The frac sand industry is showing signs of recovery, with increased drilling activity and demand for proppant driven by technological advancements and market dynamics. Companies are shifting towards in-basin sales and utilizing finer, lower-quality sands to meet evolving customer demands while reducing costs. However, despite a projected rebound in proppant demand, forecasters remain cautious about the sustainability of this growth in relation to fluctuating oil prices.

1. 1www.conexpoconagg.com
Shifting Sands
Joel Schneyer – Managing Director
Frac Sand: How Technology and Market Dynamics Will Drive Future
Success # F41

2. 2www.conexpoconagg.com
It Feels Like the Industry Is Off The Bottom
Rig counts, company budgets, and frac sand forecasts have turned a corner…
and there are a number of positive developments in the marketplace

3. 3www.conexpoconagg.com
Drilling Activity Is On The Upswing
0
500
1,000
1,500
2,000
2,500
2/4/2011
4/4/2011
6/4/2011
8/4/2011
10/4/2011
12/4/2011
2/4/2012
4/4/2012
6/4/2012
8/4/2012
10/4/2012
12/4/2012
2/4/2013
4/4/2013
6/4/2013
8/4/2013
10/4/2013
12/4/2013
2/4/2014
4/4/2014
6/4/2014
8/4/2014
10/4/2014
12/4/2014
2/4/2015
4/4/2015
6/4/2015
8/4/2015
10/4/2015
12/4/2015
2/4/2016
4/4/2016
6/4/2016
8/4/2016
10/4/2016
12/4/2016
TotalNumberofRigs(Oil+Gas)
Weekly Rig Count by Basin
Others Fayetteville Granite Wash Haynesville
Mississippian Barnett Utica Cana Woodford
Arkoma Woodford Ardmore Woodford DJ-Niobrara Eagle Ford
Marcellus Permian Williston
Source: Baker Hughes, North America Rotary Rig Count Current Week Data, as of January 13, 2017

4. 4www.conexpoconagg.com
… Driven by Horizontal Wells
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2/4/2011
4/4/2011
6/4/2011
8/4/2011
10/4/2011
12/4/2011
2/4/2012
4/4/2012
6/4/2012
8/4/2012
10/4/2012
12/4/2012
2/4/2013
4/4/2013
6/4/2013
8/4/2013
10/4/2013
12/4/2013
2/4/2014
4/4/2014
6/4/2014
8/4/2014
10/4/2014
12/4/2014
2/4/2015
4/4/2015
6/4/2015
8/4/2015
10/4/2015
12/4/2015
2/4/2016
4/4/2016
6/4/2016
8/4/2016
10/4/2016
12/4/2016
Proportion of Active Rigs by Trajectory
Horizontal Directional Vertical
> 90% Horizontal &
Directional Wells
as of January 2017 ….
Source: Baker Hughes, North America Rotary Rig Count Current Week Data, as of January 13, 2017

5. 5www.conexpoconagg.com
Completion Trends Create New Proppant Demand Drivers
Longer
Laterals
MoreStages
Overpacking
0
1,000
2,000
3,000
4,000
2012 2013 2014 2015
Average Sand per Well
(Permian/ Bakken/ Eagle
Ford)
CloserWell
Spacing
>2xincrease
2016to2018
0
5,000
10,000
15,000
20,000
25,000
2014 2016 2017 2018
# Horizontal Wells
0
500
1,000
1,500
2014201620172018
# Active Horizontal
Rigs
• Increase in frac
sizes per stage
• Increased interest
in utilizing finer
mesh sand (40/70
& 100 mesh) & CRC
Source: Goldman Sachs Global Investment Research (July 2016), Bloomberg Intelligence
0
500
1,000
1,500
2,000
Permian Williston Eagle
Ford
Pounds Sand Per Lateral
Foot
2012 2016

6. 6www.conexpoconagg.comSource: Energent Group
Industry Average Proppant per Job
EOG Average Proppant per Job
Mean = 3,210 tons
N = 8451
Mean = 6,450 tons
N = 366
TonsTons
Trend Shows Increasing Proppant Volume Demand Per Well

7. 7www.conexpoconagg.com
WE A
Operators are using more sand, and are finding finer and lower-quality sand fits the needs as
well as their tight budgets
But Things Are Different Now…

8. 8www.conexpoconagg.comSource: C.L. Dake, Univ of Missouri School of Mines & Metallurgy Bul. Tech. Ser., Vol. 6, No. 1 August 1921
Sand Supply - No Shortage of Frac Sand Deposits
40/70 & 100 mesh: Southern White
20/40, 40/70 & 100 mesh: Northern White

9. 9www.conexpoconagg.com
14% 40%
share market
Regional sand
Regional Sand
is No Longer
Shunned
$210 million
Major Northern or
White frac sand
producing region
Major Texas Brown,
Brady Brown, Hickory,
and other sand types
Sources: Bloomberg Markets “The Next Shale Boom Will Be Built on Sand”
(August 3, 2016), PacWest (2014)
a
• Trend toward “In-Basin” sales versus FOB Mine
• Use of finer grain sizes
• Acceptance of lower quality “Brown” or “Regional Sand”
U.S. Silica purchased brown-sand miner NBR Sand in July 2016 with
plans to double output near Texas oilfields to 2 million tons/year

10. 10www.conexpoconagg.com
Texas Regional “Brown” or “Hickory” Sand Northern White Sand
Regional Sand Seems to Be Good Enough

11. 11www.conexpoconagg.comSource: Energent Frac Report data & company SEC disclosures
Large Overhang Of Capacity Has Been Sitting On The Sidelines
• ~ 108 million tons of industry capacity equates to 27 million tons per quarter of sand available for sale
• 4 public companies provide ~ 60% of the industry’s current sand demands
0
2
4
6
8
10
12
14
16
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
2013Q2
2013Q1
ProppantSold(MMtons)
Other Companies Hi-Crush Emerge US Silica
Fairmount Santrol Smart Sand Eagle Materials Muskie Proppants

12. 12www.conexpoconagg.comSource: Smart Sand Inc. S/1 dated September 16, 2016 filed on Edgar
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
-
5,000
10,000
15,000
20,000
25,000
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
New Horizontal Wells 20,236 23,674 16,029 8,331 11,115 13,236 16,286 16,860
Proppant Demand 55.0 72.5 52.5 30.0 45.0 59.0 77.5 85.0
Tons Proppant / Well 2,718 3,062 3,275 3,601 4,049 4,458 4,759 5,042
NewUSHorizontalWells
ProppantDemanded(milliontons)
US Proppant Demand Is Set For A Rebound

13. 13www.conexpoconagg.com
Someone must receive the smaller slice of the economic pie
There Will Be Winners and Losers

14. 14www.conexpoconagg.com
$15 - $30 / ton
$30 - $60 / ton
$7 - $20 / ton $15 - $50 / ton
In-basin sales of frac sand is a game changer
The frac sand producer must now work into his economics all the costs of
production and delivery of products through to the “Basin Transload”
Source: Headwaters MB research
Supply Chain Profit Squeeze: Delivering Sand to Well Sites

15. 15www.conexpoconagg.com
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
mining/processing outbound transload barge
rail truck rail line switch
short line inbound transload 3rd party transload fee
CostPerTon
Source: Headwaters MB research
Regional Sand
$45-49/t
Southern
White Sand
$52-58/t
Northern
White Sand
$60-65/t
unit train
& volume
discounts
Northern
White Sand
$65-68/t
unit train
Northern
White Sand
$71-75/t
unit train
& volume
discounts
& rail line
switch
Northern
White Sand
$82-86/t
manifest
Northern
White Sand
$93-99/t
manifest
& rail line switch
Northern White Sand
Southern
White Sand
Regional Sand
Eagle Ford
In-Basin
Delivered
Cost
Estimates

16. 16www.conexpoconagg.comSource: Headwaters MB research (2016); U.S. EIA based on data from various published studies as of April 2015
Red : > $82/ton manifest
Orange : ~ $60 - $75/ton unit
trains
Blue : ~ $52-58/ton rail & barge
Green : ~ $45-49/ton truck
Lower 48 Shale Plays and Major Sand Basins
Distance Matters: Estimated Delivered Cost To Eagle Ford

17. 17www.conexpoconagg.com
Minneapolis Hub for
Delta Airlines
• Subject to
congestion and
delays at hubs
• High capital
investment to cope
with surge hours
P2P Route Map for
Spirit Airlines
• Minimizes
connections and
travel time
• Reduced
interdependency
of flights
Source: Company websites
Airlines Analogy: Hub-and-Spoke Versus Point-to-Point

18. 18www.conexpoconagg.com
WINNERS
“Point-to-Point”
Regional Sand Suppliers
(lowest cost substitute)
Southern White Sand
Mines located in
Missouri and Arkansas
(proximity to highest
demand growth)
Regional Truckers
(replacement of long-
distance railcar supply)
Mixed
Big “Hub & Spoke”
Northern White Mines
Short-line Railroads
LOSERS
×Marginal Northern
White Mines
×(need to truck to
outbound transload)
Class I Railroads
(reduced carload
volumes)



×
×
The Frac Sand Industry Scorecard

19. 19www.conexpoconagg.com
Follow the supply chain
What is the New Paradigm?

20. 20www.conexpoconagg.com
Sources:
Company
websites
Sand
Producers
Building Out
Destination
Rail
Terminals

21. 21www.conexpoconagg.com
• Expanding their product lines
into resin coated sands to get
out of commodity space
• Increasing their product lines to
include regional sands
Diversifying
Product Lines
• Building out or partnering with
transload operators
• Looking at “shipping box” and
providing the last mile solution
Squeezing
Value
from
Logistics
What Are the Sand Companies Doing To Respond?

22. 22www.conexpoconagg.com
The market expects sand companies to make money too
Expect Sand Prices to Rise

23. 23www.conexpoconagg.comSources: SEC Edgar, Yahoo Finance, Headwaters MB research
86.7
58.5
23.6
9.1
5.86.18.08.5
12.6
21.2
16.9
14.3
0
5
10
15
20
25
30
35
40
45
50
55
60
65
70
75
80
85
90
95
100
2016Q32016Q22016Q12015Q42015Q32015Q22015Q12014Q42014Q32014Q22014Q12013Q4
TEV / LTM (Adjusted) EBITDA
Hi-Crush Emerge US Silica Fairmount Santrol Average
The Market
Is Expecting
Higher
Volumes and
Better
Margins

24. 24www.conexpoconagg.comSources: SEC Edgar, Yahoo Finance, Headwaters MB research
$PerTon
-$50
-$40
-$30
-$20
-$10
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
$120
2016Q3
2016Q2
2016Q1
2015Q4
2015Q3
2015Q2
2015Q1
2014Q4
2014Q3
2014Q2
2014Q1
2013Q4
2013Q3
2013Q2
2013Q1
Adjusted EBITDA US $ / Ton Sold
Hi-Crush P Emerge P US Silica P
Fairmount Santrol P US Silica IS Fairmount Santrol IS
EBITDA
Margins
Already Up
$7 - 10/Ton
(Q1 2017
over Q3
2016)

25. 25www.conexpoconagg.com
Customers are now more focused on making money
This Is The End To Growth At Any Cost

26. 26www.conexpoconagg.com
Notes: * Price required to achieve 10% Direct ATROR
Source: EOG Presentation at Bank of America Merrill Lynch Global Energy Conference November 2016
Breakeven* Oil Price in Key Worldwide Basins

27. 27www.conexpoconagg.com
• Proppant demand fell 17% between 2014 (52 mm tons) and 2015 (43 mm tons)
and current run rate for 2016 was ~ 30 million tons, about 25% less than 2015
• Permian Basin forecast to be most active…because it has the best economics
Source: Energent Frac Report, data as of January 2017
-
1
2
3
4
5
6
Proppant(MMtons)
Other Williston Granite Wash Mississippian Fayetteville Woodford
DJ-Niobrara Barnett Eagle Ford Utica Marcellus Permian
Strong
Regional
Variation in
Proppant
Demand
Exists…

28. 28www.conexpoconagg.com
Sources: Energent Frac Report, data as of January 2017; Energy Information Administration, Cushing, OK WTI Spot Price FOB
(USD per Barrel) as of Dec 2016
$0
$20
$40
$60
$80
$100
$120
0
1
2
3
4
5
6
Jan-13
Mar-13
May-13
Jul-13
Sep-13
Nov-13
Jan-14
Mar-14
May-14
Jul-14
Sep-14
Nov-14
Jan-15
Mar-15
May-15
Jul-15
Sep-15
Nov-15
Jan-16
Mar-16
May-16
Jul-16
Sep-16
Nov-16
OilPrice(WTI,USD/barrel)
Proppant(MMtons)
Total US - Proppant Spot Price Oil
• Proppant demand covaries with oil price with approximately a 6 month lag
… But,
Overall
Proppant
Demand
Whips
Behind Oil
Price
Changes

29. 29www.conexpoconagg.com
Sources:
• Smart Sand Inc. S/1 dated September 16, 2016 filed on Edgar
• Energy Information Administration, Short-Term Energy Outlook, as of January 10, 2017, and Annual Energy Outlook, Table: Petroleum and Other Liquids Prices
• Rich Shearer (President & CEO) Superior Silica Sand presentation at the Industrial Minerals 4th Frac Frac Sand Conference in Minneapolis Sept 13, 2016
• Wells Fargo, Oil Service Statistics and Valuation Handbook, January 6, 2017
• RBC Capital, Frac Sand Supply Demand Update, December 5, 2016
• Projected proppant rebound to ~ 55 MM tons in 2017; ~ 73 MM tons in 2018
• Oil price trajectory suggests proppant markets may be optimistic
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
-
10
20
30
40
50
60
70
80
90
2013 2014 2015 2016E 2017E 2018E 2019E 2020E
OilPrice(WTI,USD/barrel)
Proppant(MMtons)
Energent - actuals Superior Silica - Consensus Smart Sand S/1
"Tudor Pickering & Holt" Jeffries Goldman Sachs
Wells Fargo RBC Oil Price - EIA
While A Future
Proppant
Demand Boom
is Widely
Acknowledged

30. 30www.conexpoconagg.com
• US proppant demand is set for a rebound… but the proppant forecasts seem too
optimistic and do not appear to reflect the oil price, supply-demand feedback loop
Sources:
• Energy Information Administration, Short-Term Energy Outlook, as of January 10, 2017, and Annual Energy Outlook, Table: Petroleum and Other Liquids Prices
• Headwaters MB research, correlation of historical proppant, oil price, and production
• Energent, Frac Report data as of January 2017
-
2
4
6
8
10
12
14
16
-
10
20
30
40
50
60
70
80
90
2013
2014
2015
2016E
2017E
2018E
2019E
2020E
MMBOE/dayProduction
Proppant(MMtons)
Proppant - actual reported
Proppant - Mean Analyst
Forecast
Oil&Gas Production - Most
Likely - EIA
Oil&Gas Production, with Low
Oil Price - EIA
Oil&Gas Production - actual
reported
Oil&Gas Production - Inferred
from Proppant Correlation
Continental Onshore USA
Tight Oil & Gas ProductionCLOSING
THOUGHTS:
Check the
Numbers

31. 31www.conexpoconagg.com
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