Pioneer Natural Resources Co. (NYSE: PXD) and U.S. Silica Holdings Inc. (NYSE: SLCA) have entered into a long-term sand supply agreement on Sept. 11, by which Pioneer will purchase an interest in U.S. Silica’s sand reserves at its Lamesa, Texas, mine in West Texas.
This agreement secures a long-term supply of sand from the mine, with U.S. Silica processing and supplying sand to Pioneer for 15 years.
“Strategically located in close proximity to our Midland Basin acreage, delivered sand from the Lamesa mine will cost approximately half that of our current delivered sand, reducing well costs into 2019 and beyond,” Timothy Dove, Pioneer president and CEO, said. “The long-term nature of this agreement will benefit both companies. U.S. Silica has been a trusted partner for many years, and this contract solidifies their position as one of our key suppliers of proppant.”
The sand reserves and sand supply will be from U.S. Silica’s mine that is located about 60 miles north of Midland, near Lamesa, Texas. The mine is expected to produce approximately six million tons annually of predominately fine grade 100 mesh and 40/70 mesh sand, with initial production expected in the fourth quarter of 2018. Pioneer expects to receive its initial sand volumes during the first quarter of 2019, with its supply increasing from approximately 1.4 million tons in 2019 to 2 million tons per year in 2020 and future years.