However, should slowing global economic growth or recession result in a long - term reduction (three to five years) in energy prices, then U.S. Silica and its peers will face the prospect of their current lucrative contracts expiring and themselves sitting atop literal mountains
of frac sand, while demand may have fallen off a cliff.
However, their long - term contracts and the fact that greater use
of frac sand is one way for oil and gas companies to maximize productivity from each well means that demand declines might prove smaller than those of other oil services companies.
Not exact matches
Along with other rail companies, it's shipping more crude,
frac sand and grain and it's doing more intermodal business — taking goods to another mode
of transportation, such as ship or plane — than it has in the past.
As
frac sand demand continues to increase, explorers have taken on the task
of finding and developing new projects.
As long as investors in
frac sand suppliers are aware
of the risks
of that prolonged depressed energy prices, an overdue market correction, and industry overcapacity pose, then they can adjust their holdings accordingly as part
of a diversified portfolio that can minimize the risks
of devastating, permanent losses.
Even without any contract cancellations, 30 %
of US Silica's production is exposed to potentially falling
frac sand prices in the spot market, which could mean 2015's financial results decline compared to the record results
of 2014.
Witnessing the adoption
of the fracking process fuel demand for
frac sand is just one example.
In my coverage
of U.S. Silica Holdings (NYSE: SLCA), as well as the
frac sand industry in general, I've explained to readers the long - term growth potential these investments represent.
The article goes on to explain that this «
frac sand» is normally high - purity quartz that can withstand between 6,000 and 14,000 pounds
of pressure per square inch.
However, given the company's strong balance sheet, future growth plans, and the strong long - term potential future
of America's shale oil and gas production, I remain bullish on
frac sand producers in general, and US Silica specifically.