Frack sand provider already feeling 2017 market improvements
After a difficult year defined by drilled but uncompleted wells, Carbo Ceramics Inc. CEO Gary Kolstad is optimistic that the oil and gas operating environment is improving. During the fourth quarter of 2016, the Houston-based ceramic proppant and sand supplier posted a 44 percent increase in revenue. Over the course of the year, the proppant and technology supplier believes it will increase revenue by 40 to 50 percent compared to the previous year. Growth will come from oilfield technology and sand, followed by ceramics and specialty proppant, the company believes.
In 2016, Kolstad said the company was unable to predict market conditions and product demand for more than a few months out. This year, line of sight for future conditions and demand is better. The company already believes that operators will continue to choose cheaper sand options for well completions. “The current commodity price environment continues to lead E&P operators to generally focus on the lowest upfront completion cost,” Kolstad said, adding that some operators are also looking at ceramic proppant for its ability to improve estimated ultimate recovery rates over the life of the well.
The move from ceramic proppant to sand will continue throughout the year, the company believes. And, numbers from 2015 and 2016 product sales will also increase. In 2015, the company sold 818 million pounds of ceramic proppant and 819 million pounds of northern white sand. Last year, 356 million pounds of ceramic proppant were sold with another 311 million pounds of northern white sand be sold.
The company will continue its approach to proppant distribution and logistics. Carbo utilizes non-company-owned rail distribution lines and transload facilities to distribute its products and according to the company, that approach will continue.
Although Carbo expects strong sales increases in oilfield technology and sand this year, Kolstad said the company is looking to diversify into other industries. “Expanding our industrial business is important given the challenges we have seen over the last oilfield downturn and will help mitigate this cyclicality going forward,” he said. “We have sold into the industrial markets for a long time and are currently pursuing multiple sales strategies for both end-customers and distribution channels.” Although these contract types take longer to pay off, they are typically long-term in nature, the company believes.
Carbo has been performing fracture consulting in the Bakken, Eagle Ford, Utica and Permian plays in 2016 while also providing specialized proppant solutions to each play.
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