Sand prices for oil and gas fracking and for the valuations of sanding mining companies are expected to remain depressed as growing supplies continue to outpace rising demand, research reports say.
Even as more sand mines shutter up North that produce the highest qualities of sand, they're more than outpaced by the growth of new mines in West Texas and even in South Texas' Eagle Ford shale that offer sand at more modest qualities, but at cheaper prices and much nearer to the oil and gas production. Even some Central Texas sand mines have closed in recent months.
Energy companies have used increasingly larger supplies of sand and water per well in the hydraulic fracturing process to help crack open the shale rock and release greater volumes of oil and gas.
A report in Moody's Investor Services said "frac sand castles may crumble" as prices stay low. Sand prices have plunged 20 percent in the last 12 months, Moody's said.
Just this week, Houston sand mining firm Hi-Crush Partners LP said it is converting from a partnership structure to a traditional corporation under the name Hi-Crush Inc. to potentially help stabilize its finances. Hi-Crush's stock has plunged from more than $20 per unit in early 2017 down to just more than $2 t0day.
Likewise, Fort Worth-based Emerge Energy Services, which is trading below $1, said it received a delisting warning from the New York Stock Exchange. Emerge said back in April it is considering filing for bankruptcy under a pre-structured plan with many of its creditors.
In an already over-supplied sand market, the Norwegian research firm Rystad Energy said U.S. oil and gas sand demand will grow by 10 percent this year and by 17 percent in 2020. However, frat sand supplies also will grow by 10 percent this year.
However, Rystad said there could be some relief by the end of 2020 if supplies fall a bit next year because of the ongoing shuttering of mines up North, especially in Wisconsin, that produce the premium Northern White sand.