Flotek’s EBITDA margin
From 1Q16 to 1Q17, Flotek Industries’ (FTK) EBITDA (earnings before interest, tax, depreciation, and amortization) margin shrank to 3.3% from 4.1%. FTK’s EBITDA margin has been 1.7%, on average, for the past five quarters.
Upstream operators’ capex cut
FTK’s EBITDA margin made considerable progress in 1Q17. From 1Q16 to 1Q17, 19 of the largest US upstream companies, in aggregate, have reduced their capital expenditures or capex by 21%.
Usually, lower upstream capex leads to a fall in revenues and operating margins for OFS (oilfield and equipment services) companies.
EBITDA margin for FTK’s peers
Will the rig count affect FTK’s revenues?
From 4Q16 to 1Q17, Flotek’s revenues rose 51%. During the same period, the US rig count rose 25%. Since March 31, 2017, the US rig count has risen another 14% as of June 30, 2017. In May 2017, the international rig count also rose by one over the previous month’s rig count. Remember, a higher rig count can increase Flotek’s revenues and earnings in 2Q17.
Flotek makes up 0.13% of the iShares Micro-Cap ETF (IWC). From March 31, 2016, to March 31, 2017, IWC rose 26%, compared with the ~74% rise in FTK’s stock price during the same period. DJIA-INDEX rose 17% during that time.
Now let’s discuss Flotek’s debt.