Committee hires independent consultant to study Flotek’s product claims

Flotek Industries Inc. has appointed a special technical committee to develop an independent methodology to analyze the performance of the company’s CnF® chemistries, and that committee has retained MHA Petroleum Consultants LLC of Denver as the principal investigators for the project. 

The committee, formed to review issues surrounding the company’s FracMax® software and the efficacy of CnF® in completions, hired MHA as advisors to assist in its charge of independently validating the effectiveness of CnF® and assist in the review of the FracMax® software and associated database. 

MHA is an oil and gas consulting firm that provides a broad range of services, such as corporate planning and reporting, acquisition and disposition, litigation support and identification of optimal plans for field development and depletion. MHA conducts reserve and resource evaluations in the US and internationally – onshore and offshore. MHA has experience in converting complex technical reservoir data, production forecasts, and economic information into reserve and resource valuations. Its integrated analysis incorporates the disciplines of geophysics, geology, petrophysics, production facility engineering, economic valuation, and risk assessment. The firm assists companies across the energy spectrum in analyzing production and reserve data, including the evaluation of various drilling, completion and production techniques and strategies. 

Tim Hower, MHA’s CEO, is the principal investigator conducting the CnF® studies. He has more than 30 years of petroleum engineering evaluation experience spanning a range of issues including unconventional reservoir assessment and reserves, field development planning, reservoir simulation and enhanced recovery. He holds a Bachelor of Science degree in petroleum engineering and a Master of Science degree in petroleum engineering, both from Pennsylvania State University. Hower is a licensed petroleum engineer in the states of Colorado and Wyoming.

MHA’s work began in November 2015 with the development of a methodology to assess the impact of CnF® on production, including attention to data collection focused on ensuring, as much as possible, the accuracy of third-party data to be used in the analytical model. MHA has been tasked with reviewing CnF® performance in three basins: The Denver-Julesburg Basin of Colorado, the Permian Basin of Texas, and the South Texas Basin. It is anticipated that the results will be released on a basin-by-basin basis, beginning with the Denver-Julesburg Basin, once the studies are completed and reviewed.  

MHA began its investigation in the Denver-Julesburg Basin because of readily available data for this basin, including both input data as well as well-centric production data. As the company noted in its November 2015 release regarding issues and errors in the FracMax® analytical process, production data from Texas is aggregated by lease or unit, making analysis of individual well production data more complex and time-consuming. 

As a result of issues raised in an independent report regarding the accuracy of Flotek’s FracMax® software and efficacy of the company’s CnF® completion chemistries, Flotek was named as a defendant in a number of shareholder class action and derivative lawsuits. In addition, the company received notice from the US Securities and Exchange Commission that it has opened an inquiry related to similar issues.

The company's board of directors subsequently formed a special committee consisting of five independent members of the board of directors to conduct an independent review of the issues as well as any other relevant issues that may arise in connection with the shareholder litigation or SEC inquiry.

Houston-based Flotek Industries is a global developer and distributor of a portfolio of innovative oilfield technologies, including specialty chemicals and downhole drilling and production equipment. It serves major and independent companies in the domestic and international oilfield service industry.

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