Oilfield services providers Halliburton Co. and Baker Hughes Inc. are stockpiling sand to protect themselves against rising costs and are buying more railcars to transport the haul. That is good news for the nation’s frac sand producers.
Halliburton, one of the world's largest provider of fracking services, is more than doubling its railcar fleet and capacity for sand terminals. It had about 3,500 railcars under management as of June 30.
Oilfield services provider Baker Hughes said that it had significantly increased the number of its railcars and is buying more sand under contract, which helps buffer it against price rises.
Companies are now pumping in as much as a trainload of frac sand into a single well to coax more oil and gas from shale rocks. But the shale rush, especially in Texas and North Dakota, coupled with a rail jam that began after last year's severe winter has resulted in shortage of sand at drilling sites.
"We did experience some disruptions early in the third quarter, where work was delayed because we were waiting on sand deliveries," Halliburton's Chief Executive David Lesar said on the company's post-earnings call. Halliburton has committed about $100 million this year to upgrade its infrastructure to move frac sand.
The company signed up 30 additional trucking companies this year to transport sand, said Jeffrey Miller, Halliburton's president. It has also opened a center in Houston to monitor supply and track its rail and trucking fleets. Halliburton is also buying more sand under contract, which it said helped shave 15-20 percent off spot sand costs.