Current CLB Stock Info

Core Laboratories (NYSE: CLB) announced its Q2 earnings, which saw an 11% YOY increase in revenue and 22% YOY increase in operating income bringing earnings per diluted share to $0.57.

Core Labs saw operating margins up 190 basis points YOY to 19.4%, ex-items, which was attributed to higher-technology services and products being requested by Core’s technologically sophisticated client base and increased utilization of the Company’s services and products, particularly in the U.S market.

According to Core, the company’s focus on ROIC is producing results, as Core currently has an ROIC of 28%, the highest for all major companies in its oilfield service Comp Group. Core reports that only it and one other company in its comp group posted ROIC that exceeded their weighted average cost of capital.

Reservoir Description

Core Lab’s Q2 revenue from reservoir description was $102 million with operating income, ex-items, of $14.8 million yielding operating margins of 15%. 80% of its revenue in this business segment is sourced from outside the U.S.

In the second quarter of 2018, Core launched a joint industry project (“JIP”) focused on evaluation of unconventional Mississippian reservoirs in the SCOOP and STACK areas of the Anadarko Basin of Oklahoma. This JIP will evaluate geological, geochemical and petrophysical characteristics of conventional cores.

The JIP will also include:

  • TGS’s extended log coverage, which will be used to enhance regional geological and petrophysical interpretations
  • Rock property data will be integrated with log data, stimulation techniques, production and seismic information
  • Regional stratigraphic cross sections will be constructed, and attribute maps generated
  • Stratigraphic models will be applied to the interpretation of template lines derived from TGS’s existing 3-D seismic survey in the area

The analysis of reservoir fluids (crude oil, natural gas and water) represented more than 60% of total revenue for this segment.

Production Enhancement

Production Enhancement operations, largely focused on complex completions in unconventional tight-oil reservoirs in the U.S. and conventional offshore development projects.

  • Revenue increased 36% YOY to $73 million
  • Operating income, ex-items, was $19 million a 105% increase YOY

Production Enhancement’s U.S. land revenue was up 48% YOY, while the Energy Information Agency reported that U.S. completions were up 30% year-over-year meaning that Core continues to gain market share in the technologically advanced perforating markets. This growth can be attributed to Core Lab’s energetic products led by its HERO® PerFRAC technology, total sales of energetic products increased 52%.

Free Cash Flow

Core continued to generate FCF during Q2, with cash from operations of $27 million and capital expenditures of $7.5 million yielding FCF of $19.5 million

Q & A

Selected Q&A from Core Laboratories Q2 earnings call:

Q: On Permian takeaway constraints, what are your customers telling to you about their activity plans for second half 2018 and early 2019?

Core Labs President, Lawrence Bruno: Yeah, James, Larry Bruno here. So I think it depends very much on the client. Some wererather foresighted and saw this takeaway problem emerging and planned well and some other companies may be caught a little flat-footed and are having to see the price of barrel they’re able to generate being compromised a bit.

Talked to a client just earlier this week. There will be some reallocation of resources to other regions outside the Permian. And I think that works out for us as our products and services are a bit easier to shift than heavy iron investments. And so, I think there will be some potential happening of the brakes little bit of slowdown for selected clients in the Permian. And I think that will affect any company that’s got exposure to completions.

Core Labs Chairman and CEO, David M. Demshur: Yeah, James, we’ve already seen an uptick in activity levels for us in the Eagle Ford, the Bakken and in the Haynesville. So some of those investment dollars from the E&P clients are being spread around other basins and due to the mobility of our services and products we can be there. We don’t have to mobilize our frac crew.

Q: Just given its presence in the wellbore and the various businesses that you have, that are associated with stage and cluster count I wonder if you could characterize for us the strong growth you guys put up in your energetics business in particular, if you could characterize the interplay between stage count and cluster count as some E&Ps seem to be moving towards something like up-spacing where they’re actually reducing stage count, but materially increasing the cluster count within those stages.

Core Labs Chairman and CEO, David M. Demshur: Yes. That’s exactly a trend that we’re seeing as well. We had that in our commentary last quarter. We see that even more so now. So additional perf clusters leading to lesser stage count. We actually think that adds to the efficiency of the well and reduces the time to drill, stimulate and complete that well.

Core Labs President, Lawrence Bruno: And I’d add one comment to that. With the work we’ve doing on stimulation, completions and in particular the work we’ve been doing on enhanced oil recovery, the critical issue for our clients is going to be maximizing stimulated rock volume, getting as much rock stimulated as possible, particularly where we’ve been able to demonstrate for them that there’s an EOR opportunity. So they’ll be trialing different techniques to get that maximize surface area and stimulated rock volume because they don’t want to be in a position to miss the opportunity to increase their recovery from these reservoirs by few hundred basis points.

The Oil and Gas Conference®

Core Laboratories is presenting at EnerCom’s The Oil & Gas Conference® at the Denver Downtown Westin Hotel, Denver, Colo. Aug. 19-23, 2018. EnerCom expects to have more than 80 presenting oil and gas companies and more than 2000 financial professionals attending this year’s conference.

To learn more about the conference and presenter schedule please visit the conference website here.

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