Emerge Energy Services LP plans to expand its sand operations with a new mining and processing facility located in Kingfisher County, Okla. Superior Silica Sands, a unit of Emerge Energy, inked a 25-year lease deal for the mining rights to 600 acres, located around 60 miles northwest of Oklahoma City. It also agreed to buy 40 acres of land adjoining its leased acreages for the construction of wet and dry processing plants.
Approximately 65 percent of the deposit consists of 100-mesh sand with the rest consisting of 40/70.
The expansion project is estimated to cost the partnership $15 million, which will be arranged from cash on-hand and revolver availability. Notably, it has $75 million in cash and cash equivalents as of March 31, 2018. Meanwhile, Emerge Energy does not expect the project to impact this year’s capital expenditure guidance, which is anticipated to lie in the range of $70 million to $90 million.
The plant in Oklahoma is expected to have a capacity of 1.5 million tpy. While site construction is anticipated to commence mid-June, production is anticipated to come online by the end of 2018. The leased acres near Oklahoma City are expected to contain reserves of 20 million tons. Superior Silica intends to employ its existing equipment for developing part of its planned dry plant. The site has a highway and railway nearby, which can ease the partnership’s product-shipping worries.
The partnership plans to address the strong demand for fine mesh products through the new plant. It is currently making deals with potential clients for the plant’s capacity and expects to complete the process by the end of this year.
“Once the plant begins production, we will have approximately 6.1 million tons per year of in-basin production capacity, or 49 percent of our new 12.4 million tons per year total capacity,” Emerge Energy CEO Rick Shearer said. “Demand for in-basin fine mesh product is strong, and we have validated the appetite for local Oklahoma sand with several key customers operating in the Mid-Continent basin. We are in the process of signing up customers under contract for the new plant’s capacity, and we expect to fully contract the plant’s capacity by year end.”