U.S. Silica Holdings Inc. announced that its board of directors has approved the construction of a new, state-of-the-art frac sand mine and plant in West Texas to serve the rapidly-growing Permian Basin.
The new facility is expected to produce approximately 4 million tons annually and is part of the company’s previously announced plan to add approximately 8 to 10 million tons of new Brownfield and Greenfield capacity to meet surging frac sand demand.
The $225 million project will be funded from cash on hand and cash flow from operations and is expected to be supported by long-term supply contracts with leading oilfield companies, which include cash pre-payments.
Construction will begin immediately and initial production is scheduled for late in the fourth quarter of 2017. The 3,200-acre site has more than 30 years of reserves of fine grade 40/70 and 100 mesh sand with excellent physical properties.
“We believe we’ve selected one of the most advantaged sites in West Texas with good availability of water, easy access to Interstate 20 and a location that is equidistant to the hearts of both the Delaware and Midland Basins,” said Bryan Shinn, president and chief executive officer. “Our focus is serving our customers. Those customers told us clearly that they want more local sand supply in the Permian to support future well completions. Their willingness to negotiate long-term supply agreements for this new capacity and to potentially commit their own capital to the project demonstrates the confidence they have in U.S. Silica and the tightness of the frac sand market now and in the future.”
Shinn added that the company expects to enter into similar agreements for other capacity expansion projects currently underway.