Flotek Industries (ticker: FTK) reported revenue of $116.8 million for the quarter ending September 30, 2014, noting that Q3 set a record, showing a revenue increase of almost 19% compared to Q3 of 2013. “This represents the fourth consecutive quarter with revenue exceeding $100 million, a trend we expect to accelerate in the coming quarters,” John Chisholm, Flotek’s Chairman and Chief Executive Officer said, noting that “revenues for the entire 2009 calendar year were just over $112 million.”
The company attributed its increase in revenues to increased sales of stimulation chemical additives, increased actuated tool and Teledrift tool rentals, and increased international valve and valve equipment sales. For the three months ended September 30, 2014, the Company reported net income of $14.3 million, or $0.26 per common share (fully diluted), compared to net income of $9.0 million, or $0.16 per common share (fully diluted) for the same period in 2013.
Flotek’s completion chemistry product line, which it calls Complex nano-Fluid (CnF) completion fluids, helps separate Flotek from conventional surfactant suppliers. Growing use of Flotek’s CnF across the basins will likely drive growth for the company through the foreseeable future as the trend is for E&Ps to employ more science and adopt advanced technologies to help them improve the completion recipe, in a drive to improve yields from every well.
A Lower Price for Oil Emphasizes the Need to Squeeze out Every Drop
“The acceleration of activity during the quarter and into the first weeks of October suggests that the recent volatility in commodity prices has not slowed our momentum and appears to have had little, if any, impact on our ability to continue our quest to gain market share across our product lines,” Chisolm said in the earnings release. “We continue to believe the second-half of 2014 will be the most successful six months in Flotek’s history.”
“You could actually make a case … that many E&P companies that have a separation between cash flow and required capital will continue their programs. The opportunity to improve production or improve barrels of oil per lateral foot is actually more impactful for them at $85 a barrel than $105 a barrel,” Chisolm said during the Flotek Q3 call.
“Regardless of where oil trades in the next week or month, for that matter even this quarter, one thing is certain: oil is a finite resource and each incremental barrel that is discovered today is as costly, if not more so, to produce than the barrel before. The easy oil has already discovered, so more costly unconventional and enhanced recovery projects are leading the sources of future supply. The marginal cost of recovery will continue to inch higher, hence the long-term pricing trend can only be higher,” Chisolm said in the call.
Responding to a question about the Permian Basin, Chisolm replied: “Now specifically regarding Complex nano-Fluid, we have more CSI resources in the Permian Basin than any other geographic area in the country. And interestingly enough, now we actually have clients referring other clients of their benefit of using CnF, which I’d have to say is the first time I’ve experienced that in any basin around, where the benefit that was directed specifically to one operator, they’ve now shared with others.”
Flotek said that the growth in CnF interest is ubiquitous across basins in the United States including the Rockies, South Texas, the Permian Basin, Mid-Continent and Appalachia, with an R&D effort ongoing to match its CnF chemistries to the Bakken and Three Forks, including a recompletion validation in the Williston.
Flotek’s conference call transcript may be accessed here.
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