All right. Hello everyone, and thank you all for continuing to join us throughout the day here at the Lytham Partners Fall 2026 Investor Conference. Again, my name is Robert Blum, Managing Partner here at Lytham. Up next, Lee Beckelman, Chief Financial Officer at Smart Sand, will be taking us through the company's slide presentation. Lee, thank you so much for your participation today. The floor is all yours.
Thanks, Robert, and thanks everyone for joining us today to learn more about Smart Sand. I'm Lee Beckelman, our CFO. I've been with the company since 2014, and I'm going to tell you about our company today. Smart Sand is a pure play Northern White provider of sand in North America. We have a very high quality reserve base, over 450 million tons of reserves of primarily fine mesh sand, and that's important because in the oil and gas market today, 80%-90% of the demand is fine mesh reserves. We also have a very high quality sand that can help improve and lead to longer reserve lives for companies that use Northern White. In addition to a high quality, large reserve base, we have 10 million tons of operating capacity in three locations, and those locations are all tied to Class I rail lines.
Logistics is a very important part of our business because all of our sand gets shipped by rail to our customers, so having a very efficient logistics operation is key to our business. Again, we have 10 million tons of capacity, 5.5 million tons at Oakdale that's connected directly to the Canadian Pacific and Union Pacific railroads. 1.6 million tons of capacity at Ottawa, Illinois, that's connected to the Burlington Northern, and 2.9 million tons in Blair, Wisconsin, that's connected to the Canadian National. Last year we sold about 5.4 million tons. Through the first half of this year, we're on pace to sell north of 6 million tons. While we're operating at high levels, we still have room to grow in our existing capacity. So we have room to grow the business substantially without having to spend a lot of capital to capture that incremental growth.
As I mentioned earlier, sustainable long-term supply and logistics advantage is key to our business. Being able to deliver our sand cost effectively and efficiently in the markets we serve is important. So we've invested in terminals throughout the U.S. in our key basins we serve, and we ship all of our sand, for the most part, by unit train shipments that are very large shipments that allow us to have very efficient and low-cost logistics operations. We're a low-cost operating business. We are in a commodity business. We sell our sand to oil and gas producers, and that is driven by the price of oil and natural gas.
We have to be very competitive throughout the operating cycles in the oil and gas industry. How we operate our plants, which I will touch on in a little bit, is key to us always being a low-cost producer and being able to compete in all operating cycles of the industry. We are very well positioned to take advantage of the rising natural gas demand in the U.S. and in Canada. We will touch on this a little more later in the presentation, but natural gas demand growth is expected to grow dramatically over the next several years. 60%-70% of our volumes today for frac sand go into natural gas markets where they are drilling and completing wells for natural gas. We are very well positioned to grow with that incremental industry growth. At the same time, we have been able to diversify our business.
90%-95% of our business today is selling sand to oil and gas producers to frack oil and gas wells. We have a small but growing business in the industrial product solutions, selling sand to industrial applications, and we continue to grow that and expect that to be a bigger part of our business on a go forward basis. We also have a very prudent capital structure in that we have very low leverage. We have always been one of our core principles is maintain low leverage, and that has allowed us to be able to manage through the ups and downs of the oil and gas industry cycles, and to be able to be well positioned when the cycles return and get strong, we are able to take advantage of that. We have a management team that is very aligned with investors.
Our CEO and Founder, Chuck Young, owns 18% of our stock today. Insiders, including myself, other executives, board members, and founders own another 18%, approximately. Together we own 36% of the business. We are aligned with the shareholders in that we are aligned to be long-term as investors in the business and be focused on what the long-term value proposition is for Smart Sand. While we have plenty of room to grow and opportunity to grow within our existing asset base with our large reserve base and our capacity of 10 million tons, we do have opportunities to grow. We also have the ability as we generate free cash flow to give value back to our shareholders. We have been doing that over the last several years. We have delivered over $34 million back to our shareholders since 2023.
We have repurchased about 7 million shares since 2023, and we have been giving value back to our shareholders in a combination of a special dividend and stock buybacks. In terms of the market overall, I think this is key to our growth opportunity for us, and you have seen that in our growth and our volumes in the first half of the year. Currently we expect to continue into the remainder of 2026 and beyond. It is really being driven by natural gas demand in the U.S. These charts represent that incremental growth demand. In the left corner here, you can see that LNG capacity is one of the key drivers for incremental growth demand in the U.S. and in Canada.
Today, we produce about 18 Bcf/d to 20 Bcf/d of gas that is going into existing LNG facilities, where that gas gets liquefied and then shipped throughout the world into different international locations. As you can see on this chart, over the next five years, LNG capacity in the U.S. is expected to grow from around 20 Bcf /d currently, to 30 Bcf/d to 35 Bcf /d . That is an incremental 10 Bcf/d to 15 Bcf/d of gas, of demand that needs to be supported by new incremental supply coming on in the U.S. and Canada. Secondly, another key driver for increasing growth and natural gas demand is the exploding power needs to support data centers. A lot of that power that is coming on to support that growth and electrical power to support that data center capacity will be natural gas fired plants.
And with some pushback on actually that power coming from the grid, that is even leading to more and more data centers looking to have behind-the-meter electric plants that just feed electricity directly into their facilities, and a lot of those facilities are going to be fed by natural gas. And that is leading to another potential 5 Bcf/d to 7 Bcf/d of incremental demand for gas over the next three to five years. So on a combined basis, you are looking at potentially 20 Bcf/d or more of incremental demand for sand versus what we are producing today. To give you some context, today, the U.S. produces about 110 Bcf/d of gas.
Over the next five years, if this demand all materializes, that production levels need to grow from 110 Bcf /d to 120, 125, to potentially 130 Bcf / d. That is going to lead to a lot more incremental wells being drilled and completed to support that demand, and that is a key driver that we think will continue to lead to strong demand for Northern White sand. Because again, 70% of our market goes to markets that are serving and drilling natural gas wells. The other thing that is continuing to drive increasing demand for frac sand is longer laterals. In horizontal drilling, and you drill a lateral, the lateral is where you basically penetrate the basin to allow the oil and gas to be produced. And laterals continue to get longer and longer.
That means there will be more need for sand, because the longer the lateral is, the more you have to sand, go throughout the lateral, and that increases the amount of sand for each well being drilled. You can see on here that one of the leading areas where the laterals are grown the most is in the eastern United States. You also see good strong growth in the blue line there, which is in the Bakken. But across all basins in the U.S., lateral lengths have been increasing from the 6,000 ft to 7,000 ft level to, in the northeastern United States today, approaching over 16,000 ft or more on an average basis. The main basins that Smart Sand serves today are four primary basins. The Marcellus and the Utica, which are in the eastern United States, so they represent this yellow line.
The Bakken, and those markets are primarily natural gas driven markets. The Bakken, which is an oil market, which is in North Dakota, and then the Montney and Duvernay Shales, which are in Canada. All these markets are, as the producers try to get more efficient, they're having longer laterals, and each lateral is going to require more sand. In addition, not only are they taking more sand because of longer lateral, they're using more sand per foot. They're increasing the intensity of the fracs. This is all about producers being more efficient. As they for each individual well they're drilling, they're trying to get more oil and gas production out of each well. Again, they're doing that two ways, by increasing the lateral length of the well, so there's a longer footage to try to produce oil and gas.
Secondly, they're increasing the intensity of the stages of the frac to try to get more oil and gas out of each foot of the lateral. One of the ways they're increasing that intensity is using more sand per foot. So we're having a combination of longer laterals requiring more sand, as well as more sand per foot, leading to increasing demand for frac sand. We expect these trends to continue. Again, we expect the market to have strong demand in natural gas markets, which we're well positioned to take advantage of. In terms of the company, we built our business, we are a bulk commodity business. We mine and produce our sand in mines in Wisconsin and Illinois.
The sand has to be transferred by rail to the operating basins, where it's taken out and transloaded into trucks at a terminal, and the trucks deliver that sand to the well site, where the sand is then transloaded from the trucks into temporary storage, which allows that sand then to be used into the pressure pumping equipment. We're a fully integrated business. We mine and produce the sand at our locations. We have very large rail footprints that we're able to load up in unit train shipments at our mine sites that we then ship to either our own terminals or third-party terminals in the basins. From there, it gets trucked to the well sites, at which we do also provide the well site storage equipment at the well site to deliver that sand into the pressure pump equipment at the well. Our mines are very efficient.
Again, we have 10 million tons of capacity. We believe we're one of the largest in terms of capacity and reserves, one of the largest providers of Northern White sands in North America. All of our mines are on Class I railroads. That's very important because that allows us to be very efficient in terms of delivering our sand to our customers in a cost-efficient manner. Also, we have multiple locations and good access to all the different Class I railroads, because not all Class I railroads serve all the operating basins we need to be able to compete effectively in the markets where Northern White is a primary source of frac sand. Our UP and our connections at Oakdale on the CP and the UP allow us to access North Dakota and the Eastern U.S. very efficiently out of Oakdale.
The BNSF in Ottawa allows us to access the Western U.S. for the frac sand business. The CN Blair is really what allows us to get into the Canadian market. It is important to have large quality reserve bases on multiple railroads to allow us to access all the basins that we want to access to be able to compete in all the Northern White markets. We also have a very fine mesh sand, so it is a very large, fine mesh sand, and allows us to be very efficient in our operations. Again, on a cost perspective, we need to be a low-cost operator, and we are very focused on that, and that is really driven by how we have set up our mines. We have very large footprints of which we do the mining, processing, and loading of the sand onto the rail cars all in one location.
It allows us to be very efficient in terms of how we mine and process our business. We basically, at our facility, will strip mine into a pit, we will load that sand either into a large haul truck or we will mix it in water and we will pump it or deliver it by truck, again, on-site, not having to go on any kind of roads or deliver to any different location to our wet plant, which then cleans the sand and sorts it into a coarse and fine feed, which then goes into the dryers. From the dryers, the sand then goes into silos and be delivered into our rail car. So it is a very efficient, low-cost operation. We also have very low royalty rates at our facilities, and we have a very high mining yield.
Again, 90% of the demand today for frac sand is fine mesh sands, and 70+% of our reserves is fine mesh. So we are able to get a very high yield in processing our sand, which matches up well to demand in the market. This just gives you an overhead view of Oakdale, which is our largest facility. Again, this is 5.5 million tons of capacity. This location is over 1,300 acres. We have over 250 million+ reserves. We have five dryers, two wet plants, over 11 mi of rail track that can handle over 700 rail cars. This is, again, we were focused from day one to make sure we had access to Class I railroads.
We could ship in very large shipments, and we are able to process very efficiently by having a very large reserve base and being able to mine, process, and ship all in one location. Our logistics is very important to our business and something we have invested heavily in over the last five or six years to make sure that we can compete effectively in the basins that we serve. Roughly 2/3 of our cost is logistics. We sell our sand typically at the terminal. That is where we transfer title. So we are responsible for the rail car, we are responsible for the freight, we are responsible for the cost of transloading the sand in terminal. So being very efficient on logistics is a very important part of our business. We have invested in five terminals that help us operate our business.
We have the Waynesburg terminal in Southwest Pennsylvania, that gives us very strong access to the southwestern part of the Marcellus market, which is again, a dry gas basin. We have two terminals, one in Dennison, Ohio, and Minerva, Ohio, that has given us access to the Utica Basin, which is a combination gas, natural gas, and oil basin. We have a terminal in Van Hook, North Dakota. It allows us very good access into the Bakken, and we will continue to look for other terminals to be able to expand our footprint, because when we have a terminal, and we control that terminal, we can dramatically increase our market share in those markets. This is important because again, freight is a big part of our cost.
Being able to ship on unit train shipments where we load 100 to 150 cars at the mine site, those cars then go directly to the terminals in the basins without any stops in between, allows us to deliver that sand very cost effectively and negotiate lower rates with our rail carriers. It allows us to be able to turn that rail car multiple times a month to reduce the amount of cost for that rail car, because that's a fixed cost to us that we rent on a monthly basis, and also allows us to be able to negotiate and when we have our own terminals, to be able to operate at very low cost there. This is a key part of our business, something we invested in.
We'll continue to look for new terminals in the markets we serve, to help grow our market share in our main operating basins. As I alluded to earlier, we do provide the well site storage service. It's a small part of our business today, represents about 5% of our overall revenues today. It's an added service we provide for companies that we sell sand to, where when the trucks deliver the sand to the well site, we can unload that through our proprietary portable transloader that then feeds it into our portable silos and ultimately feeds that into the pressure pumping equipment to frac the oil or gas well. Then a growing part of our business, a small piece, represents about 5% of our sales today, but it's grown substantially, over 60% year-over-year from [inaudible] 2025 versus 2024.
It's a part of our business that continues to grow, and we see good opportunities for growth here. This will come primarily out of our Ottawa, Illinois facility. Ottawa is well positioned to take advantage and to grow in the industrial sand markets around the Chicago metropolitan market and in the Midwest. Finally, in summary, again, we are a pure-play Northern White provider. We're very focused on having a very sustainable and efficient, cost-effective, and long-term value operating model. It really, as we've talked about today, starts with our high-quality, large reserve base, our low-cost operations at our mine sites, our unit train capabilities at the mine sites to connect to Class I railroads allows us to get good cost-efficient and effective access to all the operating basins we serve.
Our investments in terminals that allows us to be able to deliver that sand in very large volumes very efficiently, effectively, on a cost-effective basis for our customers. We have a very prudent capital structure. This is, frankly, a lot of our competitors in one of the downturns went through restructures and bankruptcies. We were able to work through that because we had low leverage levels. In this type of business where oil and gas prices can change pretty dramatically from period to period, having a low debt structure allows us to be able to manage through the down cycles, but also take advantage and really be able to grow and be able to take advantage of the up cycles very aggressively. We have a management team that is committed to our long-term capital structure, committed to long-term shareholder value.
18% owned by Chuck Young, our Founder. We are a family business. Four brothers are in the business and will continue to be in the business and leading the operations. We have over 36% ownership in our insiders, among other executives, board members, and founders. While we have a lot of opportunity to grow the business with our very large reserve base and additional capacity available to grow into, we can also continue, while growing the business, deliver value back to our shareholders in a combination of special dividends and stock buybacks. Thank you very much.
All right, Lee. Thank you very much for the participation here in the conference. Thank you, of course, everybody here for watching. If you would like to schedule a meeting here with Lee and Smart Sand, shoot me an email, blum@lythampartners.com, either here at the conference or in the weeks to come. Further to learn more about Lytham, make sure you visit our website, lythampartners.com, or follow us on LinkedIn and subscribe on YouTube to make sure you stay connected on future events such as the presentation from Lee here. We hope you all enjoy the rest of the conference here. Have a great day. Lee, again, thanks so much for your participation.
Thank you.