Frac Sand Provider in the Permian Basin

Industry

Real Assets

Company Type

Mining Non-Metals

Location

Texas

Size

$32,500,000

Investment Type

Senior Debt

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Helping Great Companies Grow

Overview

Midland Multisand Corporation has purchased a 1,280-acre property about 50 miles north of Midland, Texas containing high quality frac sand. The Company knows of no other sizeable tract in the Northern part of the Permian Basin with these frac sand reserves. Seeking +/-$32.5 million of senior debt for equipment, site development, startup capital, mortgage payoff, and transaction/contingency fees.

Senior Debt  $32.5 million (74 % LTC)

Equity  $11.6 million (contributed by Multisand)

Total Project  $44.1 million

  • Multisand has contributed the property (based on comps is worth at least $11.6 million). Based on net equity and funds spent coring the property and having the sand evaluated and tested, Multisand’s equity contribution exceeds $11.6 million
  • Based on coring and trenching, the property contains at least 18,600,000 tons of mineable frac sand (April 2019)
  • Serve drilling companies and oilfield service companies
  • Led by experienced industry personnel with years of experience in building sand mines and marketing frac sand
  • Except for a mine owned by US Silica, whose production is completely sold out, the MMC mine is the closest to the Northern Permian Basin and enjoys a significant logistical advantage over the numerous mines to the west, resulting in MMC’s frac sand being highly competitive
Helping Great Companies Grow

Opportunity

  • Due to the high rate of drilling and fracturing shale formations using very long laterals and multi-stage fracs, the demand for frac sand in the USA has grown rapidly
  • Reported usage of frac sand in the USA in 2018 was roughly 70,000,000 tons
  • Estimated that approximately 100 million tons of frac sand will be used in 2019
  • Roughly 50% of the consumed frac sand will be used in the Permian and Delaware Basins in West Texas and Eastern New Mexico
  • Analysis of the MMC site by Proptester shows high quality frac sand
  • Traditionally the best frac sand came from Wisconsin. Since the transport cost from Wisconsin to West Texas is about $50 per ton, Wisconsin sand has been gradually displaced by sand mined in Texas, where the price is currently approximately $23 per ton
  • According to IHS Market, frac sand demand is expected to reach 231 billion pounds by 2023 (over twice the demand in 2014)
Helping Great Companies Grow

Solution/Strategy

  • Construct the mine approximately five miles west of O’Donnell, TX (about 50 miles north of Midland) with the required mining equipment
  • Expect to load out 2,500,000 tons per year of frac sand
  • Plan to enter into long term contracts for a portion of expected production with operators and service companies such as Halliburton, Schlumberger, Cudd Energy Services and Propetro Services, and operators such as Encana, XTO, Concho Resources, Occidental Petroleum, etc.
  • Operation will have up to a $20 per ton transportation advantage over competitors to supply frac sand to the numerous wells being drilled in Dawson, Borden, Gaines, Howard, Martin and Northern Midland Counties
  • Nearest competitor is a mine owned by US Silica, roughly 15 miles away, whose production is sold out
Helping Great Companies Grow

Management

Lon Estes

Chief Executive Officer

13 Years in the Oil and Gas Industry. 11 Years as Operations Manager at Draco Energy Inc. Responsible for all aspects of drilling, completion and production in the Midland and Delaware Basins. Managing Member, Hat L Resources LLC.  Mineral rights purchaser and assorted oil and gas related investments. Managing Member, Poco Crudo Equipment LLC – purchase and sale of used oilfield equipment. Managing Member, Shade Tree Services LLC – oilfield chemical sales. Managing Member, East Gaines County Water Sales LLC – oil and gas related water sales. Field Engineer, PropTester Inc. BS Agricultural Economics, Texas Tech University.

Hank Diesel

Chief Financial Officer

35 years of operating and financial experience. Founded a water purification and chemical manufacturing business. Partner and Managing Director with a boutique investment bank. CFO and then CEO of CKS, Inc, providing specialized tax services to manufacturers. Vice President of Sales and Marketing at SalvageSale, Inc., and subsequently served on its board of directors until its sale (currently owned by Ritchie Bros).  Vice President of Anadarko Petroleum, focusing on international negotiations and M&A.  Worked at Amoco Corporation in progressive management assignments in strategic planning, international business development, and operations.  Ran Carr Oil & Gas, an independent oil and gas production company. BA in Economics from Rice University. MBA from Rice University’s Jesse H. Jones Graduate School of Management.

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Hi. We're not around right now. But you can send us an email and we'll get back to you, asap.

Thanks, Ken

Ken Margolis | Managing Partner Castle Placement, LLC
1460 Broadway Street, Rte 400
New York, New York 10036
(212) 418-1188 | C: (516) 712-7784
kmargolis@castleplacement.com

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