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A Shortage of Frac Sand Will Bring Supply Chain Challenges

A conveyor pours crushed sand into a stockpile before it is washed and sorted by grain class size at Preferred Sands mine in Blair, WI, on June 20, 2012. Lukas Keapproth/Wisconsin Center for Investigative Journalism

Many oilfield service and supply companies, including Halliburton (NYSE: HAL), Hi-Crush (NYSE: HCLP), U.S. Silica (NYSE: SLCA), and Fairmount Santrol (NYSE:FMSA) have cited a shortage of frac sand for the U.S. shale plays, specifically 40/70 in the Permian Basin.

Advancements in the horizontal drilling and completion techniques of leading shale E&P’s are driving frac sand demand to new high points. The significance of multi-well pad drilling in the Permian increased each of last several years, even during the downturn. In 2016, 42% of the wells completed in the Permian were drilled on multi-well pads compared to only 22% of wells in 2015. Most notably, Encana Corporation (NYSE: ECA) initiated a 64-well pad program in 2016 that continues to headline pad drilling discussions in the Permian Basin. [read more]

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