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Fairmount Santrol 1Q16: Revenues Down 52%, Sand Sold Down 8%

Fairmount Santrol logoFairmount Santrol is a proppant manufacturer/supplier headquartered in Ohio. Proppants are things like sand and ceramic beads used to “prop open” tiny fractures created in hydraulic fracturing of shale oil and gas wells. In other words, Fairmount Santrol is a regional sand supplier for shale drillers–and a good proxy to understand what’s happening (or not happening) in our neck of the woods when it comes to drilling. If drillers aren’t drilling as much, that will show up first in the balance sheets of companies like Fairmount. And so it does. Fairmount reports in their first quarter 2016 update that revenues in 1Q16 were down 52% from 1Q15. But you can’t automatically assume that means there was half the drilling one year later. Fairmount also reports the volume of sand sold was down just 8% from 1Q15 to 1Q16. Why the discrepancy between revenue and volume? Fairmount doesn’t say, but we think we know: drillers have been putting the squeeze on supply chain companies like Fairmount, forcing them to deeply discount their prices…
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CARBO Ceramics 1Q16: $25M Loss, Drillers Not Completing Wells

CARBO logoIn addition to watching companies that operate drilling rigs, like Patterson-UTI Energy (see today’s companion story) for indications of how well (or not) the drilling industry is doing, another type of company to watch is a proppant company–the companies that supply sand and ceramic beads used in fracking. CARBO Ceramics is one of the premier such companies. Yesterday CARBO issued their first quarter 2016 update. Like Patterson, the news wasn’t so good. CARBO lost $25 million in 1Q16. In some cases E&Ps (exploration and production companies, or “drillers” here on MDN) are electing to complete previously drilled wells–and that’s good for CARBO. But in many cases drillers are electing to leave already-drilled wells uncompleted, i.e. not fracked, and that’s bad for CARBO. Here’s more of the good, the bad and ugly for CARBO Ceramics in 1Q16…
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OSHA Sued to Prevent New Silica Dust Rule – but Not by O&G

Last week MDN told you that the federal Occupational Safety & Health Administration (OSHA) has published new rules for the handling of silica and silica dust (see OSHA Publishes New Silica Dust Rule, O&G Must Comply by 2018). As we pointed out at the time, the “good news” if there is any, is that the new rules don’t take effect for the oil and gas industry for two years. However, more than just the oil and gas industry are affected by the rules. The Louisiana chapter of The Associated General Contractors of America (AGC) has filed a petition against OSHA to block the new rules. AGC represents more than 26,000 firms, including over 6,500 general contractors and over 9,000 specialty-contracting firms. AGC was joined by an alphabet soup of other associations in their petition. A second petition was filed by the American Foundry Society (AFS) and the National Association of Manufacturers (NAM). Both petitions were filed with the U.S. District Court for the 5th Circuit. Notably, associations for the oil and gas industry, while critical of the proposed new rules, have not (yet) joined these other industry groups in filing a petition with the court…
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SEC Investigates OH Frac Sand Company for Allegedly Paying Bribes

One of the largest frac sand providers for shale drillers in the U.S. is Fairmount Santrol. Based in Ohio, Fairmount sells proppants (sand and other substances used in oil and gas drilling) around the world. Apparently Fairmount’s dealings in another country is what has landed them in hot water with the U.S. Securities and Exchange Commission. The SEC is investigating Fairmount under the Foreign Corrupt Practices Act. The company is accused of paying bribes to foreign officials for help in getting business. We’re not excusing such behavior, but come on, really? You don’t think such things don’t go on a million times a day in every industry from oil & gas to dog food?? Sounds more like a fossil fuel industry witch hunt to us than a legitimate investigation…
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OSHA Publishes New Silica Dust Rule, O&G Must Comply by 2018

Last December MDN warned you that the Obama Administration’s latest attempt to regulate the oil and gas industry was coming from the Occupational Safety and Health Administration (OSHA)–via new silica dust regulations (see New Dust Regulation Latest Obama Attempt to Regulate O&G). As predicted, last week OSHA published their new rules (full copy below). We certainly have nothing against being safe and guarding the safety of workers. Silica dust is nasty stuff–effectively like asbestos particles. But once again the Obamadroids have taken a serious issue and have gone to extremes. The “good news” if there is any, is that the new rules don’t take effect for the oil and gas industry for two years…
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U.S. Silica Introduces New Resin-Covered Sand for Fracking

A key ingredient in fracking is a “proppant” like sand. But not just any old sand. The sand used in fracking typically used in fracking is silica and comes from the Midwest–Wisconsin and other states. U.S. Silica is one of the largest sand companies in the world. Strangely enough, it’s headquartered in Maryland. Proppants are so-named because after being washed into fractures the sand stays behind to “prop open” the cracks, allowing oil and gas to escape from shale. Always looking for an edge, particularly against competitors that manufacture ceramic proppants, U.S. Silica recently announced a new resin-covered sand product line…
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Ceramic Beads Used to Drill CONSOL’s Monster PA Utica Well

On Monday MDN told you about CONSOL Energy’s newest Utica Shale well, a gusher with initial production of an eye-popping 61.9 million cubic feet per day per day (see CONSOL 4Q15: All About that Utica, ‘Bout that Utica, No Marcellus). The well, the GH 9, was drilled not in Ohio, but in Greene County, PA. Drillers always wonder what techniques and technologies were used in drilling such a well. How long are the laterals? What kind of choke is used? How much sand per foot? Etc. We have one bit of detail to share. Apparently CONSOL is cool with CARBO Ceramics telling the world that the GH 9 used CARBO ceramic beads in place of sand as the proppant. Here’s the details from CARBO for exactly what was used as the proppant in the GH 9…
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Seventy Seven Energy Sells Frac Sand Subsidiary, Undisclosed Sum

Seventy Seven Energy (SSE), an oilfield services company with major operations in the northeast, is the old Chesapeake Oilfield Operating division of Chesapeake–spun off into its own company on July 1, 2014 (see Long Labor & Delivery: Seventy Seven Energy Born Yesterday). Each quarter we report on the performance of this public company, and each quarter it’s the same story: red ink (see our stories here). In May of 2015 Seventy Seven sold one of its assets, a trucking operation, in an effort to raise money (see Seventy Seven Energy Sells Trucking Subsidiary for Undisclosed Sum). Also in May the company secured a $100 million loan to stay afloat (see Seventy Seven Energy Secures $100M Loan to Keep on Drillin’). We’ve just learned that a few days before Christmas Seventy Seven sold off a Wisconsin frac sand operation. Like the trucking sale earlier this year, terms of the deal were not disclosed. In fact, Seventy Seven hasn’t said anything about the sale–it was the buyer, Emerge Energy Services, who issued a press release about it…
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New Dust Regulation Latest Obama Attempt to Regulate O&G

The Obama Administration continues to push aggressive new regulations (i.e. unlegislated laws) to control the oil and gas industry in the United States. We’ve covered, extensively, the EPA’s egregious violations in this respect. Another agency that hassles the industry is OSHA–the Occupational Safety and Health Administration, part of the U.S. Dept. of Labor. Obama’s OSHA weenies are set to push through new dust regulations that will affect the drilling industry. These new standards apply to silica (or sand) dust. Silica is used in fracking. Here’s the latest attack on the industry…
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Some Shale Drillers Shutting Down from Thanksgiving to New Year

It looks like there’s a slowdown coming for many drillers in the Utica/Marcellus. Strike that–more like a stoppage, we’ve already seen a slowdown. The stoppage for some (not all) drillers will happen between Thanksgiving and New Year’s Day when some drillers, according to two different proppant companies, will stop drilling, giving their workers a forced “holiday” at the worst time of the year–the holidays. Both Fairmont Santrol, a frac sand provider headquartered in Chesterland, OH, and Carbo Ceramics, which manufactures and sells ceramic beads as an alternative to frac sand (headquartered in Houston, TX) recently indicated drillers will put on the breaks in the fourth quarter. They should know–they’re the ones who get the orders months in advance. Here’s what they said…
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Unimin Energy Expands Frac Sand Terminal in Benwood, WV

Unimin Energy Solutions - Marcellus/Utica Terminal Network (shown with 50 mile service radius) (PRNewsFoto/Unimin Energy Solutions)
Unimin Energy Solutions – Marcellus/Utica Terminal Network – click for larger version

A Texas-based company, Unimin Energy Solutions, has 11 frac sand terminals throughout the Marcellus/Utica region (see the map). The most recent terminal they opened was this past June in Jerry Run, WV (see Unimin Energy Opens 11th Marcellus/Utica Frac Sand Terminal). Another of those 11 sites is in Benwood (Marshall County), WV. Last week Unimin held a grand opening of its 2nd unit train capable terminal at Benwood. The Benwood terminal now has almost 20,000 tons of silo storage capacity and can load up to 55 frac sand trucks per hour. CSX Railroad shuttles unit trains continuously to replenish frac sand inventory at the site. Details on last week’s soirée…
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MPR Frac Sand Terminal Rising in Belmont County, OH

the sandmanMPR Transloading & Energy, part of MPR Supply Chain Solutions, operates a 20-acre transloading site on the shores of the Ohio River in Belmont County, OH, just across the river from Wheeling, WV. MPR is working hard to finish a new, large sand hopper at the site so trucks hauling frac sand can pull under it to quickly load and head off to drill sites in the region. There’s just one small problem: There are only 35 rigs operating in eastern Ohio and West Virginia today, half of the number that were operating just a year ago when the sand hopper was planned. That is, there’s less demand for sand…
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GE/Statoil Announce Winners of Sand-Alternatives Contest

Quick–what two things do you need in abundance in order to horizontally drill and frack a well? Yep–water and sand. The two together make up 99.5% of what goes down the borehole to drill and frack a shale well. Water is used to fracture or break open the rock and deliver the sand, which is called a proppant because some of it stays behind and “props open” the fractures in the rock, allowing gas and oil to escape into the borehole. The vast majority of truck trips to a well pad are to deliver water and sand. GE and Norwegian giant Statoil have teamed up to run an “Open Invitation Challenge” which is a contest for technology innovators to propose alternatives to water and sand, to reduce the amount of each and therefore reduce truck trips to and from well pads. The results are in for the sand challenge and five winners will each take home a check for $25,000. The winners have some fascinating technologies and if they meet certain other criteria are eligible for more money to develop and commercialize their technologies. And what are some of these interesting bits of tech? How about a polymer that swells to 10 times its initial size when liquid is added. Or a ceramic proppant that’s shapped in the form of an X acting like a tiny steel girder to keep rock fractures propped open. This is truly creative and potentially industry changing stuff…
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DustPRO’s Innovative New Solution to Improve Frac Sand Safety in WV

Preferred Technology, headquartered in Radnor, PA (near Philadelphia) has created a cool new product/technology called DustPRO. The new DustPRO coats frac sand with–something, not sure what–that helps the teeny tiny particles of sand behave and not get airborne where they can become a health hazard. Preferred/DustPRO announced yesterday the results of their very first application unit installed in the Marcellus/Utica in Morgantown, WV–and the results are very good indeed…
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Fracsandphobia for Some Who Live Near Keystone Sanitary Landfill

People are phobic (fearful) of the darnedest things. Some people are afraid of germs (germophobia). Some are afraid of spiders (arachnophobia). Some are even afraid of furry little kitty cats (ailurophobia). Seems that all of us have one phobia or another. Some folks who live near the Keystone Sanitary Landfill outside of Scranton, PA have a phobia over sand that may be hauled to the facility (an irrational fear of sand is eremikophobia). Because Keystone accepts drill cuttings and has, in the past, also been permitted to accept frac sand waste from drilling operations, some people who live in the area are afraid. Of what? That the sand may contain nasty fracking chemical residue and that residue will leach out of the ground and enter their bodies–ahhhhhh! Never mind that the residue in frac sand waste, chemicals like hydrochloric acid, is in such minuscule quantities it’s the equivalent of the amount of hydrochloric acid found in eye drops (yes, eye drops). But facts never get in the way of a good phobia–or a good lie spun by the likes of anti-drilling groups like Food & Water Watch that exist to stop legal, legitimate and safe businesses in the United States from operating…
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DUG East Panelists Discuss the Critical Role of Sand in Drilling

Some interesting tidbits from a roundtable discussion at last week’s Hart Energy DUG East conference. The panelists included reps from Chesapeake Energy, Range Resources, Halliburton and Schlumberger. Really, the biggest of the bigs when it comes to producers and oilfield services companies in the Marcellus Shale. A lot of the discussion seemed to revolve around the lowly grain of sand. It may surprise you (as it did us) to learn just how much sand is now being used per well in the Marcellus/Utica…
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