All right, hello everyone, and thank you all for continuing to join us throughout the day here at the Lytham Partners Fall 2025 Investor Conference. My name is Robert Bloom, Managing Partner here at Lytham. For our next presentation here, we welcome Lee Beckelman, Chief Financial Officer at Smart Sand , who will be walking through the presentation. As a reminder, Smart Sand trades on the NASDAQ under the ticker symbol SND. With that said, Lee, let me turn the floor over to you for the presentation.
Thanks, Robert, and thanks for attending today's presentation on Smart Sand. I'd like to cover our highlights. Smart Sand is a leading provider of northern white sand in North America. We provide sand primarily to the oil and gas market, as well as to industrial applications. These are some of what we believe are the key strengths of our company, which I'll highlight later in the presentation as well. First and foremost, we have 10 million tons of high-quality northern white sand mining and processing capacity that has access to all Class 1 rail lines, so we're able to access all operating basins in the U.S. We have three facilities connecting to four rail runs directly, and we're able to ship on a unit train basis of 100 to 150 cars or more out of our mines directly to terminals we own or third-party terminals in all the operating basins.
We have a very low-cost operating structure. We built our business on a bulk commodity mindset that you need to be able to operate very efficiently in large quantities. We mine, process, and through our rail access at our terminals, at our mines, we're able to deliver sand in very large bulk quantities to the market. We have very low processing costs, low royalty rates, and the ability to ship in very large bulk shipments that allow our logistics costs to be best in class as well. We have a very sustainable long-term supply and logistics advantage. The reality is all of our sand is mined in the Midwest, United States. All of our use of our sand primarily for oil and gas is in basins outside of the Midwest.
All of our sand has to move by rail to terminals, which is then loaded into trucks and delivered to the well sites. Logistics is a key component of our business, and one of the key drivers to our success is that we've been able to invest not only in high-quality mines, but we've invested in terminals and also invested in third-party relationships to allow us to ship our sand very efficiently into all the operating basins in North America. We currently have four terminals which we own today. We have our Van Hook Terminal in North Dakota, our Waynesburg Terminal in Southwest Pennsylvania, our two terminals in Ohio in Minerva and Denison, and we also have a fifth terminal in El Reno, Oklahoma. We're well positioned to take advantage of the projected growth in natural gas demand in the U.S. This is one of our key strengths.
I think it's underappreciated by the market, and we'll talk about this more in a later slide. Today, natural gas demand is growing substantially due to the needs for LNG export capacity as well as power to support AI data center growth. 70% of our sand today goes into natural basins that are drilling for natural gas. We're well positioned to help support that growth in that market. We're looking to grow and diversify our business into industrial applications as well. It only represents about 5% of our sales today, but we've grown it by over 80% year over year, and we're really looking to grow that business, hopefully to be 10% or more of our sales over time.
It really allows us to diversify into other markets to use the broader mix of our products that we make and also the industrial business as a steadier cash flow stream because it's more tied to just general GDP and economic activity versus the volatility that we typically see in the oil and gas business. Additionally, we have a very high-quality fine mesh reserve base today in the frac sand market. Sand used to be a product to frac oil and gas wells. Over 80% of the demand is for what we call fine mesh sand. We make four products: 20/40, 30/50, 40/70, and 100 mesh for the frac markets. 40/70 and 100 mesh is the primary product being used in the oil and gas business today. Our reserves are heavily a majority of fine mesh sand, which allows us to have over 70% of our reserves of fine mesh.
As we are able to process our sand, we're much more efficient and have much less waste because of that reserve quality of our base. We also have a very large and long-lived reserve base. We have over 500 million tons of reserves at three different locations with over 30+ years of reserve life. We, first of all, have the sand that the market wants, and secondly, we have large quantities of it that we can serve that market for a long time. Some really key points in terms of our capital structure and our management structure is we have a very prudent capital structure. We've always been very focused on having very low debt levels. It's really, frankly, allowed us to survive the cycles that are typical in the oil and gas industry, and a lot of our competitors got over-leveraged and led to either bankruptcies or restructurings.
We were able to avoid that by always maintaining low level debt. We'll use debt prudently to help us grow our business and sustain our capital, but we're always going to try to do it at a very focused and low leverage because we know our business will continue to have cycles in the future. We have a management team that's very aligned with our investors. Chuck Young, our founder, owns over 18% of the business. Other insiders like myself and other members of management and the board collectively own another 18%. Our management team owns over 36% of the business. We're not just managers of this business. We're long-time owners. We're invested in the business. We're aligned with our shareholders to look to create long-term value for Smart Sand and for our shareholders, for us as well as our outside shareholders.
Finally, like every other in the energy business, we know shareholders want to see some return on capital while still delivering growth and managing our business prudently. We've done that. Over the last three years, we've delivered almost $20 million of value back to our shareholders in a combination of share buybacks and dividends, and we plan to continue to do that in the future. This just kind of lines out the overall process for the frac sand business. We'll get into some more detail later, but we're a very efficient business in which, in all of our locations, we mine the sand. It gets delivered to our plants to get washed and dried. From there, on that location, it gets put into rail cars in 100 to 150 rail car shipments that then get shipped to terminals, either our own terminals or third-party terminals.
In that market, the sand is then put into trucks and delivered to the well site, of which we also offer well-site storage solutions to help our customers not only get the sand, not only provide the sand that they're using to frac the wells, but help them manage the sand at the well site to efficiently get it into their pressure pumping equipment. This is some of our financials. You can see we had a dip in the first quarter. That was really due to timing of our customers. Had a very strong fourth quarter last year, ramped up the first half in the first quarter. Customers kind of ramped up slowly, but you can see it picked up very well in the second quarter, and that led to improving financials both on a contribution margin basis as well as adjusted EBITDA.
We've sold about 2.5 million tons in the first half of the year, and we guided on our last earnings call that we expect to sell in the range of 2.5 million tons in the second half of the year as well. We expect the second half of the year to be equally as good as what we saw in the first half, if not better. We also additionally believe northern white is a superior product. Today, nearly all of our sand goes to three primary markets. We sell sand into what we call the Appalachian basins, which is the Marcellus and the Utica. The Marcellus is a primary dry gas basin. The Utica is a gas and liquids basin in Ohio.
While the Marcellus is mainly Pennsylvania and West Virginia, we also sell into the Bakken, which is primarily an oil basin, and we are expanding our ability to sell sand into Canada. Our sand is going into the Montney and Duvernay shales of Canada, which is drilling for natural gas for supply of LNG export capacity on the West Coast of Canada. As I mentioned earlier, 70% of the basins we serve are natural gas-based, so we're really tied well to the natural gas business. Those are our three primary markets, primarily because the Texas markets, the Permian, the Eagle Ford, and other markets in Texas moved to regional sand, not because of quality, because it had less logistics costs, and they were able to lower their cost of their profit in completing their wells. We believe quality ultimately does matter. We've had studies done.
Studies have been done by Rystad, which demonstrates that wells done with northern white sand versus regional sand in the Permian in particular get better long-term well results. We continue to market in those areas to kind of demonstrate that producers could get more value long-term if they use northern white sand. We haven't had a lot of success yet on that, but we still are continuing to push and market our sand in those markets. I just want to be clear, though, Smart Sand does not need to be selling sand into the Permian or the Eagle Ford to be successful. We have a tremendous amount of growth and potential in the markets we serve. We're well positioned to serve those markets.
We want to sell sand to these other markets, but that would just be an incremental benefit to what we think is a leading player of northern white in the markets we serve today. In terms of the market overview, I think a key thing to point out here, and I think this is, if you follow the energy business, this is something you'll see across the board in terms of focus of where the opportunities in North America are driving energy activity. It really comes to focus is that there's a huge potential demand increase for natural gas driven by two things. First of all, LNG capacity. LNG capacity in the Gulf Coast of the United States, as well as Canada, is right now projected to double from 15 Bcf a day to approaching 30 Bcf a day by the end of this decade.
That's an incremental 15 Bcf a day of demand that needs to come online of gas to support that capacity of LNG that's going out into international markets. Secondly, and potentially equally as important, is power generation for AI. AI is exploding in terms of building data centers. Data centers use a tremendous amount of power. Power generation needs to be added. A lot of that power generation is going to be fed by natural gas, mainly because it is a clean burning fuel, as well as it's quicker to bring to market and bring those power plants online. It's really looking to lead to an incremental growth in demand for natural gas as well from this growth in power to support AI data centers.
You can see on the bottom chart on the right that over the next five years, there's another 8 to 10 Bcf of incremental demand that could be needed in the U.S. to support this growth. That all leads to the fact that today we're producing about 100 to 105 Bcf a day. We potentially need to be able to produce as a country 125 to 130 Bcf a day, which should lead to a lot of increasing activity in natural gas basins. Smart Sand is well positioned to deliver the prop and to help support that growth. Some other drivers in the business, which we think continue to be positive trends for us. I'll have a slide in a minute that shows that frack spreads, which are the pressure pumping equipment to frac oil and gas wells in the U.S.
The data is for the U.S. I have, but it's similar in Canada, is flattening out and potentially dropping, but the amount of sand being used per each well continues to increase. There are really two drivers for that. First is the EMP producers continue to extend the lateral of the horizontals and make it longer so they can try to get more oil or gas out of each well they drill. An average lateral might have been 5,000 to 10,000 feet in 2000 to 2015. Laterals today are approaching 15,000 to 20,000 to even 25,000 feet in a single lateral, which they're drilling in a well to produce oil and gas. With that increasing lateral, it becomes more stages, which requires more proppant to complete that longer lateral. Just the length of the lateral is driving more proppant per well. Producers are also increasing the intensity of the frac.
For each stage of that, that they're fracking of that lateral, they're using more proppant to try to get more oil or gas out of each stage. They're going longer laterals, more intensity per lateral, leading to more proppant demand per well. This next chart, the graph on the right, I think really demonstrates that. You can see it continues to go up on the right, which is a very positive trend. Even though frack spreads may be flattening out and even decreasing in some markets, they're actually up in the natural gas basins this year. The amount of sand per frack spread per quarter continues to increase, which means there should continue to be increasing demand for sand, even if what we view as some leading indicators are showing kind of flagged activity. In terms of our process, it really begins with our mine.
Again, Chuck and our company have really focused on having very large footprints with large reserves that we can basically process, mine, process, and ship all of our sand from one location to really give us a low operating cost. Additionally, we recognize very early that the frac sand business in particular is a bulk business that needs large quantities of sand, and that's only increased over time. The amount of sand they use per well today is double the amount of sand they used five or ten years ago. Having strong access to railroads is very important to us. Through our three facilities, we have connections directly to four Class 1s, and then those Class 1s direct very efficiently to the Northern, the NS, and the CSX as well. At Oakdale, we can connect to the CP and the UP.
At Ottawa, we have direct connection to the BN, and at Blair, we connect directly onto the CN. Another point to make here is that not all railroads serve all basins equally. To be able to compete in all the basins where northern white is competitive, we need to have access to more than one rail line. The CP, for example, gets us very good access into the Bakken, and then through connection to the NS and CSX, we get very good access into the Appalachian basins. The BN allows us to get into the Western United States as well as the Southern United States. The UP allows us to get into the Western United States as well as the Southern United States.
The CN was very important as one of the reasons we bought our Blair facility, because the CN feeds directly into the Montney and Duvernay shales, and we weren't able to really compete into that market effectively until we had a mine that was on the CN. That's what led to our acquisition of Blair in 2022. The combination of us having very efficient mines coupled with great rail access, and we also have very low royalty rates that allow us to be very efficient operations at our mining facilities. We're really focused on being a low-cost producer, and that really is driven by being very efficient in the process of mining sand. On site, we first mine the sand from the pit. It gets either delivered by a haul truck on site or mixed with water and hydro, and delivered by pipe and pumped to the wet plant.
The wet plant processes the sand to clean out the impurities. That sand gets dried in our dry plants, and it gets sorted by product. It gets directly loaded onto rail cars on our site, and again, very large shipments of 100 to 150 rail cars to be efficiently sent to the basins. This is just an overview of our Oakdale facility. It's 5.5 million tons. It is our largest facility in our regional facility. It has the east plant, which is on the top part of this chart, which is two dryers and one wet plant, and then the west plant down below, which is fully enclosed, two dryers and one wet plant as well. We have over 11 miles of rail track here that you see in the middle. All those little gray dots are actually rail cars.
We can hold up to 700 rail cars at this location, and we have over 1,000 acres and over 200 million tons of reserves of 70% fine mesh sand at this location. It's a very efficient operation, and we've been focused on being a very efficient, low-cost operator, low-cost and efficient delivery of sand in a commodity market. This just gives you some pictures of what our loading capabilities are at Oakdale. Our Ottawa facility is a facility we bought idle from Eagle Materials in September of 2020. It's one dry plant, one wet plant, fully enclosed. It can operate year-round. It's well positioned. While we do sell frac sand from this facility, this is really where our focus for industrial sand sales are.
One of the reasons we purchased it is because it's well positioned just about an hour and a half outside of Chicago and very well positioned to other industrial markets in St. Louis and Kansas City and parts of Indiana and Ohio to allow us to really truck from this facility to lower our logistics costs, and our sand matches up well to industrial applications. Our goal is to ultimately typically have this facility be a majority, if not almost 100% industrial sand over time. Again, it's about 1.6 million tons of total capacity today. Our Blair facility, I think this is a facility that we think has a lot of potential and could rival Oakdale in terms of profitability and utilization over time. This is a facility we bought from High- Crush. It was idle. We bought it in 2022.
The main reason we bought this facility is, first of all, it's very well built. It's very efficient, has the same kind of mining processing and logistics capabilities that our Oakdale facility does, but also it was on the CN, which allows us now to compete in the Canadian markets. That opened up a new market today. In 2022, we were selling basically no sand in Canada. Today, it represents about 10% of our sales. While we're going to continue to grow our U.S. markets, we think this market can continue to grow substantially as well. It's added a third really strong key market for us to deliver northern white sand into. Talked a lot about this already, but logistics is a big part of our business. Throughout, it's roughly two-thirds of our cost to get our sand to our customers in the basin. I don't want to overemphasize.
We focused on really building and being able to ship sand in bulk commodity shipments. Nearly 90% of our sales today are what are called unit train shipments, where you load up 100 and 150 cars at one of our locations, either Oakdale, Ottawa, or Blair. It is then shipped on a single movement from our plant directly to a terminal where it's unloaded at the terminal. It immediately turns around, and then those 100 and 150 cars come straight back to our facility. It really reduces the turnover time. It takes generally three to five days to get to the terminal, two to three days to unload, three to five days to get back.
We can turn that rail car two, maybe sometimes three times in a month versus less efficient facilities that will do a manifest space where they may load up 20 or 30 cars, have to go to a second and third location to in effect build a unit train that gets delivered in the basin. It may take two or three stops before our sand can get to the market, and that may take over 30 days plus before we get that rail car back. It really allows us three things. First of all, it allows us to be able to negotiate better rail rates with our rail carriers because they're getting more efficient use of their power.
It allows us to really get a better value and return on our investment in our leased rail cars because we pay a fixed cost per month to those rail cars, and we're turning it. We're able to lower that cost per ton. Third, with our own terminals, it allows us to be able to really control those shipments and manage them in and out efficiently so we can bring in those bulk shipments and be able to serve the growing demand for our customers very efficiently. This is our Van Hook Terminal.
Basically, our terminal focus has primarily been trying to do it on a capital-light investment, which we like to have a lot of track so that we can bring in a lot of rail cars, and then we unload the rail cars with portable conveyors right into the rail trucks, and we avoid having to pay for a lot of fixed storage. We bought the Van Hook Terminal in 2018, and whenever we own our own terminal, we're able to greatly expand our market presence in that basin. Prior to 2018, we sold less than 5% of our sand into the Bakken market. Van Hook serves the Bakken market in North Dakota. Today, depending on the month or quarter, we may sell anywhere from 25%- 30% of our sand into that market. It's been a great addition to our ability to deliver sand for our customers. Waynesburg is similar.
We invested in this facility in 2020. It fully commenced operations in 2022. It really allowed us to grow our market share in the Marcellus basin. This is a facility that continues. We've expanded it. We're looking at other options there, but it feeds really well into Southwest Pennsylvania and West Virginia markets, and it has allowed us to substantially grow our market share in the Marcellus basin in particular. In 2023, we bought two idle terminals, bought them for $1.3 million. I brought them online in the fall of 2023 and earlier, and now they are driving real growth for us in the Utica basin. There's a lot of growth potential in the Utica basin. Producers like EOG, and they particularly bought Encino because of its presence in the Utica basin, are really looking to grow there because of its liquids potential as well as natural gas.
These terminals have really allowed us to really expand to that market as well. We do have our Smart Path and our silos and our ability to manage sand at the well site. It's a pretty small part of our business today, about 5%. Basically, we can provide customers either silos only where sand is delivered in a truck, fed into the silos, and that sand gets fed into the pressure pumping equipment. We also have our proprietary portable transloading system that can unload the sand through the transloader very efficiently and fast to fill into our silos on kind of a support boat basis and then into the equipment for the pressure pumping. Again, a small part of our business, an area that we're looking to grow kind of incrementally over time, but is an additional value add that we can add to our customers.
We feel like it's well positioned in terms of how we can deliver the sand, manage the sand, and deliver the sand into the pressure pumping equipment. We feel that it's very effective relative to the competitors that we are competing with in the market. Lastly, we do have the industrial products business today. Again, it represents about 5% of our sales, but it's been growing pretty rapidly. It's grown over 80% versus where we were a year ago. We have made investments. We bought the Ottawa facility for about $1.5 million, but we've added about $5 million- $10 million in investments in cooling and custom blending and other abilities to allow us to serve the industrial market. That's starting to pay dividends for us as we grow that business.
The key markets we're looking to really grow in here are the foundry, the glass, engineered stone, building products, sports turf, actually beach volleyball sand. It also goes into paints and grouts and other things. A couple of things we believe really allow us to have a competitive advantage to grow this business over time. First of all, we have a very high-quality sand. It's very white in color, which is important. Because of how we built our business, we're able to always provide very quality service and sustainable supply, which is important to industrial users. Right now, it's a very small part of our business, but we expect to grow this, continue to grow pretty rapidly. Our goal, as I highlighted earlier, we do sell some industrial sand from Blair and Oakdale, but the big driver for us is really going to be out of our Ottawa facility.
We look for that facility to be majority industrial sand over the next three to five years, if not moving almost exclusively to industrial sand by the end of this decade. We've touched on all these points, but we believe we have a sustainable operating model with a very large, high-quality reserve base that not only has a large amount of reserves, but also 70%+ fine mesh sand to meet the demand of the oil and gas business. Because of our business model, we're very focused on being a low-cost operator and have very strong, efficient, and reliable logistics capability to deliver our sand to our customers in a very efficient, sustainable, and cost-effective way.
We add that with our last mile offering and the ability to leverage our base and sell into industrial product solutions as well to really give us a fully diversified business to grow and continue to grow, providing northern white and being a leading provider of northern white in the markets today. As I highlighted earlier, we have a very prudent capital structure, low leverage. We'll continue to have low leverage and manage our business so that we can manage through the operating cycles of the oil and gas industry. As we highlighted earlier as well, we have a management team that's committed to the business. All of the executives have been with the company 10+ years or longer. We're all owners in the business. Chuck Young, our founder, owns 18% of the business.
We are partners with our shareholders and are looking to drive long-term value by getting better utilization and increasing utilization out of the assets we have today, looking to incremental growth and opportunities, particularly in terminals, to grow and increase our market share and our volumes across the basins we serve, and also return value back to our shareholders in the form of either stock buybacks and/or dividends. That is the end of my prepared comments, and I'll turn it back over to Robert.
Fantastic, Lee. Thank you so much. Fantastic presentation there. Thank you to everybody who's watching here today. If you do have any follow-up questions or perhaps would like to schedule a meeting with management during the conference here, you can send me an email. That's bloom@lythampartners.com. Further, if you'd like to learn more about Lytham , you can visit our website or be sure to follow us on LinkedIn so you can stay connected on future events such as this discussion here with Smart Sand . Lee, thank you again very much for the time. Appreciate your participation in the conference, and we hope everyone has a great day.
Thanks, Robert.