"Sand Is The New Gold"?

Tyler Durden's picture

Thanks to the growing use of fracking, or extracting oil and natural gas from shale formations, shares of U.S. companies which supply sand to energy producers are surging, and as Bloomberg reports, it does not look set to stop anytime soon. “Sand is the new gold,” says Ivaylo Ivanov, founder of Ivanhoff Capital, as Ole Slorer, a New York-based analyst at Morgan Stanley, expects demand for fracking sand in 2016 will be 96 percent higher than last year’s level. Nope, no bubble here...

 

 

As Bloomberg adds,

Emerge Energy, a Southlake, Texas-based partnership that made its initial public offering at $17 a share, changed hands for more than $140 yesterday. Hi-Crush, based in Houston, and U.S. Silica, based in Frederick, Maryland, more than tripled during the past 15 months.

 

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Demand for fracking sand in 2016 will be 96 percent higher than last year’s level, Ole Slorer, a New York-based analyst at Morgan Stanley, wrote two days ago in a report. The sand helps prop open fractures in shale, which eases the flow of oil and gas. He expects shortages for years, with supplies in 2016 trailing demand by 10 percent.

 

Slorer raised his 12-month price estimate for U.S. Silica by 36 percent, to $80, and wrote that the stock may reach $95. U.S. Silica traded yesterday at a record $71.29 and closed at $70.72, up 4 percent. Emerge Energy, whose main business is fuel processing and distribution, rose 2.6 percent. Hi-Crush added 3.2 percent.

Source: Bloomberg

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Nope, no bubble here at all...