Great Article On Ceramics Over At Seeking Alpha -- April 16, 2015

Nice article in Seeking Alpha on ceramics:

FracFocus data reveals some troubling trends for the ceramics industry and for Carbo. Last year, significant investor attention was placed on Carbo when major customer Rosetta Resources switched to all-sand completions in the Eagle Ford. A review of the FracFocus database indicates further customer losses for the ceramics industry and Carbo.

Two of last year's major E&P mergers are having a significant negative impact on Carbo: Whiting's acquisition of Kodiak Oil and Gas, and Encana's acquisition of Athlon Energy. Both deals closed at the end of the fourth quarter, and their impact only began to be felt in the first quarter. These acquisitions are likely to have an impact similar in scale to the loss of Rosetta in 2014.

Based on FracFocus data, it is likely that Kodiak was one of Carbo's top ten customers. Kodiak used ceramics as its primary proppant. However, Whiting is primarily using sand. Whiting still uses ceramics for a portion of its wells in McKenzie County, but ceramics are typically no more than 30% of the proppant volume for those wells. With the exception of Kodiak's Polar acreage, Whiting is now primarily using all-sand completions on the former Kodiak acreage.

More:

Proppants are a key ingredient in the fracturing of oil and gas reserves. Proppants are the largest non-water ingredient in a typical frac fluid mix. Proppants keep the fractured oil and gas well "propped" open, allowing for oil and gas recovery. See Wikipedia for basic information. For a more technical understanding of the fracturing process, this Baker Hughes presentation is excellent.

There are three main categories of proppant: raw sand, resin-coated sand and ceramics. Raw sand is the cheapest and comes in several sizes and qualities. Ceramics are made from a variety of metal ores, and claim to offer superior strength and performance, but charge a premium price. Resin-coated sand is a hybrid, attempting to offer some of the benefits of ceramics, but at a lower price point. Major frac sand companies include Fairmount Santrol, US Silica, Hi-Crush Partners, and Emerge Energy Services.

And more:

According to PacWest Consulting Partners, overall proppant consumption on a per pound basis has been growing at a 30% CAGR heading into the current industry downturn. Increases in the total number of horizontal wells fractured, frac stages per well and pounds of proppant per stage have all contributed to this high rate of growth. However, raw sand has seen almost all of the growth, with resin-coated sand only having modest growth and ceramics volumes flat. Resin-coated sand and ceramics have both lost share in the number of wells using them and in the percent of proppant per well.

While ceramics cost more than ten times raw sand at the source, transportation costs disproportionately impact the price of raw sand. For example, Northern White Frac Sand costs between $60-$70/ton at the mine, but typically costs $120-$160/ton at the basin after rail transportation costs. In 2014, Carbo realized a price of $600/ton for its ceramic products. Thus, in basin pricing is typically 4-6x higher for ceramics.

Given the historical pricing disparity between sand and ceramics, most E&P customers have chosen to frac with sand. According to a Freedonia Group study, raw sand accounted for 81% proppant volumes by weight in 2013, and that likely increased to nearly 90% of proppant volumes in 2014, as frac sand continued to take share.

Much more at the link. This is one of the better articles I've seen on this subject; it's a keeper; it will be archived at the source.

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