Preferred Sands is building a sand mine near Watonga to provide frack sand to well operators in Oklahoma's STACK and SCOOP plays

Sand costs for hydraulically fractured wells can eat away at profit.

But one company aims to help well operators by getting them the sand they need at a more affordable price.

Pennsylvania-based Preferred Proppants, LLC (also known as Preferred Sands) is building an "in-basin" frack sand mine in Oakwood, west-northwest of Watonga, to serve well operators in Oklahoma's STACK and SCOOP plays, it has announced.

Work to build the project already has started with plans for it to go online in the third quarter, and Preferred representatives said they now are filling about 100 positions needed to operate the mine.

T.J. Doyle, president and chief operating officer of the privately owned company, said Preferred's Oklahoma operation will join two others it operates in Texas, as well as others it has in Nebraska and Arizona.

Doyle said Preferred entered the frack sand business in 2007 as horizontal well drilling and hydraulic fracturing completions became regular practices for the oil and gas industry.

"We have sent material to anywhere they are drilling for oil and gas," including California, New Mexico, west and south Texas, Louisiana, Pennsylvania, North Dakota and into northwest Canada, Doyle said.

Initially, Preferred shipped much of that product to active plays using rail.

But Preferred realized its customers were becoming sensitive to the expense of getting the sand from where it is mined to where it gets used, Doyle said.

Especially during the 2015 and 2016 downturn, "operators really began to examine well costs so they could continue to compete by producing oil for less dollars per barrel," he said.

Preferred responded by choosing to develop in-basin mines where sand can be trucked either by contracted haulers or customers to well locations, Doyle said.

"Our mines are within about 50 to 75 miles of most of the wells that are being completed. That eliminates the long-haul logistics costs," he said. "Our portfolio of assets makes us one of the largest, if not the largest, in-basin suppliers of material."

Oakwood operation

Doyle said the Oakwood mine will produce an estimated 3 million tons of finished sand that meets well operators' specifications annually, and that it has enough reserves to continue operating for the next 25 years.

Its annual output will support the completion of about 400 wells per year. Most operators use between 7,000 and 7,500 tons of sand to complete a well, on average, Doyle said.

While sand is one of the most abundant solid elements on the planet, existing in various quantities, qualities, depth and locations, Doyle said that not all sand meets Preferred's requirements.

"We have minimum specifications that are driven by the needs of our customers," he said.

"The closer it is to the surface, the more economical it is to get at. In this case, we have identified a reserve of the product that doesn't have any wetlands or waterways we would interfere with, and at a reasonable depth and with suitable reserves."

The 100 positions for the Oakwood operation the company is filling includes everything from plant managers down to general laborers, Doyle said.

"And we are hiring in advance," he said. "We like to bring in folks early on and also get them out to other facilities so they see what the end product will look like and get them trained up on how we do business."

Sand mine are regulated by the U.S. Department of Labor's Mine Safety and Health Administration. Doyle said the firm's goal is sending its workers home each day as healthy as they were when they showed up for work.

"We are looking for individuals who are like-minded, professional and looking for a steady, good-paying job. We are excited about it," Doyle said.