Wednesday, December 28, 2016

Flotek Responds -- Rigzone -- December 28, 2016

This is a hard story to follow -- at least I had difficulty following it -- due to all the players involved, the acronyms, abbreviations, and concepts. But it appears to be a fairly important story with a number of interesting data points. For my use only; don't quote me on this. I'm sure I've made many mistakes interpreting this article. If this is important to you, go to the source. I "write" this out to make sure I actually stay focused on the article, which seemed complicated but then made more sense as I kept slogging through.

From Rigzone yesterday: Flotek refutes study finding; Flotek says the oilfield is its biggest lab. Data points:

Background:
  • Flotek apparently recently released a new study, testing its Complex nanofield Technology (CnF)
  • FourWorld Capital Management LLC apparently questioned some of the results of that study, suggesting that Flotek conducts its testing in the lab and not in the field
  • Flotek responded: it takes "learnings" from the lab and applies them to real-world situations around the world, from West Texas to Alberta to the Middle East
  • MHA Petroleum Consultants' conducted the study in question on behalf of Flotek
Players:
  • So, when reading this, MHA = the study; commissioned by Flotek
  • FWC is shorthand for FourWorld Capital Management which questioned the MHA study
The MHA/Flotek study:
  • CnF's effectiveness in DJ Basin wells was surveyed
  • FWC says the study was flawed; FWC says two products containing CnF were omitted in the study
  • OilPerm FMM-1 and FDP-S1007-11 contain CnF; omitted from the study according to FWC
  • FWC says their own study included well-known factors that MHA/Flotek failed to consider: well length, operator, and location
  • OilPerm FMM-1 and FDP-S1007-11 are both Halliburton products
  • FWC says these two Halliburton products account for 22% of the 604 wells in FWC's data set
  • Flotek apparently provided this trade name (FDP-S1007-11) to MHA for the studies in Texas conducted six months later
"Conclusions":
  • FWC: "when adjusted for operator, location, and well length, we conclude the estimated impact of CnF on production cannot be distinguished from zero relative to non-CnF wells"
  • interesting study results presented
  • FWC says CnF usage dropped from 61% in 2014 to 19 percent in 2016
  • FWC used FracFocus water volume data to determine market penetration of CnF usage in 2016 compared to 2016
  • FracFocus is linked at "Data Links" at the blog
That's the first page of the story; now the second page. Data points:
  • a new player: Stephens Inc (StInc) is an independent financial services firm
  • StInc notes that FWC has a short position in Flotek
  • StInc suggests/says/alleges:
  • FWC incorrectly considered FMM-1 and FMM-2 similar enough to be treated as the same for the study; StInc says that is not accurate
  • StInc noted that one of the consulting firms used by FWC is of questionable repute
  • StInc notes that a well-known consulting firm endorses CnF
  • StInc suggests too many variables not considered by FWC led to faulty conclusions
Now it gets real interesting:
  • origin of CnF technology comes from using d-limonene (d-limonene) -- a solvent extracted from oranges -- for cleaning oil off a concrete garage floor
  • the inventors then incorporated the technology with other additives to create a nano-droplet that could work downhole
  • Flotek acquired the patent in 2000
  • Flotek says the product "is used everywhere almost without exception that you may have a hydraulic fracturing technology" (sic)
  • near the end of the article, it sounds as if Flotek migrated to CnF for its efficacy as well as the opportunity that it could provide a way to differentiate itself from other downhole technologies
Bottom line:
  • obviously this is about money, investments, etc
  • that does not interest me at all; I have never invested in any of the companies mentioned in this story and have no plans to do so
  • what interested me: CnF, FracFocus, completion techniques -- but nothing about investment strategies
  • a similar story some years ago when I posted a note about SlickWater -- obscure at the time, and I had no idea why I posted it except I thought it might be of interest over time

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