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Sand Means Gold as U.S. Fracking Demand Booms: Chart of the Day

Chart of the Day

Shares of U.S. companies which supply sand to energy producers are surging in response to the growing use of fracking, or extracting oil and natural gas from shale formations.

The CHART OF THE DAY tracks the performance of three suppliers -- Emerge Energy Services LP, Hi-Crush Partners LP and U.S. Silica Holdings Inc. -- since Emerge went public in May of last year. The Russell 2000 Index, which includes U.S. Silica, is also shown for comparison.

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.

“Sand is the new gold,” Ivaylo Ivanov, founder of Ivanhoff Capital, wrote yesterday in a blog posting with a similar chart. The San Diego-based investor favored Hi-Crush, whose shares were rebounding after pulling back from a record reached on July 22.

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.

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