The timing was awful for the debt-financed deal as the market for fracking sand soured and competitors went bankrupt. After trying and failing to sell the industrial business,

U.S. Silica

SLCA 1.68%

finally seems to be digging its way out from under a mountain of debt still equal to its market value. Demand for sand and the prices oil and gas drillers are willing to pay for it are booming—a situation Chief Executive

Bryan Shinn

gleefully dubs “sandemonium.” Even the once-troubled industrial division is starting to click.

Following upbeat second-quarter results released late last month, analysts see the company earning $56 million this year according to consensus figures tracked by FactSet. That is seen nearly doubling in 2023. U.S. Silica hasn’t been profitable for a full year since 2017. And, more important than profit, the company is starting to spew cash with its highest free cash flow ever as a public company expected this year. Last month, following the end of the quarter, it repurchased $100 million of debt.

When wells are “fracked” in shale formations, sand is pumped in to keep tiny cracks in the rock open and hydrocarbons flowing. There are many types and the price varies by quality and location. For example, some sand grades in the northern U.S. known as Northern White from Wisconsin and Minnesota are particularly good for fracking. But sand is heavy stuff and costly to transport—especially now with diesel prices elevated and the nation’s truckers and train crews so busy. Today, sand favored by oil and gas producers in the nation’s main oil basins in Texas and surrounding states is locally mined in areas where U.S. Silica is well-represented.

That isn’t cheap either, though. A common grade called 100 Mesh sand in the prolific Permian Basin averaged about $55 a ton on the spot market in the second quarter, according to Lium Research. That is more than twice the price in the fourth quarter of last year and more than five times what it cost in the third quarter of 2020 when oil and natural gas well activity was depressed.

More important than spot prices, which are responsible for a minority of transactions, according to Lium Partner Joseph Triepke, are long-term contracts. With the next quarter “essentially sold out,” according to Mr. Shinn, those contracts probably are being signed at attractive prices. He told investors in July that he expects a “multiyear upcycle.”

At just 9.7 times next year’s projected earnings and 7.4 times 2024 projections, the stock is almost trading like the bottom is likely to fall out again. It probably will at some point in the notoriously boom-and-bust oil-and-gas industry, but here is where U.S. Silica’s nearly disastrous bid to diversify could finally pay off. With the potential for customers to use its industrial materials for new products ranging from pesticides to roofing, the financial future might be less bumpy than the past few years. That will especially be the case if the company uses the current windfall wisely and follows through on its pledge to keep reducing debt.

When the tide recedes, this sand company’s balance sheet could look like a castle.

Write to Spencer Jakab at spencer.jakab@wsj.com