CARBO Ceramics (CRR -12.2%) plunges after one of its largest customers, energy exploration company Rosetta Resources (ROSE +0.3%), said it would stop using ceramics on some of its wells.
In its Q2 earnings report, ROSE said it would switch to using sand proppant for its Eagle Ford wells and no longer use ceramic proppant.
ROSE's decision appears to have caught CRR by surprise, William Blair analyst Brandon Dobell says, adding that CRR believes it will quickly find buyers for the ceramic it was going to sell to ROSE; in the unexpected event that CRR is unable to sell any of the ceramic that was supposed to go to ROSE, Dobell says CRR's 2015 EPS would drop to $2.90-$3.48 from his previous estimate of $5.24.
Carbo Ceramics (CRR -1%) is upgraded to Buy from Neutral with a $163 price target, up from $145, at DA Davidson, after CRR noted improvement in March after weak sales early in Q1 (Q1 results).
The firm believes CRR is positioned as a clear leader in the fast growing ceramic proppant market, and will be one of the largest beneficiaries of the emerging North American oil boom and has the fundamentals - leading technology, infrastructure and capacity - for sustained long-term growth.
Cowen analysts are more non-committal, noting that telegraphed Q1 volume weakness was even more severe than expected, placing greater emphasis on Q2 and Q3 execution to meet consensus estimates.
Carbo Ceramics (CRR) warns in presentation slides for this week's Howard Weil energy conference that quarter-to-date activity has been impacted by harsh weather conditions in the Bakken and northern regions of North America.
CRR says railroads' operational issues and congestion have severely affected the distribution of proppant, and anticipates ceramic proppant volumes will end below Q4 2013 volumes, but remains positive on activity levels and ceramic proppant demand for Q2 and the balance of the year.
Carbo Ceramics Inc is a supplier of ceramic proppant. It provides fracture simulation software, fracture design, engineering and consulting services and a broad range of technologies for spill prevention, containment and countermeasures.