A Wisconsin-based frac sand mine operator with seven operations in Oklahoma has filed Chapter 11 bankruptcy, blaming largely the COVID-19 pandemic and falling oil prices.
Covia filed Chapter 11 bankruptcy this week saying a restructured plan negotiated with lenders will eliminate more than $1 billion in fixed costs.
The Ohio-based company said it has more than $250 million cash on hand that will allow the company to continue operation during the proceedings according to the Wisconsin State Journal.
Covia had mining and processsing operations in Seiling, Canton and Roff with terminals in Pond Creek, Enid, Shattuck and Elk City.
CEO Richard Navarre said the bankruptcy was brought on by a combination of the COVID-19 pandemic and “recent energy price shocks” that significantly affected Covia’s customers, which include oil and gas producers who use sand to prop open cracks in underground rock formations.
Along with the pandemic, which has triggered a global recession, oil prices plunged in March when the 13-member Organization of Petroleum Exporting Countries.
According to court filings, this came on the heels of two difficult years for producers of the high-quality Northern White sand found in Wisconsin: starting in late 2018, the companies that drill for oil and gas scaled back operations when lenders pulled back; at the same time, the supply of sand essentially doubled as producers opened dozens of new mines, and producers turned to cheaper, lower-quality sand mined closer to oil fields.
Founded in 2018 by the merger of Unimin and Fairmount Santrol, Covia operates 32 mines serving energy and industrial customers.
Covia last year idled five of its mines — including two in Minnesota and one in Bay City, Wis. — and reduced capacity of its other Northern White mines.
The company notified state officials in May that it had laid off 32 workers at its Tunnel City mine, one of its most productive.
Last week another frac sand provider, Hi-Crush Inc., announced that it plans to file for bankruptcy later this year. Hi-Crush has shuttered three of its Wisconsin operations and is operating the fourth at reduced capacity.
Emerge Energy Services, the parent company of Superior Silica Sands, filed for bankruptcy in 2019. Superior Silica operates mines in Barron and Chippewa counties.
According to the Department of Workforce Development, frac sand producers have laid off more than 130 Wisconsin workers so far this year.
Source: Wisconsin State Journal