Shares of Fairmount Santrol (NYSE: FMSA) jumped nearly 12% by 2:45 p.m. EDT on Tuesday. It wasn't the only frack-sand producer to rally today, as Hi-Crush Partners (OTC:HCRS.Q) and U.S. Silica (NYSE:SLCA) were up about 4% by the mid-afternoon. That said, these moves were a bit of a head-scratcher since there weren't any news-driven catalysts to ignite a buying spree. However, there are three plausible reasons why these stocks could be rallying.
First of all, crude continued its upward momentum, with the U.S. oil benchmark price, WTI, climbing another 0.4% today and closing at $54.38 per barrel. That pushed WTI up nearly 5% for the month to a level where more drillers are comfortable with at least maintaining their current drilling pace.
That would be good news for frack sand producers because it means that drillers would continue demanding sand to complete new shale wells, which could push up prices. That could fuel higher profits for Fairmont, Hi-Crush, and U.S. Silica.
Speaking of earnings, investors could also be growing confident that frack-sand producers will report decent third-quarter numbers when they release results over the next week. Hi-Crush is the first one out of the gate, with its report due after the market closes today. Meanwhile, Fairmount will release its results on Thursday morning, while U.S. Silica will report next Tuesday. These releases could fuel big moves in frack-sand stocks, depending on what the companies say about their outlooks.
A third potential catalyst behind today's move is that Fairmount could be nearing a deal to be acquired by Sibelco. According to a report by Bloomberg earlier this month, the Belgian mining company approached Fairmount about a transaction to combine with its U.S. division, Unimin. Such a deal would widen Unimin's lead over U.S. Silica as the biggest sand producer in the country.
All we can really do is speculate as to what's fueling Fairmount's double-digit move today. Because of that, investors shouldn't join the rush because the momentum could quickly fade, especially if Fairmount or Hi-Crush report lackluster earnings this week.