Fracking Boom Pushed Up Demand, but Oil-Price Collapse Alters Outlook
“This isn’t our first rodeo” has become a catchphrase among oil-industry executives who are laying off workers and dialing back spending in the wake of tumbling crude-oil prices.HT The Big Picture
But for many sand producers, this is their first time on the bucking bronco that is the cyclical energy business—and not all of them are ready for the wild ride, industry analysts say.
Sand is an important ingredient in hydraulic fracturing, or fracking, which has pushed American oil output above 9 million barrels a day, rivaling the production of Saudi Arabia or Russia. Sand companies’ biggest customers used to be golf courses and glass manufacturers, but the oil boom brought energy clients to their door and now roughly 60% of business is tied to fracking, according to PacWest Consulting Partners, which forecasts sand demand.
Now that oil prices have fallen, many fracking companies are retrenching—and that is bad news for sand producers.
Earlier this fall PacWest projected sand use would grow by 20% each year in 2015 and 2016. But following the plunge in oil prices, PacWest now expects sand demand to stay flat.
Meanwhile, new sand mines could add another 10% on top of the existing pile, creating a glut and pushing down prices, said Samir Nangia, a principal of PacWest....MORE
