Frac Sand

Erick Beaudoin analyzes the frac sand industry’s market trends and pricing and provides advice for lenders based on the short- and long-term outlook.

Current Trends

  • After hitting a 10-year peak of $123.64 per barrel in early March 2022, the West Texas Intermediate price of oil was still over 40% higher year over year as of mid-July.[1]
  • Supply constraints from labor shortages have negatively affected West Texas in-basin mine operations and increased Northern White frac sand shipments to the region.
  • Demand from oil and gas companies in Western Canada and the Marcellus region has been strong in 2022.

[1] Federal Reserve Economic Data


Rising oil and gas prices are driving significantly higher frac sand prices in 2022 over 2021. Frac sand sales volumes have tightened with higher prices and as large-scale sand mining operations reach capacity. Despite oil prices exceeding the $100-per-barrel mark, analysts do not anticipate sudden surges in domestic frac sand demand given ongoing constraints, including supply chain bottlenecks and labor shortages in the U.S. proppant industry.

 Industry Improving but Remains Volatile

West Texas Intermediate (WTI) oil pricing experienced significant volatility during the 12 months ended June 2022. WTI crude prices rose from under $75 per barrel in June 2021 to almost $122 per barrel in early June 2022 with gasoline and natural gas prices subsequently reaching all-time highs.[1]  Prices remained 43% higher year over year as of mid-July 2022.[2]

The Russia-Ukraine war, strong consumer demand amid ongoing global COVID-19 pandemic recovery and weak U.S. supplier output are some of the factors driving increased prices. Major U.S. producers are hesitant to increase exploratory spending because of the Biden administration’s potential to increase regulations on fossil fuels and institutional investors like BlackRock continue to steer away from companies with high environmental and social governance-risk levels.[3]

Increased oil and gas prices drove frac sand prices higher by as much as 185% as of May 2022 compared with the same period in 2021. Sales volumes have tightened with higher prices and as large-scale sand mining operations reach capacity. Wisconsin’s sand mining industry experienced rapid growth from 2011 to 2015 but began facing increased competition in 2017 from new sand mines near the busiest oilfields in the Texas Permian Basin.

Thomas Jacob, vice president of shale research at Rystad Energy, reported in January 2022 that oil and gas producers used 74 million tons of sand in 2020, down from 99 million tons in 2019. Demand rebounded to 93 million tons in 2021.[4]

Demand Expectations Increase

Despite oil prices again exceeding the $100-per-barrel mark, Rystad Energy analysts do not expect any sudden surges in domestic frac sand demand given ongoing constraints, including supply chain bottlenecks and labor market shortages in the U.S. proppant industry.

In November 2021, the energy analytics firm projected national frac sand demand for 2022 would reach approximately 99 million tons, which is in line with 2019 volume. In late February 2022, the firm revised its forecast to approximately 109 million tons to reflect additional demand expected after the outbreak of the Russia-Ukraine war.[5] Demand from oil and gas companies in Western Canada and the Marcellus region has been strong year to date.

Transportation Is a Significant Cost

The U.S. is the world’s largest producer and consumer of frac sand, and a large percentage of domestic production comes from the Great Lakes region, particularly Wisconsin, Minnesota and Illinois.

To produce frac sand and ensure the quality is acceptable, mining companies wash and dry the frac sand. Raw sand is removed from the ground and then run through a wet plant that separates it into different grades, with standard mesh sizes including 20/40, 30/50, 40/70 and 100. Once sorted, the wet sand is run through a dry plant to reduce moisture prior to transport. Wet sand, therefore, is considered in process.

Frac sand is integral to hydraulic fracturing, or fracking, as it’s injected into the rock formation with the water to fracture the rock and prop open the fractures that are created during drilling. Fracking in the U.S. is heavily concentrated in North Dakota, Pennsylvania and Texas and requires the shipment of frac sand to shale basins 1,000 miles away or more.

Moving frac sand from mines to transload facilities near oil and gas plays is the most significant expense of production and accounts for upwards of 75% of the final cost for some producers, or about $70 to $90 per ton shipped. Mines that lack direct access to a railroad spur are forced to truck the sand to rail yards where it can be loaded onto railcars, so it is advantageous for frac sand mines to have a railroad spur on site to keep costs down.

Seasonality Affects Inventory Levels

Wet sand can only be processed in warm weather, typically April through November. Winter weather in Northern White sand-producing regions, like those near the Great Lakes, affects frac sand mine operations unless processors use temperature-controlled production buildings. To keep dry mills running through the winter, processors build inventories of wet sand throughout the summer and fall, typically peaking in November. As Texan processors expand their market share, seasonality may become less of a factor.

Lenders should consider seasonality when analyzing collateral and note dry sand and wet sand inventories do not fluctuate in the same manner. Most plants store dry sand in silos or covered rail cars and maintain capacity near or at the maximum for those containers.

Before lending against wet sand inventories, lenders should request appraisals consider a conversion that assumes a portion of the wet sand would be dried before being sold to customers. Wet sand may have little to no value in the current marketplace depending on proximity to other dry plant operations.


The valuation outlook for the frac sand industry is strong as prices continue to increase among constrained supply volumes and record oil and gas prices. However, logistical constraints could negatively affect shipments and limit the amount of sand that can be shipped to the major shale plays.

Additionally, take-or-pay contracts, in which one party is obligated to either take delivery of goods or pay a specified amount, have become less frequent. These contracts have historically supported the industry, especially during downturns, and previously accounted for 90% to 100% of sales but currently account for less than 30%.

For suppliers, a shift away from these take-or-pay contracts allows them to raise prices but could limit the amount of revenue generated from short-fall payments in the long term. Generally, valuations of frac sand inventories should increase as gross margins continue to improve.

Gordon Brothers typically assumes a four- to six-month liquidation period for frac sand inventory, though this timing depends on three factors: the volume customers are taking, how much wet sand is on hand and how long it will take to convert the wet sand to dry sand. Often, bottlenecks in the production process constrain companies’ ability to convert and ship product.


[2] Link:




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