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“Given the challenging market conditions we faced during the quarter, we are pleased with our operating results,” said Gary Kolstad, president and chief executive officer. “Notwithstanding significant sequential reductions in both the North American average rig count and natural gas commodity price, CARBO was able to leverage off the operating success that was achieved during the second half of 2008, including the continued demand for our newest product, CARBOHYDROPROP™.”
Revenues for the first quarter of 2009 were flat at $90.6 million, compared to the first quarter of last year, and down 14% compared to the fourth quarter of 2008. Worldwide proppant sales volume totaled 253 million pounds for the first quarter of 2009, representing a year-over-year decrease of 11% and a sequential decrease of 14%. Proppant sales volume in the U.S. and Canada decreased 8% compared to the first quarter of 2008 and 16% sequentially, despite the significant drop in commodity prices and the reduction in the average number of drilling rigs experienced both year-over-year and sequentially. During the first quarter of 2009, overseas proppant sales volume decreased 46% compared to the same period last year and decreased 30% sequentially.
Operating profit for the first quarter of 2009 increased $6.2 million compared to the first quarter of 2008, due primarily to product mix, a decrease in freight costs and the cumulative effect of pricing increases introduced during the second half of 2008. Selling, general and administrative expenses increased in both absolute terms and as a percentage of revenue for the first quarter of 2009, compared to the same period last year, due to increased expenses associated with marketing and sales activities, certain relocation initiatives, the company’s new enterprise resource planning system and the company’s allowance for doubtful accounts. Income from continuing operations for the first quarter of 2009 increased $3.6 million compared to the first quarter of 2008.
CARBO’s penetration in the tight gas and shale resource plays continued to grow in the first quarter of 2009. Year-over-year, growth was experienced in the Rockies, the North Louisiana and the East Texas regions, including the Haynesville shale reservoir. In spite of overall low commodity pricing, the E&P community continues to recognize the economic benefits that highly conductive ceramic proppants bring to both conventional and unconventional plays.
“Although we achieved solid results this quarter, we were not immune to the rapid and large decrease in global upstream activity, as we experienced a decrease in global sales volume of 11% year-over-year and 14% sequentially,” said Kolstad. “The rate and magnitude of the deterioration in North American drilling activity that occurred over the last several months, fueled by low natural gas and oil prices and the continued weakness in the U.S. credit markets, has presented our customers with formidable financial challenges.
“As such, we have started to negotiate reduced pricing arrangements in an effort to mitigate some of our anticipated sales volume erosion. While we recognize that the significantly reduced natural gas drilling activity should bring the natural gas fundamentals back into balance, we do not see any significant recovery before 2010. However, we believe the strength of our balance sheet will provide us the means to weather this downturn. In fact, we remain committed to our capacity expansion efforts at our Toomsboro, Ga., facility and our technology development activities and continue to investigate strategic acquisition opportunities. Nonetheless, we continue to implement prudent cost control initiatives in certain areas of the business, including discretionary and capital spending.”
Additional details are available at www.carboceramics.com.