CLB - Earnings call transcript Q1 2019

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Operator

Good day and welcome to the Core Lab's Q1 2019 Earnings Call and Webcast. [Operator Instructions] Please note that this event is being recorded. I would now like to turn the conference over to Mr. David Demshur. Thank you, and over to you, sir.

David Demshur

Okay. Zed. Thanks North Pacific. in in evening and good Asia in America, morning Europe, afternoon good Good like welcome Laboratories would importantly earnings I to call. our and shareholders, conference employees most analysts to Core first XXXX all quarter of our Core's This give who a Chris will review. CFO morning financial by I'm joined Hill, detailed review. who a Head Core's forward-looking on statements; Larry make Bruno, what detailed after Core Schreffler, Core's will XXXX the Gwen projects who reading present will President operational of IR comments for QX and will into divided call The segments. be five Gwen by remarks forward-looking regarding will making start statements.

general follow building detailed comments macro a three We quarter the Core's updating and additional will and Core and back value overview shareholder pertaining XXXX with a discussing company build then performance, Lab's outlook, review will Chris employs financial to Core's regarding trends financial come tenets review then open sequential industry operations by give long-term followed on continued expected we future Gwen over session. shareholder which a the current second industry our to and the Gwen will to environment discussing then value. Core's Larry outlook technologies, of Core progress and and segments Then pertains forward-looking two Lab operating Core's for highlighting Then phones as up of back we'll major detailing new Q&A it introduction projects for regarding a some I'll the it worldwide. Gwen? turn statements. now and will to go Core. remarks

Gwen Schreffler

from other a of conditions, relating and forward-looking would oil mention uncertainties gas to any are some we during include make and international we and projections, may start types these outcome. may factors more conference no obligation to subject in vary Should our business as that Act forward-looking result information. prove statements These including or results events of the statements, otherwise. materialize or include should Before risks material of outlook. revise the projected future company's of whether our statements. any the morning, respects markets, climate, This the affect industry, this of a number that and filing the information, other in political of those one risks that XX the of those or publicly of discussion to or our or international call forward-looking new assumptions any update may call actual I'll discussed uncertainties We forward-looking estimates incorrect, business undertake in statements

XX-K, discussion and and with Annual detailed filed more the a of recent Item foregoing Factors and see XA Report For on the as uncertainties, Form Risk most as SEC of by well AFM. other risks in the our us reports statements some registration

can is non-GAAP measures Our the results. discussion most back first announcing Those measures. to directly in Dave. non-GAAP comments found the that financial I'll on our release GAAP be included financial website. With to comparable quarter include the Reconciliation our measures said, press also pass

David Demshur

Thanks cash trends operating comments encouraged invested emphasizing capital companies flow Gwen. is three Core investors. heavy today's providers. wireline pumpers whose to and clients technology technologically-sophisticated be benefits users This by are into We've and returns Core's got industry as pressure and are buying are financial solutions trend tenets. operating commodity-driven demanded within they and on that drillers, by over Core on free some offered of tend

on uniquely fewer well will analysts samples first positioning upsizing upsizing for Core to determine spacing optimal necessary sessions interference. host In to today's parent-child fluid competence, the rightsizing, all well of our XXXX, industry and increase. clients the provide Upsizing wells. eliminate Detailed Most analysis is Core better well rock optimal provide and determine to but various qualities will During sophisticated drill Core horizontal optimal industry spacing, importantly, quarter, positioned types crude watchword. and to operator calls technologically conference data well and well well but and of several oil data their well wells effects positioning. and mechanics, rock spacing all the to is continued micro-lithologies, information to technology relationships. to driven discuss and returns deleterious groups

stimulated, acquisition six maximum from and cost programs the wellbore. owing produce to reservoir to been growing Core horizontal their stimulated more be add Related maximizes the forces. stimulated stimulation but in greater many It not to or yielding technological well the has volume from continue they more Core As and as XXXX. see possible the for perforating to lower the being industry Laboratories. soon returns. way are of less this, the market, in our pads of clusters and SPECTRASTIM, a frac with stages cash Technologies costly Their for to is levels and than the as clients' Reservoir win maximum and reservoir Lab our lengths reasons perf free rock and and that region Core's revenue on clusters Addressing stage wells verify fewer a maximizing Enhancement well reducing The to avoid goals Core technologies wells drilled each critical a that as owing again activity eliminating and wellbore per to single count. are are aborted program amounts combination neighboring while will investment five completion completing technology increasing of flow using near producible reserve. wells interference more perf ensures the will loss Production to pad diagnostics are pad Description SPECTRASCAN, more or lateral will frictional EDS stimulated wells drilled, production completed charge for and can growth related are channels stage rebelize recent proximity Perf and being complex source FLOWPROFILER changing interfering be more to clusters. Global XX to Guardian near This stages stage clusters are of more becomes rock volume interference. Long and to The to new time well well Lab close XX reservoir clients location. as the is in

received industry-leading have feedback company's be program designed preassembled GoGun architecture client is the specifically each our The an positive system time. the via can used. open to be guns GoGun. Therefore on based in perforating reservoir the perforating allowing reservoir all energetic and We properties

perforating addressable any fire small. component for guns new energetics industry-leading electrical in Select no still multiple preassembled are the most Switch the preassembled Our gun elements can requires critical charges and Fire and ramping. the Core's or downhole the market of is Remember charges are Currently technology. gun

- share $XXX will less. Core program or at that targeting three approximately to of sleeps. absent grow from core and is Core's years the projects Remember X-year streams needed market last that the queued the XXXX. sales still for is However future that million projects from the The XX activity XXXX been description The XXXX, in are this market XXXX. that clients that has important revenue Reservoir - mainly that another revenue to increase back demands. case be in $XXX more energetics. FIDs is bolster in these XX and million the foreshadow Core approved of deepwater in and discussions never is production and will have in evident dating client longer while of longer international been in market in end trend for or revenue always should of start as our XXXX, projects most to cycle to Revenue XX Description up increase cycle the continued wins in announced natural to meet

being of which tenets financial three the over of publicly a value shareholder build Core history review of a XX-plus-year Now, used company. to traded is the

first in equaled $XX of all the oilfield the services. million XXXX, quarter flow net cash percentages During XXX% one free income Core highest of of generated in which

of of free the generated XXth has plans Core all Core target cash which in of cut XXXX a dividend. flow. quarter converting first In marked net The into income the no quarter sets consecutive cash. free to XXXX, positive Core XX%

will fully again XXth the with Core consecutive of its dividend. on For Core the during has the Also returned million XXXX, ROIC quarters quarter of return invested than Core's approximately capital an flow first in free past funded two quarter Once the via quarterly quarter, for repurchases turn capital the more industry-leading oilfield as dividends increase. back produced dividend. $XX XX.X%. for I'll cash review. free via its Core over share its continue shareholders financial flow detailed cash now return expand the our Chris shareholders to and all to Chris? our to quarterly excess to In to XXXX, back call continue levels a

Chris Hill

and an effective impact calls past tax on and losses Thanks the XX%. FX of gains assumes excluded guidance specifically we The last rate our David. or of call gave any

or So accordingly loss any discussion current exchange foreign today for periods. prior and gain our excludes

charges employee-related recognized excluded for XXXX. in quarter and million quarter have other first recognized expense $XX.X we charges stock the in noncash Additionally of compensation first the of

to continue required is company performance employees future performance vesting schedules retirement subject expense by XXX eligible their AAC these to this they're for Although attaining FASB age. awards share recognition and financial when of be metrics,

the Of more the just at Activity guidance income the call. is throughout million to anticipated million from this slightly quarter quarter earnings slightly we from operations was source quarter's continuing and year-over-year. the revenue the to during statement. this in international same international increase quarter up is Revenues comparable in which was looking XXXX. $XXX.X first project $XXX.X service for above Now XXXX, gave revenue

North quarter. activity in which well quarter is were the for activity are and in are completion with impacted on market. U.S. line $XX.X for year-over-year down shore Product American first tied activity However this patterns from more to seasonal typical the the sales million X%

due quarter for of quarter and XX% from Cost opportunities year operational and loss result XX% personnel-related quarter first in of Core's Moving first adoption Houston the Channel. year. in associated the quarter previous year from clients higher services increased on are was from as of revenue in equivalent revenue with to increase the was same $XX.X system service primarily for some of in the quarter ex-items of of also is a the efficiencies, last XX% XX% Ship to sales and energetics. the and closures perforating to the of cost costs million. up quarter the last transitory G&A of revenue prior The down

$XX.X and quarter our line to of quarter For margin we remain the effective depreciation was million comparable continues to several $X.X was million Income best-in-class for was XXXX G&A our in represent for the to the $XX EBIT GAAP million the is rate XXXX, at to $X.X quarter we last which to EBIT $XX amortization year. of and XX%. levels ex-items be for expense expect XX%. tax EBIT million tax also the million. the be capital quarter for operations. expenditures In around using to the expect would similar with expense was quarters. million $XX.X ex-items Depreciation and for

net in resulted a has our on the this tax ongoing $XX.X for guidance resulted effective performance. income a call, was discussed the XX% the As last of restructuring earnings and tax of XXXX. the second the recognized for allow earnings a a in GAAP rate comparison been a million. operational In has release, On tax quarter used better benefit in quarter benefit company's basis, lowering for tax tax quarter-over-quarter corporate rate first effective benefit to

our tax second now For expect be XXXX, rate effective quarter to we approaching XX%.

quarter the earnings from income from for the in net ex-items somewhat will for to in continuing prior to was from the quarter. discrete continuing GAAP $XX.X globe same down EPS quarter the impact GAAP quarter. the diluted from continue $XX.X earnings tax items the year. ex-items for as continuing calls operations tax sensitive million operations Earnings share includes Additionally per of from quarter. to benefit was first Income mix be was for and each operations million was the rate mentioned the operations continuing million across $XX.X effective last $X.XX the of which geographic $X.XX. first earlier the quarter discussed

balance underlying asset the of $XXX.X up lease we Inventory move million days to equivalent at GoGun. sheet. at the the DSOs recording guidance year-end assets as and The for new purchases of leases. payments. from aspects inventory represent raw million required balance up right-to-use sheet of The future progress on new the us from XX operating to little we liability new assets in XXXX. $XX.X at have turns improve traditionally company we'll are on introduction These to of a Now the reported were lease quarter. remained million consistent have lease lease. for the record of into but referred which anticipate to which bulk stood our million the significant resulted lease $X.X and like now of of year-end the the offerings the new stood Receivables guidance present Inventory some product turns also materials and minimum preassembled the adoption represents value X.X quarter first as $XX.X about been in assets accounting as will due

$XXX as the a corporate to million restructuring of which Moving prior balance million liability balance onto is $XX.X And the reporting on other long-term due tax assets sheet. benefit primarily from to was result of earlier. up mentioned deferred side our now of year-end the

Our from $XXX was million $XXX up million long-term year-end. debt at end quarter at

our Our debt is million, $XXX facility. as as senior comprised million at under of notes bank revolving well our $XXX credit

Lab quarter, $XX Now activities has flow. free $X.X at was and million flow cash million looking QX is operating XXth in flow generated first $XX.X CapEx, after our which the flow. paying Core cash free cash In from consecutive the in was positive cash quarter million for

anticipates to currently company with that capital the opportunities Select facilities, like for like continue have we the laboratory as capabilities evaluating GoGun. will CapEx new similar its automating Switch, be associated technologies and and XXXX expanding at AFS, production we levels the XXXX expenditure our For Firing

free has our results quarter years. almost In believe higher utilize in last XXX% when operations metric to continues which turn cash be particularly shareholders outlook. ratio XX cash shareholders one the the now as on financial an for it flow first We those free flow at update Our is flow highest company's who divided free I'll for Gwen the and an to cash important the XXXX, the discounting of for from conversion our in XX guidance was assess quarter our to net income industry for models income by evaluations. it comparing first continuing of ex-items. this than is flow over of been cash

Gwen Schreffler

Thank Chris. you,

During crude a oil worldwide the increased the XX% first supply correction sequentially. into market which prices quarter shifted more than of crude oil XXXX,

global approximately the relative quarter exited The inventories of of have international Additionally decisions in multiyear demand. a recent support projects to this global The the inventories announced the XXXX to increase crude crude now development a and days trend estimated first Pacific, consumption coming operators XXXX. declining oil oil with of of final international at XX consistent phase most These agencies of continues demand beginning $X.X oil field demand and the the Russia demand worldwide with broad-based rebalancing actions regions. particularly underpinned strong The million by in anticipated remained recent in projections is trend and per investment recovery. contract reflected the emergence in oil of rigs in to supply other rebound as oil crude of for taken crude by are prices the and the XXXX day. is equipment increase heavy indicated East, oilfield under by barrels in who Middle Asia Sea oil the North

high XXXX. expected digits and single improve Additionally, the fourth to XXXX since mid-to continues during that international behavior the bottoming reach count growth and of rig XXXX quarter in Core is to international sluggish showing XXXX believes levels.

in quarter million XXXX. in and approximately $XX a to the growth activity industry exchange. U.S. to to excludes and is subsequent expect is margin of by operators of The flat comparable operating incremental approximately sequential activity immediately revenue $XXX XXXX foreign U.S. be is losses gains Wells second margins quarter correlated rig company before million and recoveries margins operating of exceeding the XXXX of projects reservoir a need and operations events XXXX operating guidance second for to stimulation ex-items and be but for fluids and with we underlying As counts large-scale Using of but sequentially. million quarter quarter of case expected and the effective XXXX to tax be reservoir XX% $XX.X million samples wells expansion projections income activities, rate based completion growth to the rocked be is XX%. fluid second revenue revenue and Core's approximately EPS project. has and XX%, yielding second worldwide Capital to average Therefore to $XXX worldwide down limit completion count quarter company's drilled, The opportunity. rig conservatism consolidated increasing to reservoir $X.XX. the been not characterization Core completed may realizes expected second and $X.XX on rock past

for operational Now, over I'll it hand to an review. Larry

Larry Bruno

Gwen. Thanks

team First Lab's providing success. I'd for like to to innovative service servicing thank our Core employees is solutions, of team's global collective of clients and the integrity superior foundation dedication clients. The to our our

parameters to downhaul data allow and measured rock validated predicting capabilities are parameters obtain based reservoir in laboratory. understand the models, house the within for Anchorage properties Core rock such physically whole and the that Lab's as or to CT Tomography porosity, proprietary office Energy to arrival technologies. XXXX Slope calibration, this of XXXX, the database conventional and earnings year the and at Turning fluids few as hydrocarbons. worldwide characteristics the In critical the its again can of ago key Description. at wells scanning, of release, laboratory One CT that on Anchorage active undertaken Dual had rock The was its In QX dated of North Extensive other refine these announced from Core first a clients well properties. Core's are operator's Computed reservoirs. during proprietary intervals determine to arrived demographic assess include Core's situ strength recovered Core's are it performance, Description. phase very log Alaska permeability reservoir expanded provide multiple laboratory Moreover, were behavior from on QX rock Reservoir days of capabilities region clients by to Core lithology as just efforts Core models Reservoir studies with that of for reservoir studies components

through fluid laboratory lab program and be build the measurements physical in rock work, reserve gas other reservoir will and used the of to performance. will moving where estimates, compositional and are zones, natural hydrocarbons analysis now are the the the traditional Following crude of predict reservoir direct pay define initial the samples and CT inputs properties throughout and vital oil life testing PVT field. determining change other

both plan activity largely Lab most comes projects North emerging was the end been will of onshore of capabilities and winter months. years, plays of will targets reservoirs at in laboratory Alaska onshore the were where assessed. Alaska drilling during season occur Slope. awarded During unconventional the Core Anchorage expand and the drilling sampling to an strategic recognition the reservoir Part Core on summer be at of its drilling has conclusion to Alaska conventional

immediately QX side from core recovered XXXX Laboratories of XXXX, analysis conference handling over oil-bearing core del Core's stages Zama-X, of the were was these to located applied recovered of high-resolution eliminating Core in U.S. techniques the laboratory. the during projects. Core's logging preserving wellsite for laboratory, and Energy delineation developed well time-honored required parameters well, quarter Talos as of High-quality, Talos of wide employees reservoirs critical Lab from that Several shallow, STXX new efforts it stabilization including were and CT detectors. preservation feet data initial on critical in is Core Mexico-based, laboratory cores in forward The core scanned processing, had In of announced the the technologies and laboratory fast-tracking to wellsite and ray pleased arrival thus Mexico. damage expanded XXX Gulf methods. Energy Upon proprietary of in for transportation engineering was reservoir. successfully During a Block these Carmen were laboratory to and non-invasive, the to of lithological conventional of surface been Talos have sands in in the using facility offshore on Energy advance and handling from assessment Basin, rock for technologies Gulf Mexico well spectral Sureste in Mexico. and call the detail cores for completing the and Core sandstone with Energy, the of studies. range whole properties of from for geoscience Core pay X proprietary unprecedented Talos this Core core do comprehensive evaluation. by this results XX upcoming significant of of Mexico back introduction stabilization have the Mexico intrinsic analytical are patented of tools gamma looks as U.S. core January leveraged combined provided XXXX, with Ciudad derived wellsite this, Lab part of under results the its Energy proprietary, to oil that and evaluate achievement at direction line These Dual first offshore engaged wellsite laboratory been These

of operators interval identify primarily now results zone technology strengths. been The cement XX the Also Safety and SPECTRASTIM in the hours service log adequate in of and enhancement Enhancement. on and the employing ultimately saving operator shelf approximately engineers through SPECTRASTIM identified the allow the of intended confirm continental cement energetic Safety operator the this Bureau cost the casing satisfied to well-controlled Core of bond Gulf Environmental technology Production Core's observed the rig top leading-edge trace coverage of time. Environmental The offshore Bureau halfway to Lab's Deepwater SPECTRASTIM Recently potential Regulations. had intermediate the problem, an Moving have jobs a service over production only to the that need remediated Core satisfied Mexico Enforcement. Offshore cement of first the situation the interval. outer technology the top eliminates - of The and employed the interest. cemented of traditional cement that Enforcement and This coverage costly operator a of on the quarter was of single and hall be the cemented offering consistent operator a pumped casing. a for lateral providing the in tubulars. to previously to allowed Eagle into both perforated solution perforating effectively This the proprietary substantially the operating holes refrac refrac successfully solution, placed a appreciate operator refrac strings Zed our kind technology as its your of then triggered through stages unconventional a develop That plays. zones review. expanding and isolated of the when call and well number and opportunities now of are across recompletion for with perforated perforating costs operational also open new proprietary first key double optimal recompletion Core's Advances Core Thus to allowed was for in techniques. participation. to their Lab's wells the be that tubulars mature And could for were Ford compared Core's in the to major The mechanically program. concludes clients. conventional joint questions. inside system partnered such We reducing perforating day stimulated. will running Core's

Operator

[Operator from Instructions] Byron from Tudor, ahead. First Pope is Please question go Pickering, Holt.

Byron Pope

match most up color where analysis likely or on provide to top to countries the taken where with international. I some the international fluid could the I expected just mid- high revenue appreciate realized drive the have your always on single-digits done. geographies the which And But is core wanted samples international you to growth start just been international are that growth. this I down regions labs and color where with year? line

David Demshur

Byron. Yes,

Middle say the one of recovery. out as of is in the East would think ahead I that kind I international stands area pack

course, going continue northern to offshore activity America robust part some time. for the South in to of see Of we're quite

some opportunities new the of little further us. East the think for So Middle sort looking is compare of of East Middle that's the or But posing is to high curve line, bottom already running the a we think I And from of a when the down recovery. ahead are think I you I cliff. think in is where I year-over-year the cycle Brazil kind at today,

Byron Pope

said by ballpark, systems Dave. that it be today was really just about anyway the way struck expected a potential the million $XXX do to small of a framed market next you you three market that I perf the of then But the it's today. you think versus realized years? size size And the market how I And market you within preassembled fairly

David Demshur

very and preassembled $XX Yes. We $XX expanding more interested rapidly in order but million the market the to today. more of talk to somewhere preassembled gun gun this million in that using size with, that our see the clients of because we interested they're energetics. Probably

will is And conventional we're some market that So the where to gains naturally the the share we going going be perforating this think area. share market conventional have think from expense in into preassembled. the to I rapid take

Operator

The ahead. is the Chase Mulvehill next line of Bank from from go Please America. question of

Chase Mulvehill

Byron's a I on So guess international and the question just commentary A on of here. offshore follow-up lot positive side.

about Maybe digits? throughout you the could this backdrop. kind be you just reservoir Description? the when positive description kind So lay about out in not map the of we for if high growth of we being about think when comfortable of given more mid-single kind XXXX the sure year, road sequential I'm maybe are the in Reservoir think single-digit

David Demshur

overall more I think along little international we bit the plus track market. Description's Than that trend. in Core historically. improvements should track with with being the of Lab a the will business with Reservoir auto XX% We along do a bit better.

top for with of Reservoir single-digits So maybe little a on Description. added that bit the high

Chase Mulvehill

you reservoir in under kind been know I guys And have absorbed description. of

step incremental's XXXX? continued incremental's about about to just each show as we as kind in what of What revenue should we sequential through think progression So quarter. positive

David Demshur

Yes.

XX%. I think we see that as exceeding

Chase Mulvehill

Last one.

you're seeing from unconventional the updates you any rate EORs adoption have that customers? the Just and that on

David Demshur

Yes.

So a nice be story. to very it continues

about talked and are this. OSX the with in And more team companies participation field good their vocal about and Some that their IR the folks becoming OSX. progress has great there one you their I'll this to refer and publicly and is near team A But into say of the lot what see of of expressed this optimism practice. the they’ve of I would in upside some term. is clients. moving the for there lot commercial details management a they're that for they finding.

Operator

from ahead. Please The Stifel. of Stephen is go the next line question Gengaro from

Stephen Gengaro

right about consistent you of of and trying range couple the with I'm the that triangulate the things. the are just integrated million. small going data just portion, points? to I and wanted billion perf right figure like do on And back to market integrated kind out that data $XXX what heard I've just a I market. sort to Dave overall I'm piece million about the in the mentioned market struggling including perf gun what now. of in is hit you're And market now just is how kind of those thinking you $X.X think you to that $XX the I'm curious to think a

David Demshur

Yes we'll or stick by be going the hardware the control. that debt energetics the part that's our to at the and mainly want elements data – points. And We're core. the that to we looking

see we And so today three in we're comfortable or with it's less. going and where where to market years that

Stephen Gengaro

opportunity an about you sell are and integrated switchers? when the you $XX market so components that is right the hole cores integrated $XX overall in that it million into you system for talking or that those pieces million the define now? And of or the the talking energetics when all That overall you're in with the revenue gun go about only

David Demshur

For that correct. going that the to clients is address we're

Stephen Gengaro

How framework? Production playing an Enhancement think forward? quarters revenue do you And do the market do what how U.S. there within are side Enhancement and you over several how on see you overall see your division out Production thinking from kind as go about completion reacts next the of you the just that we growth land

Gwen Schreffler

may We is slightly potentially while think completions were up. Stephen be up about our think sales be thought year-over-year. of up about completions moving and the energetics were X% those to QX intensity into completions while We we they So X% year-over-year greater. going flat

market. our penetration greater with penetration into So and this preassembled guns then additional into customer that base

So that… we see

Stephen Gengaro

ahead? go Sorry

Gwen Schreffler

continues play to continue the to out. as to we ramp see Well, that year

Stephen Gengaro

look margins question. like in response on RD and Chase's to How plus incremental I side? in that the incrementals XX% the Production Enhancement as far sequential your as think I think then And reference does

David Demshur

the About same.

Operator

is Please from the Sean Meakim go line JPMorgan. Next question from of ahead.

Sean Meakim

single-digit XXXX back description so, about and growth growth come to year-on-year. thinking just to for the rate for international high So reservoir

generating half XXXX require that the double-digit year-over-year does half ramping second to the projects have you're the seems year-on-year in growth in single-digit of back achieve you visibility a that first If lower on with do steeper – cadence? overall. ramp plausible type that to growth half Is

David Demshur

do guidance ready quarterly you're we and not and It's the to right a But get or and want guidance think right. we give QX little, ahead year I don’t do we're to now. QX trend improving see for full

will stick bit expectation trend. our and our will mid with through that overall build than do it typical to with see assessment a single will overall Lab Core and year high We the better digits the little improvement

Sean Meakim

One quarter. margin you had And the just basis quarter? And ding core the what's I back what's the the progression into to back added basically point near second Is that. is of the plausible just the along that factored return term about nearly goes in for with to thinking represent, potential the exit the that business about guess in year clarify first for deepwater work? XXX margin RD expectation that that thinking without margin

David Demshur

Yes.

I think for towards on description. margin an teens had reservoir exit we high

of XXX the I X% XXX% for bps think we than that's but quarter detrimentals. ship The impairment Reservoir that to the less attainable. saw revenue interruption. tied on That's quarter first channel in the Description

back bit comes online that as of a and So that little well. there's business as seasonality in

supports that growth you As gets what online and back comes we back in that think over sequential saw QX.

Chris Hill

last margins the clients confidence the on by our those year. the high us Yes you programs coring in look Sean, here the for laid over exit mid quarters if teens to couple gives back in getting of out at

Sean Meakim

water that last deepwater? between today offshore on just the piece, clarification for point one your what of split say and same business would RD is shallow And you in

David Demshur

We to just onshore it bit tend and offshore. a slice

Chris Hill

looking and still deepwater. if be split I majority the would deepwater would shallow say offshore you're to water

David Demshur

lucrative activity so are since projects on Marine the for more caloric Among say yeah and high would much I us the deepwater. the

deepwater would revenue I the lean the bulk think opportunity side. of on our revenue opportunity the more towards being

Chris Hill

looking guess to a our deepwater the envelope operations offshore just Yes just of if I maintenance on would XX% deep back shallow. revenue is on of I had and probably XX% today venture at say the

Sean Meakim

fluids-driven be correct? is indicating would that that more you're And

David Demshur

it and correct is that shift Yeah of course now. of right will that programs coring progresses year in. the as some then And the kick

Operator

The is the of Please next question go [indiscernible] Scotia from Weil. Howard line ahead.

Unidentified Analyst

the on shallow versus how production expand I water just is magnitude can can of exploration revenues for a if And you deepwater? you on us well help some with versus guess that different you well? it

David Demshur

Yes.

has the so greater the complicated there no going ferocity viability and reservoirs projects for the tend data forward Lab are for Core of their the be to deepwater to are for down I and most they largely or historically overall think field. need of more tapped. more – unraveled complexity Zev value making The complex project. The a because the to model that's to It economic They unit the having all to two size deepwater clients of what’s implications high or good project. mistake. be comes is reservoir. the Core greater opportunity an of our really the Unfortunately huge fits Overall been they'll have addressed reservoirs risks one for a performance for Lab. of the operator answer easy error the in reservoir make that

projects. they'll So densely deepwater intense much sets data take more packed on more the much

we as Description start Core Reservoir to Those nice portfolio. pretty onto Lab's those projects us. so very for see back are And optimistic filter

Chris Hill

out less Yes is Zev revenue exploration-related. XX% than of and of our generated Reservoir Description

or operators to risk development there that take see in and to tend too on be see we They second appraisal the the high core first wells. So samples exploration well.

Unidentified Analyst

about help if think specifically for all there think onshore as it some is can is is split for revenues Reservoir you offshore well? offshore us And about Description international just or you – I

David Demshur

It's onshore as well.

Chris Hill

Yes, what globe. offshore. offshore. XX% look description our from is the reservoir oil is margins said revenue to have all tends about the so produced if at you XX% onshore higher mostly of Larry of and for Description That around XX% Reservoir

Unidentified Analyst

way two flat us pressure focused or the it help can into just are And have be activity. Is there you we last question pumping companies about from help completions think completions who me, But all would a the can sequentially comps activity may completions on other reconcile reconcile - you higher so the difference U.S. us comps? XQ. call the talk

Larry Bruno

Gwen at down drill said owing here count Yes flat near to Zev if wells. Completions the we sophisticated to be as will less technologically project clients comments in rig term. be our look slightly you to on my

to subset less on offset that. stages completions side have will we're where and perf intensity have stage that the more less will clusters per going So

completions The opportunity. be those probably flat. for us if be revenue our will up, total a will up, revenue intensity opportunity completions our even be So sophisticated giving as we of eyes see companies will technologically our with

plan be a Pioneer surprise going clients rigs already You've not to our like is to and drop best so dropping to some us. seen of this

Operator

ahead. line The from next Lynagh question Stanley. go is Connor of the from Morgan Please

Connor Lynagh

we could you increases. sort if the solutions see but gun I I'm if integrated the It of what to energetics from market could broader opportunities, just $XXX like back with wondering to million wondering we of some that go talk the potential. growth cluster sounds the I'm is share non-integrated guess gaining

Larry Bruno

Yes.

the With clusters see number complex first backing we're of stage, would what suggest, certainly we in increase that. market just more the over growth the continued because into systems

seeing per the go clusters we're five had stage of So XX-plus. to now, them six. We number as from we

So stages not see number complexity in per again for we further the stage. of the growth but

Connor Lynagh

sort could market five us said. in to any stage you magnitude above I think that you growth How six, of can give market where this And the averages that you beyond see on if and count? much

David Demshur

Gwen as mentioned. Sequentially had Yes.

Gwen Schreffler

We we the happened would I pace would kept intensity. typically activity. think be And has outpace that of is see that completion energetic or what because up, sales on overall

Connor Lynagh

I extremely the potential any was growth intensity you going or everybody this that. Yes. opportunity to do longer-term, to here, go high is potential I guess is? appreciate what feel ultimate a there more

Larry Bruno

Those are do certainly and production and will Well looking recovery that to clients. of a maximize that's bifurcation that. increase returns

to more to use are as today. be Lab. we will hence So operators not not that They There to because Core going technologically as our sophisticated the they do returns substandard are we what refer money. choose And clients to spend that. they have to be choose

giving are it's dealing subset just there. a a number that and So hard with you of that out companies knowing we're

Operator

the The line Gruber Scott of Please question ahead. from Citigroup. next from is go

Scott Gruber

the wanted the of day I to preloaded the topic on stay guns.

three you if the of that how for much revenue $XXX rate? frac pickup do If you and your we how to $XXX systems, could much you Core million provide see market years enhancement incremental? for how the So next production be the about you flat keep benefit some color for on is realize the share preloaded we million, market think opportunity on run see

David Demshur

It system more conventional expensive system. with switch system because the is a to going incremental from a a gun would to be margins be associated that that preassembled

those on high very be would incrementals sales. your So

see And the in so in might revenue up will third picking do high not pickup But incremental million year significant development. amount be of margins. have you in the very revenue shift that we us of $XXX

So watch there. you what need to I thank that's

Larry Bruno

activities. day very back market. the brought to the to well guns earlier. preassembled the derisk are is think important driver day reinforcement as do ultimately technology But at to I the it's that's been Dave end lot come said the a the of of our nice the advantage and At plainly site It of into formation. they that's the the these how casing of rocks. the understanding energetics and the of an measure of large where has Core energetics in efficiently effectively quality Lab the interact really with and into because how make preparations And rocks deep had end and

has that preassembled it's day entrances going been We energetics system. They of credit penetration quality to if move are you an seeing some some guns the pierced. And the deserved There's the on that into of that. the for was market. perspectives will that But the early into have end path. unique the at drive

Scott Gruber

a enhancer just sounds you margin either it maybe to Can bit like to the for there... it's go know be going I more Production Because system profitability. Enhancement. want the the integrated on margin a or potential And color if provide on you

David Demshur

the that the - it. were in there to XX%. XXXX that enhancement Just end be their could those in say could see with of north production and of back front at the of time incrementals a period margins ultimately XX% three of end Peak margins at

tried And We back towards to Select ourselves years that. Fire ago knew three Switch. we addressable under build working we this development. that So our was market see

ballistic more be our than to engineers. out Our much mechanical turned engineers superior

and so year about working went And with them half. Guardian for year a we out acquired Technologies and after and

Scott Gruber

how $XXX to that? it million opportunity? we about leaner What's about that cadence about think is think opportunity think of know how And able do, there’s just still just much kind think that do we manifests. do to about we do kind we of so you be faster than this literally, going to How the

David Demshur

from hurting acceptance the have system. have won't some It Because where you linear. be variety linear. you of everybody once industry you that gun get mentality be wants won't It a

to exponential want will not it but say linear. be don't So it be, will I

Scott Gruber

months? Do the in on curve hit you XX the you'll think that S inflection next

David Demshur

between and guess Probably XX. not. XX I would

Operator

from is Marc Bianchi the from question next line of The Cowen.

Marc Bianchi

math in I of about I kind thing. pricing the XX%. results quarter to go implies it as the Larry that and think it know and more a through it's and second of is results it's wanted I benefit XX% disruption important the that's I kind to What's of quarter. core that's guide ask about the description more of you give normalized the If impacting of not about Is kind do think in beyond If underlying maybe in incremental's made a sort happening the But thinking second transitory you over quarter, the comment the like think Channel I Ship we longer-term the seems overall happening. second beyond of there range. the change business? quarter, there first

comment just could Just curious progression? if you that on

Larry Bruno

than a XX% more we're approaching range. incrementals and the in range with think say XX% we lot Yes. us comfortable that's to for Mark offshore and deepwater I see schedule XH our promise what work greater

Marc Bianchi

a point clarification. just Chris, of

You and I quite the tax the catch you comment quarter for about rate second saying. what made were didn't a

that think XX% maybe to I the but just said, you clear to Is XX%. you that? expected description could you be towards or guiding right you're

Chris Hill

when up quarter sure operational rate make to was from try wanted that. mixed first to performance compare to second getting the quarter We it that we with Yes. not the clear you're tax

that in the of kind as rest tax we're So we operational corporate did performance. we to that - as through event XX% the from using But restructuring we've had, XX% can see a EPS through are guided be move of we has so approach first projecting what you year. rate recognized a based rate working on the more to approaching where this all benefit The normalized quarter.

about. what talking So we're that's

Marc Bianchi

be So when term that the we the longer something we should think XX%? about implication about business thinking to closer is

Chris Hill

Yes.

David Demshur

be why the second quarter we what the of felt in of operating And that's would Mark range we income. offered

You declines which performed that QX. in was from it nicely see

Operator

the from from is RBC. question next Kurt line Hallead The of

Kurt Hallead

and on follow a take might couple that a just the up mentioned rate I'm clear sorry it. on tax Mark opportunity make Hey, that just sure to of kind

do per tax starting to earnings is that close XX% our a that the look using right to in tax second XX% Is rate way we estimates when quarter it? So we rate. at the should be not a share calculate

Chris Hill

Yes that's correct.

Kurt Hallead

So there. kind Dave to wants or of take Larry, whoever

base I about some talking emerging of from market. investor that to of degradation. lose margin regarding was maybe there perforating some So may gun growth meaning even the kind potentially market and market on the some kind undergo concerns there's Lab’s increase share opportunity the competition of curious And just competition, Core pricing the in out preassembled going some market the are noise pressure been and

maybe offer? you wondering and the competitive if help E&P offering the So that of and is for can have Core to some or proposition and as I the was you're competitors up could out Lab’s your what advantages to us us don't give value what some insight

Larry Bruno

Kurt. Yes

we Core what between the from next intellectual We I that be few horsepower Remember quarters making this over a preassembled communication about already to and properties. we're closely performance can perforating driver they have other do means, energetic tying gun types really creates preassembled amplify open leverage here be But comes formation think on rocks. and or that's architecture that if is to buy knowledge provide. energetics and to you'll rock think Others energetics. wide which a the to we well architecture, hearing use this toward fair is a on foundation should Lab specific formation this go advances to it said And a description borehole. some energetics. get people the of position of of in specific another going and of expertise. platform. closed Think I'll gun, to delivery put And worked energetics before. the the reservoir of I working their allow that The as wide geologic tune in hardware any range people we range will their amount and a behind gun more back might phase how you in of to buy With we're our unique forward. guns an effective we’ve where preassembled that potentially aspect you the design, which gone the of preassembled choose

the site I get out and it's you that a if is, working the well decide it of things not to you that then does One configuration and way certain buy thought. the

the and on and our change different system, can't change quick of completion open work. program a relatively the set out can fly. You we With send architecture energetics

David Demshur

mode The it has make the developing always that to the just is and Yes system. cheaper rarely Conventional delivery on gun the will come, gun. the case. Kurt. charges no preassembled see can here gun again, preassembled others given us and are pierce And we always make emphasis that And buy less this formation-specific the doubt over The been on we put has as of than in guns This year. next them of anymore. emphasis can way. money by the energetics. meant perforation the more the the profitability been and you more Think that we going We always them. be

Larry Bruno

market a way be hard entry guns. that sort participating we are we'll going hard were forward. but U.S. Well that's There where was maybe the been to participating conversations in area some in. that an in of previously But preassembled of hadn't Today numbers we an this. penetrating more the estimates gun XX% that it's and kind market on of get recently industry

So here we come.

Kurt Hallead

decision with service wireline who Or And of respect kind what ultimate end you to is makes of are the company? at E&P say it the it the Is the company? the offering? day purchase

David Demshur

of the company. Well for E&P us it's a lot

had ago. conference this half For we and call a on instance a week

a Basin wanting Permian what Our from was area West client Texas technologically from first from the call to was. know our offering sophisticated

charges our the to or be company to let expensive to the the wireline decide to charges. going a E&P industry company we're decide the operating because going not our to company let ultimately, most We're in So tend that. choose

Larry Bruno

we to role operating companies these do play have it's not. Kurt a recognize to important energetics just They the possess critical like this. And that license The wireline companies do. in a

to wireline relationships great the we transfer of ownership energetics of the that's end at to. these because maintain our day will we and do companies we who So

Kurt Hallead

well have rocks of mentioned like been may really looks as I so know you've up and know, at first regional hasn’t in a FID on And revenue fluids wrap with first and up and the description of looking offshore opportunity component once the way you international and drilled this, has I to Dave the its comes your versus the right? been their count So the lab, quarter XXXX… quarter rig XX% hues, collected made bigger it's the then XXXX highlighting

David Demshur

are excited We that. about

Kurt Hallead

Yes.

say. to got You

So momentum some finely, There's now looks right. building.

point. reference good have guys You

general of context growth rig the the the momentum that being can building the I outlook in higher and any throughout rate, course then around mean XXXX. percentage, the high even count rate in growth expect of that thoughts for given year we year-on-year single-digit maybe So revenue that dynamic

David Demshur

we If prices at could Yes. keep we would that. see where oil they're we crude now, right think

Kurt Hallead

thank Fair enough. you. Right,

David Demshur

All Kurt. right

to head go going Zed. we're wrap up So and

the for levels of second in company activity the And to position we So await. challenges XXXX. significant quarter in summary operations Core's know

to well our However, and committed services Core and positions our returns technologically reservoir production we expand invested have positioned challenges maintain technologically free generation oil and help via on This and most dividends base. The remains repurchases. to capital being sector. levels field the opportunistic for shareholders industry-leading are cash share ahead. company advanced the company clients future returned and that to capital with to or uniquely of the focus optimization never better been remain existing their We operationally

to the our already Laboratories special Core, that have as analysts thanks a Management that earnings shareholders follow Board made XXth Core So noted Executive results like of worldwide closing, possible. all to employees in our quarterly thank these gives Bruno, of our Larry release, we'd and by and and the

to their proud are achievements. continuing be We with associated

time spending forward our update. next this So Goodbye thanks for us with morning we now. for look and to

Operator

the call you concluded. you, attending presentation. Thank sir. has conference gentlemen, for today's Thank and Ladies now

may You disconnect. now

Core Laboratories (CLB) 25 Apr 192019 Q1 Earnings call transcript