Core Labs Gains Fall but Beat

Oilfield services provider Core Laboratories N.V. (CLB - Analyst Report) has reported slightly better-than-expected third-quarter results, driven by strength in its Reservoir Management segment. Earnings per share, excluding foreign currency gains and favorable tax effects, came in at $1.15, surpassing the Zacks Consensus Estimate by 2 cents. 

However, on a year-over-year basis, Core Labs’ adjusted earnings per share declined 24.8% (from $1.53 to $1.15), while revenue was down 17.1% to $167.8 million. The year-over-year negative comparisons were due to weak performance from the company’s North American-centric Production Enhancement segment. 

Reservoir Description Segment 
According to business segments, revenue for the Reservoir Description segment (which focuses on international crude oil related projects) was down 9.4% year-over-year to $101.5 million. However, cost reduction initiatives allowed the segment operating income to register a modest increase. 

Production Enhancement Segment 
Core’s Production Enhancement revenue decreased approximately 31% year-over-year to $54.4 million, while segment operating income was down 45.1% to $14.6 million. Concentrated in North America, the segment suffered from the significant fall in the region’s drilling activity. 

Reservoir Management Segment 
Revenue from the Reservoir Management operations (also internationally focused) was up 2.5% year-over-year to $11.9 million, while the segment operating income increased 13.2% to $3.5 million, reflecting Core’s emphasis on potentially high-return developments and international-related projects. 

Free Cash Flow & Balance Sheet 
During the quarter, Core generated $54.0 million in free cash flow (an all-time quarterly high), while capital expenditures for the period was $4.7 million. As of Sep 30, 2009, the company had $137.2 million in cash (the highest quarter-end total). 

Guidance 
Management has guided towards fourth quarter revenue in the $165–$170 million range, while earnings per share are likely to be between $1.15 and $1.20. The company plans to spend approximately $15–$17 million on capex during 2009.

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