CARBO CERAMICS INC (Form: 10-K, Received: 03/01/2017 06:22:47)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File No. 001-15903

CARBO Ceramics Inc.

(Exact name of registrant as specified in its charter)

DELAWARE

72-1100013

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

575 North Dairy Ashford

Suite 300

Houston, Texas 77079

(Address of principal executive offices)

(281) 921-6400

(Registrant’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class		Name of each exchange on which registered
Common Stock, par value $0.01 per share		New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer	☐	Accelerated filer	☒

Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing sale price of the Common Stock on June 30, 2016, as reported on the New York Stock Exchange, was approximately $205,760,194. Shares of Common Stock held by each director and executive officer and each person who owns 10% or more of the outstanding Common Stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of February 17, 2017, the Registrant had 27,142,528 shares of Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for Registrant’s Annual Meeting of Stockholders to be held May 16, 2017, are incorporated by reference in Part III.

TABLE OF CONTENTS

PART I

Item 1.	Business	1
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	15
Item 2.	Properties	15
Item 3.	Legal Proceedings	16
Item 4.	Mine Safety Disclosure	16

PART II

Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 8.	Financial Statements and Supplementary Data	30
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	30
Item 9A.	Controls and Procedures	30
Item 9B.	Other Information	31

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	32
Item 11.	Executive Compensation	32
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
Item 13.	Certain Relationships and Related Transactions, and Director Independence	32
Item 14.	Principal Accounting Fees and Services	32

PART IV

Item 15.	Exhibits and Financial Statement Schedules	33
Item 16.	Form 10-K Summary	33
Signatures		34
Management’s Report on Internal Control Over Financial Reporting		F-1
Reports of Independent Registered Public Accounting Firm		F-2
Consolidated Financial Statements		F-4

PART I

Item 1.

Business

General

CARBO Ceramics Inc. (“we,” “us,” “our” or our “Company”) is a technology company that provides products and services to the global oil and gas and industrial markets to enhance value for its clients. The Company was incorporated in 1987 in Delaware. As used herein, “Company”, “CARBO”, “we”, “our” and “us” may refer to the Company and/or its consolidated subsidiaries.

The Company conducts its business within two operating segments: 1) Oilfield Technologies and Services and 2) Environmental Products and Services. Financial information about reportable operating segments is provided in Note 13 to the Company’s Consolidated Financial Statements.

Our oilfield technologies and services segment includes the manufacturing and selling of proppant products for use primarily in the hydraulic fracturing of oil and natural gas wells, Fracpro software for the design of fracture treatments, and StrataGen consulting services for the optimizing of well completions. Hydraulic fracturing is the most widely used method of increasing production from oil and natural gas wells. The hydraulic fracturing process consists of pumping fluids down a natural gas or oil well at pressures sufficient to create fractures in the hydrocarbon-bearing rock formation. A granular material, called proppant, is suspended and transported in the fluid and fills the fracture, “propping” it open once high-pressure pumping stops. The proppant‑filled fracture creates a conductive channel through which the hydrocarbons can flow more freely from the formation to the well and then to the surface.

There are three primary types of proppant that can be utilized in the hydraulic fracturing process: sand, resin‑coated sand and ceramic. Sand is the least expensive proppant, resin-coated sand is more expensive and ceramic proppant is typically the most expensive. The higher initial cost of ceramic proppant is justified by the fact that its use in certain well conditions results in an increase in the production rate of oil and natural gas, an increase in the total oil or natural gas that can be recovered from the well and, consequently, an increase in cash flow for the operators of the well. The increased production rates are primarily attributable to the higher strength and more uniform size and shape of ceramic proppant versus alternative materials. We are one of the world’s largest suppliers of ceramic proppant.

We manufacture various distinct ceramic proppants. KRYPTOSPHERE ^® HD, introduced in 2013, is a high-performance ceramic proppant engineered to deliver increased conductivity and durability in the highest closure stress wells. Even in challenging, high-cost environments such as deep water wells, KRYPTOSPHERE ^® HD retains its integrity and enables greater Estimated Ultimate Recovery (“EUR”) from the reservoir.

KRYPTOSPHERE ^® LD meets client needs for a lower density proppant than KRYPTOSPHERE ^® HD, yet has similar characteristics and conductivity in high stress wells.

CARBO HSP ^® and CARBO PROP ^® are high and intermediate density ceramic proppants, respectively, designed primarily for use in deep oil and gas wells.

CARBO LITE ^® , CARBO ECONOPROP ^® and CARBO HYDROPROP ^® are low-density ceramic proppants. CARBO LITE ^® is used in medium depth oil and gas wells, where higher production rates can be achieved due to the product’s uniform size and spherical shape. CARBO ECONOPROP ^® was introduced to provide a lower cost ceramic to compete more directly with resin-coated sand and sand proppant, and CARBO HYDROPROP ^® was introduced to improve performance in “slickwater” fracture treatments.

We produce resin-coated ceramic (CARBO BOND ^® LITE ^® ), which addresses a niche market in which oil and natural gas wells are subject to the risk of proppant flow-back.

CARBO NORTHERN WHITE is a frac sand that is used by operators that still value quality, but do not wish to pay the higher costs associated with ceramic or resin-coated sand proppants.

In addition, we manufacture CARBO NRT ^® , a detectable proppant that utilizes a non-radioactive tracer material to assist operators in determining the locations of fractures in a natural gas or oil well. This tracer is added to the proppant granules during the manufacturing process, and can be added to most of the types of proppant that the Company sells.

In 2014, we began sales of SCALEGUARD ^® , a porous ceramic proppant that is infused with scale-inhibiting chemicals and placed throughout the fracture as part of the hydraulic fracturing process. The infused scale inhibitor in SCALEGUARD is designed

to be released into the fracture only on contact with water and thereby reduce or eliminate expensive remedial maintenance programs. We also are developing SALTGUARD ^® and PAR AGUARD ^® to help prevent salt and paraffin wax buildup in wells, which we expect to begin marketing and selling during 2017.

Our FUSION ^® technology, introduced in 2015, improves well productivity by forming a stable, high-permeability proppant pack that prevents proppant washout from the non-compressive annulus and near-wellbore areas.

CARBOAIR ^TM , introduced in late 2016, is a high-transport, ultra-low-density ceramic proppant technology that has been developed primarily to increase production and EUR from slickwater fracturing operations. The technology enables E&P operators to avoid the introduction of gel into their fracs while improving reservoir contact and fracture conductivity.

Our manufacturing facilities also produce ceramic pellets for use in various industrial technology applications, including but not limited to casting and milling.

Through our wholly-owned subsidiary StrataGen, Inc., our oilfield technologies and services segment also promotes increased production and EUR of oil and natural gas by selling one of the most widely used fracture stimulation software under the brand FracPro ^® , and providing fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

FracPro ^® provides a suite of stimulation software solutions used for designing fracture treatments and for on-site real-time analysis. Use of FracPro has enabled our clients to recognize and remedy potential stimulation problems. Recently, FracPro has been integrated with third party reservoir simulation software, furthering its reach and utility.

StrataGen, our specialized consulting team, works with operators around the world to help optimize well placement, fracture treatment design and production enhancement. The broad range of expertise of the StrataGen consultants includes: fracture treatment design; completion support; on-site treatment supervision, quality control; post-treatment evaluation and optimization; reservoir and fracture studies; rock mechanics and software application and training.

Our environmental products and services segment is intended to protect operators’ assets, minimize environmental risks, and lower lease operating expense (“LOE”). Asset Guard Products Inc. (“AGPI”), the only wholly-owned subsidiary of ours to operate in this segment, provides spill prevention, containment and countermeasure systems for the oil and gas industry. AGPI uses proprietary technology to make products designed to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials. AGPI was formerly known as Falcon Technologies and Services, Inc.

Generally, demand for most of our products and services depends primarily upon the supply of and demand for natural gas and oil and on the number of natural gas and oil wells drilled, completed or re-completed worldwide. More specifically, the demand for most of our products and services is dependent on the number of oil and natural gas wells that are hydraulically fractured to stimulate production. Because the demand for these products and services is also dependent on the commodity price of oil and natural gas, lower commodity prices result in less of our premium products being purchased. In addition to rig counts and commodity prices, our results of operations are also significantly affected by a host of other factors, including but not limited to (a) well completions activity, which is not necessarily correlated with rig count, (b) customer preferences, (c) new product and technology adoption (including of our new KRYPTOSPHERE, CARBOAIR and SCALEGUARD technologies), (d) imports and competition, (e) changes in the product mix of what we sell, (f) costs of developing our products and services and running our business, and (g) changes in our strategy and execution. Current demand for proppant is extremely dynamic, but even if rig count and commodity prices remain constant, our business results are also highly dependent on these additional factors.

During the year ended December 31, 2016, we generated approximately 66% of our revenues in the United States and 34% in international markets.

Competition

As the demand for ceramic proppant (including proppant produced by us) continued to be negatively impacted by the severe decline in the oil and natural gas industry in 2016, the number of domestic and international competitors in the marketplace has decreased, and many of our competitors have shut down plants and/or reduced production. However, we do not have full visibility as to the extent or duration of these shut-downs and reductions. One of our worldwide proppant competitors is Saint-Gobain Proppants (“Saint-Gobain”). Saint-Gobain is a division of Compagnie de Saint-Gobain, a large French glass and materials company. Saint-Gobain manufactures a variety of ceramic proppants that it markets in competition with some of our products. Saint-Gobain’s primary manufacturing facilities are located in Fort Smith and Bauxite, Arkansas. Saint-Gobain also manufactures ceramic proppant in China. Mineracao Curimbaba (“Curimbaba”), based in Brazil, also manufactures and markets ceramic proppants in competition with some of our products. Imerys, S.A., a competitor based in France (“Imerys”), has ceramic proppant manufacturing facilities in Andersonville and Wrens, Georgia.

We are aware of two major manufacturers of ceramic proppant in Russia. Borovichi Refractory Plant (“Borovichi”) located in Borovichi, Russia, and FORES Refractory Plant (“FORES”) located in Ekaterinburg, Russia. Although we have limited information about Borovichi and FORES, we believe that Borovichi primarily manufactures intermediate-density ceramic proppants and markets its products principally within Russia, and that FORES manufactures intermediate-density and low-density ceramic proppant lines and markets its products both inside and outside of Russia. We believe that these companies have added manufacturing capacity in recent years and now manufacture and supply a majority of the ceramic proppant used in Russia. We are also aware of a large number of manufacturers in China. Most of these companies produce intermediate-density ceramic pro ppants that are marketed both inside and outside of China. Chinese proppant imports into the United States increased beginning in 2010 and 2011, which contributed to an over-supply of ceramic proppant beginning in 2012. However, beginning in early 2015, imports declined significantly.

Competition for CARBO HSP ^® and CARBO PROP ^® principally includes ceramic proppant manufactured by Saint-Gobain, Curimbaba and various producers located in China. Our CARBO LITE ^® , CARBO ECONOPROP ^® and CARBO HYDROPROP ^® products compete primarily with ceramic proppant produced by Saint-Gobain, Curimbaba and Imerys and with sand-based proppant for use in the hydraulic fracturing of medium depth natural gas and oil wells. At this time, there is not in our view a comparable competitor’s product to our KRYPTOSPHERE product line, which is the subject of patent protection.

The leading suppliers of mined sand are Unimin Corp., U.S. Silica Company, Fairmount Minerals Limited, Inc., Hi-Crush Partners LP, and Badger Mining Corp. The leading suppliers of resin-coated sand are Hexion and Santrol, a subsidiary of Fairmount Minerals.

We believe that some of the significant factors that influence a customer’s decision to purchase our ceramic proppant are (i) reservoir and geological characteristics, (ii) price/performance ratio, (iii) on-time delivery performance, (iv) technical support, (v) proppant availability and (vi) the financial status of E&P operators. We believe that our products are competitively priced and that our delivery performance is good. We also believe that our superior technical support has enabled us to persuade customers to use our technology products in an increasingly broad range of applications and has increased the overall market for our technology products.

Product Development

We continually conduct testing and development activities with respect to alternative raw materials to be used in our existing and alternative production methods. During 2015, we completed the first line of a plant retrofit to enable production of KRYPTOSPHERE ^® products including both KRYPTOSPHERE ^® LD and KRYPTOSPHERE ^® HD. We introduced KRYPTOSPHERE ^® HD in 2013, a proppant with greatly increased strength and conductivity when compared to our traditional proppants. This new proppant is intended for use in ultra-high stress wells. In 2015, we introduced KRYPTOSPHERE ^® LD, a lower density proppant than KRYPTOSPHERE ^® HD. For information regarding our research and development expenditures, see Note 1 to the “Notes to Consolidated Financial Statements.”

SCALEGUARD ^® , our new proppant-delivered, scale-inhibiting technology continues to show positive performance results in multiple basins across North America. SCALEGUARD has now been successfully used in hundreds of hydraulic fracturing stages. We are pursuing the development of other infused proppant technologies, some of which underwent field trials in 2016.

Going beyond our existing proppant detection capabilities, we are developing technology for far-field detection of proppant in a fracture, which has shown positive results.

We are aware of others engaged in the development of alternative products for use as proppants in the hydraulic fracturing process, but are uncertain of the financial status and product viability of these potential competitors. We believe that while there are potential specialty applications for such products, they will not significantly impact the use of ceramic proppants. We believe that the “know-how” and trade secrets necessary to efficiently manufacture a product of consistently high quality are difficult barriers to entry to overcome.

Customers and Marketing

Our largest customers are participants in the hydraulic fracturing industry. Specifically, Halliburton Energy Services, Inc. and Baker Hughes Incorporated each accounted for more than 10% of our 2016 revenues while Halliburton Energy Services, Inc. and Schlumberger Limited each accounted for more than 10% of our 2015 and 2014 revenues. However, the end users of our products are the operators of natural gas and oil wells that hire the pressure pumping service companies to hydraulically fracture wells. We work both with the pressure pumping service companies and with the operators of natural gas and oil wells to present the technical and economic advantages of using ceramic proppant. We generally supply our customers with products on a just-in-time basis, as specified in individual purchase orders. Continuing sales of product depend on our direct customers and the operators being satisfied with product quality, availability and delivery performance. In addition, continuing sales of product depend heavily on a favorable

level of activity in the upstream natural gas and oil industries. We provide our software products and consulting services directly to operators of oil and natural gas wells as well as service companies involved in hydraulic fracturing.

We recognize the importance of a technical marketing program in demonstrating long-term economic advantages when selling products and services that offer financial benefits over time. We have a broad technical sales force to advise end users on the benefits of using ceramic proppant, fracture simulation software, and related consulting services.

Although originally our ceramic products were intended for use in deeper, higher-stress wells that require high-strength proppant, we believe that there is economic benefit to operators of using ceramic proppant in shallower, lower-stress wells. We believe that our new product introductions and education-based technical marketing efforts have enabled us to maintain our position not only as one of the world’s largest suppliers of ceramic proppant but also as a leading innovator in our industry.

We provide a variety of technical support services and have developed computer software that models the return on investment achievable by using our ceramic proppant versus alternatives in the hydraulic fracturing of a natural gas or oil well. In addition to the technical marketing effort, we from time to time engage in field trials to demonstrate the economic benefits of our products and validate the findings of our computer simulations. Periodically, we provide proppant to operators for field trials, on a discounted basis, in exchange for their agreement to provide production data for direct comparison of the results of fracturing with ceramic proppant as compared to alternative proppants.

Our international marketing efforts are conducted primarily through our sales offices in the United Arab Emirates, Canada, Russia, and South America. Our products and services are used worldwide by U.S. customers operating domestically and abroad, and by foreign customers. Sales outside the United States accounted for 34%, 29% and 24% of our sales for 2016, 2015 and 2014, respectively. The distribution of our international and domestic revenues is shown below, based upon the region in which the customer used the products and services:

	For the years ended December 31,
	2016		2015		2014
	($ in millions)
Location
United States	$	67.6	$	199.2	$	491.0
International		35.4		80.4		157.3
Total	$	103.0	$	279.6	$	648.3

Production Capacity

We have constructed adequate capacity to support present and foreseeable demand for our ceramic proppant. We continue to incorporate new methods and technologies to reduce our manufacturing costs and make our products more cost-competitive. As production levels increase, our manufacturing costs per unit tend to decrease.

During 2014, we completed construction of the first 250 million pound ceramic proppant production line in Millen, Georgia and the plant commenced operations. In addition, we began the construction on a second 250 million pound production line in Millen. However, due to current market conditions, the completion of this second line continues to be suspended until such time that market conditions improve sufficiently to warrant completion. Similarly, the first production line is idled due to current market conditions.

The following table sets forth the current stated capacity of each of our existing ceramic manufacturing and other facilities:

	Annual
Location	Capacity
	(millions of pounds)
Eufaula, Alabama		275	*
McIntyre, Georgia		275	*
Toomsboro, Georgia		1,000	*
Millen, Georgia		250	*
Kopeysk, Russia		100
Total ceramic manufacturing capacity		1,900	**
Marshfield, Wisconsin – sand processing		1,500	*
New Iberia, Louisiana – resin-coating		300	***
Total current capacity		3,700

*	Given market conditions, throughout 2016, we mothballed our Millen manufacturing facility and greatly reduced output levels at our Eufaula, McIntyre, Toomsboro and Marshfield facilities.

**	During 2013, the Company began production of KRYPTOSPHERE ^® at its New Iberia facility. Production volumes will vary, but are not expected to exceed 15 million pounds annually.

***	Processing activities at the New Iberia facility primarily involve resin-coating of previously manufactured ceramic proppant substrate.

The retrofit of the first production line at an existing plant to produce KRYPTOSPHERE ^® was completed in late 2015. With this retrofit, we can now produce up to approximately 100 million pounds of KRYPTOSPHERE ^® annually. While this retrofit enables production of our new KRYPTOSPHERE ^® technology products, it did not add additional production capacity. The retrofit of a second production line has been deferred until market conditions warrant moving forward with the project.

During 2016, our overall total ceramic plant utilization was approximately 18% of stated capacity. Our sand processing plant in Marshfield operated at approximately 5% of its stated capacity during 2016. We do not expect any significant improvements to our ceramic plant utilization in 2017; however, we expect utilization at our sand processing plant to improve during 2017. If industry conditions do not improve, we expect to reduce output levels or idle operations at plants as a result of decreased demand for our products. Refer to our discussion of impairment considerations in the “Critical Accounting Policies” section of Item 7 - Management’s Discussion and Analysis of Financial Condition and Results of Operations. Construction of additional manufacturing capacity beyond these facilities is not expected in the foreseeable future, and would be dependent on the expected future demand for our products, access to needed capital and the ability to obtain necessary environmental permits.

Long-Lived Assets by Geographic Area

Long-lived assets, consisting of net property, plant and equipment, goodwill, intangibles, and other long-term assets as of December 31 in the United States and other countries are as follows:

	2016		2015		2014
	($ in millions)
Long-lived assets:
United States	$	496.0	$	538.8	$	578.5
International (primarily Russia, Canada, and China)		10.2		12.3		18.1
Total	$	506.2	$	551.1	$	596.6

Distribution

We maintain finished goods inventories at each of our manufacturing facilities and at remote stocking facilities. The North American remote stocking facilities consist of bulk storage silos with truck trailer loading facilities, as well as rail yards for direct transloading from rail car to tank trucks. International remote stocking sites are duty-free warehouses operated by independent owners. North American sites are typically supplied by rail, and international sites are typically supplied by container ship. In total, we lease approximately 2,530 rail cars for use in the distribution of our products, of which we have subleased approximately 545 rail cars. The price of our products sold for delivery in the lower 48 United States and Canada typically includes just-in-time delivery of proppant to the operator’s well site, which eliminates the need for customers to maintain an inventory of ceramic proppant.

Raw Materials

Ceramic proppant is made from alumina-bearing ores (commonly referred to as clay, bauxite, bauxitic clay or kaolin, depending on the alumina content) that are readily available on the world market. Bauxite is largely used in the production of aluminum metal, refractory material and abrasives. The main known deposits of alumina-bearing ores in the United States are in Arkansas, Alabama and Georgia; other economically mineable known deposits are located in Australia, Brazil, China, Gabon, Guyana, India, Jamaica, Russia and Surinam.

For the production of CARBO HSP ^® and CARBO PROP ^® in the United States we use bauxite, and have historically purchased our annual requirements at the seller’s current prices. We believe that our ability to purchase bauxite on the open market and current bauxite inventories will sufficiently provide for our bauxite needs in the United States during 2017.

Our Eufaula, McIntyre, Toomsboro and Millen facilities primarily use locally mined kaolin for the production of CARBO LITE ^® , CARBO ECONOPROP ^® and CARBO HYDROPROP ^® . We have entered into bi-lateral contracts that require a

supplier to sell to us, and us to purchase from the supplier, at least fifty percent of the Eufaula facility’s and Millen facility’s annual kaolin requirements. The Eufaula contract runs through May 2017, with options to extend this agreement for additional three year terms. The Millen contract, which commenced in July 2014, has an initial term of five years with options to extend the agreement for additional five year terms. We have obtained ownership rights in acreage in Wilkinson County, Georgia, which contains in excess of a twelve year supply of kaolin for our Georgia facilities based on full capacity production rates. We have entered into a long-term agreement with a third party to mine and transport th is material at a fixed price subject to annual adjustment. The agreement requires us to utilize the third party to mine and transport a majority of the McIntyre and Toomsboro facility’s annual kaolin requirement. Overall, we estimate that our fee simple and leasehold mineral rights in the states of Alabama and Georgia contain approximately 20.1 million tons of kaolin suitable for use in production of our kaolin-based proppants.

Our production facility in Kopeysk, Russia currently uses bauxite for the production of CARBO PROP ^® . Bauxite is purchased under annual agreements that stipulate fixed prices for up to a specified quantity of material.

We utilize our own CARBO Northern White sand and purchase third party wet processed sand reserves for our sand processing facility in Marshfield, Wisconsin, which supplies raw frac sand to the proppant market.

Ceramic Production Process

Ceramic proppants are made by grinding or dispersing ore to a fine powder, combining the powder into small pellets and firing the pellets in a rotary kiln. We use three different methods to produce ceramic proppant.

Our plants in McIntyre, Georgia and Kopeysk, Russia use a dry process, which utilizes clay, bauxite, bauxitic clay or kaolin. The raw material is ground, pelletized and screened. The manufacturing process is completed by firing the product in a rotary kiln.

Our plants in Eufaula, Alabama, Toomsboro, Georgia, and Millen, Georgia, use a wet process, which starts with kaolin that is formed into slurry. The slurry is then pelletized in a dryer and the pellets are then fired in a rotary kiln.

The portion of our plant in New Iberia, Louisiana that manufactures ceramic proppant uses a new manufacturing process associated with the Company’s KRYPTOSPHERE ^® product line. The first phase of a retrofit with this new process was substantially completed during late 2015 at our manufacturing facility in Eufaula, Alabama.

Our rotary kilns are primarily heated by the use of natural gas.

Patent Protection and Intellectual Property

We make ceramic proppant and ceramic media used in foundry and scouring processes (the latter two items comprising a minimal volume of overall sales) by processes and techniques that involve a high degree of proprietary technology, some of which is protected by patents.

We own multiple patents in the United States and various foreign countries that relate to different types of ceramic proppant and production methods used for ceramic proppant and media; however, depending on market conditions, production of products pursuant to these patents may not necessarily constitute a material portion of our output. We also own multiple U.S. and foreign patents that relate to methods for the detection of subterranean fractures and material, including gravel packs, in the near-borehole region. We also own multiple U.S. patents that relate to detectable proppant.

During 2014 and 2015, we obtained three U.S. patents relating to our KRYPTOSPHERE ^® manufacturing process, and expect these patents to provide assistance in the future sales of this product line. During 2015, 2016 and January 2017, we obtained four U.S. patents relating to our far-field proppant detection products, systems, and methods which relate to our iON ^TM product line and the QUANTUM ^TM service line, which are still under development.

We own multiple U.S. patent applications (together with a number of counterpart applications pending in foreign jurisdictions). A portion of the U.S. patent applications cover ceramic proppant, detectable proppant, processes for making ceramic and detectable proppant, detection of subterranean fractures, and our GUARD ^TM , FUSION ^® and AIR ^TM product lines and methods for making and using these products. The applications are in various stages of the patent prosecution process, and patents may not issue on such applications in any jurisdiction for some time, if they issue at all.

AGPI (formerly Falcon) owns three U.S. patents, which expire in 2026, 2027 and 2034 and relate to construction of secondary containment areas. In addition, AGPI owns three U.S. patents, which expire in 2030 and 2031 and relate to polyurea-encapsulated

tank bases. AGPI also owns multiple U.S. patent applications (together with a number of counterpart applications pending in foreign jurisdictions), each of which re lates to tank bases or methods of constructing secondary containment areas.

We believe that our patents have historically been important in enabling us to compete in the market to supply proppant to the natural gas and oil industry. We intend to enforce, and have in the past vigorously enforced, our patents. We may from time to time in the future be involved in litigation to determine the enforceability, scope and validity of our patent rights. In addition to patent rights, and perhaps more notably, we use a significant amount of trade secrets, or “know-how,” and other proprietary information and technology in the conduct of our business. None of this “know-how” and technology is licensed from third parties. However, we have negotiated a long term license for some third party intellectual property used or jointly developed in connection with our QUANTUM service line.

Seasonality

Historically, our business has not been subject to regular material seasonality fluctuations. However, with the activity in resource plays in the northern and eastern United States, we have experienced higher levels of proppant sales activities during warmer weather periods and less during colder weather months. In addition, sales activities can be decreased by the spring snow and ice “break-up” in Canada, North Dakota, Montana, and the Northeast U.S., as well as the winter holidays in December and January.

Environmental and Other Governmental Regulations

We believe that our operations are in substantial compliance with applicable domestic and foreign federal, state and local environmental and safety laws and regulations.

Existing federal environmental requirements such as the Clean Air Act and the Clean Water Act, as amended, impose certain restrictions on air and water pollutants from our operations via permits and regulations. Those pollutants include volatile organic compounds, nitrogen oxides, sulfur dioxide, particulate matter, storm water and wastewater discharges and other by-products. In addition to meeting environmental requirements for existing operations, we must also demonstrate compliance with environmental regulations in order to obtain permits prior to any future expansion. The United States Environmental Protection Agency (“EPA”) and state programs require covered facilities to obtain individual permits or have coverage under an EPA general permit issued to groups of facilities. A number of federal and state agencies, including but not limited to, the EPA, the Texas Commission of Environmental Quality, the Louisiana Department of Environmental Quality, the Alabama Department of Environmental Management, the Wisconsin Department of Natural Resources, and the Georgia Environmental Protection Division, in states in which we do business, have environmental regulations applicable to our operations. Historically we have been able to obtain permits, where necessary, to build new facilities and modify existing facilities that allow us to continue compliant operations and obtaining these permits in a timely manner will continue to be an important factor in our ability to do so in the future.

Employees

As of December 31, 2016, we had 431 employees worldwide. In addition to the services of our employees, we employ the services of consultants as required. Our employees are not represented by labor unions. There have been no work stoppages or strikes during the last three years that have resulted in the loss of production or production delays. We believe our relations with our employees are satisfactory.

Executive Officers of the Registrant

Gary A. Kolstad (age 58) was elected in June 2006, by our Board of Directors to serve as President and Chief Executive Officer and a Director of the Company. Mr. Kolstad previously served in a variety of positions over 21 years with Schlumberger. Mr. Kolstad became a Vice President of Schlumberger in 2001, where he last held the positions of Vice President, Oilfield Services – U.S. Onshore and Vice President, Global Accounts.

Ernesto Bautista III (age 45) joined the Company as a Vice President and Chief Financial Officer in January 2009. From July 2006 until joining the Company, Mr. Bautista served as Vice President and Chief Financial Officer of W-H Energy Services, Inc., a Houston, Texas based diversified oilfield services company (“W-H Energy”). From July 2000 to July 2006, he served as Vice President and Corporate Controller of W-H Energy. From September 1994 to May 2000, Mr. Bautista served in various positions at Arthur Andersen LLP, most recently as a manager in the assurance practice, specializing in emerging, high growth companies. Mr. Bautista is a certified public accountant in the State of Texas.

Don P. Conkle (age 52) was appointed Vice President, Marketing and Sales in October 2012. Mr. Conkle previously held a variety of domestic and international managerial positions in engineering, marketing and sales, and technology development over a 26

year period with Schlumberger. He served in the positions of Vice President of Stimulation Services from 2007 until 2009, as GeoMarke t Manager (Qatar & Yemen) from 2009 until 2011 and as Production Group Marketing and Technology Director from 2011 until he joined the Company.

Roger Riffey (age 58) joined the Company in July 2006 as Director of Logistics and Customer Service. He was appointed Plant Manager of the Toomsboro, Georgia, facility in July 2010, and was named Vice President, Manufacturing in May 2013. Previously, Mr. Riffey held positions with Rio Tinto Energy in Special Projects, U.S. Borax as Global Logistics Manager and Kerr-McGee Coal Corporation as Manager of Marketing.

John R. Bakht (age 47) was appointed Vice President, General Counsel, Corporate Secretary and Chief Compliance Officer in June 2015. Mr. Bakht joined the Company after 13 years with Baker Hughes Incorporated, where he last served as Vice President – Legal, U.S. Operations, Strategy and Corporate Development, and Reservoir Development Services. Mr. Bakht holds a B.A. in Economics from the University of North Carolina at Chapel Hill and a J.D. from The University of Texas.

All officers are elected for one-year terms or until their successors are duly elected. There are no arrangements between any officer and any other person pursuant to which he was selected as an officer. There is no family relationship between any of the named executive officers or between any of them and the Company’s directors.

Forward-Looking Information

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. This Form 10-K, our Annual Report to Shareholders, any Form 10-Q or any Form 8-K of the Company or any other written or oral statements made by or on behalf of the Company may include forward-looking statements which reflect the Company’s current views with respect to future events and financial performance. The words “believe”, “expect”, “anticipate”, “project”, “estimate”, “forecast”, “plan” or “intend” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, each of which speaks only as of the date the statement was made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Our forward-looking statements are based on assumptions that we believe to be reasonable but that may not prove to be accurate. All of our forward-looking information is subject to risks and uncertainties that could cause actual results to differ materially from the results expected. Although it is not possible to identify all factors, these risks and uncertainties include the risk factors discussed below.

Our results of operations could be adversely affected if our business assumptions do not prove to be accurate or if adverse changes occur in our business environment, including but not limited to:

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changes in the cost of raw materials and natural gas used in manufacturing our products;

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risks related to our ability to access needed cash and capital;

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our ability to meet our current and future debt service obligations, including our ability to maintain compliance with our debt covenants;

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our ability to manage distribution costs effectively;

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changes in demand and prices charged for our products;

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technological, manufacturing and product development risks;

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our dependence on and loss of key customers and end users;

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potential declines or increased volatility in oil and natural gas prices that adversely affect our customers, the energy industry or our production costs;

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potential reductions in spending on exploration and development drilling in the oil and natural gas industry that reduce demand for our products and services;

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seasonal sales fluctuations;

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an increase in competition in the proppant market, including imports from foreign countries;

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logistical and distribution challenges relating to certain resource plays that do not have the type of infrastructure systems that are needed to efficiently support oilfield services activities;

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the development of alternative stimulation techniques that would not benefit from the use of our existing products and services, such as extraction of oil or gas without fracturing;

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changes in foreign and domestic governmental regulations, including environmental restrictions on operati ons and regulation of hydraulic fracturing;

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increased regulation of emissions from our manufacturing facilities;

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the development and utilization of alternative proppants for use in hydraulic fracturing;

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general global economic and business conditions;

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weather-related risks and other risks and uncertainties;

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changes in foreign and domestic political and legislative risks;

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risks of war and international and domestic terrorism;

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risks associated with foreign operations and foreign currency exchange rates and controls; and

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the potential expropriation of assets by foreign governments.

Our results of operations could also be adversely affected as a result of worldwide economic, political and military events, including, but not limited to, war, terrorist activity or initiatives by the Organization of the Petroleum Exporting Countries (“OPEC”). For further information, see “Item 1A. Risk Factors.”

Available Information

Our annual reports on Form 10-K, proxy statements, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”) are made available free of charge on our internet website at http://www.carboceramics.com as soon as reasonably practicable after such material is filed with, or furnished to, the Securities and Exchange Commission (“SEC”).

The public may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, Room 1580, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, at http://www.sec.gov.

Item 1A.

Risk Factors

You should consider carefully the trends, risks and uncertainties described below and other information in this Form 10-K and subsequent reports filed with the SEC before making any investment decision with respect to our securities. If any of the following trends, risks or uncertainties actually occurs or continues, our business, financial condition or operating results could be materially adversely affected, the trading prices of our securities could decline, and you could lose all or part of your investment.

Our business and financial performance depend on the level of activity in the natural gas and oil industries.

Our operations are materially dependent upon the levels of activity in natural gas and oil exploration, development and production. More specifically, the demand for our products is closely related to the number of natural gas and oil wells completed in geologic formations where ceramic or sand proppants are used in fracture treatments. These activity levels are affected by both short-term and long-term trends in oil and natural gas prices. In recent years, oil and natural gas prices and, therefore, the level of exploration, development and production activity, have experienced significant fluctuations. Worldwide economic, political and military events, including war, terrorist activity, events in the Middle East and initiatives by OPEC, have contributed, and are likely to continue to contribute, to price volatility. Despite recent initiatives to curb supply, the global supply of oil is currently at historically high levels, and there is potential for geopolitical and regulatory events, such as normalization of trade relations with the Islamic Republic of Iran, to further increase supply of oil. Additionally, warmer than normal winters in North America and other weather patterns may adversely impact the short-term demand for natural gas and, therefore, demand for our products and services. Natural gas prices experienced a significant decline during 2012 and, although they increased during 2016, remain relatively low on a historic basis, resulting in generally lower gas drilling activity. Further, the price of oil declined precipitously from the second half of 2014 through mid-2016 and, although the price has rebounded from its low, it still remains at weakened levels for industry activity. This reduction in oil and natural gas prices has depressed the level of natural gas and oil exploration, development, production and well completions activity, resulting in significantly reduced demand and pricing for our products. This decline has had and continues to have a significant adverse impact on our results. If oil and natural gas prices and well completion activity do not materially improve and/or demand for our products does not otherwise increase, this decline could reasonably be expected to have a material adverse

effect on our financial condition or operations, including, b ut not limited to, temporary idling all or a portion of our facilities until such time as market conditions improve.

We may not have sufficient cash and/or be able to access liquidity alternatives in the credit and capital markets to meet our liquidity needs. In addition, an inability to comply with our obligations under our Amended Credit Agreement may have a material adverse effect on our financial condition.

Our primary sources of liquidity are cash on hand and cash flow from operations. Our ability to fund our working capital, capital expenditures, debt service under our Amended Credit Agreement and other obligations and to comply with the restrictive covenants under our credit facility depends on our future operating performance and cash from operations and other liquidity-generating transactions, which are in turn subject to prevailing oil and natural gas prices, economic conditions and other factors, many of which are beyond our control. Under the Amended Credit Agreement, our principal financial covenant requires us to have minimum cash on hand as described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources”, which will be $40 million until March 2017, $30 million from April 2017 until December 2017 and $25 million thereafter. Unless the Company is able to raise additional cash as described above or there is a significant improvement in operating conditions, there is a significant risk that the Company will not be able to satisfy that covenant.

If our future operating performance falls materially below our expectations, our plans prove to be materially inaccurate, or industry conditions do not materially improve, we may require additional financing. However, our Amended Credit Agreement imposes certain restrictions on our ability to obtain additional financing, the availability of which cannot be guaranteed even if permitted under our Amended Credit Agreement. Further, our Amended Credit Agreement imposes certain restrictions on our ability to sell certain assets and to engage in more than $2.5 million in non-ordinary course asset sales, and, subject to certain exceptions, also imposes restrictions on our ability to use the future proceeds from such transactions.

Even if additional or alternative financing is permitted and is or becomes available to us, future financing transactions may significantly increase the Company’s interest expense, which could in turn reduce our financial flexibility and our ability to fund other activities and could make us more vulnerable to changes in operating performance or economic downturns generally. The inability to generate sufficient cash, modify our credit agreement, or obtain replacement or additional financing, or an event of default under our credit agreement, could have a material adverse effect on our financial condition.

We therefore cannot provide any assurance that we will be able to access the capital or credit markets on acceptable terms or timing, or at all. Access to the capital markets and the cost and availability of credit may be adversely affected by factors beyond our control, including turmoil in the financial services industry, volatility in securities trading markets, the continuing downturn in the oil and gas industry and general economic conditions. Currently, we no longer qualify as a “well-known seasoned issuer,” which previously enabled us to, among other things, file automatically effective shelf registration statements. Now, even if we are able to access the public capital markets, any attempt to do so could be more expensive or subject to significant delays when compared with previous periods.

Our business and financial performance has suffered and could suffer further if the levels of hydraulic fracturing continue to decline or cease as a result of the low commodity price of oil and natural gas, development of new processes, increased regulation or a continued decrease in drilling activity.

Substantially all of our products are proppants used in the completion and re-completion of natural gas and oil wells through the process of hydraulic fracturing. Completion activity is directly impacted by the price of oil and natural gas. In addition, demand for our proppants is substantially higher in the case of horizontally drilled wells, which allow for multiple hydraulic fractures within the same well bore but are more expensive to develop than vertically drilled wells. A reduction in horizontal drilling or the development of new processes for the completion of natural gas and oil wells leading to a reduction in, or discontinuation of the use of, hydraulic fracturing could cause a decline in demand for our products. Additionally, increased regulation or environmental restrictions on hydraulic fracturing or the materials used in this process could negatively affect our business by increasing the costs of compliance or resulting in operational delays, which could cause operators to abandon the process due to commercial impracticability. Moreover, future federal, state local or foreign laws or regulations could otherwise limit or ban hydraulic fracturing. Several states in which our customers operate have adopted, or are considering adopting, regulations that have imposed, or could impose, more stringent permitting, transparency, disposal and well construction requirements on hydraulic fracturing operations. Some states, such as New York, have banned the process of hydraulic fracturing altogether. Similar efforts have been proposed in other states. Any of these events could have a material adverse effect on our results of operations and financial condition. As stated elsewhere, the upstream oil and natural gas industry is in the midst of a severe contraction, resulting in a significant reduction in horizontal drilling and further resulting in a material decline in demand for our products and services.

We have distribution and logistical challenges in our business

As oil and natural gas prices fluctuate, our customers may shift their focus back and forth between different resource plays, some of which can be located in geographic areas that do not have well-developed transportation and distribution infrastructure systems. Transportation and logistical operating expenses continue to comprise a significant portion of our total delivered cost of sales. Therefore, serving our clients in these less-developed areas presents distribution and other operational challenges that affect our sales and negatively impact our operating costs. Disruptions in transportation services, including shortages of rail cars or a lack of rail transportation services or developed infrastructure, could affect our ability to timely and cost effectively deliver to our customers and could provide a competitive advantage to competitors located in closer proximity to customers. Additionally, increases in the price of diesel fuel could negatively impact operating costs if we are unable to pass those increased costs along to our customers. Failure to find long-term solutions to these logistical challenges could adversely affect our ability to respond quickly to the needs of our customers or result in additional increased costs, and thus could negatively impact our results of operations and financial condition.

We operate in an increasingly competitive market.

The proppant market is highly competitive. We compete with other domestic and international suppliers of ceramic proppant, as well as with suppliers of sand for use as proppant, in the hydraulic fracturing of natural gas and oil wells. The expiration of key patents owned by the Company has resulted in additional competition in the market for ceramic proppant. Specifically, Chinese manufacturers have imported ceramic proppant of varying quality into North America, which has led to an oversupply of product in the marketplace. While we believe our ceramic proppant can be differentiated from low quality imports, the oversupply in the marketplace had resulted in pricing and margin pressures. From 2013 through 2016, ceramic proppant imports from China decreased somewhat when compared to early 2012, but these imports were still present in the market. Imports of ceramic proppant from China into North America remained low in 2016, as demand and pricing for ceramic proppant weakened. The entry of additional competitors into the market to supply ceramic proppant or a surge in the level of ceramic proppant imports into North America could have a material adverse effect on our results of operations and financial condition.

We have been and may continue to be adversely affected by decreased demand for our proppant or the development by our competitors of alternative proppants.

Ceramic proppant is a premium product capable of withstanding higher pressure and providing more highly conductive fractures than mined sand, which is the most commonly used proppant type. During 2015 and 2016, we saw some operators that traditionally used ceramic proppant use mined sand in its place. Despite recently improving commodity prices in the oil and natural gas industry, continued pressure on operators to reduce cost or to evaluate returns on a shorter horizon has had a detrimental impact on the demand for ceramic proppant, which is a higher cost product than mined sand. Although we believe that the use of quality ceramic proppant in appropriate geologic formations typically generates higher production rates and more favorable long term production economics than mined sand, the shifting of customer demand to lower cost products, such as mined sand, has had an adverse effect on our results of operations and its continuation could have a material adverse effect on our financial condition. The development and use of alternative proppant could also cause a decline in demand for our products, and could have a material adverse effect on our results of operations and financial condition.

We have no current plans to pay cash dividends on our common stock for the foreseeable future and our Amended Credit Agreement contains restrictions on our ability to pay dividends; therefore, you may not receive any return on investment unless you sell your common stock for a price greater than you paid.

We do not plan to declare dividends on shares of our common stock in the foreseeable future. In addition, our Amended Credit Agreement prohibits us from paying such dividends. We currently intend to retain any future earnings to finance the operation of our business and meet our debt obligations. As a result, you may only receive a return on your investment in our common stock if the market price of our common stock increases. Further, one of our financing options involves the issuance of equity securities, which would dilute current stockholders and could reduce our stock price.

The outstanding indebtedness under our Amended Credit Agreement is secured by substantially all of our domestic assets and guaranteed by our two domestic operating subsidiaries, subject to certain exceptions. A breach of certain covenants or payment obligations in the Amended Credit Agreement would result in a default. In the event of such a default, our lenders may (1) elect to declare all outstanding borrowings made under the Amended Credit Agreement and the guaranties of the two operating subsidiaries, together with accrued interest and other fees, to be immediately due and payable; (2) exercise their set-off rights; and/or (3) enforce and foreclose on their security interest and liquidate some or all of such pledged assets.

We rely upon, and receive a significant percentage of our revenues from, a limited number of key customers and end users.

During 2016, our key customers included several of the largest participants in the worldwide petroleum pressure pumping industry. Two of these customers each accounted for more than 10% of our 2016 revenues. However, the end users of our products are numerous operators of natural gas and oil wells that hire pressure pumping service companies to hydraulically fracture wells. During 2016, a majority of our ceramic proppant sales were directed to a concentrated number of end users. We generally supply our domestic pumping service customers with products on a just-in-time basis, with transactions governed by individual purchase orders and/or a master supply agreement. Because of their purchasing power, our key customers may have greater bargaining leverage than us with respect to the negotiation of prices and other terms of sale in their supply contracts with us, which could adversely affect our profit margins associated with those contracts. Disparities in bargaining leverage, when combined with the Company’s desire to maintain long-term relationships with key customers, could limit our practical ability to assert certain terms of our supply agreements with them. Continuing sales of our products depend on our direct customers and the end user well operators being satisfied with product quality, pricing, availability, and delivery performance. While we believe our relations with our customers and our end users are satisfactory, a material decline in the level of sales to any one of our major customers or loss of a key end user due to unsatisfactory product performance, pricing, delivery delays or any other reason could have a material adverse effect on our results of operations and financial condition.

The operations of our customers, and thus the results of our operations, are subject to a number of operational risks, interruptions and seasonal trends.

As hydraulic fracturing jobs have increased in size and intensity, common issues such as weather, equipment delays or changes in the location and types of oil and natural gas plays can result in increased variability in proppant sales volumes. Our business operations and those of our customers involve a high degree of operational risk. Natural disasters, adverse weather conditions, collisions and operator error could cause personal injury or loss of life, severe damage to and destruction of property, equipment and the environment, and suspension of operations. Our customers perform work that is subject to unexpected or arbitrary interruption or termination. The occurrence of any of these events could result in work stoppage, loss of revenue, casualty loss, increased costs and significant liability to third parties. We have not historically considered seasonality to be a significant risk, but with the increase in resource plays in the northern and eastern United States as well as our operations in Marshfield, Wisconsin, our results of operations are exposed to seasonal variations and inclement weather. Operations in certain regions involve more seasonal risk in the winter months, and work is hindered during other inclement weather events. This variability makes it more difficult to predict sales and can result in greater fluctuations to our quarterly financial results. These quarterly fluctuations could result in operating results that are below the expectations of public market analysts and investors, and therefore may adversely affect the market price for our common stock.

The ability of our customers to complete work, as well as our ability to mine sand from cold climate areas, could be affected during the winter months. Our revenue and profitability could decrease during these periods and in other severe weather conditions because work is either prevented or more costly to complete. If a substantial amount of production is interrupted, our cash flow and, in turn, our results of operations could be materially and adversely affected.

Our North American ceramic proppant production is manufactured at two plants. All of our mined sand is processed at one plant. Any adverse developments at those plants could have a material adverse effect on our financial condition and results of operations.

With the mothballing of our Millen plant and very limited production at our McIntyre plant, we are producing the majority of our North American ceramic production from two plants. Our Marshfield, Wisconsin plant represents 100% of our annual mined sand processing capacity. Any adverse developments at these plants, including a material disruption in production, an inability to supply the plant with raw materials at a competitive cost, or adverse developments due to catastrophic events, could have a material adverse effect on our financial condition and results of operations.

We provide environmental warranties on certain of our containment and spill prevention products.

AGPI’s tank liners, secondary containments and related products and services are designed to contain or avoid spills of hydrocarbons and other materials. If a release of these materials occurs, it could be harmful to the environment. Although we attempt to negotiate appropriate limitations of liability in the applicable terms of sale, some customers have required expanded warranties, indemnifications or other terms that could hold AGPI responsible in the event of a spill or release under particular circumstances. If AGPI is held responsible for a spill or release of materials from one of its customer’s facilities, it could have a material adverse effect on our results of operations and financial condition.

We rely upon intellectual property to protect our proprietary rights. Failure to protect our intellectual property rights may affect our competitive position, and protecting our rights or defending against third-party allegations of infringement may be costly.

The Company uses a significant amount of trade secrets, or “know-how,” and other proprietary information and technology in the conduct of its business. In some cases, we rely on trade secrets, trademarks or contractual restrictions to protect intellectual property rights that are not patented. The steps we take to protect the non-patented intellectual property may not be sufficient to protect it and any loss or diminishment of such intellectual property rights could negatively impact our competitive advantage. Additionally, our competitors could independently develop the same or similar technologies that are only protected by trade secret and thus do not prevent third parties from competing with us. Furthermore, even protected intellectual property rights can be infringed upon by third parties. Monitoring unauthorized use of Company intellectual property can be difficult and expensive, and adequate remedies may not be available.

Although the Company does not believe that it is infringing upon the intellectual property rights of others by using such proprietary information and technology, it is possible that such a claim might be asserted against the Company in the future. In the event any third party makes a claim against us for infringement of patents or other intellectual property rights of a third party, such claims, with or without merit, could be time-consuming and result in costly litigation. In addition, the Company could experience loss or cancellation of customer orders, experience product shipment delays, or be subject to significant liabilities to third parties. If our products or services were found to infringe on a third party’s proprietary rights, the Company could be required to enter into royalty or licensing agreements to continue selling its products or services. Royalty or licensing agreements, if required, may not be available on acceptable terms, if at all, which could seriously harm our business. Involvement in any patent dispute or other intellectual property dispute or action to protect trade secrets and expertise could have a material adverse effect on the Company’s business.

Significant increases in fuel prices for any extended periods of time will increase our operating expenses.

The price and supply of natural gas are unpredictable, and can fluctuate significantly based on international, political and economic circumstances, as well as other events outside of our control, such as changes in supply and demand due to weather conditions, actions by OPEC and other oil and gas producers, regional production patterns and environmental concerns. Natural gas is a significant component of our direct manufacturing costs and price escalations will likely increase our operating expenses and can have a negative impact on income from operations and cash flows. We operate in a competitive marketplace and may not be able to pass through all of the increased costs that could result from an increase in the cost of natural gas.

Environmental compliance costs and liabilities could reduce our earnings and cash available for operations.

We are subject to increasingly stringent laws and regulations relating to environmental protection, including laws and regulations governing air emissions, water discharges and waste management. The technical requirements of complying with these environmental laws and regulations are becoming increasingly expensive and complex, and may affect the Company’s ability to expand its operations. Our ability to continue the expansion of our manufacturing capacity to meet market demand is contingent upon obtaining required environmental permits and compliance with their terms, which continue to be more restrictive and require longer lead times to obtain in anticipation of any efforts to expand and increase capacity. We incur, and expect to continue to incur, capital and operating costs to comply with environmental laws and regulations.

In addition, we use some hazardous substances and generate certain industrial wastes in our operations. Many of our current and former properties are or have been used for industrial purposes. Accordingly, we could become subject to potentially material liabilities relating to the investigation and cleanup of contaminated properties, and to claims alleging personal injury or property damage as the result of exposures to, or releases of, hazardous substances. These laws also may provide for “strict liability” for damages to natural resources or threats to public health and safety. Strict liability can render a party liable for environmental damage without regard to negligence or fault on the part of the party. Some environmental laws provide for joint and several strict liability for remediation of spills and releases of hazardous substances.

Stricter enforcement of existing laws and regulations, new laws and regulations, the discovery of previously unknown contamination or the imposition of new or increased requirements could restrict our expansion efforts, require us to incur costs, or become the basis of new or increased liabilities. Any of these events could reduce our earnings and our cash available for operations.

Our international operations subject us to risks inherent in doing business on an international level that could adversely impact our results of operations.

International revenues accounted for approximately 34%, 29% and 24% of our total revenues in 2016, 2015 and 2014, respectively. We may not succeed in overcoming the risks that relate to or arise from operating in international markets. Risks inherent in doing business on an international level include, among others, the following:

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economic and political instability (including as a result of the threat or occurrence of armed international conflict or terrorist attacks);

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potential declines or increased volatility in oil and natural gas prices that would adversely affect our customers, the energy industry or our production costs;

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changes in regulatory requirements, economic sanctions, tariffs, customs, duties and other trade barriers;

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transportation delays and costs;

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power supply shortages and shutdowns;

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difficulties in staffing and managing foreign operations and other labor problems;

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currency rate fluctuations, convertibility and repatriation;

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taxation of our earnings and the earnings of our personnel;

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potential expropriation of assets by foreign governments; and

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other risks relating to the administration of or changes in, or new interpretations of, the laws, regulations and policies of the jurisdictions in which we conduct our business.

In particular, we are subject to risks associated with our production facility in Kopeysk, Russia. The legal systems in Russia are still developing and are subject to change. Accordingly, our operations and orders for products in Russia could be adversely impacted by changes to or interpretation of the country’s law. Moreover, some parts of our Russian operations have been impacted by the imposition of trade sanctions enacted by the U.S. government in response to the ongoing conflict in Ukraine. These sanctions continue in place and changes to them or additional measures implemented by the U.S. government or other applicable authorities could further affect our sales and operations in the region. Further, if manufacturing in the region is disrupted, our overall capacity could be significantly reduced and sales and/or profitability could be negatively impacted.

Undetected defects in our fracture simulation software could adversely affect our business.

Despite extensive testing, our software could contain defects, bugs or performance problems. If any of these problems are not detected, the Company could be required to incur extensive development costs or costs related to product recalls or replacements. The existence of any defects, errors or failures in our software products may subject us to liability for damages, delay the development or release of new products and adversely affect market acceptance or perception of our software products or related services, any one of which could materially and adversely affect the Company’s business, results of operations and financial condition.

The market price of our common stock will fluctuate, and could fluctuate significantly.

The market price of the Company’s common stock will fluctuate, and could fluctuate significantly, in response to various factors and events, including the following:

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the liquidity of the market for our common stock;

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seasonal or quarterly sales fluctuations;

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differences between our actual financial or operating results and those expected by investors and analysts;

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changes in analysts' recommendations or projections;

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a substantial short position in our stock;

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new statutes or regulations or changes in interpretations of existing statutes and regulations affecting our business;

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changes in general economic or market conditions; and

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broad market fluctuations.

Our actual results could differ materially from results anticipated in forward-looking statements we make.

Some of the statements included or incorporated by reference in this Form 10-K are forward-looking statements. These forward-looking statements include statements relating to trends in the natural gas and oil industries, the demand for ceramic proppant and our performance in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business" sections of this Form 10-K. In addition, we have made and may continue to make forward-looking statements in other filings with the SEC, and in written material, press releases and oral statements issued by us or on our behalf. Forward-looking statements include statements regarding the intent, belief or current expectations of the Company or its officers. Our actual results could differ materially from those anticipated in these forward-looking statements, and our financial forecasts are particularly sensitive to changes in the current market conditions. Further, out financial forecasts have been less accurate during the recent downturn. If actual results are less than our forecasts, we may not have sufficient cash to maintain compliance with the minimum cash balance required by the Amended Credit Agreement. See "Business–Forward-Looking Information."

Item 1B.

Unresolved Staff Comments

Not applicable.

Item 2.

Properties

We maintain our corporate headquarters in leased office space in Houston, Texas and also lease space for our technology center in Houston. We own our manufacturing facilities, land and substantially all of the related production equipment in New Iberia, Louisiana, Eufaula, Alabama, and Kopeysk, Russia and lease our McIntyre, Toomsboro, and Millen, Georgia, facilities. We own the buildings and production equipment at our facility in Luoyang, China, and have been granted use of the land on which the facility is located through 2051 under the terms of a land use agreement with the People’s Republic of China. The Luoyang, China facility was shut down during 2015, and we do not intend to resume production.

The facilities in McIntyre and Toomsboro, Georgia, include real property, plant and equipment that we lease from the Development Authority of Wilkinson County. The original lease was executed in 1997 and was last amended in 2008. The term of the current lease, which covers both locations, terminates on November 1, 2017, and includes a Company renewal option to extend through November 1, 2021. Under the terms of the lease, we are responsible for all costs incurred in connection with the premises, including costs of construction of the plant and equipment. At the termination of the lease, title to all of the real property, plant and equipment is to be conveyed to us in exchange for nominal consideration. We have the right to purchase the property, plant and equipment at any time during the term of the lease for a nominal price.

In November 2012, we entered into a lease with the Development Authority of Jenkins County for the land and improvements associated with the construction of a plant in Millen, Georgia. The lease term continues until the tenth anniversary of the completion of the last phase of the facility. Similar to lease terms of the two other Georgia facilities, the Millen lease requires us to be responsible for all costs (including construction costs) incurred in connection with the premises. Moreover, title to the real property, plant and equipment of the facility is to be conveyed to us at the end of the lease term for nominal consideration, and may be purchased by us at any time for a nominal price. We completed construction and commenced operations of the first 250 million pound ceramic production line in Millen during 2014. We began the construction on a second 250 million pound production line in Millen. However, due to current market conditions, the construction and completion of this second line has been suspended until market conditions warrant completion.

The Marshfield, Wisconsin sand processing plant, which became operational during 2012, is located on land owned by us. We made a decision that we will not move forward with construction of a resin coating plant in Marshfield, Wisconsin for which we had previously developed engineering plans and procured certain equipment that had long-lead delivery times.

We own or otherwise utilize distribution facilities in multiple locations around the world. See “Item 1. Business – Distribution.”

We own approximately 4,618 acres of land and leasehold interests near our plants in Georgia and Alabama. The land contains raw material for use in the production of our lightweight ceramic proppants. We also hold approximately 113 acres of land and leasehold interests in Wisconsin.

AGPI owns its service facility located in Decatur, Texas, and leases other regional service facilities within the United States.

Item 3.

Legal Proceedings

From time to time, we are the subject of legal proceedings arising in the ordinary course of business. We do not believe that any of these proceedings will have a material adverse effect on our business or our results of operations.

Item 4.

Mine Safety Disclosure

Several of our U.S. manufacturing facilities process mined minerals, and therefore are viewed as mine operations subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the recently proposed Item 106 of Regulation S-K (17 CFR 229.106) is included in Exhibit 95 to this annual report.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Common Stock Market Prices, Dividends and Stock Repurchases

Our common stock is traded on the New York Stock Exchange (ticker symbol CRR). The number of record and beneficial holders of our common stock as of February 1, 2017 was approximately 10,537.

The following table sets forth the high and low sales prices of our common stock on the New York Stock Exchange and dividends for the last two fiscal years:

	2016						2015
					Cash						Cash
	Sales Price				Dividends		Sales Price				Dividends
Quarter Ended	High		Low		Declared		High		Low		Declared (1)
March 31	$	23.68	$	14.20		—	$	41.61	$	30.00	$	0.43
June 30		16.70		10.63		—		46.00		30.04		—
September 30		14.91		10.00		—		39.05		18.99		0.20
December 31		11.87		6.08		—		24.74		15.40		—

(1)	Represents quarters during which dividends were declared. The payment months for cash dividends were February 2015 ($0.33), May 2015 ($0.10), August 2015 ($0.10) and November 2015 ($0.10).

In January 2016, our Board of Directors suspended our policy of paying quarterly cash dividends, and there can be no assurance as to the payment of future dividends because they depend on future earnings, capital requirements and financial condition.

On January 28, 2015, our Board of Directors authorized the repurchase of up to two million shares of our common stock. Shares are effectively retired at the time of purchase. As of February 28, 2017, we had not repurchased any shares under this plan.

Securities Authorized for Issuance Under Equity Compensation Plans

For information regarding securities authorized for issuance under equity compensation plans, refer to “ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” and “NOTE 10 — Stock Based Compensation” in the accompanying “Notes to Consolidated Financial Statements” in this Annual Report.

The following table provides information about our repurchases of common stock during the quarter ended December 31, 2016, all of which represent shares surrendered to us for tax withholding obligations upon the vesting of restricted stock:

ISSUER PURCHASES OF EQUITY SECURITIES

Period	Total Number of Shares Purchased			Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan (1)		Maximum Number of Shares that May be Purchased Under the Plan (2)
10/01/16 to 10/31/16		589	(3)	$	10.94		—		2,000,000
11/01/16 to 11/30/16		—			—		—		2,000,000
12/01/16 to 12/31/16		—			—		—		2,000,000
Total		589					—

(1)	On January 28, 2015, we announced the authorization by our Board of Directors for the repurchase of up to two million shares of our Common Stock.

(2)	Represents the maximum number of shares that may be repurchased under the plan as of period end. As of February 28, 2017, a maximum of 2,000,000 shares may be repurchased under the plan.

(3)	Represents shares of stock withheld for the payment of withholding taxes upon the vesting of restricted stock.

Stock Performance Graph

The graph below compares the cumulative shareholder return on our common stock with the cumulative returns of the the S&P 500 index, the S&P Smallcap 600 index, and the S&P SmallCap 600 - Oil & Gas Equipment & Services index. The graph tracks the performance of a $100 investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from December 31, 2011 to December 31, 2016.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*

Among CARBO Ceramics Inc., the S&P 500 Index, the S&P Smallcap 600 Index,

and S&P SmallCap 600 - Oil & Gas Equipment & Services Index

*$100 invested on 12/31/11 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.

Item 6.

Selecte d Financial Data

The following selected financial data are derived from our audited consolidated financial statements. The data should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto included elsewhere in this Form 10-K.

	Years ended December 31,
	2016			2015			2014		2013			2012
	($ in thousands, except per share data)
Statement of Income Data:
Revenues	$	103,051		$	279,574		$	648,325	$	667,398		$	645,536
Cost of sales		188,065			335,699			467,045		474,403			422,031
Gross (loss) profit		(85,014	)		(56,125	)		181,280		192,995			223,505
Selling, general, & administrative expenses		39,984			62,199			72,535		68,447			64,033
Other operating expenses (income) (1)		904			44,908			15,890		(43	)		586
Operating (loss) profit		(125,902	)		(163,232	)		92,855		124,591			158,886
Other (expense) income, net		(5,306	)		(517	)		16		610			(296	)
(Loss) income before income taxes		(131,208	)		(163,749	)		92,871		125,201			158,590
Income tax (benefit) expense		(51,081	)		(54,205	)		37,283		40,315			52,657
Net (loss) income	$	(80,127	)	$	(109,544	)	$	55,588	$	84,886		$	105,933
(Loss) earnings per share:
Basic	$	(3.29	)	$	(4.76	)	$	2.41	$	3.67		$	4.59
Diluted	$	(3.29	)	$	(4.76	)	$	2.41	$	3.67		$	4.59

	December 31,
	2016		2015		2014		2013		2012
	($ in thousands, except per share data)
Balance Sheet Data:
Current assets	$	217,223	$	285,277	$	337,611	$	371,382	$	349,917
Current liabilities		34,804		70,290		77,415		56,688		50,830
Property, plant and equipment, net		494,103		537,731		568,716		478,535		426,232
Total assets		723,457		836,369		934,226		878,951		808,878
Total shareholders’ equity		616,570		642,306		776,057		768,587		713,078
Cash dividends per share		—	$	0.63	$	1.26	$	1.14	$	1.02

(1)	Other operating expenses include costs of start‑up activities and gains/losses on disposal or impairment of assets.

Item 7.

Management’s Discussion and Analysis o f Financial Condition and Results of Operations

Executive Level Overview

CARBO Ceramics Inc. is a technology company that generates revenue primarily through the sale of products and services to the global oil and gas industry for production enhancement and environmental products and services.

The Company conducts its business within two operating segments: 1) Oilfield Technologies and Services and 2) Environmental Products and Services. For the year ended December 31, 2016, the Company concluded that the Environmental Products and Services operating segment met the requirements of ASC 280, Segment Reporting, because its segment revenues represents 10% or more of the Company’s consolidated revenues and, accordingly, the Company now identifies and reports it as an independent segment. Our Environmental Products and Services segment is limited to production and sales by our AGPI subsidiary.

Our oilfield technologies and services segment includes the manufacturing and selling of proppant products for use primarily in the hydraulic fracturing of oil and natural gas wells, Fracpro software for the design of fracture treatments, and StrataGen consulting services for the optimization of well completions. These products include ceramic proppant and raw frac sand. Our manufacturing facilities also produce ceramic pellets for use in various industrial technology applications, including but not limited to casting and milling. Through our wholly-owned subsidiary StrataGen, Inc., this segment also promotes increased operators’ production and EUR by providing one of the industry’s most widely used hydraulic fracture simulation software under the brand FracPro ^® , as well as hydraulic fracture design and consulting services under the brand StrataGen. Our environmental products and services segment, through AGPI, a wholly-owned subsidiary of ours, uses proprietary technology to provide products that are designed to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials. This business is intended to protect operators’ assets, minimize environmental risk, and lower LOE.

Our products and services help oil and gas producers increase production and recovery rates from their wells, thereby lowering overall finding and development costs. As a result, our business is dependent to a large extent on the level of drilling and hydraulic fracturing activity in the oil and gas industry worldwide. Although our ceramic proppants are more expensive than alternative non-ceramic proppants, we have been able to demonstrate the cost-effectiveness of our products to numerous operators of oil and gas wells through technical marketing activity. We believe our future prospects benefit from both an increase in drilling and hydraulic fracturing activity worldwide and the desire of industry participants to improve production results and lower their overall development costs.

We believe international sales will continue to have an important role in our business. International revenues represented 34%, 29% and 24% of total revenues in 2016, 2015 and 2014, respectively.

Operating profit margin for our ceramic proppant business is principally impacted by sales volume, product mix, sales price, distribution costs, manufacturing costs, including natural gas, and our production levels as a percentage of our capacity. The level of selling, general and administrative spending, as well as other operating expenses, can also impact operating profit margins. In 2015 and 2014, operating profit margin was also impacted by spending to bring our new KRYPTOSPHERE ^® proppant technology to a commercial state. And, in 2016, 2015 and 2014, the Company recognized asset impairment charges related to certain long-lived assets.

As a result of the depressed commodity price for oil during 2016 and the resulting negative impact on industry activity levels, which is having a negative impact on demand for ceramic proppant, we are currently focused on cash preservation and cost reduction strategies. Beginning in 2015, we slowed and idled proppant production to assist in managing cash and inventory levels. We mothballed our proppant facility in McIntyre, Georgia and shut down our facility in Luoyang, China, both in early 2015. However, we are now utilizing our McIntyre, Georgia facility only in a limited capacity primarily to supply the industrial market. We mothballed our proppant facility in Millen, Georgia. These events resulted in significant negative impact to the financial results of our operations. Additionally, we suspended completion of two large construction projects until such time that market conditions improve enough to warrant completion. We suspended completion of the second production line at Millen, Georgia and also the second phase of the retrofit of an existing plant with our new KRYPTOSPHERE ^® technology. As of December 31, 2016, the value of the temporarily suspended assets relating to these two projects totaled approximately 94% of the Company’s total construction in progress and we estimate that both projects are over 90% complete. See “Item 1 - Business” and “Item 1A - Risk Factors”.

Although most direct manufacturing expenses have been relatively stable or predictable over time, we have experienced volatility in the cost of natural gas, which is used in production by our domestic manufacturing facilities. The cost of natural gas has been a significant component of total monthly domestic direct production expense. In recent years, the price of natural gas has been low compared to historical prices, as well as fairly stable from period to period. However, in an effort to mitigate volatility in the cost of natural gas purchases and reduce exposure to short term spikes in the price of this commodity, we contract in advance for portions of our future natural gas requirements. Our gas contract commitments can extend several years into the future. Despite the efforts to reduce

exposure to changes in natural gas prices, it is possible that, given the significant portion of manufactu ring costs represented by this item, gross margins as a percentage of sales may decline and changes in net income may not directly correlate to changes in revenue. Due to the severe decline in industry activity beginning in early 2015, we significantly re duced production levels and consequently did not take delivery of all of the contracted natural gas quantities. As a result, we have accounted for the relevant contracts as derivative instruments.

In 2013, we began selling raw frac sand. Raw frac sand products sell at much lower prices than our ceramic proppant and can lower the overall average selling price of all proppants sold.

General Business Conditions

Our oilfield technologies and services segment is impacted by the number of natural gas and oil wells drilled in North America, and the need to hydraulically fracture these wells. In markets outside North America, sales of our products are also influenced by the overall level of drilling and hydraulic fracturing activity. Furthermore, because the decision to use ceramic proppant is based on comparing the higher initial costs to the future value derived from increased production and recovery rates, our business is influenced by the current and expected prices of natural gas and oil.

Beginning in late 2014 and continuing throughout 2015 and 2016, a severe decline in oil and natural gas prices led to a significant decline in oil and natural gas industry drilling activities and capital spending. We expect that these low oil and natural gas prices will continue for the foreseeable future and will continue to negatively impact both pricing and demand for proppant. During 2016, the average price of West Texas Intermediate (“WTI”) crude oil fell 11% to $43.14 per barrel compared to $48.69 per barrel in 2015. The average North American rig count fell 45% in 2016 to 640 rigs compared to 1,169 rigs in 2015. In addition, exploration and production (“E&P”) operators continued a movement to lowest-cost completions, a trend that we expect to continue in 2017, as our customers are under increasing pressure to consider lower cost alternatives in the current commodity price environment, notwithstanding the superior performance results of our products. These events, along with an oversupplied ceramic proppant market and low oil and natural gas prices, drove lower demand and lower average prices for our proppants during 2016, when compared with 2015.

In addition to rig counts and commodity prices, our results of operations are also significantly affected by a host of other factors, including but not limited to (a) completion activity, which is not necessarily correlated with rig count, (b) customer preferences, (c) new product and technology adoption (including our new KRYPTOSPHERE, CARBOAIR and SCALEGUARD technologies), (d) imports and competition, (e) changes in the product mix of what we sell, (f) costs of developing our products and services and running our business, and (g) changes in our strategy and execution. Current demand for proppant is extremely dynamic, but even if rig count and commodity prices remain constant, our business results are also highly dependent on these additional factors.

Beginning early in 2015, we implemented a number of initiatives to preserve cash and lower costs, including: (1) reducing workforce across our organization, (2) lowering our production output levels in order to align with lower demand, including through idling and mothballing of some of our production facilities (3) limiting capital expenditures and (4) eliminating dividends. In 2016, we idled the majority of the production activities at our New Iberia, Louisiana plant until such time as market conditions warrant bringing them back online. Our facility in Millen, Georgia remained idled due to market conditions, however we recently restarted our Marshfield, Wisconsin sand processing facility. Our remaining domestic plants remain at significantly reduced output levels. As a result of operating some of our plants below their normal production capacity, we expensed $47.3 million of production overhead costs in excess of amounts that would have been allocated to each unit of production at normal production levels. In addition to continued headcount rationalizing, we also implemented programs that allowed us to further reduce cash compensation. Also, we recorded a gain on derivative contracts of $1.9 million and a loss on derivative contracts of $15.0 million for the years ended December 31, 2016 and 2015, respectively.

The Company’s environmental products and services segment is also impacted by the global drilling and hydraulic fracturing activity, and has been negatively impacted by the significant decline in oil and natural gas industry drilling activities and capital spending.

Critical Accounting Policies

Our Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the U.S., which require us to make estimates and assumptions (see Note 1 to the Consolidated Financial Statements). We believe that, of our significant accounting policies, the following may involve a higher degree of judgment and complexity.

Revenue is recognized when title passes to the customer (generally upon delivery of products) or at the time services are performed. We generate a significant portion of our revenues and corresponding accounts receivable from sales to the petroleum pressure pumping industry. In addition, we generate a significant portion of our revenues and corresponding accounts receivable from

sales to two major customers, both of which are in the petroleum pressure pumping industry. As of December 31, 2016, approximately 33% of the balance in trade accounts receivable was attributable to those two customers. We record an allowance for doubtful accounts based on our assessment of colle ctability risk and periodically evaluate the allowance based on a review of trade accounts receivable. Trade accounts receivable are periodically reviewed for collectability based on customers’ past credit history and current financial condition, and the allowance is adjusted, if necessary. If the economic downturn in the petroleum pressure pumping industry worsens or does not materially improve or, for some other reason, any of our primary customers were to experience significant adverse conditions, our estimates of the recoverability of accounts receivable could be reduced by a material amount and the allowance for doubtful accounts could be increased by a material amount. At December 31, 2016, the allowance for doubtful accounts totaled $2.8 million.

We value inventory using the weighted average cost method. Assessing the ultimate realization of inventories requires judgments about future demand and market conditions. We regularly review inventories to determine if the carrying value of the inventory exceeds market value and we record an adjustment to reduce the carrying value to market value, as necessary. We evaluate the carrying value of our inventories relative to market value generally on a geographic by-country basis. As needed, more specific reviews within a particular country are made on a product group basis. Future changes in demand and market conditions could cause us to be exposed to additional obsolescence or slow moving inventory. If actual market conditions are less favorable than those projected by management, lower of cost or market adjustments may be required. We recorded a $1.5 million and $4.5 million lower of cost or market inventory adjustment for the years ended December 31, 2016 and 2015, respectively.

Income taxes are provided for in accordance with ASC Topic 740, “Income Taxes” . This standard takes into account the differences between financial statement treatment and tax treatment of certain transactions. Deferred tax assets (“DTAs”) and liabilities (“DTLs”) are recognized for the future tax consequences attributable to differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates is recognized as income or expense in the period that includes the enactment date. This calculation requires us to make certain estimates about our future operations. Changes in state, federal and foreign tax laws, as well as changes in the Company’s financial condition, could affect these estimates.

As of December 31, 2016, our net DTL was $1.2 million, which included a $71.3 million DTL related to accelerated tax depreciation. This DTL was partially offset by a $51.7 million DTA related to net operating loss carryforwards and $18.4 million in other DTAs primarily relating to inventories, goodwill, and employee benefits. The majority of the balance of NOL carryforwards recorded are expected to expire in 2036. In 2016, capital projects that were slowed or stalled resulted in fewer opportunities for current period accelerated tax depreciation over book depreciation. If capital projects remain stalled, future periods will see a decrease in the DTL related to depreciation. Keeping all other deferred items constant, a decreasing DTL related to depreciation could cause a change from a net DTL position to a net DTA position.

We evaluate the realizability of deferred tax assets by assessing whether it is more likely than not that some or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income, including income generated through reduced levels of tax depreciation in future years. Therefore, unless we are able to generate sufficient taxable income to utilize our net operating loss carry forwards, a valuation allowance to reduce our DTA may be required in 2017. While this would increase our expenses in the period the allowance is recognized and adversely affect our results of operations and statement of financial condition for that period, there would be no cash impact.

Long-lived assets, which include net property, plant and equipment, goodwill, intangibles and other long-term assets, comprise a significant amount of the Company’s total assets. The Company makes judgments and estimates in conjunction with the carrying values of these assets, including amounts to be capitalized, depreciation and amortization methods and useful lives. Additionally, the carrying values of these assets are periodically reviewed for impairment or whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. An impairment loss is recorded in the period in which it is determined that the carrying amount is not recoverable. This requires the Company to make long-term forecasts of its future revenues and costs related to the assets subject to review. These forecasts require assumptions about demand for the Company’s products and services, future market conditions and technological developments. Significant and unanticipated changes to these assumptions could require a provision for impairment in a future period.

As a result of the continued depressed conditions in the oil and natural gas industry, during the fourth quarter of 2016 we evaluated substantially all our long-lived assets for possible impairment as of December 31, 2016. Our key assumptions used in evaluating our long-lived assets for possible impairments varied by facility due to the type of product produced and, in the case of ceramic proppant, the production process used at each facility. For example, the operational economics and financial results associated with frac sand are materially different from those associated with a technology-based product, like ceramic proppant. We

produce both bauxite and kaolin-based ceramic proppant products. In addition, we use three generations of technologies to produce ceramic proppant. From oldest to newest, those technologies are the dry process, the wet process and the KRYPTOSPHERE process.

With respect to the overriding assumptions we used to determine undiscounted cash flows, we define full recovery of the oilfield services industry as consecutive periods of (a) sustained, profitable growth, (b) increases in equipment utilization, and (c) increases in headcount. We define our normal ceramic proppant production levels as facility utilization at or above 65% of a facility’s stated capacity.

Given the impact that the industry downturn has had on pricing for both frac sand and ceramic proppant, and the Company’s advancements in KRYPTOSPHERE technology, which we believe may render obsolete the use of bauxite based ceramic proppant, we identified indicators of impairment associated with our U.S. proppant manufacturing facilities. These indicators included the fact that (a) our Marshfield, Wisconsin facility only produces dried and sized frac sand, (b) products produced in our wet process facilities, collectively, are subject to the market pricing pressures discussed above, and (c) our McIntyre, Georgia facility is our least efficient ceramic proppant production facility. The McIntyre facility utilizes the oldest generation ceramic production process (or the dry process), which is almost exclusively used to produce bauxite based ceramic proppant.

Based on these qualitative considerations, we prepared an undiscounted cash flow analysis for all of our U.S. proppant manufacturing facilities. Key assumptions underlying our undiscounted cash flow analysis included, but were not limited to, facility utilization, raw material cost inflation and long-term sales prices for products produced. Based on these analyses, we noted that the carrying value was below the sum of the undiscounted cash flows, and thus no further impairments were required.

If there are changes to our material assumptions, it is possible that we may have to recognize impairments in the future. However, we believe that the material assumptions used in our impairment analysis were reasonable and were based on available information and forecasts at the time. We continue to monitor whether or not events or circumstances would indicate that the carrying value of any of our long-lived assets might not be recoverable.

During the year ended December 31, 2015, as a result of worsening conditions in the oil and natural gas industry during the fourth quarter of 2015, we recorded a $43.7 million impairment of long-lived assets, primarily relating to machinery and equipment at our McIntyre, Georgia manufacturing plant and our Marshfield, Wisconsin sand processing facility. As of December 31, 2016, the remaining carrying value of machinery and equipment relating to those previously impaired facilities was approximately $4.4 million.

Early in 2015, we identified an existing accounting policy as critical related to the accounting for derivative instruments as a result of not taking delivery of all of our contracted natural gas quantities. We began accounting for relevant natural gas contracts as derivative instruments, which requires us to recognize the gas contracts as either assets or liabilities at fair value with an offsetting entry in earnings. We use the income approach in determining the fair value of our derivative instruments. The model used considers the difference, as of each balance sheet date, between the contracted prices and the New York Mercantile Exchange (“NYMEX”) forward strip price for each contracted period. The estimated cash flows from these contracts are discounted using a discount rate of 5.5%, which reflects the nature of the contracts as well as the timing and risk of estimated cash flows associated with the contracts. The discount rate had an immaterial impact on the fair value of the contracts for the year ended December 31, 2016. The last natural gas contract will expire in December 2018. During the year ended December 31, 2016 and 2015, we recognized a gain on derivative instruments of $1.9 million and a loss on derivative instruments of $15.0 million, respectively, in cost of sales. As of December 31, 2016, gas contracts covering 4,080,000 MMBtu are subject to accounting as derivative instruments. Future decreases in the NYMEX forward strip prices will result in additional derivative losses while future increases in the NYMEX forward strip prices will result in derivative gains. Future gains or losses will approximate the change in NYMEX natural gas prices relative to the total quantity of natural gas under contracts subject to accounting as derivatives.

Early in 2015, low production levels triggered the component of our inventory accounting policy relating to operating at production levels below normal capacity. To determine the amount of production costs that we expense during each period, the Company allocates fixed production overheads to the costs of conversion based on the normal capacity of each production facility, generally considered to be 65% of a facility's stated capacity or higher.

When a production facility operates at normal capacity, all of its fixed production overheads are allocated to costs of conversion of each product manufactured, based on the actual level of production. This determination is made facility-by-facility on a monthly basis in order to calculate the initial measurement value to recognize as cost of goods produced in a month by a given facility.

When a facility's total production in a month drops below 65% of its normal capacity, it is considered to be operating at an abnormally low production level. In such cases, each unit of production receives an allocation of fixed overheads in the amount that would have been allocated at the lower-end of normal capacity. The remaining unallocated excess fixed overhead cost for the facility is recognized as expense in the period and classified as Cost of Sales.

Materials are the only variable component of production. Plant labor and all other ove rhead costs incurred in the production of the Company's products are either semi-fixed or fixed in nature, therefore all are included in the monthly evaluation of costs allocable to costs of conversion at normal capacity.

The Company maintains a rate for each production facility that represents the maximum fixed production overhead cost per unit of production allocable to costs of conversion. The rates are based on an analysis of a recent historical period considered representative of a normal operating environment in which the facility operated at normal capacity. The maximum rate is calculated by recasting the fixed production overhead cost per unit of production on a pro forma basis as if the facility had operated at the lower-end threshold of its range of normal capacity, generally 65% of stated capacity. The current rates are based on 2014 as the representative year. Implied in this method is the assumption that 2014 production costs relative to sales prices yield a normal profit margin. A significant, permanent deterioration in the average selling prices of the Company’s products could result in a significant lowering of the rates, thereby increasing the periodic charge.

All of the Company's production facilities are subject to this policy; however, since January 1, 2015, only the U.S. production facilities have operated at abnormally low production rates. Therefore, such excess fixed overhead costs have been expensed for each U.S. production facility in both 2015 and 2016. The most recent period in which normal capacity was achieved at the U.S. production facilities was the year-ended December 31, 2014.

Results of Operations

Net (Loss) Income

($ in thousands)

2016

Percent

Change

2015

Percent

Change

2014

Net (Loss) Income

(80,127

)

(27

(109,544

)

(297

55,588

For the year ended December 31, 2016, we reported net loss of $80.1 million, a decrease of 27% compared to the $109.5 million net loss reported in the previous year. Operations in 2016 continued to be negatively impacted by the severe decline in the oil and natural gas industry. Net loss in 2016 was impacted by a 45% reduction in the North American rig count which resulted in lower ceramic proppant sales volumes, a decrease in the average selling price of ceramic proppant, and $47.3 million in production costs expensed as a result of low production levels and idled and mothballed facilities. Further impacting net loss were $6.4 million in severance costs, $1.5 million of lower of cost or market inventory adjustments, and a $1.5 million railcar lease termination fee. Net loss was partially offset by actions taken throughout 2016 to reduce our cost base and a $1.9 million gain on natural gas derivative instruments.

For the year ended December 31, 2015, we reported net loss of $109.5 million, a decrease of 297% compared to the $55.6 million net income reported in the previous year. Operations in 2015 were negatively impacted by the severe decline in the oil and natural gas industry. Net loss in 2015 was impacted by a 48% reduction in the North American rig count which resulted in lower ceramic proppant sales volumes, a decrease in the average selling price of ceramic proppant, a $43.7 million impairment of long-lived and other assets, a $9.5 million impairment of goodwill and intangible assets, a $15.0 million loss on natural gas derivative instruments, and $33.7 million in production costs expensed as a result of low production levels and idled and mothballed facilities. Further impacting net loss were $9.5 million in severance costs, and $4.5 million of lower of cost or market inventory adjustments. Net loss was partially offset by actions taken throughout 2015 to reduce our cost base and an $8.9 million non-cash gain from realizing our China-related cumulative foreign currency translation adjustment.

Individual components of financial results by reportable operating segment are discussed below.

Revenues

($ in thousands)	2016		Percent Change			2015		Percent Change			2014
Consolidated revenues	$	103,051		(63	)%	$	279,574		(57	)%	$	648,325
Revenues by operating segment:
Oilfield Technologies and Services	$	89,351		(65	)%	$	257,373		(58	)%	$	617,233
Environmental Products and Services	$	13,700		(38	)%	$	22,201		(29	)%	$	31,092

Oilfield technologies and services segment revenues of $89.4 million for the year ended December 31, 2016 decreased 65% compared to $257.4 million in 2015. The decrease was mainly attributable to a decrease in proppant sales volumes, in conjunction

with market-driven declines in the average selling prices of proppant, both which are presented in the table below. The decline in ceramic sales volume was larg ely attributable to a 45% reduction in the North American rig count and depressed oil prices and the resulting negative impact on industry activity levels, along with E&P operators continuing to use a higher percentage of raw frac sand as an alternative to proppant due to its lower cost.

Oilfield technologies and services segment revenues of $257.4 million for the year ended December 31, 2015 decreased 58% compared to $617.2 million in 2014. The decrease was mainly attributable to a decrease in proppant sales volumes, in conjunction with market-driven declines in the average selling prices of proppant, both which are presented in the table below. The decline in ceramic sales volume was largely attributable to a 48% reduction in the North American rig count and depressed oil prices and the resulting negative impact on industry activity levels, along with an increased number of E&P operators using a higher percentage of raw frac sand as an alternative to proppant due to its lower cost.

Worldwide proppant sales volumes were as follows.

Proppant Sales Volumes	For the years ended December 31,
(Volumes in million pounds)	2016				2015				2014
	Volumes		Price / lb		Volumes		Price / lb		Volumes		Price / lb
Ceramic		356	$	0.22		818	$	0.27		1,618	$	0.33
Resin Coated Sand		-		-		19		0.19		162		0.22
Northern White Sand		311		0.02		819		0.03		1,131		0.03
Total		667		0.13		1,656		0.15		2,911	$	0.21

North American (defined as Canada and the U.S.) proppant sales volume decreased 65% in 2016 compared to 2015. North American ceramic proppant sales volume decreased 67% in 2016 compared to 2015. International (excluding Canada) proppant sales volume decreased 19% in 2016 compared to 2015, primarily due to decreases in Europe, Latin America, and China, partially offset by an increase in Russia.

North American (defined as Canada and the U.S.) proppant sales volume decreased 44% in 2015 compared to 2014. North American ceramic proppant sales volume decreased 54% in 2015 compared to 2014. International (excluding Canada) proppant sales volume decreased 36% in 2015 compared to 2014, primarily due to decreases in Latin America, China, and Africa, partially offset by an increase in Russia.

Primarily due to the change in product mix and reductions in selling prices due to the down cycle, the average selling price per pound of all proppant was $0.13 during 2016 compared to $0.15 during 2015 and $0.21 in 2014. In addition to product mix and sales prices, average selling prices can be impacted by geographic areas of sale, customer requirements and delivery methods.

Environmental products and services segment revenues of $13.7 million for the year ended December 31, 2016 decreased 38% compared to $22.2 million in 2015. Environmental products and services segment revenues of $22.2 million for the year ended December 31, 2015 decreased 29% compared to $31.1 million in 2014. These decreases were mainly attributable to the depressed commodity price environment and the resulting negative impact on industry activity levels.

Gross (Loss) Profit

($ in thousands)	2016			Percent Change			2015			Percent Change			2014
Consolidated gross (loss) profit	$	(85,014	)		(51	)%	$	(56,125	)		(131	)%	$	181,280
Consolidated as a % of revenues		(82	)%					(20	)%					28	%
Gross (loss) profit by operating segment:
Oilfield Technologies and Services	$	(84,866	)		(44	)%	$	(58,801	)		(133	)%	$	175,809
Oilfield Technologies and Services %		(95	)%					(23	)%					28	%
Environmental Products and Services	$	(148	)		(106	)%	$	2,676			(51	)%	$	5,471
Environmental Products and Services %		(1	)%					12	%					18	%

Our cost of sales related to our oilfield technologies and services segment consists of manufacturing costs, packaging and transportation expenses associated with the delivery of our products to our customers and handling costs related to maintaining finished goods inventory and operating our remote stocking facilities. Variable manufacturing costs include raw materials, while labor, utilities and repair and maintenance supplies are semi-fixed. Fixed manufacturing costs include depreciation, property taxes on production facilities, insurance and factory overhead.

Oilfield Technologies and Services segment gross loss for the year ended December 31, 2016 was $84.9 millio n, or (95)% of revenues, compared to gross loss of $58.8 million, or (23)% of revenues, for 2015. Gross loss in 2016 was primarily the result of a 56% decline in worldwide ceramic proppant sales volumes and a decrease in the average selling price of ceram ic proppant, resulting in a 65% decrease in revenues. Also negatively affecting gross loss during 2016 was $47.3 million in production costs that were not offset by increases in revenue, as a result of low production levels and idled and mothballed facili ties. We expect to incur these types of expenses in the future until our production levels return to normal capacity. Gross loss was further impacted by $6.2 million in severance costs, a $1.5 million lower of cost or market inventory adjustment, and a $ 1.5 million railcar lease termination fee to preserve cash in future years for unused railcars. Gross loss was partially offset by a $1.9 million gain on natural gas derivative instruments.

Oilfield Technologies and Services segment gross loss for the year ended December 31, 2015 was $58.8 million, or (23)% of revenues, compared to gross profit of $175.8 million, or 28% of revenues, for 2014. The decrease in gross (loss) profit was primarily the result of a 49% decline in worldwide ceramic proppant sales volumes and a decrease in the average selling price of ceramic proppant, resulting in a 55% decrease in revenues. In addition, we recorded a $15.0 million loss on natural gas derivative instruments and expensed $33.7 million in production costs that were not offset by increases in revenues, as a result of low production levels and idled and mothballed facilities. We expect to incur these types of expenses in the future until our production levels return to normal capacity. Gross (loss) profit was further reduced by $6.7 million in severance costs incurred as a result of the reductions in workforce and $4.5 million of lower of cost or market inventory adjustments primarily associated with inventories in China.

Environmental products and services segment gross loss for the year ended December 31, 2016 was $0.1 million, or (1)% of revenues, compared to gross profit of $2.7 million, or 12% of revenues, for 2015. Environmental products and services segment gross profit for the year ended December 31, 2015 was $2.7 million, or 12% of revenues, compared to $5.5 million, or 18% of revenues, for 2014. These decreases in gross profit were primarily the result of the depressed commodity price environment and the resulting negative impact on industry activity levels.

Consolidated cost of sales for the years ended December 31, 2016, 2015 and 2014 included the following:

(In thousands)	2016			2015		2014
Primary cost of sales	$	133,431		$	274,554	$	461,682
Slowing and idling production		47,318			33,724		—
(Gain) loss on derivative instruments		(1,886	)		15,040		—
Railcar lease termination fee		1,500			—		—
Lower of cost or market inventory adjustment		1,515			4,546		5,363
Severance and other charges		6,187			7,835		—
Total Cost of Sales	$	188,065		$	335,699	$	467,045

Selling, General & Administrative (SG&A) and Other Operating Expenses

($ in thousands)	2016			Percent Change			2015			Percent Change			2014
Consolidated SG&A and start-up	$	39,999			(37	)%	$	62,996			(14	)%	$	73,346
Consolidated as a % of revenues		39	%					23	%					11	%
Consolidated loss (gain) on disposal or impairment of assets	$	889			(98	)%	$	44,111			193	%	$	15,079
SG&A and start-up by operating segments:
Oilfield Technologies and Services	$	36,908			(36	)%	$	57,738			(14	)%	$	66,753
Oilfield Technologies and Services %		41	%					22	%					11	%
Environmental Products and Services	$	3,091			(41	)%	$	5,258			(20	)%	$	6,593
Environmental Products and Services %		23	%					24	%					21	%

Oilfield Technologies and Services segment SG&A and start-up expenses was $36.9 million for the year ended December 31, 2016 compared to $57.7 million for 2015. The decrease in SG&A expenses primarily resulted from actions we took during 2015 to reduce our cost base and preserve cash in light of the severe decline in the oil and natural gas industry. These savings were partially offset by $0.2 million in SG&A related severance costs in 2016. Consolidated loss on disposal or impairment of assets in 2016 consisted of $1.1 million impairment of the long-term portion of bauxite raw materials partially offset by $0.2 million gain on disposal of assets. As a percentage of revenues, oilfield technologies and services segment SG&A and start-up expenses for 2016 increased to 41% compared to 22% in 2015, primarily due to the decrease in revenues.

Oilfield Technologies and Services segment SG&A and start-up expenses consisted of $56.9 million of SG&A expenses and $0.8 million of start-up costs for the year ended December 31, 2015 compared to $65.9 million of SG &A expenses and $0.8 million of start-up costs for 2014. The decrease in SG&A expenses primarily resulted from actions we took during 2015 to reduce our cost base and preserve cash in light of the severe decline in the oil and natural gas industry. These savings were partially offset by $2.6 million in SG&A related severance costs in 2015. Consolidated loss on disposal or impairment of assets in 2015 consisted primarily of $43.7 million of oilfield technologies and services segment impairment charges ass ociated with certain long-lived assets at our manufacturing facility in McIntyre, Georgia, our sand processing facility in Marshfield, Wisconsin, and various other assets, and a $9.5 million impairment of goodwill and intangible assets within our Environme ntal Products and Services segment. These losses were partially offset by an $8.9 million non-cash gain in our oilfield technologies and services segment from realizing our China-related cumulative foreign currency translation adjustment and $0.2 million gain on disposal of assets. As a percentage of revenues, oilfield technologies and services segment SG&A and start-up expenses for 2015 increased to 22% compared to 11% in 2014, primarily due to the decrease in revenues.

Environmental products and services segment SG&A of $3.1 million for the year ended December 31, 2016 decreased 41% compared to $5.3 million in 2015. Environmental products and services segment SG&A of $5.3 million for the year ended December 31, 2015 decreased 20% compared to $6.6 million in 2014. These decreases were primarily the result of actions we took, beginning in 2015, to reduce our cost base and preserve cash in light of the severe decline in the oil and natural gas industry.

Income Tax (Benefit) Expense

($ in thousands)

2016

Percent

Change

2015

Percent

Change

2014

Income Tax (Benefit) Expense

(51,081

)

(54,205

)

(245

37,283

Effective Income Tax Rate

38.9

33.1

40.1

Income taxes are not allocated between the two operating segments. Consolidated income tax benefit was $51.1 million, or 38.9% of pretax loss, for the year ended December 31, 2016 compared to $54.2 million, or 33.1% of pretax loss for 2015. The tax benefit is due largely to net operating losses sustained during 2015 and 2016. Net operating losses generated in 2015 were carried back to 2013 and 2014. As a result of the net operating loss in 2015, we lost the benefit of our Section 199 manufacturing deduction, which negatively impacted the effective tax rate for 2015. In 2016, the effective tax rate increased as it normalized and due to a change in election for certain foreign tax credits.

Consolidated income tax benefit was $54.2 million, or 33.1% of pretax loss, for the year ended December 31, 2015 compared to $37.3 million, or 40.1% of pretax income for 2014. The tax benefit is due largely to net operating losses sustained during 2015. We filed amended 2013 and 2014 income tax returns in 2016 and received a refund of $37.4 million on those tax returns in April 2016. As a result of the net operating loss in 2015, we lost the benefit of our Section 199 manufacturing deduction, which negatively impacted the effective tax rate.

Outlook

Over the last two years, we have taken significant steps to reduce costs, including but not limited to reducing headcount to right-size the organization, and align production levels with lower customer demand resulting from the severe decline in oil and natural gas completion activity. While the depressed commodity prices experienced during 2016 may continue to create a challenging operating environment, we are projecting that the operating environment for CARBO will continue to improve in 2017.

We anticipate strong sales growth year-over-year in 2017 from our ceramic technologies but we expect base ceramic volume growth will likely be more modest as a focus on low cost completions is unlikely to change in the near term. We expect first quarter of 2017 ceramic sales to be similar to the fourth quarter of 2016.

We believe it will be beneficial to our results of operations to expand our industrial technologies business year over year given the challenges we have seen over this oilfield downturn and we believe that increasing sales from our industrial technologies business will help mitigate the impact of continued depressed oilfield activity in the future. We have sold into the industrial markets for many years and are currently pursuing multiple sales strategies for both end-customers and distribution channels to increase our industrial technologies sales. The initial sales cycle for industrial technologies sales is longer than the oilfield sales cycle; however, the resulting commercial relationship with customers is typically long-term in nature.

We are pleased with the progress we have made on ramping up our raw frac sand production facility, which we had idled early in 2016. The fourth quarter of 2016 saw sand volumes more than triple on a sequential basis, from 46 million pounds to 149 million pounds, and we expect our sand sales to continue to increase and contribute towards our goal of generating positive cash.

We believe technology sales growth, broader sources of revenue, an improving commodity price environment and a corresponding increase in industry activity, will improve our results of operations in 2017. This view, including increased demand for our products, is based on changing industry conditions and interactions with our customers. Despite our outlook for an improved operating environment in 2017, we have found generating accurate financial forecasts in the industry downturn has been difficult.

In addition, we continue to explore certain asset monetization opportunities to further strengthen the balance sheet.

Liquidity and Capital Resources

At December 31, 2016, we had cash and cash equivalents of $91.7 million compared to cash and cash equivalents of $78.9 million at December 31, 2015. During the year ended December 31, 2016, we received proceeds of $45.6 million relating to sales of common stock under our ATM program, $25.0 million in proceeds from notes payable, related parties, and generated $0.8 million from the effect of exchange rate changes on cash. Uses of cash included $32.1 million in repayments on our line of credit, $6.8 million for capital expenditures, $17.9 million used in operating activities, $0.9 million in repayments on notes payable, $0.5 million for purchases of our common stock, and $0.3 million for payments of debt issuance costs. Major capital spending in 2016 included retrofitting an existing plant with the new KRYPTOSPHERE ^® proppant technology.

On January 19, 2016, our Board of Directors suspended our policy of paying quarterly cash dividends. Future quarterly dividends to holders of our common stock, if at all, will be dependent on our financial condition, the amount of funds generated from operations and the level of capital expenditures. We estimate our total capital expenditures in 2017 will be less than $5.0 million. Due to market conditions, the completion of the second line at the manufacturing facility in Millen, Georgia and the second phase of a plant retrofit with new KRYPTOSPHERE ^® technology have been suspended until such time that market conditions warrant completion.

In April 2016, we restructured our revolving credit agreement by entering into the Amended Credit Agreement, as it is reasonably likely we would have been unable to comply with certain financial covenants under the prior credit agreement. The Amended Credit Agreement consists of a $65.0 million fully drawn term loan, which replaced the previous $90.0 million revolver, and up to $15.0 million in standby letters of credit. Our obligations under the Amended Credit Agreement are secured by a pledge of substantially all of our domestic assets and guaranteed by our two domestic operating subsidiaries. Such obligations bear interest at LIBOR plus 7.00%. Under the Amended Credit Agreement, all of the cash of the Company, including any of the subsidiary guarantors that is held in U.S. banks must be deposited into accounts with the administrative agent and therefore will be subject to set-off in the event, and to the extent, CARBO Ceramics Inc. or any of the subsidiary guarantors is unable to satisfy its obligations under the Amended Credit Agreement. The Amended Credit Agreement requires minimum quarterly repayments of principal of $3.033 million during the fourth quarter of 2016 and $3.250 million thereafter until its maturity on December 31, 2018. The Amended Credit Agreement eliminates the financial covenants contained in the prior credit agreement, but instead requires us to maintain minimum cash amounts held with the administrative agent at the end of each calendar month commencing August 2016 as follows: $40.0 million from August 2016 until March 2017; $30.0 million from April 2017 until December 2017; and $25.0 million thereafter. In connection with the Amended Credit Agreement, the lender waived non-compliance with the asset coverage ratio for the months of January, February, and March 2016. We are required to use proceeds from the sale of certain assets to repay principal amounts outstanding under the Amended Credit Agreement. As of December 31, 2016, our outstanding debt under the credit agreement was $55.901 million, and we had issued $11.980 million in standby letters of credit.

In January 2017, we repaid $3.25 million under our Amended Credit Agreement. As of February 28, 2017, our outstanding debt under the Amended Credit Agreement was $52.7 million.

In May 2016, we received proceeds of $25.0 million from the issuance of separate unsecured Promissory Notes (the “Notes”) to two of our Directors. Each Note matures on April 1, 2019 and bears interest at 7.00%. Additionally, in May 2016, each of those directors entered into a Subordination and Intercreditor Agreement with our bank lender, which, among other things, provides that each Note is subordinated to the indebtedness outstanding under our Amended Credit Agreement.

In July 2016, we filed a prospectus supplement and associated sales agreement related to an “at-the-market” equity offering program pursuant to which the Company may sell, from time to time, common stock with an aggregate offering price of up to $75.0 million through Cowen and Company LLC, as sales agent, for general corporate purposes. As of December 31, 2016, we sold a total of 3,405,709 shares of our common stock under the ATM program for $46.6 million, or an average of $13.69 per share, and received

proceeds of $45.6 million, net of commissions of $1.0 million. These sales occurred during August and September 2016, and we have not utilized the program since those sales.

Additional information as to the applicable definitions and requirements of these covenants is contained in the credit agreement. The Company anticipates that cash on hand will be sufficient to meet planned operating expenses and other cash needs for the next 12 months from the date this Form 10-K is issued. The Company’s view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for 2017, which is impacted by various assumptions regarding demand and sales prices for our products. Generally, we expect demand for our products and the sales prices to increase in 2017 compared to 2016. Although we have observed certain factors in the fourth quarter 2016 that support improving industry conditions, our financial forecasts are based on estimates of customer demand, which is highly volatile in the current operating environment, and we have no committed sales backlog with our customers. As a result, there is inherent uncertainty in our forecasts. If actual results are less than our forecasts, we may not have sufficient cash to maintain compliance with the minimum cash balance required by the Credit Agreement.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements as of December 31, 2016.

Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2016:

	Payments due in period
($ in thousands)			Less than		1 - 3		3 - 5		More than
	Total		1 year		years		years		5 years
Long-term debt obligations	$	80,901	$	13,000	$	67,901	$	—	$	—
Capital lease obligations		—		—		—		—		—
Operating lease obligations:
- Primarily railroad equipment (net of subleases)		112,835		15,272		27,629		32,069		37,865
Purchase obligations:
- Natural gas contracts		22,218		12,884		9,334		—		—
- Raw materials contracts		14,000		5,600		8,400		—		—
Other long-term obligations		—		—		—		—		—
Total contractual obligations	$	229,954	$	46,756	$	113,264	$	32,069	$	37,865

See Note 3, Note 5, and Note 15 to the Notes to the Consolidated Financial Statements.

Operating lease obligations relate primarily to railroad equipment leases and include leases of other property, plant and equipment.

We use natural gas to power our domestic manufacturing plants. From time to time, we enter into contracts to purchase a portion of the anticipated natural gas requirements at specified prices. As of December 31, 2016, the last such contract was due to expire in December 2018.

We have entered into contracts to supply raw materials, primarily kaolin, bauxite, slurry and various forms of sand, to our manufacturing plants. Four outstanding contracts do not require us to purchase minimum annual quantities, but do require the purchase of minimum annual percentages, ranging from 50% to 100% of the respective plants’ requirements for the specified raw materials. One outstanding contract requires us to purchase a minimum annual quantity of frac sand. Each of the contracts is described in Note 15 to the Notes to the Consolidated Financial Statements.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

Our major market risk exposure is to foreign currency fluctuations that could impact our investments in Russia. As of December 31, 2016, our net investment that is subject to foreign currency fluctuations totaled $15.7 million, and we have recorded a cumulative foreign currency translation loss of $34.3 million, all related to Russia. This cumulative translation loss is included in Accumulated Other Comprehensive Loss. From time to time, we may enter into forward foreign exchange contracts to hedge the impact of foreign currency fluctuations. There were no such foreign exchange contracts outstanding at December 31, 2016. During 2014 and continuing into 2015 and 2016, the value of the Russian Ruble significantly declined relative to the U.S. dollar. The financial impact of this decline on our net assets in Russia is included in Other Comprehensive Income and the cumulative foreign

currency translation loss noted above. No income tax benefits have been recorded on these losses as a result of the uncertainty about recoverability of the related deferred income tax benefits.

As of December 31, 2016, we had a $65.0 million fully drawn term loan. Under the terms of the agreement, the interest rate is set at LIBOR plus 7.00%. Our outstanding debt under the credit agreement was $55.901 million at December 31, 2016. We do not believe that we have any material exposure to market risk associated with interest rates.

We are subject to the risk of market price fluctuations of certain commodities, such as natural gas, and utilize forward purchase contracts to manage or reduce market risks relating to these costs. We do not enter into these transactions for speculative or trading purposes. As of December 31, 2016, we have contracted for a total of 4,320,000 MMBtu of natural gas at an average price of $4.36 per MMBtu through December 31, 2018.

Item 8.

Financial Statements and Supplementary Data

The information required by this Item is contained in pages F-3 through F-26 of this Report.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

Item 9A.

Controls and Procedures

(a)

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in the reports filed under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of December 31, 2016, management carried out an evaluation, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurances of achieving their control objectives. Based upon and as of the date of that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

(b)

Management’s Report on Internal Control Over Financial Reporting

For Management’s Report on Internal Control Over Financial Reporting, see page F-1 of this Report.

(c)

Report of Independent Registered Public Accounting Firm

For the Report of Independent Registered Public Accounting Firm on the Company’s internal control over financial reporting, see page F-2 of this Report.

(d)

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended December 31, 2016 that materially affected or are reasonably likely to materially affect, those controls.

Item 9 B.

Other Information

Not applicable.

PART III

Certain information required by Part III is omitted from this Report. We will file a definitive proxy statement pursuant to Regulation 14A (the “Proxy Statement”) not later than 120 days after the end of the fiscal year covered by this Report and certain information included therein is incorporated herein by reference. Only those sections of the Proxy Statement that specifically address the items set forth herein are incorporated by reference. Such incorporation does not include the Compensation Committee Report included in the Proxy Statement.

Item 10.

Directors, Executive Officers and Corporate Governance

Information concerning executive officers under Item 401 of Regulation S-K is set forth in Part I of this Form 10-K. The other information required by this Item is incorporated by reference to the portions of the Company’s Proxy Statement entitled “Security Ownership of Certain Beneficial Owners and Management,” “Election of Directors,” “Board of Directors, Committees of the Board of Directors and Meeting Attendance,” “Code of Business Conduct and Ethics,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Report of the Audit Committee.”

Item 11.

Executive Compensation

The information required by this Item is incorporated by reference to the portions of the Company’s Proxy Statement entitled “Compensation of Executive Officers,” "Director Compensation" and "Potential Termination and Change in Control Payments."

Item 12.

Security Ownership of Ce rtain Beneficial Owners and Management and Related Stockholder Matters

The information required by this Item is incorporated by reference from our Proxy Statement under the captions “Securities Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information.”

Item 13.

Certain Relationships and Related Transactions, and Director Independence

The information required by this Item is incorporated by reference to the portion of our Proxy Statement entitled “Election of Directors.”

Item 14.

Principal Accounting Fees and Services

The information required by this Item is incorporated by reference to the portion of our Proxy Statement entitled “Ratification of Appointment of our Independent Registered Public Accounting Firm.”

PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a)

Exhibits, Financial Statements and Financial Statement Schedules:

Consolidated Financial Statements

The Consolidated Financial Statements of CARBO Ceramics Inc. listed below are contained in pages F-3 through F-26 of this Report:

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets at December 31, 2016 and 2015

Consolidated Statements of Operations for each of the three years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Comprehensive (Loss) Income for each of the three years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Shareholders’ Equity for each of the three years ended December 31, 2016, 2015 and 2014

Consolidated Statements of Cash Flows for each of the three years ended December 31, 2016, 2015 and 2014

Consolidated Financial Statement Schedules

All schedules have been omitted since they are either not required or not applicable.

Exhibits

The exhibits listed on the accompanying Exhibit Index are filed as part of, or incorporated by reference into, this Report.

Item 16.

Form 10-K Summary

None

SIGNA TURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

CARBO Ceramics Inc.

By:		/s/ Gary A Kolstad
		Gary A. Kolstad
		President and Chief Executive Officer

By:		/s/ Ernesto Bautista III
		Ernesto Bautista III
		Vice President and
		Chief Financial Officer

Dated: February 28, 2017

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Gary A. Kolstad and Ernesto Bautista III, jointly and severally, his attorneys-in-fact, each with the power of substitution, for him in any and all capacities, to sign any amendments to this Report on Form 10‑K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ William C. Morris	Chairman of the Board	February 28, 2017
William C. Morris

/s/ Gary A. Kolstad	President, Chief Executive Officer and	February 28, 2017
Gary A. Kolstad	Director (Principal Executive Officer)

/s/ Ernesto Bautista III	Vice President and	February 28, 2017
Ernesto Bautista III	Chief Financial Officer (Principal Financial and Accounting Officer)

/s/ Sigmund L. Cornelius	Director	February 28, 2017
Sigmund L. Cornelius

/s/ Chad C. Deaton	Director	February 28, 2017
Chad C. Deaton

/s/ James B. Jennings	Director	February 28, 2017
James B. Jennings

/s/ H.E. Lentz, Jr .	Director	February 28, 2017
H.E. Lentz, Jr.

/s/ Randy L. Limbacher	Director	February 28, 2017
Randy L. Limbacher

/s/ Robert S. Rubin	Director	February 28, 2017
Robert S. Rubin

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management, including our Chief Executive Officer and our Chief Financial Officer, assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2016. In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control–Integrated Framework (2013). Based on its assessment and those criteria, management has concluded that the Company maintained effective internal control over financial reporting as of December 31, 2016.

The Company’s independent registered public accounting firm, Ernst & Young LLP, has issued an attestation report on the Company's internal control over financial reporting. That report is included herein.

F-1

REPORT OF INDEPENDENT REGIS TERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

CARBO Ceramics Inc.

We have audited CARBO Ceramics Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). CARBO Ceramics Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

In our opinion, CARBO Ceramics Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of CARBO Ceramics Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016, and our report dated February 28, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New Orleans, Louisiana

February 28, 2017

F-2

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

CARBO Ceramics Inc.

We have audited the accompanying consolidated balance sheets of CARBO Ceramics Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of CARBO Ceramics Inc. at December 31, 2016 and 2015, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), CARBO Ceramics Inc.’s internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 28, 2017 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

New Orleans, Louisiana

February 28, 2017

F-3

CARBO CERA MICS INC.

CONSOLIDATED BALANCE SHEETS

($ in thousands, except per share data)

	December 31,
	2016			2015
ASSETS
Current assets:
Cash and cash equivalents	$	91,680		$	78,866
Trade accounts and other receivables, net		23,622			48,596
Inventories:
Finished goods		74,133			77,537
Raw materials and supplies		23,041			27,021
Total inventories		97,174			104,558
Prepaid expenses and other current assets		3,548			3,762
Prepaid income taxes		1,199			—
Deferred income taxes		—			49,495
Total current assets		217,223			285,277
Property, plant and equipment:
Land and land improvements		45,530			45,774
Land-use and mineral rights		19,696			19,877
Buildings		87,318			83,500
Machinery and equipment		647,753			642,396
Construction in progress		92,704			96,084
Total		893,001			887,631
Less accumulated depreciation and amortization		398,898			349,900
Net property, plant and equipment		494,103			537,731
Goodwill		3,500			3,500
Intangible and other assets, net		8,631			9,861
Total assets	$	723,457		$	836,369
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Long-term debt, current portion	$	13,000		$	33,000
Notes payable		551			—
Accounts payable		7,782			10,709
Accrued payroll and benefits		3,434			6,003
Accrued freight		593			3,068
Accrued utilities		1,169			2,414
Accrued income taxes		—			139
Derivative instruments		1,599			6,240
Other accrued expenses		6,676			8,717
Total current liabilities		34,804			70,290
Deferred income taxes		1,236			63,858
Long-term debt		42,404			55,000
Notes payable, related parties		25,000			—
Other long-term liabilities		3,443			4,915
Shareholders’ equity:
Preferred stock, par value $0.01 per share, 5,000 shares authorized, none outstanding		—			—
Common stock, par value $0.01 per share, 80,000,000 shares authorized; 26,881,066 and 23,280,696 shares issued and outstanding at December 31, 2016 and 2015, respectively		269			233
Additional paid-in capital		117,192			65,067
Retained earnings		533,435			614,708
Accumulated other comprehensive loss		(34,326	)		(37,702	)
Total shareholders’ equity		616,570			642,306
Total liabilities and shareholders’ equity	$	723,457		$	836,369

See accompanying notes to consolidated financial statements.

F-4

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

($ in thousands, except per share data)

	Years ended December 31,
	2016			2015			2014
Revenues	$	103,051		$	279,574		$	648,325
Cost of sales		188,065			335,699			467,045
Gross (loss) profit		(85,014	)		(56,125	)		181,280
Selling, general and administrative expenses		39,984			62,199			72,535
Start-up costs		15			797			811
Loss on disposal or impairment of assets, net		889			44,111			15,079
Operating (loss) profit		(125,902	)		(163,232	)		92,855
Other (expense) income:
Interest (expense) income, net		(5,435	)		(470	)		597
Foreign currency exchange gain (loss), net		119			94			(303	)
Other, net		10			(141	)		(278	)
		(5,306	)		(517	)		16
(Loss) income before income taxes		(131,208	)		(163,749	)		92,871
Income tax (benefit) expense		(51,081	)		(54,205	)		37,283
Net (loss) income	$	(80,127	)	$	(109,544	)	$	55,588
(Loss) earnings per share:
Basic	$	(3.29	)	$	(4.76	)	$	2.41
Diluted	$	(3.29	)	$	(4.76	)	$	2.41

See accompanying notes to consolidated financial statements.

F-5

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

($ in thousands)

	Years ended December 31,
	2016			2015			2014
Net (loss) income	$	(80,127	)	$	(109,544	)	$	55,588
Other comprehensive income (loss):
Foreign currency translation adjustment		3,376			(5,880	)		(17,952	)
Reclassification of China cumulative translation gain to Net Loss upon substantial liquidation		—			(8,853	)		—
Deferred income taxes		—			—			(1,756	)
Other comprehensive income (loss), net of tax		3,376			(14,733	)		(19,708	)
Comprehensive (loss) income	$	(76,751	)	$	(124,277	)	$	35,880

See accompanying notes to consolidated financial statements.

F-6

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

($ in thousands, except per share data)

	Common Stock			Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total
Balances at January 1, 2014		231			56,782			714,835			(3,261	)		768,587
Net income		—			—			55,588			—			55,588
Foreign currency translation adjustment, net of tax expense of $1,756		—			—			—			(19,708	)		(19,708	)
Comprehensive income														35,880
Tax benefit from stock based compensation		—			303			—			—			303
Stock granted under restricted stock plan, net		1			699			—			—			700
Stock based compensation		—			6,688			—			—			6,688
Shares repurchased and retired		(1	)		(5,175	)		—			—			(5,176	)
Shares surrendered by employees to pay taxes		—			—			(1,804	)		—			(1,804	)
Cash dividends ($1.26 per share)		—			—			(29,121	)		—			(29,121	)
Balances at December 31, 2014	$	231		$	59,297		$	739,498		$	(22,969	)	$	776,057
Net loss		—			—			(109,544	)		—			(109,544	)
Foreign currency translation adjustment		—			—			—			(5,880	)		(5,880	)
Reclassification of China cumulative translation gain to Net Loss upon substantial liquidation		—			—			—			(8,853	)		(8,853	)
Comprehensive loss														(124,277	)
Tax expense from stock based compensation		—			(1,768	)		—			—			(1,768	)
Stock granted under restricted stock plan, net		2			698			—			—			700
Stock based compensation		—			6,840			—			—			6,840
Shares surrendered by employees to pay taxes		—			—			(580	)		—			(580	)
Cash dividends ($0.63 per share)		—			—			(14,666	)		—			(14,666	)
Balances at December 31, 2015	$	233		$	65,067		$	614,708		$	(37,702	)	$	642,306
Net loss		—			—			(80,127	)		—			(80,127	)
Foreign currency translation adjustment		—			—			—			3,376			3,376
Comprehensive loss														(76,751	)
Cumulative effect of change in accounting policy		—			697			(697	)		—			—
Stock sold under ATM program		34			45,530			—			—			45,564
Stock granted under restricted stock plan, net		2			478			—			—			480
Stock based compensation		—			5,420			—			—			5,420
Shares surrendered by employees to pay taxes		—			—			(449	)		—			(449	)
Balances at December 31, 2016	$	269		$	117,192		$	533,435		$	(34,326	)	$	616,570

See accompanying notes to consolidated financial statements.

F-7

CARBO CERAMICS INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

($ in thousands)

	Years ended December 31,
	2016			2015			2014
Operating activities
Net (loss) income	$	(80,127	)	$	(109,544	)	$	55,588
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization		48,451			54,457			50,860
Provision for doubtful accounts		918			1,857			546
Deferred income taxes		(50,535	)		(56,800	)		24,389
Excess tax benefits from stock based compensation		—			—			(372	)
Lower of cost or market inventory adjustment		1,515			4,546			5,363
Loss on disposal or impairment of assets		889			44,111			15,079
Foreign currency transaction (gain) loss, net		(119	)		(94	)		303
Stock compensation expense		5,939			7,547			7,529
Change in fair value of derivative instruments		(7,687	)		11,155			—
Changes in operating assets and liabilities:
Trade accounts and other receivables		24,569			81,371			(9,511	)
Inventories		6,433			27,022			(25,624	)
Prepaid expenses and other current assets		1,726			1,437			(112	)
Long-term other assets		156			697			(122	)
Accounts payable		631			(7,861	)		2,079
Accrued expenses		(8,405	)		(9,104	)		(2,487	)
Other long-term liabilities		1,574			—			—
Income tax receivable, net		36,137			19,780			(17,726	)
Net cash (used in) provided by operating activities		(17,935	)		70,577			105,782
Investing activities
Capital expenditures		(6,848	)		(62,747	)		(161,469	)
Net cash used in investing activities		(6,848	)		(62,747	)		(161,469	)
Financing activities
Proceeds from long-term debt		—			70,000			25,000
Proceeds from issuance of common stock under ATM program		45,564			—			—
Repayments on long-term debt		(32,099	)		(7,000	)		—
Repayments on notes payable		(917	)		—			—
Payment of debt issuance costs		(339	)		—			—
Proceeds from notes payable, related parties		25,000			—			—
Dividends paid		—			(14,666	)		(29,121	)
Purchase of common stock		(450	)		(580	)		(6,979	)
Excess tax benefits from stock based compensation		—			—			372
Net cash provided by (used in) financing activities		36,759			47,754			(10,728	)
Effect of exchange rate changes on cash		838			(1,016	)		(3,537	)
Net increase (decrease) in cash and cash equivalents		12,814			54,568			(69,952	)
Cash and cash equivalents at beginning of year		78,866			24,298			94,250
Cash and cash equivalents at end of year	$	91,680		$	78,866		$	24,298
Supplemental cash flow information
Interest paid	$	5,269		$	2,613		$	135
Income taxes paid	$	—		$	—		$	30,619

See accompanying notes to consolidated financial statements

F-8

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

($ in thousands, except per share data)

1.	Significant Accounting Policies

Description of Business

CARBO Ceramics Inc. (the “Company”) was formed in 1987 and is a manufacturer of ceramic proppants and also produces resin-coated ceramic proppants. The Company has production plants in: New Iberia, Louisiana; Eufaula, Alabama; McIntyre, Georgia; Toomsboro, Georgia; Millen, Georgia; and Kopeysk, Russia; and a sand processing facility in Marshfield, Wisconsin. The Company predominantly sells its proppant products through pumping service companies that perform hydraulic fracturing for oil and gas companies. Finished goods inventories are stored at the plant sites and various domestic and international remote distribution facilities. The Company also provides the industry’s most widely used hydraulic fracture simulation software FracPro®, as well as hydraulic fracture design and consulting services. In addition, the Company provides a broad range of technologies for spill prevention, containment and countermeasures.

Beginning in late 2014 and continuing throughout 2015 and 2016, a severe decline in oil and natural gas prices led to a significant decline in oil and natural gas industry drilling activities and capital spending. Beginning in 2015, the Company implemented a number of initiatives to preserve cash and lower costs, including: reducing workforce across the organization, lowering production output levels in order to align with lower demand, limiting capital expenditures and reducing dividends. The Company incurred severance costs of $6,426 and $9,497 during 2016 and 2015, respectively, as a result of these actions.

Temporarily idled facilities are expected to remain closed for a short period of time, generally less than one year. Mothballed facilities are expected to remain closed for one year or longer. The accounting treatment is the same for both temporarily idled and mothballed facilities, except that mothballed assets are evaluated for possible impairment while temporarily idled assets are not necessarily assessed for impairment. The Company continues to depreciate both temporarily idled and mothballed assets.

As of December 31, 2016, we are producing ceramic proppants from our Eufaula, Alabama and Kopeysk, Russia manufacturing facilities, and processing sand at our Marshfield, Wisconsin facility. We are currently producing ceramic pellets only in a limited capacity at our McIntyre, Georgia facility. Our Millen facility is currently mothballed, and our Toomsboro facility is currently idled. The Company continues to assess liquidity needs and manage cash flows and, if industry conditions do not improve and/or demand for its products does not otherwise increase, the Company would expect to temporarily idle all or a portion of our currently active facilities in the short term. As a result of the steps the Company has taken to enhance its liquidity, the Company currently believes that cash on hand will enable the Company to meet its working capital, capital expenditure, debt service and other funding requirements for at least one year from the date this Form 10-K is issued. The Company’s view regarding sufficiency of cash and liquidity is primarily based on our financial forecast for 2017, which is impacted by various assumptions regarding demand and sales prices for our products. Generally, we expect demand for our products and the sales prices to increase in 2017 compared to 2016, and this expectation is included within our 2017 financial forecast. Although we have observed certain factors in the fourth quarter 2016 that support improving industry conditions, our financial forecasts in recent periods have proven less reliable given customer demand, which is highly volatile in the current operating environment and no committed sales backlog exists with our customers. As a result, there is no guarantee that our financial forecast, which projects sufficient cash will be available to meet planned operating expenses and other cash needs as well as maintain compliance with the minimum cash balance required by the Credit Agreement, will be achieved.

Additionally, the Company suspended completion of two large construction projects until such time that market conditions improve enough to warrant completion. The two suspended projects include the second production line at Millen, Georgia and the second phase of the retrofit of an existing plant with the new KRYPTOSPHERE® technology. As of December 31, 2016, the value of the temporarily suspended assets relating to these two projects totaled approximately 94% of the Company’s total construction in progress and both projects are over 90% complete.

Principles of Consolidation

The consolidated financial statements include the accounts of CARBO Ceramics Inc. and its operating subsidiaries. All significant intercompany transactions have been eliminated.

Concentration of Credit Risk, Accounts Receivable and Other Receivables

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral. Receivables are generally due within 30 days. The majority of the Company’s receivables are from customers in the

F-9

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

petroleum pressure pumping industry. The Company establishes an allowance for doubtful accounts based on its assessment of collectability risk and periodically evaluates the balance in the allowance based on a review of trade accounts receivable. Trade accounts receivable are periodically reviewed for collectability based on customers’ past credit history and current financial condition, and the allowance is adjusted if necessary. Credit losses historically have been insignificant. The allowance for doubtful accounts at December 31, 2016 and 2015 was $2,804 and $2,688, respectively. Other receivables were $650 and $300 as of December 31, 2016 and 2015, respectively, of which related mainly to miscellaneous receivables in the United States.

Cash Equivalents

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amounts reported in the balance sheet for cash equivalents approximate fair value.

Inventories

Inventories are stated at the lower of cost (weighted average) or market. Finished goods inventories include costs of materials, plant labor and overhead incurred in the production of the Company’s products and costs to transfer finished goods to distribution centers. The Company evaluates the carrying value of its inventories relative to market value generally on a geographic by-country basis. As needed, more specific reviews within a particular country are made on a product group basis.

The Company evaluated the carrying values of its inventories and concluded that market prices had fallen below carrying costs for certain inventory. Consequently, the Company recognized $1,515 and $4,546 lower of cost or market adjustments in cost of sales in 2016 and 2015, respectively, to adjust finished goods and raw materials carrying values to the lower market prices.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Repair and maintenance costs are expensed as incurred. Depreciation is computed on the straight-line method for financial reporting purposes using the following estimated useful lives:

Buildings and improvements		15 to 30 years
Machinery and equipment		3 to 30 years
Land-use rights		30 years

The Company holds approximately 4,618 acres of land and leasehold interests containing kaolin reserves near its plants in Georgia and Alabama. The Company also holds approximately 113 acres of land and leasehold interests containing sand reserves near its sand processing facility in Marshfield, Wisconsin. The capitalized costs of land and mineral rights as well as costs incurred to develop such property are amortized using the units-of-production method based on estimated total tons of these reserves.

Impairment of Long-Lived Assets and Intangible Assets

Long-lived assets to be held and used and intangible assets that are subject to amortization are reviewed for impairment whenever events or circumstances indicate their carrying amounts might not be recoverable. Recoverability is assessed by comparing the undiscounted expected future cash flows from the assets with their carrying amount. If the carrying amount exceeds the sum of the undiscounted future cash flows an impairment loss is recorded. The impairment loss is measured by comparing the fair value of the assets with their carrying amounts. Intangible assets that are not subject to amortization are tested for impairment at least annually by comparing their fair value with the carrying amount and recording an impairment loss for any excess of carrying amount over fair value. Fair values are generally determined based on discounted expected future cash flows or appraised values, as appropriate. For additional information on the Company’s long-lived assets and intangible assets impairment assessment, please refer to Note 4 - Impairment of Long-Lived Assets.

Manufacturing Production Levels Below Normal Capacity

As a result of the Company substantially reducing manufacturing production levels, including by idling and mothballing certain facilities, the component of the Company’s accounting policy for inventory relating to operating at production levels below normal capacity was triggered and resulted in certain production costs being expensed instead of being capitalized into inventory. The Company expenses fixed production overhead amounts in excess of amounts that would have been allocated to each unit of

F-10

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

production at normal production levels. For the years ended December 31, 2016 and 2015, the Compan y expensed $47,318 and $33,724, respectively, in production costs. There were no such costs in 2014.

Capitalized Software

The Company capitalizes certain software costs, after technological feasibility has been established, which are amortized utilizing the straight-line method over the economic lives of the related products, generally not to exceed five years.

Goodwill

Goodwill represents the excess of the cost of companies acquired over the fair value of their net assets at the date of acquisition. Goodwill relating to each of the Company’s reporting units is tested for impairment annually, during the fourth quarter, as well as when an event, or change in circumstances, indicates an impairment is more likely than not to have occurred. For additional information on the Company’s goodwill impairment assessment, please refer to Note 4 - Impairment of Long-Lived Assets.

Revenue Recognition

Revenue from proppant sales is recognized when title passes to the customer, generally upon delivery. Revenue from consulting and geotechnical services is recognized at the time service is performed. Revenue from the sale of fracture simulation software is recognized when title passes to the customer at time of shipment. Revenue from the sale of spill prevention services is recognized at the time service is performed. Revenue from the sale of containment goods is recognized at the time goods are delivered.

Shipping and Handling Costs

Shipping and handling costs are classified as cost of sales. Shipping costs consist of transportation costs to deliver products to customers. Handling costs include labor and overhead to maintain finished goods inventory and operate distribution facilities.

Cost of Start-Up Activities

Start-up activities, including organization costs, are expensed as incurred. Start-up costs for 2016 and 2015 related to the start-up of the first phase of a retrofit of an existing plant to produce KRYPTOSPHERE® products. Start-up costs for 2014 related to the start-up of the new manufacturing facility in Millen, Georgia.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

Research and Development Costs

Research and development costs are charged to operations when incurred and are included in Selling, General and Administrative expenses. The amounts incurred in 2016, 2015 and 2014 were $3,817, $7,047 and $10,855, respectively.

Foreign Subsidiaries

Financial statements of the Company’s foreign subsidiaries are translated using current exchange rates for assets and liabilities; average exchange rates for the period for revenues, expenses, gains and losses; and historical exchange rates for equity accounts. Resulting translation adjustments are included in, and the only component of, Accumulated Other Comprehensive Loss as a separate component of shareholders’ equity. For additional information on the Company’s Cumulative Translation Adjustment, please refer to Note 17 – Foreign Currencies.

F-11

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

New Accounting Pronouncements

In January 2017, the FASB issued ASU No. 2017-04, “Intangibles – Intangibles and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” which removes Step 2 of the goodwill impairment test, which requires a hypothetical purchase price allocation. A goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. ASU 2017-04 will be effective for the interim and annual periods beginning after December 15, 2019, with early adoption permitted, and will be applied on a prospective basis. The adoption of ASU 2017-04 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force),” which clarifies existing guidance on cash flow statement presentation and classification. ASU 2016-15 will be effective for the interim and annual periods beginning after December 15, 2017 with early adoption permitted. The adoption of ASU 2016-15 is not expected to have a material impact on the Company’s consolidated financial statements and related disclosures.

In March 2016, the FASB issued ASU No. 2016-09, “ Compensation – Stock Compensation (Topic 718) ,” which amends and simplifies the accounting for stock compensation. The guidance addresses various stock compensation aspects including accounting for income taxes, classification of excess tax benefits on the statement of cash flows, forfeitures, minimum statutory tax withholding requirements, and classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax withholding purposes, among other things. In order to simplify the accounting for stock-based compensation, the Company made a change in accounting policy to account for forfeitures when they occur as permitted by this ASU, and as a result, the Company recognized a $697 cumulative-effect reduction to retained earnings under the modified retrospective approach. The Company elected prospective transition for the requirement to classify excess tax benefits as an operating activity. No prior periods have been adjusted. Additionally, as a result of the new guidance requirements, on a prospective basis, the Company now recognizes all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement as a discrete item in the period in which restricted shares vest. During the year ended December 31, 2016, the Company recognized $789, or $0.03 per share, in tax deficiencies, which reduced our income tax benefit. The Company adopted this guidance as of January 1, 2016. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures, other than the cumulative-effect reduction to retained earnings and income tax benefit effect.

In February 2016, the FASB issued ASU No. 2016-02, “ Leases (Topic 842) ,” which amends current lease guidance. This guidance requires, among other things, that lessees recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (2) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The new guidance will be effective for the interim and annual periods beginning after December 15, 2018 with early adoption permitted. The Company is currently evaluating the potential impact of adopting this new guidance on the consolidated financial statements and related disclosures.

In November 2015, the FASB issued ASU No. 2015-17, “Income Taxes (Topic 740) – Balance Sheet Classification of Deferred Taxes,” (“ASU 2015-17”), which requires that deferred tax liabilities and assets be classified as noncurrent in the balance sheet. The Company adopted this guidance as of January 1, 2016 on a prospective basis. The Company’s deferred tax liabilities and assets for prior periods were not retrospectively adjusted. The Company has changed its accounting principle to present deferred taxes as noncurrent in order to simplify the accounting for income taxes and to comply with ASU 2015-17.

In August 2015, the FASB issued ASU No. 2015-14, “Revenue from Contracts with Customers (Topic 606) – Deferral of the Effective Date,” which revises the effective date of ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606),” (“ASU 2014-09”) to interim and annual periods beginning after December 15, 2017, with early adoption permitted no earlier than interim and annual periods beginning after December 15, 2016. In May 2014, the FASB issued ASU 2014-09, which amends current revenue guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Upon initial evaluation, the Company does not believe there will be a material impact on its consolidated financial statements. The Company’s analysis of proppant sales contracts under ASC 606 supports the recognition of revenue at a point in time, typically when title passes to the customer upon delivery, for the majority of contracts, which is consistent with the current revenue recognition model. The Company is still evaluating the potential impact, if any, on sales contracts relating to the sale of fracture

F-12

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

stimulation software and environmental products and services. The Company expects to utilize the modified retrospective approach, which requires a cumulative adjustment to retained earnings and no adjustments to prior periods. The Company does not expect a material cumulative adjustment upon adoption.

In July 2015, the FASB issued ASU No. 2015-11, “Inventory (Topic 330),” (“ASU 2015-11”) which amends and simplifies the measurement of inventory. The main provisions of the standard require that inventory be measured at the lower of cost and net realizable value. Prior to the issuance of the standard, inventory was measured at the lower of cost or market (where market was defined as replacement cost, with a ceiling of net realizable value and floor of net realizable value less a normal profit margin). ASU 2015-11 will be effective for the interim and annual periods beginning after December 15, 2016 with early adoption permitted. The Company is currently evaluating the potential impact, if any, of adopting this new guidance on the consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU No. 2015-03, “Interest – Imputation of Interest (Subtopic 835-30),” (“ASU 2015-03”), which amends and simplifies the presentation of debt issuance costs. The main provisions of the standard require that debt issuance costs related to a recognized liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, and amortization of the debt issuance costs must be reported as interest expense. In August 2015, the FASB issued ASU No. 2015-15, “Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements – Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting (SEC Update),” which clarified that the SEC (as defined below) staff will not object to an entity presenting the costs of securing line-of-credit arrangements as an asset. The Company adopted this guidance as of January 1, 2016 on a retroactive basis. The adoption did not have a material impact on the Company’s consolidated financial statements and related disclosures.

In January 2015, the FASB issued ASU No. 2015-01, “Income Statement – Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items,” (“ASU 2015-01”), which eliminates the concept of extraordinary items from U.S. GAAP. The Company adopted this guidance as of January 1, 2016. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.

In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements – Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern,” (“ASU 2014-15”) which provides guidance in U.S. GAAP about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. The Company adopted ASU 2014-15 for the annual period ending December 31, 2016. The adoption of ASU 2014-15 did not have a material impact on the Company’s consolidated financial position, results of operations, cash flows, or related footnote disclosures.

In June 2014, the FASB issued ASU No. 2014-12, “ Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force),” (“ASU 2014-12”) , which amends current guidance for stock compensation tied to performance targets. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition and apply existing guidance in Topic 718 as it relates to awards with performance conditions that affect vesting to account for such awards. The Company adopted this guidance as of January 1, 2016. The adoption did not have a material impact on the Company’s financial position, results of operations or cash flows.

F-13

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

2.	I ntangible and Other Assets

Following is a summary of intangible assets as of December 31:

		2016				2015
	Weighted Average Life	Gross Amount		Accumulated Amortization		Gross Amount		Accumulated Amortization
Intangibles:
Patents and licenses, software and hardware designs	6 years	$	5,033	$	3,187	$	4,754	$	2,839
Developed technology	10 years		2,782		2,017		2,782		1,739
Customer relationships and non-compete	9 years		2,838		2,331		2,838		2,042
		$	10,653	$	7,535	$	10,374	$	6,620

Amortization expense for 2016, 2015 and 2014 was $915, $1,235 and $1,313, respectively. Estimated amortization expense for each of the ensuing years through December 31, 2021 is $638, $565, $279, $17 and $0, respectively.

Following is a summary of other assets as of December 31:

	2016		2015
Other assets:
Bauxite raw materials:
Inventories	$	3,989	$	4,145
Other assets		1,524		1,962
	$	5,513	$	6,107

Bauxite raw materials are used in the production of heavyweight ceramic products. As of December 31, 2016 and 2015, the Company has classified as long-term assets those bauxite raw materials inventories that are not expected to be consumed in production during the upcoming twelve month period. For additional information, refer to Note 4 – Impairment of Long-Lived Assets.

3.	Long-Term Debt and Notes Payable

The Company maintains a credit agreement, which until April 2016 included a revolving line of credit, with a bank lender. As of January 31, 2016, February 29, 2016 and March 31, 2016, the Company failed to comply with the asset coverage ratio covenant in such credit agreement. In connection with entering into Agreement and Amendment No. 7 to the Credit Agreement referred to below (the “Amended Credit Agreement”), the bank lender waived non-compliance with the asset coverage ratio for the months of January, February and March 2016.

As of December 31, 2016, the Company’s outstanding debt under its Amended Credit Agreement was $55,901, of which $13,000 was classified as current and $42,901 was classified as long-term. As of December 31, 2016, the Company had $497 of debt issuance costs that are presented as a direct reduction from the carrying amount of the long-term debt obligation. For the year ended December 31, 2016, the weighted average interest rate was 6.447% based on LIBOR-based rate borrowings. The Company had $11,980 and $8,875 in standby letters of credit issued as of December 31, 2016 and December 31, 2015, respectively, primarily as collateral relating to our natural gas commitments and railcar leases. As of December 31, 2015, the Company’s outstanding debt under the prior credit agreement was $88,000, of which $33,000 was classified as current and $55,000 was classified as long-term. As of December 31, 2015, the weighted average interest rate was 4.664% based on LIBOR-based rate borrowings. Interest cost for the years ended December 31, 2016, 2015 and 2014 was $6,022, $2,973 and $135, respectively, of which $80 and $2,038 was capitalized into the cost of property, plant and equipment in the years ended December 31, 2016 and 2015, respectively. No interest was capitalized in 2014.

In April 2016, the Company restructured its revolving credit agreement by entering into the Amended Credit Agreement, as it is reasonably likely the Company would have been unable to comply with certain financial covenants under the prior credit agreement. The Amended Credit Agreement consists of a $65,000 fully drawn term loan, which replaced the previous $90,000 revolving line of credit, and up to $15,000 in standby letters of credit. The Company’s obligations under the Amended Credit Agreement are secured by a pledge of substantially all of the Company’s domestic assets and guaranteed by its two domestic operating subsidiaries. Such

F-14

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

obligations bear interest at a floating rate of LIBOR plus 7.00%. Under the Amended Credit Agreement, al l of the cash of the Company, including any of the subsidiary guarantors, that is held in U.S. banks must be deposited into accounts at the administrative agent and therefore will be subject to set-off in the event, and to the extent, CARBO Ceramics Inc. o r any of the subsidiary guarantors is unable to satisfy its obligations under the Amended Credit Agreement. The Amended Credit Agreement requires minimum quarterly repayments of principal of $3,250 per quarter until its maturity on December 31, 2018. The Amended Credit Agreement eliminates the financial covenants contained in the prior credit agreement, but instead requires the Company to maintain minimum cash amounts held with the administrative agent at the end of each calendar month commencing August 2 016 as follows: $40,000 from August 2016 until March 2017; $30,000 from April 2017 until December 2017; and $25,000 thereafter. The Company is required to use proceeds from the sale of certain assets to repay principal amounts outstanding under the Amende d Credit Agreement.

In January 2017, the Company repaid $3,250 under its Amended Credit Agreement. As of February 28, 2017, the Company’s outstanding debt under the Amended Credit Agreement was $52,651.

In May 2016, the Company received proceeds of $25,000 from the issuance of separate unsecured Promissory Notes (the “Notes”) to two of the Company’s Directors. Each Note matures on April 1, 2019 and bears interest at 7.00%. Additionally, in May 2016, each of those directors entered into a Subordination and Intercreditor Agreement with the Company’s bank lender, which, among other things, provides that each Note is subordinated to the indebtedness outstanding under the Amended Credit Agreement.

In June 2016, the Company entered into an agreement with a financing company to finance certain insurance premiums in the amount of $1,468. Payments are due monthly through April 1, 2017 with an effective interest rate of 0.75%. The liability is included in Notes Payable within Current Liabilities on the Consolidated Balance Sheet. As of December 31, 2016, the outstanding balance was $551.

4.	Impairment of Long-Lived Assets

During 2016, 2015 and 2014, the Company recorded losses totaling $1,065, $43,697 and $15,120, respectively, on impairment of certain long-lived assets as market conditions changed with regard to demand for certain products offered by the Company.

A decline in oil and natural gas prices during the second half of 2014 resulted in a severe decline in market conditions beginning in early 2015. During the fourth quarter of 2015, industry conditions further deteriorated as oil prices fell below $30 per barrel. As a result of these worsening conditions, the Company evaluated substantially all of its long-lived assets for possible impairment as of December 31, 2015. Key assumptions used in the analysis varied by facility. However, the overriding assumptions included: 1) the industry downturn would last longer than originally anticipated, taking up to five years to fully recover; 2) production levels would rise over the recovery period eventually returning to production levels within normal capacity; 3) market pricing would be similar to lower 2015 levels, thus conservatively reducing expected gross profit and thus cash flows; 4) the Company’s wet process manufacturing plants (Toomsboro and Millen, Georgia and Eufaula, Alabama) were evaluated as a group of assets because these facilities manufacture like products; and 5) other facilities were separately evaluated. Pursuant to that analysis, the Company determined that the projected gross cash flows attributable to certain assets did not exceed the carrying value of the assets; therefore, the Company concluded that there was indication of possible impairment. The Company engaged the services of a third party consulting firm to assist with the determination of the fair market value of the related assets and concluded that the assets were impaired. The key assumptions and inputs impacting the fair value analysis were the weighted average cost of capital and perpetuity growth rate as well as certain market data with respect to the property and equipment at each facility. As a result, during the year-ended December 31, 2015, the Company recorded a $36,177 impairment of long-lived assets, primarily relating to machinery and equipment at the McIntyre, Georgia manufacturing plant and Marshfield, Wisconsin sand processing facility.

During the year-ended December 31, 2016, industry conditions remained depressed, however showed signs of improvement in the second half of the year with oil prices above $50 per barrel exiting the year. The Company evaluated substantially all of its long-lived assets for impairment as of December 31, 2016. Key assumptions were not materially different from the December 31, 2015 analysis. Pursuant to the December 31, 2016 analysis, the Company determined that the projected gross cash flows attributable to each asset group exceeded the carrying value; therefore, the Company concluded there was no indication of impairment for the year-ended December 31, 2016.

The Company also evaluated the carrying value of the long-term portion of bauxite raw materials. Much of the bauxite raw material was intended for use in production at the McIntyre facility. Based upon this evaluation, during 2016 and 2015, the Company recognized an impairment charge of $1,065 and $6,488, respectively, on the long-term portion of the bauxite raw material inventories.

F-15

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

Market conditions inside China deteriorated somewhat earlier relative to conditions in the United States. As a result of deteriorating market conditions in China during the fourth quarter of 2014, the Company recorded a $10,164 impairment of its long-lived assets in China during that period. As a result of the further deterioration of conditions in 2 015, the Company ceased production activities at its Luoyang, China manufacturing plant. During the course of 2015, the Company released substantially all of its employees inside China, sold off inventories and proceeded to wind-down the operation. The C ompany does not intend to resume operations in China. During the fourth quarter of 2015, the Company incurred a loss of $1,033 related to the write-off of abandoned inventories and other assets, and substantially liquidated the China assets and liabilitie s, as defined by U.S generally accepted accounting principles. As a result, during the fourth quarter of 2015, the foreign currency cumulative translation gain of $8,853 was released into the statement of operations and is netted with other impairment los ses.

In addition, during late 2014, the Company made a decision that it will not move forward with construction of a resin coating plant in Marshfield, Wisconsin for which the Company had previously developed engineering plans and procured certain equipment that had long-lead delivery times. As such, the Company recorded a $4,956 impairment of those assets during the year ended December 31, 2014.

The Company assesses goodwill for possible impairment annually or sooner if circumstances indicate possible impairment may have occurred. The Company evaluated goodwill during the fourth quarter of 2015, and as a result of the further decline in the oil and natural gas industry during the fourth quarter of 2015, concluded that Asset Guard Products Inc. (“AGPI”) projected future cash flows were negatively impacted and thus indicated possible impairment of the AGPI goodwill. AGPI was formerly known as Falcon Technologies and Services, Inc. The Company engaged a third party to assist in the evaluation and concluded that impairment had occurred. Fair value, which was determined using a discounted cash flows method, fell below the carrying value. Consequently, during the fourth quarter of 2015, the Company recorded an $8,664 impairment of AGPI goodwill and an $833 impairment of the indefinite-lived AGPI Trademark intangible asset, both the full value of each of those assets. Evaluation of the StrataGen goodwill resulted in no indication of possible impairment. There were no such impairments during 2016 or 2014.

During the years ended December 31, 2016, 2015, and 2014, the Company recognized gains of $176, $230, and $41 on disposal of various assets.

Components of loss (gain) on disposal or impairment of assets are as follows:

	For the years ended December 31,
	2016			2015			2014
Domestic long-lived assets impairment	$	1,065		$	42,664		$	4,956
China assets impairment		—			1,033			10,164
Goodwill and intangible assets impairment		—			9,497			—
China CTA gain realization		—			(8,853	)		—
Gain on disposal of assets		(176	)		(230	)		(41	)
Total	$	889		$	44,111		$	15,079

Leases

The Company leases certain property, plant and equipment under operating leases, primarily consisting of railroad equipment leases. Net minimum future rental payments due under non-cancelable operating leases with remaining terms in excess of one year as of December 31, 2016 are as follows:

2017	$	15,272
2018		13,262
2019		14,367
2020		16,174
2021		15,895
Thereafter		37,865
Total	$	112,835

F-16

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

Leases of railroad equipment generally provide for renewal options at their fair rental value at the time of renewal. In the normal course of business, operating leases for railroad equipment are generally renewed or replaced by other leases. For the years ended December 31, 2017 an d 2018, minimum future rental payments in the table above are presented net of sublease income related to subleases of railroad equipment of $993 and $581, respectively. Rent expense for all operating leases was $22,040 in 2016, $23,757 in 2015 and $24,11 6 in 2014. For the years ended December 31, 2016, 2015 and 2014, rent expense is stated net of sublease income of $4,778, $5,031 and $1,816, respectively.

6.	Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31 are as follows:

	2016		2015
Deferred tax assets:
Employee benefits	$	1,349	$	1,296
Inventories		8,811		7,071
Natural gas derivatives		1,281		4,183
Goodwill & other intangibles		4,881		3,980
Net operating loss		51,722		39,360
Other		2,027		1,723
Foreign losses		—		1,230
Foreign tax assets valuation allowance		—		(1,230	)
Total deferred tax assets		70,071		57,613
Deferred tax liabilities:
Depreciation		71,308		71,976
Total deferred tax liabilities		71,308		71,976
Net deferred tax liabilities	$	1,237	$	14,363

Significant components of the provision for income taxes for the years ended December 31 are as follows:

	2016			2015			2014
Current:
Federal	$	(495	)	$	1,509		$	11,310
State		(496	)		120			500
Foreign		445			966			1,084
Total current		(546	)		2,595			12,894
Deferred		(50,535	)		(56,800	)		24,389
	$	(51,081	)	$	(54,205	)	$	37,283

F-17

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

The reconciliation of income taxes computed at the U.S. statutory tax rate to the Company’s income tax expense for the years ended December 31 is as follows:

	2016						2015						2014
	Amount			Percent			Amount			Percent			Amount			Percent
U.S. statutory rate	$	(45,923	)		(35.0	)%	$	(57,312	)		(35.0	)%	$	32,505			35.0	%
State income taxes, net of federal tax benefit		(3,283	)		(2.5	)		(3,474	)		(2.1	)		1,882			2.0
Mining depletion		(378	)		(0.3	)		(1,557	)		(0.9	)		(3,035	)		(3.3	)
Change in election for foreign tax credits		(2,753	)		(2.1	)		1,442			0.9			—			—
Foreign tax assets valuation allowance		—			—			1,230			0.7			4,300			4.6
Foreign investments		(323	)		(0.2	)		847			0.5			2,980			3.2
Stock compensation excess tax deficiency		789			0.6			—			—			—			—
Other permanent differences		790			0.6			4,619			2.8			(1,349	)		(1.4	)
	$	(51,081	)		(38.9	)%	$	(54,205	)		(33.1	)%	$	37,283			40.1	%

Provision has been made for deferred U.S. income taxes on all foreign earnings based on the Company’s intent to repatriate foreign earnings. During the year ended December 31, 2016, the Company adjusted the DTL associated with its foreign investments which resulted in an additional benefit of $323. During the year ended December 31, 2015, the Company did not recognize benefits on foreign investments of $847 and recorded a valuation allowance of $1,230 due to the uncertainty of the Company being able to realize the foreign tax assets in light of current market conditions in China. During 2016, there was no change to this foreign valuation allowance.

During 2016 and 2015, the Company incurred a net operating loss in the United States. The tax benefit of these net operating losses totals $51,722 and $39,360, respectively, and is included in the deferred income tax asset. The Company filed amended 2013 and 2014 Federal income tax returns to claim $37,397 of the tax benefit which was received as a refund in April 2016. After finalization of the 2015 Federal return and a change in the attribute of the NOL carryback, additional refunds for 2012 through 2014 tax years are being claimed in the amount of $1,732. These amounts are included within deferred tax assets as of December 31, 2016. The federal NOLs generated in 2016 will be carried forward until they are utilized or their expiration in 2036.

The Company elected to claim bonus tax depreciation totaling $29,221 and $61,781 on assets placed in service in the United States during 2015 and 2014, respectively. This election increased the net operating loss in 2015 and reduced current taxable income in 2014. No such bonus depreciation is anticipated for 2016.

The Company has not recognized any uncertain tax positions as of December 31, 2016. The reserve recorded as of December 31, 2015 of $153 was associated with a period no longer subject to audit and thus was reduced to $0 during 2016.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates, the most significant of which are U.S. federal and certain state jurisdictions. In 2016, the Company received an audit notice from the Internal Revenue Service for periods 2013-2015. The Company does not anticipate any material findings. Various U.S. state jurisdiction tax years remain open to examination as well, although the Company believes assessments, if any, would be immaterial to its consolidated financial statements.

7.	Shareholders’ Equity

Common Stock

Holders of Common Stock are entitled to one vote per share on all matters to be voted on by shareholders and do not have cumulative voting rights. Subject to preferences of any Preferred Stock, the holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared from time to time by the Board of Directors out of funds legally available for that purpose. In the event of liquidation, dissolution or winding up of the Company, holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of any Preferred Stock then outstanding. The Common Stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and non-assessable.

On January 19, 2016, the Board of Directors suspended the Company’s policy of paying quarterly cash dividends.

F-18

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

Preferred Stock

The Company’s charter authorizes 5,000 shares of Preferred Stock. The Board of Directors has the authority to issue Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, redemption prices, liquidation preferences and the number of shares constituting any series or the designation of such series, without further vote or action by the Company’s shareholders.

Common Stock Repurchase Program

On January 28, 2015, the Company’s Board of Directors authorized the repurchase of up to two million shares of the Company’s common stock. Shares are effectively retired at the time of purchase. As of December 31, 2016, the Company had not repurchased any shares under the plan.

Equity Offering Program

On July 28, 2016, the Company filed a prospectus supplement and associated sales agreement related to an at-the-market (“ATM”) equity offering program pursuant to which the Company may sell, from time to time, common stock with an aggregate offering price of up to $75,000 through Cowen and Company LLC, as sales agent, for general corporate purposes. As of December 31, 2016, the Company sold a total of 3,405,709 shares of its common stock under the ATM program for $46,612, or an average of $13.69 per share, and received proceeds of $45,564, net of commissions of $1,048. These sales occurred during August and September 2016, and we have not utilized the program since those sales.

8.	Natural Gas Derivative Instruments

Natural gas is used to fire the kilns at the Company’s domestic manufacturing plants. In an effort to mitigate potential volatility in the cost of natural gas purchases and reduce exposure to short-term spikes in the price of this commodity, from time to time, the Company enters into contracts to purchase a portion of the anticipated monthly natural gas requirements at specified prices. Contracts are geographic by plant location. Historically, the Company has taken delivery of all natural gas quantities under contract, which exempted the Company from accounting for the contracts as derivative instruments. However, due to the severe decline in industry activity beginning in early 2015, the Company significantly reduced production levels and consequently did not take delivery of all of the contracted natural gas quantities. As a result, the Company began to account for relevant contracts as derivative instruments.

Derivative accounting requires the natural gas contracts to be recognized as either assets or liabilities at fair value with an offsetting entry in earnings. The Company uses the income approach in determining the fair value of these derivative instruments. The model used considers the difference, as of each balance sheet date, between the contracted prices and the New York Mercantile Exchange (“NYMEX”) forward strip price for each contracted period. The estimated cash flows from these contracts are discounted using a discount rate of 5.5%, which reflects the nature of the contracts as well as the timing and risk of estimated cash flows associated with the contracts. The discount rate had an immaterial impact on the fair value of the contracts for the year ended December 31, 2016 and 2015. The last natural gas contract will expire in December 2018. As a result, during the year ended December 31, 2016 and 2015, the Company recognized a gain on derivative instruments of $1,886 and a loss on derivative instruments of $15,040, respectively in cost of sales. The cumulative present value of the losses on these natural gas derivative contracts as of December 31, 2016 and 2015 are presented as current and long-term liabilities, as applicable, in the Consolidated Balance Sheet.

At December 31, 2016, the Company has contracted for delivery a total of 4,320,000 MMBtu of natural gas at an average price of $4.36 per MMBtu through December 31, 2018. Contracts covering 4,080,000 MMBtu are subject to accounting as derivative instruments. Future decreases in the NYMEX forward strip prices will result in additional derivative losses while future increases in the NYMEX forward strip prices will result in derivative gains. Future gains or losses will approximate the change in NYMEX natural gas prices relative to the total quantity of natural gas under contracts now subject to accounting as derivatives. The historical average NYMEX natural gas contract settlement prices for the years ended December 31, 2016 and 2015 were $2.46 per MMBtu and $2.66 per MMBtu, respectively.

9.	Fair Value Measurements

The Company’s derivative instruments are measured at fair value on a recurring basis. U.S. GAAP establishes a fair value hierarchy that has three levels based on the reliability of the inputs used to determine the fair value. These levels include: Level 1,

F-19

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

defined as inputs such as unadjusted quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs for use when little or no market data exists, therefore requiring an entity to develop its own assumptions.

The Company’s natural gas derivative instruments are included within the Level 2 fair value hierarchy. For additional information on the derivative instruments, refer to Note 8 – Natural Gas Derivative Instruments. The following table sets forth by level within the fair value hierarchy the Company’s assets and liabilities that were accounted for at fair value:

	Fair value as of December 31, 2016
	Level 1		Level 2			Level 3		Total
Liabilities:
Derivative instruments	$	—	$	(3,468	)	$	—	$	(3,468	)
Total fair value	$	—	$	(3,468	)	$	—	$	(3,468	)

	Fair value as of December 31, 2015
	Level 1		Level 2			Level 3		Total
Assets:
Impaired long-lived assets	$	—	$	—		$	5,896	$	5,896
Liabilities:
Derivative instruments		—		(11,155	)		—		(11,155	)
Total fair value	$	—	$	(11,155	)	$	5,896	$	(5,259	)

At December 31, 2016, the fair value of the Company’s long-term debt approximated the carrying value.

10.	Stock Based Compensation

On May 20, 2014, the shareholders approved the 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (the “2014 Omnibus Incentive Plan”). The 2014 Omnibus Incentive Plan replaces the expired 2009 Omnibus Incentive Plan. Under the 2014 Omnibus Incentive Plan, the Company may grant cash-based awards, stock options (both non-qualified and incentive) and other equity-based awards (including stock appreciation rights, phantom stock, restricted stock, restricted stock units, performance shares, deferred share units or share-denominated performance units) to employees and non-employee directors. The amount paid under the 2014 Omnibus Incentive Plan to any single participant in any calendar year with respect to any cash-based award shall not exceed $5,000. Awards may be granted with respect to a number of shares of the Company’s Common Stock that in the aggregate does not exceed 750,000 shares prior to the fifth anniversary of its effective date, plus (i) the number of shares that are forfeited, cancelled or returned, and (ii) the number of shares that are withheld from the participants to satisfy an option exercise price or minimum statutory tax withholding obligations. No more than 50,000 shares may be granted to any single participant in any calendar year. Equity-based awards may be subject to performance-based and/or service-based conditions. With respect to stock options and stock appreciation rights granted, the exercise price shall not be less than the market value of the underlying Common Stock on the date of grant. The maximum term of an option is ten years. Restricted stock awards granted generally vest (i.e., transfer and forfeiture restrictions on these shares are lifted) proportionately on each of the first three anniversaries of the grant date, but subject to certain limitations, awards may specify other vesting periods. As of December 31, 2016, 316,848 shares were available for issuance under the 2014 Omnibus Incentive Plan. Although the Company’s 2009 Omnibus Incentive Plan has expired, certain unvested shares granted under that plan remain outstanding in accordance with its terms. Additionally, certain units of phantom stock remain outstanding under the 2009 Omnibus Incentive Plan, as described below.

F-20

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

A summary of restricted stock activity and related information for the year e nded December 31, 2016 is presented below:

				Weighted-
				Average
				Grant-Date
				Fair Value
	Shares			Per Share
Nonvested at January 1, 2016		266,152		$	51.39
Granted		234,412		$	17.27
Vested		(110,367	)	$	59.18
Forfeited		(51,057	)	$	29.31
Nonvested at December 31, 2016		339,140		$	28.59

As of December 31, 2016, there was $4,978 of total unrecognized compensation cost, net of estimated forfeitures, related to restricted shares granted under the Omnibus Incentive Plans. That cost is expected to be recognized over a weighted-average period of 1.6 years. The weighted-average grant date fair value of restricted stock granted during the years ended December 31, 2016, 2015 and 2014 was $17.27, $34.62 and $111.99, respectively. The total fair value of shares vested during the years ended December 31, 2016, 2015 and 2014 was $6,532, $6,910 and $5,638, respectively.

As of December 31, 2016, the Company’s outstanding market-based cash awards to certain executives of the Company had a total Target Award of $1,938. The amount of awards that will ultimately vest can range from 0% to 200% based on the Company’s Relative Total Shareholder Return calculated over a three year period beginning January 1 of the year each grant was made.

The Company also made phantom stock awards to key international employees pursuant to the expired 2009 Omnibus Incentive Plan prior to its expiration and pursuant to the 2014 Omnibus Incentive Plan. The units subject to an award vest and cease to be forfeitable in equal annual installments over a three-year period. Participants awarded units of phantom stock are entitled to a lump sum cash payment equal to the fair market value of a share of Common Stock on the vesting date. In no event will Common Stock of the Company be issued with regard to outstanding phantom stock awards. As of December 31, 2016, there were 18,180 units of phantom stock granted under the expired 2009 Omnibus Incentive Plan, of which 13,737 have vested and 3,954 have been forfeited. As of December 31, 2016, there were 11,115 units of phantom stock granted under the 2014 Omnibus Incentive Plan, of which 1,302 have vested and 2,292 have been forfeited. As of December 31, 2016, nonvested units of phantom stock under the 2009 Omnibus Incentive Plan and the 2014 Omnibus Incentive Plan have a total value of $84, a portion of which is accrued as a liability within Accrued Payroll and Benefits.

11.	(Loss) Earnings Per Share

ASC Topic 260, “ Earnings Per Share ”, provides that unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The Company’s outstanding non-vested restricted stock awards are participating securities. Accordingly, earnings per common share are computed using the two-class method.

F-21

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

The following table sets forth the computation of basic and diluted (loss) earnings per share under the two-class method:

	2016			2015			2014
Numerator for basic and diluted (loss) earnings per share:
Net (loss) income	$	(80,127	)	$	(109,544	)	$	55,588
Effect of reallocating undistributed earnings of participating securities		—			—			(376	)
Net (loss) income available under the two-class method	$	(80,127	)	$	(109,544	)	$	55,212
Denominator:
Denominator for basic (loss) earnings per share—weighted-average shares		24,377,839			22,999,318			22,946,395
Effect of dilutive potential common shares		—			—			—
Denominator for diluted (loss) earnings per share—adjusted weighted-average shares		24,377,839			22,999,318			22,946,395
Basic (loss) earnings per share	$	(3.29	)	$	(4.76	)	$	2.41
Diluted (loss) earnings per share	$	(3.29	)	$	(4.76	)	$	2.41

12.	Quarterly Operating Results––(Unaudited)

Quarterly results for the years ended December 31, 2016 and 2015 were as follows:

	Three Months Ended
	March 31			June 30			September 30			December 31
2016
Revenues	$	33,102		$	20,651		$	20,241		$	29,058
Gross loss		(23,641	)		(20,012	)		(20,865	)		(20,495	)
Net loss		(24,684	)		(20,296	)		(19,950	)		(15,197	)
Loss per share:
Basic	$	(1.07	)	$	(0.88	)	$	(0.81	)	$	(0.57	)
Diluted	$	(1.07	)	$	(0.88	)	$	(0.81	)	$	(0.57	)
2015
Revenues	$	73,747		$	73,752		$	75,807		$	56,768
Gross profit		(25,998	)		(10,302	)		(4,597	)		(15,228	)
Net income		(28,602	)		(17,004	)		(13,898	)		(50,040	)
Earnings per share:
Basic	$	(1.24	)	$	(0.74	)	$	(0.60	)	$	(2.17	)
Diluted	$	(1.24	)	$	(0.74	)	$	(0.60	)	$	(2.17	)

Quarterly data may not sum to full year data reported in the Consolidated Financial Statements due to rounding.

13.	Segment Information

The Company has two operating segments: 1) Oilfield Technologies and Services and 2) Environmental Products and Services. Discrete financial information is available for each operating segment. Management of each operating segment reports to our Chief Executive Officer, the Company’s chief operating decision maker, who regularly evaluates income before income taxes as the measure to evaluate segment performance and to allocate resources. The accounting policies of each segment are the same as those described in the summary of significant accounting policies in Note 1. For the year ended December 31, 2016, the Company concluded that the Environmental Products and Services operating segment met the disclosure requirements defined by ASC 280, Segment Reporting , and that operating segment became a reportable segment.

F-22

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

The Company’s oilfield technologies and services segment manufactures and sells ceramic proppants on a global basis for use primarily in the hydraulic fracturing of natural gas and oil wells. All of the Company’s ceramic proppant products have similar pro duction processes and economic characteristics and are marketed predominantly to pressure pumping companies that perform hydraulic fracturing for major oil and gas companies. The Company’s manufacturing facilities also produce ceramic pellets for use in v arious industrial technology applications, including but not limited to casting and milling. This segment also promotes increased production and Estimated Ultimate Recovery (“EUR”) of oil and natural gas by providing industry leading technology to Design, Build, and Optimize the Frac ^TM . Through our wholly-owned subsidiary StrataGen, Inc., we sell one of the most widely used fracture stimulation software under the brand FracPro ^® and provide fracture design and consulting services to oil and natural gas E&P companies under the brand StrataGen.

Our environmental products and services segment is intended to protect operators’ assets, minimize environmental risks, and lower lease operating expense (“LOE”). AGPI, a wholly-owned subsidiary of ours, provides spill prevention, containment and countermeasure systems for the oil and gas industry. AGPI uses proprietary technology designed to enable its clients to extend the life of their storage assets, reduce the potential for hydrocarbon spills and provide containment of stored materials.

Summarized financial information for the Company’s operating segments for the three-year period ended December 31, 2016 is shown in the following tables. Intersegment sales are not material.

	Oilfield Technologies and Services			Environmental Products and Services			Total
	($ in thousands)
2016
Revenue from external customers	$	89,351		$	13,700		$	103,051
Loss before income taxes		(128,128	)		(3,080	)		(131,208	)
Total assets		709,180			14,277			723,457
Capital expenditures, net		7,008			(160	)		6,848
Depreciation and amortization		46,871			1,580			48,451
2015
Revenue from external customers	$	257,373		$	22,201		$	279,574
Loss before income taxes		(151,772	)		(11,977	)		(163,749	)
Total assets		817,845			18,524			836,369
Capital expenditures, net		62,996			(249	)		62,747
Depreciation and amortization		52,451			2,006			54,457
2014
Revenue from external customers	$	617,233		$	31,092		$	648,325
Income (loss) before income taxes		94,019			(1,148	)		92,871
Total assets		899,709			34,517			934,226
Capital expenditures, net		160,820			649			161,469
Depreciation and amortization		48,361			2,499			50,860

Geographic Information

Long-lived assets, consisting of net property, plant and equipment and other long-term assets, as of December 31 in the United States and other countries are as follows:

	2016		2015		2014
Long-lived assets:
United States	$	489,374	$	531,518	$	561,109
International		10,241		12,320		18,052
Total	$	499,615	$	543,838	$	579,161

F-23

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

Revenues outside the United States accounted for 34%, 29% and 24% of the Company’s revenues for 2016, 2015 and 2014, respectively. Revenues for the years ended December 31 in the United States, Canada and other countries are a s follows:

	2016		2015		2014
Revenues:
United States	$	67,609	$	199,187	$	491,004
Canada		7,460		33,614		73,092
Other international		27,982		46,773		84,229
Total	$	103,051	$	279,574	$	648,325

Sales to Customers

The following schedule presents customers, primarily from the oilfield technologies and services segment, from whom the Company derived 10% or more of total revenues for the years ended December 31:

	Major Customers
	A			B			C
2016		—			20.4	%		11.1	%
2015		10.7	%		26.9	%		—
2014		22.4	%		29.9	%		—

14.	Benefit Plans

The Company has defined contribution savings and profit sharing plans pursuant to Section 401(k) of the Internal Revenue Code. Benefit costs recognized as expense under these plans consisted of the following for the years ended December 31:

	2016		2015		2014
Contributions:
Profit sharing	$	—	$	—	$	2,337
Savings		939		1,547		1,849
	$	939	$	1,547	$	4,186

All contributions to the plans are 100% participant directed. Participants are allowed to invest up to 20% of contributions in the Company’s Common Stock.

15.	Commitments

In January 2011, the Company entered into an agreement with one of the Company’s existing suppliers to purchase from the supplier at least 70 percent of the annual kaolin requirements for the Eufaula plant at specified contract prices. The term of the agreement was three years, with options to extend for an additional six years. In May 2012, the agreement was amended to require the Company to purchase from the supplier at least 50 percent of the annual kaolin requirements for the Eufaula, Alabama plant at specified contract prices for the remainder of 2012 and the ensuing five calendar years. The agreement has options to extend the term for an additional three years. For the years ended December 31, 2016, 2015 and 2014, the Company purchased from the supplier $968, $2,380 and $2,263, respectively, of kaolin under the agreement.

In January 2003, the Company entered into a mining agreement with a contractor to provide kaolin for the Company’s McIntyre plant at specified contract prices, from lands owned or leased by either the Company or the contractor. The term of the agreement, which commenced on January 1, 2003, and remains in effect until such time as all Company-owned minerals have been depleted, previously required the Company to accept delivery from the contractor of at least 80 percent of the McIntyre plant’s annual kaolin requirements. In 2006, the Company’s plant in Toomsboro, Georgia commenced operations and became part of this agreement. In November 2015, the agreement was amended to require the Company to accept delivery from the contractor of 100 percent of the annual kaolin requirements for the plants in McIntyre and Toomsboro. For the years ended December 31, 2016, 2015 and 2014, the Company purchased $1,196, $3,245 and $14,823, respectively, of kaolin under the agreement.

F-24

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

In July 2011 , the Company entered into an agreement with a supplier to provide hydro sized sand for the Company’s Marshfield, Wisconsin plant at a specified contract price. The term of the agreement was five years commencing on July 30, 2011 and required the Company to purchase a minimum of 40,000 tons and 100,000 tons of hydro sized sand during 2011 and 2012, respectively. Effective January 30, 2012, the agreement was amended and requires the Company to purchase a minimum of 150,000 tons of hydro sized sand annually during 2012 and 2013 and a minimum of 350,000 tons of hydro sized sand in 2014, all at a stated contract price. There were no purchase commitments required during 2015 or through the end of the agreement. For the years ended December 31, 2016, 2015 and 2014, the Company purchased $0, $3,997, and $6,922, respectively, of sand under this agreement.

In May 2012, the Company entered into a supply agreement with a contractor to provide kaolin for the Company’s manufacturing plant in Millen, Georgia at specified contract prices, from lands owned or leased by either the Company or the contractor. The term of the agreement, which commenced in July 2014, has an initial term of five years with options to extend for an additional five years and requires the Company to accept delivery from the contractor of at least 50 percent of the Millen plant’s annual kaolin requirements. For the years ended December 31, 2016, 2015 and 2014, the Company purchased $0, $561 and $1,465, respectively, of kaolin under this agreement.

In October 2014, the Company entered into an agreement with a supplier to mine kaolin and process into a slurry for the Company’s manufacturing plant in Millen, Georgia at specified contract prices. The term of the agreement was five years with automatic two (2) year extensions and requires the Company to source at least 50 percent of the Millen plant’s annual slurry requirement from the supplier. For the years ended December 31, 2016, 2015 and 2014, the Company purchased $0, $1,300 and $577, respectively, of slurry under this agreement.

In November 2014, the Company entered into an agreement with a supplier to provide frac sand for the Company’s Marshfield, Wisconsin plant at a specified contract price. The term of the agreement, which commenced on November 13, 2014, remains in effect until the specified sand is depleted and required the Company to purchase a minimum of 300,000 tons of frac sand during 2015 and 400,000 tons of frac sand for each year thereafter. Effective October 12, 2015, the Company entered into a Letter Agreement with the supplier resulting in the adjustment of required annual minimum purchased tons of frac sand to 123,203 and 116,599 for years 2015 and 2016, respectively. On July 21, 2016, the Company entered into a Letter Agreement with the supplier which removed the required annual minimum purchased tons of frac sand for 2016. The minimum frac sand purchase requirements of 400,000 tons for years 2017 and thereafter until the specified sand is depleted remains unchanged. For the year ended December 31, 2016 and 2015, the Company purchased $252 and $1,751, respectively, of frac sand under this agreement.

The Company has entered into a lease agreement dated November 1, 2008 with the Development Authority of Wilkinson County (the “Wilkinson County Development Authority”) and a lease agreement dated November 1, 2012 with the Development Authority of Jenkins County (the “Jenkins County Development Authority” and together with the Wilkinson County Development Authority, the “Development Authorities”) each in the State of Georgia. Pursuant to the 2008 agreement, the Wilkinson County Development Authority holds the title to the real and personal property of the Company's McIntyre and Toomsboro manufacturing facilities and leases the facilities to the Company for an annual rental fee of $50 per year through November 1, 2017, and includes a Company renewal option to extend through November 1, 2021. Pursuant to the 2012 agreement, the Jenkins County Development Authority holds title to the real estate and personal property of the Company’s Millen, Georgia manufacturing facility, and leases the facility to the Company until the tenth anniversary of completion of the final phase of the facility. At any time prior to the scheduled termination of either lease, the Company has the option to terminate the lease and purchase the property for a nominal fee plus the payment of any rent payable through the balance of the lease term. Furthermore, the Company has security interests in the titles held by the Development Authorities. The Company has also entered into a Memorandum of Understanding (the “MOU”) with the Development Authorities and other local agencies, under which the Company receives tax incentives in exchange for its commitment to invest in the county and increase employment. The MOU with the Jenkins County Development Authority also requires the Company to pay an administrative payment of $50 per year during the term of the Millen lease. The Company is required to achieve certain employment levels in order to retain its tax incentives. In the event the Company does not meet the agreed-upon employment targets or the MOU is otherwise terminated, the Company would be subjected to additional property taxes annually. Based on adverse economic conditions beyond the Company’s control that negatively impacted employment levels, a notice dated December 1, 2015 sent by the Company to the Development Authority of Jenkins County declared a force majeure, which suspended employment levels defined in the original agreement and preserved tax incentives until further notification of the restart of plant operations. The suspension period defined in the amended agreement cannot extend beyond January 1, 2021. Based on adverse economic conditions beyond the Company’s control that negatively impacted employment levels, a notice dated February 1, 2016 sent by the Company to the Development Authority of Wilkinson County declared a force majeure, which suspended employment levels defined in the original agreement and preserved tax incentives until further notification of the restart of plant operations. The Development

F-25

CARBO CERAMICS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS––(Continued)

($ in thousands, except per share data)

Authority of Jenkins County and the Development Authority of Wilkinson County has not challenged the Company’s declaring a force majeure. The pro perties subject to these lease agreements are included in Property, Plant and Equipment (net book value of $289,154 at December 31, 2016) in the accompanying consolidated financial statements.

16.	Employment Agreements

The Company has an employment agreement through December 31, 2017 with its President and Chief Executive Officer. The agreement provides for an annual base salary and incentive bonus. If the President and Chief Executive Officer is terminated early without cause, the Company will be obligated to pay two years base salary and a prorated incentive bonus. Under the agreement, the timing of the payment of severance obligations to the President in the event of the termination of his employment under certain circumstances has been conformed so that a portion of such obligations will be payable in a lump sum, with the remainder of the obligations to be paid over an 18 month period. The agreement also contains a two-year non-competition covenant that would become effective upon termination for any reason. The employment agreement extends automatically for successive one-year periods without prior written notice.

17.	Foreign Currencies

As of December 31, 2016, the Company’s net investment that is subject to foreign currency fluctuations totaled $15,710, and the Company has recorded a cumulative foreign currency translation loss of $34,326, all related to Russia. This cumulative translation loss is included in and is the only component of accumulated other comprehensive loss within shareholders’ equity. During 2014 and continuing into 2015 and 2016, the value of the Russian Ruble significantly declined relative to the U.S. dollar for which the financial impact on the Company’s net assets in Russia is included in other comprehensive income and the cumulative foreign currency translation loss noted above. No income tax benefits have been recorded on these losses as a result of the uncertainty about recoverability of the related deferred income tax benefits.

18.	Legal Proceedings and Regulatory Matters

The Company is subject to legal proceedings, claims and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, management does not expect that the ultimate costs to resolve these matters will have a material adverse effect on the Company’s consolidated financial position, results of operations, or cash flows.

19.	Subsequent Events

In January 2017, the Company awarded the following:

297,685 shares of restricted stock to certain employees. The fair value of the stock award on the date of grant totaled $3,066, which will be recognized as expense, less actual forfeitures as they occur, on a straight-line basis over the three-year vesting period.

147,950 units of phantom shares to certain employees. The fair value of the phantom shares on the date of grant totaled $1,524. Compensation expense for these shares will be recognized over the three-year vesting period. The amount of compensation expense recognized each period will be based on the fair value of the Company’s common stock at the end of each period.

In January 2017, the Company repaid $3,250 under its Amended Credit Agreement.

F-26

Exhibit Index

3.1		Restated Certificate of Incorporation of CARBO Ceramics Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 10-Q filed for the period ending June 30, 2012)
3.2		Second Amended and Restated By-Laws of CARBO Ceramics Inc. (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K Current Report filed July 17, 2013)
4.1		Form of Common Stock Certificate of CARBO Ceramics Inc. (incorporated by reference to Exhibit 4.1 of the Registrant’s Form S-1 Registration Statement No. 333-1884 filed July 19, 1996)
4.2		Certificate of Designations of Series A Preferred Stock (incorporated by reference to Exhibit 2 of the Registrant’s Form 8-A12B Registration Statement No. 001-15903 filed February 26, 2002)
**10.1		Amended and Restated Mining Agreement dated as of November 30, 2015 between CARBO Ceramics Inc. and Arcilla Mining & Land Co. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2015)
10.2		Addendum to Mining Agreement dated as of November 10, 2009 between CARBO Ceramics Inc. and Arcilla Mining & Land Co. (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2010)
*10.3		Second Amended and Restated Employment Agreement dated effective as of January 1, 2012, by and between CARBO Ceramics Inc. and Gary A. Kolstad (incorporated by reference to Exhibit 10.8 of the Registrant’s Form 10-K filed for the period ending December 31, 2011)
*10.4		Third Amended and Restated Employment Agreement dated effective as of December 16, 2014, by and between CARBO Ceramics Inc. and Gary A. Kolstad (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 10-K filed for the period ending December 31, 2014)
*10.5		Fourth Amended and Restated Employment Agreement dated as of March 15, 2016, by and between CARBO Ceramics Inc. and Gary A. Kolstad (incorporated by reference to Exhibit 10.6 of the Registrant’s Form 10-Q filed for the period ending March 31, 2016)
10.6		Proppant Supply Agreement dated as of August 28, 2008 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended September 30, 2008)
10.7		Amendment No. 1 to Proppant Supply Agreement dated as of February 28, 2011 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2011)
10.8		Side Letter to Proppant Supply Agreement dated as of August 26, 2011 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended September 30, 2011)
10.9		Amendment No. 3 to Proppant Supply Agreement dated as of March 24, 2014 by and between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2014)
10.10		Amendment No. 4 to Proppant Supply Agreement dated as of September 25, 2015 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended September 30, 2015)
**10.11		Amendment No. 5 to Proppant Supply Agreement dated as of September 25, 2015 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.10 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2015)
10.12		Amendment No. 6 to Proppant Supply Agreement dated as of April 30, 2016 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2016)
10.13		Promissory Note between CARBO Ceramics Inc. and Williams C. Morris (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2016)
10.14		Promissory Note between CARBO Ceramics Inc. and Robert S. Rubin (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2016)
**10.15		Master Purchase Agreement for Goods and Services dated as of January 18, 2017 between CARBO Ceramics Inc. and Halliburton Energy Services, Inc.
10.16		Lease Agreement dated as of November 1, 2008 between the Development Authority of Wilkinson County and CARBO Ceramics Inc. (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K Current Report filed December 30, 2008)
10.17		Option Agreement dated as of November 1, 2008 between the Development Authority of Wilkinson County and CARBO Ceramics Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K Current Report filed December 30, 2008)

10.18		Lease Agreement dated as of November 1, 2012 between the Development Authority of Jenkins County and CARBO Ceramics Inc. (incorporated by reference to Exhibit 10.9 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2012)
*10.19		CARBO Ceramics Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K Current Report filed May 21, 2009)
*10.20		2014 CARBO Ceramics Inc. Omnibus Incentive Plan (incorporated by reference to Appendix A of the Registrant’s Definitive Proxy Statement on Schedule 14A filed April 2, 2014)
*10.21		Form of Officer Restricted Stock Award Agreement for Omnibus Incentive Plan (incorporated by reference to Exhibit 10.20 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2010)
*10.22		Form of Amended and Restated Officer Restricted Stock Award Agreement for Omnibus Incentive Plan (incorporated by reference to Exhibit 10.12 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2013)
*10.23		Form of Non-Employee Director Restricted Stock Award Agreement for Omnibus Incentive Plan (incorporated by reference to Exhibit 10.21 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2010)
*10.24		Form of Amended and Restated Non-Employee Director Restricted Stock Award Agreement for Omnibus Incentive Plan (incorporated by reference to Exhibit 10.14 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2013)
10.25		Form of Performance-Based Cash Award Agreement for 2014 CARBO Ceramics Inc. Omnibus Incentive Plan (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2015)
*10.26		Description of Annual Non-Employee Director Stock Grants (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2010)
*10.27		Description of Modification to Annual Non-Employee Director Stock Grants (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2011)
*10.28		Description of Modification to the Annual Non-Employee Director Stock Grants (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2012)
*10.29		Description of Modification to Annual Non-Employee Director Stock Grants (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2013)
*10.30		Description of Modification to Annual Non-Employee Director Stock Grants (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2014)
*10.31		CARBO Ceramics Inc. Omnibus Incentive Plan Annual Incentive Arrangement (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K Current Report filed January 21, 2010)
*10.32		CARBO Ceramics Inc. 2014 Omnibus Incentive Plan Annual Incentive Arrangement (incorporated by reference to Exhibit 10.24 of the Registrant’s Form 10-K filed for the period ending December 31, 2014)
10.33		Office Lease dated as of January 20, 2009 between I-10 EC Corridor #2 Limited Partnership and CARBO Ceramics Inc. (incorporated by reference to Exhibit 10.27 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2009)
10.34		First Amendment to Lease dated as of January 15, 2010 between I-10 EC Corridor #2 Limited Partnership and CARBO Ceramics Inc. (incorporated by reference to Exhibit 10.28 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2009)
10.35		Second Amendment to Lease dated as of March 1, 2015 between I-10 EC Corridor #2 Limited Partnership and CARBO Ceramics Inc. (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2015)
10.36		Credit Agreement, dated as of January 29, 2010, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K Current Report filed February 4, 2010)
10.37		Amendment No. 1, dated as of March 5, 2012, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K Current Report filed March 6, 2012)
10.38		Amendment No. 2 to Credit Agreement, dated as of July 25, 2013, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2013)
10.39		Amendment No. 3 to Credit Agreement, dated as of October 31, 2014, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended September 30, 2014)

10.40		Amendment No. 4 to Credit Agreement, dated as of July 27, 2015, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2015)
10.41		Amendment No. 5 to Credit Agreement, dated as of September 14, 2015, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended September 30, 2015)
10.42		Amendment No. 6 to Credit Agreement, dated as of February 26, 2016, among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.37 of the Registrant’s Form 10-K Annual Report for the year ended December 31, 2015)
10.43		Agreement and Amendment No. 7 to the Credit Agreement, dated as of April 27, 2016, by and among CARBO Ceramics Inc., as borrower, Wells Fargo Bank, National Association, as administrative agent, issuing lender and swing line lender, and the lenders named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2016)
10.44		Amended and Restated Pledge and Security Agreement, dated as of April 27, 2016, by and between CARBO Ceramics Inc., as borrower and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2016)
10.45		Patent and Trademark Security Agreement dated as of April 27, 2016 by and among CARBO Ceramics Inc., as borrower, certain Material Domestic Subsidiaries of the Borrower and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2016)
10.46		Waiver Agreement dated as of April 27, 2016, by and among CARBO Ceramics Inc., as borrower, certain Lenders parties thereto and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2016)
10.47		Guaranty Agreement dated as of April 27, 2016, by and among certain Guarantors of CARBO Ceramics Inc. thereto and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.5 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2016)
10.48		Security Agreement, dated July 27, 2015, among CARBO Ceramics Inc., as borrower and Wells Fargo Bank, National Association, as administrative agent (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2015)
*10.49		Form of Change in Control Severance Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended March 31, 2012)
10.50		Sales Agreement between CARBO Ceramics Inc. and Cowen and Company, LLC, dated July 28, 2016 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K Current Report filed July 28, 2016)
*10.51		Summary of Initial Compensation Terms for John R. Bakht (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q Quarterly Report for the quarter ended June 30, 2015)
21		Subsidiaries
23		Consent of Independent Registered Public Accounting Firm
31.1		Rule 13a-14(a)/15d-14(a) Certification by Gary A. Kolstad
31.2		Rule 13a-14(a)/15d-14(a) Certification by Ernesto Bautista III
32		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95		Mine Safety Disclosure
101		The following financial information from the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, formatted in XBRL: (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Comprehensive (Loss) Income; (iv) Consolidated Statements of Shareholders’ Equity; (v) Consolidated Statements of Cash Flows; and (vi) Notes to the Consolidated Financial Statements.

*	Management contract or compensatory plan or arrangement filed as an exhibit pursuant to Item 15(b) of the requirements for an Annual Report on Form 10-K.

**	Pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, confidential portions of these exhibits have been omitted and filed separately with the Securities and Exchange Commission pursuant to a request for confidential treatment.

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Confidential portions of this exhibit have been omitted and filed separately with the Securities and Exchange Commission under a confidential treatment request. The redacted terms have been marked in this exhibit at the appropriate place with “XXX” .

MASTER PURCHASE AGREEMENT FOR GOODS AND SERVICES

THIS MASTER PURCHASE AGREEMENT FOR GOODS AND SERVICES (“Agreement”) is made between Halliburton Energy Services, Inc., a Delaware corporation with a principal place of business at 3000 N. Sam Houston Pkwy E Houston, TX 77302, USA (“Halliburton”) and CARBO CERAMICS INC , a Delaware corporation, with a principal place of business at 575 North Dairy Ashford, Suite 300, Houston, Texas 77079 (“Seller”). The term “Party” shall mean either Seller or Halliburton and the term “Parties” shall mean both Seller and Halliburton.

For and in consideration of the payment of money and delivery of Goods or Services and other good and valuable consideration in hand paid, the receipt and sufficiency of which are hereby mutually acknowledged by the Parties,

The PARTIES hereby agree as follows:

Article I SCOPE OF AGREEMENT

1.1

Initial Term of Agreement. This Agreement is effective on the date of the last signature by the authorized representative(s) of the Parties (“Effective Date”) and shall continue in effect for four (4) years thereafter (“Initial Term”), unless earlier terminated in accordance with the provisions of this Agreement. The term of each Purchase Order issued under this Agreement is stated therein. The Parties hereby agree that after the Initial Term, this Agreement may be renewed for up to one additional four (4) year term (a “Renewal Term”) upon written renewal notice from Halliburton to Seller at any time prior to or on the expiration of the Initial Term in Halliburton’s sole and absolute discretion. The Initial Term and any Renewal Term shall be referred to herein as the “Term.”

1.2	No Minimum Purchase Requirement. HALLIBURTON IS NOT BOUND TO PURCHASE ANY GOODS OR SERVICES UNDER THIS AGREEMENT. THIS AGREEMENT DOES NOT OBLIGATE HALLIBURTON TO ANY MINIMUM OR EXCLUSIVE PURCHASE REQUIREMENT.

1.3

Geographical Scope of Agreement. The provisions of this Agreement apply to the United States of America (“USA”) and countries outside the United States as may be identified in any Affiliate Addendum. Country specific provisions, which control over the terms and conditions of this Agreement, shall be contained within any Affiliate Addendum executed in connection herewith. Except as may otherwise be expressly provided for herein, in the event of any inconsistency between the terms of this Agreement and any other communication between the parties, the terms and conditions of this Agreement shall control and prevail.

1.4	Services at Halliburton Facilities. To the extent that Services under this Agreement are to be provided at Halliburton locations or Halliburton customer locations, the Parties shall execute, and attach as an Exhibit hereto, an applicable Halliburton Policies Exhibit.

1.5

Well Site Services. To the extent that Services are to be provided at a well site, the Parties shall execute, and attach as an Exhibit hereto, Halliburton’s standard WELLSITE SERVICES RISK ALLOCATION terms and conditions. In the event of any conflict, the Parties agree that the terms and conditions of the WELLSITE SERVICES RISK ALLOCATION Exhibit shall control.

Article II DEFINITIONS

For purposes of this Agreement, the following terms have the meanings specified or referred to below:

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

2.1

Affiliate. The term “Affiliate” shall mean any company, corporation or other entity controlled by, in control of or under common control with one of the Parties to the Agreement. For purposes of this definition, “control” means the ownership, legally or beneficially, directly or indirectly, of more than fifty percent (50%) of the voting shares or fifty percent (50%) of the assets of any company or corporation.

2.2

Applicable Law. The term “Applicable Law” shall mean, without limitation, any law, statute, rule, regulation, order, or ordinance of the United States, or any state, municipality or political subdivision thereof, where any Goods or Services are provided hereunder as well as the law of any legal jurisdiction, including but not limited to any sovereign country, any state, province or other political subdivision or court thereof, any governmental agency, or authority of any country, including, without limitation, laws and regulations pertaining to import, export, re-export, anti-corruption labor, wages, hours, equal opportunity and other conditions of employment, the environment, and safety, where: (a) any Work is performed or Services are provided; or (b) either of the Parties or any Affiliate of a Party who executes an Affiliate Addendum under this Agreement is located. In the event of any conflict, the laws of the United States shall control.

2.3

Background Intellectual Property. The term “Background Intellectual Property” shall mean all Intellectual Property owned by or licensed to a Party prior to the performance of services under this Agreement. Each Party shall retain all ownership and/or interest in its Background Intellectual Property.

2.4

Breach. The term “Breach” shall mean: (a) any failure to perform or comply with, any covenant, obligation, warranty, or other provision of this Agreement; or (b) a written declaration or objective manifestation of intent or inability by a Party to fail to perform or comply with any such warranty, covenant, obligation or other provision of this Agreement.

2.5	CBI Protection Law. The term “CBI Protection Law” shall mean any Applicable Law that provides protection from public disclosure of information deemed by the owner or possessor to be confidential business information, trade secret and/or otherwise proprietary and not generally known to the public.

2.6	Conflict Minerals and DRC Conflict Free. The terms “Conflict Minerals” and “DRC Conflict Free” have the meanings ascribed to such terms in the rules and regulations of the U.S. Securities and Exchange Commission promulgated under Section 13(p) of the Securities Exchange Act of 1934, as amended.

2.7	Consequential Damages. The term “Consequential Damages” shall mean any damages arising from, or calculated by, the loss of business opportunity, loss of profit, loss of production, loss of data, loss of use of hardware, economic loss of use of software, indirect, special, or incidental damage.

2.7.1

The Parties agree that logistical expenses associated with the replacement of Seller’s Goods in connection with any contract remedy or termination do not constitute Consequential Damages and are specifically excluded from the foregoing definition of Consequential Damages.

2.7.2

Damages awarded to a third party based on a claim of infringement misappropriation or misuse under the terms of the Confidentiality, Patents, Copyrights, Trademarks and Trade Secrets, Non-Infringement, Warranty, or Indemnity provisions of the Agreement shall not be deemed to be Consequential Damages and are specifically excluded from the foregoing definition of Consequential Damages.

2.8

Denied Sales. The term “Denied Sales” shall mean Purchase Orders or written requests (including email) by Halliburton for Goods listed on Seller’s then-current Pricing Schedule (which Purchase Orders or written requests are issued in good faith on reasonable terms not less favorable to the Seller than those set forth in this

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Agreement) that are rejected by Seller or not fulfilled by Seller in breach of its contractual obligations, and in substitution for such Goods, as a result of such rejection or breach by Seller, Halliburton subsequently purchases similar products from third party for the same project.

2.9	Documentation. The term “Documentation” shall refer to both electronic and written materials supporting the terms of a specific transaction .

2.10

EDI. The term “EDI” shall mean “Electronic Data Interchange” and shall refer to any interchange of data through the Halliburton Supplier Network or by other digital or electronic means which is intended to effectuate binding purchase and sale transactions and to facilitate the processing of any purchase order, work order, service order, invoice or payment in a manner authorized by Halliburton that is otherwise consistent with the terms and conditions of this Agreement.

2.11

Health, Safety and Environment. The term “Health, Safety and Environment” or “HSE” shall refer to any matter arising from or under any Applicable Law relating to health, safety, or the environment, including but not limited to those Applicable Laws concerning pollution, protection of the environment, the use, storage, handling, treatment, management, discharge or disposal of hazardous or toxic materials, substances or wastes, the environmental content of goods or products, the regulation of chemical substances or products, industrial hygiene, or worker or occupational safety or health.

2.12

HSE Information. The term “HSE Information” shall refer to information about the content, ingredients, characteristics (including but not limited to hazard and ecotoxicity characteristics), performance, or use of Seller’s Goods or Services that is required by Halliburton in order to enable Halliburton to comply with any Applicable Laws relating to health, safety, or the environment, or that otherwise is requested by Halliburton pursuant to this Agreement in connection with Halliburton’s compliance with any such Applicable Laws.

2.13	Goods. The terms “Good” or “Goods” shall refer to the goods furnished pursuant to this Agreement, any Purchase Order transaction pursuant to this Agreement, or as otherwise agreed by the Parties.

2.14	Halliburton Supplier Network. The term “Halliburton Supplier Network” or “HSN” shall refer to the internet enabled Purchase Order and Invoice processing site maintained by Halliburton for any authorized user.

2.15

Halliburton Trademarks. The term “Halliburton Trademarks” shall refer to the mark “HALLIBURTON” and any other trademark, logo, or service mark in which Halliburton or an Affiliate of Halliburton has any rights as either: (a) identified by Halliburton or an Affiliate of Halliburton in public filings and registrations in the United States and elsewhere throughout the world, whether acquired by purchase, registration, and/or application; or (b) through use in commerce in the United States or elsewhere throughout the world.

2.16

Information. The term “Information” shall include but is not limited to all data, designs, drawings, specifications, and other information in any form whatsoever, revealed or disclosed in any form or manner to Seller by Halliburton, including but not limited to information relating to Halliburton’s past, present, and future research, development, business activities, proprietary products, materials, services, and other technical information which Seller may utilize in providing Goods to Halliburton, whether the Information is written, oral, electronic, visual, graphic, photographic, observational, or otherwise. The term “Information” also includes all documents produced or created by Seller which relate to the Goods provided by Seller to Halliburton.

2.17

Intellectual Property. The term “Intellectual Property” shall mean all confidential or proprietary information or rights, including inventions, ideas, trade secrets, computer programs, formulae, industrial processes, business plans and strategy, data, materials, know-how, patents, design patents, patent and design applications,

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

registered designs, copyrights, trademarks and all similar results of intellectual effort, whether developed, owned by or licensed to a Party .

2.18

Invoices. The term “Invoices” whether referring to paper or electronic invoices, will refer to authorized submissions of requests for payment that contain the following information, to the extent applicable: Purchase Order Number or FI Requisition Form Number, this Agreement Number, Item Number, description of items, quantities, unit prices and extended totals. Invoices, including electronic invoices, will contain a separate line item for transaction taxes if applicable.

2.19	NWA. The term “NWA” shall refer to the map titled US NWA Map on Schedule A and its associated regions, attached hereto.

2.20	Product and Services Warranty. The term “Product and Services Warranty” shall refer to Seller’s warranties associated with the provision of any Goods or Services hereunder.

2.21

Purchase Order. The term “Purchase Order” shall mean the document or digital electronic data transaction setting forth Halliburton’s requirements as to the Goods or Services. The Purchase Order will specify the type of Goods or Services, provide details of quantity and quality, price, delivery time, reference any applicable Services and Products Pricing Exhibit and include the appropriate Agreement Number. A valid Purchase Order may be written or electronic in form.

2.22	Services. The term “Services” shall mean the services and associated deliverables furnished under this Agreement, whether pursuant to a Purchase Order under this Agreement, or as otherwise agreed to by the Parties.

2.23

Services and Products Pricing Exhibit. A “Services and Products Pricing Exhibit” may be attached from time to time to this Agreement and be incorporated herein by reference. The Services and Products Pricing Exhibit, if attached, will define the scope of work, reference applicable specifications, and set forth the pricing and rates applicable to the goods or services to be provided. The Services and Products Pricing Exhibit may also set forth specific terms and conditions of purchase and sale applicable to individual services and products, as well as a description of either the price to be charged for such Goods or Services or the means by which such price may be determined through the Purchase Order acceptance process. Any Services and Products Pricing Exhibit issued under this Agreement will reference this Agreement by Agreement Number.

2.24	Work. The term “Work” shall mean the Goods, Services and any other deliverables described in and furnished under this Agreement.

Article III OBLIGATIONS OF THE PARTIES

3.1	Purpose of Agreement. The Parties agree that Seller or its Affiliates may provide Goods or Services to Halliburton and its Affiliates in accordance with all of the requirements of this Agreement. Such purchases may be effectuated through a Purchase Order issued by Halliburton.

3.2

Master Agreement. All purchases of the Goods or Services described in any Services and Products Pricing Exhibit or Purchase Order issued under this Agreement by Halliburton and its Affiliates are governed by the terms and conditions of this Agreement as of the Effective Date of this Agreement except as otherwise agreed by the Parties in connection with any Purchase Order, Affiliate Addendum or Exhibit to this Agreement. Halliburton and Seller object to any and all additions, exceptions or changes to these terms, whether contained in any printed form of Halliburton, Seller or elsewhere, unless approved by both parties in writing. Any terms and conditions on Halliburton’s or Seller’s internet site, attached to an invoice, contained in a proposal or

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

report, and/or Purchase Order acknowledgments will be null and void and are of no lega l effect on the parties.

3.3

Agreement Supersedes other Agreements among Parties and Affiliates. Except for any ongoing obligations existing under a prior agreement (including but not limited to indemnity, warranty, audit, confidentiality, outstanding deliveries under purchase orders or payments under any purchase orders, and obligations not extinguished by Exhibit A), this Agreement supersedes any and all prior Agreements, Services and Products Pricing Exhibits and any Purchase Orders, any and all prior or contemporaneous agreements, amendments, negotiations or understandings with respect to any Goods or Services identified in any Services and Products Pricing Exhibit or Purchase Order issued under this Agreement with respect to the subject matter of this Agreement. Goods or Services referenced or purchased under this Agreement shall be made available to Halliburton and its Affiliates at the prices agreed to between the Parties.

3.4

Changes. Subject to the agreement of both Parties, Halliburton may make changes or additions to any specifications, instructions for work, method of shipment or packing, or place of delivery in a Purchase Order, such changes must be documented by a designated Halliburton Procurement representative. If any such change causes an increase or decrease in the cost of or the time required for supply of the Goods or Services, upon mutual written agreement of the Parties, the Purchase Order will be modified accordingly. Any claim by Seller for an adjustment must be asserted in writing by Seller to Halliburton within thirty (30) days after Seller’s receipt of notification of the change. SUBSTITUTIONS OR CHANGES IN QUANTITIES OR SPECIFICATIONS BY SELLER, INCLUDING BUT NOT LIMITED TO CHANGES IN PART OR OTHER NUMBERS, MAY NOT BE MADE WITHOUT HALLIBURTON’S PRIOR WRITTEN APPROVAL.

3.5	Restrictions and Purchase Requirements. Seller and Halliburton or any of their Affiliates shall reference this Agreement by Agreement Number for any purchases hereunder unless an approved digital information exchange or other approved electronic method is used.

3.6

Affiliate Addenda and Orders by Affiliates. Where permitted by law, Halliburton Affiliates may order Goods or Services under this Agreement from Seller and/or Seller’s Affiliates by issuing a Purchase Order that references this Agreement by Agreement Number. Prior to ordering or supplying any Goods or Services each Affiliate will execute a written Affiliate Addendum that: (a) is signed by the Parties; (b) incorporates the terms of this Agreement; and (c) contains such other provisions as are reasonably necessary to comply with the applicable laws and regulations of the jurisdiction for which the Affiliate Addendum is issued. With respect to jurisdictions outside the United States with special legal or tax requirements, the Parties mutually agree to represent and warrant compliance with local Applicable Law in any such Affiliate Addendum. CHARGES FOR ORDERS BY HALLIBURTON AFFILIATES WILL BE INVOICED TO AND PAID BY SUCH AFFILIATES.

3.7

EDI. Any EDI transactions covered by this Agreement must be approved in advance by Halliburton and reference this Agreement by Agreement Number or reference any Affiliate Addendum executed in connection herewith. The pricing terms thereof shall be binding upon acceptance of the Purchase Order by Seller.

3.8

Independent Contractor. Seller is an independent contractor with respect to the Goods or Services supplied hereunder and neither Seller nor anyone engaged or employed by Seller shall be deemed for any purpose to be the agent or employee of Halliburton in the supply of such Goods or Services. Halliburton shall have no direction or control of Seller or its employees; Halliburton being solely interested in the results to be obtained.

3.9

Interpretation of Agreement. Each Party has participated fully in the review and revision of this Agreement. Any rule of construction to the effect that ambiguities are to be resolved against the drafting Party shall not apply in interpreting this Agreement. The language in this Agreement shall be interpreted in strict accordance

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

with the terms herein and not strictly for or against any Party.

3.10

Publication of Agreement. Except for the rights expressly enumerated herein, this Agreement does not grant, and shall not be construed as granting, any rights to Seller to use any Halliburton name or mark. Seller is not granted any right to use Halliburton’s name in connection with any proposals to third parties, disclose the existence or content of this Agreement (except as may be required by applicable law or regulation), or make any press release or any other public announcement regarding this Agreement absent the express prior written consent of Halliburton.

3.11

Invoices. Payment of Invoices will not constitute acceptance of the Goods or Services and will be subject to adjustment for shortages, defects, or other failure of Seller to meet the requirements of this Agreement, including, but not limited to, pricing or quantity errors arising in the course of a transaction.

3.12

Payment. Halliburton shall pay to Seller all undisputed amounts due on Invoices pursuant to the payment terms set forth in this Agreement or any Purchase Order issued hereunder. Unless otherwise agreed, payment to Seller shall be made only in the country where the Services were provided or where the Goods were shipped. Halliburton, at its sole discretion and upon prior internal approvals, may make payments in a country other than where the Services are provided or where the Goods were shipped subject to making the appropriate withholdings to Seller’s account as may be required by Applicable Laws or regulations.

3.13	Payment Term. All payments will be made within sixty (60) days from receipt of invoice. Invoice receipt date refers to the Accounts Payable entry date (the date the Invoice is permanently entered into Halliburton’s accounts payable system).

3.14

Pricing. Pricing shall be calculated in the manner agreed to by the Parties herein as may be indicated on the Services and Products Pricing Exhibit, and shall appear on each Purchase Order and Invoice. Acceptance of a Purchase Order and issuance of an Invoice against the Purchase Order shall constitute acceptance of the pricing terms contained therein. Under no circumstances may the Seller impose any additional amount (“gross up”) upon the fee for any taxes, fees, licenses or other charges. Halliburton shall not be required to pay such additional amounts and if paid may offset the payment against future Invoices without terminating or cancelling any Purchase Order or voiding any Warranty.

3.15

Limitation of Actions. S eller must submit any claims or disputes arising under this Agreement that relate to billing or payment to Halliburton in writing within one hundred twenty (120) days after invoice date, and Seller’s failure to do so will constitute a waiver by Seller of any legal or equitable rights with respect to the subject matter of the claim or dispute.

3.16	Withholding and Set Off.

3.16.1

Halliburton shall have the right to withhold any amounts that are the subject of a good faith dispute due on an Invoice until the dispute is resolved by the Parties without incurring any penalty and without cancelling this contract or any individual Purchase Order.

3.16.2

Any amounts payable to Seller hereunder may be offset by Halliburton in whole or in part on account and to the extent of any actual, liquidated (and then existing) claims for amounts which Seller may owe Halliburton with respect to the purchase of Goods or Services hereunder or by any Services and Products Pricing Exhibit or Purchase Orders issued under this Agreement.

3.17	Time of Performance. Seller acknowledges that the time periods for delivery specified in any Purchase Order are critical to Halliburton and that time is of the essence in performance of this Agreement for the avoidance of

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

substantial loss to Halliburton; provided, however that failure to meet the time period specified in a Purchase Order shall not entitle Halliburton to any damag es or remedies unless otherwise specifically provided for in this Agreement. Seller’s failure to meet any delivery date or delivery schedule for any reason other than Force Majeure or Halliburton delay without Halliburton’s prior written consent may const itute a material breach of Agreement or default hereunder. Provided that Halliburton gives Seller notice , and provided that Seller consents (such consent shall not be unreasonably withheld, delayed, or conditioned) Halliburton shall have the right to insp ect and request adequate assurances regarding any work hereunder in order to verify timeliness of performance and quality control. Halliburton and Seller will determine a mutually agreeable time for Halliburton’s visit which shall be within Seller’s hours of operation. In the event Halliburton is granted permission to visit Seller’s facilities as part of any adequate assurance agreed to by Seller, Halliburton shall remain liable for any injury, including death, to Halliburton employees while visiting Seller ’s locations, unless such injury is the direct result of Seller’s sole negligence. Prior to accessing Seller’s facilities, Halliburton employees and agents will undergo a reasonable safety instruction course provided by Seller’s authorized representative . Halliburton shall make all reasonable efforts to ensure that its employees and agents abide by Seller’s facility rules and regulations, which are to be communicated during the aforementioned safety instruction course, while on the premises of such Seller facilities. Halliburton employees will be accompanied by at least one (1) of Seller’s employees when visiting any Seller facility. For purposes of clarification, under this Section 3.16, any requests made by Halliburton to access Seller’s facilities shal l be limited to concerns relating to quality of the Goods or complications in delay. Should Halliburton have concerns pertaining to quality of the Goods or timeliness of any shipments, Halliburton shall in good faith attempt to first resolve the issue by w orking with Seller to resolve any concerns or issues. In the event of delay or reasonably anticipated delay from any cause other than Force Majeure or Halliburton delay as herein provided, Seller will immediately notify Halliburton in writing of the delay or anticipated delay, and its approximate duration. Seller will undertake to shorten or make up the delay by all reasonable and expeditious means. In the event that Halliburton reasonably determines that Seller will be unable to meet any delivery date(s) hereunder and such failure is the result of circumstances solely within the control of Seller, Halliburton shall have the right, as its sole and exclusive remedy, to either: (a) acquire the Work from a third-party source and charge Seller for reasonable c osts in excess of the Purchase Order price for such Work; or (b) pursue the remedies set forth in the provisions herein concerning Default and Termination for Cause , without the necessity of providing Seller a cure period. In the event that Halliburton rea sonably determines that Seller will be unable to meet any delivery date(s) hereunder and Halliburton acquires the Work from a third-party source, whereby Seller becomes obligated to reimburse the reasonable costs in excess of the Purchase Order price for s uch Work, Halliburton shall consider any reasonable sourcing alternative, for the Goods, identified in writing by Seller to Halliburton. Seller shall communicate such sourcing alternative to Halliburton in a timely manner so as to permit Halliburton’s avoi dance of penalties associated with Halliburton’s non-performance of work requiring the aforementioned Seller non-delivered Goods.

3.18

Inspection and Acceptance. Work delivered hereunder will be subject to final inspection and acceptance by Halliburton at the designated destination notwithstanding prior payment or inspection at Seller’s facility. Acceptance of any goods will not alter or affect the Seller’s Products and Services Warranties herein. If the Goods received do not conform to those ordered or if more than the quantity ordered is shipped, Halliburton may, at its option: (a) hold rejected Goods for Seller’s instructions and at Seller’s risk; (b) return them to Seller at Seller’s expense and require their correction; or (c) request an equitable price reduction for acceptance of non-conforming Goods. Halliburton shall inspect the Goods within thirty (30) days of receipt at Halliburton’s designated destination or within such time as may be specified in the applicable Purchase Order or Services and Products Pricing Exhibit. If Halliburton fails to inspect and approve the Goods within such thirty (30) day period or within such time as may be specified in the applicable Purchase Order or Services and Products Pricing Exhibit, the Goods shall be deemed to have been accepted as of the such thirtieth day after receipt at Halliburton’s designated destination.

3.19	Product and Service Warranties.

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

3.19.1

With respect to Goods furnished under this Agreement, Seller warrants that the Goods will: (a) strictly conform to the drawings, revision number, specifications, and sample (if any), and other requirements referred to herein or provided by Halliburton to Seller; (b) be of good quality and conform to any Seller published information regarding such Good; (c) meet or exceed ISO 13503-2 and ISO 13503-5 and any subsequent amendments to the API or ISO standards (for example API 19C and API 19D); (d) conform with all Applicable Laws; and (e) be free from defects in materials, performance, operation and workmanship for one hundred twenty (120) days from date of acceptance by Halliburton pursuant the clause related to Inspection and Acceptance herein, or any other period as agreed by the Parties.

3.19.2

In the event Seller is not the manufacturer of the Goods, Seller will obtain assignable warranties for the Goods from its vendors and suppliers, which it will pass-through or assign to Halliburton, and Seller will cooperate with Halliburton in the enforcement of such warranties. If a manufacturer’s warranty is not assignable, or no pass-through or assignment is made, then Seller will assume the responsibility of the warranty.

3.19.3

Seller will supply evidence satisfactory to Halliburton, of the origin, composition, manufacture, kind and quality of the Goods or Services upon request by Halliburton.

3.19.4

With respect to Services provided under this Agreement, Seller warrants and agrees that: (a) Seller’s work product will meet all quality and performance standards set forth in writing by Halliburton and will strictly comply with all performance obligations and deadlines contained therein; (b) Seller’s facilities, equipment, personnel, methods, operations and procedures are suitable for performance of the Services to be provided; and (c) Seller possesses all necessary expertise to perform the Services in compliance with all applicable specifications, standards and other requirements of this Agreement, any Services and Products Pricing Exhibit, Purchase Order, or required by Applicable Law.

3.19.5

At Halliburton’s request, Seller will correct any defects or deficiencies in its Work as soon as possible at no additional charge, and those corrections will be subject to acceptance or rejection by Halliburton. If Halliburton reasonably believes that the provision of Work has been so deficient that timely and proper correction is not feasible and Halliburton has notified Seller of such fact and provided a reasonable time for cure, Halliburton may (in addition to any other legal or equitable remedies available) immediately terminate the applicable Services and Products Pricing Exhibit or Purchase Order in whole or in part and/or remedy the deficiency itself (or utilize a third party to do so) and charge the Seller with the reasonable cost of correction. Such costs shall include removal, re-installation, and manufacturing value-added costs, including labor, access and shipping costs. Any such Product and Services Warranty work will be performed in a workmanlike manner in accordance with: (a) any specifications provided by Halliburton; (b) any Halliburton site requirements communicated to Seller; (c) generally accepted industry practices applicable to the Services; (d) all Applicable Laws; and (e) this Agreement. The Work provided under the Products and Services Warranty shall be warranted for a period of one hundred twenty (120) days from the date of acceptance by Halliburton. The foregoing shall be Halliburton’s exclusive remedy for a breach of the express warranties contained in this Article 3.19. Seller expressly disclaims all other warranties, express or implied, that may arise at law or otherwise , INCLUDING BUT NOT LIMITED TO THE WARRANTY OF FITNESS FOR ANY PARTICULAR PURPOSE AND THE WARRANTY OF MERCHANTABILITY. To the extent state law does not allow exclusion of implied warranties, the same are limited in duration to one year if applicable law allows such limitation.

3.19.6

The Parties agree that any expense associated with the repair or replacement of Seller’s Work in

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

connectio n with any remedy, termination, or warranty hereunder does not constitute Consequential Damage.

3.20

Audit.

3.20.1

Seller shall maintain, and shall cause its agents and subcontractors (if any) providing Goods or Services hereunder to maintain, books, records, and documents, to ensure accurate billing of any charges incurred as well as the quality of the Goods or Services provided under this Agreement.

3.20.2

Such records shall be retained for four (4) years after the expiration or termination of this Agreement. Records involving matters in litigation related to this Agreement shall be kept for one (1) year following the termination of litigation, including all appeals.

3.20.3

All such records shall be subject at reasonable times and upon reasonable prior notice, to examination, inspection, or audit by personnel authorized by Halliburton and/or any third party auditor designated by Halliburton. Except in the event of a good faith dispute between the Parties, such audits shall occur no more than twice per year, upon prior written request. Seller shall provide Halliburton with the requested documents or provide adequate and appropriate workspace at Seller’s facility in order to conduct such audits. During the four (4) year period after expiration or termination of the Agreement or one (1) year following litigation, delivery of and access to these items will be at no cost to Halliburton. In the event any such audit indicates inaccuracies, overbilling, or other violation of this Agreement, and any or all of such inaccuracies, overbilling, or other violation of this Agreement result in a cost to Halliburton, in addition to Halliburton’s rights to recovery of such costs, Seller shall be responsible for the reasonable costs associated with such audit.

3.20.4

If applicable, Seller shall incorporate the records retention and review requirements of this Article in agreements with its agents and subcontractors (if any) who or which will provide Work to Halliburton under this Agreement.

3.21	Title, Shipment, Risk of Loss and Supply Chain Security Programs.

3.21.1

Seller warrants clear title to the Work, free from any and all liens or other encumbrances until the Work is delivered.

3.21.2

At its expense and risk, Seller is responsible for properly packing Goods for transportation and safely and correctly stowing the Goods for transport on the vehicles designated by Halliburton at the Seller’s premises. Risk of loss will transfer to Halliburton as defined by Incoterm FCA (Seller’s delivery premises), Incoterm 2010, which requires the Seller to clear the Goods for export, provide a commercial invoice, packing list and comply with any Halliburton documentary instructions during the shipping process; Halliburton shall appoint onward movement. Customs Import Brokers will only be those appointed by Halliburton.

3.21.3

Seller is committed to Halliburton’s supply chain security and to compliance with the requirements of Halliburton’s Global Supply Chain Security programs, including specifically the requirements of U.S. Customs and Border Protection’s Customs - Trade Partnership Against Terrorism (C-TPAT) and European Union Authorized Economic Operator (AEO) programs, and where required by Halliburton, to international security programs to expand Halliburton’s supply chain security network worldwide. Seller hereby agrees, warrants and represents that throughout the term of this Agreement, all of the Seller’s shipments to Halliburton shall be performed exclusively by freight forwarders and customs brokers approved in advance in writing by Halliburton Global Logistics. Exceptions to this can only be

Page 9 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

made in writing by Halliburton Global Logistics Compliance.

3.22

Conflicts of Interest. Seller may not offer Halliburton’s employees any gifts, entertainment, or other favors of other than nominal value. Seller may not pay any commissions or fees or grant any rebates or other remuneration or monetary gratuity to any employee, agent, or representative of Halliburton.

3.23

Insurance Requirements. Seller agrees to provide and maintain the minimum coverages set forth in this Section, or as may otherwise be specified in this Agreement, for the Term of this Agreement by an insurer reasonably acceptable to Halliburton. Such policies shall name Halliburton as an additional insured, and shall be endorsed with a waiver of subrogation in favor of Halliburton. Prior to commencement of the Work, Seller agrees to provide Halliburton with a Certificate of Insurance evidencing such coverage and the above endorsements. Should Seller fail to provide or maintain such insurance, Halliburton may, at its election, either (1) obtain such coverage on Seller’s behalf and Seller shall immediately reimburse the reasonable costs of such insurance to Halliburton or (2) immediately terminate this Agreement. Seller shall maintain, at its own expense throughout the entire progress of the Work, minimum insurance as set forth herein: (a) Workmen’s Compensation – Statutory; (b) Employer’s Liability - $1,000,000 (c) Comprehensive General Liability (including Contractual Liability in all cases and Products Liability insurance where Seller is the manufacturer of the product(s)) - $2,000,000 Per Occurrence, Bodily Injury & Property Damage combined; (d) such other available insurance or increased limits as Halliburton may request. In addition, in the event that Seller provides Work at Halliburton’s facilities, Seller shall maintain Automobile Liability coverage at $2,000,000 per occurrence, Bodily Injury & Property Damage combined. Seller shall provide Halliburton with thirty (30) days’ written notice prior to the effective date of any cancellation or material change of Seller’s insurance.

3.24

Supplier Diversity. Halliburton is committed to utilizing small, woman, and minority owned suppliers. In an effort to comply with Halliburton’s contractual obligations to its customers, Halliburton may be required to report Seller’s company ownership status as a small, woman, or minority owned business if Seller’s headquarters are located in the United States. If Seller is considered a small, woman, or minority owned business, Seller hereby specifically consents to Halliburton’s disclosure of information demonstrating Seller’s status as a small, woman, or minority owned business to the extent required by Halliburton’s Customers or to the extent required by Halliburton Customer’s reporting or other disclosure obligations under Applicable Laws.

3.25

Program Management. Seller will designate an individual who will be primarily dedicated to the Halliburton account (the “Seller Account Representative”) who is reasonably acceptable to Halliburton. The Seller Account Representative: (a) will be the primary contact for Halliburton in dealing with Seller under this Agreement for the Goods or Services; (b) will have overall responsibility for managing and coordinating the delivery of the Goods or Services; (c) will meet regularly with Halliburton; (d) will facilitate performance assessments to determine how well Seller’s team delivered on Halliburton’s desired outcomes; and (e) will have the authority to make decisions with respect to actions to be taken by Seller or requests made by Halliburton in the ordinary course of day-to-day management of the Goods or Services in accordance with work to be provided under this Agreement. Seller Account Representative shall have no authority to amend the terms of this Agreement. Seller may change the Seller Account Representative upon thirty (30) days written notice to Halliburton. Commencing January 1, 2016 Halliburton and Seller agree to meet every four (4) months to discuss strategic initiatives.

3.26

Assignment and Subcontracting. Seller will not sell, assign, or transfer all or any part of this Agreement, or subcontract all or any part of Seller’s obligations hereunder, without the prior written consent of Halliburton, which consent will not be unreasonably withheld, delayed or conditioned. Halliburton’s approval of any such sale, assignment, transfer or subcontract will not relieve Seller from any obligations imposed upon Seller by this Agreement. Seller warrants and represents that any assignee or subcontractor shall comply with all

Page 10 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Applicable Laws and the Ethical Business Conduct requirements imposed by this Agreement and shall p romptly disclose any violations thereof.

Article IV COMPLIANCE AND RISK ALLOCATION

4.1

Force Majeure. In the event that either Party is prevented by Force Majeure from performing any of its obligations under this Agreement, any Services and Products Pricing Exhibit or any Purchase Order issued hereunder, the obligations which the Party is prevented from performing shall be suspended so long as the provisions of this Article 4.1 are met.

4.1.1

Force Majeure shall mean any act of God, weather or nature, or any act of government, or any other act or force where such occurrence could not reasonably have been foreseen at the time of entering into the applicable Purchase Order and could not reasonably have been avoided or overcome by the Party asserting benefit of this Article and shall include without limitation, hostilities, war, revolution, riots, act of terrorism, maritime border or boundary dispute, civil commotion, strike, labor disturbances, lock out or injunction, epidemic, quarantine, accident, fire, lightning, flood, wind storm, earthquake, explosion, blockade or embargo, lack of or failure of transportation facilities or any law, proclamation, regulation or ordinance, demand or requirement of any government or any government agency or agencies having or claiming to have jurisdiction over the Goods, Services or the Parties hereto. Notwithstanding the foregoing, neither mechanical nor electronic difficulties, unless such mechanical or electrical difficulties result from a Force Majeure event, shall be considered Force Majeure.

4.1.2

The Party which is prevented from performing its obligations by Force Majeure shall advise the other Party immediately of its inability to meet its obligations under any applicable Services and Products Pricing Exhibit or Purchase Order, specifying the Force Majeure and the estimated extent to which the Force Majeure event or conditions will impact performance and shall advise the other Party when such difficulty ceases. If either Party fails to give such advice in writing within seventy two (72) hours following the occurrence of the claimed Force Majeure event or condition, that Party may not claim Force Majeure as a defense or excuse of performance hereunder. The Party claiming a Force Majeure event or condition shall act diligently to remove or remedy such condition (but shall not be required to settle any labor dispute on unfavorable terms).

4.1.3

In the event of Force Majeure, Halliburton and Seller agree that, although performance of the obligations may be suspended, all Purchase Orders shall remain in full force pending the cessation of such Force Majeure, or termination of any applicable Purchase Order in accordance with the terms hereof or thereof.

4.1.4

Neither Party shall have any right to claim, and the other Party shall have no obligation to pay, additional compensation, costs, damages, or expenses incurred directly or indirectly as a result of any Force Majeure.

4.1.5

As soon as practicable, but in any event within no more than seventy-two (72) hours following the cessation of Force Majeure affecting Seller, Seller shall provide Halliburton with written details of the cessation of Force Majeure and Seller’s best reasonable estimates of its impact on the timing of Seller performance of its obligations.

4.1.6

In the event that any Force Majeure causes a delay of more than ten (10) days in filling a Purchase Order, Halliburton may terminate the Purchase Order without giving rise to any claim by Seller other than for Goods or Services delivered and accepted by Halliburton.

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

4.2

Compliance with Applicable Law. Seller warrants and represents that in conjunction with its performance under this Agreement, Seller will comply with all Applicable Law and that no Applicable Law has been violated in supplying Halliburton the Goods or Services. Without limitation, Seller agrees to hold Halliburton harmless from and indemnify Halliburton for any losses, expenses, costs and damages resulting from Seller’s breach of this warranty.

4.2.1

In circumstances in which Halliburton determines that it is necessary to disclose any Seller Confidential Information (as defined in Section 5.3) to a governmental entity to enable Halliburton to comply with any Applicable Law in connection with Halliburton’s business operations, including but not limited to HSE laws requiring disclosure of HSE Information, and Halliburton believes in good faith that such Seller Confidential Information will be protected from public disclosure pursuant to any CBI Protection Law, Halliburton will have the right to disclose the Seller Confidential Information to any such governmental entity. Halliburton shall have no obligation to notify Seller of any such disclosure.

4.2.2

In circumstances in which Halliburton determines that disclosure any Seller Confidential Information (as defined in Section 5.3) to a governmental entity, public-safety official, or emergency-response personnel is required by exigent circumstances—including but not limited to an emergency release of a hazardous substance obtained from Seller that creates an immediate threat to public health or the environment—Halliburton will have the right to disclose the Seller Confidential Information to any such governmental entity, public-safety official, or emergency-response personnel. Halliburton shall notify Seller of any such disclosure as soon as reasonably practicable.

4.2.3

To enable Halliburton to comply with any Applicable Law (pursuant to Section 4.2.1) or make disclosure as required by exigent circumstances (pursuant to Section 4.2.2), Halliburton may disclose the relevant Seller Confidential Information to its third-party consultants, contractors, attorneys, or other agents who have a need to know such Seller Confidential Information for those purposes and who are subject to obligations no less restrictive than this Agreement. Halliburton shall remain responsible for any unauthorized disclosures made by such parties.

4.3	Ethical Business Conduct. The following standards of conduct and legal requirements shall be observed both with respect to this Agreement and with respect to any Affiliate Addendum:

4.3.1

All dealings involving the relationship contemplated hereunder will be conducted in a fair manner with honesty and integrity, observing high standards of personal and business ethics.

4.3.2

Business books and records will be maintained in a proper, responsible and honest manner which will allow both Parties to comply with Applicable Law.

4.3.3

Seller warrants and represents that neither the Seller nor the Seller’s parent or subsidiary companies, Affiliates or any of their shareholders, subcontractors, members, managers, directors, officers, employees, independent contractors, subcontractors or agents: (a) has made or authorized or will make or authorize any offer, payment, promise to pay, any money, including kick-backs, or a gift, promise to give, or the giving of anything of value to any third party including, but not limited to, a government official, political party, party official, family member or representative of a state-owned enterprise, for the purpose of wrongfully influencing the recipient; obtaining or retaining business; or for securing or obtaining an improper business advantage; or (b) has taken or permitted or will take or permit any action to be taken, including an action in connection with the conduct of their business and the transactions contemplated under this Agreement, which would cause the Seller, Halliburton or any

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Halliburton Affiliates to be in violation of any applicable Anti-Bribery or Anti-Corruption Laws, including, where applicable, but not limited to, the United States Foreign Corrupt Practices Act of 1977, as amended; the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions and related implementing legislation; and all local equivalent laws in the countries in which business is conducted. The Seller f urther agrees that it will make no payment in any form to any government official on behalf of Halliburton for the purpose of expediting or securing the performance of a routine non-discretionary governmental duty or action (“Facilitating Payment”) without the prior written approval of Halliburton. For this purpose, email is considered written approval. Separate approval is required for each such Facilitating Payment.

4.3.4

Seller agrees that it will perform no act for or on behalf of Halliburton which would subject Halliburton to fines or penalties or loss of tax benefits for violation of United States anti-boycott laws.

4.3.5

Seller agrees that it will perform no act for or on behalf of Halliburton which would subject Halliburton to fines or penalties for violation of export controls or licensing requirements or trade sanctions including those of the United States to the extent that they apply.

4.3.6

The business relationship contemplated hereunder will be conducted in compliance with applicable antitrust and competition laws.

4.3.7

In case of conflict between the laws of the United States of America and the local laws in the countries where business is transacted, compliance with the laws of the United States of America will be given priority.

4.4	Import and Export Compliance.

4.4.1

Seller agrees that, when Seller is the Shipper of Record of any Work called for by a Purchase Order under this Agreement, Seller shall be solely responsible for required compliance with any applicable import and export laws and regulations, including any re-export laws in its supply of Work under this Agreement. When the Work (or any part thereof) is subject to export control laws and regulations imposed by a government, Seller will provide Halliburton with any and all information needed for Halliburton to comply with Applicable Law, including but not limited to, applicable Export Commodity Classification Numbers and harmonized Tariff Schedule Numbers, including certificates of manufacture in accordance with the origin rules imposed by governmental authorities. If any Work is eligible for preferential tax or tariff treatment (such as free trade or international agreement) Seller will provide Halliburton with the documentation required to participate in said treatment. Seller understands and acknowledges that Halliburton will rely on the information provided by Seller, including information bearing upon the determination as to whether any United States or foreign export or import license is required for the export of the supplied materials to the country of destination.

4.4.2

Seller shall advise Halliburton of the nationality and or country of allegiance of individuals assigned to projects involving intellectual property subject to treatment as “deemed exports” under the laws of the United States and any countries imposing similar requirements upon the Parties.

4.5

Taxes. Seller is responsible for all taxes legally imposed upon its business, including but not limited to taxes imposed upon its income, its personnel or its property. Such taxes are on Seller’s account. Where legally permitted and as required by Applicable Law, Seller is responsible for the collection and reporting of applicable transaction taxes such as sales, use, value added or similar taxes. Transaction taxes are in addition to established prices and shall be shown as a separate line item on the Invoice. If tax withholding is required by

Page 13 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Applicable Law, Halliburton will adhere to statutory tax withholding requirements with respect to payments to Seller. Such withholdings are on Seller’s account. Certif icates of withholding taxes shall be provided to Seller as soon as administratively possible.

4.6

Indemnification. SUBJECT TO THE WELL SITE SERVICES AGREEMENT, WHICH SHALL CONTROL ANY WORK BEING DONE ON LOCATION, EACH PARTY (THE “INDEMNITOR”) AGREES TO RELEASE, INDEMNIFY, DEFEND AND HOLD THE OTHER PARTY (THE “INDEMNITEE”), ITS OFFICERS, AGENTS, AND EMPLOYEES HARMLESS FROM ANY LOSS, COST, DAMAGE, PENALTY, FINE OR BODILY INJURY (INCLUDING DEATH) OF WHATSOEVER KIND OR NATURE TO THE EXTENT ARISING OUT OF OR INCIDENTAL TO INDEMNITOR’S NEGLIGENCE OR WILLFUL MISCONDUCT IN INDEMNITOR’S PERFORMANCE UNDER THIS AGREEMENT.

4.7

Pass-Through Indemnification. Seller shall be entitled to receive the full benefit of all indemnifications in its favor by reason of Seller’s contractual inclusion as an indemnitee from the entity for whom Halliburton is performing services and Halliburton cannot raise any claim against Seller for same.

4.8	Consequential Damages. NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, OR OTHER INCIDENTAL DAMAGES EXCEPT AS SPECIFIED ELSEWHERE IN THIS AGREEMENT.

Article V CONFIDENTIALITY AND INTELLECTUAL PROPERTY

5.1	Confidentiality of Agreement and Purchase and Sale Information. Seller shall not disclose any data, content or Information processed in the purchase and sale process, including but not limited to all Information contained in a Services and Products Pricing Exhibit, Purchase Order or Invoice.

5.2

Confidentiality of Halliburton Information. Halliburton Information that is disclosed or provided by Halliburton to Seller, and all Information produced or created by Seller and relating to Goods or Services provided by Seller to Halliburton will be held in strict confidence by Seller and may be used by Seller solely for the purposes of this Agreement. Furthermore, no such Information will be disclosed to any third party without the prior written consent of Halliburton and may be disclosed within Seller’s organization only on a need-to-know basis. Notwithstanding the foregoing, Seller shall not provide Halliburton information to any third party unless and until such third party has agreed in writing to confidentiality requirements with Seller at least as restrictive as those set forth herein.

5.3

Confidentiality of Seller Information. Seller’s Background Intellectual Property and certain Information produced or created by Seller and relating to Goods provided by Seller to Halliburton, including but not limited to the terms and conditions of this Agreement and all Exhibits, as well as any current or future Pricing Reports or Pricing Notices may be designated by Seller in writing as confidential, and will be treated and protected by Halliburton as confidential and will not be disclosed to any third party without the prior written consent of Seller with the exception of disclosures in accordance with Section 4.2.1, 4.2.2, and 4.2.3.

5.4

Disposition of Confidential Information. Within three (3) days after the termination of this Agreement or upon the request of Halliburton at any other time, Seller will immediately return to Halliburton any Information provided to, or produced or created by Seller for Halliburton in connection with this Agreement, including all copies of Information made by Seller. Seller may, upon obtaining prior written approval from Halliburton, satisfy this requirement by providing a written certification of destruction of such Confidential Information. Seller shall otherwise certify to Halliburton in writing that Seller has deleted Information from all electronic storage media on which it was placed by Seller. Seller will not publicize or disclose the existence,

Page 14 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

con tent, or scope of this Agreement to any third party by any means without obtaining the prior written consent of Halliburton. Seller shall not take any physical forms of Information from the Seller’s offices or worksites (or makes copies of them) without Ha lliburton’s prior written permission.

5.5

Exclusions. The foregoing obligations with respect to Confidential Information shall not apply to any Information obtained by Seller in connection with this Agreement which: (a) is publicly known or becomes publicly known through no fault of or disclosure by Seller; (b) is given to Seller by someone other than Halliburton as a matter of right and without restriction of disclosure; (c) was known to the Seller prior to receiving the Information from Halliburton; (d) is developed by Seller without reference to Halliburton’s Information; or (e) is legally compelled to be disclosed. If Seller receives a subpoena, order, notice, process or other legal process seeking disclosure of Halliburton’s Information, Seller shall promptly notify Halliburton in order to allow Halliburton the opportunity to oppose the order, notice, or process, or seek a protective order. If requested by Halliburton, Seller shall cooperate fully with Halliburton in contesting such disclosure. Except as such demand shall have been timely limited, quashed or extended, Seller may thereafter comply with such demand, but only to the extent required by law. Where Halliburton obtains a protective order, nothing in this Agreement shall be construed to authorize Seller to use in any manner or disclose Halliburton’s Information to parties other than such governmental or judicial agency or body or beyond the scope of the protective order. Disclosures that are made to Seller under this Agreement which are specific shall not be deemed to be within the foregoing exceptions merely because they were embraced by general disclosures that are either in the public domain or in the possession of Seller. In addition, any combination of features shall not be deemed to be within the foregoing exceptions merely because individual features are in the public domain or in the possession of Seller, but only if the combination itself and its principle of operations are in the public domain and in the possession of Seller.

5.6

Background Intellectual Property of Halliburton and Seller. To the extent that Halliburton’s Background Intellectual Property is required to permit Seller to supply Goods or Work under this Agreement, Halliburton grants Seller a non-exclusive, non-transferable, worldwide, royalty-free license to use Halliburton’s Background Intellectual Property for the sole purpose of providing Goods to Halliburton and its Affiliates under this Agreement. Such license shall run concurrent with and terminate with this Agreement. Seller grants Halliburton a non-exclusive, non-transferable, worldwide, royalty-free license to use Seller’s Background Intellectual Property solely to the extent required for, and for the sole purpose of, receiving Seller’s Goods and Services and incorporating them in their intended use (and/or for resale) by Halliburton.

5.7

Intellectual Property. Seller agrees to assign, and does hereby assign, to Halliburton all right, title and interest in any invention, idea, discovery, innovation, and/or other development (hereinafter “Invention”), patentable or not, that is made or conceived either solely by Seller or jointly by Seller with others exclusively in connection with the performance of this Agreement, except if such Invention relates substantially to Seller’s Background Intellectual Property. Seller will promptly disclose to Halliburton any such Invention that is made or conceived in connection with the performance of this Agreement, whether solely by the Seller or jointly by Seller with others, except if such Invention relates substantially to Seller’s Background Intellectual Property. Also in consideration of the payments made by Halliburton to Seller under this Agreement, Seller agrees to assign, and hereby assigns to Halliburton all rights, title and interest in any work of authorship that Seller writes or develops exclusively in connection with the performance of this Agreement, including any software, computer programs, drawings, designs, reports, computations, calculations, working papers, and documents of every kind, including all trade secret, patent and copyright rights relating thereto. Seller agrees to deliver any such software, computer programs, drawings, designs, reports, computations, calculations, working papers, and documents of every kind to Halliburton. Seller will, upon request by Halliburton, execute an assignment document to evidence the assignment to Halliburton of any patent, trade secret, copyright or other proprietary right in such Invention, and will do anything else reasonably necessary to enable Halliburton to perfect and protect its rights therein, including the execution of any documents deemed necessary or expedient by Halliburton in order to apply for, obtain, and maintain Letters Patent in the United States and/or foreign

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

countries for any such Invention. Seller agrees, at Halliburton’s sole expense, to cooperate fully with Halliburton or its nominee: (a) in the preparation, prosecution, and maintenance of patent applications and any resulting Letters Patent; and (b) in any litigation or administrative proceedings involving any of the foregoing.

5.8

No Right to Use the Halliburton Trademarks. Seller shall not use any Halliburton Trademarks, including the name “HALLIBURTON,” in any publication or public presentation without the prior written consent of Halliburton that is provided through a separate Trademark Licensing Agreement, which will be incorporated as part of this Agreement.

5.9

Use Rights to Intellectual Property. Except for the limited use rights expressly enumerated herein, this Agreement does not grant, and shall not be construed as granting, either Party a license or any rights under any of the other Party’s patent, trademark, copyright, or trade secret rights beyond that necessary for the purposes of this Agreement, or the granting of any right to use the other Party’s name in connection with any proposals to third parties.

5.10

Patents, Copyrights, Trademarks and Trade Secrets Non Infringement Warranty. Seller warrants, represents and covenants that the Goods or Services provided to Halliburton under this Agreement: (a) do not infringe directly or indirectly any patent, copyright, trademark, or other Intellectual Property interest of a third party; and (b) do not unlawfully include or use any trade secrets or other Intellectual Property of a third party. In relation to the provision of Goods or Services by Seller under this Agreement, Seller agrees to release, defend, and indemnify Halliburton and hold Halliburton harmless from and against any and all actions, claims, costs (including attorney fees and court costs), expenses, fines, losses, damages, and liabilities arising out of any alleged or actual patent, copyright, or trademark infringement, or any improper use or misappropriation of confidential information or other Intellectual Property. Except as provided in the foregoing, if the provision or use of any Goods or Services, or any part thereof, provided by Seller to Halliburton under this Agreement is held to constitute an infringement or unlawful use of any Intellectual Property, and the use or sale of the Goods or Services or any part thereof is enjoined, Seller will, at its own expense and as Halliburton’s sole and exclusive remedy for any damage or loss in connection therewith, either procure for Halliburton the right to continue utilizing the Goods or Services, replace the infringing Goods or Services with a non-infringing product or process that is acceptable to Halliburton, modify the Goods or Services so that the Goods or Services are no longer infringing, or, in the event the foregoing options are not possible, compensate Halliburton for all of Halliburton’s expenses resulting from the infringement. For purposes of this article, any provision of this agreement excluding liability for consequential or other incidental damages or limiting Seller’s liability in any way shall not apply.

Article VI DISPUTES

6.1

Termination of Agreement for Convenience. The Parties agree that Halliburton has the right to cancel any Purchase Order, or any part thereof for convenience, without cause or for any reason whatsoever. In the event of such cancellation or termination for convenience, Seller shall be entitled to payment for the Goods satisfactorily provided or shipped prior to the date of the cancellation, less any money previously paid to Seller. Upon tendering payment, Halliburton shall have the right to take possession of any materials or Goods whose purchase price was paid by Halliburton. Seller will not be entitled to any lost profit, lost revenue, lost business opportunity, logistics or transportation expense or any incidental, indirect, economic, consequential or other damages because of cancellation or termination for convenience. Halliburton may pay a restocking fee for any Goods which are returned, excluding a warranty and/or non-conformance claim, or cancelled not pursuant to a Halliburton customer cancelation.

6.2	Default and Termination for Cause. In the event of Seller’s: (a) Breach of this Agreement or default under

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

any provision of this Agreement and failure to cure such Breach or default within ten (10) days after notice from Halliburton;(b) bankruptcy, reorganization, r eceivership, insolvency, or making an assignment for the benefit of creditors; or (c) evidence of financial or organizational instability, Halliburton has the right, in addition to any rights or remedies it may have in law, in equity, or under this Agreeme nt, to immediately cancel this Agreement for cause by written notice to Seller. Upon termination by Halliburton as a result of Seller’s default hereunder, Seller will be liable to and will immediately reimburse Halliburton for all reasonable costs of any n ature, excluding Consequential Losses, in excess of the applicable price under this Agreement which may be incurred by Halliburton to effect completion of performance pursuant to this Agreement or any issued Purchase Orders thereunder.

6.3

Termination Services. Commencing at the delivery of any notice of termination through the effective date of termination thereof, Seller will provide to Halliburton reasonable cooperation, assistance and Services with the goal of allowing the Services to continue without interruption or adverse effect and to facilitate the orderly transition and migration of the Services to Halliburton or its designee. Seller shall charge Halliburton for termination Services on the basis of the prices set forth on any Services and Products Pricing Exhibit or Purchase Order, unless otherwise agreed to by Halliburton and Seller.

6.4

Dispute Resolution. Prior to trial or final judgment of any claim or dispute hereunder, upon the request of either Party, any claim or dispute arising hereunder shall be referred to mediation in Houston, Harris County, Texas. Each Party will be responsible for its own costs associated with such mediation, including attorneys’ fees, and one-half of any mediation fees.

6.5	Choice of Law. This Agreement shall be governed by the laws of the United States of America and the State of Texas, without regard to the United Nations Convention on the International Sale of Goods or other international treaty, rule or accord, and exclusive of conflict of laws principles.

6.6

Jurisdiction and Venue Selection. The Parties agree that venue for any judicial proceeding will be proper in Harris County, State of Texas, United States of America. The Parties hereby irrevocably submit to the exclusive jurisdiction of the federal and state courts located in Harris County, Texas for the resolution of any claim under this Agreement, and each Party agrees not to assert any defense to any suit, action or proceeding initiated by the other within Harris County based upon improper venue or inconvenient forum.

Article VII MISCELLANEOUS

7.1	Surviving Clauses. The provisions of this Agreement relating to Audit, Intellectual Property, Products and Services Warranty, Warranty Remedies, Compliance with Laws, Indemnity and Confidentiality will survive termination or expiration of this Agreement.

7.2

Notice. All notices provided or permitted under this Agreement must be in writing and may be served by: (a) depositing same in the United States mail, addressed to the party to be notified, postage prepaid, and registered or certified with return receipt requested; (b) delivering the same in person to such party; (c) prepaid overnight courier; or (d) facsimile copy transmission. Any such notice shall be conclusively deemed delivered when delivery is indicated on the receipt or other indicia of delivery by the email, facsimile, private messenger service, overnight courier service or the United States Postal Service (in the case of delivery by certified mail, return receipt requested) or when the intended recipient of any such notice refuses any such notice as indicated on the receipt or other indicia of delivery by email, private messenger service, overnight courier service or the United States Postal Service. For purposes of notice, the addresses of the Parties shall be follows:

Page 17 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Halliburton Energy Services, Inc.	Carbo Ceramics, Inc.
Attn: Halliburton Sand and Proppants Category Management	Attn: Don P. Conkle
Address: 3000 N Sam Houston Pkwy E Houston, TX 77032-3219	Address: Energy Center II, 575 N Dairy Ashford, Houston, Texas 77079
Phone: 281-871-5149	Phone: 281-921-6420
Email: Brian.McConn@Halliburton.com	Email: Don.Conkle@carboceramics.com

7.3

Entire Agreement. This Agreement and the Addenda, Schedules and Exhibits hereto (all of which shall reference this Agreement by number) as well as any Purchase Orders issued against this Agreement, shall constitute the entire Agreement between the Parties with respect to the Goods or Services ordered under this Agreement. Price terms applicable to particular transactions may be determined from the offer and acceptance of individual digital electronic Purchase Orders which reference this Agreement and reflect documented pricing terms. No amendment to this Agreement will be effective or binding upon the Parties unless set forth in writing and duly executed by each of the Parties. Transactional documentation evidencing an EDI transaction is explicitly made subject to the terms and conditions of this Agreement and may not modify or supplement any part of this Agreement in any way.

IN WITNESS WHEREOF , the Parties have caused this Master Purchase Agreement to be signed effective the date first shown above.

Halliburton Energy Services, Inc.

Carbo Ceramics, Inc

Signature:

/s/ David M. Adams

Signature:

/s/ Don P. Conkle

Printed Name:

David M. Adams

Printed Name:

Don P. Conkle

Title:

SVP Completion & Production

Title:

VP Marketing & Sales

Date: January 12, 2017

Date: January 5, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ James Brown

Printed Name:

James Brown

Title:

President WH

Date: January 16, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ Michael Hillman

Printed Name:

Michael Hillman

Title:

VP PM&L

Date:

January 18, 2017

Page 18 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

SERVICES AND PRODUCTS PRICING EXHIBIT A

This Exhibit A, Services and Products Pricing Exhibit, is subject to and incorporated in the Agreement No. 9610018283 executed by Halliburton Energy Services, Inc. (“Halliburton”) and Carbo Ceramics, Inc. (“Seller”) on the date of the last signature by the authorized representative(s) of the Parties (the “Agreement”).

Article I P RICING

1.1.

Pricing. The Parties recognize the importance that the pricing set forth herein be competitive in the market. Seller shall provide the Goods listed in this Exhibit A at the pricing specified in the tables below (the “Pricing Report”) commencing on the Effective Date of this Agreement unless otherwise agreed to in writing pursuant to Section 1.2 Price Adjustments. The Pricing Report shall contain base pricing which shall specifically exclude field trial pricing or bundled pricing. All prices and currency amounts specified in this Exhibit A are in United States Dollars (USD). The Pricing Report, and any prices specified on any Seller accepted Purchase Order over any period covered by this Agreement shall be pursuant to Section 1.1.3 Most Favored Nation, and honored for all deliveries under that Purchase Order, regardless of any subsequent price change.

Pricing Report:

[XXX]

1.1.1.

Purchase Order Pricing. The Parties agree that the pricing on each Purchase Order shall be the pricing established in the Pricing Report. No increase in price shall be made by any Purchase Order unless agreed to in writing by Seller and Halliburton prior to the issuance of such Purchase Order pursuant to Section 1.2 below. If Halliburton mistakenly issues a Purchase Order for a price which is higher than that specified in the Pricing Report or agreed to price per Section 1.2, Seller shall take all reasonable measures to inform Halliburton of the error. Seller shall refund any overcharges immediately upon demand by Halliburton.

1.1.2.

Other Pricing. Pricing for any Goods not listed on the Pricing Report shall be mutually agreed to by the Parties in writing prior to the issuance of any Purchase Order. If Halliburton makes changes to the technical requirements or specifications, Seller shall submit a justified request for any price adjustment to reflect the technical changes. Said price adjustment must be agreed to by Halliburton in writing in advance.

1.1.3.

Most Favored Nation. Seller represents and warrants that Halliburton is a preferred purchaser and, accordingly, the prices for any Goods paid by Halliburton shall be lower than or the lowest price (excluding one-off geographic inventory liquidations, field trial pricing and bundled pricing) charged by Seller for the same Goods or similar Goods in the same Geographic Region to any current or future Seller customer directly or indirectly in the oil and gas industry, (“Most Favored Nation”), unless a combination of Halliburton, its Affiliates and its “Current Project Customers” (as defined below) do not issue Purchase Orders to Seller equating to [XXX] of Halliburton’s [XXX]

(“MFN Requirement”). [XXX]

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Geographic Region means each of the geographic regions as more specifically defined o n Schedule A attached hereto, as each of such regions is applied and defined in the ordinary course of Seller’s business. In the event such MFN Requirement is not met then Seller’s exclusive remedy is its release from the Most Favored Nation obligations. [XXX]

In addition, in the event Halliburton markets or sells any third party products under a Halliburton name in competition with Seller’s Goods listed in Pricing Report Table of Section 1.1, Halliburton will no longer be entitled to Most Favored Nation pricing under this Agreement regardless of the percentage purchases Halliburton is making from Seller. For purposes of this paragraph, “Current Project Customers” means any customer utilizing any of Seller’s ceramic proppant listed on Exhibit E attached hereto for a well which is pumped by Halliburton, regardless of who has invoiced the customer for such proppant.

1.1.4.

Pricing Discounts. Pricing for any Goods purchased in the USA shall be discounted from the pricing set forth herein. Such discount shall be based on Seller’s percentage of Halliburton’s [XXX] cumulative purchases of such Goods or similar goods in the USA from all sellers on a semiannual basis, as follows:

[XXX]

1.2.

Price Adjustments. The Parties agree that the prices set forth in the Pricing Table above may not account for certain market fluctuations and long-term industry trends affected by certain factors that could result in pricing adjustments. Such factors include, but are not limited to, the price per barrel of oil, technological developments in the oil and gas industry and increases in production efficiencies. Accordingly, the Parties agree to review pricing every [XXX] beginning [XXX] in order to determine MFN qualification and forward percent discount pricing. Parties may also meet on an as-needed basis to take into account fluctuations or trends not contemplated by this Exhibit. The Parties agree to negotiate any necessary price adjustments in good faith and if such adjustment is agreed to by the Parties the agreed to price may be effectuated by a Purchase Order.

Article II PRODUCT SUPPLY

2.1.

Supply Continuity. The Parties agree throughout the term of this Agreement that they shall meet as reasonably necessary to discuss and review trends in the oil and gas industry. To further the course of the transactions contemplated herein, Halliburton encourages Seller to provide Halliburton with new proposals and other new business opportunities.

2.2.

Preferential Supply . Seller agrees, commencing on the Effective Date and so long as Halliburton is entitled to Most Favored Nation pricing and issues Purchase Orders to Seller each calendar year, to supply Goods to Halliburton, on an “as available” basis and preferentially to any other of Seller’s customers.

Page 20 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Article III [XXX]

Article IV RIGHT OF FIRST REFUSAL

4.1.

Right of First Refusal for New Technology. So long as Halliburton remains in compliance with the MFN Requirement for a consecutive period of [XXX] , Seller shall make reasonable best efforts, prior to or at least contemporaneously with the availability of any new products or services to be offered for their initial commercial sale by Seller to a third party, whether generally to the public or to any party or person, including any new Intellectual Property developed by Seller (regardless of when such development began) to be offered for their initial commercial sale by Seller to a third party, (collectively, “New Technology”), send written notice (a “Technology Notice”) to Halliburton of the need to execute a Non-Disclosure Agreement regarding such New Technology. Upon execution of such Non-Disclosure Agreement, Seller shall make disclosures containing the details of its New Technology. Halliburton shall have the right to enter into exclusive negotiations for the purchase of, distribution of or other commercial arrangement or disposition with respect to the New Technology (“Technology Right”). Halliburton shall have [XXX] days after receipt of the Technology Notice to exercise the Technology Right (“Notice Period”). Halliburton may exercise the Technology Right by sending written notice to Seller of its intent to exercise the right (“Exercise Notice”) during such Notice Period. Upon receipt of the Exercise Notice by Seller, the Parties shall enter into good-faith negotiations as provided for herein, with a goal to finalize the mutually agreeable terms, in each Party’s sole discretion, within [XXX] days of the receipt of the Exercise Notice by Seller. Halliburton shall be deemed to have not exercised the Technology Right if an Exercise Notice is not sent during the Notice Period, and Seller shall then be free to market such New Technology to another party. If Halliburton and Seller mutually agree in writing to the terms and conditions of the sale of Seller’s New Technology, Seller shall sell such Seller’s New Technology to Halliburton pursuant to the terms mutually agreed upon in the written agreement. Seller shall not be required by this Section 4.1 to disclose information it determines in its sole discretion to be competitively sensitive or otherwise detrimental to Seller. For the avoidance of doubt this Section 4.1 does not apply to a sale of substantially all of the assets of Seller, a transfer or assignment of assets in connection with a bankruptcy, financing, liquidation or other reorganization, or any other exigent circumstances or corporate transactions, including but not limited to any joint developments between Seller and any third party, each as determined by Seller in its sole discretion.

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

4.2.

Preferred Manufacturer/Supplier for New Technology. [XXX] Halliburton and Seller shall meet to discuss Halliburton’s needs for the development, manufacturing or supply of proppant technology and related products and services (“New Proppant Supply Needs”). The Parties agree that all discussions and information relating to Halliburton’s New Proppant Supply Needs shall be maintained in confidence pursuant to Article V of t he Agreement. When Halliburton sends written notice to Seller containing Halliburton’s New Proppant Supply Needs, including a summary thereof (a “Supply Notice”), thereafter Seller shall have the right to enter into negotiations for the manufacture of, or other commercial arrangement or disposition with respect to Halliburton’s New Proppant Supply Needs (“Supply Right”). Seller shall have [XXX] days after receipt of the Supply Notice to exercise the Supply Right (“Notice Period”). Seller may exercise th e Supply Right by sending written notice to Halliburton of its intent to exercise the right (“Exercise Notice”) during such Notice Period. Upon receipt of the Exercise Notice by Halliburton, the Parties shall enter into exclusive good faith negotiations a s to the New Proppant Supply Needs to Seller on agreeable terms, in each Party’s sole discretion, for a period of [XXX] days. Seller shall be deemed to have not exercised the Supply Right if an Exercise Notice is not sent during the Notice Period. Halli burton shall not be required by this Section 4.2 to disclose information it determines in its sole discretion to be competitively sensitive or otherwise detrimental to Halliburton.

Halliburton Energy Services, Inc.

Carbo Ceramics, Inc

Signature:

/s/ David M. Adams

Signature:

/s/ Don P. Conkle

Printed Name:

David M. Adams

Printed Name:

Don P. Conkle

Title:

SVP Completion & Production

Title:

VP Marketing & Sales

Date: January 12, 2017

Date: January 5, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ James Brown

Printed Name:

James Brown

Title:

President WH

Date: January 16, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ Michael Hillman

Printed Name:

Michael Hillman

Title:

VP PM&L

Date:

January 18, 2017

Page 22 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

EXHIBIT B

FOR ONSITE SERVICE PROVIDERS

Halliburton Policies

The following Halliburton Policies are corporate policies that Seller, its employees, agents and contractors are required to abide by while performing the Services for Halliburton. Seller agrees to provide copies of and communicate the following to its employees, agents and contractors that will be performing the Services. Failure to abide by or violation of the following shall result in the immediate termination of the Agreement by Halliburton pursuant to the Article entitled “Default and Termination for Cause” within the Agreement.

1. HALLIBURTON DRUG, ALCOHOL & SUBSTANCE ABUSE POLICY

PREAMBLE: This policy establishes Halliburton’s compliance goals on drug, alcohol and substance abuse in the workplace and on the use of drug, alcohol and substance abuse testing. The policy forms a template from which Business Units, in conjunction with local laws and local regulations, are to develop Business Unit specific practices and procedures.

PURPOSE: This document establishes the policy of Halliburton, its Business Units, divisions, subsidiaries and affiliates (collectively “Halliburton”) concerning drugs, alcohol and substance abuse in the workplace in order to maintain a drug free work environment safe for employees and conducive to high work standards.

SCOPE: Covered Persons: Employees and Contractors while on Customer property or Halliburton property shall, at a minimum, be required to comply with the provisions of this policy as well as any applicable business unit or regional alcohol and controlled substances business practices, applicable Customer policy, local law and local regulatory agency policy.

POLICY:

Summary: This policy prohibits the use of controlled or Prohibited Substances by “Covered Persons” at any time and prohibits and/or regulates the use of alcohol and intoxicating beverages by Covered Persons while engaged in Halliburton activities. This policy will be administered and enforced through and in concert with applicable subsidiaries and divisions on a country by country basis in regard to alcohol and intoxicating beverages and local law or regulatory agency policy. In cases where this policy is in conflict with local law or regulatory agency policy, local laws and local regulatory agency policy will be adhered to.

Substances Restricted by This Policy:

1. Illegal drugs including inhalants and “designer drugs.” The use, sale or attempted sale, possession, distribution or attempted distribution, manufacture or attempted manufacture, transfer or attempted transfer, and transportation or attempted transportation of illegal drugs including inhalants and designer drugs (collectively, “Prohibited Substances”) is strictly prohibited at any time. The detectable presence of Prohibited Substances at a level determined by Halliburton and consistent with local law or local regulatory guidelines is prohibited. Medications requiring prescriptions from a duly licensed medical practitioner are also prohibited unless the use by the Covered Persons is consistent with the written instructions in a valid written prescription in the Covered Person’s name.

2. Alcohol or Intoxicating Beverages. The use, sale or attempted sale, possession, distribution or attempted distribution, manufacture or attempted manufacture, transfer or attempted transfer, and transportation or attempted transportation of alcohol or intoxicating beverages while On Duty is prohibited. The detection of alcohol or intoxicating beverages at a level of .02 BAC (% Blood Alcohol Concentration) or above while on duty will result in disciplinary action as described in the Drugs of Abuse and Alcohol Testing Procedures Manual (contractual requirements, local law or local regulatory guidelines may supersede minimum discipline procedures).

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

T he prohibitions above apply to all Covered Persons while On Duty, or while in, on, or using Halliburton Property or Customer Property. It is the Covered Persons’ responsibility to determine by consulting with their health care provider whether a prescripti on medication would affect their performance. Covered Persons in safety sensitive positions who have been prescribed medication that could affect the safe performance of their duties are required to notify their Halliburton supervisor prior to performing a ny hazardous or dangerous tasks. Failure by a Covered Person to notify his/her Halliburton supervisor shall be a violation of this policy.

Prohibitions: Operating any Customer Property motor vehicle or vessel or Halliburton Property motor vehicle or vessel under the influence of Prohibited Substances, alcohol or intoxicating beverage is strictly prohibited. Reporting to work under the influence of any Prohibited Substances, alcohol or intoxicating beverage is strictly prohibited.

Prohibited Substances, alcohol or intoxicating beverages are strictly prohibited at all Halliburton facilities. An appropriate officer of Halliburton or business unit may in certain cases, grant exception regarding restrictions on alcohol or intoxicating beverages usage; however, no exception may be granted regarding the operation of motor vehicles or vessels owned or otherwise controlled by Halliburton.

Customer Policy: It is Halliburton’s policy to support Customer’s policies regarding drugs, alcohol, and substance abuse. Covered Persons shall comply with Customer’s policies regarding drugs, alcohol and substance abuse while on customer property.

Testing: All testing of Covered Persons done as a part of this policy must conform to Halliburton procedures, applicable Halliburton policy, local laws and local regulatory agency guidelines. Where permitted by local law, or local regulatory guidelines, the following drug and alcohol tests may be conducted by or on behalf of Halliburton or its Customers: pre-employment, Customer requested tests, post incident, random, sweep, reasonable cause, rehabilitation and other tests as mandated by local regulatory agencies and law. Collections and testing will be conducted only by qualified personnel and as applicable regulations and laws allow.

The presence of a Prohibited Substance, alcohol or intoxicating beverage in a Covered Person’s urine, blood, or breath is a violation of this policy. Halliburton reserves the right to require on an unannounced basis, collection of a second specimen in the event the first specimen has been determined to be invalid for testing purposes. Confirmed positive test results indicating the presence of a Prohibited Substance, alcohol or intoxicating beverage in a Covered Person’s urine, blood or breath are grounds for immediate disciplinary action up to and including immediate termination.

Tampering by a Covered Person with a specimen or using a substance or device designed to falsify test results is a violation of this policy which may result in termination and bar re-employment or bar consideration for employment. Refusal to provide an adequate sample, within a reasonable time frame, for testing under the terms of this policy is a violation of this policy, which may result in disciplinary action, up to and including termination or bar consideration for employment. Covered Person may request that the sample that was originally submitted be re-tested by an approved laboratory at his or her own expense. If a confirmed positive test result is reversed due to the results of the re-test, Halliburton will reimburse the Covered Person for all testing costs. A Covered Person will be given the opportunity to have test results explained to the Covered Person in confidence. The Covered Person, upon written request, may obtain copies of all information and records related to his or her test.

Confidentiality: Halliburton treats all testing information as confidential, save and except any requirements of Halliburton to disclose any testing information under applicable Customer policy, local law and/or local regulatory agency policy.

Searches: All searches of Customer Property or Halliburton Property must conform to any Halliburton procedures, applicable Customer policy, and any local regulations and/or local law. As a condition of providing services, employment or continued employment by Halliburton, Covered Persons consent to searches. Employees may be requested to sign forms documenting this consent; however, a signed consent form is not required, for continued

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

employment consent. Contractors, and other Covered Persons while on Halliburton Property or on Customer Property, shall be required to compl y with the provisions of this policy and Customer requirements, when applicable, in order to provide products and/or services to Halliburton. Where Employees are covered by specific Customer requirements or a site labor agreement, those published procedure s will be followed.

Discipline: Violation of this policy may result in disciplinary action up to and including dismissal pursuant to local law or local regulatory policy.

Rehabilitation/Re-employment: Procedures vary depending on location. Employees are encouraged to seek rehabilitation; Halliburton support and eligibility for rehire are dependent on local regulatory policy and local employment law.

DEFINITIONS

“ Contractors ” shall mean any person, including that person’s employees, agents and representatives, who supplies products and/or services to Halliburton or to a Customer at the request of Halliburton.

“ Covered Person ” shall have the meaning set forth in the second paragraph of this policy.

“ Customer ” shall mean any customer of Halliburton.

“ Employees ” shall mean all present (including temporary and casual) and prospective employees of Halliburton.

“ Prohibited Substances ” shall have the meaning set forth in the first paragraph under Substances Restricted by this Policy.

“ Property ” shall mean all owned, operated, controlled or leased real and personal property of Halliburton or Customers.

“ On Duty ” shall mean: (a) When being compensated on an hourly or salaried basis for work related activities and/or (b) When engaged in activity, the principal purpose of which is the furtherance of Halliburton’s business.

2. HALLIBURTON HARASSMENT POLICY

Code of Business Conduct: Harassment Date: May 21, 2003 Exhibit No.: 3-0016

PURPOSE : This Policy establishes and communicates Halliburton’s policy prohibiting harassment.

Halliburton believes that all Employees should be treated with dignity and respect. It is the policy of Halliburton to provide a work environment which is free from harassment. Halliburton prohibits all forms of harassment of its Employees by Directors and other Employees, including supervisors or other members of management.

It is the responsibility of every Employee and Director to cooperate in reaching this goal. Harassment is considered a serious act of misconduct and may subject an Employee to disciplinary action including immediate discharge. As used in this Policy, the term “harassment” includes sexual, racial, ethnic, and other forms of harassment, including harassment based upon disability.

Some examples of what may be considered harassment, depending on the facts and circumstances, include the following:

1. Verbal or Written Harassment. For example, unwelcome or derogatory comments regarding a person’s race, color, sex, religion, ancestry, ethnic heritage, mental or physical disability, age, appearance or other classification protected by Law; threats of physical harm; or the distribution, including by email or other electronic media, or display in any Halliburton work area, of written or graphic material having such effects.

2. Physical Harassment. For example, hitting, pushing or other aggressive physical contact, touching or threats to take such action, or inappropriate gestures.

3. Sexual Harassment. For example, unwelcome sexual conduct, whether verbal or physical, including, among other

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

things, sexual advances, demands for sexual favors, or other verbal or physical conduct of a sexual nature, whether or not it was designed or intended to promote an intimate relationship.

4. Racial Harassment. For example, unwelcome or derogatory comments regarding a person’s race, color, ancestry or ethnic heritage; or distribution, including email or other electronic media, or display in any Halliburton work area, of written or graphic material having such effects.

It is not considered harassment of any sort for supervisors and other members of management to enforce job performance and standards of conduct in a fair and consistent manner.

Employees who violate this Policy against harassment will be subject to disciplinary action at the discretion of Halliburton, up to and including suspension and termination of employment. Supervisors and other members of management who fail to report violations by others of which they become aware, also will be subject to disciplinary action, up to and including suspension and termination of employment.

Procedure:

Any Employee who believes she or he is being harassed should consider telling the offending party that she or he objects to that conduct. This often solves the problem. However, if an Employee is not comfortable confronting the offending party (or if the offending party’s unwelcome conduct continues), the Employee should advise his or her immediate supervisor of the offending conduct. If the Employee is more comfortable discussing the issue with someone other than his or her immediate supervisor, or if the immediate supervisor has not taken what the Employee regards as appropriate action to solve the problem, the Employee should contact a Human Resources or Law Department representative.

All such complaints will be investigated promptly and discreetly. Employees will not suffer adverse consequences as a result of reporting any act of harassment, including sexual harassment.

3. BACKGROUND INVESTIGATIONS-US

Reference No.: 4-31111-US Date: June 22, 2009

PURPOSE: This Policy defines the requirements for conducting background investigations and obtaining background investigative reports.

SCOPE: This Policy applies to Halliburton operations in the U.S.

POLICY: Halliburton Human Resources is responsible for oversight and implementation of this Policy and will coordinate with Procurement in order to establish procedures consistent with this Policy for background investigations in connection with the retention of Agency Employees and Independent Contractors. Halliburton conducts background investigations on prospective Regular, Part-time, Temporary, Co-op Employees, International Assignees, and Interns considered for employment in the United States. Halliburton conducts background investigations on Independent Contractors performing services for Halliburton for thirty (30) or more consecutive days. Halliburton also conducts background investigations or causes employers of Agency Employees to conduct background investigations on Agency Employees performing services for Halliburton for thirty (30) or more consecutive days.

No prospective Regular, Part-time, Temporary, or Co-op Employee, Intern, Agency employee or Independent Contractor may commence employment with or begin performing work for Halliburton in the U.S. until background investigative report is completed and the individual is granted a “meets criteria” disposition as required by this Policy.

Halliburton conducts background investigations on employees promoted into positions of substantial authority as set forth in Corporate Business Practice 4-17033 and Code of Business Conduct Policy 3-00001. Halliburton reserves the right to take discretionary employment action against employees with background investigative report results that do

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not meet Halliburton requirements. Such background investigations are performed by a third party consumer reporting agency retained by Halliburton, and such agency pr ovides Halliburton with background investigative reports. The type of information that may be collected by the agency includes information pertaining to an individual’s criminal history, motor vehicle record history, past employment, education, credit hist ory, and personal and professional references.

Halliburton conducts background investigative reports in compliance with applicable laws and statutes. Consent from individuals is obtained as required by such laws.

Terms expressed in Corporate Policy 3-1302, Application of Human Resources Policies and Business Practices, are incorporated by reference into this Policy.

DEFINITIONS

Regular Employee – an employee hired for an indefinite period who regularly works the equivalent of 40 or more hours per week.

Part-time Employee – an employee hired for an indefinite period, but who regularly works less than 40 hours per week.

Temporary Employee – a person hired to work for Halliburton on Halliburton payroll, for a limited period of time not to exceed six (6) months of continuous employment. May include individuals employed by Halliburton in-house agencies to work on temporary assignments for Halliburton for limited periods of time. Agents, agency employees, distributors, Sellers, independent contractors and other similar third parties are not considered Temporary Employees.

Agency Employee – Also referred to as a leased or contract employee. A person provided by an external staffing agency who performs office, technical or other services for Halliburton for a specific, limited period of time not to exceed twelve (12) months of continuous service. Staffing agencies are required to have a contractual agreement with Halliburton under which a charge, or mark up, is payable for each agency employee provided. The staffing agency is responsible for paying the employee and withholding the appropriate taxes as dictated by local regulations.

Co-op Employee – A Temporary Employee who is currently seeking a baccalaureate, master’s or doctoral degree and is enrolled in an accredited college or university co-op program. Co-op employees generally alternate semesters of work and school for a total of up to four working semesters.

Interns – A Temporary Employee who is currently seeking a baccalaureate, master’s, or doctoral degree and is enrolled in an accredited college or university. An internship consists of non-recurring, full-time employment of up to four months and typically occurs during the summer months.

Independent Contractor – A self-employed individual, which includes Seller, who provides a unique service or expertise to Halliburton on an as-needed basis, over a specific period of time not to exceed twelve (12) months. This service or expertise is provided directly to Halliburton through a contractual agreement to perform work according to their own methods, without being subject to control of Halliburton except for the final work product. Independent Contractors are paid through Accounts Payable and are not paid by Halliburton payroll. Each country’s laws regarding the exact definition of Independent Contractors may vary slightly.

4. HEALTH, SAFETY & ENVIRONMENTAL REQUIREMENTS AND ACKNOWLEDGEMENT

Contractor confirms and acknowledges that an authorized representative of Contractor has received, read, completed, understood and agrees to comply with the following Halliburton Health and Safety Policies while onsite:

1. Contractor Health, Safety and Environment (HSE) Questionnaire;

2. Halliburton Contractor Guidelines;

3. Halliburton 20 Rules of Responsibility for Contractors; and

4. All additional Halliburton Safety Policies provided or posted onsite.

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The signature of the Parties confirms and acknowledges that Halliburton has provided to Seller the foregoing policies and procedures, that Seller or an authorized representative of Seller has received, read, completed, understood and agrees to comply with the foregoing Halliburton Policies, and will communicate the above policies and required compliance to all employees and contractors of Seller that will deliver G oods or perform Services for Halliburton.

Halliburton Energy Services, Inc.

Carbo Ceramics, Inc

Signature:

/s/ David M. Adams

Signature:

/s/ Don P. Conkle

Printed Name:

David M. Adams

Printed Name:

Don P. Conkle

Title:

SVP Completion & Production

Title:

VP Marketing & Sales

Date: January 12, 2017

Date: January 5, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ James Brown

Printed Name:

James Brown

Title:

President WH

Date: January 16, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ Michael Hillman

Printed Name:

Michael Hillman

Title:

VP PM&L

Date:

January 18, 2017

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

EXHIBIT C

WELL SITE SERVICES RISK ALLOCation

This Well Site Services Risk Allocation Exhibit is subject to and incorporated in the Master Purchase Agreement executed by Halliburton Energy Services, Inc. (“Halliburton”) and CARBO CERAMICS INC (“Seller”) on the date of the last signature by the authorized representative(s) of the Parties (“Effective Date”) and shall apply to the extent that Services are to be provided at a well site. In the event of a conflict between this Exhibit and the Agreement, the terms and conditions of this Exhibit shall control. Unless otherwise agreed, the Agreement and this Exhibit shall collectively be referred to herein as the “Agreement.”

Article I LIABILITY AND INDEMNITY

In those matters in which a Party is required to indemnify the other Party, the indemnifying Party shall release, protect, defend, indemnify, and hold the indemnified Party and its Group (hereinafter defined) harmless from and against any and all Claims (hereinafter defined) against the indemnified Party or any member of its Group.

1.1

Application of Indemnities. EXCEPT TO THE EXTENT OTHERWISE EXPRESSLY PROVIDED HEREIN, ANY INDEMNITY GRANTED TO A PARTY IS GIVEN REGARDLESS OF CAUSE INCLUDING WHO MAY BE AT FAULT OR OTHERWISE RESPONSIBLE UNDER ANY CONTRACT, STATUTE, RULE, OR THEORY OF LAW, AND INCLUDING WITHOUT LIMITATION, THE SOLE, JOINT, OR CONCURRENT NEGLIGENCE OF ANY INDEMNITEE, WHETHER ACTIVE OR PASSIVE, STRICT LIABILITY (INCLUDING UNSEAWORTHINESS), LATENT, PATENT, OR PRE-EXISTING DEFECTS OR CONDITIONS, AND EVEN THOUGH THE INDEMNITOR MAY BE PROTECTED FROM DIRECT SUIT BY STATE WORKERS COMPENSATION LAWS OR THE LONG SHORE AND HARBOR WORKERS’ COMPENSATION ACT OF THE UNITED STATES OR ANY OTHER WORKERS’ COMPENSATION LAWS, AND INCLUDING ANY CLAIMS ARISING OUT OF INGRESS, EGRESS, LOADING AND UNLOADING OF PERSONNEL OR CARGO. PROVIDED THAT, NO INDEMNIFYING PARTY UNDER THIS EXHIBIT SHALL BE LIABLE TO AN INDEMNIFIED PARTY TO THE EXTENT OF CLAIMS CAUSED SOLELY BY THE INDEMNIFIED PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. THE INDEMNITIES CONTAINED HEREIN SHALL ONLY APPLY WITH RESPECT TO CLAIMS ARISING OUT OF THIS EXHIBIT. BOTH PARTIES ACKNOWLEDGE THAT THIS STATEMENT IS CONSPICUOUS AND AFFORDS FAIR AND ADEQUATE NOTICE.

1.2	Definitions.

1.2.1

“Claims” shall mean any and all losses, expenses, costs, damages, liabilities, claims, demands, liens, causes of action, suits, judgments, settlements, regulatory proceedings, citations, orders, decrees, and taxes, of any nature, kind, or description (including without limitation, reasonable attorney fees, court costs, fines, penalties, interest, cleanup, remediation, debris removal, and well control) that may be brought or asserted against an indemnitee by any person or legal entity whomsoever.

1.2.2

“Halliburton Group” shall include Halliburton, its parent, subsidiaries, and affiliates, and its and their joint owners, co-lessees, partners, joint venturers, lessors, clients, customers, contractors, and subcontractors (other than Seller and its contractors and subcontractors), and entities with whom Halliburton has entered a sharing agreement or for whom Halliburton is performing services, and the owners, shareholders, directors, officers, employees, agents, representatives, and invitees of all the foregoing.

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1.2.3

“Seller Group” shall include Seller, its parent, subsidiaries, and affiliates, and its and their joint owners, co-lessees, partners, joint ventures, contractors, and subcontractors, and the owners, shareholders, directors, officers, employee s, agents, representatives, and invitees of all the foregoing.

1.3

Persons.

1.3.1

SELLER’S LIABILITY. SELLER SHALL BE LIABLE FOR, AND HEREBY RELEASES HALLIBURTON GROUP FROM ALL LIABILITY FOR, AND SHALL PROTECT, DEFEND, INDEMNIFY, AND HOLD HALLIBURTON GROUP HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS DIRECTLY OR INDIRECTLY ARISING OUT OF ANY PHYSICAL ILLNESS, INJURY, OR DEATH OF ANY MEMBER OF SELLER GROUP. IT IS FURTHER AGREED THAT ANY COMPENSATION OR MEDICAL PAYMENTS, COSTS OR FEES, PAID OR PAYABLE TO OR ON BEHALF OF SELLER’S EMPLOYEES (OR ITS SUBCONTRACTORS’ EMPLOYEES) UNDER THE LOUISIANA WORKERS’ COMPENSATION ACT, OR ANY OTHER WORKERS’ COMPENSATION ACT, SHALL BE PAID SOLELY BY SELLER OR ITS SUBCONTRACTORS OR ITS OR THEIR INSURERS WITHOUT ANY RIGHT OF CONTRIBUTION, STATUTORY OR OTHERWISE, FROM HALLIBURTON GROUP.

1.3.2

HALLIBURTON’S LIABILITY. HALLIBURTON SHALL BE LIABLE FOR, AND HEREBY RELEASES SELLER GROUP FROM ALL LIABILITY FOR, AND SHALL PROTECT, DEFEND, INDEMNIFY, AND HOLD SELLER GROUP HARMLESS FROM AND AGAINST, ANY AND ALL CLAIMS DIRECTLY OR INDIRECTLY ARISING OUT OF ANY PHYSICAL ILLNESS, INJURY, OR DEATH OF ANY MEMBER OF HALLIBURTON GROUP (EXCLUDING ITS CLIENTS AND CUSTOMERS). IT IS FURTHER AGREED THAT ANY COMPENSATION OR MEDICAL PAYMENTS, COSTS OR FEES, PAID OR PAYABLE TO OR ON BEHALF OF HALLIBURTON’S EMPLOYEES (OR ITS SUBCONTRACTORS’ EMPLOYEES OTHER THAN THE EMPLOYEES OF SELLER OR SELLER’S SUBCONTRACTORS) UNDER THE LOUISIANA WORKERS’ COMPENSATION ACT, OR ANY OTHER WORKERS’ COMPENSATION ACT, SHALL BE PAID SOLELY BY HALLIBURTON OR ITS SUBCONTRACTORS’ (OTHER THAN SELLER AND SELLER’S SUBCONTRACTORS) OR ITS AND THEIR INSURERS WITHOUT ANY RIGHT OF CONTRIBUTION, STATUTORY OR OTHERWISE, FROM SELLER GROUP.

1.4

Property.

1.4.1

1.4.2

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PROPERTY, EQUIPMENT, OR INSTRUMENTS OF HALLIBURTON GROUP (EXCLUD ING ITS CLIENTS AND CUSTOMERS).

1.5	Seller shall be entitled to receive the full benefit of all indemnifications in its favor by reason of Seller’s contractual inclusion as an indemnitee from the entity for whom Halliburton is performing services and Halliburton cannot raise any claim against Seller for same.

1.6

To the extent permitted by applicable law, the indemnity and insurance provisions contained herein shall be liberally construed. Seller and Halliburton agree that said indemnities shall be supported by insurance or qualified self-insurance with minimum limits not less than the amounts required under Section 2 of this Exhibit and that such insurance policies will contain contractual liability coverage to provide insurance coverage for the insurable liabilities assumed by the named insured in this Agreement; otherwise the types and amounts of insurance required herein shall in no way limit either Party’s indemnity obligations as stated above. If either the limit or extent of the indemnities or the insurance requirements hereunder are found to exceed the maximum limit or extent permissible under applicable law, the subject indemnities and/or insurance requirements shall automatically be amended to the extent necessary to make them enforceable.

1.7

Louisiana Workers’ Compensation Act. In all cases where Seller’s employees (defined to include Seller’s direct, borrowed, special, or statutory employees) are performing Work or working in Louisiana or are otherwise covered by the Louisiana Workers’ Compensation Act, the Parties recognize, acknowledge, and agree that the work and Services to be performed by Seller hereunder are part of Halliburton’s trade, business, or occupation (or that of its affiliated companies), and are an integral part of and are essential to the ability of Halliburton (or its affiliated companies) to generate their goods, products and services; that for the purposes of the Louisiana Workers’ Compensation Act, the employees of Seller (and its subcontractors, if any), whether direct, statutory, borrowed, or otherwise, are therefore statutory employees of Halliburton (or its affiliated companies, as applicable) in accordance with the Louisiana Workers’ Compensation Act; and that Halliburton (and its affiliated companies) shall be entitled to the protections that are afforded a statutory employer under Louisiana law. Irrespective of Halliburton’s status as the statutory employer or alleged special employer of Seller’s employees, Seller shall remain solely and primarily responsible for the payment of Louisiana workers’ compensation benefits to its employees, and shall not be entitled to seek contribution for and shall indemnify Halliburton Group for any such payments, and all such employees shall remain employees of Seller, not Halliburton (or its affiliated companies), for all purposes including the indemnity and insurance provisions of this Agreement.

Article II INSURANCE

2.1	Without in any way limiting Seller’s liability hereunder, Seller shall maintain the following insurance in form and with underwriters reasonably satisfactory to Halliburton.

2.1.1

Worker’s Compensation Insurance as prescribed by applicable law.

2.1.2

Employer’s Liability Insurance with a limit of liability of not less than $5,000,000 per occurrence.

2.1.3

Comprehensive or Commercial General Liability insurance including: (i) Contractual Liability to cover liability assumed under this Agreement, (ii) Product and Completed Operations Liability, and (iii) explosion, collapse and underground hazards (deletion of the E.C.U. exclusions) if such exposures exist. The limit of the liability for such insurance shall not be less than $5,000,000 per occurrence, bodily injury and property damage combined.

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2.1.4

Automobile Liability Insurance. Such insurance shall exten d to owned, non-owned and hired automobiles used in the performance of this Agreement. The limits of liability of such insurance shall be sufficient to comply with all applicable state and federal regulations, including but not limited to a MCS-90 Endorse ment, but in no event shall the limit be less than $2,000,000 per occurrence for bodily injury and property damage combined.

2.2	The above insurances shall be on an occurrence basis and shall include a requirement that the insurer provide Halliburton with 30 days written notice prior to the effective date of any cancellation or material change of the insurance.

2.3	The insurance specified in 2.1.1 and 2.1.2 above shall contain waivers of subrogation in favor of Halliburton, its Affiliates, its clients and its and their officers, agents and employees.

2.4	The insurance specified in 2.1.3 and 2.1.4 above shall:

2.4.1

Contain waivers of subrogation in favor of Halliburton, its Affiliates, its clients and its and their officers, agents and employees;

2.4.2

Provide that said insurance is primary with respect to Seller’s operations hereunder; and

2.4.3

Name Halliburton, its Affiliates, its clients and its and their officers, agents and employees as Additional Insureds.

2.5	Seller shall, before commencing the Work and at any time thereafter upon request, provide Halliburton with a certificate of insurance evidencing to Halliburton’s satisfaction all required coverage.

2.6	Seller shall procure additional insurance coverages or limits of insurance as directed by Halliburton upon written request. Verified additional cost of such insurance incurred by Seller shall be for Halliburton’s account.

The signature of the Parties confirms and acknowledges that Halliburton has provided to Seller the foregoing Well site Services Risk Allocation Addendum, that Seller or an authorized representative of Seller has received, read, completed, understood and agrees to comply with the foregoing Well site Services Risk Allocation Addendum, will communicate the terms and conditions hereof, and require compliance of all employees and contractors of Seller that will deliver Goods or perform Services for Halliburton on well sites. To the extent the terms of this Well site Services Risk Allocation Addendum conflict with terms and conditions of the Agreement to which this Well site Services Risk Allocation Addendum is attached, the terms and conditions of this Well site Services Risk Allocation Addendum will control.

[ SIGNATURE PAGE TO FOLLOW ]

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

H alliburton Energy Services, Inc.

Carbo Ceramics, Inc

Signature:

/s/ David M. Adams

Signature:

/s/ Don P. Conkle

Printed Name:

David M. Adams

Printed Name:

Don P. Conkle

Title:

SVP Completion & Production

Title:

VP Marketing & Sales

Date: January 12, 2017

Date: January 5, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ James Brown

Printed Name:

James Brown

Title:

President WH

Date: January 16, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ Michael Hillman

Printed Name:

Michael Hillman

Title:

VP PM&L

Date:

January 18, 2017

EXHIBIT D

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

DETENTION AND DEMURRGE


Accessorial	Definition	Method	Rate	Notes	Approval Required
Trucking Detention	Detention is the number of billable hours a truck is detained beyond allowed free time.	Per Hour	$55 in the South region $65 in the North Region	In North America, after the first 6 hours at unloading site, Detention will be paid at $55 per hour in the South capped at $550 in a 24 hour period and $65 in the North capped at $650 in a 24 hour period. Time spent unloading must be noted and verified by location. If a truck is still waiting at 6 hours the driver must notify the on-site operations group of the accumulating detention time.	YES Halliburton approver's name and USER ID must be provided on invoice.
Rail Demurrage	Demurrage is a fee charged for the extended use or storage of rail cars	Per Day	$0	In North America, Halliburton will not pay any rail Demurrage in association with Carbo Ceramics	YES Halliburton approver's name and USER ID must be provided on invoice.

[ SIGNATURE PAGE TO FOLLOW ]

Page 34 of 38

Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

Halliburton Energy Services, Inc.

Carbo Ceramics, Inc

Signature:

/s/ David M. Adams

Signature:

/s/ Don P. Conkle

Printed Name:

David M. Adams

Printed Name:

Don P. Conkle

Title:

SVP Completion & Production

Title:

VP Marketing & Sales

Date: January 12, 2017

Date: January 5, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ James Brown

Printed Name:

James Brown

Title:

President WH

Date: January 16, 2017

Halliburton Energy Services, Inc.

Signature:

/s/ Michael Hillman

Printed Name:

Michael Hillman

Title:

VP PM&L

Date:

January 18, 2017

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

EXHIBIT E

CARBO Proppants

CARBO Base Ceramic Proppants

CARBO New Technology Proppants

▪ CARBOHYDROPROP

▪ CARBOECONOPROP

▪ CARBOLITE

▪ CARBO PROP/ISP

▪ CARBO HSP

▪ CARBOBOND LITE

▪ KRYPTOSPHERE HD

▪ KRYPTOSPHERE LD

▪ SCALEGUARD

▪ CARBOAIR

▪ FUSION

▪ CARBONRT

▪ CARBONRT ULTRA

▪ CARBOBOND KRYPTOSPHERE HD

▪ CARBOBOND KRYPTOSPHERE LD

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Exhibit 10.15

Master Purchase Agreement

Agreement No. 9610018283

SCHEDULE A REGIONAL MAPS

US Regional Map

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Agreement No. 9610018283

US NWA Map

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Exhibit 21

CARBO CERAMICS INC.

SUBSIDIARIES


NAME OF ENTITY	JURISDICTION OF ORGANIZATION	PERCENTAGE OWNED


CARBO Ceramics (Mauritius) Inc.	Mauritius	100%
CARBO Ceramics (China) Company Ltd.	China	100%
CARBO Ceramics Cyprus Ltd.	Cyprus	100%
CARBO Ceramics (Eurasia) LLC	Russia	100%
CARBO International, Inc.	Delaware, USA	100%
Asset Guard Products Inc. (formerly known as Falcon Technologies and Services, Inc.)	Delaware, USA	100%
StrataGen, Inc.	Delaware, USA	100%

Exhibit 23

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the following Registration Statements:

(1) Registration Statement (Form S-8 No. 333-113688) pertaining to the Carbo Ceramics Inc. Savings and Profit Sharing Plan of Carbo Ceramics, Inc.,

(2) Registration Statement (Form S-8 No. 333-160145) pertaining to the Carbo Ceramics Inc. Omnibus Incentive Plan of Carbo Ceramics, Inc., and

(3) Registration Statement (Form S-3 No. 333-211519) of CARBO Ceramics Inc.;

of our reports dated February 28, 2017, with respect to the consolidated financial statements of CARBO Ceramics Inc. and the effectiveness of internal control over financial reporting of CARBO Ceramics Inc. included in this Annual Report (Form 10-K) of CARBO Ceramics Inc. for the year ended December 31, 2016.

/s/ Ernst & Young LLP

New Orleans, Louisiana

February 28, 2017

Exhibit 31.1

Annual Certification

As required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

I, Gary A. Kolstad, certify that:

1. I have reviewed this annual report on Form 10-K of Carbo Ceramics Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e )) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f )) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:		February 28, 2017

		/s/ Gary A Kolstad
Gary A. Kolstad
President & CEO

Exhibit 31.2

Annual Certification

As required by Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934

I, Ernesto Bautista III, certify that:

1. I have reviewed this annual report on Form 10-K of Carbo Ceramics Inc.;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and proce dures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide a reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:		February 28, 2017

		/s/ Ernesto Bautista III
Ernesto Bautista III
Chief Financial Officer

Exhibit 32

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), each of the undersigned officers of Carbo Ceramics Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Annual Report on Form 10-K for the year ended December 31, 2016 (“Form 10-K”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-K fairly presents, in all material respects, the financial condition and results of operations of the Company, as of, and for, the periods presented in the Form 10-K.

Dated:		February 28, 2017

		/s/ Gary A Kolstad
Name:		Gary A. Kolstad
Title:		Chief Executive Officer

Dated:		February 28, 2017

		/s/ Ernesto Bautista III
Name:		Ernesto Bautista III
Title:		Chief Financial Officer

Exhibit 95

MINE SAFETY DISCLOSURE

For the year ended December 31, 2016, the Company has the following mine safety information to report in accordance with Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, in connection with the Eufaula, Alabama processing facility, the McIntyre, Georgia processing facility, the Toomsboro, Georgia processing facility, the Marshfield, Wisconsin processing facility, and the Millen, Georgia processing facility.

																Received
															Received	Notice of
															Notice of	Potential	Legal
					Section						Total Dollar		Total		Pattern of	to Have	Actions		Aggregate		Aggregate
Mine or					104(d)						Value of		Number		Violations	Pattern	Pending		Legal		Legal
Operating	Section		Section		Citations		Section		Section		MSHA		of Mining		Under	Under	as of		Actions		Actions
Name/MSHA	104 S&S		104(b)		and		110(b)(2)		107(a)		Assessments		Related		Section	Section	Last Day		Initiated		Resolved
Identification	Citations		Orders		Orders		Violations		Orders		Proposed		Fatalities		104(e)	104(e)	of Period		During		During
Number	(#)		(#)		(#)		(#)		(#)		($) (1)		(#)		(yes/no)	(yes/no)	(#)		Period (#)		Period (#)
Eufaula Facility MSHA ID 0102687 Eufaula, Alabama		0		0		0		0		0	$	580		0	No	No		0		3		3
McIntyre Facility MSHA ID 0901108 McIntyre, Georgia		0		0		0		0		0	$	-		0	No	No		0		0		0
Toomsboro Facility MSHA ID 0901164 Toomsboro, Georgia		0		0		0		0		0	$	-		0	No	No		0		0		0
Marshfield Facility MSHA ID 4703636 Marshfield, Wisconsin		0		0		0		0		0	$	-		0	No	No		0		0		0
Millen Facility MSHA ID 0901232 Millen, Georgia		0		0		0		0		0	$	-		0	No	No		0		0		0
Totals		0		0		0		0		0	$	580		0				0		3		3

(1)	Amounts represent the total dollar value of proposed assessments received.