HOUSTON, April 28, 2016 /PRNewswire/ -- CARBO Ceramics Inc. (NYSE: CRR) today reported
a GAAP net loss of $24.7 million, or
a loss of $1.07 per share, on
revenues of $33.1 million for the
quarter ended March 31, 2016.
The GAAP net loss includes $5.7
million, or $0.25 per share,
of after-tax charges and $6.5
million, or $0.28 per share,
of after-tax costs associated with slowing and idling
production.
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CEO Gary Kolstad commented,
"Continued low commodity prices further reduced industry activity
levels during the first quarter of 2016 as the North American
average rig count declined 57% compared to the first quarter of
2015. Given the pressure to reduce costs during this downturn,
E&P operators are currently opting for lowest-cost completions,
at the risk of compromising production. In some resource plays,
E&P operators are also electing not to complete the wells they
drilled. These factors negatively impacted our ceramic sales
volumes during the quarter.
"As oil and gas activity continued to deteriorate, we witnessed
an acceleration in the inventory liquidation of stranded,
low-quality Chinese ceramic proppant. Although the near-term impact
is negative for our ceramic sales volume, we believe this
liquidation benefits us in the long term as the inventory of
imported Chinese ceramic proppant is sold off.
"Our efforts to preserve cash and reduce the cost structure of
the organization continued during the first quarter. In
addition to continued headcount rationalization, we are
implementing programs that allow us to further reduce cash
compensation.
"We remain focused on our mission to provide technology that
increases production and recovery and reduces lease operating
expenses. We believe the industry's bias to lowest-cost
completions is a direct result of operators merely trying to
survive this downturn. From a long-term standpoint, we are
very excited about the increasing value our technology portfolio
brings to our clients," Mr. Kolstad said.
First Quarter 2016 Results
Revenues for the first quarter of 2016 decreased 55%, or
$40.6 million, compared to the first
quarter of 2015. The decrease was primarily attributable to a
57% reduction in the average North American rig count, which
resulted in a decrease in proppant sales volumes (as specified in
the Proppant Sales Volumes table below), associated reductions in
the average proppant selling prices, and a move to lowest-cost
completions.
Operating loss for the first quarter of 2016 was $36.1 million compared to $42.5 million in the first quarter of 2015.
The improvement was largely due to a $14.4
million decrease in miscellaneous charges and cost cutting
measures implemented beginning in early 2015. These
improvements were partially offset by the revenue decline explained
above.
Net loss for the first quarter of 2016 was $24.7 million, compared to $28.6 million in the first quarter of 2015.
Proppant Sales
Volumes
(in million
lbs)
|
Three Months
Ended
March 31,
|
|
2016
|
2015
|
|
|
|
Ceramic
|
120
|
177
|
Northern White
Sand
|
75
|
343
|
Total
|
195
|
520
|
Summary of
Miscellaneous Charges and Other Production Costs
|
Miscellaneous
Charges
(In
thousands)
|
Three Months
Ended
March 31,
|
|
2016
|
2015
|
|
|
|
Impairment of
Long-Term Bauxite Reserves
|
$ 1,065
|
$
-
|
Loss on Derivative
Instruments
|
227
|
12,547
|
Severance and
Inventory Charges
|
7,144
|
10,327
|
Tax effect
|
(2,775)
|
(6,167)
|
After-tax
Total
|
$ 5,661
|
$ 16,707
|
Other Production
Costs
(In
thousands)
|
Three Months
Ended
March
31,
|
|
2016
|
2015
|
|
|
|
Slowing and idling
production
|
$ 9,707
|
$ 8,421
|
Tax effect
|
(3,194)
|
(2,947)
|
After-tax
Total
|
$ 6,513
|
$ 5,474
|
Technology and Business Highlights
- QUANTUMTM, an innovative Propped Reservoir
VolumeTM (PRVTM) imaging service, has seen
significant interest from E&Ps. As a result, field
testing has been accelerated. QUANTUM fracs allow E&Ps to
visualize the location of the PRV for the first time which will
improve decision making in well spacing, perforation cluster
spacing, fluid selection and proppant selection. QUANTUM will
enable E&Ps to maximize their EURs and develop their reserves
more economically.
- Following the successful introduction of KRYPTOSPHERE® LD on a
high-profile Utica well in the fourth quarter of 2015, interest in
this technology has been strong. KRYPTOSPHERE LD was pumped
in another high profile well in the first quarter of 2016.
This low density, high strength, and highly conductive proppant is
being incorporated into a number of new completion designs in other
U.S. basins and internationally.
- CARBONRT®, an inert detection technology, is continuing to
expand its applications in the international market with successful
implementation in a horizontal well in Saudi Arabia. This detection technology was
successfully used to verify the effectiveness of a new diverter
treatment in multiple stages.
- CARBONRT "GP" proppant was also developed in the first quarter
of 2016 to meet client needs for detection in open-hole gravel pack
completions. This proprietary method allows the evaluation of pack
quality, including the top of gravel. This technology has spawned
interest in various geographical areas and is scheduled for
implementation on an international offshore project.
- A comparison performed on two deep Marcellus Shale wells demonstrated that a well
utilizing CARBOECONOPROP® in a tail-in application outperformed a
comparable fracture design using white sand and resin-coated sand
by over 40% after the first 150 days of production. The
production increase represents approximately $1.1 million of net incremental value in the
first five months. Further optimization using the STRATAGEN®
WELLWORX® data-driven model indicated that an additional 20%
production improvement can be made by increasing the CARBOECONOPROP
tail-in portion of the completion design. It is estimated
that this tail-in modification will generate in excess of
$500,000 of additional value per well
for the operator.
- SALTGUARDTM field trials conducted in the Bakken in
the third quarter of 2015 continue to provide positive results.
SALTGUARD prevents salt scale from forming in the frac and
wellbore, preventing a decrease in production, lowers lease
operating expenses and eliminates need for costly fresh water
injection. Two additional GUARDTM products,
PARAGUARDTM and H2SGUARDTM, will enter field
trial mode in the second quarter of 2016.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "Given
the overall levels of industry activity, the near-term outlook for
ceramic proppant remains extremely challenging. In addition,
the inventory liquidation of low-quality Chinese ceramic proppant
in North America will likely lead
to additional pressure on our ceramic proppant volumes during the
second quarter of 2016.
"We continue to manage through this downturn with a two-pronged
approach. The first focuses on cash preservation and cost
reductions across the organization. The second focuses on the
advancement of our proprietary technologies. KRYPTOSPHERE LD
continues to be engineered into E&P operators' completion
programs, and we see continued client interest for KRYPTOSPHERE HD
for deep, high-stress wells in the Gulf
of Mexico and international areas. In addition,
SCALEGUARD technology provides a break-through scale control
solution for deepwater wells, at a lower cost than has ever been
possible.
"We continue to stay in front of our clients via our technical
marketing team as well as our independent STRATAGEN
consultants. Their emphasis is on providing up-to-date
production studies which highlight the benefits and value creation
of placing high conductivity ceramic proppant in the
reservoir. We estimate that over 50% of the wells drilled in
the U.S. will have closure stress greater than 6,000 psi, a point
at which even the best white sand will start to crush. Using
sand in these wells means the production and recovery of these
reservoirs will be compromised.
"Given the continuing deterioration in the industry, and with
limited visibility on when an industry recovery may occur, we
believe it will be necessary to seek additional sources of capital
beyond our recently amended credit facility. In addition, we
are exploring the monetization of certain technologies to further
bolster our cash reserves. During the first quarter of 2016,
we reduced debt by $23.0 million and
ended with $41.5 million in
cash. This ending cash balance excludes the income tax refund
of $37.4 million received in late
April.
"The industry is navigating through unprecedented times, but we
are focusing on areas that are within our control. Many
of the decisions we have made have not been easy; however, they are
essential to maintaining an enduring company and will position us
well for the next upcycle," Mr. Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss
CARBO's first quarter 2016 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/10083988
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 May 5, 2016 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
10083988. 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, and product development risks, our
dependence on and loss of key customers and end users, 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, 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
March 31,
|
|
2016
|
2015
|
|
(In thousands except
per share)
|
Revenues
|
$
33,102
|
$
73,747
|
Cost of
sales
|
56,743
|
99,745
|
Gross loss
|
(23,641)
|
(25,998)
|
SG&A
expenses
|
11,475
|
16,547
|
Loss (gain) on
disposal or impairment of assets
|
948
|
(32)
|
Operating
loss
|
(36,064)
|
(42,513)
|
Other expense,
net
|
(721)
|
(131)
|
Loss before income
taxes
|
(36,785)
|
(42,644)
|
Income tax
benefit
|
(12,101)
|
(14,042)
|
Net loss
|
$
(24,684)
|
$
(28,602)
|
Loss per
share:
|
|
|
Basic
|
$
(1.07)
|
$
(1.24)
|
Diluted
|
$
(1.07)
|
$
(1.24)
|
|
|
|
Average shares
outstanding:
|
|
|
Basic
|
23,063
|
22,975
|
Diluted
|
23,063
|
22,975
|
|
|
|
Depreciation and
amortization
|
$
12,291
|
$
12,994
|
Supplemental
Income Statement
(Break-out of
miscellaneous charges and other production costs)
|
|
|
|
Three Months
Ended
March 31,
|
|
2016
|
2015
|
|
(In
thousands)
|
Revenues
|
$
33,102
|
$ 73,747
|
Cost of
sales
|
40,121
|
69,770
|
Slowing and idling
production
|
9,707
|
8,421
|
Other
charges
|
6,915
|
21,554
|
Gross loss
|
(23,641)
|
(25,998)
|
SG&A
expenses
|
11,019
|
15,227
|
Loss (gain) on
disposal or impairment of assets
|
948
|
(32)
|
Other
charges
|
456
|
1,320
|
Operating
loss
|
(36,064)
|
(42,513)
|
Other expense,
net
|
(721)
|
(131)
|
Loss before income
taxes
|
(36,785)
|
(42,644)
|
Income tax
benefit
|
(12,101)
|
(14,042)
|
Net loss
|
$ (24,684)
|
$ (28,602)
|
Balance Sheet
Information
|
|
|
|
|
March 31,
2016
|
December 31,
2015
|
|
(in
thousands)
|
Assets
|
|
|
Cash and cash
equivalents
|
$
41,462
|
$
78,866
|
Deferred
income taxes
|
-
|
49,495
|
Other current
assets
|
174,608
|
156,916
|
Property,
plant and equipment, net
|
528,616
|
537,731
|
Goodwill
|
3,500
|
3,500
|
Intangible and
other assets, net
|
11,337
|
9,861
|
Total
assets
|
$ 759,523
|
$ 836,369
|
|
|
|
Liabilities and
Shareholders' Equity
|
|
|
Bank
borrowings (current)
|
$
12,349
|
$
33,000
|
Derivative
instruments (current)
|
6,010
|
6,240
|
Other current
liabilities
|
24,089
|
31,050
|
Deferred
income taxes
|
39,867
|
63,858
|
Bank
borrowings (noncurrent)
|
52,651
|
55,000
|
Derivative
instruments (noncurrent)
|
4,361
|
4,915
|
Shareholders'
equity
|
620,196
|
642,306
|
Total liabilities and
shareholders' equity
|
$ 759,523
|
$ 836,369
|
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-first-quarter-2016-results-300259016.html
SOURCE CARBO Ceramics Inc.