The Lucrative Side-Character in the U.S. Oil Story

When it comes to retirement planning, sand is probably the last thing to come to mind — unless you’re having visions of beaches or golf courses.

But the truth is that sand has become a very valuable commodity… in fact, over the past 30 years, sand has been a better investment bet than gold!

It’s true. Since 1983, the price of sand has outperformed gold by some 259%.

So the stuff you’ve been thoughtlessly pouring out of your shoes after a run on the beach or cursing when your golf ball flies into it has quietly become a valuable tool for bringing in huge amounts of cash.

Now, I’m not saying to start hiding sandbags under your bed. Instead, we’ll find our profit opportunity at the source of this increased demand.

The need for fracking sand has created a “sand rush” of sorts…

Sand is a useful raw material in things like concrete and glass. Think about the latest Samsung and Apple smartphones with their glass screens or the monstrous skyscrapers going up in China and you begin to get a sense of why sand is such a hot commodity.

But the real key to understanding the bull market for sand is to look at one of the biggest growth segments of the U.S. economy — petroleum exploration and production.

The U.S. oil industry is enjoying new life thanks to the process of fracking. As I’ve written before, the breakthrough is transforming large swaths of the Midwest as previously unattainable oil enters the production stream.

That outflow of oil has been great for investors. In fact, several of the high-income picks I’ve shared with my readers owe their cash flows to oil from fracking. But today I’m going to show you how to cash in on something few investors have considered — the actual process of fracking itself.

The process starts the way traditional oil wells start, drilling into the ground to find an oil formation. But then the well is sealed, and high-pressure water, chemicals and other additives are sent down the hole to fracture the rock (hence the name) and create fissures that allow oil and gas to be released so they can be pumped to the surface.

But to fully release the product, something needs to go along with the water to effectively hold the broken rock open. The best material for the job is — you guessed it — sand.

In 2013 alone, the fracking industry used more than 28-29 million tons of sand — an amount that has increased by double digits over the past two years alone. As more wells are drilled, the amount of sand needed will continue to increase. But that’s not all…

On average, each drill hole uses about 4 million pounds of sand. However, oil companies have discovered that by doubling the amount of sand in the fracking process, they can as much as double the oil they recover.

This means that in the coming years, we could see the overall market demand for sand not just keep expanding by 10–20% per year — but double or even triple.

Now, of course, this isn’t just any sand…

To be useful to fracking companies, the sand needs some specific qualities. It needs to be very pure and have a consistent size and shape. It also needs to be hard enough to avoid being crushed in the fracking process.

So a company can’t drive down to the beach and load up on sand. The costs would just be too high for very little payout. Ideally, you need to find solid deposits of pure silica and/or quartz… and formations that haven’t been too exposed to seismic and tectonic forces that can weaken the sand granules.

Once you’ve found a useful sand deposit, it has to be mined and processed. The closer to the surface, the cheaper it will be to mine. You need to take out contaminants and moisture. Then it has to be sorted.

Fracking sand needs to have a consistent size and shape. And the granules have to be spherical so they are transported more efficiently in the water injection process and to make it easier for the oil to flow past the propped holes. Each batch needs to be uniform.

Despite all of that, finding the right kind of sand wasn’t all that difficult in the early years of fracking. Most of it came from formations and mines in Texas — not far from oil fields. But as fracking has expanded far and wide, the demand has soared aggressively, outpacing local supplies.

The need for fracking sand has created a “sand rush” of sorts, with purveyors jumping on every source of usable sand the U.S. Geological Survey has uncovered. And they’ve focused on the best hub of quality, easily-accessed sand — the St. Peter sandstone formation, not far from the Minnesota River (which, not coincidentally, used to be called the St. Peter River.)

The formation stretches from Minnesota to Missouri and runs from Indiana to Nebraska and neighboring states, with prime mining sections in Wisconsin and Minnesota.

Today, there are dozens of public and private companies working to get that sand — and other sand like it — into the wells of fracking companies. Hitch on to the right one and you could be in for a solid source of income for years to come.

All my best,

Neil George
for The Daily Reckoning

P.S. After extensive research, I’ve found a company that is not only keeping control over the production and environmental risks, but also has a laser focus on its shareholders. Margins on its sand are huge and double its competitors’. And I gave readers of the Daily Resource Hunter a unique opportunity to discover this company for themselves. Don’t miss another great profit opportunity like this one. Sign up for the FREE, Daily Resource Hunter, right here.

Original article posted on Daily Resource Hunter

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Neil George

Neil George is the editor of Lifetime Income Report and Income on Demand — investment advisories dedicated to finding Wall Street’s best yields.

Before joining Agora Financial, Neil was the editor of Personal Finance and oversaw investment journals in the United States, Germany and other countries. He’s been featured in the Wall...

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