Frack Sand Providers Struggling To Stay Afloat: This Is Why
Zacks Investment Research | Dec 10, 2019 09:28PM ET
According to the EIA, volume from U.S. oil fields has risen more than 50% since mid-2016 to 12.9 million barrels per day. This backdrop should bode well for the providers of technical products and services to drillers of oil wells, aka the oilfield equipment and service companies. Considered the backbone of the exploration and production companies, oilfield service providers should be a prospering industry with lots of growth opportunities.
On the contrary, they are facing an extremely challenging operating environment. Bulk of the industry is struggling despite record-breaking oil production. In particular, things are looking bleak for the suppliers of frack sand – something that is used extensively in the hydraulic fracturing process.
Even as oil and natural gas production in the United States have been reaching one high after the other, the stock prices of most frack sand providers have fallen substantially from where they were a year ago. Some names have gone bankrupt, while few have warned of more stress ahead.
Just last month, CARBO Ceramics Inc. (NYSE:CRR) , a seller of frac sand, raised doubt about its ability to continue as a going concern. Currently trading well below $1 a share, the Zacks Rank #4 (Sell) stock has lost 90% over the past 12 months. Meanwhile, Hi-Crush Inc. (NYSE:HCR) had to shed its MLP status, eliminate dividend and convert to a C-corp to free up cash. Amid all this, shares have slumped 79.1% so far this year. Earlier, this summer, Emerge Energy Services L.P. declared Chapter 11 bankruptcy protection.
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