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yeap QLTS just like http://www.wsj.com/articles/small-firm-strikes-it-rich-with-fracking-sand-1410801465 A small Texas investment firm has discovered a gold mine in a pile of Wisconsin sand.

Insight Equity Holdings LLC, a private-equity firm based in Southlake, Texas, manages $1.3 billion and has fewer than 20 investment specialists. The firm has scored about $500 million of gains for investors in 12 years of small-scale buyouts in various industries, a respectable figure but not eno ugh to gain much recognition in Texas, let alone on Wall Street.

Insight's anonymity may be nearing an end, thanks to an investment that has gone from embarrassing to enormous in just four years. The firm owns about 30% of Emerge Energy Services LP, which started out supplying sand to golf courses but has struck riches mining the silica crystals for energy companies.

Emerge Energy closed at $122.78 a share on Monday from $17 at its initial public offering in May 2013. The surge has generated paper and realized gains for Insight and its investors of about $1.4 billion, on an investment of $91 million.

"It's exciting," said Ted Beneski, Insight's chief executive, who acknowledges checking Emerge Energy's stock price "about 10 times a day." Mr. Beneski himself owns shares valued at about $80 million.

The U.S. shale boom has generated huge wealth for chief executives including Harold Hamm of Continental Resources Inc. and Charif Souki of Cheniere Energy Inc. But it continues to create new fortunes from investments that in some cases weren't initially aimed at cashing in on the growth of hydraulic fracturing, or fracking. In this process, sand is mixed with water and chemicals, then pumped down a hole to create fractures allowing oil and natural gas to be extracted from rock formations.

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In 2008, Insight, based about a halfway between Dallas and Fort Worth, paid $70 million to purchase a regional, family-run firm called Texas Sports Sands, which supplied sand to golf courses in east Texas and to some local roofing companies.

Insight bet that more companies would embrace fracking and figured that more fracking would mean greater demand for the Texas sand, ideal for natural-gas drilling.

Less than a year later, however, natural-gas drilling slowed significantly, as natural-gas prices tumbled on the heels of the financial crisis and as gas supplies soared. As recently as the middle of 2010, Texas Sports Sands, which was renamed Superior Silica Sands, was virtually worthless, Mr. Beneski said.

In 2011, Insight shifted course, using about $25 million of the firm's cash to build a facility to mine sand in Wisconsin, which has coarse, Northern White sand more suitable for fracking oil wells. Hundreds of acres of hills were flattened to extract the sand, Mr. Beneski said.

Insight also received $16 million to help build the facility from customers eager to get their hands on Wisconsin sand, including oil-service companies Schlumberger Ltd. and Baker Hughes Inc., which received a commitment of future sand shipments in exchange for their investments.

Over the past three years, oil drilling has boomed in shale-oil formations around the country. Natural-gas production also has revved up, boosting demand for the original Texas mine.

Still, when Insight merged Superior Silica with two other energy holdings to create Emerge Energy and the company went public as a master limited partnership last year, few showed much excitement. The company's IPO priced below the expectations of Insight's executives, who had hoped for $22 a share.

"It felt terrible; it felt like we were being taken advantage of, to be honest," said Mr. Beneski.

But over the past year or so, drillers have determined that using larger amounts of sand in fracking can lead to much better energy production. That has led to surging demand for Emerge Energy's sand and soaring shares.

While the firm's fuel division, which separates gasoline and diesel from refined fuel, is a steady performer, Insight acknowledged that sand is key to Emerge Energy's growth.

An Emerge Energy plant in Wisconsin. 'We're very bullish that a lot of upside is left,' said CEO Rick Shearer. ENLARGE
An Emerge Energy plant in Wisconsin. 'We're very bullish that a lot of upside is left,' said CEO Rick Shearer. EMERGE ENERGY SERVICES / SUPERIOR SILICA SERVICES
Frackers are expected to use nearly 95 billion pounds of sand this year, according to the latest report from energy-consulting firm PacWest Consulting Partners. That is up nearly 30% from 2013 and a 50% increase from forecasts made by the firm a year ago.

"Sand-demand growth is showing no signs of slowing down as industry [oil and natural-gas] volumes are expected to grow by 22% by 2017," according to a report by brokerage Tudor, Pickering, Holt & Co.

Other private-equity firms have uncovered their own fortunes in the sand. San Francisco-based Golden Gate Capital raked in more than $1 billion of profit by buying U.S. Silica Holdings Inc., another sand supplier, in 2008, at the dawn of the shale boom. The buyout firm sold the last of its shares in 2013. The stock is up 175% in the past year. Golden Gate declined to comment.

Insight's gains could have been even larger. The firm owned more than 70% of Emerge Energy's shares before the IPO, but sold some stock when the company went public and other shares through an add-on sale. Had Insight held on to those shares, it would be sitting on an additional $400 million in paper profits.

Mr. Beneski said there likely will be more stock sales over the next year, as the firm exits its investment. "It has been an incredible performer," Mr. Beneski said, though he noted his team is "very conscious" that the bulk of the gains are on paper.

Emerge Energy is opening new production facilities that will add to the supply of sand, potentially sending prices lower. The company can produce 4.4 million tons of sand a year but will ultimately increase capacity to 12 million tons. Its sand production is expected to double by the end of 2015. Rivals are boosting their own capacity as well.

Brokerage Robert W. Baird recently downgraded Emerge Energy to a "neutral" rating from a "buy," saying the stock is expensive.

Prices for sand could drop as supply expands, Mr. Beneski said, "but demand is expected to continue to outstrip supply" as oil and gas producing stays strong. He also said it is getting harder for new sand companies to get approvals to build mining facilities.

"We're very bullish that a lot of upside is left," said Rick Shearer, Emerge's president and chief executive officer. "Every step of the way in the shale-gas revolution has included using more natural sand and proppant."

—Ryan Dezember and Matt Jarzemsky contributed to this article.

Write to Gregory Zuckerman at [e-mail]