CLB Q2 2014: Core Lab Reports GAAP EPS Of $1.42; Q2 2014 Ex-Items EPS Of $1.35

CLB Q2 2014: Core Lab Reports GAAP EPS Of $1.42; Q2 2014 Ex-Items EPS Of $1.35

PR Newswire

AMSTERDAM, July 23, 2014

AMSTERDAM, July 23, 2014 /PRNewswire/ -- Core Laboratories N.V. (NYSE: "CLB
US" and Euronext Amsterdam: "CLB NA") reported second quarter 2014 GAAP
earnings per diluted share ("EPS") of $1.42, and second quarter EPSof $1.35,
when excluding foreign exchange translations ("ex-fx") and normalizing for a
24% effective tax rate (both referred to as "ex-items"), both setting second
quarter records. Second quarter 2014 net income was $60,468,000, ex-items.
Year-over-year and sequentially, quarterly revenue increased to $267,562,000,
a record for any second quarter in Company history while operating income, was
$82,834,000, ex-fx, yielding operating margins of 31%.

Core Lab Logo.

Free cash flow ("FCF"), defined as cash from operations less capital
expenditures, for the quarter topped $53,000,000, reflecting Core's first half
2014 weighted capital expenditure program. This first half 2014 weighted
capital expenditure program is expected to produce record levels of second
half 2014 revenue, operating income and margins, net income and FCF. Core
used the cash generated during the quarter to pay dividends of approximately
$22,400,000 and to buy back approximately 455,000 shares, lowering the
Company's outstanding diluted share count to a new 16-year low of 44,707,000
at quarter's end.

On the Company's May 12, 2014 guidance conference call, several changes in
anticipated customer activity were discussed which would have a slight
dampening effect on second quarter revenues and operating income. These
projected changes in activity did occur and the Company now reports earnings
per diluted share to be at the top of this revised range and revenues to be in
the middle of the indicated range. To recap and update from the May conference
call:

  oDeferred Major Coring Programs.
    Revenue growth and operating margin expansion for Core's Reservoir
    Description operations were projected to be affected as a result of the
    deferral of major coring programs, especially in the deepwater Gulf of
    Mexico (GOM). Due to acute wellbore stabilization and mechanical issues
    that occurred during the first half of 2014, several major deepwater
    coring programs in the GOM were deferred and are now scheduled for the
    second half of 2014. Core's GOM clients now have nine major deepwater
    coring programs scheduled for the last six months of 2014; risk adjusting,
    Core has included revenue from five of these projects in its second half
    revenue and earnings guidance. Deepwater programs generate some of the
    highest revenue, operating and incremental margin opportunities for
    Reservoir Description operations. It is significant to note that Core
    continued to work virtually all high pressure and high temperature
    reservoir fluid phase-behavior projects in the deepwater GOM, aided by its
    specialized mobile lab capabilities.
    
  oReduced Activity in Established Unconventional Plays.
    Also impacting expected revenue growth and contribution to earnings were
    client decisions to reduce the number and length of cores being cut in
    established and maturing unconventional plays in the Marcellus, Bakken,
    Niobrara, and Eagle Ford formations.
    
    It is significant to note the moderation in coring activities in
    established unconventional plays are substantially being offset by new
    coring and reservoir fluids projects in emerging plays such as the
    Tuscaloosa Marine Shale (TMS), the Woodford in the south central Oklahoma
    oil play (SCOOP), and the Spraberry, Codell and Parkman formations, among
    others. Core also projects the number of coring and reservoir fluid phase
    behavior projects from the Permian Basin will continue to increase in the
    second half of 2014.
     
  oBasic Technology Perforating Charge Pricing
    Production Enhancement saw pricing for its most basic perforating charge
    technology stabilize late in the second quarter of 2014. Core continues
    to phase out basic perforating charge technology which now represents less
    than 20% of Production Enhancement revenue. Core expects to introduce
    additional new high margin perforating systems in the second half of 2014
    to further reduce revenue levels from basic technology systems.

Segment Highlights

Core Laboratories reports results under three operating segments: Reservoir
Description, Production Enhancement, and Reservoir Management. All operating
results exclude foreign currency translations from the second quarter of 2014
as referenced in the non-GAAP reconciliation.

Reservoir Description

Reservoir Description operations posted second quarter 2014 revenue of
$130,589,000 and operating income of $35,567,000 yielding operating margins of
27%. Although the revenue established a second quarter record, lower relative
amounts of higher-margin, international and deepwater related revenue, as the
Company has previously announced, weighed on year-over-year revenue growth and
expansion of operating margins.

Reservoir Description operations continued to benefit from increasing amounts
of core and reservoir fluids samples from emerging unconventional tight-oil
plays and the evaluation of potential unconventional oil plays in North
America. Interest levels in evaluating the potential of unconventional plays
in Europe, both oil and natural gas related, increased throughout the quarter.

Core continues to expand its high-pressure, high-temperature reservoir fluids
phase behavior service base in the deepwater GOM, where Core essentially works
all projects outsourced by the major operators. Core is commissioning a new
ultra-high-pressure phase behavior system with a pressure-measurement
capability to 30,000 psi, giving the Company the highest-rated pressure system
in the industry.

Core is studying the effects of using low-salinity water in floods to increase
estimated ultimate recovery rates in an oilfield that has employed other
enhanced oil recovery techniques in the past. The Company also is determining
the effectiveness of straight CO[2] injections versus water-alternating-gas
("WAG") injections, and WAG processes are showing excellent results in one
field. Core believes that combinations of low-salinity and miscible-gas
floods will significantly impact future ultimate recovery rates.

Several large-scale Middle East projects are ongoing to improve the production
of natural gas from unconventional reservoirs. Core has been requested to
expand its analytical capabilities in the Middle East to meet increased demand
from numerous clients who are evaluating multiple, unconventional natural gas
plays in the region.

Also in the Middle East, Core signed its largest Reservoir Description
contract ever with the Kuwait Oil Company. The multi-year contract for tens
of millions of dollars is for furnishing cutting-edge, reservoir-condition
reservoir rock properties and reservoir fluids phase behavior technologies.
This contract replaces a smaller contract that recently expired.

Production Enhancement

Production Enhancement operations posted records for both second quarter
revenue of $110,993,000 and operating income of $37,345,000, yielding margins
of 34%. Year-over-year growth in North America was offset by declining sales
in Latin America, particularly in Venezuela and Argentina where Core no longer
serves those markets through a local presence. Although results were up only
marginally compared with the year-ago quarter, as guided earlier, Production
Enhancement revenue, and especially operating income, ramped up late in the
quarter to yield Production Enhancement's most profitable month ever in June.
This portends well for the third quarter because these trends continued into
the first three weeks of July.

The Company continued to increase market penetration with its
FlowProfiler™technology in the second quarter of 2014. This technology is
helping operators in liquid-rich plays to evaluate and optimize the
effectiveness of their completion and development strategies. FlowProfiler
diagnostic tracers are also being used to identify communication between frac
stages from the treatment well to surrounding offset wells, enabling the
operator to make informed decisions on lateral spacing and, of increasing
importance, on the vertical spacing of horizontal wells. FlowProfiler
technology is being combined with Core's other diagnostic services to provide
a comprehensive understanding of the completion and to identify opportunities
to increase hydrocarbon production and ultimate recovery.

The introduction of FlowProfiler oil-soluble tracers in July will increase the
number of unique tracers from 12 to 32, which should begin to impact
Production Enhancement revenues in the third and fourth quarters. The
introduction of several new SpectraChem^® diagnostic tracers in the second
quarter of 2014 has already started having an impact on activity levels. The
additional tracers are allowing operators to more discretely evaluate the
effectiveness of the growing number of frac stages in horizontal wells.

The strategic move over the last year to add Regional Engineering Advisors is
helping to grow Core's business by shifting from sales on a single well basis
to larger, longer-term, multi-well projects. The engineering advisors were
placed regionally to meet client demand for access to Core's industry
recognized experts. This approach has been successful in helping clients
across North America increase production through changes in completion designs
and development strategies.

There was also increased market penetration during the second quarter of 2014
by Core's KODIAK Enhanced Perforating Systems™ energetic technology, which
combines the Company's HERO^® High Efficiency Reservoir Optimization
perforating charges (now API-certified as the industry's deepest penetrating
perforating charges) with proprietary accelerator propellant pellets to boost
the effectiveness of the perforating/stimulating event. The detonation of the
perforating charge initiates a complex, sequentially oxidizing reaction of the
solid rocket fuel pellets, thereby generating a high-pressure pulse of gases.
This pulse then initiates and propagates fractures ("mini-fracs") into the
unconventional reservoir sequence, creating cleaner perforating tunnels,
improving stimulant/proppant injection, and increasing hydrocarbon
production. Moreover, the propellant-activated mini-frac can potentially
reduce the frac breakdown pressure of the reservoir by as much as 15%.
Lowering the formation frac breakdown pressure will, in turn, reduce the
amount of compressive horsepower needed at the surface, thereby lowering frac
stimulation costs. Core's suite of perforating technology products and
services will produce systems that maximize cluster efficiencies and
significantly increase the volume of stimulated reservoir rock.

Reservoir Management

Reservoir Management operations posted second quarter 2014 revenue of
$25,980,000 and operating income of $9,568,000, its most profitable second
quarter ever. Operating margins reached 37%.

Reservoir Management continued to expand its geo-engineering projects in the
Permian Basin that are focused on improving oil recovery factors from the
multiple horizons being exploited by operators. The Delaware Basin project
has focused on the Avalon Shale, Bone Spring Sands and Wolfcamp formations
with the play expanding into the Southern Delaware Basin. Twenty-four
companies are currently participating in the project and have contributed
core, well logs, and completion and production data for 38 wells, which are
being analyzed and evaluated by Core's project team. The project is on target
to include over 72 wells.

The Midland Basin project has focused on the Wolfcamp, Cline, Spraberry, and
Dean formations, and it has recently been expanded to include the Barnett and
Woodford sections. Forty-eight companies are now participating with
membership continuing to increase. Reservoir core samples have been
contributed from over 80 wells, with some wells represented by over a thousand
feet of core. The project will eventually have over 130 cored pilot wells.
Similar to the Delaware Basin project, the scope of the project includes
reservoir characterization, fracture stimulation optimization, and production
best practices for oil recovery.

During the quarter, Reservoir Management also initiated a new project directed
at expanding the Woodford oil play in Oklahoma. Recent successes in the SCOOP
areas of the Anadarko Basin are driving possible expansion of the play to
include other areas. A total of nine operators have joined the project to
date.

Internationally, Reservoir Management has continued to increase its portfolio
of West Africa and East Africa deepwater projects. Regional petroleum systems
studies are being performed in cooperation with national oil and gas
ministries in Cote d'Ivoire, Senegal, Tanzania and Mozambique.

Free Cash Flow, Share Repurchases, Dividends, Capital Returned To Shareholders

During the second quarter of 2014, Core Laboratories generated $65,609,000 of
cash from operating activities and had capital expenditures of $12,119,000,
yielding $53,490,000 in FCF. The lower year-over-year FCF reflects a heavily
weighted capital expenditure program for the first half 2014, as necessitated
by the increased activities of Core's clients. The first half weighting of
capital expenditures should yield record levels of revenue, operating income
and FCF during the second half of 2014. In spite of the heavily weighted
capital expenditure program in the first half of 2014, Core converted over 20
cents of every revenue dollar into FCF, one of the highest conversion rates
for the oilfield services sector.

Core's FCF in the second quarter 2014, along with borrowings from the
Company's revolving credit facility, was used to pay $22,400,000 in cash
dividends and to repurchase approximately 455,000 shares. Core's outstanding
diluted share count of 44,707,000 shares stands at its lowest level in 16
years. In all, Core has reduced its diluted share count approaching 39,000,000
shares and has returned over $1.83 billion to its shareholders, -- equaling
over $40 per diluted share-- through diluted share count reductions, special
dividends, and quarterly dividends since implementing its Shareholder Capital
Return Program over 11 years ago.

On 14 April 2014, the Company's Board announced a quarterly cash dividend of
$0.50 per share of common stock that was paid on 23 May 2014 to shareholders
of record on 25 April 2014. This amount, if paid each quarter of 2014, would
equal a payout of $2.00 per share of common stock. Dutch withholding tax was
deducted from the dividend at the rate of 15%.

On 8 July 2014, the Board announced a quarterly cash dividend of $0.50 per
share of common stock payable in the third quarter of 2014. The third quarter
cash dividend will be payable on 18 August 2014 to shareholders of record on
18 July 2014. Dutch withholding tax will be deducted from the dividend at a
rate of 15%.

Return On Invested Capital

As reported in previous quarters, the Company's Board has established an
internal performance metric of achieving a return on invested capital ("ROIC")
in the top decile of the oilfield service companies listed as Core's peers by
Bloomberg Financial. The Company and its Board believe that ROIC is a leading
performance metric used by shareholders to determine the relative investment
value of publicly traded companies. Further, the Company and its Board
believe shareholders will benefit if Core consistently performs in the highest
ROIC decile among its Bloomberg peers. According to the latest financial
information from Bloomberg, Core Laboratories' ROIC was the highest of any of
the oilfield service companies listed in its Comp Group. Comp Group companies
listed by Bloomberg include Halliburton, Schlumberger, Carbo Ceramics, FMC
Technologies, Baker Hughes, Cameron International, Oceaneering, National
Oilwell Varco, and Oil States International, among others.

Several of the peer companies failed to post ROIC that exceeded their WACC,
thereby eroding capital and shareholder value. Core's ratio of ROIC to WACC
is the highest of any company in the Comp Group. Core will update its ROIC
compared with the oilfield services sector for the second quarter of 2014 in
its third quarter 2014 earnings release.

Third and Fourth Quarter 2014 Revenue and EPS Guidance

Core anticipates that North American activity will continue to increase for
emerging unconventional oil plays while activity will remain at reduced, yet
stable, levels in established unconventional tight-oil and gas plays. The
Company also anticipates higher numbers of deepwater coring programs,
especially in the deepwater Gulf of Mexico. The volume of high-pressure,
high-temperature reservoir fluid phase behavior projects is also expected to
remain at high levels. Internationally, in response to very supportive Brent
crude prices, the Company projects modest growth through the end of 2014, and
expects higher levels of activity entering 2015.

Therefore, for the third quarter of 2014, Core expects revenue of
approximately $280,000,000 to $290,000,000 and EPS to range between $1.49 and
$1.52, up sequentially by approximately 11%. Within those ranges, operating
margins are expected to be approximately 32%, with year-over-year incremental
margins as high as 60%. A 23% effective tax rate is assumed for the third
quarter of 2014. FCF is expected to be between $77,000,000 and $81,000,000.

For the fourth quarter of 2014, Core expects revenue of $285,000,000 to
$295,000,000, with EPS ranging between $1.56 and $1.61. Within those ranges,
operating margins in the quarter are expected to be approximately 33% while
exiting the year at 34% with year-over-year incremental margins as high as
60%. A 24% effective tax rate is assumed for the fourth quarter of 2014 as a
result of operational activity expected in higher tax rate jurisdictions. FCF
for the final quarter of 2014 is expected to range between $81,000,000 and
$85,000,000.

All operational guidance excludes any foreign currency translations and any
shares that may be repurchased other than already disclosed.

The Company has scheduled a conference call to discuss Core's second quarter
2014 earnings announcement. The call will begin at 7:30 a.m. CDT/2:30 p.m.
CEST on Thursday, 24 July 2014. To listen to the call, please go to Core's
website at www.corelab.com.

Core Laboratories N.V. (www.corelab.com) is a leading provider of proprietary
and patented reservoir description, production enhancement, and reservoir
management services used to optimize petroleum reservoir performance. The
Company has over 70 offices in more than 50 countries and is located in every
major oil-producing province in the world.

This release includes forward-looking statements regarding the future revenue,
profitability, business strategies and developments of the Company made in
reliance upon the safe harbor provisions of Federal securities law. The
Company's outlook is subject to various important cautionary factors,
including risks and uncertainties related to the oil and natural gas industry,
business conditions, international markets, international political climates
and other factors as more fully described in the Company's 2013 Form 10-K
filed on 13 February 2014, and in other securities filings. These important
factors could cause the Company's actual results to differ materially from
those described in these forward-looking statements. Such statements are based
on current expectations of the Company's performance and are subject to a
variety of factors, some of which are not under the control of the Company.
Because the information herein is based solely on data currently available,
and because it is subject to change as a result of changes in conditions over
which the Company has no control or influence, such forward-looking statements
should not be viewed as assurance regarding the Company's future performance.
The Company undertakes no obligation to publicly update any forward looking
statement to reflect events or circumstances that may arise after the date of
this press release, except as required by law.





CORE LABORATORIES N.V. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(amounts in thousands, except per share data)

(Unaudited)
                        Three Months Ended          Six Months Ended
                        30 June 2014  30 June 2013  30 June 2014  30 June 2013
REVENUE                 $  267,562    $  263,139    $  530,465    $  524,066
OPERATING EXPENSES:
     Costs of services  168,158       163,503       329,827       327,148
     and sales
     General and
     administrative     11,148        11,173        21,667        23,982
     expenses
     Depreciation and   6,318         5,964         12,951        11,989
     amortization
     Other (income)     (2,196)       630           (941)         41
     expense, net
OPERATING INCOME        84,134        81,869        166,961       160,906
Interest expense        2,794         2,263         5,157         4,532
INCOME BEFORE INCOME    81,340        79,606        161,804       156,374
TAX EXPENSE
INCOME TAX EXPENSE      17,244        19,664        36,555        39,700
NET INCOME              64,096        59,942        125,249       116,674
NET INCOME ATTRIBUTABLE
TO NON-CONTROLLING      362           266           451           482
INTEREST
NET INCOME ATTRIBUTABLE
TO CORE LABORATORIES    $  63,734     $  59,676     $  124,798    $  116,192
N.V.
Diluted Earnings Per    $  1.42       $  1.29       $  2.77       $  2.51
Share:
WEIGHTED AVERAGE
DILUTED COMMON SHARES   44,910        46,128        45,045        46,313
OUTSTANDING
SEGMENT INFORMATION:
Revenue:
Reservoir Description   $  130,589    $  129,222    $  255,845    $  254,467
Production Enhancement  110,993       110,199       221,273       217,630
Reservoir Management    25,980        23,718        53,347        51,969
     Total              $  267,562    $  263,139    $  530,465    $  524,066
Operating income:
Reservoir Description   $  36,341     $  36,918     $  71,194     $  71,769
Production Enhancement  37,660        37,239        74,862        71,477
Reservoir Management    9,794         7,475         20,268        17,321
Corporate and other     339           237           637           339
     Total              $  84,134     $  81,869     $  166,961    $  160,906





CORE LABORATORIES N.V. & SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET

(amounts in thousands)
ASSETS:                                         30 June 2014  31 December 2013
                                                (Unaudited)
Cash and Cash Equivalents                       $  29,548     $   25,088
Accounts Receivable, net                        200,990       201,322
Inventory                                       51,392        46,821
Other Current Assets                            40,312        30,637
        Total Current Assets                    322,242       303,868
Property, Plant and Equipment, net              143,926       138,824
Intangibles, Goodwill and Other Long Term       222,960       218,318
Assets, net
        Total Assets                            $  689,128    $   661,010
LIABILITIES AND EQUITY:
Accounts Payable                                51,292        50,821
Other Current Liabilities                       82,632        84,954
        Total Current Liabilities               133,924       135,775
Long-Term Debt & Lease Obligations              333,000       267,002
Other Long-Term Liabilities                     85,923        88,844
Total Equity                                    136,281       169,389
        Total Liabilities and Equity            $  689,128    $   661,010



CORE LABORATORIES N.V. & SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW

(amounts in thousands)

(Unaudited)
                                               Six Months Ended
                                               30 June 2014
CASH FLOWS FROM OPERATING ACTIVITIES           $   131,233
CASH FLOWS FROM INVESTING ACTIVITIES           (23,553)
CASH FLOWS FROM FINANCING ACTIVITIES           (103,220)
NET CHANGE IN CASH AND CASH EQUIVALENTS        4,460
CASH AND CASH EQUIVALENTS, beginning of period 25,088
CASH AND CASH EQUIVALENTS, end of period       $   29,548

Non-GAAP Information

Management believes that the exclusion of certain income and expenses enables
it to evaluate more effectively the Company's operations period-over-period
and to identify operating trends that could otherwise be masked by the
excluded Items. For this reason, we used certain non-GAAP measures that
exclude these Items; and we feel that this presentation provides the public a
clearer comparison with the numbers reported in prior periods.

Reconciliation of Operating Income

(amounts in thousands)

(Unaudited)
                                            Three Months Ended
                                            30 June 2014
Operating income                            $    84,134
Foreign exchange (gains) losses             (1,300)
Operating income excluding foreign exchange $    82,834

 

                                         Three Months Ended 30 June 2014
                                         Reservoir    Production   Reservoir
                                         Description  Enhancement  Management
Operating income                         $  36,341    $  37,660    $  9,794
Foreign exchange (gains) losses          (774)        (315)        (226)
Operating income excluding foreign       $  35,567    $  37,345    $  9,568
exchange



Reconciliation of Net Income

(amounts in thousands)

(Unaudited)
                                             Three Months Ended
                                             30 June 2014
Net income                                   $    63,734
Foreign exchange (gains) losses (net of tax) (1,024)
Impact of lower effective tax rate           (2,242)
Net income excluding specific items          $    60,468



Reconciliation of Earnings Per Diluted Share

(Unaudited)
                                       Three Months Ended  Three Months Ended
                                       30 June 2014        30 June 2013
Earnings per diluted share             $     1.42          $     1.29
Foreign exchange (gains) losses (net   (0.02)              0.03
of tax)
Impact of lower effective tax rate     (0.05)              —
Pro-Forma earnings per diluted share   $     1.35          $     1.32

Free Cash Flow

Core uses the non-GAAP measure of free cash flow to evaluate its cash flows
and results of operations. Free cash flow is an important measurement because
it represents the cash from operations, in excess of capital expenditures,
available to operate the business and fund non-discretionary obligations. Free
cash flow is not a measure of operating performance under GAAP, and should not
be considered in isolation nor construed as an alternative consideration to
operating income, net income, earnings per share, or cash flows from
operating, investing, or financing activities, each as determined in
accordance with GAAP. You should also not consider free cash flow as a measure
of liquidity. Moreover, since free cash flow is not a measure determined in
accordance with GAAP and thus is susceptible to varying interpretations and
calculations, free cash flow as presented may not be comparable to similarly
titled measures presented by other companies.

Computation of Free Cash Flow

(amounts in thousands)

(Unaudited)
                                          Three Months Ended  Six Months Ended
                                          30 June 2014        30 June 2014
Net cash provided by operating            $    65,609         $   131,233
activities
Capital expenditures                      (12,119)            (19,787)
Free cash flow                            $    53,490         $   111,446



Logo- http://photos.prnewswire.com/prnh/20100712/DA33898LOGO

SOURCE Core Laboratories N.V.

Website: http://www.corelab.com
Contact: Richard L. Bergmark, CFO, + 1 713 328 2101, or Chris Hill, Investor
Relations, + 1 713 328 6401, investor.relations@corelab.com
 
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