Will US Rig Count Affect Flotek Industries in 4Q16?

FTK’s revenue share

In the past one year, Flotek Industries’ (FTK) revenue share from the US has come down. In 3Q16, FTK’s US revenue share fell to 79% compared to 84% in 3Q15. During the same period, FTK’s aggregate revenues fell 16%.

FTK makes up 0.06% of the iShares Russell 2000 Growth ETF (IWO). The energy sector makes up 1.4% of IWO. Higher US rig count can improve revenues for Weatherford International (WFT), FMC Technologies (FTI), and Superior Energy Services (SPN).

Will US Rig Count Affect Flotek Industries in 4Q16?

US rig count

From September 30 until the week ending January 13, 2017, the US rig count rose ~26% to close at 659. A higher US rig count could increase the 4Q16 earnings and revenues of oilfield equipment and service providers like FTK and Oil States International (OIS). International rig count, by comparison, fell 1% from September 2016 to December 2016.

Crude oil price has recovered 8% since September 30. Higher crude oil prices have driven the US rig count higher. Read the latest on crude oil prices and energy stocks in Market Realist’s Why Crude Oil Prices Hit 1-Month Low. The US rig count reached its multiyear high in September 2014. Since then, it has dropped 66% as of January 13, 2017, following the decline in crude oil prices.

Next, we’ll discuss how FTK’s operating margin was affected by upstream companies’ capex.