in Canada that claim commercial grades of every mineral you can think of.  Besides why invest in hope when the best plays, EMES and SLCA offer more appreciation potential?

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Is suitable sand plentiful?  Also, does the distance between the mine and the customer matter a lot?

 

To me, this seems like a questionable macro play on shale gas.

 

Suitable frac sand is not plentiful, most of it comes from a small area in the US midwest. However, expansions are underway there. Also, the transportation piece is overbaked into that seeking alpha article, and an important downside is missing.

 

Although Firebag is much closer to Edmonton, there is significant trucking involved. Trucking in the Ft McMurray region costs more than trucking anywhere else in North America.

 

Just like everything else. Operating a frac sand mine near Ft Mac is a huge disadvantage, in my opinion, due to the labour market in that area. Oil sands producers are growing like crazy, and equipment operators make ridiculous money. It's a bigger labour shortage there than North Dakota. I'd rather own the frac sand mine in wisconsin where there is cheap labour and my mine is right next to a rail line, but that's just me.

 

I've owned this company in the past (don't currently) but not for the frac sand, for the gravel. Those same oil sands companies have a huge need for gravel, and transporting it any distance is prohibitively expensive. It's on my watchlist to repurchase, as those gravel pits are annuities of the best kind, but I'd like to buy it cheap.

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Is suitable sand plentiful?  Also, does the distance between the mine and the customer matter a lot?

 

To me, this seems like a questionable macro play on shale gas.

 

Most of the suitable sand is in the US in several counties in southwestern Wisconsin, in an arc that extends a little bit into Minn. and Illinois.  There are now API standards for frac sand, but not certain how restrictive they are. 

 

The distance shipped matters in the sense that it tends to give the advantage to the half dozen large players that now have transloading facilities all over the country.  There is evidence that drillers can easily pay a lot more for frac sand than they are currently paying, so any cost increases are not a factor.

 

The weight of the analysts following the three public sand companies believe frac sand demand is growing faster than the ability for supply to respond to it and that there is growing pressure in Wisconsin to further limit the growth of frac sand mining.  This is slowing down the ability to bring new sand on stream.  I think all commodity plays suffer from the issue of potential supply response, and this may or may not be better than most, but its hardly the worst.

 

There is also the potential for international export business as fraccing takes root overseas, but that would be long term.

 

Even though EMES and SLCA have already become multibaggers, the metrics are still very investable as the market for frac sand is now growing at an accelerating rate.  The play in frac sand is the growing and greatly increased intensity of sand use per well, both because the laterals have increased in length and in the intensity of sand use per foot based on new fraccing methods pioneered by EOG and WLL.  Frac sand usage will increase dramatically as these methods, that more than double sand usage per well, are adopted by most other drillers.  This is happening right now and accounts for the current upsurge in sand usage and stock prices.  Estimnates are frac sand usage will increase over 25% this year.

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