Preferred’s frack sand sell-off marks new shale in-basin strategy

By Luke Geiver | December 05, 2017

Preferred Proppants LLC is taking a new, more regional approach to the frack sand supply business. The Pennsylvania-based sand producer and supplier has provided proppant to multiple shale plays in the U.S. over the past seven years, but it’s recent sale of a Wisconsin sand mine marks a new strategy, according to the company.

“We are strong believers in the shift to regional and local sand as the primary source of supply to the major basins,” said Michael O’Neil, founder and CEO of Preferred.

The company has sold its Bloomer, Wisconsin-facility to Frontier Sands LLC in a deal that also includes sand lease agreements, royalty rights and all equipment at the facility that had been shuttered in 2015 following the collapse in oil prices and the demand for frack sand. The sale is one in a string of other deals the company has performed in an effort to connect its main focus to the Permian and Eagle Ford shale plays.

Along with existing frack sand production facilities Preferred owns and operates in Nebraska and Arizona, in addition to three new plants set to come online in Texas, the company is looking to supply only to Texas. The strategy to become a regional sand supplier started three years ago, Preferred said, and helps it to be what it calls the lowest cost-landed-at-well in-basin provider of frack sand.

In addition to the sell-off of out-of-basin frack sand sites in Wisconsin or British Columbia, Preferred has also made a push to reduce its rail tank car fleet. Since last quarter, Preferred has shed nearly one-fifth of all railcars and is instead hoping to move most sand from production sites to wells via truck.

Preferred isn’t the only major frack sand provider to add in-basin sand production sites in Texas to meet demand of current- and future-Permian and Eagle Ford shale operations.

Performance Proppants opened a new 1.4 million ton per year frack sand production site this year in Louisiana to serve Haynesville shale gas producers.

U.S. Silica purchased a Missouri frack sand production site earlier this year in a deal that also included an idled Texas frack sand facility that could serve the Permian.

Twin Eagle Sand Logistics LLC also expanded its Texas sand operations this year. The company added storage silos and rail infrastructure to the company’s growth strategy that hinges on frack sand demand in the Permian.