Flotek on back foot following FracMax fracas

Bronte Capital CEO - FracMax data ‘does not compute!’

In a presentation to the 2015 Stephens Fall Investment Conference in New York, Flotek president and CEO John Chisholm defended the company’s FracMax flagship data analytics and visualization toolset. FracMax is described as a ‘powerful interactive sales tool’ that provides access to 25 million well records that illustrate the ‘results and profitability’ associated with Flotek’s Complex nano-fluid (CNF) technology.

Last month, John Hempton, chief investment officer at Bronte Capital Management, posted a critical and lengthy blog which analyzed the data that FracMax uses. He found ‘several problems’ viz: production data did not match that which was reported to the RRC, the data ‘appears to have been adjusted’ and various other numbers appeared to be in error. Hempton concluded that ‘the data … does not compute’ and may have been altered to make the well that uses its product seem more productive than wells that do not. Flotek stock halved on the post.

Chisholm presented an analysis of Hempton’s criticism that recognized errors in three of the wells analyzed that had been misinterpreted by Flotek. The errors however ‘do not change the conclusion that the CnF well outperformed the non-CnF wells.’ Flotek further noted that its client Sabine Oil & Gas continues to use CnF on its completions, ‘an indication that Sabine’s internal data show compelling benefits from the technology.’ To be on the safe side, Flotek has appointed a team of independent verifiers check the accuracy, transparency and credibility of FracMax and its database. The team is to report early in 2016.

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