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.
Logo -
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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 E&P operator saw over a 30% increase
in cumulative production after 250 days when using ceramic
proppant, compared to an offset sand completion. StrataGen®
had performed a detailed evaluation of completion procedures and
resulting productivity for this E&P operator. From the
study, StrataGen recommended modifications to their completions
program including adopting the use of CARBO ceramic proppant. The operator is
planning to employ ceramic proppant as well as implement other
StrataGen recommendations in future completions.
Outlook
CEO Gary Kolstad commented on the
outlook for CARBO stating, "We
continue to execute on our strategy to drive both revenue growth
and profitability improvement. The second quarter resulted in
a 26% sequential revenue increase and strong sequential incremental
operating margins. We anticipate technology products,
industrial ceramic products and mineral processing opportunities to
lead our revenue growth and return to profitability, and now
believe our revenue growth in 2017 will be at least a 60% increase
over 2016.
"Although the commodity price environment remains tenuous in the
oil and gas industry, we are optimistic about our oilfield business
for the second half of 2017.
"Technology product sales are tracking as expected and existing
second half of 2017 opportunities are strong compared to the first
half of 2017. KRYPTOSPHERE HD continues to see success in
deep wells, specifically the Lower Tertiary Gulf of Mexico, where
all super majors have now selected the product for use.
Currently, there are several wells slated for completion with
KRYPTOSPHERE HD in the second half of 2017. Additional
technologies, such as SCALEGUARD, continue to grow as well.
"We expect the base ceramic business to see higher volumes in
the second half as compared to the first half of 2017. We are
focused on improving the pricing. We have had modest price
increases in base ceramic over the last couple of quarters, and we
expect this trend to continue as the industry should move from an
inventory liquidation mode, into a mode of increased pricing to
produce profit on manufactured proppant. We believe the
negative returns throughout the base ceramic industry should lead
to increased industry pricing moving forward, given the basic logic
that companies want to provide a positive economic return on
business.
"The frac sand business has grown substantially this year and is
part of delivering a complete suite of product offerings to our oil
and gas clients. Given the strong demand for frac sand, we
ramped to full utilization at our Marshfield, Wisconsin sand plant during the
second quarter of 2017. We anticipate similar levels of sand
sales in the third quarter of 2017 as compared to the second
quarter of 2017. In addition to increased sand volumes, we
are also benefiting from rail car revenue generated from leased
rail cars dedicated to this business.
"We believe the work completed in the second quarter of 2017, to
solidify our industrial product offering and increase our sales
channels, will allow us to continue to grow industrial products and
services in the second half of 2017. Our current product
suite, including new products we are introducing in the industrial
arena, should allow us to grow this business over the
long-term.
"We believe AssetGuard, our environmental business, will
generally follow industry activity in the second half of
2017. Industrial product sales continue to be identified as
we focus resources on growing this business.
"Given the sequential improvement in EBITDA in the second
quarter of 2017, our expected revenue increases and benefits from
fixed cost reductions, we believe our second half of 2017 cash burn
and EBITDA should improve.
"We are focused on returning CARBO to profitability, and believe our
strategy to reduce reliance on any single business line will make
us a stronger company in the future," Mr. Kolstad concluded.
Conference Call
As previously announced, a conference call to discuss
CARBO's second quarter 2017
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/10109095
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
4th, 2017 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 10109095.
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 (NYSE: CRR) is a
global technology company that provides products and services to
the oil and gas and industrial markets to enhance value for its
clients.
CARBO Oilfield
Technologies - is a global leader that provides 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. Oilfield Technologies is
the world's largest producer of high quality ceramic proppant,
provides one of the industry's most widely used fracture simulation
software, has proprietary technology that provides fracture
diagnostics and production assurance, and offers consulting
services for fracture design and completion optimization. The
Company also provides a range of technology solutions for spill
prevention and containment.
Its products and services are sold to operators of oil and
natural gas wells and to oilfield service companies for use in the
hydraulic fracturing of natural gas and oil wells.
CARBO Industrial
Technologies - is a leading provider of high-performance
industrial ceramic media products that are engineered to increase
process efficiency, improve end-product quality and reduce
operating costs.
Its products and services are primarily sold to industrial
companies that work in manufacturing and mineral processing.
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 most recent annual report on Form
10-K, and similar disclosures in subsequently filed reports with
the SEC. We assume no obligation to update forward-looking
statements, except as required by law.
Note on Non-GAAP Financial Measures
This press release includes unaudited non-GAAP financial
measures, including EBITDA and Adjusted EBITDA. We present
non-GAAP measures when our management believes that the additional
information provides useful information about our operating
performance. Non-GAAP financial measures do not have any
standardized meaning and are therefore unlikely to be comparable to
similar measures presented by other companies. The
presentation of non-GAAP financial measures is not intended to be a
substitute for, and should not be considered in isolation from, the
financial measures reported in accordance with GAAP. See the
table entitled "Reconciliation of Reported Net Loss to EBITDA and
Adjusted EBITDA" below and the accompanying text for an explanation
of the non-GAAP financial measures and a reconciliation of the
non-GAAP financial measures to the comparable GAAP
measures.
-tables follow –
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
(In thousands
except per share)
|
|
|
(In thousands
except per share)
|
|
Revenues
|
|
$
|
43,572
|
|
|
$
|
20,651
|
|
|
$
|
78,242
|
|
|
$
|
53,753
|
|
Cost of sales (see
Cost of Sales Detail table below)
|
|
|
57,005
|
|
|
|
40,663
|
|
|
|
111,133
|
|
|
|
97,406
|
|
Gross loss
|
|
|
(13,433)
|
|
|
|
(20,012)
|
|
|
|
(32,891)
|
|
|
|
(43,653)
|
|
SG&A
expenses
|
|
|
10,265
|
|
|
|
10,034
|
|
|
|
21,062
|
|
|
|
21,509
|
|
(Gain) loss on
disposal or impairment of assets
|
|
|
—
|
|
|
|
(23)
|
|
|
|
—
|
|
|
|
925
|
|
Operating
loss
|
|
|
(23,698)
|
|
|
|
(30,023)
|
|
|
|
(53,953)
|
|
|
|
(66,087)
|
|
Other expense,
net
|
|
|
(1,623)
|
|
|
|
(1,615)
|
|
|
|
(3,524)
|
|
|
|
(2,336)
|
|
Loss before income
taxes
|
|
|
(25,321)
|
|
|
|
(31,638)
|
|
|
|
(57,477)
|
|
|
|
(68,423)
|
|
Income tax
benefit
|
|
|
(499)
|
|
|
|
(11,342)
|
|
|
|
(211)
|
|
|
|
(23,443)
|
|
Net loss
|
|
$
|
(24,822)
|
|
|
$
|
(20,296)
|
|
|
$
|
(57,266)
|
|
|
$
|
(44,980)
|
|
Loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.93)
|
|
|
$
|
(0.88)
|
|
|
$
|
(2.15)
|
|
|
$
|
(1.95)
|
|
Diluted
|
|
$
|
(0.93)
|
|
|
$
|
(0.88)
|
|
|
$
|
(2.15)
|
|
|
$
|
(1.95)
|
|
Average shares
outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
26,665
|
|
|
|
23,109
|
|
|
|
26,636
|
|
|
|
23,086
|
|
Diluted
|
|
|
26,665
|
|
|
|
23,109
|
|
|
|
26,636
|
|
|
|
23,086
|
|
Depreciation and
amortization
|
|
$
|
11,671
|
|
|
$
|
12,157
|
|
|
$
|
24,101
|
|
|
$
|
24,448
|
|
Cost of Sales
Detail
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
(In
thousands)
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Primary cost of
sales
|
|
$
|
45,896
|
|
|
$
|
28,489
|
|
|
$
|
87,921
|
|
|
$
|
68,610
|
|
Slowing and idling
production
|
|
|
10,797
|
|
|
|
13,515
|
|
|
|
22,009
|
|
|
|
23,222
|
|
Loss (gain) on
derivative instruments
|
|
|
309
|
|
|
|
(824)
|
|
|
|
1,200
|
|
|
|
(597)
|
|
Other charges
(gains)
|
|
|
3
|
|
|
|
(517)
|
|
|
|
3
|
|
|
|
6,171
|
|
Total Cost of
Sales
|
|
$
|
57,005
|
|
|
$
|
40,663
|
|
|
$
|
111,133
|
|
|
$
|
97,406
|
|
Product Sales
Volumes
(in million
lbs)
|
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Ceramic
|
|
|
96
|
|
|
|
71
|
|
|
|
178
|
|
|
|
191
|
|
Northern White
Sand
|
|
|
496
|
|
|
|
41
|
|
|
|
866
|
|
|
|
116
|
|
Total
|
|
|
592
|
|
|
|
112
|
|
|
|
1,044
|
|
|
|
307
|
|
Reconciliation of
Reported Net Loss to EBITDA and Adjusted EBITDA
|
Three Months
Ended
|
|
|
Six Months
Ended
|
|
(In
thousands)
|
|
June
30,
|
|
|
June
30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Net
loss
|
|
$
|
(24,822)
|
|
|
$
|
(20,296)
|
|
|
$
|
(57,266)
|
|
|
$
|
(44,980)
|
|
Interest expense,
net
|
|
|
1,627
|
|
|
|
1,623
|
|
|
|
3,715
|
|
|
|
2,419
|
|
Income tax
benefit
|
|
|
(499)
|
|
|
|
(11,342)
|
|
|
|
(211)
|
|
|
|
(23,443)
|
|
Depreciation and
amortization (1)
|
|
|
11,509
|
|
|
|
12,157
|
|
|
|
23,391
|
|
|
|
24,448
|
|
EBITDA
|
|
$
|
(12,185)
|
|
|
$
|
(17,858)
|
|
|
$
|
(30,371)
|
|
|
$
|
(41,556)
|
|
Loss on disposal or
impairment of assets
|
|
|
—
|
|
|
|
(23)
|
|
|
|
—
|
|
|
|
925
|
|
Other charges
(gains)
|
|
|
3
|
|
|
|
(734)
|
|
|
|
3
|
|
|
|
6,410
|
|
Loss on derivative
instruments
|
|
|
309
|
|
|
|
(824)
|
|
|
|
1,200
|
|
|
|
(597)
|
|
Adjusted
EBITDA
|
|
$
|
(11,873)
|
|
|
$
|
(19,439)
|
|
|
$
|
(29,168)
|
|
|
$
|
(34,818)
|
|
|
Adjusted EBITDA is
used by management to evaluate and assess our operational results,
and we believe that Adjusted EBITDA allows investors to evaluate
and assess our operational results. Adjusted EBITDA excludes
various charges primarily related to the downturn in the energy
industry.
|
|
|
(1)
|
Depreciation and
amortization for the three and six months ended June 30, 2017
excludes $162 and $710, respectively, of amortization of debt
issuance costs and debt discount, which is included in interest
expense, net, above.
|
Balance Sheet
Information
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
(in
thousands)
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
39,361
|
|
|
$
|
91,680
|
|
Restricted cash
(current)
|
|
|
5,723
|
|
|
|
—
|
|
Other current
assets
|
|
|
137,599
|
|
|
|
125,543
|
|
Restricted cash
(long-term)
|
|
|
5,543
|
|
|
|
—
|
|
Property, plant and
equipment, net
|
|
|
472,258
|
|
|
|
494,103
|
|
Goodwill
|
|
|
3,500
|
|
|
|
3,500
|
|
Intangible and other
assets, net
|
|
|
8,674
|
|
|
|
8,631
|
|
Total
assets
|
|
$
|
672,658
|
|
|
$
|
723,457
|
|
Liabilities and
Shareholders' Equity
|
|
|
|
|
|
|
|
|
Long-term debt,
current
|
|
$
|
—
|
|
|
$
|
13,000
|
|
Derivative instruments
(current)
|
|
|
2,490
|
|
|
|
1,599
|
|
Other current
liabilities
|
|
|
24,153
|
|
|
|
20,205
|
|
Deferred income
taxes
|
|
|
1,602
|
|
|
|
1,236
|
|
Long-term debt and
related parties notes payable, net
|
|
|
74,116
|
|
|
|
67,404
|
|
Other long-term
liabilities
|
|
|
4,141
|
|
|
|
3,443
|
|
Shareholders'
equity
|
|
|
566,156
|
|
|
|
616,570
|
|
Total liabilities
and shareholders' equity
|
|
$
|
672,658
|
|
|
$
|
723,457
|
|
Contact:
Mark Thomas,
Director, Investor Relations
(281) 921-6458
View original
content:http://www.prnewswire.com/news-releases/carbo-announces-second-quarter-2017-results-300495061.html
SOURCE CARBO Ceramics Inc.