"While significant uncertainty remains in the oil and gas marketplace, we have begun to observe operator behavior that suggests oilfield activity is beginning to improve," said John Chisholm, Chairman, President, and Chief Executive Officer of Flotek. "Various drilling and completion measures have begun to trend higher which, if sustained, should benefit Flotek and other oilfield services as 2016 ends and the New Year begins. In addition, we continue to see customer and prospect interest which, we believe, will provide additional commercial opportunities for our core chemistries. While it is far too early to suggest an industry recovery is underway, we are optimistic that the opportunity set will continue to improve into 2017."
Flotek's operations have benefited from the more constructive market environment. Based on our review of quarterly activity to date, the Company expects fourth quarter total Energy Chemistry segment revenues to increase by 10-15% when compared to third quarter, 2016 results. The Company expects total Energy Chemistry segment gross margins for the fourth quarter to decline modestly, likely to the 38-40% range, from the third quarter level of 40.4%
Flotek also expects, after reviewing October and November results for the Company' s Consumer and Industrial Chemistry segment, CICT revenues to decline by $2.5-$3.5 million in the fourth quarter when compared to third quarter results. Flotek has previously indicated that seasonal demand fluctuations, changes to its product offerings and a greater focus on terpene development for the Company's energy chemistry business are likely contributors to the more moderate sales forecast. Even with the fourth quarter decline, Flotek's CICT segment should post record annual revenues in 2016.
"While the recent and rapid fluctuation in commodity prices can be hard to decipher, it does appear companies are slowly returning to work, both drilling and completing wells," said Chisholm. "While business trends at the inflection point of any cycle are typically more volatile than normal, we are pleased with the way the fourth quarter is developing, especially that the 'holiday slowdown' that concerned us does not appear to be nearly as significant as we earlier expected. While there is significant work ahead to make sure Flotek continues toward its goal to become the leader is oilfield completion chemistry, we believe the increase in industry activity in the last 60 days could be a signal that better opportunities and a more constructive operating environment are in store as we enter 2017."
Flotek continues to work with clients to expand chemistry usage, including the Company's suite of CnF® completion chemistries as well as its PrF® pressure reducing fluids, a less invasive alternative to traditional friction reducers.
"As our clients increasingly entrust us with improving the performance of their assets, we trust our clients to vote every day with their capital as to the effectiveness of our products," said Chisholm. "We believe the growth in CnF use – from our largest customers to small independent producers – should be the most important indicator of effectiveness. When combined with the analysis conducted by many of those clients that has resulted in usage of Flotek's key completion chemistries, we are confident in our current sales profile and future commercial opportunities."
Flotek anticipates it will release fourth quarter and full year, 2016 results in early February.
About Flotek Industries, Inc.
Flotek is a global developer and distributor of a portfolio of innovative oilfield technologies, including specialty chemicals and down-hole drilling and production equipment. It serves major and independent companies in the domestic and international oilfield service industry. The company also serves commercial and industrial markets with a portfolio of diverse chemistry technologies. Flotek Industries, Inc. is a publicly traded company headquartered in Houston, Texas, and its common shares are traded on the New York Stock Exchange under the ticker symbol "FTK."
For additional information, please visit Flotek's web site at www.flotekind.com.
Certain statements set forth in this Press Release constitute forward-looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934) regarding Flotek Industries, Inc.'s business, financial condition, results of operations and prospects. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Press Release.
Although forward-looking statements in this Press Release reflect the good faith judgment of management, such statements can only be based on facts and factors currently known to management. Consequently, forward-looking statements are inherently subject to risks and uncertainties, and actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, but are not limited to, demand for oil and natural gas drilling services in the areas and markets in which the Company operates, competition, obsolescence of products and services, the Company's ability to obtain financing to support its operations, environmental and other casualty risks, and the impact of government regulation.
Further information about the risks and uncertainties that may impact the Company are set forth in the Company's most recent filings on Form 10-K (including without limitation in the "Risk Factors" Section), and in the Company's other SEC filings and publicly available documents. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this Press Release. The Company undertakes no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Press Release.
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SOURCE Flotek Industries, Inc.