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Core Labs Matches EPS, Lags Rev

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Core Laboratories N.V. (CLB - Free Report) has reported mixed first quarter 2012 results, reflecting impressive performances across all the three business units, partially offset by steeper cost of sales.

Quarterly earnings per share (EPS), excluding special items, came in at $1.06, in line with the Zacks Consensus Estimate. Comparing year over year, EPS increased 37.7% from 77 cents.

The performance was influenced by higher activities in the unconventional oil-field in North America and strong contributions from global projects. The focused deepwater operations in North Sea and Middle East also aided the results.

Total revenue for the quarter was $234.2 million, up 13.3% from $206.7 million in the prior-year quarter, aided by strong growth in all business units. However, the result was below the Zacks Consensus Estimate of $238.0 million.

Reservoir Description Segment

Revenues at the Reservoir Description segment (which focuses on international crude oil related projects) upped 7.9% year over year to $116.1 million in the first quarter. Operating income for the unit grew 22.6% year over year to $32.4 million, with the operating margin coming in at 28%. The improvement was attributable to several well performing international projects and deepwater offshore crude-oil-related ventures as well initiation of new studies.

Production Enhancement Segment

Core Laboratories’ Production Enhancement revenues leaped 17.8% year over year to $96.7 million in the quarter while operating income improved 44.1% year over year to $33.5 million. Operating margin was an impressive 31%, buoyed by the greater market share of the HTD-Blast perforating system and high demand for advanced technologies. Additionally, several field-flood projects in the Middle East boosted the performance level.

Reservoir Management Segment

Quarterly revenues from Reservoir Management operations were $21.4 million, up 25.5% year over year while operating income moved up 18.8% year over year to $7.9 million. Operating margin for the quarter was 37%. The results were driven by expansion of operations across the globe.

Balance Sheet, Free Cash Flow & Share Buyback

As of March 31, 2012, Core Laboratories had cash and cash equivalents of $23.5 million. Capital expenditures for the first quarter were $7.3 million. The company generated free cash flow of $46.5 million.

Quarterly Dividend

On April 16, 2012, Core’s board announced a cash dividend of 28 cents per share (amounting to an annualized payout of $1.12 per share) of common stock. The dividend will be paid on May 25, 2012 to shareholders of record on April 27, 2012.

Dual Listing

In an attempt to support the expanding overseas operations and bring in more international institutional investors within the company’s ownership, Core Labs plans to list its shares on the NYSE Euronext Exchange in Amsterdam in mid-May.


The company has refrained from providing definite quarterly and annual earnings guidance until the listing procedure is complete.

However, Core Labs expects to witness strong international project growth, aided by the on-time arrival of additional deepwater rigs throughout the remainder of the year. 2012 will likely see greater pre-salt activities in the Kwanza basin offshore Angola as well as in Iraq and Asia Pacific.

Core Labs aims to improve its activities in the deepwater Gulf of Mexico and emphasize on unconventional oil-shale reservoirs operations in North America, South America and North Africa.

Our Take

Amsterdam, Netherlands-based Core Laboratories, with market capitalization of over $6 billion, enjoys a deep portfolio of proprietary products and services. The company’s strong presence in the emerging shale plays and its global footprint –including markets in the Middle East, Asia Pacific, and East and West Africa – would facilitate steady growth rates going forward.

However, the company’s business is not immune to gas/oil price volatility, exploration and production spending patterns, costs, geo-political risks, competition and the advent of new technologies.

Hence, we expect Core Labs to perform in line with other players such as Baker Hughes Incorporated and Halliburton Company (HAL - Free Report) and maintain a long-term Neutral recommendation on the stock.

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