Forecast for frac sand demand over the next two years

In a recent presentation, Emerge Energy Services (EMES) provided Wall Street analysts’ estimates for frac sand demand. Analysts expect frac sand demand in 2017 and 2018 to be higher than historical peak levels. An increase in rig count and expected increases in drilling efficiencies are expected to drive the demand. More wells drilled per rig and higher sand intensity per well increase drilling efficiency.

Can the Expected Rise in Frac Sand Demand Benefit HCLP, EMES?

Increased consumption per well

Increased frac sand consumption per well is a key contributor to the growing demand. DUC (drilled but uncompleted) well inventory is expected to contribute to the demand for frac sand since those wells are completed.

The above chart shows the demand for frac sand over the last six years and the forecast for the next two years. As the chart shows, the expected demand for 2017 is much higher than prior years. The demand is expected to grow at a 70.0% CAGR (compound annual growth rate) over two years.

“We expect Hi-Crush to operate near full utilization on its 13.4 million tons of annual capacity, which, coupled with our advantaged logistics capabilities and holistic service offering to customers, positions us as a clear industry leader,” said Robert E. Rasmus, CEO (chief executive officer) of Hi-Crush Partners (HCLP), in the company’s 2Q17 earnings release.

In the next part, we’ll see what institutional investors are doing with their Hi-Crush Partners and Emerge Energy Services holdings.

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