Supplying sand Boxes isn’t that hard of a job.

2019 Frac Sand Demand Preview:

It’s a commodity product that sells for low costs per ton and doesn’t take a whole lot of processing. The challenge for frack sand suppliers is getting that sand to fracking locations on time. Transportation and logistics are some of the most expensive parts of the whole process.

Rather than sit on the sidelines and let some third party take care of logistics, U.S. Silica took the initiative by acquiring a logistics business known as SandBox, which provides last-mile delivery service of sand with specialized containers that drastically reduce loading and unloading times.

U.S. Silica’s Sandbox, which delivers frac sand directly to the wellhead during fracking stages, in box-like containers, is arguably the best last mile solution in the frac sand industry due to its ease of transport and handling abilities. Two years ago U.S. Silica  (SLCA) said that it has wrapped up the purchase of logistics solutions provider, Sandbox Enterprises LLC.

The buyout, at the time, would provide U.S. Silica with unmatched logistics capabilities, allowed the company to offer its customers significantly improved transportation and operating efficiencies and meaningful cost savings relative to existing proppant delivery systems. It is in sync with the company’s strategy of managing the entire supply chain of frac sand from the mine to the well site.

• – Third quarter revenue of $423.2 million
• – GAAP and adjusted EPS for the quarter of $0.08 and $0.44, respectively
• – Oil and Gas volumes up 10 percent sequentially
• – Strong operating cash flow in the quarter of $94.7 million
• – Record financial performance in the quarter for the Industrial business

U.S. Silica CEO Bryan Shinn announced the company was improving its offer to customers with on-time delivery guarantees:

[Our customers] also generally prefer that the sand provider manages both sand and logistics all the way to the blender, which gives rise to the fourth dynamic that’s currently influenced our industry, and that’s the importance of having a leading last mile sand logistics solution to serve operators who want to self-source their own sand. We believe that we have the best solution in the market today with SandBox, and we’re seeing more customers recognize this as well. We have a very strong pipeline of new work with recent contract awards from several operators from multiple crews planning to start in Q4 and Q1.

We’re also happy to announce an expansion of our commercial offering for delivered sand to include performance-based pricing. Our track record gives us confidence that we can deliver on spec and on time, and we’re the only sand company today offering to pay customers when they wait on our proppant in exchange for bonuses when they do not.

The Demand is expected to continue to grow as more companies are doing longer frac stages.  Pressure pumper’s conference calls are telling for the industry as a whole.

For example, ProPetro (PUMP) verified that sand per lateral foot is increasing, Keane Group (FRAC) and Mammoth Energy (TUSK) reported that no slowdowns in completions are occurring, and Patterson-UTI (PTEN) confirmed that lateral lengths are growing, (along with countless other E&Ps who are reporting the same thing), which is why demand for their rigs are soaring.