Here's a story that the big oil companies can probably relate to on a personal level. See, we all know that big oil boys like Exxon Mobil (NYSE:XOM) and BP (NYSE:BP) would love to sell more oil and gas at today's high prices, but they just can't. They don't have the production capacity. On the flip side, Carbo Ceramics (NYSE:CRR), a company devoted to making products that help oil companies boost production, is itself production-constrained.

Revenue rose only 2% in the fourth quarter and net income dropped about 3%. The issue isn't demand -- service companies like Schlumberger (NYSE:SLB), Halliburton (NYSE:HAL), and BJ Services (NYSE:BJS) all continue to see very strong demand for pressure pumping. No, the issue here is costs and capacity.

Carbo Ceramics sold about 6% fewer pounds of proppants (small ceramic granules) in the quarter, since the company couldn't really dip into inventory to augment production as it had in the year-ago period. So while prices were up about 7% on average, there just simply wasn't as much product to sell.

Unfortunately, the company's natural gas hedges expired in the quarter, and Carbo was subjected to considerably higher market prices for energy. What's more, a problem with a bauxite supplier forced it to shift to a lower-priced alternative finished product, which didn't help margins either.

The good news is that a new production facility in Georgia opened on schedule and will increase overall capacity by about one-third, when it's fully up to speed. Similarly, the company is looking to a new facility in Russia to boost its overseas business; sales to Russia were curtailed this quarter because the company chose not to compete with cheaper Russian rivals that didn't have to pay duties, tariffs, or international shipping.

Given the role that Carbo Ceramics' proppants play in energy services and oil/gas production, it's no surprise that this stock trades along with the oil services sector. That said, I was surprised myself to see how closely the stock tracks the movement of the OilServices HOLDRs (NYSE:OIH) ETF, though the latter has significantly outpaced Carbo this past quarter. While there's always the chance that company-specific news and developments will lead to outperformance, this stock's fortunes are largely tied to those of the entire energy services sector -- for better or worse.

For more serviceable Takes:

Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).