The Shale Rebound
Follow the Sand

Sand is one of the most important ingredients of any fracking operation—it’s those fine particles that, when mixed with a proprietary slurry of water and chemicals and injected into shale rock at high pressures, can release the hydrocarbons trapped within. Low oil prices have put the breaks on the shale boom these past two years, but prices are nearly $20 up from their January nadir and we’re seeing signs that shale firms are getting their feet underneath them once again. The latest example comes to us courtesy of the WSJ:

Four publicly traded miners of sand have seen their share prices rally by an average of 320% from their 52-week lows. The largest, U.S. Silica Holdings, announced last Monday that it was buying an unlisted competitor operating a single mine for $210 million.

Investing in sand is a bet that hydraulic fracturing, or fracking, will rebound. The production technique is the marginal supply source for crude in the world both because it is at the edge in terms of cost and also because it has by far the quickest turnaround time. Wells drilled today can be producing in a matter of several months. Hundreds already drilled but uncompleted, so-called DUCs, can be brought online even faster. Both require sand—lots and lots of it.

Investment in sand extraction companies is up—sharply!—and that’s a very encouraging sign for a shale industry that, beleaguered these last 25 months, could use some good news. These things never happen overnight, but fracking firms have time and again proven their ability to adapt to new market conditions more rapidly than their more conventional competitors. Get ready for the shale boom version 2.0—leaner, meaner, and ready to roar once again.

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