From Frac Sand to Aggregate
Zach Ellis, Commercial Credit Group, discusses diversification in industry. Ellis gives a reports from the road about a frac sand hauler having to diversify his business into other areas.
“I was in the Permian last week and visited a couple customers and one was looking to buy a large group of 50-75 brand new belly dumps,” Ellis said. “Again this was a customer who was strictly hauling sand for some of the bigger guys out there, the EOGs, the NexTiers, the Conchos, or whoever it may be. That was is primary contract and business, now he is talking about switching his paradigm from strictly hauling sand to highway contracts where he is hauling aggregates. He’s talking about a reefer contract picking up produce at the Mexican border in Laredo and hauling it to Dallas and Oklahoma. So the well shut ins impacted a lot of people.”
New Mexico Steps Back
As Covid-19 shock waves reverberate across U.S. oil towns, perhaps nowhere is their speed and severity more apparent than in America’s newest shale powerhouse.
Just months ago, New Mexico, the third-biggest producer of U.S. oil, approved the state’s largest budget ever, paid for by an oil boom that made up 40% of the state’s revenues in 2019. Now that plan has been slashed by more than $600 million, affecting everything from pay raises for state workers to a program designed to provide free community college to state residents.
Oil-producing states across the U.S. are facing a double whammy with both drilling and overall consumer spending cut back by the pandemic. New Mexico, meanwhile, stands as exhibit A of this boom-to-bust dynamic, with the state’s revenue forecasts plunging and more than 4,600 workers in mining, most of which is oil and gas-related, claiming unemployment insurance in the week ended June 13.
“We were just starting to stand on two legs,” said Reilly White, a finance professor at the University of New Mexico. “All of that stuff that passed, and that we were expecting this year, oil was a big part of that. The rug has just been swept out from under us.”
Frac Sand Innovation Changes Quickly
Craig Ray, Keystone Oil Fabrication, gives a history his company’s diversification in industry. From Sand Kings to Cranes to Silos, Ray discusses past pitfalls and successes in a volatile market.
Ray explains the difference between “silo” and “box” in the frac sand market and what his professional opinion is. The speed of change in the frac sand industry is also discussed, Ray explains how new technologies disrupted the marketplace within short time frames.
“Today we don’t build anymore Sand Kings, can’t give them away. I have six out here in my yard out my window, I am looking at them right now,” Ray said. “They are still a good piece of equipment, it still runs, but sand silos and sand boxes have become the rage.”
The Crude Life Podcast can be heard every Monday through Thursday with a Week in Review on Friday.
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