Super-sized hydraulic fracturing jobs, which use vast amounts of sand to coax more oil and gas from shale, have led to astronomical returns for investors in companies that mine the tiny particles.
The question is whether those super-sized gains can continue.
Demand has jumped for the sand used in hydraulic fracturing, which blasts it, along with water, chemicals, into wells to crack rock and release crude oil and natural gas. The increasing practice of "superfracking" requires much more sand, and investors have taken notice.
Emerge Energy Services, a master limited partnership that produces sand for use in hydraulic fracturing, began trading a little more than one year ago at $17 per unit. Today the units trade at about $109. Shares of two other sand miners, U.S. Silica Holdings and Hi Crush Partners, have more than doubled in the past year.
And Fairmount Minerals, one of the largest providers of sand to the oil and gas industry, is considering a $1 billion initial public offering, according to sources familiar with the situation. Still, investing in these companies carries risks.
A drop in crude prices would slow drilling. And the market for sand itself is opaque, requiring investors to make a leap of faith as contract terms, prices and supply and demand are not fully disclosed.
Also, some oil and gas companies, such as EOG Resources, are cutting out the middleman by buying their own sand mines. At the same time, RBC Capital Markets says U.S. demand for raw frack sand will climb 30 percent from 2013 to 2015.
Houston oil and gas company Rice Energy, which operates wells in the eastern United States, says it has benefited from using at least 7 percent more sand than its competitors.
"It's something that we've found really effective to help stimulate the well" to produce more oil and gas, said Julie Danvers, director of investor relations.