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[February 2009]
CARBO Ceramics Announces Q4 and FY 2008 Earnings
CARBO Ceramics Inc (Irving, TX, USA) has reported income from continuing operations of US$20.5 million, or US$0.85 per diluted share, on revenues of US$105.6 million for the quarter ended 31 December 2008. The company previously reported that it had sold its fracture and reservoir diagnostics business to Halliburton Energy Services Inc. Because of the transaction, which closed on 10 October 2008, the results of this business have been accounted for as discontinued operations. Continuing operations include the company's ceramic proppant, software, consulting services and geotechnical monitoring businesses.
President and CEO Gary Kolstad commented: "I am proud of the success CARBO achieved this year, and want to congratulate our employees for delivering quality products and services to our clients. During 2008, we set several quarterly records in proppant sales volume, revenues and profit. These results are a testament to the success of our Economic Conductivity™ technical marketing effort. This effort, along with the introduction of our newest product, CARBOHYDROPROP™, which experienced overwhelming demand over the course of the year, indicates there is an ongoing awareness and acceptance by the E&P industry of the economic benefits of employing our ceramic proppant.
“This is particularly evident in an increasing number of reservoirs, including but not limited to North American resource plays such as the Bakken and Haynesville shale areas. With oil and natural gas reservoirs becoming more complex, current economics being challenging, and exploration and production companies seeking a greater return on their investment, we believe that CARBO's ceramic proppant should continue to be in demand, given the fact that it enhances productivity and recovery in wells, when compared to using lower performing sand-based proppants.
"During the fourth quarter of 2008, the proppant business generated record revenue, with a global proppant sales volume increase of 19 percent when compared to last year's fourth quarter. North American proppant sales volume increased by 30 percent compared to the fourth quarter of 2007 despite an increase of only 2 percent in the US natural gas rig count and a 14 percent increase in the rig count in Canada."
Revenues for Q4 increased 30% compared to last year's fourth quarter due primarily to a 19% increase in proppant sales volume and an increase in average selling price. Worldwide proppant sales totalled 293 million pounds for the quarter. Proppant sales volume in North America increased 30% compared to the fourth quarter of 2007 due to strong demand for the company's ceramic proppant in resource plays such as the Bakken and Haynesville Shale areas. Overseas proppant sales volume decreased 25% compared to the same period last year, as strong North American demand limited the supply to several of these markets.
Operating profit for Q4 2008 increased $13.0 million compared to the fourth quarter of 2007 due primarily to the significant increase in proppant sales volume, product mix and the cumulative effect of pricing increases experienced on certain of CARBO’s products. Selling, general and administrative expenses increased as a percentage of revenue for the fourth quarter of 2008 compared to the same period last year due to higher spending for marketing and sales activities associated with higher proppant sales, information technology expenses associated with the company's new enterprise resource planning system and start-up costs resulting from the re-start of the New Iberia manufacturing facility that was previously idled.
Income from continuing operations for the fourth quarter of 2008 increased US$8.5 million compared to the fourth quarter of 2007.
For the full year ended 31 December 2008, revenues increased 29% compared to 2007 due primarily to an increase in proppant revenue. The increase in revenue in the company's proppant business was primarily the result of a 33% increase in North American proppant sales volume.
CARBO's worldwide proppant sales volume totalled 1,162 million pounds for the full year 2008. Sales volume in North America increased 33% from 2007 as a result of a 39% increase in US sales volume and a 14% increase in sales to Canada offset by a 6% decline in sales to Mexico. Overseas sales volume increased 5% primarily due to increased sales volume in Russia offset by some sales volume decreases in other undersupplied overseas markets.
Operating profit increased 22% compared to 2007 due primarily to the significant increase in proppant sales volume and product mix. Selling, general and administrative expenses increased both in absolute terms and as a percentage of revenue due to increases in marketing, research and development activity and administrative expenses necessary to support higher operating and sales activity.
In addition, CARBO experienced a US$2.6 million decrease in foreign currency exchange gains resulting from fluctuations in Russian and Chinese currency valuations relative to the US dollar in 2008 when compared to 2007. The company recognises gains and losses resulting from fluctuations in these currencies as a result of the capital structure of its investments in those countries. It benefitted from a reduction in its effective tax rate due to a depletion deduction afforded to mining operations, which it began taking in 2008, that favourably impacted the company. Full year income from continuing operations for 2008 increased 22% compared to 2007.
ENDS