What CARBO Ceramics Inc. (CRR) Earnings Mean to You

Perhaps the best news was that one of the biggest risks to the company’s business may be subsiding. Sales of low-cost, low-quality ceramic proppants have been pouring into domestic energy plays from China. CARBO Ceramics Inc. (NYSE:CRR) has worked feverishly to educate drillers on the dangers of such proppants in recent quarters and announced that “inventories appear to be shrinking”. That could lead to increasing market share for the company when drilling activity picks up.

The facts certainly support CARBO Ceramics Inc. (NYSE:CRR)’s claims. Consider the following image, which shows CARBO Ceramics Inc. (NYSE:CRR)’s ceramic proppant on the left and a low-quality Chinese ceramic proppant on the right taken from a well in Bakken.

Source: CARBO Ceramics

The uniform size and shape of the proppant on the left allows for much better hydrocarbon flow in a well, whereas the irregular shape of the proppant on the right will reduce flow and decrease the economics of a well. Additionally, low-quality Chinese proppants are not as strong, which causes them to crumble into fine particles that clog wells.

Foolish bottom line
All in all, I think the future remains bright for CARBO if it can continue to improve its distribution and logistics network to cut transportation costs and, of course, if drilling activity increases in the years ahead. More efficient operations should be the priority of management right now, since efficiency will help the company withstand future market downturns in a more profitable way. Offshoot businesses — such as Fracpro and Falcon — are important, but remain too small to make much of a difference to the overall business.

The article What CARBO Ceramics Earnings Mean to You originally appeared on Fool.com and is written by Maxx Chatsko.

Fool contributor Maxx Chatsko has no position in any stocks mentioned. Check out his personal portfolio, his CAPS page, or follow him on Twitter @BlacknGoldFool to keep up with his writing on energy, bioprocessing, and biotechnology.The Motley Fool has no position in any of the stocks mentioned.

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