Why Smart Sand Inc.'s Shares Popped 18% Today

What happened

Shares of Smart Sand Inc (NASDAQ: SND) jumped as much as 17.9% in trading Wednesday, after the company announced a big new contract in North Dakota. Shares settled some later in the day and finished 9.7% up.

So what

In anticipation of the recently acquired rights to a unit train-capable transloading terminal, the company agreed to a "take or pay" agreement with a large exploration and production company. The customer wasn't announced, but the company said the contract will begin generating revenue as soon as April.

Oil well in the middle of an open field.

Image source: Getty Images.

A take-or-pay contract ensures revenue likely profit for Smart Sand and can be a way to stabilize a business for the long term.

Now what

The market certainly liked the new contract for Smart Sand, probably because it indicates a continued recovery in the business. Smart Sand was able to grow net income in 2017, and with fracking growing in the U.S., it looks like 2018 will be another good year. After a long fall in shares last year, this may be a buying opportunity for this fracking supplier.

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Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.