Carbo Ceramics (NYSE:CRR) is a relatively unknown company in the commodity field for the average investor, as they operate largely under the radar of most traders because they provide support products to the energy sector, rather than the more sexy extraction of large quantities of oil and gas from various projects; offshore or onshore.
Since dropping from a low of a little over $27 a share in April 2009, the share price of the company has soared to $80.20 at the close of trading on Friday. From July 31, 2009, they've almost doubled in price, when they stood at about $41 a share.
What is it that makes Carbo such a powerful company and produce these types of results? A little particle they produce called a "proppant."
Most people understand what fracking is, or if not by that name, at least the principle. It is the process of using very high-pressure liquids to push apart the shale layers where oil or gas reside.
What most don't know, is included in that stream of fluids is tiny little granules called proppants.
How they work is they're basically left before after the separation of the shale in order to keep the shale apart or open. That's what keeps the oil or gas flowing and able to be extracted.
With the huge discoveries of natural gas in the U.S. residing in shale, it has propelled the U.S. to the top of the heap with Russia as the predominant source of the relatively clean energy.
That means there will be, and continue to be, a huge demand for proppant for decades, or longer, into the future. That is why Carbo has been performing so extraordinary, and should continue for a long time.
Obviously the price of the shares of the company have soared, but this play is really just getting going, and there should be an enormous amount of growth for many years.
To confirm all this, in its recent quarterly report, the company generated earnings of $18.7 million, or 81 cents a share, about twice what it was last year in the same quarter. Revenue also increased to $111.5 million, a gain of 61 percent. That far exceeded analysts' expectations of $101.1 million in revenue, or 65 cents a share.
This is a simple and easy to understand company. You watch natural gas demand and the ability of Carbo to supply proppant to meet that demand for the fracking process.
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