As oil prices have dropped +/-$100 per barrel to the current +/- $45 per barrel, drilling activity has slowed and frac sand consumption is projected to drop from 55 million tons consumed in 2014, to the current estimate in the range of 33 million tons for full year 2015.

- Rick Shearer, CEO of Emerge Energy Services


While the overall secular trends for sand is excellent with sand intensity per well continuing to increase (longer laterals, more sand per foot drilled, closer well spacing), the industry is in survival mode trying deal with the new oil price reality. Sand buyers are requiring more in-basin delivery of product, requiring the sand producers to either take over a good portion of the logistics or partner with specialist transportation and logistics companies.  Nevertheless, even after providing more services, the net EBITDA margin for sand producers per ton of sand sold continues to drop, from a high of $30 per ton in 2Q 2014, to the current $15 per ton in 2Q 2015.  Market trading valuations also show deflation, with the Total Enterprise Value (TEV) to EBITDA ratio dropping from 23.5x in 2Q 2104 to 6.2x in 2Q 2015.

The report below was presented by Joel Schneyer, Managing Director at the IM Frac Sand Conference on September 1, 2015.