Core Labs 3Q15 Earnings Call Notes

Crude markets well on their way to balance by year end or early next year

“we believe that the worldwide crude oil supply and demand markets are well on their way to balance by year-end or in early 2016. On the crude oil supply side, U.S. crude production peaked in April of 2015 and over 9.6 million barrels of oil per day.”

Middle east production will continue to fall

“Core believes the Middle East production levels will continue to fall in Q4 led by declines in Iraq notwithstanding unknown and unpredictable crude oil supplies from Iran. ”

Core continues to see a V shaped recovery

“Core continues to see a V-shaped recovery getting underway in 2016. The industry is still on the left hand side of this V going into Q4 perhaps with activity upticks in early 2016.”

Budgets should continue to come down in 2015

“In spite of our view of a recovery in 2016, for the fourth quarter 2015, we project further industry activity declines in North America tight oil plays. Currently, U.S. rig counts are down 8% from average third quarter 2015 levels. [Oil] company 2015 operating budgets are at very low levels and nearing exhaustion which we believe will force the North America rig counts to further contract later in the fourth quarter.”

We think Deepwater will be better next year than this year

“I would say in the deepwater Gulf of Mexico, visibility going into Q1 and Q2 is pretty good. Other deepwater slots around the world, offshore eastern South America, West Africa, some parts of the North Sea and Asia Pacific, the visibility not as clear, but certainly we think we will do as well in the deepwater that we did in Q3 and Q4 this year in Q1 and Q2 of next year.”

Technologically sophisticated clients are focused on ROIC, better for Core Labs

“when you look at our technologically sophisticated clients, they still are looking at returns and are buying technology to enhance their return on their invested capital, and you do have a number of independents, that all they are looking and doing is to drive down costs. They don’t tend to be as good a client for Core Lab as the technologically sophisticated clients”

EORs in unconventional wells have not peaked

“No they have not peaked. What we’re seeing right now is an artifact of low commodity prices because we’re looking at the operators drilling up their very best acreage.”

Still room for more stages and longer laterals

“we know that we can push a hydrocarbon, a long chain hydrocarbon about 120 feet at an average tight oil reservoir, so if that is indeed the case we should have a stage every 240 feet or feet apart, stages are still more than on average 400 feet apart, so we still have some optimization going on the drilling and completion stimulation techniques. We are still proponents of longer laterals, and if you look at companies that are drilling the longest laterals out there Pioneer Natural Resources come to the mind. They are 10,000 footers, but looking at the number of stages they are putting in their in the amount of profit that’s still a blueprint for success and higher EORs.”