Core Labs Keeps Competitive

We keep our Buy rating on Core Laboratories NV (CLB - Analyst Report), based on its prospects in the current oilfield cycle. We believe the company’s technology-heavy portfolio of proprietary products and services gives it the opportunity to capitalize on the need to optimize production from new as well existing fields. Moreover, a global presence and strong existing relationships in all major hydrocarbon producing regions gives Core Labs a competitive edge over peers.

International operations are expected to be a key growth driver for the firm going forward. In order to capitalize on its international growth opportunities, the company is actively investing in high-growth markets, like the Middle East and South America. These strategic moves should increase the company’s market share in lucrative markets and its capacity to handle larger projects.

We see growth continuing at attractive levels for Core Laboratories in the next few years. The demand for oil has generated a surge in prices globally, and helped in driving the success of Core Labs. The company should continue to fair well as the trend does not seem to be slowing any time soon. The development of non-conventional natural gas reservoirs in the U.S. and the oil sands in Canada will play an important role in its long-term growth plans.

Despite recent gains, we believe this quality oilfield service stock still offers upside from current levels, being a strong growth story in a niche market. Our new $155 price objective, up from $142, reflects 2008 P/E and EV/EBITDA multiples of 25.1x and 16.8x, both well within historical trading ranges. We believe that the premium in Core Labs’ valuation relative to peers is justified, given its leading position in the reservoir optimization niche.

Read the full analyst report on CLB

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