“Oil prices dropping from well over $100 per barrel to $45 per barrel in 2014 have had a distinct impact on the frac sand industry,” says Rick Shearer, chief executive officer of Superior Silica Sands, which produces the sand used by oil and gas companies in hydraulic fracturing. “A lot of companies aren’t going to make it.”
Fortunately, Shearer doesn’t think Superior Silica Sands, one of three companies owned by Insight Equity in a master limited partnership called Emerge Energy Services, will be one of them. “We built this business from the ground up, with a business model designed to withstand the ebbs and flows of the oil and gas market.” he says.
Superior Silica Sands has certainly always been the company that could. Back in 2008, when the oil and gas industry was dominated by vertical drilling, which doesn’t require frac sand, a small, family-owned quarry in a tiny town called Kosse, Texas, located two and a half hours outside of Fort Worth, was making sand. Shortly after, horizontal drilling, also known as hydraulic fracturing, took off. “As I tell the story, Texas Sport Sands didn’t find the frac sand market; the frac sand market found them,” says Shearer. “Oil and gas companies were starting to drill horizontal wells in the Barnett Shale play, and were looking for any type of sand they could use.” Insight Equity caught wind of the demand, decided it wanted in, and began looking for an acquisition. When the company’s executives went to look at Texas Sport Sands, they couldn’t believe their eyes. “Trucks were lined up out the gate waiting to be loaded with frac sand,” Shearer says. “They knew right then the market was for real, so they bought Texas Sport Sands, changed its name to Superior Silica Sands, and changed its focus to frac sand for the oil and gas industry.”
Shearer himself came onboard in 2010, when Insight Equity realized the company was struggling due to years of mismanagement. “A friend of a friend knew the CEO of Insight Equity, and one thing led to another,” says Shearer, who in addition to being president and CEO of Superior Silica Sands is CEO of Emerge Energy Services. “I came down here in May of 2010, and since then we’ve grown from a sleepy little local sand pit operation to one of the leading frac sand producers in the country.”
Shearer certainly knows the business. Formerly president of US Silica, the second-largest industrial sand company in North America, he quickly gained exposure to the oil and gas industry. “The way you make money in the sand business is by selling, as they say, the whole pig, including the squeal,” he says. “That means you really want to minimize the amount of waste sand you process, so when I was running US Silica, selling finer-grade glass sand market, we were searching for a market for mountains of leftover course sand, and we concluded the best market was the oil and gas industry.”
Shearer turned Superior Silica Sands around within a few years, and by 2014, its year-over-year revenue growth was 30 percent. Then, oil prices declined, and Shearer had to think about how he’d protect the company’s market share. “A lot of companies will struggle, but when you’re in the oil and gas business, it’s not unusual to have cycles, and you have to have a business model that will withstand them,” says Shearer, who’s confident that Superior Silica Sands will not only survive but thrive. He’s already seeing the oil and gas industry gravitate toward the major frac sand players, who have the infrastructure to get the product out and storage terminals close to well heads. As a result, he thinks the top four or five producers, including Superior Silica Sands, will be less vulnerable. At the same time, the company will be looking for acquisition opportunities and is already seeing good values. “We’re looking forward to proving ourselves and growing in this industry, close to 30 percent this year,” Shearer says.