Sand miner U.S. Silica Holdings Inc said demand could triple over the next five years as energy companies use increasing amounts of sand in hydraulic fracturing to extract more oil and gas from shale fields.
"We are seeing customers that are using 10,000 tons of sand for one well, and just to put it in perspective, that's a mile long train of sand, to just frac one well," Chief Executive Bryan Shinn told Reuters.
Energy companies, eager to unlock more oil and gas from shale fields, are using increasing amounts of sand, boosting demand for U.S. Silica and rivals such as Hi Crush Partners LP and Emerge Energy Services LP.
Sand along with water and chemicals is blasted into wells to crack rock and release crude oil and natural gas in hydraulic fracturing, a drilling method that has unleashed a production surge in North America.
"(We) see a clear pathway to the volume of sand demand that's out there doubling or tripling in the next four to five years," Shinn said.
U.S. Silica sold about 8.2 million tons of sand in 2013. Half of this went to energy companies.
The company, whose revenue has doubled over the last four years, expects its sand volumes to grow 30 to 35 percent this year.
The company is looking to ramp up fracking sand production capacity to 14 million tons by 2016. The company produced 6 million tons in the quarter ended June.
U.S. Silica shares have more than doubled this year and of the 12 analysts covering the company, not one has a sell rating.
Two analysts have a hold rating, while the rest have a buy or a higher rating.
Analysts on average have pushed up their price targets on U.S. Silica's stock by 60 percent in the last 90 days alone.
The median price target on the stock is $80, above the stock's Thursday close of $71.40 on the New York Stock Exchange.
(Writing by Swetha Gopinath in Bangalore; Editing by Don Sebastian)