CLB - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen, and welcome to the Core Laboratories Q2 2019 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]

I would now like to turn the conference over to David Demshur. Please go ahead.

David Demshur

Chris. you, Thank North evening in afternoon Europe, in Good Asia-Pacific. America, good in and morning good We welcome Laboratories like importantly, earnings would to call. our and shareholders, conference employees most analysts to Core second XXXX all quarter of our Hill, This Schreffler, CFO; Larry Core's Core's by COO. and Gwen President IR; Core's and morning, of joined I Bruno, am Chris Head

updating then current call industry And current remarks regarding making will start will by the Core to be The pertaining worldwide then of statements. trends divided oil we'll And Lab's Gwen macro performance. some into trends. supply environment, thoughts five segments. future crude review forward-looking expected on some

financial build will review value. We the company tenets, long-term Core's shareholder employs to three then which

building XXXX followed third Core's shareholder detailing of discussing open Core's follow and the worldwide. pertains segments, for and as will Core's discussing outlook operations then, Gwen go our major value, and Lab over overview operating session. Q&A a highlighting will Chris a regarding phones of then detailed will by quarter we with Core general two Then Larry to and And new Core's some progress financial it industry introduction the a prospects. outlook projects comments and successful continued technologies, additional

to turn regarding I'll over Gwen forward-looking it remarks for statements. Gwen?

Gwendolyn Schreffler

David. you, Thank

morning, political including affect Act in business any conditions, include outlook. may to start include would our projections, may XX a the call mention Before other statements the climate, that information. of types international make forward-looking of industry, oil this This risks the These filings we outcome. the are during and that number and of Company's markets, factors I'll our estimates conference of some we gas those of other the and discussion relating to subject forward-looking business and discussed statements international uncertainties

forward-looking whether a assumptions future statements. those of vary Should one the should materialize obligation new no to projected respects in We or material from these actual revise our more events risks as of may uncertainties result incorrect, forward-looking in publicly otherwise. prove update statements, of any or or or or undertake results any information,

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

Reconciliation Our second to found our included measures be comparable non-GAAP the financial directly non-GAAP website. also Those measures. quarter GAAP comments financial measures the most include can press release results. in is our on announcing

discussion the Dave. pass I'll to back said, that With

David Demshur

Thanks, Gwen.

and encouraged demanded as returns to commodity-driven flow tend financial onto trends some cash users sophisticated are solutions. within Core by This their heavy operating clients free benefits of investors. technology and today's three Core, industry our tenets. companies whose own trend is on technologically and invested furthering emphasizing then commitments Now are that be their operating to capital over

quarter, the well to conference continued upsizing, and rightsizing, to During discuss analysts well sessions positioning relationships. well spacing, Core and calls, industry second and industry parent-child groups optimal host several

the today. clients two industry's the Proper commissioning most Larry effectiveness a second. discussed recent efficiencies rank upsizing lateral of a forces. of discussion have close frictional less but industry spacing advanced of lengths yielding Core's complex will within that stage, improving Also and length Completions the perf to ROC owing are detailed well perforating Optimized To Core's topics and Bruno to while maximum most or their Reservoir or Lab. add per nearing laboratory end, continue clusters more will stages,

to see trend continuing. more a the this -- The Technologies the XX stimulated per the to a as our many as of clients source and interference. increasing growing reasons produce of count. the region avoided a more acquisition the well growing lower reservoir in programs is stage close frac and interference stimulation addressing market, they and cost We rock for is clusters and Guardian completion It reducing be being volume to as Core are for near Long maximum now stimulated of to avoid are problems for reservoir more possible changing well costly time the and using wellbore clusters. the clusters wellbore. are Adding stages Laboratories. to proximity and way channels Perf amount new perf Global XX well to fewer owing be to are are stimulated volume perf to reservoir continues recent stage win new the technological rebelize within

and market positive preassembled the have industry-leading energetic We acceptance feedback, systems received via market our on share GoGun. client company's

most scaling is as preassembled to being to XX,XXX gun order had continues Core's [ph] interaction remain and including system charges an energetic several single introduced of order at added. challenge valued turn The Core's to next significantly space a any over economics perforating perforating of the Note, refaced down wells. the Core systems ROC. and biggest current their the systems, currently recently million. innovate next most years. watch the over meet that $X the automated and system best team with quarters industry-leading demand results recently refaced Core's improves well critical for refrac up ballistics are components reservoir the several guns,

to quarter activity been lower revenue that projects dating The increased international cycle to another description in XXXX. increase XX meet in needed to description never water The that sleeps. wins still Core evident most or the from important activities Revenue increase reservoir production second and is back and XX of international projects here streams offsetting reservoir activity have these in the did bolster has revenue of always decline in absent the up Remember, approved cycle queued in in mainly North long longer foreshadow trend for more than America. been be curves will XX has Core's and XXXX, from XXXX, XXXX. activity in this deep The and FIDs continued future last XXXX client for demand. more

the An production offsetting that some gains notable, crude fact curve over years have Now have is comes indication of over or the Eagle fallen Moreover, Bakken in Ford seventh consecutive Russia. decline year of year will the their production We from and Russian non-OPEC the Also bullish the on projected for comments than on more several totals worldwide non-US effects the gains production in next remain near as oil. peak so. been decline permanent its play last crude slowing. supply.

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

plans Core dividend it's as base marking generating has our of investor our European important second the investor cutting we XXXX, flow, generated During base, over XX of positive on consecutive to our million being view sacrosanct. the quarter cash. free Core no cash quarter in as $XX especially free

pushing cover to markets and confident the a to revenue free cost our core With company's Core And plan. the embarked flow Lab bolster that American operating to cutting asset light dividend. the model more emergence cash is North future international margins, add Core's than on will of cash, allow has further company

We the current increased and to continues are streamline market for to continuing to automation businesses, structures review right-size conditions. operating costs

levels all second quarter, an capital industry-leading of ROIC the divestment low company businesses. continue the via pointing recently the in non-strategic again shareholder XXXX, back out. the quarter, invested appreciate field second back $XX In the increase. capital shareholders XX.X%. quarter during to out Core of Core return to Core We oil quarterly then quarter opportunities second return and flow repurchases cash in quarterly dividend. will approximately the case via that analysts as margin put once to produced non-core on its they've to returned addition, notes share for Also million with that our review Also the as XX and continue was the our of will dividends consecutive free

to overview. Chris? Chris financial detailed for back a it turn I'll

Christopher Hill

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

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

Additionally, of business the as associated reporting a $X of streamline gain a reduction non-strategic million cost of and lines to our divestiture we operating part on have excluded the business $X.X a and charge structures program. million efforts company's with company-wide the

was below the last comparable Now, at this $XXX.X from last year. was Of $XXX income in Revenue second looking sequentially. X% but quarter revenue quarter, continuing to down million for operations same quarter, service million the the quarter, revenue, statement. the

in This Asia-Pacific. divestiture the quarter's activity America and than $X revenue the was with with North in million reduction impacted almost of service non-strategic projected by business associated lower revenue of in a

from However, offset XXXX. increased international and items was by improving anticipated which activity offshore half of into the projects, to from second continue is the impact these partially

our in quarter, are US for Product nicely XX% led to for sales, this million the American growth product product $XX.X which last up activity quarter. which were quarter was sales, North by quarter. the X grew % sales energetic from tied The

the revenue, the XX% for of on Cost second are Moving down services to due of operational improved previous quarter, quarter efficiencies. to quarter XX of the % sales from in were in cost XX% revenue, service is from quarter. which to XX% last fixed $XX down down of in approximately absorption ex-items G&A from the quarter for the due costs. improved previous slightly of million, quarter was slightly

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

quarter quarter million income using for quarter the the million. the tax expense GAAP slightly at million. lower was XX%. EBIT expense for $X.X of Income for second an was $X.X tax tax was effective $XX GAAP rate

be effective approximately rate our project tax to continue to We XX%.

income share also million GAAP Earnings $X.XX million from $X.XX. up the items million, prior to operations continue for mix somewhat discussed over the the second a across ex-items to was quarter $XX.X EPS from the quarter. Income operations for almost quarter. from of for continuing last last little X% as from from operations the diluted continuing quarter be quarter. was each was effective up will quarter GAAP from $XX.X to Additionally, X% tax ex-items globe operations the $XX.X $X rate in and impact sensitive or continuing of and second was geographic earnings the quarter. million earnings calls, discrete for per continuing

move from significant a Receivable on sheet. year the quarter and up $XXX.X up we'll $X.X to end. little for aspects stood the at of balance Now, million, million

Inventory QX. However, $XXX,XXX about our for we anticipate XX and were quarter, will the second bulk through Inventory purchases for second turns were of materials half inventory work some the that purchased raw of continue X.X consistent XXXX. turns stood year for from days about DSOs in improve quarter. million, up last we down but from at $XX.X as quarter, end, at to remained million the have $X.X

onto And the now sheet. the side balance liability of

end business as that from debt operations $X $XX.X proceeds $XXX long-term end. used these down our the completed at was Our was facility. The the in sale discontinued reduce quarter approximately businesses and sale of under non-strategic surplus our held million, the company million debt business last from region of revolving Asia-Pacific The proceeds for net to million. were of quarter credit

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

flow. our at QX Core flow was which in $XX.X flow generated XX $X cash operating cash quarter, is the in flow with positive free the million, Looking after $XX.X was second cash paying free and Lab for CapEx million in quarter, our activities consecutive from million cash

like impacted cash GoGun programs. service and and innovations flow system investment free an add capital with technological These expand Lab. for ROC additional our automation associated increase capabilities investments quarter and was the operational capital for and Our offerings efficiencies capital second in the increased technologies integrated by our and new working

between to the company For XXXX, be will its $XX CapEx anticipates million. $XX that million

Lab flow Dave to the the to future generation than incremental that dividend. to margins confident to our operating will improve mentioned, future continue more fuel free our of We of continue our a cash remain strong. Operating the Core continue cash As international of be cover expansion important previously grow will is flow. and margins market margins we'll and for emergence and will

one which flow cash highest by be conversion at effective using free ratio, the assess particularly continuing for from industry for valuations. tax of XX% is divided just results, shareholders important Our to We cash flow XXX% the XXXX. income rate, when operations a to in free is company's normalized cash flow first discounted shareholders half an financial this who over of believe comparing those utilize metric for the continues model

will I an it turn to guidance for now our update over and Gwen on outlook.

Gwendolyn Schreffler

Chris. you, Thank

million the International XXXX a the the with estimates a recent the XX% The and market demand. barrels cuts be rig for stabilized X.X the and the day, decline Agency During rig modest OPEC report global XX.X% slightly and international half production quarter will between supporting first down crude growth of first most second oil inventories, continuation in oil year-over-year. of increased during XXXX. Energy crude XXXX, by supply balance demand quarter, the offshore overall per count Also by count year-over-year of from increase international global

of regarding crude While balance production and the future are market concerns limited demand, global exist oil additions a oil crude on basis. supply

The the the decline time. of crude balancing improve drive curve These oil quarter prevailing activity are crude supply levels, a XXXX. GAAP in Investment Final These heading and new in mature mature Core's continue as supply Decisions international to emerging internationally, is demand price in clients' expected required fields the over production international The fundamentals which continues crude for oil crude of to and reinvestments. investments the field oil third towards is field international replacement. the underpins supply supports critical, oil and decline development from are fields oil crude which

Consequently, be to Core's XXXX Reservoir count segment to accepts US projected oil benefit down. third in from the crude international client rig spending markets. the quarter average The increased is Description

on operators field remains free budgets. flow growing while continue to generating cash significant in investment, completions well capital lever returns on their managing returns and focus While investment optimizing a

Core to quarter flat result, activity, of the the be US energetic As they completion projects as a US would activity second expect rate sequentially. XXXX. onshore in to completion did of Core exceed sales

yielding approximately $XXX and effective to million $XXX third an incremental be consolidated with excludes million, margins the million approximately of margins, XX%. we for rate million of Company's is foreign using and XXXX, The third exchange. for expect guidance projections $XX.X based in operating to the $XX.X is income XXXX XXXX $X.XX. losses Core projected tax of revenue exceeding operating quarter ex-items, XX%, to XX%, to operations Therefore, of gains quarter quarter of underlying third and on Lab's $X.XX EPS

continue following the recovery quarter provide summarize, Reservoir international to The assumptions the revenue third international benefiting were to company expected used To guidance. by XXXX generated Description. is

XXXX quarter to projected is be US Third rig down. count

sales completion be US XXXX. may energetic we American market they activity potential expect both However, sequentially. challenges US would And to Core onshore the North of quarter the as of And projects completion did that business affect flat activity exceed the second to in rate lastly, segments.

the I'll said, With turn Larry. that call over to

Lawrence Bruno

Gwen. Thanks,

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

Description. Turning first to Reservoir

in the continued Talos During conference Core's analysis April the Core Zama-X of in XXXX, of Block on XXX from well of the feet Zama-X XX% under the the XX, of of Sureste Zama-X Mexico. conventional Mexico project, in the with similar XXX XXXX record conventional was over from core located Talos feet engaged Talos' longest was the of in in X core QX the well, a breaking it for well. conventional quarter Energy from delineation of unconventional the offshore Gulf single Core of direction Energy history this Well from that a Basin, the well call core offshore captured provided second recovery Laboratories Mexico. Core second own announced In services, Over

for range wide the of developed for Upon Gulf core applied. proprietary, again including workflows, Zama-X core gamma established CAT of proprietary Scanning pay data critical were and in methods. techniques Core's of non-invasive a the Energy of high-resolution with the advance arrival Core conventional dual laboratory, Lab technologies range These analytical Talos assessment a by portion lithological of immediately time-honored logging spectral US in in reservoirs detectors. provide parameters wide successfully laboratory ray preservation stabilization scanned and was the well surface and Previously sandstone Mexico energy using

described of to Margin provide turbidity is deepwater, a Brazil. evaluate second offshore continues forward incorporates ongoing. the detailed sets data to Zama-X Brazil's Zama-X study North analysis considerable interpretive geochemistry, Eastern will looks Core to of pleased Duncan, new completed globally Late exploration of reservoir are had participating Basins Core geology during a Offshore based on from study what multicompany use attention the that the calibrate unprecedented Talos, to fully This laboratory to reliable Advanced quarter XXXX, Also, and integrated completing including provided analysis the and this ultimately recognized Laboratories models stratigraphy, Basin. This to calculations studies. the provides subsurface asset. and on of data attracting engineering Timothy Cretaceous Core rock will seal be as geoscience and Atlantic companies Talos resources CEO, Lab a wells achievement that President recoverable study part by set access opportunities, several and operators. across rock be

projects make the QX, clients in Ford gas for and detailed are Core addition, its on two laboratory Permian results field progress reservoir in multicompany tests Core's injection Eagle to opportunities scale in continue based to engineered analysis In fluid the EOR and evaluate using deployment. the Basin.

in Some proprietary are the additional already opportunity Core work with of Core's clients companies at scale looking are testing Lab. through fields and

ROC Moving reservoir second solutions an ROC now commissioned and Lab enhancement; gas flow features with The best enhancement that designed on Lab a highly paired to in of in internally completions manufactured to the test vessel and is temperatures specialized, segment production during pumps operators maximize uses energetic reservoir. reservoirs and planet. an new is Lab the XXXX, matching controllers. of capable Core encountered of system Godley, production pressures The vessel challenging to most the its Lab determine type, cutting or ROC the developed flow Core's ROC oil industry-leading proprietary and test perforation The so for Texas. edge optimized a quarter as specific the productivity

proprietary brine, the of of multi-phase oil, these displacing gas loop energetics. have to been that decades optimize flow create relied dynamically porous technological with Core and a Combined, tests investment. medium fluid rock flow its capable this in experience perforated conducting on many technologies samples through preselected through

ROC to grade ability client the high determine with the and of leading penetration, tunnel assess to test This completion geometry, XD-CT volume to and depth addition, see industry Lab formation, gives industrial In all resolution, has inside scanner. a scanner onsite resolution. the the imaging look damage samples,

Cores, between scientists Core is opportunity to The presents obtain measured fluids Reservoir and Cores fluid Lab pore and This positioned all stress energetics targets. enhancement the rocks, and collaboration rock, which experts segments. for on the that and at collaborative for reservoir a stratigraphic development data Combined with in with Description, Lab energetic proprietary is uniquely ballistics among select ROC clients can clients interrelationships production engineering laboratory various instrumentation geological analysis conditions. the performance options, will optimize Core's now specific techniques. the

delivery and ballistic are perforating adaptive pre-assembled Core's its of addressable system Core's differentiators system. switch fire key GoGun

of as Core's adoption client to communication to XXXX, of they offerings. system devices continued technologies advanced quarter these convert legacy second the delivery from During downhole grow and

Also the the to encountered approach reliability existing demand avoids a increase off when are proprietary its smaller technologies mechanical This the a communication for inside refrac attempted be between of saw for closing and in well in original isolation the the diameter reservoir wellbore. second casing Refrac can that recompletions. cementing diverter in issues completely wells. perforating recompletions casing, substantial approach [ph] as part and works involves Mechanical isolation technology. quarter, a placing Core existing

casing isolation and first while strength solution, mechanical size, its consistent is optimal with recompletion effects. uneven provides size. two the Without layers generating attempt Core's reestablish kind offering challenge perforation into Labs produce stimulation opportunities such to key stimulated, tubular. effective uniform through of to hole mature, allows consistent be stimulated hole Advances of zones the life perforating the refrac sizes wells. hole The would pumped unconventional to under across strings This Core recompletion for in older refrac plays. successfully are through as proprietary new breathing of technology effectively and lateral both expanding communication

parent-child clients and [indiscernible] utilize services, fracture relationships spacing between minimizing frac well wells. to optimum Core's diagnostic well assist interference. Core usage, continues understanding technology its determine to while in

with as program diagnostic on communication which frac well multiple During portions to which of across design Core objectives. EDS for and expertise sizes, as hydrocarbon large able treatment the Core's XX Permian Work with evaluating identify scale the field XX-XX wells project. well portfolio complex large specific production overlapping the mesh the and program as on the to both programs is such was a networks, to as second Basin proprietary of quarter total pads. were of Core on XXX-mesh were ongoing engineers FLOWPROFILER of to a deployed well operator Core's tracers in designed [ph] a XXXX, profile extensive this offset around fracture performance. impact operator Critical

open operational and our concludes the participation will Chris That your for questions. call now review. appreciate We

Christopher Hill

We questions will now. take

Operator

Merrill [Operator much. Mulvehill of with question very you from Thank Instructions] is Lynch. first Our Chase America Bank

Chase Mulvehill

you guess question, should I enhancement outlook, if that or So that? thinking will XQ revenues on the those if being flat about morning. sounds enhancement. there be completions we production talk just think in in of flattish? for and XQ, It production like, we energetics up you particular all Good be outperform kind think about first the about revenues do could will

Gwendolyn Schreffler

those to -- this Think going is Gwen. Chase, are

customers the sale. to adoption and That's with as and new think on that customers are the to as with penetration having those would And sequentially completion then technology. activity a flattish. energetic new I more energetics, we be somewhat owe well existing going flat

Chase Mulvehill

of everyone energetics gotten if of what the you kind GoGun and Okay. And have and differentiates versus on GoGun preassembled that far, in quantify kind particular, you could -- of guns so the market think else's? that kind maybe maybe your you share really, the because you you've the penetration what on

David Demshur

think, it's phase -- up I still the GoGun So ramp the we're in market. innings so a yes, a that. on Chase. to still very It's early of into introduction And

are can but of is companies it's site that Lab's preassembled efficiency -- people energetics. to the determining Core the to gun, well a ultimately, effectiveness the the I can That's important what ultimately convenient point and think package offerings. is drives deliver the deliver terms other the factor. We the in energetics the and differentiator of

Chase Mulvehill

of on Description, through Okay. The quick just back seemed helpful. rebound year. maybe year kind of them possibly here in half of follow-up FIDs nice in That's a you good back quarter and [indiscernible] the Could that the the and, about the Right. obviously half be coming margins. Reservoir talk

what growth on kind Description that mark for plausible and you year-over-year XX% hit Reservoir margins? we So of Reservoir what of year that do When the that's growth? XX% about the EBIT think by end for Description? year-over-year Do

Christopher Hill

to quite here, Not year this our rebound market? view right the but full international in in guidance is margins Okay. now ready of third give that, further we'll penetration improving see and the quarter

David Demshur

Yes.

to we North that because Right of in impact. We America. generate the Description was some offset see growth of some Chase in do have Reservoir caution kind though so of do X% international now, America, offset at some that's by international some or North we decrease revenue

I So the that's think watchword.

as can America next digits, you get to as quarter. flat North Description, If hold XX%, in early certainly maybe high-single I that Reservoir think we

Chase Mulvehill

it That's right. turn back helpful. I'll over. All Okay.

David Demshur

next margins, quarter, we on fourth be looking I quarter. that knocking Chase, And could XX% think so door we're at on

Chase Mulvehill

All to Dave. hear. right. Good Thanks. Thanks,

David Demshur

Thank you, Chase.

Operator

from Pope Tudor Please you. Holt. The Pickering question is of next Thank go ahead. Byron

Byron Pope

everyone. morning, Good

will demand trying the just back of continue the And direction. think to understand in -- the were some in just was about color trend wondering the For you demand right you discretionary the some the in half enhancement, trend where to headwinds could realized production clearly QX. direction. on there right that continues I energetics services energetics if give year because the within so as dynamic again, to

Gwendolyn Schreffler

the Byron, discretionary so services part on service is diagnostic enhancement that of represents fairly that is the production third services about a that a segment.

of we the did business. see in So North somewhat part a America of decline that

Byron Pope

Okay. That's helpful.

Lawrence Bruno

opportunities to diagnostics that, field for Byron, that. I'll some to programs. in offshore there's completion development add very I'll our nice add

And we so, providing internationally, some completion US forward. support offshore and diagnostics going both those as for improve see that

Byron Pope

segue next That's good then that's my And Okay. helpful. question. to a

Just segments just Reservoir skewed but international is the could that frame about region. business Africa, the realize you Middle there region over Europe, that And largest see international your XX toward Description, prospects next across thinking both I you correctly months? recall East growth more it's

Lawrence Bruno

Yes.

international is, say, and us of the primarily mentioned this a on. Asia-PAC last still America the XXXX East sort year, things going on We've on a event. seen so Middle leading. Middle the of South continuing the -- for and views I see continuing hasn't largely nice in forefront work very a Australia us East some I Middle quite the think I ongoing recovery. offshore I think East But mature project still South still think developing nice think, I I well. changed as of half for think developing as We've clip into and than America a the very are East opportunities for -- quarter, Brazil recovery a us nice the not XXXX. Middle for back the some maybe, I as as got and opportunities in I is new in emerging

Byron Pope

Great. Thanks.

David Demshur

to Asia-PAC growth we at, at and Byron, add point East Latin and the third. just prospects South looking rank this to America number Middle one, two would number that,

Operator

Sean from Thank Meakim you. The next question JP is of Morgan.

Sean Meakim

into the in more unpack enhancement quarter, a of little morning. in was Good I mix guidance second could read the a maybe gives hoping, your quarter. third you. we Thank production the for

the and XX%, -- are for it's percentage the sorry, services two-thirds I rate was -- that what so a were and energetics guess US if So what for constitute would So the of give third can drove energetics segment approximate growth what just that's percentage growth the overall? up that, the of products sense decline. third products you us given of was

to get the sense trying magnitude? a Just of

Lawrence Bruno

part product we sales. don't is So typically give a the of significant sales lines, product the energetics but by

sell also some instrumentation. We

there group from also So in there's product if looking you're instrumentation as just Reservoir well. at sales, total Description our

Christopher Hill

of in But product sales, production more and our energetic enhancement. bulwark especially are the so

Sean Meakim

of one-third US Right. the in roughly the And offshore. business about two-thirds is international is and

to but [indiscernible] he gave detail, a figure of some trying often, still the of detail. lot out I'm So give

that, just I'm to had trying other. seems up we get the services one data to drop the down bulk in was diagnostics much so hard it's quarter-over-quarter? products to see And business How to the X% point the a like XX%. Just get that to to and of bridge if off understand, of the to

So volatility not in it I've I'm just services trying better to conceptually previously. the heard understand that because much

Gwendolyn Schreffler

equated million $X That during down to Sean. Yes, about in the quarter service.

Sean Meakim

And the but to understand the one to bridge Okay. off-line, came other. more trying to the just [indiscernible] up point data that

of another of So could already kind gave terms Dave bit I'm maybe on mean, a to go of exit what where Description. just question the Reservoir like. I rate in look trying little around

knocking Are it like on sounds it that door through? make driving seems been have there up mix to mix, job just sense. you any profitability confidence second besides quarter other step in coming So the that the is in that directionally factors XX% and

David Demshur

Yes, challenged offshore North America. and Core's international by it's and

take through So Sean, We those recoveries we've currently XXXX stages of happening place seen think -- these now. beginning right trends actually we're XXXX. the in seeing in

Gwendolyn Schreffler

the that's the and see Sean, reminder, the step is a fixed tied you up EBIT coming And activity as a more nice the reason cost through and margin. structure. directly That's to nice incremental's

David Demshur

Right.

fruition these announced are So to were some us, XXXX in finally generating revenue coming FIDs from back for and XXXX of that those.

Sean Meakim

Right.

that projects big and on leverage why margin then the get see that's the step So you you up? top, and higher operating fixed cost

David Demshur

Correct.

Sean Meakim

Makes sense.

that thank Okay, for you detail.

David Demshur

Sean. right, All

Operator

go from Please is ahead. Simmons. Thank you. The question Ian next of MacPherson

Ian MacPherson

leverage short well Good David, flow cash just operational have What I you my been question about for or of a to wanted and the operating flow I to I dividend operating are is dividend And the the looks get in from your half, has pretty morning, bridge to second But what cash because Chris on have side wanted Thanks whomever target coverage for that I side, there? the XX%. all know fallen that like had ask in flow see cash pull on everybody. what you Hi to first free that. by coverage think half. covered. expectations that. to

Christopher Hill

Sure.

So historically the I of driven I important that, it's and cash flow It there. and Description this think of was by what our Core year, to of group activity about as free But have the margins. is it's continue the generated this the we fundamentals free the that for half sort improve going flow to are remember that. and slightly the all go down and expansion second and that factors highlighted of international still we Reservoir quarter to into those of impacted believe Lab cash growth from talk some

my we cash that that my said flow generation. So international notes, are we into what this do, we free be that to that's get notes going going or confident deeper speaking I as I'm in in reiterate recovery, our reflected to

So would that we're pull. pulling the normally levers we

we to think little expanding there. see improve about, product like talked bit, lines our inventory but I a we'd like we're turns

product new of So we little have inventory purchases bulk build there's then But a and there. with did some also some offerings. bit

that, you'll improvements as see some So well. through we work there as

Ian MacPherson

already So in as I capital it, understand second the the the half. intensity associated low in it's uplift earnings expected with essentially

Christopher Hill

Yes, exactly.

David Demshur

No, no additional [indiscernible] required.

we it And theme -- real that's a here Core cost so a that will structures be fixed deploying Lab.

Ian MacPherson

And again? see restructuring Got for up, it continuing $X the in or we million that you should be follow it, thanks. lingering then beyond charges QX the took that will any

Christopher Hill

at this plans any [ph] don't time. have We

Ian MacPherson

anything the And anything divestitures, potential significant you on more $XX for material you totaling non-core last mentioned sold what as remaining quarter million. as that,

David Demshur

review, in we've so of run operation XX year, continually laboratory countries, last in XX the XX our years. there always got the one going to Ian. and locations we'll we've Singapore look last for diversities Yes, We're through

center laboratories made location put low in was that Lumpur in Asia-Pacific. viable Indonesia, we margin Kuala that no central when Australia, XXXX, it'd lab a longer So But Singapore the of operation. become adding

sale. kind at [indiscernible] any So off. that. things for of We we'll one businesses The don't holding was continue to look have we're like promo that a

we laboratories look right in positioned place. we'll maybe the opportunities as So individual that just stand, of for aren't

Ian MacPherson

Thanks, Thanks, Okay. everyone. Dave.

Operator

next The Scott of ahead. is Please from you. Thank go Gruber Citigroup. question

Scott Gruber

Good morning.

completion is that from the visibility you so frac be marketplace companies, be market, but early the provide is in in mark will down signs realize back flattish domestic to down? to coming low, indications that the I frac that are versus just activity What in the more So XQ. trending seeing confidence going XQ

Gwendolyn Schreffler

see we of utilization It's that the completion Scott. the intensity the energetic in

saw QX, we that into that well. QX would in as So expect to we continue

Scott Gruber

wells the fracs? versus comment So more energetic flattest sales is overall on

David Demshur

Yes.

as And of increasing the XX now, we're I clusters the seeing stage. commentary, so the about associated talked energetics. in my with completion, per many some Right as complexity especially

enhancement why no into that feeds this not should production and revenue know, increase. You reason continue there's to the

flattish. number It revenue standpoint, of opportunity, completed. total So down But from from bit. wells our from be standpoint, a our our might be might

Scott Gruber

Makes should and of that months? core It and technology. mix the it we rate opportunity hear over it interest about data interesting for refract from me the interesting here. XX the revenue the penetration pays to highlight on sounds be watching you for Can size

David Demshur

just plays. older This of product opportunities had new is that the that some use We've introduced. in point. we've brand this to some a at unconventional Unknown

is We decline. Ford, the are plays in which like certainly now targeting Eagle

couple gas go over Bakken, targeting here or We adoption half. but which The be the Haynesville, large is year natural very a will the a and next of us. is production project, We is year we into also which for decline. quarters. the nearing the And peak over next think producer, we'll opportunities

stages several stages. eight rock uncommon about ago. years us have stages completion wells for to think were A to stimulated we those the lot Just between through where Not five of wise three lose. will

So we're very that's the working encouraging a has closely we're that had of with couple some that it market at. We're very results. operators that looking

in to process under other clients over with stimulated that the beating there We're drum on wells. the of look

very a think nice. can but And where to clip little It's at going good been put penetration near-term. a market pretty metrics we in the hard us, be so it see any for on we early improving

Scott Gruber

the color. appreciate you. I'd Thank Yes,

Operator

from Please of is Connor The Stanley. question Lynagh next you. go Thank ahead. Morgan

Connor Lynagh

Description. to morning. Want go Reservoir to Good back

seems I FID us about, like of Here the rate I your revenue is lot or earnings you could run mean, right it think impact. rate if there's not a was wondering, your now, help run

as is So the longer in And million terms we revenue think should of the that, about we -- we're growth? think of run FIDs these in then $XXX layer seeing a term about should annual can beyond baseline? year good rate how you this of sort impact

Lawrence Bruno

Connor. Yes,

Description run $XXX largely reflected of million -- rate, the quarter the downturn, call spending the at Reservoir which During about OpEx days was running per darker from clients.

So us now into here into $XXX and what you've in that is capital seen in of the lift-off million stream. the million, moving from revenue right spending getting $XXX more direction the the coming that,

David Demshur

you We had FIDs in start We could running that once those would XXXX, expect million up pile at four levels a you the revenues to in look again XXXX. over XXXX, quarter. you these $XXX if years. or five approach So

Gwendolyn Schreffler

Connor that in And shows operating also our income that and XX% being up year-over-year. sequentially XX%

margin. see it the EBIT see incremental's and or you then expanding So expanding

Connor Lynagh

Yes, makes sense.

FIDs it just margin work for than historically that margin been maybe the these think time your in had horizon? bidding there reason different to So, on side. that at follow-up any there to Is which incremental XXXX the

Gwendolyn Schreffler

Connor. No,

David Demshur

cost We No. peak, XX. The high which margins our reached our products offerings was XXXX, better. in XXs, structure the kind of better. like We like

no that, can't happen. that So reason

Connor Lynagh

All right. you. Thank

Operator

go Thank question is you. Instructions] ahead. next Our [Operator Please [indiscernible]. from

Unidentified Analyst

place of [ph] This Vaib is in Emily's.

you. Sorry to disappoint

Lawrence Bruno

A hitter worthy there. pinch

Unidentified Analyst

Okay.

year? So ask a that How you do activity realize what savings I more what about then think you to just next wanted And would could that? guess, cost you future stab maybe effort took. the timing you you think potential over the U.S. be cost cutting about do at taking

David Demshur

a laboratory a improve driver we're automation cost working toward of to our of been in businesses, term streamline operational big cost manufacturing Yes, long that's the savings. a and been path that's cutting, We've terms on structures.

that be going them to quite some get got Yes, as we've it's level We of of a be to near X% started it's term. But we'll we're so would evolution we've between progression that an the that building more of in pleased. it that things more implementing target And a on structure. X%. or think somewhere and efficient

Unidentified Analyst

Okay.

implied structure guess for he what your of growing activity. Is was modestly, if, I business if and you're is kind that properly, that was Take fair? So you saying sized if are properly it is now away?

David Demshur

yet. not Well, Correct,

automation, those we get And the quarters, to will there. Over next also levels. be it can of couple with adding some

Unidentified Analyst

I one question, just modeling may. And if

enhancement that the and with it's help production on production, of declined revenues of international. my declined revenues the And about a ballpark? given is XX% Am Can that? the suggested the U.S. the envelope you X%, in about much ASMAN I by XX%. So a share for me back

David Demshur

We're Yes. with good that.

Operator

Thank you.

is Stifel. ahead. Next go Stephen of Gengaro Please question from

Stephen Gengaro

kind Thanks. R.D of are think business XXXX. digits talking that's about forward R.D. the you mind. international leverage everybody. high A here? this you as XX%-ish to and lot Two One, just single peers you about Good go of Do your reasonable for things morning, if year, don't think in growth there. maybe the

David Demshur

right Yes, can we're at now, so get there. definitely we it

Gwendolyn Schreffler

that market. so X% force year-over-year. revenues then And International of or that their are from up XX% building. that segment, we RD revenues Yes, at of see that sourced

would description. trying reservoir what about in or be you're growth to that model when of So think determine kind

David Demshur

margin international you America a nicely from it And can decrease had in because see that we offsets North growth. expansion

Stephen Gengaro

total was three. business up. round So International The is up

suggested So piece that XX% that dramatically? was down

David Demshur

Correct.

the You math. can do

Stephen Gengaro

guess measure flat growth you sense. Would the -- to about sort as sort you a that then months? of the on makes -- X like that if of sort -- you Okay, you next of had sort intensity looks hazard intensity be what And over the percentage willing XX a energetic side. environment? talked What to a of

David Demshur

it put teens. I'd the in

Stephen Gengaro

the In teens?

David Demshur

In the teens.

Stephen Gengaro

Wow.

great. Okay,

Gwendolyn Schreffler

that. of Well, going an go get Steve to example I'm

If sequentially, is worth XX% got XX up sales our so you've there. that energetic completions were there up X% percent were sequentially, U.S.

Stephen Gengaro

then not just what that's that when that energetic Is your up Is that number when that's gave the obviously; everything? -- your you about that's you -- does sales, product And XX% helpful. all you number of Okay, encompass? think sales, just sales? GoGun energetic

Gwendolyn Schreffler

That is correct.

David Demshur

Perf operating charges.

Stephen Gengaro

Charges and delivery systems?

David Demshur

Yes.

Stephen Gengaro

Okay, that's helpful you. color. Thank

David Demshur

we're ahead Chris, while to we wrap and see Stephen. any don't go questions. going Okay, more

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

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

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

We with achievements. their are to proud be associated continuing

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

Operator

now your you may call gentlemen. Thank and lines. you concludes That very much, disconnect this ladies conference and

Core Laboratories (CLB) 25 Jul 192019 Q2 Earnings call transcript