Pumping oil out of the ground isn't as simple as drilling a hole and sucking out the black gold. Because it's embedded in hard rock and fissures, drillers need to crack open that rock and keep it open for the smooth extraction of the slick fuel.

To do that, companies like Halliburton (NYSE:HAL), Schlumberger (NYSE:SLB), and BJ Services (NYSE:BJS) primarily use hydraulic fracturing to split open the rock under high pressure. Fluid infused with small granules called proppant is pumped into the well, which cracks open the rock, and the granules keep the fractures propped open (hence the name).

Sand has been the preferred choice for proppant because it's cheap, but its irregular shape prevents oil from flowing smoothly. A better alternative is resin-coated sand, which, while more expensive, provides a more uniform face for the oil and gas to flow around. The best alternative found thus far is ceramic beads such as those made by CARBO Ceramics (NYSE:CRR). Smooth as glass and hard as rock (and more expensive than the alternatives), the individual ceramic granules offer higher strength and uniform size and shape. That helps drillers boost productivity by allowing for greater recovery of oil and gas from the well.

CARBO owned the ceramic market for years, but there are now a number of competitors. According to its own estimates, CARBO held a 36% market share for ceramic proppants in 2006 and provides as much as 6% of all proppants used worldwide. Shares in CARBO reached a 52-week high of $53 in October, but they've since fallen to around $40 because sales volume in the U.S. -- where the company generates two-thirds of its $333 million in annual revenues -- fell 9% from the year before. Despite a higher rig count domestically, they were in shale formations, where ceramic proppants are little used.

The investment opportunity in CARBO comes from international operations and from its fracture mapping services. While CARBO Ceramics had once owned the Russian proppant market, the dismantling of oil producer YUKOS virtually eliminated the purchase of imported proppants, and CARBO's market share dried up. While CARBO's China facility made it somewhat less expensive to ship proppant to Siberia, with the ramp-up of its own Russian facility, CARBO can now effectively compete there.

Russia is second to only Saudi Arabia in oil production, producing nearly 10 million barrels of crude oil a day. As Russia expands its production capabilities, the need for high-quality ceramic proppants will increase, too. International sources account for one-third of CARBO's revenues, and international sales volume increased 92% in the third quarter, primarily because of sales to Russia and China.

Moreover, CARBO's fracture mapping service, Pinnacle Technologies, enables drillers to improve fracture design and optimize well placement by inserting microseismic tools directly into the well to measure the fissures created by the fracturing process. With less than 3% of hydraulically fractured wells utilizing mapping services, there is a significant opportunity for expansion. Sales in this division jumped 58% for the past three months and fostered the 10% increase in overall quarterly revenue.

At only 17 times earnings, CARBO Ceramics is trading near the average for the broader market. Earnings are expected to grow 15% next year and 25% annually over the next five years. The company is in good financial shape, pays a dividend of 1.4%, and has negative free cash flow right now only because of the heavy investments it has made in its new Russian factory and expansion of its distribution facilities. With no immediate significant capital improvements after this year, CARBO will have resources to spend on other areas of its business.

It looks like there might be a lot of slick possibilities in the future for CARBO Ceramics.

For related Foolish articles:

Need new ideas for your money for the new year? Take a risk-free look at Stocks 2008, or visit our new Motley Fool CAPS investment community.

Fool contributor Rich Duprey owns shares of CARBO Ceramics but does not have a financial position in any of the other stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.