Thursday, December 8, 2016
Flotek: some new research
In plain english Flotek makes a chemical mix which makes sand-water mixes slippery so you can get more sand into fractures when you fracture an oil and gas reservoir. Their chemical mix is a surfactant.
There are many suppliers of surfactants. The product is a commodity.
However Flotek sell their product as somehow special. The claim: their surfactant is a "complex nano-fluid", but it is really a mix of d-limonene (the oil from orange peel) and isopropyl alcohol.
This blog once showed that data Flotek provided for pitching their complex nano-fluid was either (a) made up or (b) did not support the idea that their fluid was particularly effective.
We were right. Flotek put out a press release effectively admitting all of our allegations.
In other words their key claims were BS.
At the time Flotek claimed they had a software sales tool (that ran on an iPad) called FracMax which was critical to demonstrating their fluid effective - but we could not find a working copy of FracMax and could not find anyone who had ever seen one.
This was problematic. Flotek told the market that FracMax was their main selling tool.
Whatever FracMax has disappeared from Flotek's literature.
So their main selling tool was also BS.
All this should have been the death-knell for the stock. But it wasn't. Sure the stock is lower but not much (given the decline in oil and gas volumes) and somehow people still believe the "complex nano-fluid" story. I have never met a serious Flotek owner - so the stock price remains a mystery to me.
Today FourWorld Capital Management (an outfit I had never heard of) put out an updated and more thorough analysis of Flotek.
Its darn good - so go read it.
Why this stock trades above pennies I do not understand.
It will trade at pennies one day. I remain short.
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