Core Labs 2Q15 Earnings Call Notes

Crude markets are will on their way to balance

“Core believes that worldwide crude oil supply and demand markets are well on their way to a balance at year-end, 2015. On the crude oil supply side, U.S. production peaked in April of this year.”

Core sees a V shaped recovery

“Core sees the V-shape recovery, led by higher commodity prices and followed by worldwide drilling activities, starting to increase in early 2016.”

Book equity is not a proxy for solvency

“Clearly, book equity does not represent the solvency of a company. And, we note that several S&P 500 Companies who generate significant levels of free cash, also have negative book equity, because, they return that free cash to their owners, just as we have done. We do not have debt or contracts compliance requirements, to report positive net worth.”

Deepwater projects actually benefitting as oil cos focus capex on developing known reservoirs

“Those are a little bit longer term projects. If you look at some of the comments made by the major operating companies in the deepwater, Conoco being the most recent, they talked about creating value from discoveries that have already been made. So, as opposed to looking at CapEx for drilling exploratory wells, CapEx is now being focused on development.”

Unconventional OUS are tied to a few world class developments

” If you just look at the major, because right now the concentration on the unconventionals outside of North America are tied to, really, a few world-class developments. All of which are in the earlier stages.”

The Middle Eastern producers may not be able to keep producing at narrow spare capacity

“If we look at just production levels in the Middle East, you have all countries producing at, what we would think, would be maximum amounts of the amount that they can prove, very little spare capacity there. These are carbonate reservoirs. One of the dangers of producing maximum amounts, from carbonate reservoirs, is you start drawing larger amounts of water. And we would think, at the levels at which we see production throughout the Middle East, that they would be in danger if they continue with those levels, for producing larger amounts of water.”

International should lead the V-shaped recovery

“Very good. We see that being led by international. And, they are going to be tied to crude oil related projects. You will see a lot of these deepwater projects. I believe there are 18 that are looked to be sanctioned here, the end of 2015, 2016 and 2017. That will lead your international activity recovery and again, all on the development side. We don’t see much exploration happening there. So, we will start to see upticks in the amount of international spending and activity levels. And then, followed by North America onshore”