Release Date: October 24, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Core Laboratories Inc (NYSE:CLB) reported a 3% increase in revenue compared to Q2 2024 and a 7% increase compared to Q3 2023, indicating strong growth.
• The company achieved a significant reduction in net debt by nearly $12 million or 9%, lowering the leverage ratio to 1.47, the lowest in six years.
• Operating margins for the Reservoir Description segment improved from 14% in Q2 to 17% in Q3, demonstrating enhanced profitability.
• International product sales increased by 24% sequentially, reflecting strong demand in global markets.
• Core Laboratories Inc (NYSE:CLB) continues to focus on innovation and technology, introducing new products like the Pulverize technology for plug and abandonment operations, which aligns with global demand for cost-effective solutions.

Negative Points

• Geopolitical conflicts, particularly in the Middle East and Russia-Ukraine, continue to create headwinds for revenue growth and operating margins.
• Weather events, such as hurricanes in the Gulf of Mexico, negatively impacted revenue and operating margins, causing delays in scheduled projects.
• There was a sequential decline in domestic product sales due to decreased U.S. land completion activity.
• The U.S. land market is expected to trend lower in Q4 2024, influenced by recent E&P consolidations and weak natural gas prices.
• The completion activity in the U.S. is expected to experience a typical seasonal decline towards the end of the year, potentially impacting revenue.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with CLB.

Q: Can you elaborate on the CCS opportunity and whether it involves ongoing revenue opportunities? A: Lawrence Bruno, CEO: Unlike oil fields, CCS projects won't have long-term engagement with Core Lab. Our involvement focuses on how CO2 introduction affects the rock and fluids. Once established that there's no damage, our role ends. However, we have a joint industry project and proprietary studies that are beneficial. Our expertise from EOR studies is applied here, focusing on storing CO2 in the rock.

Q: What is the longer-term opportunity for the Pulverize technology in offshore wells? A: Lawrence Bruno, CEO: The opportunity is significant, as every offshore field will eventually require plug and abandonment (P&A). We're in the early stages of deploying Pulverize, which has shown success in reducing costs and improving efficiency in P&A operations. We're also exploring its application for less complex onshore wells.

Q: How do you view international growth rates for 2025, particularly for Reservoir Description? A: Lawrence Bruno, CEO: We expect to perform as well or better than peers, driven by engagement in big offshore projects. Rig availability will be a limiting factor, but as projects pick up, we'll benefit from high-caloric, lucrative projects with high incremental margins.

Q: Can you provide an update on the U.S. perforating business and its challenges? A: Lawrence Bruno, CEO: The market is competitive with many players. Core Lab remains a leader in perforating globally. The business is influenced by different operator philosophies on oriented guns. Completion activity has decreased, but we expect it to pick up in 2025.

Q: Is the perforating market crowded due to key players or smaller machine shops? A: Lawrence Bruno, CEO: It's a mix, with about 8-10 different gun offerings. Our success is driven by clients who prefer our energetics as part of their systems, though we also sell components to those using other guns.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.