Joel Schneyer, managing director in the Minerals Capital & Advisory Practice at Headwaters MB, will be one of the keynote speakers at the Frac Sand Insider 2016 Conference & Exhibition, to be held on May 10-11 in LaCrosse, Wis., sponsored by Mining Media International and Rock Products.
His talk is entitled “Frac Sand Outlook and Perspectives.” Cheap loans, excess liquidity and high oil prices fueled a North American shale boom. As a result, substantial investment has been made in frac sand, driven by the growth in the use of hydraulic fracturing.
Of the top 10 sand suppliers, six of these have close ties to private equity. While the long-term outlook for fracking looks promising, the current low oil price has put the entire E & P sector (and their Private Equity sponsors) under duress.
Sand that was selling for $60 per ton FOB Mine Wisconsin when oil prices were $100 per barrel, now has a clearing price of $60-80 per ton for the in-basin sale.
Sand Producer EBITDA margins have declined from a high of $35 per ton in Q3 2014 to $7 per ton in Q4 2015. TEV/EBITDA multiples show a similar deflation, from the irrational “peak” exuberance of 23x Q2 2014 to 6x in the “trough” of Q3 2015.
In response to the oil downturn, sand producers have idled their high cost production, developed their own in-basin terminals, embraced “plus size” unit trains, and expanded their product platforms. Drilling and completion costs in aggregate have come down on average 30 percent from the 2012 peak. These well-cost savings, coupled with continuing optimization in well completion techniques, make the core areas of U.S. shale plays competitive globally. U.S. shale is here to stay.