Carbo Ceramics (CRR)
Chris Orndorff
Financial Fundamentals (3/20/13)
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Current Price: $95.07
52 week range: $60.33-106.51
Beta: 1.18
Market Cap: $2.2 Billion
P/E: 20.72 on EPS of $4.59
Dividend Yield: 1.1%
ROE: 18.2%
Trailing 12-month Revenue: $645.5 Million
Cash: $90.6 Million, Debt: $0
Business
Carbo Ceramics makes ceramic beads that are
used to prop open oil wells (called proppant).
These ceramic beads help to keep fracked
wells open so that the liquids are able to flow
freely to the surface. Carbo’s ceramic
proppant is considered by many to be the best
proppant available.
Ceramic vs Alternative Proppant Diagram
Assets
• Plentiful Bauxite fields that serve as its raw
resources
• Best proppant in the industry designation
• Strong customers Haliburton and
Schlumberger who are two of the most
important companies in fracking
• Strong ability to manage costs: much of the
reason the stock popped back in late January
– early February of 2013
Customers
• Halliburton (HAL)
– Considered to be one of the top dogs in fracking in
the Dakotas
– Heavy user of Carbo’s products
• Schlumberger (SLB)
– One of the most diversified liquids plays in the
world
– Working to increase efficiency of its proppant use,
however, is loyal to Carbo
Competitive Advantage
Carbo Ceramics competitive advantages lie in a few
main points:
• First, they have the best proppant in the industry and
strong local exposure to American fracking
operations
• Second, they have strong patents on their products
• Third, they have strong industry research that proves
that their products have significantly higher yields
than alternative products – allows them to more
easily persuade prospective customers
Why Did the Share Price Dip Before?
The share price drop resulted largely due to
investor fear of falling rig counts eating into
profitability. This was due to the natural gas
glut as well as falling gas commodity prices.
Never fear, however, because the rig count is
already stabilizing and increasing in fact. In
addition, the natural gas glut is disappearing
and prices are stabilizing and increasing.
Second, investors were worried due to strong
Continued…
Chinese competition. This has been resolved
in large part by the increased fracking
operations in China pulling those
manufacturers back to China. In addition,
many oil rig operators are switching to Carbo’s
products for the higher yield rate.
Opportunities
• Carbo Ceramics is set to open their new
distribution center in the Bakken region
sometime this year: this will greatly assist in
lowering logistical costs
• Carbo is set to release their new ultradeepwater fracking proppant this year as well
which will be a boon for them in the offshore
industry
Competition
• US Silica – Sand proppant: generally
considered to be considerably inferior in terms
of yield but is cheaper; can steal market share
• Chinese imports – low-quality ceramic and
sand proppant that tends to have much lower
yields but is very cheap; flooded the market
for a while but there is now a pullback due to
a few factors
Website
• http://www.carboceramics.com/