CARBO Ceramics

About CARBO Ceramics

CARBO Ceramics, LLC's proppants, which are tiny alumina-based ceramic beads, are designed for natural gas and oil well operators. To increase well production, operators use hydraulic fracturing, a process where fluids are pumped down wells at high pressure to create fractures in the hydrocarbon-bearing rock formation. Proppants are suspended in the fluid to fill these channels and "prop" open the fissures, allowing natural gas and oil to flow to the surface. The company's products compete with sand-based proppants. CARBO Ceramics also provides related software, consulting services, specialty polymers, and geotechnical monitoring businesses. Operations CARBO Ceramics is the world's leading supplier of ceramic proppant, offers the world's most popular fracture simulation software, and provides fracture design and consulting services. The company also supplies a wide range of technologies for spill prevention, containment and countermeasures, as well as geotechnical monitoring. The company's ceramic proppants are manufactured from alumina-bearing ores, including clay, bauxite, bauxitic clay, and kaolin. The primary US deposits of these ores are located in Arkansas, Alabama, and Georgia. Economically viable deposits are also found in Australia, Brazil, China, Gabon, India, Jamaica, Russia, and Surinam. Its other operations include Applied Geomechanics (monitoring systems), Falcon Technologies (high performance polymers), and StrataGen (reservoir stimulation technology). Geographic Reach Headquartered in Houston, Texas, CARBO Ceramics manufactures its products in Eufaula, Alabama; Toomsboro and McIntyre, Georgia; Luoyang, China, and Kopeysk, Russia. The company operates numerous storage and distribution facilities in North America (US and Canada), Europe, and Asia (China). Sales and Marketing CARBO Ceramics supplies its customers with products on a just-in-time basis. Ongoing product sales depend on customer satisfaction with product quality, availability, and delivery performance. The company also provides its software simulation products and consulting services directly to owners and/or operators of oil and gas wells and service companies. International marketing efforts are managed through sales offices in Dubai, UAE; Aberdeen, Scotland; Beijing, China; and Moscow, Russia, as well as through commissioned sales agents in South America and China. Halliburton and Schlumberger each represented over 10% of CARBO Ceramics' 2011 revenue. Financial Analysis The company's revenues increased by 32% in 2011. This growth was driven by a 19% rise in proppant sales volume, attributed to the expansion of shale play development, particularly in the US; a 12% increase in the average proppant selling price due to price adjustments; and higher revenues from Falcon Technologies. Approximately 79% of CARBO Ceramics' revenues are generated within the US. CARBO Ceramics' net income rose by 65% in 2011. This improvement resulted from increased revenues, a 19% growth in proppant sales volume, a 12% increase in the average proppant selling price, and an enhanced gross profit margin as a percentage of sales. These positive factors were partially offset by higher selling, general, and administrative expenses. Income tax expense in 2011 increased due to higher pretax income. Strategy To expand its US manufacturing capabilities, the company acquired real estate and submitted environmental permit applications in 2011 to build a ceramic proppant plant in the Millen, Georgia area. CARBO Ceramics anticipates this plant, scheduled for completion in 2013, could support an annual manufacturing capacity of up to 500 million pounds of ceramic proppant. Additionally, in 2012, the company was constructing a 600 million pound-per-year resin-coating plant in Marshfield, Wisconsin. As part of its commitment to innovation, the company introduced CARBONNRT in 2010. This non-radioactive traceable ceramic proppant serves as an environmentally friendly alternative to radioactive proppants used as traceable markers in the computer monitoring of fracturing activity. Ownership William C. Morris, Neuberger Berman, and Baron Capital Group, Inc. hold 12%, 10%, and 10% of CARBO Ceramics, respectively.