Flotek: Servicing the Growing Fracking Industry

Hydraulic Fracturing, also known as fracking, has become an important method of extracting energy in the United States. It is estimated that as much as 80% of natural gas will be removed from the ground using this method over the next decade. Thanks to methods such as fracking, the United States can reduce its dependency on foreign sources of energy. This should please both consumers and politicians.

Whenever there is a rush for any resources, one should always keep an eye on the companies that service the miners. For example, everybody has heard of Levi Strauss’s jeans, which he originally created to clothe gold miners; however, few can name any of the miners. The fracking business is no different, dry well or not, someone has to supply them. This includes both drilling equipment and chemicals used in production. Furthermore, these wells become depleted faster than conventional wells, which is good news for anyone who is selling equipment for the next well.

One of the top fracking service companies is Flotek. Founded in 1985, Flotek has grown to be a full service provider in the fracking industry. This would include drilling and production equipment as well as chemicals. The company has subsidiaries that manufacture and lease equipment to the drilling companies.

The market for fracking is solid. It is a commodity, so any investor needs to be concerned about the market turning. However, despite objections from some environmental groups, fracking has become a reality. In fact, fracking miners have realized the importance of maintaining high standards and moved to police themselves. Combine this with a good source of employment for workers and extra income for property owners and it will be hard for states to say no to fracking. This is good news for Flotek.

The demand for the company’s products has translated into an excellent financial picture. Revenues have more than doubled in the past year to $312 million. Operating margins are within the industry average of 16%. After becoming profitable in 2011, Flotek’s earnings doubled in the past year.