Core Laboratories' CEO Discusses Q2 2012 Results - Earnings Call Transcript

Core Laboratories NV (CLB)

Q2 2012 Results Earnings Call

July 19, 2012 8:30 AM ET


David Demshur – Chairman, President and CEO

Dick Bergmark – Executive Vice President and CFO

Monty Davis – Chief Operating Officer


James West – Barclays

Jim Crandell – Dahl Rose

Kurt Hallead – RBC Capital

Rob MacKenzie – FB

John Daniel – Simmons

Blake Hutchison – Howard Weil

Stephen Gengaro – Sterne, Agee

John Lawrence – Tudor, Pickering



Good morning. My name is Kimberly, and I will be your conference operator today. At this time, I would like to welcome everyone to the Core Lab Q2 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Mr. David Demshur. Please go ahead, sir.

David Demshur

Thanks, Kimberly. I’d like to say good morning to everybody in North America, good afternoon in Europe and good evening to all of the listeners in Asia-Pacific. We’d like to welcome all of our shareholders, analysts, and most importantly, our employees to Core Laboratories’ second quarter 2012 earnings conference call.

This morning I’m joined by Dick Bergmark, Core’s Executive Vice President and CFO. And also again this morning we are joined by Core’s COO, Monty Davis, who’ll present the detailed operational review.

The call will be divided into five segments. Dick will start by making remarks regarding forward-looking statements. Then we’ll come back and give a brief investor update and highlight the three financial tenets by which Core’s executive management executes the company’s growth strategies.

We believe these three tenets have produced industry leading shareholder returns and returns on investment capital. We will also discuss Core’s long health philosophy of returning excess capital back to our shareholders.

Then Dick will come and follow-up with a detailed financial overview and additional comments regarding building shareholder value and Core’s industry outlook for the third quarter of 2012, which confirm our confidence in the trends of increasing activities in unconventional oil reservoirs in North and South America, and North Africa, and especially the international deepwater activities tied to crude oil and large LNG developments.

Then Monty will go over Core’s three operating segments, detailing our progress and discussing the continued successful introduction of new Core Lab technologies and services, and then highlighting some of Core’s operations and major projects. Then we’ll open the phones to a Q&A session.

So I’ll now turn it over to Dick for remarks regarding forward-looking statements. Dick?

Dick Bergmark

Before we start the conference this morning, I’ll mention that some of the statements that we make during this call may include projections, estimates, and other forward-looking information. This would include any discussion of the company’s business outlook.

These types of forward-looking statements are subject to a number of risks and uncertainties relating to the oil and gas industry, business conditions, international markets, international political climate and other factors including those discussed in our ‘34 Act filings that may affect our outcome.

Should one or more of these risks or uncertainties materialize or should any one of our assumptions prove incorrect actual results may vary in material respects from those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

For more detailed discussion of some of the foregoing risks and uncertainties see item 1A risk factors in our annual report on Form 10-K for the fiscal year ended December 31, 2011, as well as the other reports in registration statements filed by us with the SEC or the AFM.

Our comments include non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures is included in the press release announcing our second quarter results. Those non-GAAP measures can also be found on our website.

With that said, I’ll pass the discussion back to David.

David Demshur

Okay. Thanks, Dick. I’d like to give a quick investor update. Core’s operation produced another solid quarter, as the company can really do benefit from our continues focus on and the increase in international and deepwater offshore activities, and unconventional oil plays in response to relatively high oil prices and dwindling global spare oil producing capacity.

The focus on crude oil related projects continued to build in 2012 as we discuss the projected decrease in natural gas drilling activities in North America on our last four previous conference calls. Therefore Core’s revenue mix now is closer to 80% oil and 20% natural gas, a shift from the previous 70/30 mix earlier.

Moreover, most of the natural gas related projects emanate from the international theaters and these LNG projects are related to major developments in the Eastern Mediterranean, East Africa and Western Australia.

Turning to our ops, Core’s reservoir description results reflected the focus away from natural gas and the positive increases in both international and deepwater activities, which continued into 2012.

Core Lab dominates these deepwater core analysis and reservoir fluid markets capturing virtually all outsourced projects from offshore Brazil, West Africa, East Africa that includes thousands and thousands of feet of core that has been cut in East Africa, the Eastern Mediterranean and the deepwater markets throughout Asia-Pacific.

Looking at reservoir management, they posted another strong quarter reflecting additional oil company support for its worldwide joint industry projects in oil shales and international areas of interest like the deepwater areas offshore Western Brazil where Core Lab currently ops six joint industry project and Petrobras continues to be Core Laboratories largest and most important national oil company client.

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