The Future of Frac Sand Industry

With the current drop in oil prices, there are expected changes in the frac sand industry. But just how will the drop of oil affect the industry?  Like any situation, there is the optimist and doubtful.

Photo Courtesy from Spring Grove Herald

Photo Courtesy from Spring Grove Herald

While reviewing the largest area of the fracking sand industry of Wisconsin, we know that there is room for growth. Currently, there are plans to continue to move forward according to Journal Interactive, but Wisconsin’s fracking sand industry is aware that with the drop of oil prices things may slow down, but won’t come to a complete halt.  An article from The Cap Times, with a statement from Rick Shearer states,

“We certainly expect things will be softer in 2015 than they were last year,” says Rick Shearer, CEO of Emerge Energy Services LP of Fort Worth, Texas, which employs around 350 people in Wisconsin and has invested over $100 million in major facilities in Barron County in the northwestern part of the state.

While there is a change in the amount of production that will happen in the industry, there is no need to be worried about the industry to come to a complete freeze or job loss at this point in time. With such a high demand in 2013 with oil prices at an all-time high and an increase of 30 percent from its recent years with fracking, it is hard to reproduce the same high numbers from the previous year.  While the frac sand industry is trying to reproduce high numbers, the oil industry numbers continue to drop. With such a large decrease in pricing for the oil industry there may be a dramatic decrease in the necessity for sand use, but just how much of decrease can we predict? A statement from Ethan Bellamy, a managing director and senior energy industry analyst for Milwaukee-based Robert W. Baird & Co. says,

“Public sand companies are unlikely to be totally immune, but we suspect they will survive the downturn at the expense of mom-and-pop operators who are likely to be squeezed out as demand dwindles,” Bellamy said. “Idled capacity and layoffs would not surprise us at all, and we think greenfield mines and mine expansions don’t make much sense unless and until oil recovers.”

According to Samir Nangia, a principal at PacWest Consulting Partners, “Even though things look grim right now, it seems like the outlook for the sand guys could be a little bit better than it is for (other oil industry operators).” Only time will tell the true effect that will happen to the frac sand industry.