Hi-Crush CEO: we’ve been sold out of sand since January
Since mid-January, Hi-Crush Partners LP has been sold out of every grain and every grade of frack sand it sells. “It is undeniable that we are seeing a substantial increase in demand for our products and services even though we are only in the early stages of a market recovery,” said Robert Rasmus, CEO of the Houston-based frack sand miner and supplier that operates four plants in Wisconsin.
For the full year, Rasmus expects volume demand to stay strong. In the spring, sand prices may dip as more previously idled sand facilities began ramping up output, but prices and demand will pick up again as industry adds more drilling rigs, completes more wells and continues to inject record-level volumes of sand.
Prices at the mine gate are already hovering in the $40/ton range and Rasmus doesn’t expect any give back in sand prices moving forward into the year. “Our customers are seeking surety of supply,” he said. “We are seeing a strong insurgence from our customers looking to lock in prices now. Our customers are interest in that,” he added, “but we are not as we believe prices will rise.”
Since the beginning of January some customers have chosen rough grain sand over the finer grades just to ensure they would have the supply available when needed.
Hi-Crush is not currently operating all of its Wisconsin plants at capacity, but it expects to do so later this year.
The company will also continue its focus on sand logistics. In Odessa, Texas and Colorado, Hi-Crush has added two rail terminals with silo storage. The acquisition of Permian Basin Sand Company LLC will give the company a sand mine in the heart of Texas oil production where many of Hi-Crush clients are focused. The 1,226-acre sand reserve has more than 55 million tons of 100 mesh sand and cost Hi-Crush $275 million to acquire.
To build a sand processing facility on the reserve, Hi-Crush will invest $45 million to $50 million. The plant could produce 3 million tons per year and could be producing by Q3 or Q4 this year.
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