HOUSTON, July 28, 2016 /PRNewswire/ -- CARBO Ceramics Inc. (NYSE: CRR) today reported
a GAAP net loss of $20.3 million, or
a loss of $0.88 per share, on
revenues of $20.7 million for the
quarter ended June 30, 2016. The GAAP net loss includes
$8.7 million, or $0.38 per share, of after-tax costs associated
with slowing and idling production.
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CEO Gary Kolstad commented, "The
operating environment within the oil and gas industry remained
extremely challenging in the second quarter of 2016. The
North American rig count declined 35% sequentially. However,
we believe the second quarter likely marked the bottom for activity
levels as both oil and natural gas commodity prices and the North
American rig count started to recover. Sales volumes began to
improve as the quarter progressed. In addition, with the
increasing commodity prices, we have received increasing customer
inquiries about procuring ceramic proppant for completions in the
second half of 2016.
"We remain committed to developing industry-leading fracture
technologies that increase well production and estimated ultimate
recovery (EUR). As the industry recovers, we believe that
E&P operators will be even more receptive to technology that
lowers their cost per Barrel of Oil Equivalent (BOE).
"SCALEGUARD® and KRYPTOSPHERE® technologies continue to gain new
clients. SCALEGUARD, the industry's most effective
in-fracture, long-term scale prevention technology, is designed to
improve the economic value of wells by both improving production
and EUR, as well as lowering lease operating expense (LOE).
KRYPTOSPHERE, the industry's most durable and highest conductivity
proppant, is designed to improve production and EUR in the
industry's most challenging, high stress well completions. We
are pleased that another major E&P operator will utilize
KRYPTOSPHERE HD in the prolific, but challenging, Lower Tertiary
play in the Gulf of Mexico.
"Some analysts have pointed out that productivity gains
(production/rig) are leveling off in the U.S. Some of this is
likely due to the drilling of the better prospects first, and also
the leveling off of rig efficiency gains. There are still
opportunities to change this trend with technology. The fact
remains that over 50% of the wells drilled in the Lower 48 will see
stresses that crush the best white sand. Often, the best
engineered approach to maximizing EUR will not be to just pump
higher volumes of sand, but rather design the fracs with a durable,
high conductivity proppant that lasts the life of the well.
"We significantly lowered our cost base in the quarter, and we
remain focused on cost reductions and cash preservation. We
were able to renegotiate contracts associated with some of our
leased railcars and also reduced SG&A expenses
sequentially. As announced in May, we bolstered our cash
reserves through a $25 million
placement of subordinated notes on attractive terms.
Maintaining financial flexibility remains essential," Mr. Kolstad
said.
Second Quarter 2016 Results
Revenues for the second quarter of 2016 decreased 72%, or
$52.6 million, compared to the same
period in 2015. The decrease was primarily attributable to a
53% 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 second quarter of 2016 was $30.0 million as compared to $24.9 million in the same period in 2015,
primarily due to the revenue decline explained above, and was
partially offset by cost cutting measures implemented beginning in
early 2015.
Net loss for the second quarter of 2016 was $20.3 million, compared to $17.0 million in the same period in 2015.
Proppant Sales
Volumes
(in million
lbs)
|
|
Three Months
Ended
|
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Ceramic
|
|
|
71
|
|
|
|
190
|
|
Northern White
Sand
|
|
|
41
|
|
|
|
258
|
|
Total
|
|
|
112
|
|
|
|
448
|
|
Technology and Business Highlights
- The second field trial with QUANTUM™, a proprietary Propped
Reservoir Volume™ (PRV™) imaging service, was completed in the
Marcellus basin. The test was conducted for an active, independent
operator and utilized iON™ detectable proppant to visualize the
location of the propped length and height on each perf cluster
within each frac stage. Once the analysis is complete, the iON
detectable proppant will provide information for the operator to
improve decision-making in well spacing and stimulation design.
Several more field trials are planned in the second half of 2016.
QUANTUM has the potential to unlock tremendous value for E&Ps
to develop their resource plays more economically.
- Two ultra-deep wells previously completed in the Lower Tertiary
with KRYPTOSPHERE SCALEGUARD have been on production for several
months. Water production samples verify the scale inhibitor
residual levels are as engineered. The SCALEGUARD treatments were
engineered to treat millions of barrels of water on the deep subsea
wells. Combining KRYPTOSPHERE and KRYPTOSPHERE SCALEGUARD has
become the standard completion design for the operator of these
wells.
- SCALEGUARD proppant-delivered, scale-inhibiting technology
continues to gain market acceptance. This Production Assurance
technology was used by several new clients in the Permian, Bakken
and Uinta basins during the quarter. To date, SCALEGUARD has
alleviated long-term scaling issues on hundreds of applications
with several wells now experiencing over two years of scale-free
production.
- A recently completed StrataGen® analysis of several deep Utica
wells drilled from the same pad indicates that completion and frac
designs utilizing CARBOECONOPROP® have a 36% higher return on
investment and will generate almost 50% more value after one year
of production compared to completions incorporating resin-coated
sand.
- Following the introduction of FUSION® in the Gulf of Mexico during the first half of 2016,
numerous jobs have been engineered and are scheduled to be
completed in the third quarter of 2016. FUSION is a proppant pack
consolidation technology which creates a bonded proppant pack
without closure stress. FUSION provides long-term well integrity
for production and injector wells, which has not been possible
before in certain reservoir and production conditions. The
integrity of the proppant pack can also be verified for the life of
the well.
- CARBONRT® continues to provide an understanding of
near-wellbore proppant placement in various applications. This
technology was recently utilized in a vertical completion in
Russia to successfully measure
propped fracture height growth to develop a better understanding of
the stress layers and bounding zones in the formation.
- CARBONRT enabled a Middle East
client to enhance completion effectiveness by providing insight on
achieving zonal isolation when using diverting agents. The
information gathered from multiple wells with varying diverter
systems, in conjunction with the measurement of proppant placement
and FRACTUREVISION™ evaluation services, led the operator to
optimize the stimulation program in that particular field.
- CARBONRT GP proppant was successfully deployed in two open-hole
gravel pack installations in offshore Trinidad and Tobago. The inert traceable
detection technology provided critical information to the operator
on whether channels or voids were present in the gravel pack, as
well as the location of the top of gravel. The proprietary method
was developed to evaluate pack quality and became a key factor in
determining the success of the gravel pack operation.
- Announced at-the-market equity offering program of up to
$75 million.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "We are
becoming more optimistic on the industry operating environment,
given recent oil and natural gas commodity price levels.
Communications with our clients lead us to believe third quarter
2016 ceramic proppant sales will increase from second quarter 2016
levels. In addition, the third quarter typically sees an
increase in industry activity due to coming out of Canadian spring
breakup and fewer weather-associated issues in the northern
regions. We anticipate an environment where E&P operators
gradually step back in to using more durable, high conductivity
proppants, likely concentrated on tail-in applications.
"On the technology front, KRYPTOSPHERE and SCALEGUARD continue
to see acceptance in this challenging market. We now have
wells using SCALEGUARD producing scale-free for over two
years. We also believe there is untapped value residing in
other areas of our technology suite. We continue to explore
ways to accelerate the value of these technologies.
"Efforts to reduce our cost base continue, including the
reduction of our railcar lease expense and SG&A costs. In
addition, higher natural gas commodity prices provide a cash
benefit relating to our excess natural gas commitments as these
contracts are net settled. As a result of these cost
reduction efforts, coupled with our efforts to further lower
inventory levels, we anticipate our quarterly cash burn to improve
next quarter.
"We are looking forward to the second half of 2016 which should
see improved overall industry activity levels due to the
improvement in the commodity price environment from the first
quarter of 2016. We will continue our focus on deriving
additional value from our technology platforms and strengthening
our balance sheet to afford us financial flexibility to capitalize
on opportunities during the next up cycle," Mr. Kolstad
concluded.
Conference Call
As previously announced, a conference call to discuss
CARBO's second 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/10089017
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 4, 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 10089017. 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 and liquidity and capital resources, are
forward-looking statements within the meaning of the U.S. Private
Securities Litigation Reform Act of 1995. Forward-looking
statements describe future expectations, plans, results or
strategies and can often be identified by the use of terminology
such as "may", "will", "estimate", "intend", "continue", "believe",
"expect", "anticipate", "should", "could", "potential",
"opportunity", or other similar terminology. 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
of 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. Additional factors that could
affect our future results or events are described from time to time
in our reports filed with the Securities and Exchange Commission
(the "SEC"). Please see the discussion set forth under the
caption "Risk Factors" in our annual report on Form 10-K for the
fiscal year ended December 31, 2015, our Form 10-Q for the
fiscal quarter ended June 30, 2016,
and similar disclosures in subsequently filed reports with the
SEC. We assume no obligation to update forward-looking
statements, except as required by law.
-tables follow -
|
|
Three Months
Ended
|
|
|
Six months
ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(In thousands except
per
share)
|
|
|
(In thousands except
per
share)
|
|
Revenues
|
|
$
|
20,651
|
|
|
$
|
73,252
|
|
|
$
|
53,753
|
|
|
$
|
146,999
|
|
Cost of
sales
|
|
|
40,663
|
|
|
|
83,554
|
|
|
|
97,406
|
|
|
|
183,299
|
|
Gross loss
|
|
|
(20,012)
|
|
|
|
(10,302)
|
|
|
|
(43,653)
|
|
|
|
(36,300)
|
|
SG&A
expenses
|
|
|
10,034
|
|
|
|
14,746
|
|
|
|
21,509
|
|
|
|
31,292
|
|
(Gain) loss on
disposal or impairment of assets
|
|
|
(23)
|
|
|
|
(131)
|
|
|
|
925
|
|
|
|
(163)
|
|
Operating
loss
|
|
|
(30,023)
|
|
|
|
(24,917)
|
|
|
|
(66,087)
|
|
|
|
(67,429)
|
|
Other expense,
net
|
|
|
(1,615)
|
|
|
|
(4)
|
|
|
|
(2,336)
|
|
|
|
(136)
|
|
Loss before income
taxes
|
|
|
(31,638)
|
|
|
|
(24,921)
|
|
|
|
(68,423)
|
|
|
|
(67,565)
|
|
Income tax
benefit
|
|
|
(11,342)
|
|
|
|
(7,917)
|
|
|
|
(23,443)
|
|
|
|
(21,959)
|
|
Net loss
|
|
$
|
(20,296)
|
|
|
$
|
(17,004)
|
|
|
$
|
(44,980)
|
|
|
$
|
(45,606)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.88)
|
|
|
$
|
(0.74)
|
|
|
$
|
(1.95)
|
|
|
$
|
(1.98)
|
|
Diluted
|
|
$
|
(0.88)
|
|
|
$
|
(0.74)
|
|
|
$
|
(1.95)
|
|
|
$
|
(1.98)
|
|
Average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
23,109
|
|
|
|
22,999
|
|
|
|
23,086
|
|
|
|
22,987
|
|
Diluted
|
|
|
23,109
|
|
|
|
22,999
|
|
|
|
23,086
|
|
|
|
22,987
|
|
Depreciation and
amortization
|
|
$
|
12,157
|
|
|
$
|
14,012
|
|
|
$
|
24,448
|
|
|
$
|
27,006
|
|
Supplemental
Income Statement (Break-out of other production costs and
miscellaneous charges)
|
|
|
|
Three Months
Ended
|
|
|
Six months
ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
|
|
(In
thousands)
|
|
|
(In
thousands)
|
|
Revenues
|
|
$
|
20,651
|
|
|
$
|
73,252
|
|
|
$
|
53,753
|
|
|
$
|
146,999
|
|
Cost of
sales
|
|
|
28,489
|
|
|
|
72,130
|
|
|
|
68,610
|
|
|
|
141,900
|
|
Slowing and idling
production
|
|
|
13,515
|
|
|
|
11,208
|
|
|
|
23,222
|
|
|
|
19,629
|
|
(Gain) loss on
derivative instruments
|
|
|
(824)
|
|
|
|
58
|
|
|
|
(597)
|
|
|
|
12,605
|
|
Other (gains)
charges
|
|
|
(517)
|
|
|
|
158
|
|
|
|
6,171
|
|
|
|
9,165
|
|
Gross loss
|
|
|
(20,012)
|
|
|
|
(10,302)
|
|
|
|
(43,653)
|
|
|
|
(36,300)
|
|
SG&A
expenses
|
|
|
10,251
|
|
|
|
14,586
|
|
|
|
21,270
|
|
|
|
29,812
|
|
(Gain) loss on
disposal or impairment of assets
|
|
|
(23)
|
|
|
|
(131)
|
|
|
|
925
|
|
|
|
(163)
|
|
Other (gains)
charges
|
|
|
(217)
|
|
|
|
160
|
|
|
|
239
|
|
|
|
1,480
|
|
Operating
loss
|
|
|
(30,023)
|
|
|
|
(24,917)
|
|
|
|
(66,087)
|
|
|
|
(67,429)
|
|
Other expense,
net
|
|
|
(1,615)
|
|
|
|
(4)
|
|
|
|
(2,336)
|
|
|
|
(136)
|
|
Loss before income
taxes
|
|
|
(31,638)
|
|
|
|
(24,921)
|
|
|
|
(68,423)
|
|
|
|
(67,565)
|
|
Income tax
benefit
|
|
|
(11,342)
|
|
|
|
(7,917)
|
|
|
|
(23,443)
|
|
|
|
(21,959)
|
|
Net loss
|
|
$
|
(20,296)
|
|
|
$
|
(17,004)
|
|
|
$
|
(44,980)
|
|
|
$
|
(45,606)
|
|
Summary of Other
Production Costs and Miscellaneous (Gains) Charges
|
|
Other Production
Costs
|
|
Three Months
Ended
|
|
(In
thousands)
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
Slowing and idling
production
|
|
$
|
13,515
|
|
|
$
|
11,208
|
|
Tax effect
|
|
|
(4,838)
|
|
|
|
(3,923)
|
|
After-tax
Total
|
|
$
|
8,677
|
|
|
$
|
7,285
|
|
Miscellaneous (Gains)
Charges - Cost of Sales
|
|
Three Months
Ended
|
|
(In
thousands)
|
|
June 30,
|
|
|
|
2016
|
|
|
2015
|
|
(Gain) loss on
derivative instruments
|
|
$
|
(824)
|
|
|
$
|
58
|
|
Other (gains)
charges
|
|
|
(517)
|
|
|
|
158
|
|
Tax effect
|
|
|
480
|
|
|
|
(21)
|
|
After-tax
Total
|
|
$
|
(861)
|
|
|
$
|
195
|
|
Balance Sheet
Information
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2016
|
|
|
2015
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
80,723
|
|
|
$
|
78,866
|
|
Deferred income
taxes
|
|
|
—
|
|
|
|
49,495
|
|
Other current
assets
|
|
|
130,621
|
|
|
|
156,916
|
|
Property, plant and
equipment, net
|
|
|
517,159
|
|
|
|
537,731
|
|
Goodwill
|
|
|
3,500
|
|
|
|
3,500
|
|
Intangible and other
assets, net
|
|
|
10,675
|
|
|
|
9,861
|
|
Total
assets
|
|
$
|
742,678
|
|
|
$
|
836,369
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Long-term debt,
current
|
|
$
|
12,566
|
|
|
$
|
33,000
|
|
Derivative instruments
(current)
|
|
|
4,014
|
|
|
|
6,240
|
|
Other current
liabilities
|
|
|
17,506
|
|
|
|
31,050
|
|
Deferred income
taxes
|
|
|
28,428
|
|
|
|
63,858
|
|
Other long-term
liabilities
|
|
|
77,333
|
|
|
|
59,915
|
|
Shareholders'
equity
|
|
|
602,831
|
|
|
|
642,306
|
|
Total liabilities and
shareholders' equity
|
|
$
|
742,678
|
|
|
$
|
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-second-quarter-2016-results-300305256.html
SOURCE CARBO Ceramics Inc.