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CARBO® Announces Second Quarter 2017 Results

Conference Call Scheduled for Today, 10:30 a.m. Central Time

HOUSTON, July 27, 2017 /PRNewswire/ -- CARBO Ceramics Inc. (NYSE:CRR) today reported financial results for the second quarter of 2017.

  • Revenue for the second quarter of 2017 of $43.6 million, an increase of 111% year-over-year and 26% sequentially.
  • Year-to-date 2017 revenue up 46% compared to the same period in 2016, anticipate full year 2017 revenue to grow at least 60% year-over-year.
  • Revenue mix and continued reduced fixed structural costs, resulted in an incremental adjusted EBITDA of approximately 61%, compared to the first quarter of 2017.
  • Subsequent to quarter end, received remaining $12.3 million under $65 million credit facility.
  • Subsequent to quarter end, signed agreement for the disposition of Russian proppant business for $22 million.

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The Company reported revenues of $43.6 million and an operating loss of $23.7 million for the quarter ended June 30, 2017 compared to revenue of $20.7 million and an operating loss of $30.0 million in the same period of 2016. The operating loss includes $11.1 million of costs primarily associated with slowing and idling production, two thirds of which is non-cash.

CEO Gary Kolstad commented, "Revenue continues to rebound and is now up 115% off the trough witnessed in the third quarter of 2016. We made progress during the second quarter in expanding our opportunities in technology products and services, and in our industrial products and services. Our efforts to reduce fixed structural costs resulted in increased fall-through on revenue growth. These are the key parts of our strategy to strengthen and build upon the foundation that we believe will make CARBO a stronger company in the future.

"Although the oil and gas industry remains challenging, we are pleased with our technology product sales during the quarter. We continue to find opportunities for our value-added, production enhancement technologies in a low commodity price environment that leaves many operators focusing primarily on upfront costs. In addition, we saw revenue growth in the Fracpro® software, StrataGen® consulting, and base ceramic businesses.

"Frac sand continues to see strong demand as operators push the limits on the volumes of sand being pumped into today's wells. Given this demand, we are now at full utilization at our sand plant in Marshfield, Wisconsin.

"Our strategy to grow the industrial products and services business is proceeding. We initiated several product tests with potential new clients, laid the groundwork to expand our sales channels and introduced two new products for testing during the second quarter of 2017.

"As we mentioned last quarter, we started plant trials at our facilities to produce products other than base ceramic proppant. Those mineral processing plant trials have proven successful and have led to increased revenue generation in the second quarter of 2017. We continue to develop additional opportunities within the industrial, agricultural and oil and gas industries to return our idle assets back to work.

"AssetGuardTM, our environmental business, improved on the back of increased oil and gas industry activity. In addition, we started to capitalize on efforts to generate revenue from industrial opportunities during the second quarter of 2017.

"We continue to right-size our fixed costs to better align with activity levels. During the second quarter of 2017, we made strategic decisions to reduce our distribution footprint through facility closures and subleasing of facilities, yet remain flexible enough to serve our client base. We are also finding additional opportunities to sublease idled rail cars and generate revenue from rail cars dedicated to the frac sand business.

"Subsequent to quarter end, we met remaining post-closing conditions under our $65 million credit facility and received the remaining $12.3 million. On a pro-forma basis, our cash balance at quarter end including this $12.3 million, stands at $62.9 million. In addition, subsequent to quarter end, we signed a share purchase agreement to sell our Russian proppant business for $22 million and, subject to local regulatory approval, expect the closing of this transaction to occur in the third quarter of 2017. This additional liquidity, coupled with our expectation for reduced cash burn in the second half of 2017, keeps our balance sheet strong," Mr. Kolstad said.

Second Quarter 2017 Results

Revenues for the second quarter of 2017 increased 111%, or $22.9 million, compared to the same period of 2016. The increase was primarily attributable to increases in technology product sales, frac sand sales, and environmental product sales.

Operating loss for the second quarter of 2017 was $23.7 million as compared to $30.0 million in the same period of 2016, primarily due to the increased sales combined with a reduction in certain fixed structural costs, and a decrease in slowing and idling expenses.

Technology and Business Highlights

  • QUANTUM™, a proprietary Propped Reservoir Volume™ (PRV™) imaging service, completed another field trial in the STACK during the quarter as the technology and service continues to be enhanced and perfected. Operators continue to express strong interest in QUANTUM and its ability to visualize the location of the PRV to optimize well spacing and stimulation design.
  • KRYPTOSPHERE® HD was successfully pumped by another super major E&P company in a deep well in the Gulf of Mexico's Lower Tertiary. KRYPTOSPHERE HD provides higher conductivity than conventional bauxite-based proppant, is more resistant to cyclic loading and acids, and is significantly less erosive on frac pumps and downhole tools.
  • CARBONRT® ULTRA, an inert detection technology that is 100% environmentally safe as compared to radioactive tracers, was successfully deployed in the Powder River Basin to evaluate fracture height. The operator had previously used the technology to calibrate its fracture models and then pressure match the data and corresponding log results to help optimize its completion program.
  • CARBONRT ULTRA was also used to evaluate a re-fracturing operation for a previously stimulated zone in offshore Colombia. By utilizing CARBONRT ULTRA in both fracs and deploying a pulsed neutron logging tool both pre and post-frac, the log evaluation showed an increase in fracture height at the perforation interval. The technology used in this exploratory well, in conjunction with production and temperature logs, will allow the operator to optimize key reservoir characteristics.
  • SCALEGUARD®, a proppant-delivered scale-inhibiting technology, experienced another solid quarter with several new clients and increased use in the Permian basin. A single scale inhibition treatment with SCALEGUARD can prevent production losses during the life of the well and dramatically reduce lease operating expenses. Advances in product placement techniques have enabled GUARD technologies to be used in non-propped completions such as acid stimulations during the quarter.
  • A successful SALTGUARD® field trial performed in the North East has demonstrated positive results after several months of salt inhibition and several new trials are scheduled to transition the technology into commercialization. SALTGUARD inhibits salt buildup in the frac and wellbore in order to prevent production decreases, lower lease operating expenses and eliminate the need for costly fresh water injection and the associated disposal of the resulting saltwater.
  • In the Utica, a major...