​Montney, Duvernay drillers get new unit train frac sand delivery terminal as demand grows

Source Energy Services CEO Brad Thomson (centre), joined TMX and Source leaders to open the market in April 2017. Image: TMX Group

Source Energy Services has opened its first unit-train capable delivery terminal for frac sand into the Western Canada Sedimentary Basin as companies deploy bigger fracs for higher results.

Unit trains, which carry a single commodity opposed to multiple cars carrying multiple commodities, will allow Source to connect dedicated deliveries of frac sand from its mines in Wisconsin to Alberta.

Frac sand demand in the WCSB is expected to increase by 28 percent this year and a further 31 percent to a total of 10.3 million tonnes in 2019, according to GMP FirstEnergy.

“This is driven largely by higher average proppant intensity in the Montney and Duvernay,” analysts wrote in a research note this week.

The Fox Creek terminal location intersects both the Montney and Duvernay plays – confirming area activity levels, SemCAMS also recently announced it will build a new 60 mmcf/d gas plant at Fox Creek based on processing contracts with a joint venture of Athabasca Oil Corporation and Murphy Oil.

The new facility expands Source’s operations at Fox Creek, Alberta, where it opened its first terminal in 2015. The company now has eight frac sand delivery terminals in Alberta, BC and Saskatchewan of varying sizes. A unit train capable terminal is also being built at Edson, Alberta.

Source said it plans to spend between $10 million and $20 million of its 2018 budget of $50 million to $65 million on terminal expansion projects.

The company will also spend $10 million to $15 million on development of additional sand delivery systems, $15 million to $20 million on production facilities, and $9 million to $12 million in mine development activities.

Source reported a 255 percent increase in sand sales in the third quarter of 2017 compared to the third quarter of 2016, leading to net income of $3.0 million compared to a a net loss of $12.3 million in the previous year period.