Bakken frack sand provider expands through $15M acquisition

By Luke Geiver | March 19, 2018

Texas-based Smart Sand Inc. is expanding in North Dakota’s Bakken shale oil play. After announcing the processing capacity expansion of its Oakdale, Wisconsin frack sand mine early this year, Smart Sand has now acquired the rights to a unit train transloading terminal in the heart of the Bakken.

Through a $15.5 million deal, Smart Sand has acquired the assets and formed a long-term lease agreement with Canadian Pacific for the terminal. By 2018, the terminal, which had been used for crude storage and shipment, will be converted to receive and distribute northern white frack sand.

“Our new unit train capable terminal in Van Hook, North Dakota, allows us to continue growing our presence in the Williston Basin,” said Charles Young, CEO of Smart Sand. According to Young, operators in the Bakken are now pursuing higher-intensity finer mesh frack designs. The Oakdale facility has ramped up from 3.3 million tons to 5.5 million tons.

“Working with Smart Sand to repurpose this existing rail facility into a high0-efficinecy sand terminal is well-aligned with our commercial strategy to maximize capacity and asset utilization,” said Coby Bullard, vice president of sales and marketing, merchandise, energy, chemicals and plastics for CP. The new terminal will capitalize on CP’s high-capacity corridor between the nation’s premier proppant-producing region and North Dakota’s Williston Basin.

According to Smart Sand data on frack sand demand, since 2016 the amount of proppant demand per new horizontal well has been on a sharp increase. In 2016, the horizontal wells market was roughly 50 million ton of proppant. Today, the market for horizontal wells has created a proppant market that demands more than 140 million tons of sand. On a per well basis, wells in 2016 required just more than 8 million pounds of sand per well. But in Q1 2018, horizontal wells are using, on average, nearly 16 million tons of proppant per well.

Less than one week after announcing its plans in Van Hook, North Dakota, Smart Sand formed a multi-year take-or-pay contract for sand with a large exploration and production company. "We continue to believe that, over the long term, many customers want a sand service company that can not only provide high quality sand, but also offer efficient and cost effective solutions for delivering that sand to the wellhead," Young said.