Supply is barely keeping up with growing demand in Q2, see when new supply will overtake demand, frac sand growth drivers, frac sand mega trends, and much more.

1. 1Experience // Expertise // Excellence
Frac Sand Mega Trends
Taylor Robinson,
President, PLG Consulting
May 23, 2018
Forth Worth, TX
Dynamic Environment Will Continue

2. 2Experience // Expertise // Excellence
Experience // Partial List
CORE EXPERTISE SERVICES INCLUDEPLG TEAM
• Bulk commodity
logistics
• Surface
transportation and
logistics
• Energy and
chemical market
intelligence
• Investment
strategy and
corporate
development
• Logistics
infrastructure
design
• Supply chain design
and operational
improvement
• Market analysis &
strategy
• Investment thesis,
target identification,
due diligence, post-
transactional support
• Diagnostic
assessments and
supply chain
optimization
• Independent logistics
technology
assessment and
implementation
• Site selection
• Real-world,
industry veterans
• Over 50 logistics,
supply chain,
market, and
engineering
experts
• Delivering value to
over 200 clients
since 2001

3. 3Experience // Expertise // Excellence
Our Clients // Partial List

4. 4
Frac Sand Market Overview
• Legacy mines running at
capacity now
• 10 new Permian mines now
in production
• Total market demand likely
topping 100mtpa in 2018
• Sand pricing remains strong,
still inflationary
• $70 WTI will drive more
demand
Supply is barely keeping up
with growing demand in Q2

5. 5Experience // Expertise // Excellence
Frac Sand Market Overview
• Northern White and regional
capacity still remain available
• Permian mines will add 6-8 more
mines and ramp production 2018
• New Eagle Ford, Haynesville,
and SCOOP/STACK mines will
start production in 2018/2019
When will the new supply overtake demand?

6. Frac Sand Growth Drivers
• Rising oil prices driving rising rig count and
completion crews
• Longer laterals continue
• Higher sand intensity/foot – followers still
catching up to leaders
• Pad drilling with zipper fracs – “mass
production” completion growth
• Local sand – cheaper and more abundant
supply will spur higher intensity wells
Average Proppant/Ft.
Growth risks – Oil price drop, local sand
adoption slows, last mile challenges, sand dune
lizard, technology breakthroughs

7. 7
Download this PLG whitepaper at
www.plgconsulting.com/presentations
Pipelines at Capacity in the Permian…Impact
to Sand Growth Curve?
• Limited high-volume rail
loading terminals will limit
crude by rail growth
• Trucking growth challenged
by driver shortages and no
existing long haul crude
network
• Crude production growth
will be limited by bottleneck
Limited logistics alternatives

8. 8Experience // Expertise // Excellence
Frac Sand Is Now A Strategic
Differentiator for Shale O&G Producers
Growing
bottom-line
impact
Logistics
challenges
grow with
volume
Opportunity
to more
tightly control
supply chain
costs and
performance

9. 9Experience // Expertise // Excellence
Transition
to Local
Sand
E&P Direct
Sourcing
Last Mile
Focus
Frac Sand Mega Trends

10. 10
Operating Costs =
$10 - $20 / ton
Transload
Facility Fees =
$7 - $20 / ton
Freight + Railcar Leases +
Fuel Surcharges + Logistics =
$30 - $60 / ton
“Last Mile”
TruckingCosts =
$15 - $50 / ton
Logistics makes up about 3/4 of the total delivered cost
Mining Processing Rail
Load-out
Long Haul
Rail
Transloading
and Storage
Trucking to
Well
Northern White
Local Sand
X X X X X X
X X X
The Northern White supply chain – long/complex

11. 11Experience // Expertise // Excellence
Local Permian Sand // Cost Savings Impact in Two Waves
5k-7k
tons
x =
Eliminate
rail &
transload
Average
sand per
well
Savings
range per
well
Reduced market
pricing after
adequate
supply…$100k+
savings/well
$250k-
$420k
-$50~$60/
ton
1st wave (Logistics)
2nd wave
(Competition)

12. 12Experience // Expertise // Excellence
Local Sand Could Become Majority of
Permian Supply Later in 2018
With further
share and
volume growth
expected in
2019

13. 13
Local Permian Sand Development
in Progress
Source: Baker Hughes (11/24/17), EIA, Infill Thinking, PLG Analysis, May 2018
Permian Mines in Production
1. Hi-Crush
2. Aequor
3. Alpine Sand
4. Black Mountain Vest
5. High Roller
6. Vista
7. Preferred Sands Monohans
8. Black Mountain El Dorado
9. Fairmont Santrol
10. U.S. Silica Crane County
Announced – Not yet in Production
1. Unimin
2. Badger Mining
3. Atlas Energy Kermit
4. Schlumberger
5. U.S. Silica Lamesa
6. Preferred Sands Kermit
7. West Texas Sand
8. Atlas Sand #2

14. 14Experience // Expertise // Excellence
Local Sand Growth – Not Just the Permian
Permian
Eagle Ford
SCOOP /
STACK
Haynesville

15. Chemicals
Water
Mud
Other
Consumables
Diesel Fuel
Direct Sourcing | Debundling | Self Sourcing
Producers are exercising more control of their supply chain
beyond frac sand

16. 16Experience // Expertise // Excellence
Direct-Sourcing Frac Sand – Not for everyone
Challenges:
• NPT/demurrage can quickly
wipe out savings
• Need skilled logistics experts
on team…it is hard work!
• Need to gain leadership
support with investment and
long-term commitment
• Change management
Estimated to be 1/4 to 1/3 of current frac sand market
Opportunities:
• Real cost savings potential
• “Team” can include capable
3rd party logistics providers
• Up-front oilfield supply chain
strategy is critical to future
success
• Leveraging new technology
applications

17. 17
Key Issues Impacting Frac Sand Last-Mile
Local Sand Growth
E&P Direct Sourcing
New Entrants Offering
Last-Mile Solutions
OSHA Silica Dust Mandate
New Equipment Innovations
Trucking Industry Challenges
Sand Intensity Per Well

18. Wellsite Storage - Conventional, Box or Silo?
It depends on…..
• Buyer preference / commitment
• Safety
• Sand pumping velocity
• Well site layout
• OSHA silica dust compliance
from June
• Bottom-line and capital cost
impact
Note – Conventional systems
still over 50% share

19. Trucks - Pneumatic, Flatbed or Bottom-Dump?
It depends on…..
• Conventional or containerized
solution choice (previous page)
• Equipment, trucking company
and driver availability
• Bottom-line, total delivered cost
impact
• Bottom-dump still under
development especially feed
system into silos

20. 20
*
Limited data available*
Permian Last-Mile Total Delivered Cost Study
Note: Based on 100-mile haul with high volume
sand including fixed and variable costs
• With good wellsite
management, total last-mile
cost within ~$7/ton for all last-
mile solutions
• Poor wellsite management can
wipe out savings with
demurrage/NPT
• Wellsite sand
planning/execution is still a
major challenge for lower level
performers…and it costs them!
($12/ton+ differential)

21. 21Experience // Expertise // Excellence
Summary
SERVICES INCLUDE
• Tight supply now - tipping point later 2018
into 2019
• Local sand will be revolutionary in
southern shale plays
• Direct sourcing trend will take time to
grow – not an easy transition
• Last-mile - still “last frontier” in frac sand
Frac sand has been a dynamic industry and will
continue to be in the future!

22. 22Experience // Expertise // Excellence
I Look Forward To Your Questions!
Thank You!
For follow up questions and
information, please contact:
Taylor Robinson
President
PLG Consulting
+1 (508) 982-1319
trobinson@plgconsulting.com
www.plgconsulting.com
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