CRR
#Yes.
So maybe looking at it from a gross profit or operating profit standpoint, <UNK>, taking a look at the first quarter, if you exclude the charges in DD&A, I think our result would have been a positive gross profit, something approximating something close to $7 million.
After G&A, we're at a loss of about $7 million.
So it's a little bit complicated to answer that question only from the standpoint that your depreciation's going to ---+ depreciation plus some component of net settlement of natural gas is going to be fixed.
That's going to vary based on how much natural gas we use.
The other is going to be variable.
And so I would say, as a reasonable estimate, it's probably in the 60%-plus range that's fixed versus variable.
But again, it's all going to be dependent on how we ---+ on our utilization of the plant.
Unfortunately, it's not just a simple answer.
It flips the other way.
That's right.
That's difficult to determine, I think.
We only know our own and what we can do there, but we do track the trends around the world, and we have for years, on the imports and where it all goes.
That's a difficult one to put it into months.
I think the second half will be better than the first half is probably the best way to describe it.
There's a lot of folks there that are in pure panic mode out there, trying to move inventory right now and that will start to dissipate as time goes on.
Yes, I think those are the folks, right, that are just looking to convert to cash and stuff because they've got ---+ sometimes you get caught in a trap with stuff in rail cars.
Sometimes you've got it sitting in warehouses in Seattle and all those things.
It's not a whole lot different than the last down cycle, although given the decline this year compared to last down cycle, it's probably more frantic, I would say.
Quite honestly, I like that, because this is a temporary problem in our world, in CARBO's world.
It's good for them to feel some pain on that lower quality imported stuff and it means some pain for all of us, but eventually maybe people learn.
And we know the path we're on and we can't really correct all the other people.
<UNK>, was your question also associated with ---+ when you said assets, do you mean like producing assets.
No.
I'm very confident that there won't be any new building for a while.
That much I'm very confident in.
There are fellow competitors in the US, they've mothballed some things and maybe they'll mothball some of their older facilities that they announced permanently.
I don't know.
China, of course, is kind of shut down, which it should be.
But why would you want to buy those assets.
We're trying to put out a positive message here to the E&P too.
Besides being lower quality, all this import stuff, it doesn't burn the natural gas that those of us that produce in the US use to make good proppant and it doesn't support American jobs or anything.
So we try and approach this on all aspects and that's the order in which it's importance.
It hurts the wells and doesn't use the product that you produce and it hurts American jobs.
So I realize I'm getting on a soap box there a little bit but it's true.
And as far as asset buying, no, we haven't heard any of that, nor is that really going to affect CARBO that much.
We are going to separate ourselves.
Once again, we're the lowest cost, highest quality and that will only get more separated as we get KRYPTOSPHERE in the platform technologies developed.
So not going into specifics but just in general, when you don't consume the natural gas, you net settle it based on that month's NYMEX price and the contracted price at which you agree to.
And so it changes and varies month to month.
But that's the basic formula.
We know the Chinese have been.
Some of our customers have told us that and everything.
But that's a normal practice there, right, it's the Chinese way, right, build overcapacity and to solve that problem, build more capacity.
For sure, yes, I mean, even recently we knew 50% of the plants were shut down.
It's probably, whatever, 90% now.
It is what it is.
There's always been overcapacity there for the last decade.
So we've touched on continued under absorption and idling type costs, just because of the levels of production.
Our cost reduction initiatives are not complete.
We will continue to look at that, which may include some additional severance-type costs as we go in the second quarter, as we go through the second quarter.
We have got most of the majority of the work behind us, however.
That is correct.
That's part of what <UNK> is talking about.
And then there's other things involved with just having a larger footprint, of course, that gets challenging.
But I tend to think the second half in the industry will be better and probably in the camp that 2016 would logically be better.
It's a wait-and-see thing and we'll adjust if it doesn't show up.
We do know what to do there.
We had previously mentioned a target of ---+ on an absolute dollar basis of a reduction of 20%.
That's still the objective for the year.
No, it's very similar to when we move proppant around the world, across the water.
Those logistics are the same.
In this case, we just take it ---+ it's loaded on a boat by one of the great fracturing companies and they go out and pump it.
Really isn't anything for us.
One of the things that our clients have been asking us for is to develop something at a little bit less density which helps them in some of these very deep wells.
It may ease in the process of circulating out or the various things that could happen.
So it's been a client request and for us it just provides more products in the platform.
It's still a high-density product, but it's just a little bit lighter.
And so it has all those benefits and it ---+ remarkably we have almost the same conductivity.
So it's quite a breakthrough by our folks there.
And that means it has more applications, literally, on any well wherever it may be, globally, on land or wherever.
So you'll see us, we have a low density that we know what we're going to do there.
We have a high density.
We've tried to reduce the weight of that high density if our clients want it.
You'll see, this isn't just an offshore product.
I needed to say that, right.
This is for people that really want to make wells produce.
And one of the incredible other breakthroughs for KRYPTOSPHERE was that the incredible surface of the pellet helps E&P operators in these deep wells to where they can pump and it won't wear out the downhole jewelry.
And conversely, it helps the pressure pumping companies because it doesn't wear out their pumps.
So this incredible surface we put on KRYPTOSPHERE helps.
And we've seen cases where some of our theoretical competitors pumping some of the lower quality proppant literally wash out pumps and things like that of the service companies and jobs have to be stopped.
KRYPTOSPHERE will be a benefit to pressure pumping companies from a maintenance cost on their iron.
We hope that all service companies do the right things for wells and increase production and recovery.
And if we all join in that effort, because that's our religion at CARBO, is increasing production recovery.
So if everybody does that, we'll all be happy.
Thanks, everyone, for joining us today.
As we've mentioned, we've taken and will continue to take the actions to manage this down cycle with a focus on cash preservation and cost reductions.
We've been through this so many times before.
We know what we need to do.
We're comfortable with our current cash balance today and liquidity outlook for 2015.
Extremely excited about the technologies that we're rolling out and the ones that are in the pipeline and what they can mean for the future of the Company.
And the industry will recover eventually and when it does we think our production enhancement technologies will continue to differentiate CARBO.
Thank you.
