Frac Sand Weekly: An Up Week for the Walking Dead

The stock prices of all five publicly traded frac sand companies rose this week, but that is not likely cause for much celebration among shareholders. The biggest gainer was Hi-Crush Inc., whose stock rose 11.2 percent from the prior Friday. However, its price was still down more than 85 percent from its year ago level, translating into a loss of more than $500 million in value over the last year. The stock of CARBO was virtually unchanged over the week, as the company flirts with bankruptcy. The plunge in its stock price has cost its shareholders more than $120 million in value over the last year.

Oil prices dropped 4.8 percent over the week, with all the drop occurring on Friday. It appears that Saudi Arabia has no immediate plans to cut production, which means that there will be plenty of oil on world markets. The oil and gas produced from fracking competes with oil from the rest of the world. When the world price of oil drops it means that producers of fracked oil and gas will get less money per barrel of oil or cubic foot of gas.

With many fracking operations marginally profitable with world oil prices in its current range near $55 a barrel, there is not likely to be a major expansion of fracking operations if oil prices don’t rise substantially. That outlook means there is little hope for relieving the current glut of frac sand on the demand side of the market.