E&Ps’ appetite for proppant has kicked up a fierce sand storm as operators pack in, on average, 10 million pounds per horizontal well to boost recoveries.

In areas where proppant loading hasn’t been as pervasive as, say, the Permian, other companies are also latching onto proppant loading. In the Williston Basin, Oasis Petroleum Inc. (NYSE: OAS) reported its latest horizontal well tests used about 10 million pounds, which the company estimates will boost EURs by 25%. Its base completion methods had used 4 million pounds of proppant.

While service companies welcome the surge in demand, they’re also trying to keep ahead of the supply curve through acquisitions that add capacity to meet operator's requirements.

On March 23, Mammoth Energy Services Inc. (NASDAQ: TUSK) said it had bought nearly all assets from bankrupt Chieftain Sand and Proppant LLC with a bid of $35.25 million. The deal comes two days after Mammoth entered multiple agreements to expand its sand operations to keep up with strong proppant demand with three acquisitions valued at $133.8 million.

Other service companies have also delved into acquisitions to increase capacity. In fourth-quarter 2016, Schlumberger Ltd. (NYSE: SLB) purchased Wisconsin Proppants, including its 1.2 million ton per year (MMtpa) mine.

Chieftain’s assets include a wet and dry plant located on about 600 acres in New Auburn, Wis., and a sand mine with estimated reserves of 30 million tons of Northern White Jordan Substrate frack sand. The sand meets or exceeds all API standards including solubility, turbidity, roundness, sphericity and crush resistance.

Chieftain’s facilities are located on the Union Pacific Railroad (UP) with unit train capability on site, the assets will provide a cost-effective solution to transport sand to the Midcontinent, Eagle Ford, Permian and Denver-Julesburg (D-J) basins. Initial expected capacity of the dry plant will be 1.5 MMtpa once operations are restored, Mammoth said.

Mammoth’s sand mine acquisition also supports vertical integration with Scoop/Stack fleets.

Proppant intensity has accelerated through 2016. The average proppant per well increased 56% in 2016 compared to 2015. With U.S. rig counts up to 291—a 105% increase in the past 42 weeks—Jefferies estimates a six-month lag between rig and completions.

“Sand demand can go back to fourth-quarter 2014” by third-quarter 2017, said Brad Handler, an equity analyst at Jefferies.

Sand costs now represent 30% to 60% of frack costs per stage and are set to become nearly 15% of well costs by 2018, Handler said.

Adding to the pricing rise, companies such as U.S. Silica Holdings Inc. (NYSE: SLCA), Fairmount Santrol Holdings Inc. (NYSE: FMSA) and Hi-Crush Partners LP (NYSE: HCLP) nearly sold out at active mines, with other mines currently idled.

Mammoth management said March 21 that it felt an “urgency” to acquire several companies due to demand for high-grade sand. The company has pulled back its sand shipments from customers to use in its own operations.

“We’re 45 to 60 days sold out on the finer grades,” said Mark Layton, Mammoth’s CFO. “Demand for finer grades has increased dramatically in the past couple of months.”

Mammoth CEO Arty Straehla said March 23 that the Chieftain acquisition will grow total sand processing capacity to nearly 4 MMtpa when combined with pending acquisitions, including Taylor Frac.

“More importantly, these assets are located on the UP which fulfills part of our strategy to have sand mines with low-cost transportation options into the most active basins in the country,” he said. “Through the addition of Chieftain’s assets, we will have direct access to the Appalachian Basin, Midcontinent (Scoop/Stack), Eagle Ford, Permian, Bakken and D-J Basin in addition to the Western Canada markets.”

Once operational, the Chieftain mine is expected to directly support the expansion of our pressure pumping fleets destined for the Scoop/Stack with frack sand and provide further direct access to other markets in West and South Texas, Straehla said.

Tudor, Pickering, Holt & Co. said the headline purchase price of $35 million is “very reasonable … although we expect TUSK will likely need to deploy additional capital—about $10 million—for facility enhancement/upgrades.”

Darren Barbee can be reached at dbarbee@hartenergy.com.