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FTK, SLCA, and SPN: Returns and Outlook for 1Q18

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Share price returns versus the industry

Since February 22, Flotek Industries’ (FTK) stock price has generated -56% returns as of February 21. During this period, FTK underperformed the VanEck Vectors Oil Services ETF (OIH), which has generated -26% returns. Superior Energy Services (SPN) has also outperformed FTK during this period. Since February 22, SPN has produced -43% returns. During the period, U.S. Silica Holdings (SLCA), with -58% returns, has underperformed its oilfield equipment and services (or OFS) peers FTK and SPN, as well as the OFS industry represented by OIH.

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OFS stocks versus ETFs and crude oil prices

FTK, SPN, and SLCA have significantly underperformed the SPDR S&P 500 ETF (SPY), which has given 14% returns since February 22. West Texas Intermediate (or WTI) crude oil prices have increased ~15% in the past year. Read more on crude oil price movements in Market Realist’s Global Oil Supply Outage and Libya: Rise in Global Oil Supplies?Stock Prices

What will drive U.S. Silica Holdings in 2018?

SLCA’s management expects Oil & Gas Proppants segment volume growth to taper off in 1Q18. Bryan Shinn, U.S. Silica Holdings’ CEO, commented in the 4Q17 press release, “For the first quarter, we expect that volumes and pricing in Oil & Gas will be flat compared with the fourth quarter of 2017.” Regarding the Industrial & Specialty Products segment outlook, SLCA’s management commented, “For ISP, we expect first quarter volumes may be up slightly from the fourth quarter of 2018 with the restart of a large customer’s plant and some additional new business. We also believe we will see some positive impact on margins from the previously announced price increases put into effect January 1st on about 50% of ISP total sales.”

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What will drive Flotek Industries in 2018?

FTK’s management expects a mixed outlook for 1Q18. Regarding this outlook, John Chisholm, Flotek Industries’ chairman and CEO, commented in the 4Q17 press release, “With respect to our ECT segment, the oil and gas industry is shaping up for a stable operating environment moving into 2018. To date, operators appear to be acting with a degree of financial discipline and a renewed focus on returns over growth. Disciplined spending behavior, logistics challenges and weather delays in major basins during the start of the year are likely to lead to a more flattish environment in completions activity in 1Q18 sequentially, however, the quarter will be dependent upon how quickly activity can return to pre-December levels. In our CICT segment, we expect revenues to increase sequentially and be flat to up year-over-year.”

What will drive Superior Energy Services in 2018?

SPN’s management talked about better opportunities in 2018. David Dunlap, Superior Energy Services’ CEO, commented in the 4Q17 press release, “Looking ahead to 2018, I am confident that an improved oil price environment and economic outlook can lead to better than expected results and improving margins as our operating efficiency continues to improve.”

Next in this series, we’ll discuss Wall Street analysts’ recommendations for Flotek Industries (FTK).

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