Fracking Makes Sand The New Hot Commodity: What You Need To Know

September 03, 2014


There are also, now, a number of Chinese ceramic proppant manufacturers, Sichuan FultonTec Co. Ltd, for example, which may also be worth keeping an eye on.

As for that debt and equity investment recently made by KKR, that was the $680 million its special situations fund announced at the end of July was going to be pumped into Preferred Sands, one of North America's largest frac sands producers, to keep it in business.

While opportunities to invest directly in frac sands may be circumscribed by the dearth of publicly quoted companies out there, indirect investment opportunities in the frac sands "phenomenon" may not be so circumscribed.

On a number of occasions, particularly in the press, frac sand has been equated in one way or another with gold, and current demand for it a "gold rush." If that's the case, there should be indirect opportunities in the services necessary to support it—as there have been in previous "gold rushes."

Two such services that may offer opportunities are:

Shipping & Logistics

Frac sand resources are often located at a distance from where they are actually needed, e.g., in New Mexico, North Dakota and Pennsylvania. However, oil drillers' preferences may also dictate obtaining frac sand from a particular region and of a particular type such as Wisconsin White, the grains of which are especially round—even if the source of the sand may be nowhere near where they are operating.

However, the sand needs to get to the wells. And the railways in North America are getting it there. Whether Class 1 like BNSF, the Canadian National Railway Company, Union Pacific Railroad or the very much smaller Progressive Railroad, rail companies in the U.S. are shipping many—often thousands—of railcars of frac sand each year. The volume is rising and so, often, is their investment in the sand "boom" among other things in cars, new lines and infrastructure.

That said, though, those who ship by rail are starting to express concerns "that the U.S. rail network won't be able to handle rapidly rising traffic volumes, resulting in higher transportation costs and lost sales." Not least because "[g]rowth in frac sand and oil shipments connected with the domestic energy boom is further pressuring the network."

However, it's not only the freight customers of the railways who are concerned; those who like or need to travel by train are also feeling the effects of this increase in traffic.


Find your next ETF

Reset All