CARBO CERAMICS INC. 
By Conference Call Scheduled for Today, 10:00 a.m. Central Time
· Quarterly revenues of $158.1 million were up 32 percent compared to the prior year
· Net income of $33.1 million, or $1.43 per diluted share for the quarter
· Full year 2011 diluted earnings per share of $5.62 versus $3.40 in 2010
President and CEO Gary Kolstad commented, "2011 was a record year for CARBO. Proppant volumes increased 19 percent year-over-year to 1.6 billion pounds. Revenues and net income increased 32 and 65 percent, respectively, year-over-year. We continued to focus on returning cash to our shareholders by increasing the quarterly dividend 20 percent. This marked the 11th consecutive year the Company has increased its dividend.
"For the fourth quarter 2011, proppant volumes increased 16 percent, revenues increased 32 percent and net income increased 59 percent when compared to the fourth quarter 2010. Notwithstanding this solid performance, the fourth quarter had its challenges beyond typical seasonality.
"The severe decline in natural gas prices during the quarter led E&Ps to reduce capital spending in natural gas basins and increase capital spending in liquids-rich basins. The largest impact associated with this shift in capital spending was a reduction of approximately 70 percent in our Haynesville proppant sales volumes from the third quarter of 2011, which was partially offset by growth in the liquids-rich plays and international markets.
"The growth of activity in liquids-rich plays contributed to logistical issues in the industry. These logistical issues burdened our distribution network. From our perspective, the industry's response to the decline of activity in the Haynesville, reallocation of proppant supply and demand and adjustment to natural gas fundamentals will take some time to work out. During the fourth quarter 2011, we accelerated several distribution infrastructure investments to address the logistical challenges we faced.
"The economic success our clients achieve by utilizing our high conductivity proppant in their oil and natural gas wells continues to give us confidence in the long-term demand for our proppant," Mr. Kolstad said.
Fourth Quarter Results
Revenues for the fourth quarter of 2011 increased 32 percent, or $38.5 million, when compared to the fourth quarter of 2010. North American (defined as Canada and the U.S.) proppant sales volume increased 16 percent while international proppant sales volume increased 21 percent, compared to the same period last year.
Operating profit for the fourth quarter of 2011 increased 59 percent, or $18.3 million, compared to the fourth quarter of 2010. This increase is primarily due to higher proppant sales volume, an increase in the average proppant selling price and a higher contribution from the Company's other business units, partially offset by an increase in freight and logistics costs.
Net income for the fourth quarter of 2011 increased 59 percent, or $12.3 million, compared to the fourth quarter of 2010.
Proppant Sales Volumes (in millions lbs) | Three Months Ended December 31, 2011 | Three Months Ended December 31, 2010 |
Ceramic Proppant Volumes | 339 | 317 |
Other Proppant Volumes* | 48 | 15 |
Total | 387 | 332 |
* Includes CARBOBOND® RCS (resin-coated sand) and API / ISO certified ceramic proppant manufactured on an outsourced basis.
Full Year Results
For the year ended December 31, 2011, revenues increased 32 percent, or $152.6 million, compared to 2010. The increase is mainly attributed to the increase in proppant sales volume, an increase in the average proppant selling price, and an increase in the revenues of Falcon Technologies.
CARBO's worldwide proppant sales volume totaled 1.6 billion pounds for the full year 2011, an increase of 19 percent compared to 2010. Sales volume in North America increased 21 percent primarily due to increases in both U.S. and Canada sales volume. International sales volume increased 12 percent primarily due to increases in Russia, Latin America and Asia Pacific, including China.
Full year net income for 2011 increased 65 percent, or $51.4 million, compared to 2010.
Technology and Business Highlights
· Several wells were completed utilizing CARBO's iPROP™ family of proppants. CARBOTAG® and CARBONRT® (a non-radioactive detectable proppant), have now been successfully deployed in North America, Latin America, Europe, Africa, the Middle East and Asia Pacific. This technology mitigates the issues surrounding the use of radioactive isotopes by the E&P industry.
· Production data from key producing basins continues to substantiate the 20 percent plus gains in production and recovery CARBO expects operators to achieve when using our high conductivity ceramic proppant.
· Falcon Technologies®achieved revenue growth of 20% in 2011 when compared to 2010. Falcon continues to develop and deliver solutions that are Engineered to Protect™ the environment and our clients' assets and reputations.
· Fracpro®, the industry's most popular frac simulation software, achieved record revenues in 2011 due to clients' increased focus on fracturing in unconventional reservoirs and the need for multiple-fracture simulator solutions.
· StrataGen® Engineering's Data and Neural AnalysisSM (DANA) studies are gaining E&P operator interest by contributing to the optimization of completions and frac methods in the Bakken and Eagle Ford.
Outlook
CEO Gary Kolstad commented on the outlook for the Company stating, "We believe 2012 industry activity levels will be influenced by many factors. The contraction of North American natural gas fundamentals should be balanced by the continued strength of the liquids-rich unconventional plays, which should lead to volume growth for CARBO in these plays. We are pleased that we continue to see more clients adopting our high conductivity ceramic proppant in these liquids-rich plays.
"Our financial position remains strong and debt-free, and it affords us the ability to fund our growth from internally generated cash flows. We remain committed to growing our proppant manufacturing capacity, for both ceramic and resin-coated sand.
"With respect to our ceramic production capacity and as we noted last quarter, we have submitted our environmental permit application for our new plant in Millen, Georgia. Although timing is still uncertain surrounding the receipt of an approved permit, we expect this plant could commence production before the end of 2013.
"Regarding our resin-coated sand operations, we initiated the start-up process on our second resin-coating line in New Iberia in late January 2012. Our resin-coating expansion efforts continue at our Marshfield, Wisconsin site. The first phase of this project is completing our sand processing plant, which is expected to be operational by the end of the second quarter 2012. Once completed, we will be back-integrated into our own sand reserves which will feed our New Iberia plant and ultimately our resin-coating operations in Marshfield.
"Separately, our environmental risk reduction business, Falcon Technologies, achieved revenue growth of 20 percent in 2011. We are excited about the future of this business as we expect our Engineered to Protect™ solutions and the environmental stewardship exhibited by our clients to drive future growth.
"We believe 2012 will be another successful year for CARBO. We will continue to market the benefits that increased conductivity can achieve for our clients through Economic Conductivity® analysis," Mr. Kolstad concluded.
CARBO is the world's largest supplier of ceramic proppant for fracturing oil and gas wells; provider of the industry's most popular fracture simulation software; and a provider of fracture design and consulting services. The Company also provides a broad range of technologies for spill prevention, containment and countermeasures, along with geotechnical monitoring.
Contact:
Ernesto Bautista, III CFO
(in millions lbs)
December 31, 2011
December 31, 2010
Ceramic Proppant Volumes
339
317
Other Proppant Volumes*
48
15
Total
387
332
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