Core Labs 1Q15 Earnings Call Notes

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Crude oil markets are well underway for balance by year end

” Core believes that the worldwide crude oil supply and demand markets are well underway for year end 2015 balance. On the crude oil supply side, U.S. production is beginning to rollover as we speak. No one needs to look at Bakken production for January and February of this year. It has already fallen by 50,000 barrels a day year-over-year or about 4%.

With respective decline curve rates of 70%, 40% and 20% for the first three years of production in the Bakken, significant year-over-year declines will manifest themselves as 2015 progresses and into a sharp decline in 2016. ”

Core expects a v shaped recovery

“Core sees a V shaped recovery led by higher commodity prices and then shortly there followed by increased worldwide drilling activities in the start in early 2016.”

Production could fall significantly in 2016

“We now believe the U.S. supply growth will roll over in May or June of 2015 and that year-over-year crude oil production will be flat to down. Therefore, the current activity levels in the field, U.S. production could fall significantly in 2016. While worldwide oil production continues to stagnate or decrease slightly because recent international production gains may not be sustainable over the long-term. We continue to project North American and international activity levels to decline in the second quarter.”

Refrac is not the easiest thing to do

“If we look at refracs, this is not the easiest technological — it’s not the easiest thing to do. First of all, you’ve got sliding sleeves in wellbore. Refracs are kind of out of balance. Moreover, if you look at just horizontal wells that have been perforated and stimulated using plug-and-perf, those are no longer candidates for additional plug-and-perf. And we have to go in with specialized technologies. It just so happens that Core Lab’s HTD-Blast perforating system delivery system is especially made exactly for that.”

Refrac is attractive at lower commodity prices

“Obviously the lower — the longer that we have lower commodity prices that becomes a bigger market. If we get a rebound in commodity prices as per our theory, the refrac market will be there but it will never realize the size it would, with let’s say, $50 WTI and $60 Brent.’

Everybody can get data from the Bakken

” in using Bakken data, because — and the reason we like to talk about the Bakken is because everybody can use that data available from northdakota.gov just hit Bakken production.”

Core’s operations have positioned company for increased activity in early 2016

“So in summary, Core’s operations have positioned the company for increased activity levels in early 2016, but we know significant challenges stills await in 2015. However, we have never been better operationally or technologically positioned to help our clients maintain and expand their production base.”