U.S. Silica Holdings Inc. (SLCA) has been underestimated by investors worried about frac spending as oil prices continue dropping, says Brandon Dobell, Partner and Group Head of Global Services at William Blair & Company, L.L.C. He expects SLCA to capitalize on growing demand for frac sand.
“I think we feel pretty good that the amount of sand being used in the industry will continue to grow at a pretty healthy clip, and on top of that large providers of frac sand are going to continue to take market share at a pretty significant pace because of the logistical complexities of delivering a lot of sand to many different basins on a very short time frame. I think that’s what Silica is well-positioned to do,” Dobell said.
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Dobell says U.S. Silica will surprise investors with its performance in the next couple of months, changing their perception about the company, which will he expects will result in a higher stock price.
“Part of it is just the industry structure I think is underestimated in terms of the amount of sand that the industry is going to need because it’s one of the best ways to drive production higher without really spending a lot more money, and then second is logistics driving market share, and then finally, the stock is retraced significantly over the last three, four weeks on the heels of lower oil prices,” Dobell said.
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