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Excerpt From TPH Energy Morning Note On Friday February 16

Q1'18 Sand Delivery Issues (Part I)

Sand rail constraint rumblings real but magnitude may be overblown

Sector:Oil Service | Ticker: OSX | Recommendation: NA | Target: NA | Close: $136.55

Yesterday HAL noted sand delivery constraints associated with the Canadian National Railway (“CN”) are impacting activity (i.e. cold weather impacting ability for unit trains to brake effectively). We reached out to a few industry participants and Q1 weather issues, and avalanche/derailment, strong grain demand (competition for rail access), and cold weather do seem to be having some effect on shipments. We also note the Canadian Pacific may have seen some intermittent issues.



Q1'18 Sand Delivery Issues (Part II)

So who (of the sand producers) has exposure here?

Sector:Oil Service | Ticker: OSX | Recommendation: NA | Target: NA | Close: $136.55

The sand market appears tight Q1'18, but some (possibly much) of the constriction stems from supply/demand preference mismatch (i.e. mesh-size). 100-mesh allegedly what's seeing particular tightness, ironic given that's primarily what in-basin, Permian is primarily comprise of. A private sand producer we spoke to with an attractive logistics footprint noted some recent shipment issues but the delays sounded manageable. FMSA and SLCA appear to be the sand producers with the least potential exposure to these issues while SND, HCLP and EMES all have material CN and CP rail access. Sidebar but also of note, we've now picked up multiple data-points indicating potential turbidity issues with local sand...stay tuned for more on that front.

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