What: Shares of Flotek Industries Inc (NYSE:FTK) plunged as much as 25% in morning trading on Wall Street after updating investors on fourth-quarter results. By 12:00 p.m. ET, shares had recovered about half of their losses and were down 13%.
So what: Management didn't give great detail on fourth-quarter results but said that revenue from CnF, its patented surfectant, would be flat from the third quarter on about a 5% increase in volumes. But the non-CnF chemistry business will be "meaningfully weaker" and the drilling technologies segment will decline about 5% sequentially.
On top of the bad results, the company said the SEC has started an inquiry into the company's reporting and accuracy of FracMax. When the SEC comes sniffing around, it's never a good sign for a company.
Now what: Flotek was able to squeeze out a narrow profit of $2 million in the third quarter, but a significant decline in revenue could lead to a loss in Q4. What may be more concerning long-term is the SEC looking into FracMax, a product management once thought would be a growth driver. That product is now up in the air, and with the oil industry in the U.S. in a major decline, I don't see a reason to be a buyer of shares on today's drop.