Core Labs 3Q16 Earnings Call Notes

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Core Laboratories NV (CLB) CEO David Demshur on Q3 2016 Results

Crude supply/demand is balancing

“Thanks, Gwen. Core believes that worldwide crude oil supply and demand markets are close to balancing, and will balance by the end of 2016. On the crude oil supply side, U.S. production peaked at 9.7 million barrels a day in March of 2015, and has since fallen by over 1.3 million barrels per day owing to high decline curve rates associated with tight oil reservoirs.”

Avg productivity of a Bakken well is down 26% since peaking in 14

“An excellent example that the decline curve always wins and never sleeps and the difficulty in reversing fall in production totals in tight oil reservoirs is the Bakken [ph] formation. Bakken production is down over 233,000 barrels a day since its peak in December of 2014. Since that peak there have been 1,770 wells added to a producing base of 9,000 wells of production leading to Bakken’s net 12% decline curve rate over that period from December of 2014 up through August production. However, the average productivity for Bakken producing well is down 26% since peaking in 2014. As long as Bakken completions fall below 130 per month, Bakken production will continue to fall in 2017.”

The global production decline curve is approximately 3.3%

“Globally Core estimates that the net crude oil production decline curve is currently at approximately 3.3%. Applying the 3.3% net decline curve rate to the worldwide crude production of approximately 85 million barrels per day means that the planet will need to produce approximately 2.8 million new barrels by this date next year to maintain current worldwide production capacity.”

US production is probably going to be down once again in 17

” each individual well producing in the Bakken, which now number about 10,700, the productivity is down 26%. So to turn that decline out of these tight reservoirs is going to take Herculean effort. We just don’t see that happening in 2017, and hence we see production down in the U.S. once again.”

We don’t see an upward trajectory to US production until the second half of next year

“Yes, Marc, we actually — at the current rig count rates we actually don’t see a change in the trajectory of downward U.S. production. I would say at current levels, probably into second half of next year, maybe fourth quarter…We are — for us to see a significant change in U.S. production we would need to have about 900 rigs drilling for oil for a 12 to 18-month period. And that would get us on a trajectory where we could have strong additions to production.”