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Analyst Blog

Core Laboratories N.V. (CLB - Analyst Report) reported mixed third quarter 2012 results, highlighting robust business unit results that were partially overshadowed by steep operating expenses.

Quarterly earnings per share (EPS), excluding special items, came in at $1.13, surpassing the Zacks Consensus Estimate of $1.10. Compared year over year, EPS increased 13.0% from $1.00.

The company’s consistent emphasis on enhancing its operations in major oil-related and liquefied natural gas projects globally complemented the results.

Total revenue for the quarter was $245.4 million, up 6.1% from $231.3 million in the prior-year quarter on the back of strong growth across all segments. However, the result missed the Zacks Consensus Estimate of $247.0 million.

Reservoir Description Segment

Revenues at the Reservoir Description segment (which focuses on international crude oil related projects) upped 3.6% year over year to $124.2 million in the third quarter. Operating income for the unit grew 27.8% year over year to $36.8 million, with the operating margin coming in at 30%. The better segment results are attributed to the company’s increased activities in various offshore field development projects across Brazil, Angola, Gabon, Nigeria, and Ghana as well as the Middle East and Gulf of Mexico. Capturing additional markets and use of superior quality technologies also boosted the segment performance.

Production Enhancement Segment

Core Laboratories’ Production Enhancement revenues leaped 3.6% year over year to $100.9 million in the quarter while operating income improved 1.9% year over year to $31.3 million. Operating margin was an impressive 31%, buoyed by the greater market share of the HTD-Blast perforating system and high demand for the company’s technical expertise.

Reservoir Management Segment

Quarterly revenues from Reservoir Management operations stood at $20.4 million, up 44.9% year over year while operating income moved up 72.2% year over year to $6.0 million. Operating margin for the quarter was 30%. The primary catalysts for the segment were high-quality study results that have attracted many industry players. In Brazil, Core Labs, in collaboration with Petroleo Brasileiro S.A. or Petrobras (PBR - Analyst Report), has undertaken a number of reservoir analysis ventures in onshore and offshore plays of the country.

Balance Sheet, Free Cash Flow & Share Buyback

As of September 30, 2012, Core Laboratories had cash and cash equivalents of $24.7 million. Capital expenditures for the third quarter were $9.3 million. The company generated free cash flow of $42.0 million.

Quarterly Dividend

On October 9, 2012, Core’s board announced a cash dividend of 28 cents per share (amounting to an annualized payout of $1.12 per share) on its common stock. The dividend will be paid on November 20, 2012 to shareholders of record as of October 19, 2012.

Outlook

Amsterdam, Netherlands-based Core Labs provided a positive outlook for 2013, reflecting favorable Brent crude pricing along with the arrival of additional deepwater drilling rigs. These will enable the company to walk into more new projects and operate in other rich oil and gas acreages. Core Labs also plans to bring in advanced technologies and added services aimed to pep up the daily production and hydrocarbon recovery rates.

For the fourth quarter, Core Labs forecasts total revenue in the $245 million to $250 million range. Earnings per share will likely be between $1.10 and $1.17 per share.

Our Take

Core Labs currently retains a Zacks #5 Rank, reflecting a Strong Sell rating for a period of one to three months.

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