Oilfield service company, Core Laboratories N.V. (CLB - Analyst Report) reported a stellar fourth quarter – in fact, the most profitable one in its history. Strength seen in all its segments and the use of superior quality technology were the primary drivers of this record performance.
Quarterly earnings per share (EPS) came in at $1.43, surpassing the Zacks Consensus Estimate of $1.41. Comparing year over year, EPS increased 22.2% excluding one-time items.
Total revenue for the quarter was $276.3 million, up 8.6% from $254.5 million in the prior-year quarter. The top line, however, failed to meet the Zacks Consensus Estimate of $279.0 million.
For 2013, Core Lab reported per share profits of $5.32, above the Zacks Consensus Estimate of $5.30 and higher than the 2012 earnings of $4.52 per share. Revenues of $1,073.5 million improved 9.4% from the prior-year figure but missed the Zacks Consensus Estimate of $1,198.0 million.
Core Labs has kept the earnings streak alive in the oilfield services industry, continuing the impressive performance by larger rivals like Baker Hughes Inc. (BHI - Analyst Report), Schlumberger Ltd. (SLB - Analyst Report) and Halliburton Co. (HAL - Analyst Report).
Reservoir Description Segment (which focuses on international crude oil related projects) revenues increased 5.8% year over year to $136.3 million in the fourth quarter. Operating income for the unit grew 3.8% year over year to $38.6 million. The result reflects growth in the number of reservoir-fluids-related projects around the world. Moreover, technological development contributed to the segment’s results.
Production Enhancement Segment revenues increased 8.1% year over year to $115.3 million in the quarter and operating income leaped 23.5% year over year to almost $41.0 million. The primary reason for the improvement was the success of Core Lab’s FLOWPROFILER service. This oil-based tracer technology has seen a surge in demand, bringing profits for the company.
Reservoir Management Segment revenues were $24.8 million, up 30.2% year over year, while operating income moved up 43.7% year over year to $7.7 million. Operating margin for the quarter was 32%. The primary catalyst for the segment was high-quality study results that attracted many projects in unconventional reservoirs in North America.
Balance Sheet & Free Cash Flow
As of Dec 31, 2013, Core Laboratories had cash and cash equivalents of $25.1 million. Capital expenditures for the fourth quarter were $8.4 million. The company generated free cash flow of $79.1 million.
On Jan 13, 2014, Core’s board of directors increased its quarterly common stock dividend by 56.25% to 50 cents per share ($2.00 per share annualized). The new dividend will be paid on Feb 21, to shareholders of record as of Jan 24.
Amsterdam, Netherlands-based Core Labs posted a positive picture for 2014, as the company expects a sequential increase in North American activity levels. The international market looks good as well. The company’s focus will be on the deepwater “Golden Triangle” region in the Gulf of Mexico, North America’s unconventional tight-oil plays, other emerging plays in Russia, North Africa and Australia and oil recovery ventures in the North Sea, Middle East, and Asia Pacific.
After the exit from Venezuela in 2013, Core Labs plans to minimize operations in Argentina as well because of government controls that exist in the nation.
For first quarter 2014, Core Labs forecasts total revenue in the $280 million to $286 million range. Earnings per share will likely be between $1.43 and $1.45.
The company currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Core Labs has a leadership position in the reservoir optimization niche, along with its global footprint and deep portfolio of proprietary products and services. Furthermore, the company’s low asset intensive operations and limited capex needs allow it to generate substantial free cash flows.
Core Labs relies on its ability to develop and acquire essential products and technologies that drive its operational performance and growth. If their technologies or products become obsolete or cannot be brought to market in a timely and competitive manner, they may face severe operational and financial dilemmas.