CARBO Ceramics — Scotia Howard Weil 43rd Annual Energy Conference 2015
42 slides from CARBO Ceramics's conference presentation, Mar 25, 2015
Slide 1: Production Enhancement - Higher Production & EUR
Production Enhancement ....provides industry leading technology for: Scotia Howard Weil 43 rd Annual Energy Conference March 25 th , 2015 Higher Production & EUR Exhibit 99.1
Slide 2: Forward Looking Statements
Forward Looking Statements The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Any written or oral statements made by the Company or on behalf of the Company in conjunction with this presentation may include forward-looking statements which r
Slide 3: A leading production enhancement company
• Frac Conductivity & Durability • Production Assurance • Flow Enhancement • Fracture Evaluation • Well Site Supervision • Frac Diagnostics & Optimization • Field Development Optimization • Reservoir & Formation Analysis • Frac Design • Economic Optimization • Reservoir Performance • Post Job Analys
Slide 4: Managing Through The Down-Cycle Actions
Managing Through The Down-Cycle Actions
Slide 5: CARBO Down-Cycle Actions and Focus
In the near term, we focus on being cash positive: – – CARBO Down-Cycle Actions and Focus CARBO will manage through this down-cycle, and will continue with its long term strategy Reduce discretionary spending, and seek reduction in costs from our suppliers Capex expenditures and dividend reductions
Slide 6: Managing The Company For The Long Term
Managing The Company For The Long Term Improving Well Production and EUR with Technology
Slide 7: Differentiate with Design-Build-Optimize
Differentiate with Design-Build-Optimize The Frac technology strategy. Our multi-year effort to develop industry leading technology is starting to pay off. – KRYPTO SPHERE is a “game-changer” proppant, Offshore E&P orders are growing – SCALE GUARD , NRT , RPM , save money for E&P and are growing in
Slide 8: New Technology Growth Targets
New Technology Growth Targets Product Revenue 330% 75% 35% 2014 2015 2016 2017 $0 $10 $20 $30 $40 $50 $60 $70 $80 $90
Slide 9: Our technology is 100% focused on improving Production and EUR
Our technology is 100% focused on improving Production and EUR • Frac with the right technology the first time, to maximize ROI – Re-fracs are a costly example of not doing it right the first time • Technology developed for “life of the well” to maximize EUR • Technology developed for quick payback
Slide 10: Built To Last The Life Of The Well
Oil & Gas Multiple transverse fractures Wellhead “Built To Last The Life Of The Well” …..when we are done, the only thing left is the well and the proppant , make sure it has a long productive life. Reservoir
Slide 11: Ceramics Proppant Delivered Technology Platforms
Ceramics Proppant Delivered Technology Platforms Proppant Delivered Production Assurance Proppant Delivered Flow Enhancement Proppant Delivered Fracture Evaluation Higher EUR Production R.O.I. Infused Chemical Delivery System Resin Coated Products CARBO BOND
Slide 12: Production Assurance - SCALE GUARD
• Chemically infused porous proppant with controlled release of scale inhibitor, into the production stream • Industry’s most effective scale inhibition due to controlled release • Increases Production and EUR, and lowers LOE for E&P Operators - Provides production protection for months/years - Redu
Slide 13: SCALE GUARD - Long Life Protection
SCALE GUARD - Long Life Protection • No production loss due to scaling, and lowers LOE • Controlled release working as designed • After 8 months, no scaling problems • Maintain scale control above an engineered minimum inhibitor concentration • Projecting several years of inhibition Uinta Basin Scal
Slide 14: Flow Enhancement - CARBO RPM
Flow Enhancement - CARBO RPM • Increases Production and EUR by improving the permeability to hydrocarbons in the propped fracture • Minimize capillary pressures in propped fracture with neutral wettability • Increase effective fracture conductivity – Improve fracture clean-up – Reduce multiphase flo
Slide 15: Fracture Evaluation - CARBO NRT
Fracture Evaluation - CARBO NRT • Identifying proppant placement, helps identify production improvement • Non-radioactive tagged proppant – Environmentally friendly, manufactured into proppant grains – Direct measurement of proppant placement • In vertical wells, measurement of fracture height allow
Slide 16: Well Production - Hierarchy of Proppant Value
Well Production - Hierarchy of Proppant Value Chart prepared by and property of CARBO Ceramics Inc. Highest Conductivity Highest Production, EUR, ROI Mono-sized Spherical Smooth surface Low beta Low steel erosivity Quality Ceramic Standard Ceramic Chinese, Russian, Brazilian Ultra-conductivity More
Slide 17: Ultra-conductive ultra-high strength proppant technology
Originally developed for deep water and ultra-high stress formations. Have since developed it into a family of products to address other reservoir conditions. Ultra-conductive ultra-high strength proppant technology
Slide 18: KRYPTOSPHERE HD
KRYPTO SPHERE HD KRYPTO SPHERE is a paradigm shift in improved Conductivity Competitors Bauxite • Superior Shape, Surface, Microstructure, and Durability • KRYPTO SPHERE HD is the strongest, highest conductivity Proppant commercially available today for the industry’s deepest, highest stress wells •
Slide 19: Proppant is one of the biggest factors in Production and EUR
“Proppant is one of the biggest factors in determining Production and EUR in fracture stimulated wells. It is important that E&P Operators know what proppant is being used in their wells. Make sure you are getting the Conductivity and Quality you are paying for.”
Slide 20: Do You Know What Proppant Is Going In Your Well?
Do You Know What Proppant Is Going In Your Well? Chart prepared by and property of CARBO Ceramics Inc. Highest Conductivity Highest Production, EUR, ROI Mono-sized Spherical Smooth surface Low beta Low erosivity Quality Ceramic Standard Ceramic Chinese, Russian, Brazilian Ultra-conductivity More uni
Slide 21: Production & EUR is sacrificed using low quality Chinese ceramic
Production & EUR is sacrificed using low quality Chinese ceramic Three Bakken field samples of low quality Chinese ceramic: IDC = Intermediate Density Ceramic Production & EUR Loss due to Poor Quality: • Irregular Size & Shape reducing flowrates • Rough Surface reducing flowrates • High Internal Por
Slide 22: CARBO LITE versus Chinese Ceramic
CARBO LITE versus Chinese Ceramic Three Bakken field samples of low quality Chinese ceramic: IDC = Intermediate Density Ceramic Bottom Row Represents Whole Pellet Cross Sections CARBO LITE Chinese 20/40 IDC Supplier A Chinese 20/40 IDC Supplier B Chinese 20/40 IDC Supplier C
Slide 23: CARBO LITE versus Brazilian & Russian Ceramic
CARBO LITE versus Brazilian & Russian Ceramic Two Brazilian & one Russian field samples of low quality ceramic proppant: Field Samples #B1 taken in South Texas; #B2, #R1 taken in North Dakota LDC = Low Density Ceramic Bottom Row Represents Whole Pellet Cross Sections CARBO LITE Brazilian 20/40 LDC #
Slide 24: Bakken Operator CARBO vs Chinese Ceramic
Bakken Operator CARBO vs Chinese 30 Day Cum Oil *EUR 6 wells with CARBO ECONOPROP low density ceramic (LDC) 4 wells with Chinese intermediate density ceramic (IDC) Frac Design (per well) ~ 24 stages ~ 3 million lbs *Operator projected EUR from early time data +20% +120,000 bbl Oil ECONOPROP Average
Slide 25: American Made vs Low Quality Chinese Ceramic Proppant
Stakeholder Value Measurement American Made Ceramic Proppant Low Quality Chinese Ceramic Proppant E&P Operators Production & EUR Higher Lower Less BOE produced, due to poor quality of proppant E&P Operators Natural Gas Consumption Higher Zero Due to being manufactured in China USA American Jobs High
Slide 26: Case Histories
“Over 150 SPE papers have been written documenting the benefits of increased conductivity on well Production and EUR. Generally, the payout on the additional Proppant investment is less than 3 - 6 months, and increases Production and EUR in a range of 20% to 100%.” Case Histories
Slide 27: Contact Area and Conductivity
Contact Area More Stimulated Reservoir Volume = Higher EUR Convergent Flow, High Velocity & Delta P To be economical, low perm reservoirs require large contact areas to drain Create many transverse fracs, in a horizontal well Create complex fractures by using tech niques such as slickwater, more sta
Slide 28: Is Your Well Built On Sand Foundations?
Is Your Well Built On Sand Foundations?
Slide 29: Eagle Ford - Small Mesh Sand Evaluation
Closure Stress (psi) Reference conductivity - does not include effects of non-darcy flow, multi-phase flow, gel damage, etc. Smaller mesh size proppant, has much lower Conductivity Small-Mesh Operators Other Operators Eagle Ford – Small Mesh Sand Evaluation …..100 mesh sand can reduce EUR Source: Pu
Slide 30: Permian Basin - Wolfcamp Operators, Ward County
Note: Production Only – 1 yr Ceramic Production Gains Net $ Gain @ $40 Oil, $3 Gas Permian Basin - Wolfcamp Operators, Ward County Ceramic wells out produce offset RCS wells by 45% Ceramic vs Sand 74,870 bbls $2,560,000 Ceramic vs RCS 56,610 bbls $1,855,000 183,097 126,482 108,229 20,000 40,000 60,0
Slide 31: Permian Basin - Bone Spring Operators, Lea County
Note: Oil Production Only - 14 mo Ceramic Production Gains Net $ Gain @ $75 Oil Permian Basin - Bone Spring Operators, Lea County Ceramic wells out produce offset Sand wells by 42% Ceramic vs Sand 21,980 bbls $1,650,000 Ceramic vs RCS 32,110 bbls $2,410,000 74,682 42,571 52,702 10,000 20,000 30,000
Slide 32: Permian Basin - Bone Spring Operators, Lea County
Note: Production Only - 6 mo Ceramic Production Gains Net $ Gain @ $40 Oil, $3 Gas Permian Basin - Bone Spring Operators, Lea County Ceramic wells out produce offset Sand wells by 32% Ceramic vs Sand 18,391 bbls $675,000 Ceramic vs RCS 42,286 bbls $1,560,000 76,522 34,236 58,131 10,000 20,000 30,000
Slide 33: Bakken Operator - Optimizing Completion Design
Initial Wells Tested Sand Tested More Stages Today’s Design 6 Month Production Gain ~ 30,000 bbl oil per well Stages Proppant Type Ceramic Sand Sand Ceramic Well Cost $5.5M $5.0M $5.4M $6.7M Model EUR 409 MBO 359 MBO 469 MBO 605 MBO Pay Out 14.8 mo 15.5 mo 12.6 mo 12.5 mo Well Count Bakken Operator
Slide 34: Bakken - Statoil Mountrail County
Note: Oil Production Only Production Gains Net $ Gain @ $75 Oil Bakken - Statoil Mountrail County 6 Months 54,000 bbls $4,050,000 36 Months 92,000 bbls $6,900,000 Ceramic wells out produce offset Sand wells by 42% SPE Paper 134595 & 146376 – Brigham Exp/Statoil Conductivity investment payback < 4 mo
Slide 35: Bakken - Liberty Resources Williams County
Bakken - Liberty Resources Williams County Source: Bakken/Three Forks American Business Conference 180 Day Cum Oil 81,000 73,000 56,500 • Liberty Resources has lead the way in increasing Contact Area and Conductivity • Higher well production results compared to offset wells, has verified the technic
Slide 36: Eagle Ford Operator - Optimizing Completion Design
Original Design Incr Length, Stages, Sand Incr Length, Stages, Ceramic Eagle Ford Operator – Optimizing Completion Design Avg # Stages Proppant Type Ceramic Sand Ceramic Lbs Prop/Feet of lateral 1,312 2,533 1,402 Well Count * Public production data 28,860 35,100 66,300 10,000 20,000 30,000 40,000 50
Slide 37: Haynesville - High Stress Reservoirs Need Ceramic
48 Month Production Gain 0.52 BCF per well Haynesville – High Stress Reservoirs Need Ceramic SPE Paper 160206 CARBO HYDROPROP 40% Tail-in (20 wells) Resin Coated Sand 40% Tail-in (33 wells) * Public production data Net $ Gain @ $4.00 NG $2,070,000 Payout on Conductivity < 3 Months 24% 500,000 1,000,
Slide 38: Northeast, Belmont County - Cost Neutral Design
Lateral Length (feet) Proppant (Million lbs) Frac Stages Number Cumulative Gas Normalized on 6,800 Lateral Gas Production Only Production Gains Net $ Gain @ $3/MCF CARBO ECONOPROP White Sand (Normalized) 2.4 x increase in sand/ft lateral yields 32% less Production Ceramic well out produces offset Sa
Slide 39: The Industry Down-Cycle Business Impacts
The Industry Down-Cycle Business Impacts Industry Impact On Our Results
Slide 40: Industry Down-Cycle Business Impacts
Industry Down-Cycle Business Impacts With oil price down ~50%, and natural gas pricing expected to remain low: The decline in rig count has been very large, and very fast. Lower 48 down ~ 50% E&P Operators are not completing (fracturing) all the wells they are drilling – Backlog of drilled but uncom
Slide 41: CARBO Down-Cycle Actions and Focus
CARBO Down-Cycle Actions and Focus In the near term, we focus on being cash positive: Reduce inventory levels – Mothballing, idling and slowing down production at our manufacturing facilities. This results in under-absorbed / period costs (depreciation, natural gas commitments, fixed facility charge
Slide 42: We are building an enduring company
“We are building an enduring company that withstands the large industry cycles, by focusing on improving well Production and EUR through continuous development of industry leading technology.”
Carbo Ceramics — Scotia Howard Weil 43rd Annual Energy Conference 2015 on 6ix