Profile: Flotek Industries, Inc. (FTK)

Flotek Industries, Inc. (Flotek) manufactures drilling products and production equipment. The Company's drilling products division manufactures and distributes casing centralizers, which are vaned cementing sleeves and integral joint stand off tools that improve mud and cementation displacement in drilled oil wells. The Company's production equipment division develops, manufactures and markets the Petrovalve + Plus Pump Valves that include the PetroValve Gas Breaker, the Standing Valve for use with electric downhole pumps, the Petrovalve Injector Valve, which are valves for downhole sucker-rod pumps used in oil wells.

Flotek was originally incorporated on May 17, 1985. Effective September 7, 1995, the Company transferred its corporate status by continuing under the laws of the Province of Alberta. Flotek is headquartered in Houston, Texas and its common shares have been listed on the OTC Bulletin Board market.

The Company is a provider of the patented Petrovalve line of production equipment and a complete portfolio of casing centralizer products. The Company operates primarily in the United States Gulf Coast market and in Latin America.

Flotek sells Turbeco casing centralizers for all applications and provides technical advice to customers. Service personnel are available to install the product at the well site.

Flotek sells the complete line of Petrovalve products and provides engineering data and support to each customer as requested or required. On-site installation is also provided as requested.

Drilling Products

Flotek's drilling products division manufactures, distributes and services several products that enhance oil and gas well cementing programs and the safety and effectiveness of the drilling process. Its primary products include the Cementing Turbulator, which the Company began distributing in March of 1994, when it acquired Turbeco Inc., an oilfield service company. The Turbulator is a steel sleeve, which is placed over pipe before the cementing process of pipe or casing. This pipe or casing is commonly cemented in the open hole section of a recently drilled oil well. The main purpose of this tool is to provide maximum standoff and improve displacement to obtain the best cement bond.

The Company was one of the first companies to distribute spiral vaned cementing turbulators. The Turbulator has gained widespread acceptance through its proven ability to improve oil and gas well cementing programs and is effective in deep, directional and horizontal well applications. New products that have been successfully introduced are the Integral Pup Centralizer, the Eccentric Turbulator (jointly patented with Marathon Oil), and the Turbolock Centralizer. Recently the Company introduced its Pressure-Actuated Casing (PAC) centralizer. This pressure-actuated tool is designed to accommodate "slim-hole" deviated well completion programs. The PAC centralizer is an integral part of the casing and does not activate until it is its final position in the drilled well, thus reducing drag during insertion of the casing in the well bore. Once in place, the vanes are activated providing a positive stand off of the casing to maximize the integrity of the cementing process. Patent applications are pending and marketing efforts are active.

The Company's Drilling Products customers are made up of the North American oil producers, including major oil companies that are involved in exploration and the drilling and cementing of oil wells. The Company's active customer base is well distributed between major oil companies and smaller independent operators. The Company's marketing area includes the Gulf of Mexico. Currently the Company's primary competitors with respect to its drilling products are: Weatherford International, Inc., Franks Industries, Ray Oil Tools and Milam Tool Company.

Production Equipment

The Company has focused on the development of its proprietary and patented technologies: the Petrovalve + Plus Pump Valve and the Petrovalve Gas Breaker Valve. Both patented products are valves used in downhole sucker-rod pumps. The Petrovalve Gas Breaker Valve provides a solution to gas lock problems. Both valves offer producers operating advantages by performing more efficiently and lasting longer than the traditional ball and seat valves. Flotek's original technology was developed in concert with several university research departments, including the University of Alberta, and is the subject of various patents and patent applications. The Company's production equipment customers are the North American oil producers, and international energy companies.

The Company's competition in the production equipment market is comprised of ball-and-seat manufacturers as well as rod-pump manufacturers. There is substantial competition in the oil field industry, which the Company assumes will remain at current levels for the foreseeable future; however, there is no other significant proprietary artificial lift technology in the down-hole sucker-rod pump market. The pump manufacturers manufacture an inferior ball & seat and can only set themselves apart by pricing. Presently, ball-and-seat manufacturers produce the majority of ball-and-seat valves for manufacturers of rod-pumps, yet, the rod-pump manufacturer is not considered to be in competition with the ball-and-seat manufacturer. The Petrovalve Plus valve product is manufactured by leading manufacturers to the Company's controlled specifications.

The Company's largest competitors with respect to its production equipment product line engage primarily in the manufacturing and direct sale of new equipment. These large manufacturers include Halliburton, and Weatherford International, Inc. within the United States. These companies tend to concentrate on the sale of new equipment, (down-hole sucker rod pumps and associated equipment), with sales to the customers through their regional and local pump repair facilities.

Flotek utilizes outside manufacturers under license arrangements to manufacture its patented products. The Company currently uses A-1 Carbide in California, Aves in Arlington, Texas, among others. The Company's valve products are sold directly to the end user, the oil and gas producer, and distributed domestically through pump repair facilities and regional oilfield supply stores; and internationally through area agents and distributors, as well as direct Petrovalve Plus sales.

In March 2002, the Company acquired International BioSystems 2000 (IBS) of Denver. IBS has several formulations and applications of environmentally friendly oil and gas well treatment additives.