A Mammoth Frack Sand Expansion

Recent acquisitions and expansions have helped Mammoth Energy Services greatly increase its ability to serve shale oil producers in the U.S. and Canada.
By Patrick C. Miller | July 14, 2017

New well completion techniques with longer laterals and mega-fracks using much larger quantities of sand—combined with an uptick in oil and gas activity—have led to reports of U.S. shale oil producers experiencing frack sand shortages. 

However, Mammoth Energy Services Inc.—an integrated oilfield services company based in Oklahoma City—has not only responded to the challenge, but also has expanded its frack sand operations to meet the increased demand. Mammoth's line of services includes pressure pumping, well services, natural sand proppant, contract land, directional drilling and other remote accommodation energy services.

“We have positioned the company to capitalize on the tightness the industry is seeing and ensure that our clients are able to complete their wells in a timely manner,” says Don Crist, Mammoth’s director of investor relations.

Active in the Utica, Permian, Eagle Ford and the SCOOP/STACK shale plays, Mammoth recently completed the acquisition of Chieftain Sand and Proppant LLC in New Auburn, Wisconsin, which now operates as Piranha Proppant. This gives Mammoth access to the Union Pacific railway with unit train capabilities to Texas where the demand for frack sand remains high.

“We have mines located on all of the major rail lines, allowing for low cost transportation into every major basin in the U.S. and the Montney in Canada,” Crist notes. “We plan to sell into every major basin going forward.”

Earlier in the year, Mammoth also acquired Taylor Frac LLC in Taylor, Wisconsin, which owns a sand mine and a 700,000-ton-per-year processing plant. Combined with Muskie Proppant LLC, Mammoth’s frack sand operation in Pierce County, Wisconsin, the company expects to expand its sand processing capacity from 700,000 tons per year in 2016 to 4 million tons by the end of 2017.  Mammoth will have about 75 million tons of frack sand reserves.

As a result of the acquisitions and expansions, Crist says Mammoth’s pressure pumping fleet hasn’t experienced any disruptions because of frack sand shortages. In fact, he says the company’s fracking calendar is fully booked into the fourth quarter and discussions for 2018 have begun.

“While Mammoth does sell sand into every market, the majority of our recent sales have been in the northeast—Marcellus and Utica,” he says.  “The majority of our current sand production is utilized by our pressure pumping fleets, with a smaller portion sold to third parties.”

Once its sand mines are operating at full capacity, Crist says Mammoth’s six pressure pumping fleets will use 2.1 million tons per year. Another 1 million tons will be contracted to third-parties and the remaining tonnage will be sold on spot markets.

Changes in fracking techniques have not only changed frack sand volumes, but also sand grades. 

“Over the past two years, there has been a big shift to finer grades of sand,” he says.  “The highest demand grade is 40/70, which is a shift from past years when 20/40 was in highest demand.  This was facilitated by a shift in slickwater completions, which has become the preferred completion method. We have looked at ways to increase the production of the higher-demand, fine-grade sands and move away from producing the coarser grades.”

The concentration of sand has been increasing over the past several years with the industry pumping around 2,000 pounds per lateral foot today, which has increased significantly within the past few years.

“The rig count increases since the low-point in the second quarter of 2016 have occurred primarily in the basins that have the highest demand for sand,” Crist explains. “As a direct result, for every rig that is added, you can roughly calculate the demand that rig will have on the sand market. 

“For example,” he continues, “if one rig is added in the SCOOP/STACK and it is expected to drill one well per month—12 wells per year—with lateral lengths of 10,000 feet each and sand concentrations of about 2,100 pounds of proppant per lateral foot, then we can expect sand demand of roughly 252 million pounds—or 126,000 tons.”

With 22 sand trucks serving the Appalachian Basin, 20 trucks on order for the Permian Basin, 20 on order for the SCOOP/STACK and more than 2,000 leased rail cars, Crist says Mammoth hasn’t experienced any difficulties with logistics in getting its frack sand to where it’s needed.

“We have internal logistics as part of our integrated model, so we are not dependent on third-parties to move our sand,” Crist notes. “The trucking side of the business—last-mile—has gotten very tight and given the increased concentrations of sand required per well, we expect this to continue.  We are positioned well to adequately supply our needs and provide trucking for other companies as well. “

In the next few years, Crist expects the demand for frack sand to increase significantly as sand concentrations continue to increase across the oil and gas industry.

“Oil prices, which influences the rig count, is the biggest driver of demand,” he says.


A rising tide raises interest in Hexion’s solutions

Hexion Inc.—a global provider of coated sand proppants and technology-based solutions to the oil and gas industry—hasn’t experienced any difficulty in obtaining sand for its products.

Jerry Kurinsky, senior vice president and general manager of Hexion’s Oilfield Technology Group, says there are two reasons why the company hasn’t been affected by sand shortages.

“We’re not integrated on the raw sand side,” he explains. “It’s one of the raw materials we buy to develop technical products that we sell into the marketplace.”

The advantage of this approach is that Hexion—headquartered in Columbus, Ohio—can buy sand from any provider, which enables it to optimize the logistics of getting the sand to where it’s needed.

“The disadvantage is that we’re buying at a market price, but we’ve been able to manage that,” Kurinsky says.

The second reason is that Hexion doesn’t require the same volume of sand as oil and gas operators, which gives the company great flexibility in determining who and where it buys sand from.

Because of increased drilling and fracking activity in U.S. shale plays—particularly in the Permian Basin—Kurinsky notes that Hexion is seeing renewed interest in some of its sand-related products, such as OilPlus proppant and the Sentinel dust suppressant system.

“What we’re finding now is that the discussion is trending back toward technology and getting the best value out of their assets,” he explains. “They’re not just thinking about near-term costs; they’re also thinking about long-term performance of the well.”

Although Hexion’s OilPlus proppant has been on the market for some time, Kurinsky says its sales have increased over the last two quarters. It changes the relative permeability of the proppant to improve oil flow and increase production.

“We’ve had customers tell us that they’ve generated $1 million of additional revenue on a well in a year by using that product,” he says.

Meeting OSHA regulations that go into effect next year on permissible exposure to respirable silica dust creates a challenge for frack sand producers and users. Hexion’s Sentinel solution is a chemical treatment to reduce silica dust

“It’s very easy to apply at the sand mine or the frack site,” Kurinsky says. “With the work we’ve done so far, it stays effective all the way from start to finish. So handling the sand in between different points in the value chain doesn’t degrade its performance.”

Overall, Kurinsky expects oil prices to trend slowly upward into 2018, a trend he believes will cause producers to be more interested in long-term technological solutions rather than the bottom line of initial production.


Author: Patrick C. Miller
Staff Writer, North American Shale magazine