I recently returned from a trip to Calgary, Alberta where I traveled to accomplish two objectives. First, I attended the Canadian Frac Sand Conference on September 11 and 12 with the goal of returning with more useful information than I’ve taken away from the few conferences I’ve attended in the US. Second, I needed to add recent important developments in western Canada to my knowledge base. I’m glad to say my money wasn’t wasted – I accomplished both goals and, here is what I learned.
The Canadian Frac Sand Conference was well done. With a few exceptions, the speakers were well informed and the information presented was actually useful to industry professionals. This was not a conference designed for investors and analysts, but for the men and women wishing to improve their operations, lower their costs and solve problems common to all like-minded operators. These were my kind of people – not just because being from Montana I know how to speak Canadian, but because most of these folks had mud on their boots, metaphorically speaking. I picked up some really good information.
To accomplish my second objective – coming up to speed on the state of the western Canadian frac sand business – I spent quality time speaking with local operators and other key individuals who are in the middle of the game. As I knew I would hear, frac sand development near the basins in Alberta is following suit with the surge of development in the Permian.
At least, sort of.
The pressure pumpers are convinced they don’t need to ship Tier I sand from the north-central US when they can use Tier II local sand and see acceptable results. The difference in Canada is the local sand producers are not spending huge sums on land and mega-plants. They are proceeding in a bit more judicial manner. I think the bitter cold winters make people approach capital spending decisions with more prudence.
Don’t get me wrong. I’m not saying that building a multi-million ton-per-year plant next door to several other multi-million ton-per-year plants all producing dune sand in West Texas is a bad idea (assuming of course prices and Tier II proppant performance remain high). It just isn’t the way the Canadians are doing it.
What is surprising to me though is that, after investing a lot of money in Northern White sand just a couple of years ago only to see it lose a lot of its sparkle, investors are doing essentially the same thing in the Permian only on a larger scale, with lower quality sand and in a pricing environment that is almost guaranteed to decline. Which is OK if you’re the low-cost producer.
I may be biased but, the Canadian model seems to make more sense to me.