CLB - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good morning and welcome to the Core Laboratories Q1 2020 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event this note being recorded. Please

now David Demshur, would go like the to to over ahead. conference the CEO Please turn Board. I and of Chairman

David Demshur

America, say Grant. Core in evening Laboratories' employees earnings analysts We'd all XXXX morning like and you, welcome Pacific. in conference to first to our Thank in and quarter I’d Asia North call. to of good like good most afternoon Europe our good shareholders, importantly

Core's divided long-term Schreffler, of Chris COO. start Hill, which segments. forward-looking Core's Larry and company I’ll regarding This Core's IR; Gwen to statements. remarks morning, I'm value. Bruno, return tenets Gwen and the employs we’ll joined by The shareholder CFO; call into will Head President Core's and review financial Then, build making will by be five three

progress introduction some and of and follow Chris a Then, of projects add Core’s over major comments Q&A for our discussing segments, overview regarding highlighting session. we'll technologies will and Then, detailing shareholder Lab worldwide. financial Core’s a Larry additional and the detailed also then value. will the new phones go Gwen operations operating comment. will Core continued building open then two with successful

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

Gwen Schreffler

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

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

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

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

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

David Demshur

Thanks, Gwen. the I’d company. like XX-year over the to three shareholder build which financial to has used being a on publicly of value review history traded tenants Core

first marking of XXth quarter free free The of quarter free flow company's cash $XX,XXX,XXX the cash. XXXX, consecutive generated During the cash flow over lucid. Core in remains generating

repurchasing Also over back Core's via in with capital on Core stock, reducing modest debt industry-leading to tenant, quarterly while in for the returned first And financial the quarter and third XX%. amount invested quarter. quarter, Core return our a consecutive ROIC exceeding $XX once again an shareholders produced dividend our million XXnd the oilfield of

I’ll Chris? review. to financial a now it for turn over Chris detailed back

Chris Hill

Thanks, David.

covenants. been in March focal corporate began early many financial the our around discussions and in of associated points structure One the that has debt of our

include these some interest. points changed comments the to today’s of address financial format we So of to overview

performance our the quarter, sheet our first Then, position, covenants. company's current overview and material summarize items financial for the will provide cash of and debt operational the liquidity two in first the the instruments balance I’ll I primary associated flow.

in differences by the prior caused what the COVID-XX understand some downturns we saying between the by today pandemic. off global has start to like and would industry I of been

service oilfield Core pretty severe. that is the also last and few it able is remain generate which important free to to understand the flow was However, downturn, cash still was throughout companies Lab which of profitable one

history to and the generate our and that free that model confidence this current positive cash light-asset with continue It through is maintain company our business challenges. profitability culture provides flow will organization we our the

its Core XX, had continues and million additional revolving XXX to to million credit which if ability needed. the utilize $XXX as outstanding under of million facility an XXX March we XXXX, draw

we additional borrow need facility. However, our to are the credit not funds against projecting

cost reduction changes of outstanding our indicate In reduced and future our implemented, needs and to the fact, policy, debt. projections a initiatives with capital reduction dividend announced the

release, management’s quantified clarity, we For been have repeat and to speaking within the are approved, near plans earnings have we that as today. are in control I’m going are reduction the cost completion

interest the has to the back company’s coverage Lab leverage and two credit facility, these a described, XXXX. issued unsecured that instruments notes financial are private carry just revolving were primary some a and covenants Core maintain restriction minimum debt in debt company Both ratio. placement which must a the of instruments; ratio

is to ratio ratio and across Leverage which is The instrument. ratio Xx of for calculation are a used X.X. EBITDA to consistent instruments. net coverage interest traditional debt restricted is debt minimum note calculations permitted each different both The the

and and credit for modified Core calculation ratio under for facility the expenses stock credit compensation. agreement been to a uses has a adjusted and financial historically most charges facility restricted EBITDA as X.X, impairment such of back the debt non-cash revolving the restrictive The ratio of Lab. which The adds is goodwill leverage covenant

March its also by Lab million relationship a able calculated as have The group bank reduce For to X good revolving an net XXXX, agreement to Core line credit the of XXXX. was communication. our the under as with quarter and also to first continues maintain open and of leverage company ratio debt of XX, X.XX

other initiatives many implemented companies than is in the described indicators sector. continue remain generating that are by Core to flow above, all the and and cost will within a cash Lab financial reduction factors ability free the positive The company's to organization stronger and continue energy the profitable positive much position be

guidance we effective excluded quarter. of and to regards specifically call and XX%. with Now on last our losses calls rate performance gains FX any impact past tax of our gave financial the assumed this The or an

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

been underlying an the to financial eligible age additional in understanding million for the segment, our provide of goodwill from million of who items employees expanded or reached results results XXXX with enhancement stock quarter the associated XXX performance cost a excluded Additionally, our million include production associated plans of more and intangible their operations. quarter. retirement as we of the acceleration X.X first and impairment with have financial for first from These X.X clear reduction expense charges assets the compensation of have

XXXX. at operations down the XXX.X XXX.X statement. about continuing from income fourth the million looking Revenue the from Now in quarter of X% was in first million quarter,

steady. Our international business remained

However, commodity sharply the in and forecast. prices onshore activity as originally fell March, in early than quarter was weakened the weaker

pandemic, caused by revenue events our global Revenue this disruptions XXX first revenue, sequentially. quarter. international after for COVID-XX and associated and quarter, would the by revenue the which million have is challenged more X.X% about service XXX.X million Of the or from was impacted was also these original forecast the down for

X.X% revenue sequentially. international grew Our

onshore was a the U.S. primarily X% However, from U.S. decline activities. decline U.S. revenue drop sourced in this the in associated The offset in the with was by

quarter. and international the which pandemic, on international have delays COVID-XX second also projects were some global a as continued experienced facilities result into the in However, of

to from XX.X for from the U.S. are International quarter, sales of onshore increase the which activity, XX.X more tied sales, over to sales North million American million the product last an in partially were product significantly increased activity quarter which levels decline by down last but Product completion was X% quarter. were market, quarter. last offset

Some due with our COVID-XX to to product international caused were customers the sales delayed by airfreight pandemic. disruptions carriers

very highlighted revenue, the just as strong ability of XX% in incremental quarter margins, service during perform slightly our XX%. cost very from services services approximately is for incremental When the Moving considering declined and the low have we service cost cost first company's or tests historically on revenue up quarter that to XX% of additional to to of quarter. laboratories generate slightly the are last

for through services field-based laboratory for our clients network. would would costs direct level our consistent direct costs variable This be of fairly variable our of costs also be These considered services. performing

these costs. employee in not including variable are our We cost direct

workforce our changes. considered in be changes So structural would

higher for in absorption of the both sales product variable future improvement was increased to from sales quarter when carry last XX% of would of costs. segments. sales XX% a our to also direct a projecting results fixed as able understand important cost and fourth slight quarter across revenue, of improve is product were our XX% average component generally the financial sales slightly Cost which sales, Product and operating we to XX%

primarily was last employee from for up due ex-items increase associated from in expenses G&A the is non-cash quarter, G&A, the XX.X compensation million for quarter million was quarter. The to plans. with which XX

we million anticipate approximately reductions G&A quarter, will lower cost the With be expense announced projections. than this previous $X

the which our And amortization was quarters. XX year capital around million. are and quarter prior compared for several million to the lower to to we expenditures be to expense expect In levels. would Depreciation slightly depreciation projected XXXX, last be is X.X when comparable

EBIT, million XX%. best-in-class of EBIT was quarter, continues margins ex-items XX.X for the and represent to

million other million for quarter goodwill the and impairment on charges was basis the assets discussed. and GAAP loss of operating previously which the Our the non-cash XXX a intangible for XXX charge of includes

reported rate impairment million. quarter of On GAAP ex-items million expense, the effective the the tax company benefit with benefit the associated Income a X.X tax an income The is income charge. tax an tax quarter. basis, and X of for using XX%, was for goodwill

of the items globe be each the For somewhat the tax XXXX, to will quarter. of remainder the impact across mix rate and earnings continue to discrete sensitive to the geographic effective of

operations XX.X loss million sequentially for was XXX operations, continuing first GAAP from ex-items, from continuing XX% quarter. Income the was from down XX.X million. million, about for quarter operating the

operations first diluted was quarter. per $X.XX share continuing the for from loss $X.XX. was the ex-items, continuing from The for per operations, Earnings share GAAP quarter

was move end. the balance million quarter to on million we’ll sheet. X.X decreased and Receivables XXX.X last from Now

Our at days slightly last DSOs from for quarter XX improved quarter. the

including and the remotely banks We plans to ourselves, as globe tested Mark. implemented during work the impacted, organizations across believe and global clients were were

closely to collections currently payment any our client we our behaviors as in anticipating We from are or monitor base. significant will changes practices not continue

shipments to little year-end during March. materials as primarily Inventory the quarter, was were international receded the delayed anticipated some XX.X X bulk raw million, million and planned, up in a over due that from

the finished exited as in build unanticipated goods we market some were the in quarter. activity sharply onshore dropped U.S. there Additionally, as

the balances throughout Our some key This cooperation XXXX. take vendors organization evaluate to inventory of working of of remainder suppliers. with will and coordination and diligently is and assess the reduction our

side of the the onto balance sheet. now And liability

million. XXX long-term debt X Our quarter million at net reduced end and debt we was by

is our of million XXX credit As as comprised well as discussed under million at facility. our outstanding XXX revolving earlier, debt our senior notes bank

cash free excess management’s earlier, reducing is towards the stated As focus direct foreseeable for debt. future to

the XX Looking at activities million. In after QX from CapEx, was our paying And cash in million, our XX% was operating increase cash cash in flow. flow first an XX.X of sequentially. flow almost free million quarter, X.X

XXXX, its down For company the anticipates CapEx compared approximately XX% to be as XXXX. that will

continuing Our from cash using charges free rate, cash flow divided effective is operations, of over which normalized income ratio, the excluding by XX% quarter tax non-cash conversion first was XXX% free flow for XXXX. a and

generated Core manage ahead. also through to free challenging cash has This Lab we free are the marks as projecting we flow, generating market quarter cash continue and the XXth positive consecutive organization the positive

believe this company's counting metric particularly to models shareholders cash when flow for important results, for those valuations. this who comparing assess utilize shareholders We an is financial

outlook. Gwen for to I'll update an over our now on it turn

Gwen Schreffler

Chris. you, as the other mandated decline expects and near XXXX. remain mitigate around Global consumption crude in in demand COVID-XX. outbreak of transportation, daily of to mid-term quarter given the restrictions to fell implemented low prices seen crude Lab movement community the the oil Thank were global for first the globe to oil Core

on imbalance crude demand been of the As continues or on managing focus greater. oil uncertainty pressure place the downward their balance clients’ sheet of around supply longevity between the never to has price and

breakeven will short capital they and addition, long-term the for In oil price cycle projects. crude support spending both evaluate needed to

in a capital XXXX in quarter and companies by oil XX.X% prices declined XXXX, plans XX% E&P first especially U.S. which in completion fall of in average as a decline witnessed the frac significantly During reducing the XX% expenditure the their spread activity. crude index resulted

of negative as is international result demand in a related COVID-XX associated experiencing chain, In decline with transportation supply as and overall disruptions and impacts activity addition, well. the

million and an April plan reduce production X.X barrels On announced to through of April crude OPEC+, unprecedented non-members, the by three of OPEC X.X million XXXX. XX, day per oil phase million, and X.X oil

Core the in remainder lower E&P companies XXXX crude quarter the by believes agreement unfolds, As in modestly the OPEC+ consequently of versus the to in demand XXXX the response COVID-XX price and crude the industry oil XXXX of disruptions the may the actions XXXX. decrease the improve. E&P and activity, price overall activity oil abate, during first of taken indicate

continue and environment. second to clients prioritizing declines activity company's this unprecedented North in operating projects internationally are conducting XXXX. of for Core plans in the America The during their quarter activities

is the anticipated level as of clients’ onshore to of activity sharply anticipated to the and International not decline timing high activity, year-over-year. continues level regards to Core’s U.S. a with be decrease; in however, as activity. There uncertainty

Consequently, during Core From may company is a quantitative second in in and provide at project quarter of this improve the a to anticipates of delays products for not that international guidance time. XXXX. the work qualitative half shipment position perspective, the upcoming

work segment’s the fluid revenue is completion activity. expect solely we be description, would for tied and of resilient drilling reservoir to reservoir not more than analysis more given accounts to this which For XX%

production of activity, plug which offerings, not to wide innovative programs. completion has such international remediation Additionally, a tied some well and enhancement and as and product large abandonment of are drilling range

So sales to when following. XX% direct approximately consider product carry projecting variable while higher general financial averages costs the had in the also a Core of revenue historically direct future variable costs, Lab, has lower Service important it performance XX%, XX%. to which is

and Additionally, business the will financial which reservoir over future of by over will by cost million X financial has earlier, implemented X future results remainder million plans significant for the Chris million both description’s by structural described over XX benefit by benefit enhancement, quarter per segments. performance reductions Core cost The will benefit reduction remainder reductions and XXXX. per of quarter product results and for million for XXXX. And XX.X the as

to over Now, I discussion will the Larry. pass

Larry Bruno

Gwen. Thanks,

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

staff of Before industry. and this sacrifices all during of to Core turning for made commitment details dedicated the especially energy in review, the thank personal I period also the Lab’s have operational our want to their for unsettled they

to clients This dedication global allowed safely operational and remain business, allowed and their to largely importantly to schedules. adaptability Core Core continue very network to recent our challenges to across our has on Lab our conduct service

critical business Core us best-in-class understand previous industry of the technologies than of XX difficult periods for as well years. Those the in to plays service have industry Lab nature as that the the providing both the more weathered cyclical role in and

first a The the to Turning reservoir Lab. Atlantic regions to development exploration, South Core for currently international is Northern most It description. appraisal, production continues margin be very attractive among active projects. area for and

the engaged Core’s BHP, Lab, for under BHP's This program project offshore analysis employing provide Core of - proprietary Bele is multi-well and X direction and Tuk analytical Bele XXXX, ST the patented quarter the X, Licenses was X, wells. and laboratory to Trinidad X Northern In assess Hi laboratory - to of rock Hat properties - first X, Tobago. technologies reservoir ST X, from Boom - - - - X Deepwater

to was the fluids unconsolidated target were recovery intervals. strata floor the the from at reservoir techniques. methods core and Core using the of proprietary handling transportation the that cores laboratory. upon rock cores during recovered rig the pore natural the and site Once reached conventional are well quality, stabilized the Lab the retained from in These High fabric ensure the subsurface,

Gamma proprietary petrophysical proprietary Upon non-invasive experts for lab, branded wide Spectral provided including as NITRO. these of as with were High CT using well package immediately variety technologies logging, arrival Duel-Energy pay optimization critical and This lithologic cores as scanned assessment. BHP’s surface at the a technologies, parameters reservoir Core’s for Frequency information, of

results a of laboratory the advance millimeter-scale team time-honored a also the NITRO provided in bed with bed intervals of with the derived core millimeter-scale from conventional well format, archive provided format were in with analyses. XD digital in three-dimensional deliverables NITRO These BHP These cores a resolution. Web-enabled resolution.

consultations of assisting significant These very are laboratory pleased physical to program BHP Lab evaluation measurements between cores Core following traditional and conventional Core the Lab’s is BHP’s technical their in progressing the discovery. through of teams. be now

to Moving enhancement. now production

launched quarter Asia-Pacific program in extensive participation of Core its for first abandonment XXXX, operating comprehensive operating plug international in an region. shutoff multi-well, For a multiyear the and and large water company, the

The isolation product to Lab other plug abandonment innovative as three-dimensional well existing procedures. effective perforations. seal utilizes the as step technology Core is utilizes provide X-SPAN over downhole permanent a program well Core's zonal a metal in technologies. metal and system and X-SPAN to Efficient energetic-based critical abandonment and plugging proprietary

is cost highly abandonment from are wide range a solution efficient being X-SPAN a and in configurations. across of operations result These reliable reservoir. and proprietary depleted Lab for eliminated plug deployed the Core production water technologies patented well and effective unwanted

Core's superior to execute reduce provide per an services site well an product the savings with abandonment IOC well job with to performance than ability superior individual Lab to instrumental technological days X,XXX Core by the ethic integrated service along to of product more for flow. decision This were helped significant time program. have package and in two this use Core’s the IOC’s improved well. provides expertise, offerings and cash extensive

we and session, went fortunate Lab a XXth earnings be in and companies alongside Before call. Dave’s success motivation enough to source been take all work move XX those industry to history for both pillars vision leadership, of both That’s Lab’s Core Lab the general. our inspiration want have and a this years public Core acknowledge Since the of will great to ago, an of drive Demshur’s of Q&A that publicly quarterly in Dave and accomplishment extraordinary among moment Core I to traded him.

and Dave me thank and had of always leadership for more mentorship privilege for and rest want support, that personally Lab Core the the I team. years has to confidence the the he to I've the XX provided than

time, through from the to high to with team work face industry and spirits company. to dedication leadership time the every Core entire that Lab challenges Dave brought will permeate clearly While day and the the them always will

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

David Demshur

Larry. you, Thank

Operator

[Operator will begin We question-and-answer the now Instructions]. session.

ahead. question Meakim from comes JPMorgan. go Sean first Please Our with

Gwen Schreffler

Good Sean. morning,

Operator

are we ahead. instead going go George like looks with Co. take It Please O’Leary to & TPH

Gwen Schreffler

Hi, George.

George O’Leary

Good you? Gwen. are How morning,

Gwen Schreffler

well. Doing

David Demshur

Hi, George.

George O’Leary

guys. Good morning,

dialogue-oriented maybe then Just high domestic any just aren’t describe curious, color dialogue also qualitative providing progressing you a American customers wanted if perspective, would of you could customers? to from in I rate just how the international behavior, realize just customer has is NOC with even quantitative but to question, versus kickoff it with be level helpful tone, outlook, IOC change, anything versus framing? be And North discussion, qualitative guys differences

David Demshur

Yes, George, a few along comments that.

location disruptions project, So The been projects, that’s have for and say to those been – none of international on quite frankly the to say sending been being offshore cancelled. America their They’re South we’re have on transportation their our the so time staff sending our have location largely and an at largely the offshore not operations not shutdown request. staff related.

are those told with. they forward they’re all is move to us. have projects I anticipation So That’s going think reasonable that very what

you some told forward and are the development, Those – what to that projects. information have with they’re long are big be we’ve received publicly not from going the forward all projects. publicly. investment community they’ve publicly They’re them told These And of them. moving moving said these stopping cycle from

will forward. equipment so around the people they those once ability back move planet, move normal and to And get to

stability international very be think greater. the a front, appears the influence to on Clearly I with projects will So be us. nice much the stabilizing those for

on been crew. cutting I down frac statements America about companies has some clear there think by laying back rigs in and North very

the what’s line be So that talked U.S. will the than off North outside There is there drop we’ve be about I a heard will steeper America region in publicly. think everything with in been

would really you. IOC In you no change say, we’re hang ready when I and in terms call of there. there. We’ll NOC, for

George O’Leary

has the your market, your international revenue color. in helpful And the highlighted have How from that of market, in side over to through That’s exposure, a Have those highlighted leading the in shut-ins already but lot rumblings in I of release do be America a on have emanating maybe How you North reservoir are impact that shut-ins. started heard business you now the basis we’ve guys and on North on going mulling great. – America? that realize you do edge Okay, to North and business some OPEC increasing. is then and large a business stream which some does of shut-ins of degree. folks a guys American Clearly time what percentage that fluid that pretty stout is Norway here? shut-ins shut-ins portion seeing to there’s

David Demshur

Yes.

need business reservoir business question bit. in where That side is fluids. to bigger long – or the the description cycles. and frame There generator, rocks little which the such I of is the a cycle laboratory the side waves So goes of in on the revenue and

been so since the And XX%. And XXXX than fluids more was XXXX, to than XX%. then business rock then more has from business

those the rock what properties. business. but so need global the monitor appraisal sub And their equal count, with fluids to is on for and business for fluid somewhat, as that I more to and rig into example, be come to exploration continue being we less in people the get into tied would That development see Lab of anticipate we’ll of back fluids round come next said, Core business for play, the development projects is us

first shut-in might go have is have of going wellbore have to well, a of drifted pressure or to happen they the they the near at one that’s than properties to and way the when reservoir. a rather the better oil, back because things to is that say will reservoir Now in the the it probably check

go to have and they’ll so check back that. And

then So there rebound as some impact immediate fluids be back production on. in a there might might bring people but that where be concomitant shut-ins a would the period testing,

see comes in in made say, there’s on. period And a fixed market I back develop. the pool a some we internationally some about our that’s we will our your the be making gone with move with in anticipate and different the adjustments there And work – areas, say demand so to U.S. for of that will services. has our get we’re to more but we’ve to as forward in to adjustments see been The question our with those – has workforce. as the us and earlier labor I cost in have think But we heavy line I lifting been of what all of together we’ll front plans the lot that today of done transition largest

George O’Leary

Great. for very I’ll Thank much color. back you the over. it turn

Operator

next Meakim will Our JPMorgan. Please go with come Sean ahead. question from

Gwen Schreffler

Good morning, Sean.

Sean Meakim

Good morning. Thank you.

So I was hoping factors challenging than more to start off with There’s last a question this number a on downturn the make one. the reservoir of description. that

able to You’ve OpEx $XXX that that quite just a business maybe of still analysis The now. a of long quarter been million that’s helpful mix given orientation sustain is the revenue two-thirds for today. fluid and time

and challenges here, cetera, price do forward? do puts takes of about mark? pressure reaching customer we are oil that So budgets, disruptions, given et the there How unfolding think going that see million the risk we a on COVID $XXX quarter

Larry Bruno

the way looked barrels that of last the in Core over planet, million The always transported being participation keeping is roughly produced that laboratory. Labs in moving at cycle and Yes. $XXX was and tested oil we’ve was XXX Sean, that, say quarter the around a million

impact production an of we is for there that yes, drop could see so some as happen And period that time.

amount is amount and fixed produced consumption. that’s don’t think that a dollar insensitive being of so the oil floor I put to And into

that but that. to likely XXX see ready segment see. to will below and that million, will So have revenue We’ll again not face that specific that do we give I be guidance will in we on that’s something think

Sean Meakim

that appreciate I and Understood Larry. feedback,

should pretty Can And margins going how decremental operating incremental the what put business, parameters high about downside and trying high given the the just so quarters what the beyond? quarter in pretty the quarter. decremental the in first and impact? is the or think can think in some to whole about to – we done production then just you but in or to enhancement, I’m mitigate around pressure It’s and that frame particularly on a acute naturally quarter XQ. to leverage be what first in how future a happened it second think about to XQ face given industry maybe

Larry Bruno

let the take that fill Yes, I’ll forward in about bit going I’ll first then and Chris part a question there. little of

So, we’re the coming had think constructive getting conversations if the Yes, we year. lot about back part completions. to early on of had We out a QX, new with you in where U.S. we sharp going of were a business slowdown Sean, in clients. of

rebound had cost we build. in add to What off. brings turned That We start We to place and responding the play, the So client furloughs to materials we in pan we’re to starting and into not saw into OPEC+ liked the us That the response in slowdown. back events is would a those way pretty of QX meeting see XXXX. nice that didn’t after clearly out have the the of virus going happen. any demands.

in that. had sharp we so reversal a And very

we the our seeing to the to that were on early we in being and advised rebound quarter cost clients. by come had some So respond off

off. a we we And And some had back so the system. very then drop brought into cost steep

at by made our turned we the making March time we’ve release, we getting So on following point. those control adjustments started under XX costs had that – very the knobs quickly

And so we brought with And -- we that back had first those costs into some to decremental quarter. of respect going unwind the to forward

Chris Hill

in basis Larry that we’re with didn’t in a QX drop done was honestly that like we’re of that in in late changes kind workforce, of came the so have talking a reduction done about, of just at the And of beginning sharp QX. of the the structural impact any the QX. the on QX. very in was lot end think I off it really So in some That quarter, really the temporary and quarter out saying, taking cost back

will So in going decremental it savings soften those and forward. through definitely will the flow QX

in not saw are decremental expecting QX. we projecting you QX So like or for

Sean Meakim

with really with That’s to could helpful. you. where decremental? about of component respect QX Thank that But revenue could downside and go, where activity to feedback any just the completion go,

Chris Hill

a pretty of forecast And pretty would additional done worst the we way. got internally case, have is come that our sort which I can tell you we’ve I out coming with base robust probably tell Yes, case in line a cuts and with consensus there. much and a cost two-year we you up

surprised be don’t through if some see additional So initiatives you in cost QX. reduction coming

would about I you we’re to very trying So thoughtful tell that. be

employee our our about talking base, workforce. We’re

So also closely doing but it way. we’re in very that a we’re monitoring thoughtful

where will you short is as be that long through continue term. is we move going see monitor to activity and and going more to or the So be term that exactly

Sean Meakim

Larry. appreciate Thanks, I Thanks, Chris. that.

Larry Bruno

welcome. You’re

Operator

ahead. next question Please from Our will come with go Scott Citigroup. Gruber

Gwen Schreffler

morning, Scott. Good

Scott Gruber

morning, everybody. Good Good morning, Gwen.

Larry Bruno

Scott. morning, Good

Scott Gruber

morning. Good

following million-ish the on back how a near barrels term. to given in E&P description low of I the is international of to say so interject just question middle COVID disruptions description, XXX uncertainty million reservoir out to back look that and Just 'XX great the demand, but we and If down understand the of is shut-ins around we’re XXX customer XX%, deal revenues reservoir the leverage or CapEx? much it oil or spending so XX%, or now activity is

Larry Bruno

Yes.

OpEx revenue largely tied remember the important to that description think thing spending. is I reservoir to

with question that in a earlier. So from ties Sean’s bit

come disruptions feel pause a as year in activity those OpEx see we benefit filter the will improved here back that. some for the and half a reference second we’ll on. the But opportunity to through some saw has of reservoir year made back up, turn this come COVID-XX that we’re budgets demand then as maybe decline, or start and that world as back the to starts we description that OpEx starts in of demand change to to As and going effects later to

these CapEx we’ve like So pretty that offshore BHP projects quarters, work the we Australia, talked be our segment just tends we’ve some of business obvious the several in the that OpEx for here, talked sprinkled like one with last about, referenced about heavy to large that. in Guyana a things

Scott Gruber

Got it.

the are debt turning on Just sheet excess guys that to balance you and now turning focused cash. with

there for Just how want should pay that you being cash? think before balancing think with some long other a to target Is pay start we that? get to about about color medium-term uses down on how a debt cash, of you down excess leverage you priority

Chris Hill

Yes, this Chris. is

to sort that you And to okay. What tell to see scenario, forecast. I debt look worst we that So is again, how we’ve of and case in get close done we right tried we’ve a now stress our would covenant. be test even two-year

so for and in see foreseeable is target. So are good say we’re leverage say of to might under or that or X.Xx past the focus. hey, sector, is we’ve focus an the free have more I’ll cash the going appropriate a future flow you the less our term and I’ve we’ve for time reduced start debt I excess cash room there historically is I news. ratio debt. change What that think got Longer ratio the the energy about when on us in that for reducing we would maybe But forecast leverage being, then uncertainty that’s to the said, comfortable flow

Scott Gruber

it. appreciate you. Thank I

Operator

from Our Chase next question will come ahead. of America. go Mulvehill Bank Please with

Gwen Schreffler

Good morning, Chase.

Chase Mulvehill

and morning, hope everybody’s Good I Gwen. safe Hi, Larry. healthy.

Larry Bruno

here. Same

Chase Mulvehill

completion frame and reservoir during if you. spending, maybe and I your not I a you reacted down as how rebound up Obviously the it the you going as come you talked being little wanted much maybe fluids talk a could during and more And impacted reservoir these be business to bit in to fluids. bit guess going a XXXX term, how in as just – last but it it’s during a you’re it downturn? XXXX maybe the point about that little Thank kind see to near downturn? start the to but description and of wells to performed back

and have good 'XX off be context work the would it 'XX So of? to to

Larry Bruno

Yes.

maybe if of million back I somewhat base say see pretty you XXX tied there of closely pretty to but coincidently, of it barrels think every performance wise revenue that our the we go much was XXX that the million consuming to you trend planet tied about XXX across barrels at reservoir would day. the million look and that oil I financial were and description,

there pretty you tied counts resilience I to much the So globe. came amount and what oil resilience think being that even down, saw was in – in produced you across the the consumed though rig saw of

that there we demand, But plays which side and effects seeing is here producing back oil. and think is the very what ties half respond things a we’re as consuming unwind And really think be be today of – in while pretty can those those this the of fluids less the we the think into quickly will is so that. going feel to recovery I well, some well world going one hiccup is business year we the to out start but that no how and predict of quickly to to

NOC a business, rock side major that. it’s reemphasize slowly some I land but always to CapEx said, little clients lucrative America projects, and that that the about are our business, will important ones onshore into to talked more business. specifically changes are of offshore respond That they think the to I they think derailing making of core are clients large the that our of being not very the IOC here the have North side plans,

Chase Mulvehill

wrapped kind XX description? kind look think the think makes It you’ll pull you cost your were can for bump And you do able million XQ of cost more for cuts, well. looks about as some the XX And where of consider we of could think That then sense. you’re the XX% XQ? should good. talk and maybe if the you risk, nice of downside XQ we out that and in hold reservoir about how above to of think got sounds kind description that more if and as and pocket we kind cost flip into to then cuts, annualized. up some segment’s That reservoir But about look you that we into kind to at of the like million margins the

Chris Hill

Chase. This Chris. is Hi,

the its would additional on is across and actually segments. to relative size, What look gave at XX is relative Gwen enhancement basis. deeper of I in know some sort there I reduction on a workforce guidance cost So you if production tell the the split million you reductions, that the

in of bulk group. description really the our employees the So reservoir are

deeper cost there additional earlier like speak. are if but I mentioned for perspective we as being So production formulated are enhancement, that cuts from actually reduction plans are that

and the the that So are kind place. have announced in finalized, ones that we’ve of been put ones approved

will there additional cuts. cost be So

more forward. I business more American challenged is activity. But committed For be onshore to tied because that going a we’re directly is it think long at term, North keeping to to minimum going that breakeven business

sort the even operating of where reservoir our could there description EBIT of margins, low a or out margins you we case for be in benchmark think So worst scenario. laid with that XX% that’s the end projections on

to or appropriate those of cost of I are would that necessary We if keep at reductions margins say. kind amount making higher the to structural dedicated

Larry Bruno

And I’d on a the little just amplify bit cuts. cost

put most – in those be to talked materials to the so going see cuts. what there stuff all demands in in costs So all those are pay our cuts going reductions back not we words, that and that’s fixed structural about include that did that we like like and and been included like say matter those we’ve We are come nonessential Those table. of work looked until travel release. In you variable and our not it, table cut and in table in the furloughs, in that and release supplies have things costs. we the sure we in that you’re I’m there, considered over to workforce, large other be

Chase Mulvehill

it appreciate the I back turn color. over. Okay. I’ll

Larry Bruno

Thanks, Chase.

Operator

come Blake Wolfe Gendron will next ahead. from question with Please Our Research. go

Gwen Schreffler

Blake. morning, Good

Blake Gendron

morning, Hi. everybody. Good

here near down. term of kind the commentary if dip things that customers pretty projects some international might bridge larger the So from encouraging on your over the activity of

a providers changing larger – smaller We lot I’m some what know Is assets they’re providers. in a of production more in of also term, and assets hands, downturn? terms that though maybe just having of imagine to internationally? selling but operator hearing so the re-stimulate of flow in group you’re free of from changing conservative this backend more wondering the to would smaller of I the start cash the there’s if response what normalize. that here communicating response a things maybe of near to aggressive kind of been

Larry Bruno

think not projects. in any off from of large some these big about large voice CapEx going foot Yes, They’re continue IOC projects. they’re plans. But pausing on – they’re been not clients they’re our their the I these the of changing talked who the with biggest to room have taking

good value general reservoir over model a as look time performance the when up that’s be for aspects at need change we to that always thing asset. of Core as there’s that because come different I to of answered assets companies try think different questions here, because hands that rule look Lab a to

us. tends things change to when So hands, that good be for

Blake Gendron

of anything has oil a gravitated long-term in outlook late natural way? East any secular that global in in get conservation subscale there from if into the away if wondering bigger specifically to description, to as reservoir are the Core particularly opportunities it’s but been done The market sense. also to your has on I a you know somewhat Wondering that Middle tailwind? get gas gas. potentially of part makes for in for That of

Larry Bruno

Actually, a couple of here. things

project. up gas look BHP, lab call I the anticipating tied We next of others will in and couple in we here that. big country a Middle lot are new Trinidad from at our that some Tobago are East. that’s the gas There offshore to project earlier referenced a a about you we in today That got If spool that quarters. fluids of over commissioned opening the was that’s up release, talked play. a And the

So be there in structure. for been short phases oil, fluids when in behavior I multi-phase it’s core involved more there’s Oil is clients lucrative the answer little we’ve the present that the to a projects understand natural to us gas flow. more projects. guess water, of complex and for always of Crude gas much the tend three

we’ll we or more the your to But gas projects participate hemisphere So have likely be in on involvement. pick Pennsylvania planet place a and everywhere from those some tend lucrative. to little

Blake Gendron

components least but some through you remarks, contribution you in in capital of cash I the go should made XXXX? here just prepared know here. the one in to appears the been big you in last terms appreciably I for built of If have source of expect squeeze wondering helpful. capital could working cash fairly pretty comments levels up from That’s working XXXX working we relative was and capital. major and in, can more It a what perspective downturn to if at a

Chris Hill

Right. This Chris. is

a I quarters, quarter. bit this actually pretty actual if last up little from on well DSOs, look They the think crept versus of those our couple maintained you So but we’ve last whole at cycle. us quarter improvement throughout the an

those be market. our around has think inventory. enhancement I production those levels. working been DSOs, would so we’re that – think inventory to I in started to improvement expecting stay biggest a that capital And with see preassembled if back of to you go build even around in of years So the the and the of I’d couple Guardian segment, kind service we acquisition building like

the we have So that. dynamics for understand changed

inventory. on that to diligently reduce that’s working focused organization be will Our

going through think time, aggressive goals a progress I we got to as but the to year bit we’ve some that. that’s of little take reduce

long us, take it’s to lot of time, So work materials going type items. are those from to of our some help with purchase bulk a lead sort vendors because suppliers key and raw

So going those push of have we’re to those things to and adjust kind plans out.

Blake Gendron

it, that’s helpful Got Thanks. color.

Operator

ahead. go come Hallead Markets. with Kurt RBC will from question Our next Capital Please

David Demshur

Kurt. morning, Good

Kurt Hallead

Good morning, everybody. Hope well? everybody’s doing

David Demshur

are you you. Thank Hope too?

Kurt Hallead

in. Yes, hanging

this test? not flow for forward I’m you cash ratios the bit stress look I that period Chris, kind testing. free did flow stress if earlier, kind a this So free I you as you range on focus dynamic on guess What’s where your cash flow of up of free under came that cash this but of mentioned little sure leverage commentary two-year through you with heard and

Chris Hill

you lot to give in few Well, this variable I’m just test didn’t any uncertainty we’ve look bad changes that there. anything that what through debt. a you a free lot numbers. But last giving of of up it. of with experience make projections what about the outline might costs tell customers’ are, the DSOs what same. really COVID-XX I model can would in not our can We tried the the like to to last your be you factor past the to different But able scenarios. different we’re with stress and experienced tried remain the you quarters going especially respect of the write-offs company. our across under cash still higher that so not so kind tried enough guidance downturns. model we’ve timing There’s should to you significant flow you can I stuff of the excessively some tell in about to take sort you to and costs than that give can come we haven’t structural can We’ve of be

challenging we going down I think say to be inventory are our going not will our going to working are – but for are but to going a you balances us to we’re go year. area I’m turns to for the be inventory inventory I’m that. working remainder reduce telling the improve, of

there, talking model a So last that you’re a the multi-variable quarters but equation think you kind going as you about model like looks that I is forward. use if few can of what

Kurt Hallead

we debt as assumption we be get maybe then in XXXX, through, what well? into not if work out a reduction And just as of context the reasonable XXXX would Okay. as

Chris Hill

there that’s I out assume we’ve you debt. flow cash free flow guidance dividend out to excess take the is just you would reducing okay, going cash what use do dividend, given be subtract model think Yes, the operations for CapEx, what and think from for XXX% to try that above is, what I then on

Kurt Hallead

it. Got much. Thank so you

Chris Hill

Yes.

David Demshur

Grant, Okay, we hour. are at our

levels quarter Core challenges the summary, second in of position await. So continue and operations in activity XXXX company the to for know significant we

to to positioned technologically base. never we’ve or operationally and production clients However, been expand their maintain better help our

the capital remains remain services. our repurchases. reservoir levels, future cash on returned most shareholders committed oilfield opportunistic This company being return Core capital and free in generation, advanced to the for and of The and positions to all focused industry-leading long-term are challenges with company dividends optimization via share invested ahead. well We uniquely technologically

a Larry closing, employees So already to as have And in Board thanks and Bruno, our thank management all worldwide these possible. the special Laboratories made shareholders Core. and give to that follow analysts we’d by of like executive that our results Core of noted the

with associated proud are achievements. continuing to be We our

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

Operator

Thank you concluded. now has conference presentation. The for attending today’s

may disconnect. You now

Core Laboratories (CLB) 23 Apr 202020 Q1 Earnings call transcript