Horizontal Drillers Seeing Vertical Stock Movement
Horizontal drilling has lead the discussion recently, mainly due to the fact that it is the major method used in shale oil and gas extraction. Since the shale plays are currently dominating the oil industry, finding a company that specializes in horizontal drilling could be a great stock pick. Carbo Ceramics is that company, and Ian Wyatt explains why.
…Carbo Ceramics (NYSE: CRR), a company that specializes in the horizontal drilling used to bring oil and gas deposits out of shale.
Carbo has handily outperformed the Dow Jones U.S. Oil Equipment & Services Index since the beginning of 2010, rising over 90 percent.
Carbo Ceramics isn’t on a lot of traders’ radar screens because it’s thinly traded, averaging just over 260,000 shares traded daily. That’s not a lot for a $3.1 billion market cap company.
Carbo is the world’s largest producer of ceramic proppant (a granular material) used in the hydraulic fracturing process. Sales in 2010 were $473 million, an increase of 38 percent year over year. Net income was $78.7 million, an increase of 49 percent. Earnings per share came in at $3.40, compared with $2.27 in 2009.
Proppant helps facilitate hydraulic fracturing of sedimentary rock, making the process of extracting the oil, or gas, more efficient and keeping the wells operating longer and for cheaper. Carbo Ceramics makes its ceramic proppant at three U.S. plants and two more in Russia and China. Over the past decade, sales volume has tripled, keeping its plants operating at capacity.
The company also provides other services, including spill prevention and containment through its Falcon Technologies subsidiary, acquired in 2009.
This year the company’s earnings are expected to grow an impressive 27 percent over 2010, and by 62 percent by the end of 2012…
This company seems to be on the right track, and right now the right track seems to be shale plays. With their expertise in horizontal drilling, they are on a path to success. CRR is an interesting pick, which is a great reason for further due diligence and possible investment.
Reported by Ian Wyatt, Read the entire article here.
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