Jul 13, 2023
The Texas Tycoon Making A New Fortune Selling Sand To Frackers
Growing up in Midland, Texas, there wasn’t a lot to do, Bud Brigham says. “We used to sled on the dunes—using a cardboard box. If you were really fancy you made a sled, put laminate on the bottom and
Growing up in Midland, Texas, there wasn’t a lot to do, Bud Brigham says. “We used to sled on the dunes—using a cardboard box. If you were really fancy you made a sled, put laminate on the bottom and waxed it.” Fifty years later, you can still sled the giant sand dunes at Monahans State Park. If you’re lucky you might spot a threatened three-inch dunes sagebrush lizard skittering amid the shinnery oak bushes.
What you will see for sure is sand trucks. Lots of them. Brigham’s company, Atlas Energy Solutions, fills up to 1,200 trucks a day, each with 24 tons of sand destined for oil fracking operations. Brigham’s no longer playing on the dunes; instead, he’s digging them up—to the tune of 10 million tons a year.
At the heart of Atlas’ mine in bone-dry Kermit, Texas, is the incongruous sight of a 50-acre blue lagoon, where barges dredge the sand, sucking it up through hoses. It goes through cleaners, dryers and screens, then into tall silos for loading into trucks.
The sand doesn’t have far to go. For hundreds of miles around Kermit, the landscape, known as the Permian Basin, is dotted with thousands of oil-and-gas wells, with dozens of new ones being fracked every day. You cannot frack without sand—and you need preposterous amounts of it, on the order of 10,000 tons per well. At the drilling site that sand is mixed with water, then injected at high pressure into the wellbore (often three miles down, then two or more miles horizontally). This subterranean blasting, Brigham explains, “props open fissures to let the oil and gas out.”
Brigham’s six-year-old company, which went public in March and now sports a $1.8 billion market cap, is the biggest sand supplier in the Permian, with 25% of the market and deep enough reserves to keep digging for 100 years. Brigham, 63, owns 15% of the company. Add in his proceeds from a decade of oil deals, and Forbes estimates his net worth is in excess of $500 million.
Atlas has big plans for its $300 million in IPO proceeds. The company has begun building a 42-mile electric sand conveyor belt made of reinforced rubber, called Dune Express. “It’s really four ten-mile conveyors,” says Atlas’ president, John Turner, standing atop the Kermit silos looking west to where the line will extend over the New Mexico border into the world’s biggest fracking hotspot, where ExxonMobil, Chevron and Occidental Petroleum plan thousands of wells in the coming decades.
The oil companies are thrilled. Before local mines opened, they had to buy sand by the trainload from as far away as Wisconsin and pay $50 a ton just for transportation. Today Atlas, the dominant sand supplier, is gushing cash. In the first quarter of 2023, it generated $63 million in net income on $153 million in sales. Mining costs are about $7 per ton, with about $3 a ton in royalties. With sand selling for about $43 a ton, Goldman Sachs analyst Neil Mehta sees Atlas’ net income surpassing $500 million by 2025, thanks in part to Brigham’s conveyor belt, which should be fully operational by the end of 2024. The Dune Express will cut transportation costs in half to about $7 per ton.
Other cost savings are immeasurable. “This project is going to save lives,” says Hope Williams, a former Winkler County commissioner and member of the Kermit City Council. Since the sand boom started in 2016, the public roads have become choked with 40-ton sand trucks, leading to horrific accidents on State Highways 302 and 285. Across the Permian region, 277 people died on the roads in 2022, up 19% over 2021. Moving sand by conveyor instead of truck could take 70% of sand trucks off the roads around Kermit.
Sandman Brigham lives 300 miles away in Austin, a green oasis relative to Midland. His office sits on a bluff above the Colorado River, with downtown views. He drives a black Ford Bronco with a bumper sticker that reads, “Who is John Galt?” — a famous line from his favorite book, Atlas Shrugged, by libertarian icon Ayn Rand.
Brigham’s parents divorced when he was young. His mother raised him and five siblings in Midland, working for oilfield legends like T. Boone Pickens’ partners Cyril Wagner Jr. and Jack E. Brown. Brigham studied geophysics at the University of Texas, then got a job at Western Geophysical studying seismic data. “I was just one little cog in the wheel. I felt I could add so much more value,” he recalls. In 1984, he got a job at Rosewood, the oil-and-hotels holding company owned by Caroline Hunt, a daughter of oil baron H.L. Hunt, who was considered the richest man in the world when he died in 1974. “There, I knew everything that was going on. I felt empowered.”
In 1990, at age 30, he founded Brigham Exploration to drill for oil, using then-novel subterranean seismic imaging to spot reservoirs. He took the company public in 1997, just in time for the great American oil boom of the early 2000s, made possible by the combination of steerable drill bits and hydraulic fracturing (a.k.a. fracking). Brigham acquired 400,000 acres in North Dakota’s Bakken shale fields, competing against the likes of billionaire Harold Hamm. The shale boom was on. “When I started in the 1980s, most holes were dry holes. Now it’s a factory on the ground,” Brigham says. In 2011 Norway’s Statoil (now Equinor) bought Brigham Exploration for $4.7 billion.
Brigham cleared about $100 million on the deal and was keen to put it to work in his next venture. Brigham Resources leased 80,000 acres in the Permian and started drilling, funded with Brigham’s cash and an additional $700 million in private equity. Brigham’s investors tripled their money in 2017 when Diamondback Energy bought the company for $2.5 billion. Brigham’s take was about $300 million.
He could have started another oil company, but having bought a lot of sand over the previous decade, he knew a good business when he saw it. When the fracking revolution began, drillers believed that the most effective so-called “proppant” would be relatively large-grained, perfectly round sand like Northern White, railed in from mines in Wisconsin. “Sphericity is so important for crush strength,” Brigham notes. At first, “We thought the coarser grains were better because [they offered] more space for oil and gas to get through.” They even experimented with microscopic ceramic balls.
“We tried everything,” he says, and were surprised when consensus emerged among Permian frackers that the most effective sand was right in their backyard. In 2017 Brigham and some friends founded Atlas Sand and began negotiating the rights to mine two giant dunes.
Separately, Brigham had been building another public company, Brigham Minerals, which focused on buying rights to oil and gas still in the ground. It raised $300 million in a 2019 IPO, then late last year merged with Denver’s Sitio Royalties in a $4.8 billion deal—freeing up Brigham to focus on Atlas.
You can’t corner the market on sand in the Permian without visiting the Sealy & Smith Foundation, which owns a 10-by-10-mile block of land encompassing the biggest sand dunes and the park where Brigham sledded as a kid, as well as myriad oil wells. About 140 years ago, John Sealy had acquired the large tract for a family retreat. The arid land had natural springs, and Sealy’s original idea was that they could provide water for the locomotives running on transcontinental rail lines. Oil—and now sand—has proven vastly more lucrative. The foundation has gone on to contribute more than $1 billion from oil, gas and sand royalties to building research hospitals for the University of Texas. It will make a risk-free royalty of about $3 on every ton that Atlas mines for the next 94 years.
Brigham’s 42-mile conveyor belt, made from steel and reinforced rubber, was designed by Atlas engineers with the help of a wind tunnel at Texas A&M. It took four years to negotiate with ranchers for rights of way.
Automation is key. From a control room at HQ in Austin, technicians remotely activate spouts on the silos to fill customers’ sand trucks, each of which has been fitted with an RFID tag. “We love exponential efficiency,” Brigham says. Even after the Dune Express is complete, they’ll still need a lot of trucks to move sand from the conveyor belt over unpaved, rocky oilfield roads to drilling sites. Atlas has already bought 120 military-grade Mack trucks, which can haul triple trailers filled with 72 tons of sand. It’s also working with Robotic Research, developer of autonomous trucking systems for the military, in the hope that these trucks will eventually drive themselves.
Infrastructure and logistics aren’t Brigham’s only challenges. Drilling and sand mining are habitat killers for the tiny dunes sagebrush lizard, which lives among the shinnery oaks growing in the dunes. In June, The U.S. Fish & Wildlife Service said it was seeking comment until September on a proposal to place the lizard on the endangered species list. This could severely limit sand drilling and mining in the area. “Where the lizard is living there should be no more removal of its habitat and destruction,” says Michael Robinson of the Center for Biological Diversity.
Anticipating trouble, Atlas has already been working with the Department of Interior and other agencies on conservation plans that might enable the lizard and the oil industry to peacefully coexist. Brigham argues that many of Atlas’ large-scale operations are on the giant open dunes, far from shinnery oak ecosystems.
For all its 5 million barrels per day of oil production, the Permian Basin remains a desolate, inhospitable place. But it has been a bona fide cash machine for the state of Texas and the University of Texas system, which encompasses 13 institutions and 240,000 students, and owns stakes in millions of acres of oilfields. It received $2.3 billion in oil-and-gas royalty income last year, virtually all of it from fracking. The University of Texas system’s endowment is now $57 billion.
“I think saner minds will prevail here,” says Harold Carter, a longtime private equity investor in Brigham’s ventures. “The landowners want to see the royalties, and the state can see the benefit that mining the sand provides. That lizard’s got plenty of land.”
By John Dobosz
John Dobosz is editor of Forbes’ Billionaire Investor newsletter.Growing up in Midland, Texas, PAYDIRT “We will need 1,500 cars of sand and gravel for that warehouse,” reported a Chicago contractor to his firm. “Where shall we buy it?” “Order it of Astrid Rosing and you’ll get service,” came the reply. “Are you sure this Rosing man is reliable?” “Man! That business belongs to a woman—built it up herself, and I want to tell you that when I need materials in double quick time I always deal with Miss Rosing.” —Forbes, March 30, 1918 HOW TO PLAY ITOccidental Petroleum (OXY)MORE FROM FORBES