FTK stock traded up 63% on December 28, 2021, as rumors circulated that the company could be a takeover target. The rumors appear to be coming from a press release by the company. Is the press release the result of pressure by the NYSE for the company to get its share price above $1 per share?
Flotek Industries Receives Unsolicited Indication of Interest, Engages Piper Sandler
On December 27, 2021, Flotek Industries, Inc. (NYSE: FTK) has received an unsolicited indication of interest for a potential transaction for all or part of the Company. To assist in evaluating this unsolicited indication of interest, Flotek’s Board of Directors has engaged Piper Sandler & Co. (“Piper Sandler”) as a financial advisor to assist with the evaluation process.
There can be no assurance that such evaluation will result in one or more transactions or other strategic change or outcome. The Company has not set a timetable for the conclusion of its evaluation of the offer, and it does not intend to comment further unless and until the Board has approved a specific course of action or the Company has otherwise determined that further disclosure is appropriate or required by law.
For further information, interested parties may contact Sanjiv Shah, Managing Director and Global Co-Head of Energy & Power Investment Banking at Piper Sandler (phone: +1 (713) 236- 9999; email: [email protected])
Flotek Industries, Inc. creates solutions to reduce the environmental impact of energy on air, water, land and people. A technology-driven, specialty green chemistry and data company, Flotek helps customers across industrial, commercial, and consumer markets improve their Environmental, Social, and Governance performance. Flotek’s Chemistry Technologies segment develops, manufactures, packages, distributes, delivers, and markets high-quality cleaning, disinfecting and sanitizing products for commercial, governmental and personal consumer use. Additionally, Flotek empowers the energy industry to maximize tile value of their hydrocarbon streams and improve return on invested capital through its real-time data platforms and green chemistry technologies. Flotek serves downstream, midstream, and upstream customers, both domestic and international.
Flotek receives continued listing standard notice from NYSE
On December 10, 2021, Flotek Industries announced it has received written notice from the New York Stock Exchange that the average closing price of the company’s shares of common stock was below $1.00 per share over a period of 30 consecutive trading days, which is below the requirement for continued listing on the NYSE. In accordance with applicable NYSE procedures, the company plans to notify the NYSE that it intends to cure the $1.00 per share deficiency.
Flotek Announces Third Quarter 2021 Results
On November 8, 2021, John W. Gibson, Jr., Chairman, President, and Chief Executive Officer, stated, “I’m pleased to report that our revenues for the third quarter are up approximately 11% compared to the second quarter. Customer growth and diversification continue to improve as revenueThe income statement provides a summary of a company's revenue and expenses over a specified period of time, typically a year or a quarter. It shows the company's total revenue, th... from new or non-core customers grew 34%, while the total number of customers grew by 22% sequentially in our energy chemistry technologies business. Additionally, our data analytics business reached two important milestones during the third quarter by obtaining international certifications for our Verax analyzers and launching a new patent-pending Advanced Interface Detection Algorithm (AIDA) application.”
“We executed our sales team realignment during the third quarter, adding eight new sales professionals supporting the energy chemistry business and three new professionals for the data analytics business. These sales professionals are all experienced with proven track records. Supporting our Professional Chemistry activities, we also successfully secured three contract manufacturing and toll blending agreements with U.S based suppliers, entered into manufacturing representation agreements with four agencies providing coverage in 48 states with over 150 sales representatives, and extended our product line with 18 private label options for distribution and re-distribution groups.”
“I’m pleased to announce the commercialization of Flotek’s ESG scorecard assessment service, which analyzes the full well cycle chemical utilization to support our customer’s ESG reporting goals, operational efficiencies, and enterprise risk management. Our ESG scorecard further demonstrates our commitment to engaging with the industry to highlight the strategic benefits of green chemistry solutions.”
“We also continue to focus on improving our liquidity. In August, we completed a lease agreement for our Monahans facility, converting it into a more marketable, income generating property. We have also applied for forgiveness of our Paycheck Protection Program (“PPP”) loans and have received an extension of the loan maturity date from April 15, 2022 to April 15, 2025. Finally, we continue to clear legacy matters through our settlement with ADM, which eliminates a sizeable cash commitment.”
Third Quarter Financial Results
- Consolidated Revenues: Flotek generated third quarter 2021 consolidated revenue of $10.2 million, down 20.1% from $12.7 million in the third quarter 2020, but up 10.9% versus $9.2 million in the second quarter 2021. The year-over-year decrease in revenue was primarily due to the loss of two major energy customers that were purchased by non-customers during the second quarter of 2021, and nominal decreases in international sales, offset by certain current and returning customer revenue increases during the current quarter that did not have prior year comparable activities.
- Consolidated Operating Expenses: Consolidated operating expenses (excluding depreciation and amortization) were $5.4 million in the third quarter 2021, a 55.4% decrease from $12.1 million in the second quarter 2021. The decrease was primarily driven by the ADM lawsuit settlement and related net benefit of $7.6 million. Consolidated operating expenses for the nine months ended September 30, 2021 decreased $32.6 million, or 51.0% versus the same period of 2020. The year-to-date decrease was primarily due to reduced cost of sales due to lower sales during 2021 and the net benefit of $7.6 million to operating expenses related to the ADM lawsuit settlement.
- Corporate General & Administrative Expenses (CG&A): CG&A expenses for the third quarter of 2021 were consistent with the same comparable period last year at $2.7 million and were 7.0% less than the CG&A expenses of $2.9 million for the second quarter of 2021. The declines were primarily driven by the reversal of bonus accruals in the third quarter of 2021.
- Net Income: The Company recorded net income for the third quarter of $0.5 million, or an income of $0.01 per basic/diluted share, compared to a loss of $6.5 million, or $0.09 per basic/diluted share in the second quarter 2021. The increase was primarily driven by the ADM lawsuit settlement and the related net benefit. Year-over-year improvement is mainly due to no impairments during 2021 compared to the $24.2 million and $81.7 million impairments recorded in the three and nine months ended September 30, 2020 and the ADM lawsuit settlement and related net benefit.
- Adjusted EBITDA: Adjusted EBITDA for the third quarter 2021 was a loss of $6.3 million, a 6.0% improvement on the $6.7 million loss in the second quarter of 2021 and a 2.8% improvement on the $6.5 million loss during the same period of the prior year.
Balance SheetThe balance sheet is a snapshot of a company's financial position at a specific point in time. It shows the company's assets, liabilities, and equity. and Liquidity
As of September 30, 2021, the Company had cash and equivalents of $20.5 million which were impacted by operating losses in the quarter. Flotek also had $4.8 million of PPP loans outstanding. The Company has applied for forgiveness for its PPP loans and received an extension of the loan maturity date from April 15, 2022 to April 15, 2025, reducing the current portion of long-term debt from $4.8 million to $1.3 million as of September 30, 2021.
Chemistry Technologies Segment: Energy Chemistry and Professional Chemistry
In the third quarter 2021, sales in the Chemistry Technologies segment declined 22.4% year-over-year to $9.4 million. The year-over-year decrease was primarily the result of decreased demand from the company’s major customers and smaller operators that have not returned to the pre-pandemic levels. In addition, revenue from two major customers was lost as a result of market consolidation in the Permian basin in the second quarter.
Highlights from the quarter include:
- Revenue improved 28.2% quarter on quarter, outpacing the market and indicating market share growth.
- Revenue generated from new or non-core accounts grew 34% while the total number of customers grew by 22% quarter on quarter, demonstrating the continued emphasis on improving customer acquisitions and revenue diversification.
- Secured a pilot project with a major international service company to deliver a four-well trial of Flotek’s proprietary slick water hydraulic fracturing fluid system to a major national oil company in the Middle East.
- Executed a five-year service contract extension at our Material Translogistics facility in Raceland, LA with one of the world’s top oilfield services providers while expanding that business through the impact of Hurricane Ida.
- Successfully entered into an adjacent energy market with revenue generation in geothermal drilling and cementing operations.
- Entered into early negotiations with key suppliers to secure future purchase prices and material allocation volumes with our top product lines for 2022 as we focus on continued growth.
- Commercialized our ESG scorecard assessment service offering that analyzes the full well cycle chemical utilization and identifies opportunities to support customer’s ESG reporting goals, operational efficiencies, and enterprise risk management.
- Signed three contract manufacturing and toll blending agreements with U.S based suppliers.
- Gained sales force expansion via manufacturing representation agreements with four agencies providing coverage in 48 states with over 150 sales representatives.
- Extended our product line with 18 private label options for distribution and re-distribution groups.
- Added revenue from the agricultural adjacent market with our green solvents and adjuvant applications.
- Data Analytics Segment
In the third quarter 2021, Data Analytics’ sales decreased from the second quarter 2021 by 45.6% and grew 22.6% compared to the third quarter 2020.
- Developed a new line of Verax analyzers for the international market obtained the necessary certifications for usage in hazardous locations internationally.
- Launched the Advanced Interface Detection Algorithm system, or AIDA, a new patent-pending application that uses advanced machine learning algorithms to enable pipeline operators to cut batches using real time detection of batch interfaces without the need for additional sampling or chemometric modeling.
📽 Fireside Chat with Flotek Industries (FTK) CEO John W. Gibson, Jr.[embedyt] https://www.youtube.com/watch?v=Pm6XiAhgNJ0[/embedyt]
📉 FTK Stock Technical Analysis
The short term trend is negative, as is the long term trend. There should be more interesting stocks out there. Worse, the large players volume is falling into the upward move as big players sell into the press release on December 28, 2021, about the takeover speculation. FTK is part of the Chemicals industry. There are 118 other stocks in this industry, of which 91% are performing better than FTK. Volume is considerably higher in the last couple of days. In combination with the strong move down this is a bad signal. FTK is currently trading in the lower part of its 52 week range, which is not a good signal considering the S&P500 Index is trading near new highs. There is resistance at 0.98 from a trend line in the daily time frame. There is also resistance at 1.01 from a trend line in the daily time frame. The technical rating of FTK is bad and it also does not present a quality setup at the moment. Prices have been extended to the upside lately. For a nice entry it is better to wait for a consolidation. Click here to sign up for email alerts on FTK stock and when it consolidates for a good entry.