HOUSTON, July 30, 2015 /PRNewswire/ -- CARBO Ceramics Inc. (NYSE: CRR) today reported
a GAAP net loss of $17.0 million, or
a loss of $0.74 per share, on
revenues of $73.3 million for the
quarter ended June 30, 2015.
This net loss includes $7.6 million,
or $0.33 per share, of after-tax
costs primarily associated with slowing and idling
production.
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CEO Gary Kolstad commented, "We
are pleased to see our ceramic proppant sales volumes increased 7%
sequentially, despite an average North American rig count that
declined 40% sequentially. The industry environment remains
extremely challenging, but we are making progress in several
areas. We continue to create opportunities to help
E&P operators make better wells through the application of our
existing and new technologies, thereby increasing estimated
ultimate recovery (EUR) and lowering their finding and development
costs.
"CARBO expanded the boundaries
of proppant technology as we successfully employed KRYPTOSPHERE® HD
and SCALEGUARD® technologies in a challenging deep well
environment, the Lower Tertiary formation in the Gulf of Mexico. Both of these technologies,
KRYPTOSPHERE and SCALEGUARD, continue to garner interest across a
number of the oil and gas plays in the industry.
"Developing and delivering leading technologies is a core focus
of CARBO. Incorporating these technologies into our
Design, Build, and Optimize the Frac® platform allows
E&P operators to increase well production and EUR. This
synergistic platform is being recognized within the E&P
community as it helps lower finding and development costs, reduce
costly workovers and minimize lost production. The deployment of
new technologies during the second quarter is a testament of
E&P operators' desire to improve reservoir recovery.
"We continue to execute on our cash preservation and cost
reduction efforts. Idling our production facilities over the
last quarter to lower inventory, along with our cost reduction
efforts, has reduced working capital, produced positive operating
cash flows and helped maintain the strength of our balance
sheet. Toward the end of the second quarter, we started
bringing production back online, albeit at reduced levels. We
are also pleased that we reached an agreement with our lender to
amend our credit facility and believe it should provide the
additional flexibility needed to navigate the downturn," Mr.
Kolstad said.
Second Quarter Results
Revenues for the second quarter of 2015 decreased 59%, or
$103.3 million, compared to the
second quarter of 2014. The decrease was mainly attributable
to a decrease in ceramic proppant and resin coated sand sales
volumes (as specified in the Proppant Sales Volumes table below) in
conjunction with market-driven reductions in the average selling
prices.
Operating loss for the second quarter of 2015 was $24.9 million compared to an operating profit of
$34.1 million in the second quarter
of 2014. The decrease was mainly attributable to the decrease
in ceramic proppant sales volumes and a decrease in average
proppant selling price. In addition, the Company expensed
$11.2 million in unabsorbed
production costs as a result of low production levels and idled
facilities. These miscellaneous charges and other production
costs are presented in the tables below. The impact of these
items was partially offset by SG&A cost cutting measures
implemented in early 2015.
Net loss for the second quarter of 2015 was $17.0 million, compared to net income of
$23.0 million in the second quarter
of 2014.
Proppant Sales
Volumes
(in million
lbs)
|
Three Months
Ended
June 30,
2015
|
Three Months
Ended
June 30,
2014
|
|
|
|
Ceramic
|
190
|
454
|
Resin Coated
Sand
|
10
|
43
|
Northern White
Sand
|
258
|
271
|
Total
|
458
|
768
|
|
|
Summary of Other
Production Costs and Miscellaneous Charges
|
|
Other Production
Costs
(In
thousands)
|
Three Months
Ended
June 30,
2015
|
Three Months
Ended
June 30,
2014
|
|
|
|
Slowing and idling
production
|
$ 11,208
|
$ -
|
Tax effect of other
production costs
|
(3,923)
|
-
|
Total
|
$ 7,285
|
$ -
|
|
|
|
Miscellaneous
Charges
(In
thousands)
|
Three Months
Ended
June 30,
2015
|
Three Months
Ended
June 30,
2014
|
|
|
|
Loss on Derivative
Instruments
|
$
58
|
$ -
|
Severance
|
318
|
-
|
Tax effect of
miscellaneous charges
|
(21)
|
-
|
Total
|
$
355
|
$ -
|
Technology and Business Highlights
- As announced in June, both KRYPTOSPHERE HD and recently
commercialized KRYPTOSPHERE SCALEGUARD were successfully employed
by a major E&P operator in the Gulf
of Mexico's Lower Tertiary trend, marking the largest and
deepest job for these proprietary technologies to date. To address
the operator's production challenges, CARBO engineered a tailored solution for their
deepwater well by incorporating these two innovative technologies.
Combining KRYPTOSPHERE HD and SCALEGUARD enabled the operator to
both maximize conductivity and scale-control.
- CARBONRT® use and client base continues to expand
internationally. This inert detection technology was used to
measure the propped fracture height near the wellbore and verify
propped fracture containment within target formations. During the
quarter, the technology was deployed in Australia, India and New
Zealand.
- A Marcellus E&P operator is conducting a field trial of a
new tracer proppant in its stimulation program to determine
perforation cluster efficiency. The new product utilizes NRT
technology with a new manufacturing process, enabling it to be used
with all proppants, including sand, thereby increasing applications
to all fracs. This was the first horizontal well application in
North America and will help the
operator optimize its completion design, thus increasing EUR.
- SCALEGUARD use was expanded in the Permian basin. An
independent E&P operator incorporated the scale inhibiting
technology into its stimulation design on four wells to alleviate
long-term scaling issues commonly associated with the San Andres formation.
- SCALEGUARD was also used for the first time in the southern
portion of the Eagle Ford basin. An independent E&P operator
used the technology as part of its completion program on two wells.
Early production performance data shows a dramatic improvement in
the gas decline curve in comparison to offset wells as a result of
the elimination of scale previously inhibiting flow in the proppant
pack.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "As it
appears the rig count may be stabilizing, and with E&P
operators having seen large well cost reductions, we are cautiously
optimistic on the opportunities for increases in our new technology
sales. Base ceramic proppant sales volumes may remain stable
in the third quarter of 2015. Imports of the low-quality,
Chinese ceramic proppant have subsided this year; however, we
believe the inventory of imported ceramic proppant in the U.S. may
still be at levels that keep pressure on pricing.
"In the last several quarters, we have seen experimentation by
operators using large amounts of sand to frac wells. Given
the time that has elapsed, there is increasing evidence in the
production data that suggests using large amounts of sand is not
the best approach to optimize the frac when certain reservoir
conditions exist. In addition, we have started to see clients
returning to ceramic proppant in their completions after having
gone through periods of experimentation with other completion
techniques. From a technical viewpoint, low permeability
reservoirs need both large reservoir contact area and high
conductivity fracs to optimize the completion. Using large
amounts of sand only addresses one part (i.e., contact area), and
as a result, conductivity in the fractures suffers, reducing
recovery. In fact, a leading operator recently made a
presentation that showed through production studies they can
increase EUR for approximately $5 per
incremental barrel by optimizing their completions, in part with
ceramic proppant.
"As an industry, we are only recovering a minimal amount of the
oil and gas in these unconventional reservoirs. We have to do
better, and we believe CARBO has
an integral role to play in the evolution and delivery of
production enhancement technologies. We will continue our
technical marketing campaign, centered on the Design, Build,
and Optimize the Frac
platform, which provides our clients with the technical expertise,
technology products, and services to make better wells, increase
production, and lower their finding and development costs and lease
operating expense.
"Notwithstanding the challenging base ceramic proppant market,
our new proppant technologies are making inroads within the
industry. Another Gulf of Mexico KRYPTOSPHERE and SCALEGUARD
job is scheduled for the third quarter, and we expect additional
sales of these new proppant technologies in the quarters
ahead. We are working diligently to add KRYPTOSPHERE
manufacturing capacity to meet increased demand for the
product. The first phase of our retrofit to an existing
facility is expected to start production by the end of the third
quarter of 2015. When the second phase of the retrofit is
completed in early 2016, annual KRYPTOSPHERE capacity will total
250 million pounds. Field trials for additional new proppant
technologies are ongoing and nearing completion. We will
provide more details once the evaluations of the new technologies
are complete.
"Our efforts to date on our cash preservation and cost reduction
initiatives continue to yield positive results. Going
forward, we remain focused on maintaining a strong balance sheet
and generating positive operating cash flows in the second half of
the year," Mr. Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss
CARBO's second quarter results is
scheduled for today at 10:30 a.m. Central
Time (11:30 a.m.
Eastern). Due to historical high call volume, CARBO is offering participants the opportunity
to register in advance for the conference by accessing the
following website:
http://dpregister.com/10068803
Registered participants will immediately receive an email with a
calendar reminder and a dial-in number and PIN that will allow them
immediate access to the call.
Participants who do not wish to pre-register for the call may
dial in using (877) 232-2832 (for U.S. callers), (855) 669-9657
(for Canadian callers) or (412) 542-4138 (for international
callers) and ask for the "CARBO
Ceramics" call. The conference call also can be accessed through
CARBO's website,
www.carboceramics.com.
A telephonic replay of the earnings conference call will be
available through August 6, 2015 at
9:00 a.m. Eastern Time. To access the
replay, please dial (877)-344-7529 (for U.S. callers), (855)
669-9658 (for Canadian callers) or (412) 317-0088 (for
international callers). Please reference conference number
10068803. Interested parties may also access the archived webcast
of the earnings teleconference through CARBO's website approximately two hours after
the end of the call.
About CARBO
CARBO focuses on integrating
technologies to produce engineered solutions in its Design,
Build, and Optimize the Frac technology businesses, delivering
important value to E&P operators by increasing well production
and EUR.
For more information, please visit www.carboceramics.com.
Forward-Looking Statements
The statements in
this news release that are not historical statements, including
statements regarding our future financial and operating
performance, are forward-looking statements within the meaning of
the federal securities laws, including the Private Securities
Litigation Reform Act of 1995. All forward-looking statements
are based on management's current expectations and estimates, which
involve risks and uncertainties that could cause actual results to
differ materially from those expressed in forward-looking
statements. Among these factors are changes in overall
economic conditions, changes in the demand for, or price of, oil
and natural gas, changes in the cost of raw materials and natural
gas used in manufacturing our products, risks related to our
ability to access needed cash and capital, our ability to meet our
current and future debt service obligations, including our ability
to maintain compliance with our debt covenants, our ability to
manage distribution costs effectively, changes in demand and prices
charged for our products, risks of increased competition,
technological, manufacturing, distribution and product development
risks, our dependence on and loss of key customers, changes in
foreign and domestic government regulations, including
environmental restrictions on operations and regulation on
hydraulic fracturing, changes in foreign and domestic political and
legislative risks, the risks of war and international and domestic
terrorism, risks associated with foreign operations and foreign
currency exchange rates and controls, weather-related risks and
other risks and uncertainties described in our publicly available
filings with the Securities and Exchange Commission. We
assume no obligation to update forward-looking statements, except
as required by law.
-tables follow -
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
(In thousands except
per share data)
|
(In thousands except
per share data)
|
Revenues
|
$
73,252
|
$ 176,561
|
$
146,999
|
$ 325,125
|
Cost of
sales
|
83,554
|
122,913
|
183,299
|
227,113
|
Gross (loss)
profit
|
(10,302)
|
53,648
|
(36,300)
|
98,012
|
SG&A and
other operating expenses
|
14,615
|
18,728
|
31,129
|
35,681
|
Start-up
costs
|
-
|
811
|
-
|
811
|
Operating (loss)
profit
|
(24,917)
|
34,109
|
(67,429)
|
61,520
|
Other (expense)
income, net
|
(4)
|
200
|
(136)
|
292
|
(Loss) income before
income taxes
|
(24,921)
|
34,309
|
(67,565)
|
61,812
|
Income tax (benefit)
expense
|
(7,917)
|
11,292
|
(21,959)
|
20,368
|
Net (loss)
income
|
$
(17,004)
|
$
23,017
|
$
(45,606)
|
$
41,444
|
(Loss) earnings per
share:
|
|
|
|
|
Basic
|
$
(0.74)
|
$
1.00
|
$
(1.98)
|
$
1.79
|
Diluted
|
$
(0.74)
|
$
1.00
|
$
(1.98)
|
$
1.79
|
|
|
|
|
|
Average shares
outstanding:
|
|
|
|
|
Basic
|
22,999
|
22,948
|
22,987
|
22,948
|
Diluted
|
22,999
|
22,948
|
22,987
|
22,948
|
|
|
|
|
|
Depreciation and
amortization
|
$
14,012
|
$ 11,903
|
$
27,006
|
$
23,706
|
|
|
|
Supplemental
Income Statement
(Break-out of other
production costs and miscellaneous charges)
|
|
|
Three Months
Ended
June 30
|
Six Months
Ended
June 30
|
|
2015
|
2014
|
2015
|
2014
|
|
(In thousands
)
|
(In thousands
)
|
Revenues
|
$
73,252
|
$ 176,561
|
$
146,999
|
$ 325,125
|
Cost of
sales
|
72,130
|
122,913
|
141,900
|
227,113
|
Slowing and idling
production
|
11,208
|
-
|
19,629
|
-
|
Loss on derivative
instruments
|
58
|
-
|
12,605
|
-
|
Lower of cost or
market and other inventory
adjustments
|
-
|
-
|
4,372
|
-
|
|
|
|
|
Severance
|
158
|
-
|
4,793
|
-
|
Gross (loss)
profit
|
(10,302)
|
53,648
|
(36,300)
|
98,012
|
SG&A and
other operating expenses
|
14,455
|
18,728
|
29,649
|
35,681
|
Start-up
costs
|
-
|
811
|
-
|
811
|
Severance
|
160
|
-
|
1,480
|
-
|
Operating (loss)
profit
|
(24,917)
|
34,109
|
(67,429)
|
61,520
|
Other (expense)
income, net
|
(4)
|
200
|
(136)
|
292
|
(Loss) income before
income taxes
|
(24,921)
|
34,309
|
(67,565)
|
61,812
|
Income tax (benefit)
expense
|
(7,917)
|
11,292
|
(21,959)
|
20,368
|
Net (loss)
income
|
$
(17,004)
|
$
23,017
|
$
(45,606)
|
$
41,444
|
Balance Sheet
Information
|
|
|
June 30,
2015
|
|
December 31,
2014
|
|
(In
thousands)
|
Assets
|
|
|
|
Cash and cash
equivalents
|
$
106,584
|
|
$
24,298
|
Deferred
income taxes
|
37,012
|
|
11,348
|
Other current
assets
|
193,601
|
|
301,965
|
Property,
plant and equipment, net
|
574,466
|
|
568,716
|
Goodwill
|
12,164
|
|
12,164
|
Intangible and
other assets, net
|
20,872
|
|
15,735
|
Total
assets
|
$ 944,699
|
|
$ 934,226
|
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
Bank
borrowings
|
$
95,000
|
|
$ 25,000
|
Derivative
instruments (current)
|
5,941
|
|
-
|
Other current
liabilities
|
32,560
|
|
52,415
|
Deferred
income taxes
|
82,905
|
|
80,754
|
Derivative
instruments (long-term)
|
5,017
|
|
-
|
Shareholders'
equity
|
723,276
|
|
776,057
|
Total liabilities and
shareholders' equity
|
$ 944,699
|
|
$ 934,226
|
|
|
|
|
Contact:
Mark Thomas,
Director, Investor Relations
(281) 921-6458
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/carbo-announces-second-quarter-2015-results-300120998.html
SOURCE CARBO Ceramics Inc.