So what exactly are proppants? They're different sized particles mixed with fracturing fluid to hold fractures open after a hydraulic fracturing treatment. They can be made of naturally occurring sand grains or man-made or specially engineered proppants, such as resin-coated sand or high-strength ceramic materials like sintered bauxite. Proppant materials are carefully sorted for size and sphericity to provide an efficient conduit for the production of fluid from a trapped petroleum reservoir to the well bore for extraction.

The use of hydraulic fracturing ultimately increases the rate at which fluids can be recovered from subterranean natural reservoirs that are typically porous sandstones, limestones or dolomite rocks, but also include "unconventional reservoirs" such as shale rock or coal beds. Hydraulic fracturing enables the extraction of natural gas and oil from rock formations deep below the earth's surface (5,000–20,000 ft) which is greatly below typical groundwater reservoir levels. At such depth, there may be insufficient permeability or reservoir pressure to allow natural gas and oil to flow easily from the rock to the well bore to make the process economically feasible. As a result, creating conductive fractures in the rock is instrumental in extraction from naturally impermeable shale reservoirs. Fractures are a conductive path connecting a larger volume of reservoir to the well. In some cases "Super Fracking," is a process that creates larger cracks deeper in the rock formation to release even more oil and gas with greater efficiency.
According to the International Energy Agency, the remaining technically recoverable resources of shale gas are estimated to amount to 208 trillion cubic metros (208,000 km3), tight gas to 76 trillion cubic metres (76,000 km3), and coalbed methane to 47 trillion cubic metres (47,000 km3). As a rule, formations of these resources have lower permeability than conventional gas formations. Therefore depending on the geological characteristics of the formation, specific technologies (such as hydraulic fracturing) are required. Although there are also other methods to extract these resources, such as conventional drilling or horizontal drilling, hydraulic fracturing is one of the key methods making their extraction economically viable. The multi-stage fracturing technique has facilitated the development of shale gas and light tight oil production in the United States and is believed to do so in the other countries with unconventional hydrocarbon resources.
The yield for typical shale bores generally falls off after the first year or two, but the peak producing life of a well can be extended to several decades.

HI-Crush Partner's reserves consist primarily of Northern White sand predominately found in Wisconsin and limited portions of the upper Midwest region of the US. This particular sand is highly valued as a preferred prop pant due to its favorable physical characteristics. From this source Hi-Crush Partners produces a range of frac sand sizes used in all the major U.S. shale basins. It's also one of the few Northern White sand producers with onsite rail capacity. Substantially all of their frac sand production is sold to leading investment grade-rated pressure pumping service providers under long-term, take-or-pay contracts that require their customers to pay a specified price for a specified volume of sand each month.
In June 2013 HCLP acquired D&I Silica, LLC, the largest supplier of frac sand servicing the Marcellus and Utica shale regions. As part of that acquisition the company not only supplies frac sand, they also now provide a variety of trainload services for their customers including terminal storage and railcar storage and handling.
3 May 2015 Price $34.88 1yr Target $45.25 Analysts 12 1yr Cap Gain 29.73% Dividend $2.70 Yield 7.74% 1yr Est Tot Return 37.47% 1yr DivGR 16.75% 2yr DivGR N/A P/E 10.38 PEG 1.37 | Market Cap $1.29 Bil Beta UNK EPS (ttm) $3.36 Payout Ratio 80.35% EPS next yr $3.42 Forward P/E 10.20 Debt/Equity 1.14 ROA 32.60% ROE 78.20% ROI 35.60% Sales $386.50 Mil Income $123.10 Mil Profit Margin 31.85% |

The company is a leading producer of industrial minerals, including sand proppants, whole grain silica, ground silica, fine ground silica, calcined kaolin clay and aplite clay. In addition to offering over 250 products in these categories, U.S. Silica also operates as a research and development specialist for customized products and solutions utilizing the same raw materials. The wide variety of industries and applications served by U.S. Silica includes oil and gas, glass, chemicals, foundry, building products, fillers and extenders, recreation, industrial filtration and treatment, and testing and analysis.
3 May 2015 Price $37.67 1yr Target $41.77 Analysts 13 1yr Cap Gain 10.88% Dividend $0.50 Yield 1.32% 1yr Est Tot Return 12.20% 1yr DivGR 33.33% 2yr DivGR N/A P/E 16.89 PEG 0.56 | Market Cap $2.01 Bil Beta UNK EPS (ttm) $2.23 Payout Ratio 22.42% EPS next yr $1.86 Forward P/E 20.30 Debt/Equity 1.25 ROA 13.60% ROE 37.90% ROI 15.30% Sales $876.70 Mil Income $121.30 Mil Profit Margin 13.83% |

Sand. Emerge Energy Services’ sand subsidiary produces silica sand that is a key input for the hydraulic fracturing of oil and gas wells. While the Company is able to produce sand suited for the stimulation of both oil and gas wells, the Company has developed a strong reputation in the industry for producing sand that meets the strict requirements for use in oil wells. Their sand facilities are located in New Auburn, WI, Barron County, WI and Kosse, TX, with headquarters in Fort Worth, TX.
Fuel Processing and Distribution. Emerge Energy Services’ Fuel Processing and Distribution subsidiary is focused on acquiring, re-refining and selling transmix (transportation mixture). Transmix is received by the business from a number of common carrier pipelines that include the Explorer, Plantation, and Colonial pipelines, as well as via truck and private pipeline from independent refinery and terminal operators. Additionally this subsidiary includes wholesale, terminal and biodiesel operations.
3 May 2015 Price $39.85 1yr Target $59.13 Analysts 8 1yr Cap Gain 48.38% Dividend $5.64 Yield 14.15% 1yr Est Tot Return 62.53% 1yr DivGR 273.65% 2yr DivGR N/A P/E 10.80 PEG 0.26 | Market Cap $945.24 Mil Beta N/A EPS (ttm) $3.69 Payout Ratio 152.84% EPS next yr $3.52 Forward P/E 11.31 Debt/Equity 1.51 ROA 22.50% ROE 55.20% ROI 25.00% Sales $1.11 Bil Income $89.10 Mil Profit Margin 8.01% |
Although hydraulic fracking has been around for about 65 years, it wasn't applied effectively to the oil and gas industry until around 1947, but at the time the technology of fracking was just too expensive to be practical. The current processes became economically viable in 2004 as the price of oil rose above the $60 per barrel threshold. Once that level was breached, an entire industry was created almost over night in North Dakota and South Texas. And that continued until the Saudi's realized they were losing market share and flooded the market with cheap OPEC oil. The result was both the fall in the price of oil and the end to hydraulic fracturing. And that greatly affected the sale of proppants. This can easily be seen in the price charts of the three companies above.
Since proppants are tied to hydraulic fracking and that is tied to the price of oil, then proppants are tied to the price of oil. I believe the price of oil bottomed a month ago near $45 per share and is now on the way up. Granted it won't be a straight line upward, but as oil pushes above $60 per barrel hydraulic drilling suddenly makes since. And the demand for proppants explodes.
While this is not the simple buy and hope strategy that most investors find themselves in after the buy is made, and it's not a buy based on an historical growing dividend since the track record on these are just not there. This is an investment that needs a little more monitoring. But it's also one that could be explosive as the price of oil moves higher.
It must be remembered that Hi-Crush is a pure play proppant company and is price will be the most dependent on the price of oil. US Silica Holdings and Emerge Energy Services have additional subsidiaries that will insulate its stock price on both the upside as well as the downside possibly making them a better investment as the price of oil falls and a worse investment as the price of oil rises.
I plan to monitor the price of these three companies and use cash secured puts and covered calls, as well as my usual momentum indicators, to slowly swing into and out of these shares. I think trading these stocks could provide both good money and good entertainment.