Silica: The Critical Ingredient That Makes Shale Rock Bleed Oil – U.S. Silica (NYSE:SLCA) | Seeking Alpha

Summary

Despite shifting sands in the industry, U.S. Silica Holdings is operating on solid ground.

The company is among the top 10 producers of industrial sand and gravel in U.S. and was the second-largest producer in 2012.

More than a mining company, U.S. Silica Holdings is an impressive logistics company.

The recent drop in share price is an opportunity to buy at attractive valuation.

U.S. Silica Holdings, Inc. (NYSE:SLCA) is well-positioned to take advantage of continued shale drilling in North America. The company supplies a key necessary component of the technology driving the rapid growth of shale industry, without which the oil well could not be completed.

Company Description

U.S. Silica Holdings is one of the largest domestic producers of commercial silica, a specialized mineral that is a critical input into a variety of end markets. The company has developed core competencies in mining, processing, logistics and materials science that enable them to produce and cost-effectively deliver over 250 products to customers across these markets. In the company’s largest end market, oil and gas proppants, frac sand (silica) is used to stimulate and maintain the flow of hydrocarbons in oil and natural gas wells. This segment of business is experiencing rapid growth due to recent technological advances in the hydraulic fracturing process, which have made the extraction of large volumes of oil and natural gas from U.S. shale formations economically feasible. Silica is also used as an economically irreplaceable raw material in a wide range of industrial applications, including glass making and chemical manufacturing. Additionally, in recent years a number of attractive new end markets have developed for high-margin, performance silica products, including high-performance glass, specialty coatings, polymer additives and geothermal energy systems.

The company’s share price is closely aligned with the U.S. energy sector, more specifically, the unconventional oil sector (shale) and the price of oil. As a direct consequence of the recent drop in price of Brent oil, the share price for SLCA has seen a sharp decline since middle of September, creating the opportunity to purchase SLCA at an attractive valuation.

via Silica: The Critical Ingredient That Makes Shale Rock Bleed Oil – U.S. Silica (NYSE:SLCA) | Seeking Alpha.