CLB - Earnings call transcript Q3 2019

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Operator

Good day, and welcome to Core Laboratories Q3 2019 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this event is being recorded. 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 America, Pacific. good in and morning good We'd welcome Third importantly, our Conference like and employees analysts to Call. to all of Core Laboratories Quarter Earnings shareholders, XXXX our most morning, Gwen Core's CFO; Bruno, President Head Hill, Larry Schreffler, and and I'm COO. joined IR; This Chris Core's Core's by of call be divided will into The X segments. remarks Gwen will statements. start regarding forward-looking by making

current trends review performance, pertaining current updating on some to and Lab's then macro the will supply industry We crude future Core expected then trends. thoughts worldwide environment,

quarter We the and will industry general follow long-term Chris tenets, building discussing then review it XXXX as overview Core's Core's outlook fourth prospects. followed then comments additional X shareholder outlook to company financial which value, and with will financial Gwen shareholder build a employs detailed pertains regarding a to by value. Core's

X Core's over new introduction detailing then the of some technologies Core's progress will a Lab worldwide, projects phones successful Core operating Larry continued to discussing session. of we'll Q&A then and operations major segments, open and highlighting the then go our and

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

Gwendolyn Schreffler

you, Thank Dave.

these respects materialize statements. any Should assumptions one forward-looking incorrect, that may discussed affect uncertainties are Before make to projections, outcome. gas start discussion this that political some actual statements more of and may to our the the subject of we projected company's business oil material Act in from of industry, will in relating the climate and those factors our mention other of the of this forward-looking conditions, in conference statements the a I'll XX types risks of we morning, include may or business information. other including forward-looking filings estimates vary prove that any international uncertainties and and those call international our This results during should call include and or risks These outlook. markets, number

any revise a update information, obligation or We of new undertake events publicly forward-looking future result as statements, no or to whether otherwise.

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

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

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

David Demshur

Thanks, Gwen.

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

today. Further continued quarter, the well industry of spacing and third several spacing, Core's host to discuss up parent-child calls Proper analysts well sessions and topics to rightsizing, the in clients and groups with will are well discussed seen well During positioning conference industry upsizing, and most XXXX. X Core for upsizing be relationships. spacing various optimal

Fit-For-Reservoir completion and efficiencies significant ROC effectiveness yielding changes the practices. perforating is cutting Fit-For-Reservoir Optimized Completions Reservoir Core's strategy close led stimulation is second, and commissioning Laboratory recent Improving to of rank Lab a edge, Core's in The for and which or completion. strategy

well and reducing as count. increasing stimulation more clusters to to the per to stage lateral less completions lower Perf to per owing for cost stage, stages, to XX and XX industry and many maximum the be but are programs are complex lengths to yielding frictional clusters will may XX as add The going perforating continue owing forces. while stage, time near

reservoir stages possible stimulated as Long rock well frac rock well are more amount wellbore. close in and to more The clusters to the the they is for of parent-child to stimulated channels avoided the produce Stimulated fewer problems in rebelize rock way and is proximity reservoir clients and interference being clusters. source volume changing are are reason be region perf to our maximum volume more the child the of near-wellbore well Reservoir perf avoid It relationships. interference costly using are --

Global the acquisition for and new Laboratories. a Core a Addressing to continues growing technological Technologies market, of windfall Guardian be

market and industry-leading company's GoGun. receive energetic our continue automated continue to system added. as preassembled and via up current to increased to market we positive meet Core's biggest We have client share demand feedback, GoGun is systems be scaling acceptance the of challenge

up and that the most for trend components Core's be refrac The activities The cycle system improves in meet in that the be and longer introduced continue most increase This in results will team wells. performing from increase of that continued that were to needed XXXX. the production will -- important remain future to refrac-ed activity is have best projects economics significantly client FIDs recently ballistics rock. The future XX wells refrac-ed XXXX, increased their and that the number deepwater will Core international to demand. go significantly. another and in for XX last up of reservoir industry-leading and charges XX with perforating that system most critical are the XX approved perforating including more of foreshadows approximately Core's in systems, any XXXX interaction queued innovate preassembled the energetic the to the

streams cycle mainly absent XXXX. to from been Description Revenue Core's absence revenue -- have Reservoir from longer dating back projects

international our since However, increased quarter in fourth Reservoir bolster this XXXX. of of XXXX, revenue Description revenue quarter the did activity the highest third

million decade liquids worldwide in crude natural production U.S. oil about produced an Current up about million at barrels barrels is which worldwide last day, macro down some the outlook XXX record. gas at X.XX a The crude on X.XX The Eagle in record a a barrels all-time This barrel from Russian conventional the a September. production now Of decline million barrels Xth-year offsetting for led barrels is worldwide is supply. day also conventional is the years barrels million barrels production. production, the this the worldwide at a day by is looking row, This Bakken more which Non-OPEC million a is for it over non-U.S. was XX day, XX.X at gains unconventionals. million Of is -- globe of made XX-year from XX,XXX a Ford last reservoirs, of note, by in production and currently three day. of discovered X.X is XX production. and in of is and of in million of Gulf fell XXXXs. comments in this its liquids. high. the Now low. million of discoveries at are which Mexico, production. permanent a another from are the than the note are Permian peak nears X.XX

linked at we'll be million a in a at There'll XXX,XXX growth oil is to due is is an XXXX. to introduce Saudi to XXX,XXX new Norway, take another XXX,XXX at XX.X in is Johan's XXXX. a barrels will be barrels production the act. month X the low XXX,XXX last from day disruption barrels XXX,XXX early X-year of production barrels countries. day, probably of barrels to day. in right day a Liza OPEC the Sverdrup now be up barrels underarm estimated now, The down the next which By way, supply Guyana, limited production, the first oil due to year. U.S,

will So be million supply total XXXX. new about a in day barrels X.X

perf XXXX client XXXX. wins always It's targeted never are Remember it that also the for noted that and significantly sleeps. lower ads and

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

cash, consecutive base generating positive especially no During quarter XXXX, to investor plans free the being third generated dividend cut importance we over marking XXnd the cash. review Core Core of quarter our European investor sacrosanct. our million base, to in as our of its as $XX free has

With for flow, continues of future current in model streamline conditions. company the the Core will free than the further continues businesses Core's to And cost via Core the pushing dividend markets confident to that operating flow to to automation increased company's rightsize is the XXXX. cash and operating to review allow structures cash market bolster the cover revenue free asset-light Lab margin, emergence and international more

again Also return as industry-leading tenant, returned financial $XX the invested free increase. consecutive back via XXth cash our second -- we to quarterly repurchases levels quarter the Core to for produced oilfield Core Core's with capital Xrd dividend its to approximately will continue on in million shareholders quarter, XX%. dividend. And once back flow XX via return approaching share ROIC and our quarterly our shareholder capital

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

Christopher Hill

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

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

operations on and the reflects for projects higher of increased $XXX.X a at million the the driven sequentially quarter, revenue, looking revenue X% million quarter, X.X% $XXX.X being the the up outside international activity Of up Revenue developed was by from this Now service U.S. income and over from continuing offshore activity was third was in to levels which compared last quarter, statement. projects.

energetic product was more select of from we market addressable the and quarter, GoGun. the performance led the onshore quarter, is penetration up market the and firing sales, $XX.X sales our completion tied quarter. decline also for our third the during to activity, the which are Considering activity by sales, X% high with American pleased of which for the of million North Product over switch last U.S. were

down in second improve. the sales for the in for was revenue, as of up of approximately previous the of XX% was continued the last little which in Moving is XX% services of efficiencies from a XX% $XX just quarter. G&A on, the previous from Cost sales from up quarter cost revenue, service quarter are million quarter to the quarter slightly quarter. $XX million, operational XX%

be we XXXX, $XX $XX million G&A the for between to ex-items year. million and expect now For

quarter the to for amortization last which the million, was quarters. and Depreciation is several $X.X comparable

items expect the margin of Income EBIT continues of to was discrete quarter. of tax to at expense remainder similar and rate For that was remain for XX.X%. million. the for income GAAP levels. EBIT quarter result was rate XX%. $XX.X effective $XX.X of quarter tax was for as the using benefited would lower this best-in-class the quarter third and depreciation capital $X.X GAAP million expense expenditures expense EBIT a we the and tax an yield million, $X.X XXXX, million ex-items the for quarter

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

Additionally, mix and as earnings earnings the to discussed of will the geographic each be somewhat sensitive to effective across impact the calls, of prior quarter. items discrete in rate the tax globe

diluted the million third operations quarter. from $X.X from per was EPS million, quarter, X% from million operations almost continuing up the ex-items GAAP X% quarter. continuing for also for up operations ex-items for quarter. or Earnings the for was income from almost continuing $XX.X from share last operations was Income was third $XX.X continuing the GAAP $X.XX $X.XX. from $XX.X quarter million quarter last

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

However, integrated additional materials, bulk purchases our the Inventory GoGun at DSOs from switch the days inventory firing lines product $X about stood as building select up million and quarter. of for XX addressable the raw at we're consistent made June million, and XX, for remained systems. new like $XX.X we

quarter, X.X fourth of quarter will for the XXXX. third and turns the inventory were improve for we anticipate turns Inventory

last from debt million at end $XXX end. Our million, quarter long-term quarter $X was up

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

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

higher flow third also cash levels results operations. from -- operating in Improved in resulted quarter of the of levels

However, this absorbed flow cash levels capital. in working improvement higher of some in was of

working offering will capabilities required. continue we some to our also high-end expand production As additional of capital the in and be investment perforating products,

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

than markets international will activity continue Lab. As the with reduction operating with the dividend and the actions, expansion mentioned, to cash cover flow This, the previously Core more our future margins over cost our projects important longer for support Dave of is our term. to associated in combined

the effective Our continuing industry XX% continues income free XX% of of the cash is and over in divided a conversion XXXX. one operations ratio, by normalized flow to free which cash third using the rate, be just from quarter for tax flow at highest

I discounted still cash for those our metric over will is We outlook. believe assess now comparing guidance utilize to important for results, when flow update this and company's to an turn shareholders valuations. Gwen who models particularly shareholders financial an on for it

Gwendolyn Schreffler

Chris. Thank you,

global supply demand quarter third market for the crude the of During balance change. the oil and did XXXX, materially not of

of disruption impacted output. from Saudi the adversely Although, production Arabia temporarily supply

the demand likely oil growth from be increase crude growth months, growth will OPEC, non-OPEC crude from While is has predicted supply aligned hydrocarbon oil to past offset more its that weakened countries, countries declines and by provinces. over modestly X mature though

levels crude reduction should crude months, expected growth Core inventory the as oil global will X inventory support crude higher a decline crude in also oil Lab The a over anticipated is days of projects of oil which potential result oil is price. inventories the global in crude world's consumption essentially to continue in production coming limited to countries. in decline to in the oil

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

mentioned, can add and Norway, crude supplies believes few Dave the the As only oil next Brazil that Guyana meaningful over Core U.S., years.

for the levels as drive Reservoir international the mature new of replace is curve international supports investment for reinvestment supply underlying and to current over our fields outlook continues Therefore, segment. in These the project. remains suggesting production time. is from crude international the Core's investments required the the decline Core's on oilfield in are fundamentals final underpins projects field oil and activity crude gap which development These the crude Description markets critical international supply mature decline price, in crude internationally prevailing supply. oil oil demand positive oil balancing clients. crude The and the of a decision The fields

Turning to U.S. the

opportunity While U.S. managing well while investment capital return focus cash improve optimizing free and operators to flow development fields on generating to continue on their significant the the their -- for remains return on investment, budgets. investment a completions of

the publicly budgets indicated, flow priorities. operators focused are However, XXXX as free have within on and cash U.S. they're spending

count during the U.S. activity. both This the onshore XXXX and the by was apparent quarter rig third in declines notable completion

will Core result, Core's considering to approximately impacted be will land of land a U.S. of operating Therefore, segment revenue which but to lesser though also the U.S. million by from of believes expected U.S. fourth million, level most $XXX project onshore yielding Core's expected operating activity income activity impacted. to degree. be fourth approximately we decline, segment uncertain to Enhancement quarter quarter $XX As decline Description a continue Reservoir is and in activity, approximately of $XXX consolidated million $XX to decline margins million XX%. Production

align tax gains on for EPS control is fourth we company's will $X.XX of be projected with Further, projections operations XXXX evaluate Lab's year. quarter Core fourth Lab cost $X.XX. the condition. The announced the opportunities this for XXXX foreign using continue to from XX% efficiently executing losses based quarter excludes the and Core to effective earlier business market rate an to is guidance or is underlying to exchange. actions,

the I'll Larry. Now pass over discussion to

Lawrence Bruno

Thanks, Gwen.

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

Description. first on located continued Reservoir under of to Core XXXX, cores Australia. reservoir an evaluate discovery, designed to offshore from In laboratory Santos the Lab, shallow-water program direction quarter third Turning Limited, conventional extensive of and work fluids the Western Dorado the

proprietary CAT lithologic sandstone interest. core intervals were scan its Core utilized Rock to Lab Characterization than More characteristics conventional Digital of recovered high-quality the from determine reservoir. feet technology this XXX of based in

physical for pay representative In technical zone Digital and log crucial modeling, being petrophysical select rock Santos testing. on to Core quickly samples for calculations. advanced The staff calculation conducted geological Characterization downhole are and representative these that the are enables reserve accurate Rock addition, and ongoing measurements work work to samples Lab's

mercury-free, rock addition In collected characterization hydrocarbon hydrocarbons samples the of cells Core proprietary Lab programs, Pressure-Volume-Temperature used the multiple to were behavior or the determine reservoir. conditions. subsurface to varying horizons within phase the PVT reservoir from relationships under stratigraphic its

in technological role in discoveries, largest playing Western new Core to be needs. client Also meet pleased Core offering quarter, Lab to Australia. introduced the third one is of the a offshore evaluating hydrocarbon a

and phases several are needs. large complex technologies these fields, sets. to Lab critical meet oil development reservoir deliver proprietary properties measure, integrate and to exploration, geological, early-time petrophysical Core gas these of and developed data the data appraisal required fluids During and has

tomography, dual client group optimization, for access. Core's Lab's branded high-frequency technologies. from and comprehensive, platform gamma high interpretations integrates web-enabled innovation computed nuclear high-resolution for energy as Lab non-invasive into results Core technologies reservoir NITRO, a micro-CT, proprietary energy other x-ray along Core magnetic these includes fluorescence resonance, technologies noninvasive and continuous logging with digital

the pace, results intervals XX applying has over presented, gain are leader analysis. transformation well core allows in the within indicators of oilfield space workgroups. of to in performance years. time-honored reservoir service at properties. technologies accelerated in integrated shared clients and key their Through latest visually the represents laboratory This digital Core been Core's platform, an an this industry client interactive Lab past into innovation to from reservoir evaluate insight cutting-edge derived evaluated digital the advance NITRO

In mechanical plug-and-perf perforations the old operations. casing, Moving particularly inside world's from and recovery This risk, Enhancement the offers isolation advantages, recompletion mechanically their well's operator liner new is their products. one technology approach with to Ford distinct Production and U.S. in on largest E&P optimize independent This of improve onshore allowing perforating diverter and both Bakken isolating compared develop now wells helped less Production perforated existing to energetics existing completions, return formations minimize programs Core's partnered and the investment. team for run Eagle companies cemented a isolated for breakthrough the solution to reliable a Enhancement.

hole energetics perforating produce typically small when substandard single yield to The perforation required These and produce that holes layers high attempt string consistent the results. through of friction perforating charges, to ability two commodity deliver inadequate the to require charges on pump slow small perforations relies hole casing, of tubulars. the isolation to through commodity strings tubulars, mechanical a inconsistent sizes those perforation of rates, stimulation size effectively inconsistent successful, time increase X of shot including be penetrate stimulated To from stage. and

operator the Technology to Technology. optimal stages ability position, of within techniques. effectively successfully both perforating consistent conventional has laterals stimulated. through strings allowing be in Eagle proprietary Core's To-date, to regardless ReFRAC ReFRAC new of for the double and of hole gun Bakken day deliver existing using Perforating both completed is been The the wells zones engineered to numerous tubulars, over reported Ford have number Core's per and Perforating complete sizes

E&P The reliable frac along consistent stage of older that Core's large from life under-stimulated. and originally with refrac company the also fracs has wells well seen results. stage encouraging -- and production new well existing technology breathes to were fleet into to

Mexico. completing High-quality for a LLOG can the an continued Core XXXX, options require now Exploration additional completions evaluate to the pay Also Gulf log recovery across its drilling explorations separate an of on horizon, varying between used zones use reservoir having multiple LLOG sand the control the reservoir significantly to in original multiple the strategy. rock project completion approach. elected Core's stages were be reservoir given alternative and zones increasing diagnostics technologies work and of properties, well. of deepwater Exploration rock its The pay each completion for deepwater comprehensive program the quarter diagnostics third and completion in tapped, intervals without Buckskin oil and expense on

be direct of Core Exploration allowed well a well LLOG strategy, opposed to minimizing all quality to flow drawdowns of degradation frac completion significant multi-stage/single-trip typical strategy. well completion measurements with Exploration SpectraScan, on placed more to recovery each no services while contribution LLOG project. PackScan for more using completed diagnostic the that have to in the completions diagnostic approach stages. each guide This and and at to of diagnostic rate. able assist Core the very utilized pleased been than a higher its as operational oil proppant will providing from achieved zone The SpectraStim, with sustainable, Lab Core's frac as the normal confidence is flow Core's the as risks. determine services were pack single-stage/multi-trip higher this pack to confirm target services well the the decision provide effective operator helped to to fluid the FLOWPROFILER capacities. the and

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

Operator

[Operator Instructions].

from is question first Pickering, Pope Our Byron Tudor, of Holt.

Byron Pope

related Reservoir just to Description. First question

and all continue your international very segment you to down as have trying within board you line about growth see on top to that you think what and in pin the you fluids rocks XXXX. perspective? You healthy international But international tap you're about on component and of how frame, qualitatively growth and Description analysis drawn thinking international from of just Reservoir from Could were offshore reservoirs. terms a job

Lawrence Bruno

Yes. Byron, Sure.

positive, remains board been better than it's downturn and it's project in shape began. the overall Our since

the mid- growth be quarter-to-quarter If in said, see projects, looks be are digits. year-over-year international. see the tend these it, but you to favorable us. they They high Description. largely We That in, over lumpy look Reservoir X% back being next large can it year-to-date, and see call single projects you'll clearly to for year a XXXX. We trend the

Byron Pope

And my the want QX question That's helpful. this about share just then guidance. make relates just way. I'm thinking right the to to I Okay. second

though Reservoir is bit QX sounds Description. implied of But than also lot in like, be be it little the a year. a last case will it that -- for erosion less So pronounced the Production even top Enhancement, for was margin in like line erosion there more the will the sounds

have cost taken? is all is Or job So plays that it that guidance. mix actions again an the just that in you to of context understand Just QX trying predominantly of the well? behind that function element -- control a

Gwendolyn Schreffler

furloughs as well period to going the right. in time nature in QX more for utilize at that's a temporary standpoint. cost transitory we've of base QX. reduction of combination Yes. reductions of Byron, a from activity for an And to those. made that is that activity QX looking our permanent as They're We're

Operator

MacPherson The next question from Simmons. is of Ian

Ian MacPherson

the have contract as a to we them about otherwise, through wireline sales seeking fourth and then systems least companies. clearly evolving the rather you and than in resist? to the operators given about Are more, variance and product also seeing more defensive anything feel Production systems the you And decline seeing that that that that? revenue side level stabilize of, we at within a cuts learn in you disruption Is furloughs do I'm integrated compel you've on that cost margins, the you're quarter. expected I Enhancement gun on margin to purchase mean is switch within at Production in integrated there would you I for are talking X% begin Or normalized channels in to specifically, market GoGun, guns, your that in unbundle gun to these we, addition your mix? periphery a And and to channel evolving the to your the that, some open are wireline is that Enhancement. undertaking the, marketplace? would -- the agnostic sort the creating X% In think, the for than

Lawrence Bruno

to through cover quite Production try a -- couple question, that several go in ground bit of The new Enhancement. a -- of helping support margins are products are those. So in I'll there

all and switch, to nice So guns buying very preassembled rates. addressable the people the are We're components guns. agnostic whether adoption a also preassembled refrac bit -- or seeing

the to guns want decision they site well offerings. of, be significantly, type ourselves if energetic to make, switch are. clients whatever to out sort demands the to able the open We preassembled fly architecture changes our allows of our structure, are positioning to flexibility which an at different Also to a for real-time match on client amount the use of adapt

energetics So convenience job, operators the preassembled you and we've will, perforating which the the while gone important the into for business that of if companies, is any it bulwark carrier wireline the market of the gun, that project. the understanding for a energetics. end the day at the offers this that's are of opportunity perforating And end, the --

Ian MacPherson

see the have expect regard self-source. of or That's wireline helpful. and then pushing seen operators you've something and And products a very just Is position possibility to on? your companies unbundling to that with to

Lawrence Bruno

Not particularly.

example flexibility a engineers value it of we we E&P, I we think space that's program that energetics, of the We proposition of make get about and quality brought and have a very independent our got of a We've the in we have what how great we of really -- does maintained components, its assemble of to the earlier refrac to that all nice on in new work reflective cited closely and large that energetics all I E&P also that identify example ballistics can performance to the set all problem. on to specifically they then companies very it with it's the among folks work That's Lab solution nearly market. operating and we need connections. a all driven how talented product of the great our of Core terms this in R&D., our client operators, did of with together.

our we are lot always They the with perf focused E&P a performance And -- companies. the energetic But to of critical deploying on efforts in selling role -- have of so have energetics been deal companies. jobs. our the and doing a value play the wireline to do our

Operator

Mulvehill of The from question Bank Chase next of is America.

Chase Mulvehill

the some And then us it there. hear pricing also hope talk the you actually the So whether side? I on what up just color can assuming and I'm revenue give want it. stick energetic in I integrated but the particularly seeing was competitive guns, side I a of I may XQ, was you're and guess, of Could energetics to didn't environment on little about you bit be energetics

Lawrence Bruno

Go ahead, Gwen.

Gwendolyn Schreffler

to U.S., slightly completions give X.X% And in activity it about that can when I you was Yes. down then activity. completion compare of sequential in a basis, U.S. decline a some the year-over-year. the color XX% sequentially for about decline also on were And energetics on The but with Chase. compared U.S. U.S. you terms to about favorably completion was X% of compares it energetics that, favorably, year-over-year. XX% down

Chase Mulvehill

And about the competitive more a in it is bit activity? what decline up, pricing or is then holding given Okay. pricing, getting

Gwendolyn Schreffler

end high -- holding up Pricing targeting use to that energetics communicate nicely. operators is high-end their rock. to want Because, we're the with again,

Chase Mulvehill

That Reservoir fourth and sense. Okay. a dots consolidated Description your help makes the just to Reservoir to understand trying over relative and what's to revenue us and our you going All margin? Switching in just quarter to guidance. hand and little to Could margin hold line connect with happen Description top right. the relative bit

Lawrence Bruno

guidance not we So strong a I don't specifically, really -- board. we give project see sector think, do but

at -- back mentioned you go in through see also it's to bit throughout that good. part best time, I look looking and any shape I mentioned the Reservoir because As the and it little recovery earlier, performance the it's it, as tend international. you'll been And large, if to earlier, a projects tends cycle, there's Description lumpiness of be be in the in that of

control what XX-month somewhere. at look problem if happens have international a where has year-over-year, if We hole the no up you a they cycle a we've have rig stuck say, been or the Description X%. over in over last, But trend, revenue Reservoir

I flat the We roughly are Reservoir on fourth quarter. would sequentially Description for seeing, say,

Chase Mulvehill

kind kind mid-single of an is out opportunity cost take XXXX, you Description to of of go a into Reservoir And there Okay. as digit it's growth? if

Lawrence Bruno

a Also biggest looking at constantly the cost we in nonperforming we it. we the our satisfied at on Description. we were that. asset returns earlier weren't year, this look Chase, Reservoir divested with are that getting We So of labor, we part --

possible. number evaluating business But the that to think turn. we people, of through that rollout company, to and so as produce laboratory more And the automation to across so, all continue helps same run efficiently knob the that's us opportunities to work we another continually as continue we're i

Operator

Wolfe Next Research. question of Gendron is from Blake

Blake Gendron

touch Just a want to for Reservoir Description on bit.

outside of is is activity that hands the the was maybe driver for the what FID change regional of on Hemisphere, the driver we been normal the hands. these of that and players. I Lab cadence wondering focused if we've changing conventional may more certain framed for and track us assets the assets of opportunity is be from IOCs on as Eastern non-core to One a Core this

Lawrence Bruno

in figure It dig don't out good to thing is and because got for know us what they've Yes. already. they actually

new industry then may those joint acquired projects get asset new We is, and that given not project into market company, fluids leverage the rocks own their original And information. that just and that us when we into have purchased their we E&P would data areas and particularly, studies. one entrant interpretive to does a companies comes our to entrant So have a into. the the log company databases of study access the that can not rights on having consolidate in and multiple the the their their well those be

to new the off buy margin the would revenue to high the that some and in new us into So the or shelf. that player that dollars stream. puts to have come investor When happens, game profit our very

Blake Gendron

the board for anyway part of now right there like is you what frame that? Is for job to us to related activity

David Demshur

side exploration that leverage good continue wants I'd move projects their that specifically. that turning that's we a of screws to on sliced think But transition particular bring a is and where maybe the the it they'll these company one. we in company been at side, be and production. huge on field of to don't better of required exploration a I on We're skill way X valves over to the say may and are are the it the to little that another turn tuned not and sets up aware, of to to it's really there's some business aware

that, engaged. we make sure and we so work across And both we that companies follow stay to

Blake Gendron

for the meaningfully changed what versus or last for system that's direct separately GoGun marketing line months? the over effort Great. the the you E&P and company, wireline X the then Okay. and on effort following questioning. us HEROPerFRAC then maybe And of frame going sales if is, on Could Ian's just specifically

Lawrence Bruno

the energetics, The and We the are wireline by sell to work change. then so predominance and that products. and value across and the ones our they have go into the efforts to companies No Lab proposition the them on are the companies of sales and energetics. license made sometimes but job, companies. on marketing to a tasked them our to of operating are do both. large direct the hold They we energetic use Core making to We're a performance wireline

Blake Gendron

operate risk, those give bit a for the perhaps, the year to folks Could you you to to little in specialized? did color are front. perhaps, business how more and And be bit we rehire XXXX? Perfect. us I a losing just early you And and you bit as But little some fourth that here. on specialized quarter? because one, mention labor to Is furloughs guess, into messaging expect frac a into don't head last different you the obviously, furloughs I will Okay. more little on been have sensitive guys there look next how maybe have then crude the you're any you the as understand so

Gwendolyn Schreffler

the Blake, that still employed, their of reduce number the still of number Because question the folks, sick terms still while furloughs. of in down, of their answer those remain leave, gainfully workweek, of they're hours to cost things sorts benefits in can that's the vacation, bring the beauty thus days retention of are you intact, and base intact. the

that's the because furloughs will leveraging And segment. Enhancement that the terms we're most the so impacted, of where be Production in most

Lawrence Bruno

they are on where are patches to employees It don't as work in. typically home shareholders. to maintain allows an Blake, -- very furloughed used They do somewhat number that their and reduced market, led what employees it -- before. been we the out -- schedule as be well add navigate years it coming go a benefits. and ago. program time the through as furloughs company they in program to -- income us of I not we found It both a first for is remain has Gwen soft a we've our rolled completely effective it the the that, have

importantly, for be our any our having and the driven business very very multiple of there'll protect allows trust, And of work it through to Core much us modified is technologically Lab business. been So cycles, in and a which philosophy schedule. our brain foundation

Operator

JPMorgan. question The of Sean from next is Meakim

Sean Meakim

that or I most but On have think systems mentioned open agnostic architecture systems. closed you're have components the integrated Production your at And versus Enhancement, systems. you all of competitors your

systems, extent share push incentive back more systems when make forward their harder own it and to wireline as maybe you did to take for now integrated have providers historically. their So what try they going to closed that market some own offer does to

your total closed addressable So market of prior? does dynamic that versus way among in architecture any peers your reduce

Lawrence Bruno

space. think always problem all there energetics, penetrating that I on own have we've number the are Sean, that making in best is that business into we're and big been that with, of their familiar of the brand had perspective wireline names no companies, market some that

those In get the name, our because client fact, of on some that wireline you'll instructed have energetics, brand, companies see list, E&P Core go Lab companies specifically, them I performance. want

Sean Meakim

trying towards -- integrated this were out move commoditized. you you which to to the of was system, prior But business, gun get just

Is different you where you're, it solely now And to not these selling to demand, being dynamic customer previously on were by focus to energetics? some you And integrated someone dynamic? provide having Do those were a on shift guns more excited that as view selling focused else. systems? those a so systems. than guns are due integrated perhaps, of And provided different more now in be

Christopher Hill

Sean, Chris. this is

think about more it, it's I the think was when market -- yes, you componentized.

in electronic addressable the were only new making even a that cases. guns folks of or the switch energetics have didn't lot So necessarily

correct, commoditized. shift. is a especially still those you and But the which is been it of were when out it like market, gun-making componentized we us, for had said, and was getting So more

as have to system, switch, attractive new that addressable think within the package, that, think a it you Now I that integrated a it components makes more energetics firing have an superior product which it's does us want offer want to get this buy and able that. after. be an the integrated proposition. these system, superior to gun from energetics see our If value And into us, they go they for if customers to we of

Sean Meakim

Okay.

on discussion. rig that you're you high on But that year, segment. be fair North next improvement overall may is this off international offshore what or America levered? feel where the sounds piece? expectation it a get count to to like XXXX the given the is so And points year expectation by for It is be somewhat offshore hundred overall confident the versus to shaving expect tempered R&D that thinking XX% the growth basis Just the magnitude, to we're say few as just you'd follow-up going for going that's so the revenue about

Lawrence Bruno

of into has Yes. before are results That A Lab's couple be than is some at on Maybe and that Lab happen rock One plate are that. tends little R&D and lab, give like before color. delivered. announcements all their are later taken, little the of in projects the things their things the companies place, are I'll other samples done a service to you on to in rigs gets these the a way Core turn Core involvement cycle that. fluid that find getting hardware, focused

to are, the that of So be do companies. cycle bit I other a we some inevitable North headwinds tend later there little in side and unavoidable. the on potential think the call than it, America are that

business for a market our includes or that preparing are -- that we so for market uncertainty. our And

Operator

is from question Citi. Scott next The of Gruber

Scott Gruber

you Question highlighted. drag for Chris, was the as in capital quarters, working a

like Sounds easier? working or of size take capital days can be there you the if that How where will a about release potential XQ. think that's benefit we should in

Christopher Hill

correct. that Yes. is Scott,

spoke I QX, is of some think in some what building we in the inventory offerings Enhancement product are new saw segment. which we around you to, Production of these that

natural we've expansion a is it's to of is build, So going seasonal. little But they're the little just carried there traditionally also products. bit than as a a of that -- be higher some

receivables quarter sales bulk keep QX, raw at do what consistent bumps we're some improvement and is model expect would to that what see You'll some QX. inventory. I would revenue also so looking from day a the another into in about then looks impacted material, purchases for I due for you to that but the how think X of When going

is we where to So our inventory reduce guys currently. from it are targeting are and targeting

flow in cash see should in a up from capital QX. you So working nice pick

Scott Gruber

playing terms in you It seeing given And then the diagnostic seems that from seems as Larry, positively quarter. are and around of effects, et Can services What impacting during point were you're supporting E&Ps on parent-child like benefit well the the Enhancement these color provide on seeing the driver you spacing, also is Dave it. demand Production services Got tracer parent-child, diagnostic some focal a on it spacing, intensity the for or out. your service cetera? side? about focus energetics we is trends think

Lawrence Bruno

Yes.

the specific One optimum with I misconception of a that. two sort footage well think come early-on So is, up they maybe could -- -- on things spacing. high-level, that

an rock to conditions. I -- properties aware or that, rock are will, device that's to different that if not time some people for been -- think of quite in going the of, say set sort in completion for specific diagnostics -- that are a that's reservoir that aware the it of allows broadly given we've our operator you And -- and of happen set now. analytical thermometer, a

two. how that brittle the rock of created around also is So the frac. particular well in makes all frac, way for dialing the pressure, rock you've the What the of well diagnostics the hardness, between validate size and that sense area if the intensity then and the interference to

approach for measured the using bodes more adopt well for clients opportunity think I So us. to a diagnostics

multi-company at process to finding looking a well optimum for we're to companies spacing. on more validating going a, right number come engaged sort pretty this approach Secondly, engage soon. out We're now, of, of taking -- a with to

completion One today other play on particularly, in for that in is in there big where offshore be Exploration diagnostics here one for like on earlier and a gave LLOG the frac reservoirs, forget, just some a I have like I diagnostics, to described jobs us had nice don't to packing example earlier point the that decisions today, also conventional was addressed. role

domestically to side of tracer opportunities that that there picks the both business. arena internationally in up too. So Enhancement do we for And get our Production is play if and

Scott Gruber

the growth going and currently Enhancement you international forward? of see that Any side how color the on Production

Lawrence Bruno

projection out year. single-digits think think I before. put mid- we'll next I numbers stick and sort of, the we We've improvement seen to in-line upper overall for the, with with year-over-year the

Gwendolyn Schreffler

more one take call. will Chris,

Operator

Howard is from Vaishnav question Last of Vaibhav Scotia Weil.

Emily Boltryk

It's for Emily line on the Vebs.

could quarter. If wondering I'm done the Apache correctly it us quickly just last you help remember impact June. in of in you about did the divestment I if So was think

then for for a add the headwind XQ, if such million, think impact could you then XQ. low months $X a you million in for So impact say, revenue million in I some of color the keeping And $X generally $X would And it if about would Reservoir Description decremental if as segment you that for like give had quarter revenue that, to well. had the levels incremental could more what's at quarter? helpful I on the be more X

Christopher Hill

is Chris. This

you regards So done quarter mid-second with to that that. and the we about was divestiture that did mentioned, highlight yes,

those to wanted about or a trying compare quarter you're a in you revenue. some going that the between so that of to $X year-over-year, from bit $X That line top And guidance? if that's did $X.X want if some talk around try -- of million guess basis, some growth businesses. in to to probably was million happen. for to do is I year-over-year that So did little a million, that was is forecast the you Gwen, look to headwind, out trying you're do QX at have of That subtract probably -- forward on if to and detracts

Gwendolyn Schreffler

Yes.

talent. on out of the of base course we the guidance, permanent retaining been base we've then since cost that the use So because it And a think estimated And on XX% permanent margin the to side decremental quarter. basis. us temporary sequential benefit furloughs we taking through that's last more QX we'll to gives cost the manage manage on of about and nature, in cost our

David Demshur

Chris. Okay,

In fourth significant of close await. Core's we XXXX. And know to continued going levels the we're challenges operations quarter in for summary, activity position to So the now. company

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

shareholders and Core Larry these noted and Core the the already of quarterly management of have as possible. a and employees wish our our XXth worldwide results that our follow Bruno, by special that earnings give our made thank of to release, closing Board we all to Directors in So analysts executive thanks

with be achievements. are associated We their to continued proud

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

Operator

your may Thanks concludes it very lines. much, conference and and now sir. you call, this Ladies gentlemen, disconnect

Core Laboratories (CLB) 24 Oct 192019 Q3 Earnings call transcript