Flotek Industries to Acquire Stake in Cavo Drilling Motors

Flotek Industries has entered into a definitive agreement to purchase a 50% interest in Cavo Drilling Motors for approximately $6 million, subject to normal closing conditions. The transaction will be funded with cash, common stock and a seller note, and is anticipated to close later this month.

CAVO is a complete downhole motor solutions provider specializing in the rental, servicing and sale of high-performance mud motors for a variety of drilling applications. CAVO serves both the domestic and international drilling markets with a customer base extending throughout North America, South America, Russia and West Africa. CAVO and Flotek are scheduled to participate at the Permian Basin Oil Show later this month.

"Our drilling tool group began purchasing motors from CAVO in 2005 and has continued to expand its inventory of rental motors to keep pace with customer demand," said Jerry Dumas, Chairman and CEO of Flotek Industries, Inc. "Based on the operating results in the Rocky Mountains, we have found the CAVO motor performance to be equal or superior to the best competitors' offerings. We plan to leverage CAVO's existing domestic and international sales channels in conjunction with Flotek's established domestic sales and distribution network to expand overall revenues for both companies. The motor rentals have generated profit margins higher than our overall drilling tool group, with lower-than-expected repair costs. Demand for these motors has been very strong and I anticipate significant activity in this area in 2007."

Flotek manufactures and markets innovative specialty chemicals, downhole drilling and production equipment, and manages automated bulk material handling, loading and blending facilities. It serves major and independent companies in the domestic and international oilfield service industry.

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