Monday, September 22, 2014

Ceramics Vs Sand -- (C)Rude Awakening? September 22, 2014


Later, 4:26 p.m. CDT: a reader sent me a link to the one-year graph for CRR. The sell-off did not begin today. The sell-off began in July / August and was much, much worse, or certainly as bad. Check out the one-year CRR chart at Yahoo!Finance. There's more going on than what the article from IBD had today; see below.  If this portends more about the oil and gas industry, or the global economy or the national economy, than just CRR, it could be the canary in the coal mine. Scary.

Original Post

Shares of Carbo Ceramics plummet 18% today. The graph is stunning.

This is not an investment site. Do not make any investment decisions based on what you read here or what you think you may have read here.

Investor's Business Daily is reporting:
Carbo Ceramics expects ceramic proppant sales to take a hit as drillers try new techniques that require sand proppants, sending shares plummeting Monday.
The company also noted increased price competition on ceramic proppant sales from domestic and international manufacturers, especially in the Bakken play.
"We plan to manage the current competitive pricing environment, caused by proppant oversupply, by focusing on sales volumes and introducing new technologies," CEO Gary Kolstad said in a statement.
Some Carbo clients are also seeing delays with well completion, pushing some sales the company expected to make in September to later in the year.
The company sees third-quarter ceramic proppant sales volumes of 375 million pounds, similar to first-quarter sales, as demand for frac sand rises from drillers like Rosetta Resources.
Carbo shares plunged 19% on the stock market today. Frac sand producers U.S. Silica and Emerge Energy Services were down more than 3%.
Stock market analysts seem to see things on a quarterly basis.

Pad drilling is causing havoc with frack schedules. Winter is almost here in the Bakken, though the "winter" weather should not affect the fracking schedule in any meaningful way until December at the earliest.

However, combining pad drilling with winter weather and the industry may be into November by now, for planning purposes.

If so, it's very possible, in addition to everything said in IBD, operators are slowing down in purchases of proppant as we move into November/December fracking schedule.

Again, I have no formal training in this stuff and no background whatsoever in the oil and gas industry, and so this is simply armchair/idle chatter from someone who probably knows less about the Bakken than you do. So take my comments for what they are worth: my comments plus $1.89 will get you a cup of coffee at Starbucks.

Also, just for grins, there could be a lot of pressure on BNSF and the rest of the railroads to minimize non-agricultural products while trying to meet the demand of the 2014 harvest. The farmers have a lot of clout in Washington and nothing surprises me any more. It's very possible, BNSF, others are under great pressure to replace some of their sand/ceramic hoppers with grain hoppers.

Idle chatter.

Just out of curiosity, sand or ceramics for those two nice Whiting wells reported this weekend? Both. Sand and ceramic.

I believe EOG is pretty much 100% sand, but always has been, nothing new.

The most-talked about "current" Bakken presentation is probably the CLR presentation which mentions "high volume proppant" but does not compare sand vs ceramic. There is one slide and one slide only in which sand is mentioned; ceramic is not mentioned. The generic term "proppant" is used throughout. Unless the oral presentation suggested something different, there seems to be no evidence in the presentation whether CLR prefers sand over ceramics.

CLR does stress slickwater. Can ceramics be used with slickwater. Here's one answer:

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