Infill Thinking Lifting the O&G knowledge curve
We caught up this week with Jason Holton, CEO of Omega Sands. Omega is a new entrant frac sand producer focused on a 1Q19 Mid-Con launch.
Omega Sands has been flying under the radar planning their frac sand industry debut in Oklahoma… until now.
During a phone conversation Monday afternoon, Jason Holton confirmed all permit applications were filed last month and agreed to share Omega Sands’ story here in advance of those permits hitting the public record.
The company’s website will be activated within the next few days, with the full site launching a couple weeks from now. Until then, here is what Jason shared with Infill Thinking.
Breaking Ground This Summer On A 2mmtpa Mine; Targeting 1Q19 Startup
The Omega Sands’ plant is initially sized at 2mmtpa, with a design conducive to upsizing production capacity if brownfield expansion is justified by demand in the future.
Construction is poised to begin in the next 45 days with first shipments targeted for mid-1Q19. Market and Johnson has been contracted to build this plant, and long lead-time items have been ordered (so equipment is unlikely to delay the timeline here).
Estimated resource base on the property is approximately 30mm tons today, with potential for significant increase as the company exercises options to expand acreage.
Dewey County Location, 50:50 Gradation Split, & Shipping Details
We’ll have to wait on the permit to pin down the exact coordinates, but Jason told us the Omega site will be situated in southeast Dewey County, just northwest of the town of Fay.
The company closed on the land purchase last week, securing an initial 700 acres (another 700 acres are under option). Their selection of this particular parcel goes back about six months.
On grade mix, the company expects to produce in the vicinity of a 50:50 split of 100-mesh and 40/70. This is a higher cut of 40/70 than some of the company’s Mid-Con peers whose mix seems more skewed to 100-mesh. This could be an important point of differentiation for Omega. Crush strength will be similar to what other producers will make locally, as this deposit isn’t far from the other plants around Oakwood, Seiling, and Fay.
Culture, Contracting & Staffing
We get the sense that Jason – a native Oklahoman himself – is putting his organization together with a single-basin, small company feel. His play is the long term SCOOP/STACK trend-line, not a shotgun approach to entering multiple growth basins.
He told us they intend to stay private, and the sponsor-backed capital he has secured for the company is long-term in nature.
With patient capital behind them, the Omega Sands’ team intends to stay pureplay, focused on a single-basin strategy yielding lasting relationships with customers. With Permian new entrants now diversifying across basins, this is something we aren’t hearing as much of these days, and Oklahoma operators may be receptive to this rifle shot approach. By putting all their eggs in one basket, Omega has to make this facility/basin work, unlike some other miners that are diversified and can withstand losses in one basin as long as they are doing well in others. That certainly seems like a motivator to deliver excellence to us. And they won’t have to manage simultaneous buildouts hundreds of miles apart or split resources.
On the contracting front, the company is targeting selling ~70% of their tons under term contract arrangements, reserving ~30% for spot sales. The team has met with dozens of customers over the past few months (both pumpers and operators), and says feedback has been very positive. SCOOP/STACK customers are testing local brown sand now and seem open-minded (much of the current regional supply is white sand coming from the established mines located to the southeast of the play).
Omega Sands expects to have firm agreements in place for up to ~70% of production before the plant begins operations early-next year.
The company is led by a team of industry vets with operating, business development and sales experience.
