Our domestic energy boom has drastically affected employment in several states, set off a maelstrom of controversy -- and ignited the sand industry? That's right, sand is king! Without sand, hydraulic fracturing isn't effective, and without hydraulic fracturing, well, our energy picture would be very different. Hydraulic-fracturing sand is the perfect example of paying attention to tangential ties to a booming industry.
Last year, 28.7 million tons of sand were used in hydraulic fracturing. The sand is mixed with a variety of chemicals and millions of gallons of water and then injected into wells at incredible pressures. The role of the sand is to hold open cracks in the shale so that gas may flow into and up the well to the surface.
The current market price for one ton of certain types of sand is about $120. Sales of this precious silica eclipsed the $1 billion mark in 2010, and some analysts expect sand demand to grow 30% this year.
For the past two years, demand has been such that high-quality sand has been hard to come by, prompting some companies to buy their own sand plants, enabling them to control supply and avoid the high costs that come hand in hand with high demand.
Buying up sand plants
Talk about foresight. In 2008, EOG Resources
The company saves an estimated $1 million-$2 million per well in the Eagle Ford shale, and part of that is because it owns its own sand.
Pioneer Natural Resources
For those looking for a more direct way to invest in the sand boom, consider one of Fool analyst Jason Moser's recent Rising Star picks: CARBO Ceramics
There is some risk in CARBO, specifically regarding class-action lawsuits, and many investors may feel most comfortable adding the company to My Watchlist for now, continuing to monitor that story as it develops.
Even if there are few direct ways to cash in on a tangential play, it is important to recognize when companies do it. EOG's foresight cut costs and is indicative of smart management and good long-term decision-making.
Fool contributor Aimee Duffy doesn't own shares of the companies mentioned in this article. If you have the energy, check out what she's keeping an eye on by following her on Twitter, where she goes by @TMFDuffy
The Motley Fool owns shares of CARBO Ceramics. The Motley Fool has a disclosure policy.
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