Will Fracture Sand Pricing Power Return?

Rigs have jumped nearly 30% YTD in the Lower 48. The average number of actively fracturing fleets jumped 20% month-over-month in January and has remained steady since. Due to both a large backlog of drilled uncompleted wells (DUCs) built during the pandemic-induced activity crash and the higher-than-anticipated crude prices we’re now experiencing, completion activity — and by extension hydraulic fracture sand demand — is set to increase meaningfully Y/Y. Enverus tracks a multitude of metrics to help companies understand anticipated sand demand, regional sand production levels, total sand supply, and sand pricing. Figure 1 describes the relationships between these metrics. Starting in early 2018 with the large influx of in-basin sand in key regions such as the Permian, the fracture sand industry went through a period of rapid capacity expansion. The total theoretical sand supply grew ~65% over 12 months while actual demand for fracture sand increased only ~35%. With the cost advantages inherent to in-basin sand, many operators abandoned the use of northern white sand (NWS) in favor of the cheaper alternative. Figure 1 also exhibits of one of our proprietary proppant price indices. It clearly shows the impact of in-basin sand on proppant prices starting in 2018.  It… continue reading

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