Pioneer Natural Resources Co. and U.S. Silica Holdings Inc. announced that the companies have entered into a long-term sand supply agreement by which Pioneer will purchase an interest in U.S. Silica’s sand reserves at its Lamesa, Texas, mine in west Texas. This agreement secures a long-term supply of sand from the mine, with U.S. Silica processing and supplying sand to Pioneer for 15 years.
Timothy L. Dove, Pioneer president and CEO, stated, “We are pleased to announce our agreement with U.S. Silica that provides Pioneer with low-cost West Texas sand for the foreseeable future. Strategically located in close proximity to our Midland Basin acreage, delivered sand from the Lamesa mine will cost approximately half that of our current delivered sand, reducing well costs into 2019 and beyond. The long-term nature of this agreement will benefit both companies. U.S. Silica has been a trusted partner for many years, and this contract solidifies their position as one of our key suppliers of proppant.”
Bryan Shinn, U.S. Silica president and CEO, stated, “We are pleased and excited to have the opportunity to expand and deepen our relationship with Pioneer, one of our largest and most dependable customers. This unique, very long-term contract at our new Lamesa site delivers significant value for both companies in the Permian and is clearly aligned with our stated goal of generating sustainable and predictable free cash flow yield from our oil and gas sand mining assets.”
The sand reserves and sand supply will be from U.S. Silica’s previously announced mine that is located about 60 miles north of Midland, near Lamesa, Texas. The mine is expected to produce approximately 6 million tpy of predominately fine grade 100 mesh and 40/70 mesh sand, with initial production expected in the fourth quarter of 2018.
Pioneer expects to receive its initial sand volumes during the first quarter of 2019, with its supply increasing from approximately 1.4 million tons in 2019 to 2 million tpy in 2020 and future years.
U.S. Silica also recently held a ribbon cutting event in celebration of an expansion project at the firm’s Kosse, Texas, sand mine and processing plant attended by Texas State Representative Kyle Kacal.
U.S. Silica’s $8 million investment in the site includes new equipment. New, state-of-the-art sand dryer technology installed at the site about doubles the production output from 50 tph to 120 tph.