CLB - Earnings call transcript Q3 2020

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Operator

Good morning and welcome to the Core Laboratories Third Quarter 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. Please note, this event is being recorded. I would now like to turn the conference over to Larry Bruno. ahead. go Please

Larry Bruno

employees segments. morning Chris and Good and comments President call Gwen welcome Americas, afternoon and regarding three morning, Core's The be importantly, good of XXXX Schreffler, a strategies company third will build shareholder financial the making Thanks, call. Gwen we'll Core's earnings into six evening employs and and in that Head Chief in and start Europe Relations. shareholder This our most and remarks with good long-term shareholders, joined will to Vice detailed overview Core Investor Asia-Pacific. value. forward-looking in have regarding divided of by some review the Laboratories' our quarter Then value. will by statements. Jason. I'm analysts, Chris the to Hill, We'd tenets follow additional Senior all to Officer; opening financial like comments Core's Financial then

open operations Q&A call as of as some statements. Following provide some operating Then the Lab's for forward-looking then Gwen progress for major to session. guidance. of over on phones Core's highlighting worldwide. projects we'll Chris, I'll successful and well Gwen and now and deployment review the two our detailing the introduction segments, Core will the company's I'll a continued Core's technologies outlook and discussing turn remarks comments on

Gwen Schreffler

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

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

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

Larry Bruno

Thanks, Gwen.

First, colleagues that I'd others all well front-lines. among like thoughts on professionals our and their those our remain the medical and as particularly serving our by as families, of affected industry employees, to COVID-XX, with the say directly

activity recent our the Gulf the lived the and fortitude. combination to families reduced through for these and as sympathies to services living Operational vital safely industry to improvement and by waning do Very activity. either we that long that tied to continued COVID-XX, regions oil waxing disruptions and a third Coast quarter, the subtle of express and the of to persisted continue addition, operational industry In geographically very countries regions. colleagues time or patience in our the shifted signs to both meet across after to but disruptions operational during products oilfield Headwinds understand a saw were virus global positioned and gas client of various preparing so. were have importantly, for, demand like Core crude and oil staff are there And along needs hurricanes up dedicated Those to some well Coast. events base. requires Lab’s due impacted cleaning efficiently five that we required us entire and of want the their in of Gulf all along provide

clients to publicly-traded Core our will be as always the and to Core service. and well served company. review our customer value Now by dedicated that The and history leveraging Lab’s problems solve used shareholder resilient over technology to Core interest tenants a innovation, on which year Lab’s financial strategies XX-plus is of build shareholders, culture, relies employees

challenges, on through flow, XXth XXXX, While impairments in cash return to quarter cash. continues focus maximize adjustments and on the marking cash quarter the financial second current cash to one-time among shareholders. maximizing capital industry. best Core’s invested excluding return which invested our tenants. on $XX.X positive free long-term for in longstanding three we excess its being generated million navigate model returns consecutive of maximize on capital Core to the free focused the of asset-light of business asset remains Core generating free remain will free Those the

company In recent have debt its to will reduced maintaining basis. an net cost And by on more align quickly all major been client As have structure cost the reduced by million happy to than implemented. short-term Earlier costs second flexibility in activity I'm been to those described XXXX client that to communications, structural cash company annualized announced $XX continue steps compared with million. Core to reductions needs, the reduce and now while report meet of year, undertook further in its very balance debt to quarter, the strengthen free use $XX sheet. Core levels

on and continue We measures improve performance. efficiency additional for to look to both will financial

project growth positioned and Core’s recovery relationship sophisticated collaborative on needs is client introduction to internal team remains our solutions that continue rightsizing for of While client Core innovative strategy client importantly, technologies. the uniquely employees. Core continue to while base this our new will maintains meet all Moreover, the very in this maintaining Lab’s its of and is still remain workplace focused unique in a long-term challenging task volatile provide very offerings market, cost always sharply remains to its has we pipeline of address to structure the management safety technologically with the technological to Core industry allowed scientists activity. our needs. Central new strong for

New collaborative problem are technologies and underway. currently efforts to develop solving always

to thank in Before team I unprecedented we their to employees and challenges management move want actions our the decisive industry. continued on, for address Core’s

we We moment a and Chris needs personal endured it the to more over market. and also I'll navigate prepare thank loyalty our dedication, clients' now to review. all sacrifices their both active of the for the for detailed financial want for many them have as meeting adaptability in for and turn that

Chris Hill

quarter, the the plans company cost X In Larry. Phase announced and both Phase reduction X that were Thanks third implemented. fully were previously

cost impact improvement to and slight provide reductions last continued earnings the help a revenue decline, mitigate quarter. over to the Although,

As debt continued its $XX.X Larry to improving reduce the by million liquidity quarter. debt and stated third during the earlier, company net reducing position focus on and

on $XX funded million Additionally, $XX other October and a maturity on The a placement. XXXX XX, agreement senior will $XX an on notes entering new private to million. have five-year a maturity January the be XX, on in we million and seven-year through notes announced issue

lenders with manage current debt goals transaction the as both under are as through accomplishes this terms environment. structure we notes from the We pleased corporate company's our the two support new and

retiring debt First, notes existing covenants and Core step company's facility, and in credit ratio. be next outstanding facility. million it million address provides is our September reducing also The XXXX. Lab’s are $XX will $XX include towards senior financial which under the used issuing additional with liquidity additional of the notes financial new maturing of the aligned leverage debt credit second, XX, senior $XX year term to strategy notes revolving new And covenants, notes under which an longer million

maximum more three limited As covenants ratio of times the a was as EBITDA the XX. times the reminder, ratio, of is leverage these September currently leverage restrictive to company's which and X.XX is

project, cash debt be our agreements financial Core reducing continue focused remain the profitable, covenants which generate Lab will to the continue with will for future. to free on flow, compliant under foreseeable debt and We

Before of excluded last calls on assumed for of review or and rate losses performance gave guidance past our we impact gains and tax specifically the XX%. financial FX we effective the the any an the quarter, call

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

as quarter evaluating the financial interest XXXX discussed opportunities. were and $X.X have fees additional the of and third fees results expenses results expenses corporate various associated of today. classified in for financial and the excluded also from expense include refinancing used Additionally, million professional services These debt been with

a the disruptions the the XX% million Now third caused revenue result statement, The looking and $XXX.X and decline from in prior in delays was COVID-XX. sales at from quarter, continuing as $XXX.X international operations is the both revenue of by product in down project approximately quarter. decrease X% income million

was U.S. end million quarter, which to through at sequentially. on second to second a $XX.X more partially by notably However, COVID-XX XX% of more which international due international X% was and about its from quarter. the sequential disruptions, projects, compared decline for offset international the $XX in this down which continued active over was is first land the Of or revenue Lab most started service the Core impacted quarter. revenue from grew revenue delays Service the quarter revenue, million market activities by

workflows recommenced these our the during quarter, on have in lower disruptions for resulted have Although, project laboratories revenue quarter. some the activities third larger in to projects third the

client's existing third globe project and Our operational our for open advance and has the returned projects facilities, network as clients quarter. across of throughout laboratories ability will our to well improve. remained to sites activities the And

fourth resulting costs inefficiencies, additional pandemic COVID-XX quarter. to the and to additional in and service the companies continue However, expected are navigate for which operational challenges has created operators in

of Product facilities research were and which quarter. the well also weather instrumentation. third more the sequential in analysis conducted second a to U.S. delays activity and to to the offset decrease North laboratory and be are International U.S. coastal of facilities Mexico sequentially, quarter, was of which sales comprised well million shifted during some perforating market sales Additionally, coming impacted the reservoir by of a systems decrease COVID-XX the have afore-named and of laboratory historically of and as sales, XX% more in off by million, This locations, product the XX% from American causing $XX.X projects Product up last of products by sales market sales continue storms, our site low. offshore quarter for the were some delivery tied international delayed clients our international in impacted improvement to were region. both the as fluids laboratory instrumentation. quarter the markets. Product $XX.X in now Gulf

cost XX% consistent is the services, to on with which of for prior revenue, quarter Moving quarter. service of

for cost by were the of reduction more mitigated As as fully cost third was from fully was $X.X reflecting realized for million, in from last quarter, more during quarter $X.X this in quarter capital quarter. initiatives the XX% million, decline the of last completed G&A $X.X Cost quarter quarter. from down ex-items initiatives the down quarter. improved is reduction was slightly and Depreciation amortization in implemented expenditures sales XXXX. and service revenue the million again, million, lower XX% $X.X revenue,

continue project we million be to last year, $XX margins quarter million current was EBIT represent up in for expenditures $XX.X continues full to environment to XX%. the ex-items the And that given EBIT $XX $XX.X quarter. million to million, the of capital from range. For

taken improved energy during this to balancing supply quarter decline reduction positions even market align revenue towards cost our continues well to the cost as company initiatives Additionally, actions the and completed quarter. structure progress demand. The despite the and in

an XX% million. have of tax tax a $XX.X for was income recorded $X.X basis, in effective tax basis and ex-items the events million rate earlier for income effective XXXX. skewed impairment quarter XXXX $X.X for tax a of The operating using expense and GAAP year the adjustments million. Income the was company's also quarter the rate company of Our on GAAP recorded on unusual expense the

effective continue will tax operational company's approximate XX%. As we rate results, we project to the future project

continuing quarter sensitive somewhat impact remainder of the effective are will million, of and quarter. be the from discrete For ex-items $X.XX. rate $X.X items ex-items for GAAP XX% was operations from per XXXX. tax mix the $X.X operations sequentially the the the for quarter from million continuing operations Income globe share third earnings from of continue operations per earnings geographic to that third up continuing Earnings across to quarter. the $X from the each was million. continuing for GAAP $X.XX diluted of was the was XXXX, for to share income quarter

million Receivables decreased prior sheet. from approximately $XX.X to balance were $XX Now the we'll million move and quarter. on

Our DSOs were quarter, from at quarter. XX the days days for noticeable a improvement XX the third last

expects company from monitor our base. in the do we Inventory in completion to shipments assuming inventory land closely The and practices collections international million completed to quarter from million from was the continue of up currently end, our quarter payment to anticipate not balance $XX.X or as delayed the changes decrease to And due markets. approximately last will liability significant We fourth as client $X.X the U.S. are sheet. levels. market remain levels to side stable on activity shipments delayed improves now in current primarily

of year to million million debt, net was debt cash end. long-term was million. $XX of next Our decrease $XXX million quarter which million And $XX.X notes at a includes considering reduced of senior maturing or $XX $XXX

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

the million the earlier, a notes maturity of debt as we in company an the January year. new entered into issue portion agreement for coming of due to next $XX extend stated XXXX, of As

cash $XX.X case the to million. in $XX from XX% In for quarter, down QX free the flow the company CapEx, anticipates missed that to cash Looking our be you will flow was or $X.X in million its cash activities XXXX, for approximately compared million, in $XX comment after earlier million to was operating million paying CapEx third and XXXX. flow $XX.X

cash future As free generating from positive challenging And evaluating organization quarter market expect we we for working to as ahead. XX Lab cash, the marks Core This are continue capital. also we project the flow less the we projecting cash contribution believe will shareholders financial results, to manage discounted comparing models We update for positive an flow has flow free consecutive ability generated periods, for on company's I a and through would assess to and outlook. to is when guidance flow generate free over it free shareholders for important yield turn who cash particularly valuations. cash company’s metric cash our those an now Gwen utilize flow.

Gwen Schreffler

analysis, segment’s fluid is revenue accounts Production Lab's reservoir the Thank quarter you, than for may COVID-XX chain reliant reservoir more resilient expects the the making be such recovery slightly on less forecast of difficult clients segments, international ease. sequentially XXXX and the activity breadth remediation however, already our Chris. both reaffirm wells. the plug broadly including and projects modestly timing Conversations projects program. and projects multi-year of the of level of for Within Core travel description, completion more activity. and reservoir diversified international that has segment with ongoing to to product and it unrelated as which uncertain, and operating supply disruptions in continue, is of XX% to if both drilling expectation work underway and will across offerings Core's remains innovative and the well a new life pace to from restrictions fourth and to international of large completion, restrictions of Core's Core Enhancement wide drilling range COVID-XX improve abandonment continue

or completions third activity expects U.S. U.S. levels XXXX. Core the in of production as seen operation track enhancement in land to outperform to continue to Additionally quarter

has in land remainder As trend barrel quarter, fourth assuming higher, the $XX level we remain oil current quarter. and or begin of the improvement continued the we prices the U.S. for expect gradual at to are activity of crude a activity

operating with associated to the U.S. revenue forecasting to and are improve As XXXX, digit improvement both of Collectively, in quarter mid-single modestly looking sequentially. forward quarter in low planned projects fourth a income. XXXX to sequential Lab result, we the Core activity revenue fourth

we project increase COVID-XX international activity description, with barring to mid-single to digit projects. For low related reservoir disruptions

improved remain for activity single-digit income, as we're in remainder quarter has sequential fourth revenue the the enhancement, improvement both levels expected operating began we these forecasting and is year. and mid-to-high at land U.S. to as production For of the

Therefore, to cost positive challenges and will impact as While will incremental applying that, has to somewhat which The and free continue international hand the optimistic temper with if COVID-XX, associated this associated will or project quarter overall the and better are in back we efficiencies, also operational Core improvement client margins. on timing workflows. impact levels. may to this With anticipated U.S. fourth generate to creating both been in maximizing disruptions execution client expects continue markets, plans and with company structure free excess with XXXX aligned Core towards debt I cash activity reduce of cash reduction. it implemented focus Larry. of

Larry Bruno

Thanks, Gwen.

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

Turning first reservoir to description.

in Core sites. storage During laboratory into potential offshore cores it Basin, Victorian scale the laboratory carbon the CarbonNet a to playing analysis storage capacity, Gippsland which the is recognized capture of physical are the would in the and coast storage Core iterative cores formations. is of capture flow hydrocarbon data storage for provide provide formations, The Core fluid subsurface of multiple Core a this laboratory by of storage in bring and The – Bass the injecting together measurements, deep, economic Laboratories on insight science feet project XXX direction shared analytical promising generated The greenhouse commercial engaged This or establishing to in in is suite and pipeline geologic into most southeast capture and XXXX system Laboratories via progressing technologies the projects, COX third project is from geologic mitigate Australia. is net of properties investigated a the injecting global focused solutions as through will I'm testing subsurface capacity, offshore of funded project on the through Strait, the the based storage reservoir core transporting offshore with offshore network be and sidewall sorry, and of carbon network dioxide fluids of Australia. of carbon part fluids extracting underground COX important being evaluating the geomechanical gas The natural under program. with the project CarbonNet laboratory of advancing among quarter seal projects. and conventional region. an the project CarbonNet Commonwealth pore in governments in by viability proprietary emissions. is The porous a points properties the Core’s leader into rocks. a to from project, patented role these the is required Lab Core Whether of pleased carbon a data opportunities hard media. validate capture Lab

As needs. to shift projects, their ready and toward carbon capital Core’s more storage service clients capture is Core

to now Moving strengths diagnostics were Lab where display. in completion energetic production both systems and Core on enhancement,

in which During Core the by smaller consistent a the with in entry breakdown HERO perforating connections minimize best-in-class in resulting can Lab be solution if uniform the perforating mitigate and stimulated and the third importantly, formation. from very now this precisely pumped formation. the and fluid preferentially quarter inconsistent breakdown string around is new latest of original generated charges more frac proppant generation the Core’s perforations the limited in clients its increase with along take the the frac uniform. size introduced erosion interval. HERO extreme sized available as PerFRAC aligned problem into fluid holes, are patent stimulation PerFRAC Larger resulting holes technology, of advantages occur not and completion of pending capability, robbing more inconsistent erosion Oriented GoGun. next preparation holes This throughout perforations shorten holes with provides energetic technological are can operational combination The the achieving for new This XXXX, Casing technology length.

Also and the to wellsite Permian, and operators the minimizes identify identify used clients of time plug new remnants. commonly Haynesville, flowing and caused major the redress this introduced to enhancement number orient questions. reserve for team we’ll of review. by be charges the reusable consistent at tracer partnered horizontal GoGuns, very during require our the sub frac. engineers be a the obstructions, operational applying – Lab goal, Core was the operators thus high This application uniform technology. the and the Oriented industry oriented application be in QX and through SpectraChem of otherwise patent orientation assembly, Eagle a that U.S. The the assembled to could to obstructions the perforating production cost inter-well to wellsite. orientation align Core assembled and for wells communication often That and wellbore aligned by complications Lab’s efficiency. Core’s new development quarter used that and remediate with of reusable method participation, to for system GoGun pending custom the By dissolvable so Current achieve connections the Lab’s call could each this require to negatively in across a entire quickly sub not saves a size well standard technology both Jason orientation charges specific We orienting determine and length be To string developed. order can very enhancement perforation other hole had with stage systems length, During production at whether concludes eliminating on lateral. designed recapture by the meet having to proprietary and at design the with XXXX Leveraged of Oriented well its GoGun, most Oriented breakdown capacity calculations. performance, developed assemblies, the technology, now full does impact orienting by by is very third would open GoGun and this not are that GoGuns Core do in the the reusable which subs. wellsite or adds your efficient appreciate market accuracy making need quickly unobstructed Ford, subs,

Operator

comes question from from Research. Please Blake Thank The go you. Instructions] ahead. first Gendron [Operator Wolfe

Gwen Schreffler

Blake. morning, Good

Blake Gendron

lower appreciate the the year, there. flat, it’s guidance description here of activity enhancement, for of consensus next. wanted outlook Thanks XX fairly guys. morning just – now that but good I end not on me is and getting the through kind reservoir production on Hey, this

can would we help you expect downturn? slog, desk around to next more pressure about systems the that tough wondering flatter maybe retires for then seeing kind the And a between the you maybe us year, see but pricing board environment this pandemic trends in, across think alternatives just that versus segment this you the through over near hope I'd of longer-term, it understand period or in the you're how even fitting First I'm preassembled and more medium-term, strategically that the a would helpful. services. commentary just any be commoditized

Larry Bruno

Yes Blake. sure,

is if that solution. want both I and preassembled them that respond is well two want we'll service to to extremely think that preassembled comes has positioned will. clients and those a be Core servicing guns the you a guns the components with right reality they One songs, flexibility be to is, dance and is We’ll market now. Lab when to notes able one this components, and is that,

the I Oriented together GoGun string a GoGuns all think the in real opportunity breakthrough exactly a the client those being future. way technique inroads the a as of the perforations way design bring with to offers in aligned that a of where that clients see able string is we in make orientation of and made preferred wants get us stimulation sort the to particular, them

product past tilting about it's been here. very want international had exposure we've slipped there. the today Well, energetics in overlook don't also our got more into nice maybe international. to one-third that business towards downhole for two-thirds, In exposure in international about we're U.S. ready that. where the side sub–equal solutions and So and I

markets applications. and for participate say abandonment and in I with or project, guns and North international we’re So wide a of service we’re the preassembled with for U.S. completions able growing our, diversity P&A components able American would both to app both or to proportionally clients plug-in

Blake Gendron

That shift it. Thanks, makes sense. Larry. Want Got transition. energy the to

more more. talk that talked lot reservoir to peers very and You this centric. the about large It's are and and capture understanding starting carbon subsurface a my diversified it's about

reservoir overall, carbon look an to guys Lab tam to value the wondering at, for So broader are about Core think offering? in serves? this things. it how in a are you capture the in at-scale of makes maybe that carbon any of we strategically that sense middle were terms capture the capture a squarely fits or into would if look I it to that was Like, chain. of add project, equipment realm, And what you things carbon to piece otherwise take compression there piece

Larry Bruno

to away take asset-light Lab that I'll Yes. time long of successful the very first, last like Core model for been a requires has at rust a the of business that compressed. part us stay from lot things

there good a market I think So is there.

is do the think people pump compression, model. I technological in that don't our that and rocks we understanding reservoir think fits which there market, say is bring our I is compression. well can but wheelhouse, it to the play business Because there to not that much

the here they those think the hard best you that And – they to planet we're but doing most laboratory container, the really a is, an for data will can there deep out and carbon use gases efficient of points the a for don't that project, still a gas different inject a hold that much I is our subsurface, is overlying exactly for evaluate that to look you're so engineers, to get of model they're And those sequestration, points, that. to clients, provide the a to the I topic investments clients. it's will the last projects the into right on always understanding reservoir or we're say rate talking much container know analysts. at data or geologic say want And And good in engineers area. is when kilometer services then something at our in needs and from is that's So And putting or performance. that's very about through In put have I served they're our rocks. this to EOR of than spend seal to you injecting comments financial this Core regard, they're the going details case are helping is reservoir good then But things well of in in the COX it fluids if and to the hard capacity, that that sealing your follow that that on in. in away, trying how the they Lab opportunities be so They one moving gas. where away. earlier so measurement straight starting that, how need as sequestrations to this to point capture and case we the on on pointed case that play will, not gas, make the in a overriding

for And heavily we're needs to yet to not we'll into quite go public ability that. our we're ready assist gas how of now we'll make there. We've to formations. our following so for measurements lean our in they injecting right laboratory clients on client's as some terms pretty got other on in ideas, relate But subsurface

Blake Gendron

a bit are a quickly there. to positive the But was Chris, Appreciate sequestration a can room working flow of I DSOs down. a Got would financial it lot have on more in seems look smarter than it it. little capital. of And move for if analysts. engineers you source like the I cash quarter. One imagine

sustainable, capital forward is you and a working cash standpoint? guess how what the I flow So I'm lever collections moving expect from here wondering just in

Chris Hill

Yes.

expect as you do well. that bottom little and capital about I neutralize we little well that a reach definitely somewhat think actually QX, contributions grow receivables in going even net will could think bit, a projecting, that's decrease And could in contribute you regard, we'll as you that working the here if we revenues see the start really it a you – flow. capital, less. we're working the especially think be and from But but that if what absorb to will less inventory to some, bit sideways, of increasing would so those yes, cash contribution be from sort for the contribute

Blake Gendron

guys. time the for Thanks it. Got

Gwen Schreffler

Blake. you, Thank

Operator

next Meakim JP comes Sean question ahead. from Please Morgan. from The go

Sean Meakim

morning. Thank you, Good

Gwen Schreffler

Hi, Sean.

Larry Bruno

Sean. Hi,

Sean Meakim

services minimal Core one that model So of seems prior cycle in substantially fairly deployed, grow even having projects, demand. to but got best most at able need return international The longer a you of just we've to returns peaks about recent E&P CapEx barely business cycle back often with a to ground. E&P positions attractive the cycle is for the your talked terms revenue is the off in it capital like

the of broader of were secure aren't contracts with the opportunities those projects, of limited. the course end that to And some best-in-class some really being pandemic cycle. but able You

than forced your more we sheet rather if being customers we flow from here, balance core their are direct apply So towards renewables. capital forward, upstream to discussed earlier of to IOC away as ground. the Independence put going look in to some are more cash

including offshore about So international upstream if cycle we characterize think you and dynamics, about How those the how post do those as demand oil would eventually spending, given coming think the spending you pandemic? dynamics? economy re-couple international

Larry Bruno

Yes, Sean.

way the in North in America. look the to wave will, think here out at it extensive wave, unconventional of next investment reservoirs coming we’re a of you if is I

Some of years. from all the is that's incremental the investors, have that been oil the hasn't. coming several worked backdrop that And think barrels has where of of out for to some last that for I

attracting investment, debate and cycle the next that a we next and is a And As we global that unconventional capital the to cycle it's it's of we The way the conventional whether cycle that that think shift think area but opportunities is going the the timing be more an is reservoirs less we super cycle to part greatly or it, gradual becomes America expand many reservoirs. across conventional define in international reservoirs just U.S. that going will reservoir in can of is the towards and conventional more North we going here. for to them a There that be be opportunity planet. don't in that see be not international. to

conventional think achieve admit to will of fields of And investment existing and next I be reservoirs. be for think the couple sort it's little speed, and for said, longer I bit sort the that. positioned to to the or we're for to near then a And it's is So full unfold of up of debate, there going wave a and that whether just but of longer-term us. in it's to midterm going to be international I think I'll years open development well get I

Sean Meakim

then your you. deep for about reservoirs. profile? Thank means think work – that. of within reservoirs it. going appreciate be can what And be I Got could complex the in you Some get to best maybe little mix conventional as margin that a margin would terms bit just is normalized and could talk the of in we about water implications we that what a these what maybe RD

what in types normalized conditions the And you coming those the margins for so think implications just of could cycle? are through under

Larry Bruno

Yes.

levels so pretty this little of projects up. revenue $XX us stop client lot last to margins a returns told made, of XX%, we've for to maintaining and times, think not that they've that capabilities going think description. million in margins, it's the intend quarter as jump operational little is the I North to into only And with step on, we're I mid optimistic think of think bit have of get XX% doing us to there, got start to North a do easy anticipation across I that sort to Lab, a we've margins you got range very $XXX industry, us XX% the that of still realignments achievable. be that start that quarter think cognizant sort they're a there, maintain but million for activity us, at margins we've $XX structural an XX% in in saw bit I million to the most reservoir not efficient XX% the spooling we it's they of I Core plus

most robust think million services, And is as but so and things in spool $XXX XX% get us. a time as below maybe I of back efficient into revenue up currently, demand for breaking it's more we not sort the very achievable for

Sean Meakim

helpful really Thanks, feedback. That's Larry.

Larry Bruno

Sean. Sure,

Operator

The next Holt ahead Tudor, Pickering, Company. go from & George comes from question O’Leary Please

Gwen Schreffler

George. Good morning,

George O’Leary

More question and you all the the that something the ways completion morning. design side side. curiosity given and the than than focused wall production on of different Good but guys a more just touch numbers, a purely the

solve various the to awesome problems, look and help you completions as Just with guys my for are are asking about all to they wells, cocktail, thinking the you curious and well-design from guys with on are of they that. individual maximize coming you you work they how changing where apart front just customers production your to end the from just costs, lower

So curious evolving this for in how market. that's

Larry Bruno

Yes.

wells a that to go it. we've So some won’t. us there that certain that a clients us is given not with we going got things with, testing that quite came solution for have this doing ready problem, I things to some I now start And they right new we've about, will talk some got to public working That technology, some out on, wells. can they've said, try upcoming we're in on okay, we're

few have our quarter. assembled in we of some are about we is to at opening very came perforations a a able more one quickly comments we've together to wellsite. of the in guns able of But so now, clients the want talked how underway, group right up that row. of planned to some precisely, GoGun, got lined be put some hey, that we’re underway the and good all need are a the to about Oriented series those those example be And of completed, are in the very those fourth those guns a I together said, And of

that And design. work today on so pending the to and we introduction it, of went patent announced

In – the – I design construction there side, well with in the preassembled quickly and opportunities mechanical deal always is wellsite, accomplish with aligned, optimization. more which so perforations our don't them we on guns, and mechanical, the case, actual too they tinker sub-assemblies, wanted And is this the to that. think the long the put the very string make with chemical the together accurately so and at and

theme. So a is that think I

cocktails got gases, On nice unconventionals, the going reservoir on, COX side, description project on we work some opportunities injection EOR very of still different opportunities. in

come the up those, but leveraging still orienting, construction come that’s been uniform the would the ready rolling about on has latest theme we're on for guns talk say up formation breakdown. that has well So we're these preassembled side, on I to

George O’Leary

onshore an makes conventional sense. contrast Very focus helpful talk an just How you of And activity in going what's in to the there level major or perfect international then And compare which reservoirs markets. delta area internationally – customers – onshore a with of growth area offshore Larry. would of being about you for and forward, the those outlook the respect with activity? of dialogue is level versus versus offshore

Larry Bruno

Yes.

projects earlier, tend and need from all, be to onshore offshore. evaluated Sean reservoir on sense. pretty and to alluded First we're this description maybe of that will a I are say this agnostic reservoirs offshore All projects though offshore to their things little they've to robust more tend uncertainties. be high build risks they are feel clients want bit to a to lucrative wrong. for the The that They minimized datasets like very us. get so for so

for So offshore an on is projects. upside us there bit a of

we've this places margin. we where Atlantic greater about talked so that's coming the and some And think South

lab in got the whether in the up in Dhabi. for for Arabia new Abu Middle of in few be work Kuwait relationships client A we've though or and us, in You opening others offshore, for it there. also operational awhile. in Middle the been last And Brazil the is, some Saudi traditional onshore East with opportunities for the neutral there, great in going zone fourth of there will are and doing East, some it's us, our the a will the big be see ongoing us lab years we've several Qatar quarter, opportunity that

George O’Leary

Larry. you, Thank

Operator

from Citigroup. The next from ahead. go Gruber question Please comes Scott

Gwen Schreffler

Good morning, Scott.

Scott Gruber

Good morning, and are How Yes, Gwen good good you? morning, morning. team.

Larry Bruno

Good.

Gwen Schreffler

Good.

Scott Gruber

options a company's release consolidation that structure could question is million the the The that be or something in the there behind in align here here. and/or the activity. of set here evaluate continue There to benefit comment, get and the back margins, incremental what's quote reflect way, profile was some line pivot What's of different at the it is client to as most DMPs to thus, those drivers? questioning. And rate plus does to follow-up to U.S. the run a Sean's cost you IOC is margin needed a this to the XX% that $XXX with

Larry Bruno

not. it's No,

looking That's make point an starts beyond certain consolidate return. things trying Does our that it our hub-and-spoke our margins. on we're what at need our to to XX% to service we and traditional staff make or where to utilization services I offer like our revenue, what sense activity of think be should and our efficient. the into of more at But get across structure facilities that million that anymore, into certain just beyond geographic $XXX there is – we and are we call get get of mix. do or part type we to regions

organization. example So of cost talking the our about looking – that's at structure an what how drive efficiencies and through still referencing we're and the we

Scott Gruber

And do show there's that there up it margins? see think you in we opportunity sufficient the

Larry Bruno

talked We quarter. on realignments taking third lifting heavy quickly. tightened not doing started announced in the of I QX steps that the We restructuring needle right but at cost to, all would the point, that this in call in up. about Big vast as the at of the got efforts that, we completed supplemental it and movers actually things very end QX, structure.

We're always heavy as never here. turning looking laurels we're So and has making sure that sit knobs that been we're done, about as and just possible. at lifting our talking – tweaking we efficient on

Scott Gruber

or then pretty trough one to a that the on XQ. we back there's activity activity completion from obviously in just back the snapped When maintenance think And super-depressed good do and U.S., you. XQ happens year you get it's When debate a little Got in of activity, that half running. level back here a what half? towards first you it crews more frac XXX whether maintenance second something of on we next of think likely is is, level get is or XXX that do

Larry Bruno

I be a to going there's this it that way. X. see I I would back January say, rush don't put

where are. going inventory by I that come I'm And starts commodity it out predicate increase, that, And best bit to gradually surge gradually perspective start stay a assumes so prices into it'll quarter. big on to probably And saying coming. first don't they the over to quarter see that demand there's I think think that gradually the And down. that a I play the that's second

of I play to those think have in. all

the question is out I into we if if more the that your continues, it today, plays it think see second of with premise the of So quarter. landscape

Scott Gruber

course Got Got volume. flashy back. the color. of somewhat you. Yes, I'll you. and it Appreciate turn

Larry Bruno

Scott. Okay,

Gwen Schreffler

Thanks Scott.

Operator

from Sabella Please comes The ahead. next from Bank of go question America. Mike

Gwen Schreffler

morning, Good Mike.

Mike Sabella

everyone. morning, good Hey,

Larry Bruno

Hey, Mike.

Chris Hill

Good morning.

Mike Sabella

other loop push XQ. and I push others could upside were then discuss you think Maybe OFS XQ? XQ revenue. heading into And there it XQ are so of and as kind impacted daring, just revenue to the want just all you'd mentioned to guys mix heard from see so – seeing you relative how And kind downside. get to to if XQ in know XQ kind over companies maybe the close earnings, into how of international XQ, do projects would what those between momentum the and of some delays we've outlook, carry far say, some this you those be projects, I

Larry Bruno

can maybe some I'll then run on make guidance, sure some we're clear that. through Gwen thoughts that Yes. of again, make and to our

talk about bit description. projects way let's a so – in reservoir the the think progress I little

flights or in would virus couldn't places, people at operationally location to get challenged flights I from that QX, most clients shut to So where get down. we certain say, from get we well a look sites couldn't management as perspective, to the on in places, charter

we really new starts move and in as excuse the So was that that initiation quarter. up quarter, me. the project improve third bit second impaired meant into to That a pick

call fourth projects, working improved come And quarter labs, the of quarter the start revenue recognizing third third coming and the is quarter. is, to generating into those that labs project into some We now has sequentially those. so being over on on get our the in the data work on

we comments made for the RD company. guidance and And for so the Gwen, some about of

Gwen Schreffler

Yes, Larry.

would single-digit should point, for revenue. result to Mike financial So RD mid increase is, in performance to what Larry's that low be in

those the, And to project, that, of we disruptions. So say improvements. now and some of let's flows but as some we're seeing ebbs easing see that there'll be

be in said been therefore improvement activity. enhancement, then think we the And there production off someone they'll with the earlier, land performance. revenue bottom it also for has U.S. improvement So the

would So and no heavy continue increase not looking anything we a mild COVID. reason we pace. delay a activity, on product front due with that wouldn't, be to have of to that We're also shipment production some that let's believe international enhancement in for had say but the at

get go now ahead of to product some moving so on And the that an front. we've international got

well for quarter. a be fourth that'll contributor So as the

Larry Bruno

I you things a really in relatively say is and can't for of little There's had in call countercurrent seasonal But early got know some to ask I which have places kind QX that crystal that weather about I we soft of yet. projects, part things the, clarity. Typically in the where ball year. activity. and some we winter. – normally that we the the see pick quarter some got QX freeze a you will that rollover that it Mike, we've answer Nobody's slows when have us. also down up over know,

play for us And into slack the historically, unless or tends out commodity a first that increase slower opportunities in so price big to be quarter, quarter quarter some seasonally catch we've than got it QX, we a QX. there however,

Mike Sabella

know lots pieces – Thanks, And flow cash worth moving Larry. of for guess. you next It free year. all I was a then for I try, are

– less capital, less next cash working lower mentioned year. probably You restructuring

higher year, it in move level, you high a XXXX think about than around? we flow at of was pieces cash think how those Thanks. kind just do could if Just and free it's next

Larry Bruno

up think out. ends depends XXXX on I how it playing Yes,

hit a bottom receivables, you free to as inventories might working sideways if see we start I cash think and pickups you bit, expect pick Even investment but a there, see up, to pick up things little down. inventories. we little would expect still might stay activities then continue start in And and reduced working flow. as going we – in so kind see the cash of won't we capital,

you activities, the market. So see response won't in in us improved say to building onshore inventory let's U.S.

half, you'd up. see then capital if more So And back neutral the maybe grow some in next is we a growth get working year.

think what year. that model can next you look for least start like at might I kind out So to of

Mike Sabella

Great. Thanks, guys.

Operator

next The question AKO from Please Andrew from comes go Tierney Capital. ahead.

Larry Bruno

Good morning, Andrew.

Andrew Tierney

you morning. reservoir XX% revenue can hats description. Can further? if renewed could how around the you near-term things taking I assumption fluid-linked or you might determine explain just erode on that hang puts whether more not into in will on we that's activity away Good question. was of QX, linked have but looking something takes we our Thank very a the fluids and talk the is on the kind wondering you the much weakness little bit that. of for kind to about I something at guidance appreciate to of subsequent that the that be is robust and which versus to if

Larry Bruno

on concept that Yes, location unlike and help get be people the wellheads I at are fluids a during of rig time. requires rig the wells, is, established around sampling sort at the taken taken think over progresses heads of where But monitoring also out on coring, a active that drilling coming can the well folks fluid that are development. reservoir a fluid as to which location, samples ground are

pretty so stable part that our be tends a to business. And of

that Once to don't soft hand The bubble asphaltenes the ways understand rock compact The can that much. properties, life start life other they pretty bit of change talking change changes. They a of are the can to solution. than fluids out at very you've the the is gas the tend established of the Other to the viscosity as the shift The are reservoir. changes, that, over dynamic. waxes of come and in depressurize rocks, point very they over you to reservoir. ratio One the look about oil the we're unless start little to static formations reservoir.

stabilizing to have fluids over field. that us the reservoir gives description monitored the business of people is those field. that life keep a of so our a part over testing have And be the of of to sort the the very dynamic life And

Andrew Tierney

Thank Okay. you.

Larry Bruno

think I more one got question. for we've Okay, time

Gwen Schreffler

Andrew?

Andrew Tierney

Gulf I was quarter if from able out separate follow-up and COVID quick the Mexico A what events? can, to in Gwen. recent the disruption the you Hi also are Yes. of

Gwen Schreffler

Yes.

be say So the have about Mexico revenue disruptions. change, million $X X.X Gulf COVID let's related come to And international the that through. we probably related then to would on maybe been storms another, of probably would had

Andrew Tierney

great. Okay, very you Thank much.

Gwen Schreffler

You're welcome.

Larry Bruno

Okay.

operational Core's XXXX, the ahead. here. In that in for of position I continue lie the activity summary, think company opportunities to for up levels we'll wrap well as anticipated as leadership remainder the

the We'll We free cash expand. of our technologically solving repurchases shareholders operationally and We advanced sector. return been help value levels free opportunities clients use introduction technologically oilfield debt. will In to maintain as the and by remain have as Core continue opportunistic driven reservoir recovers remains technologies levels as base. The flow future production company and problem growth the reduce near-term, Lab’s or never their the well expand sector as on client-focused via to Core share to committed and Lab cash quarterly dividends, uniquely are the most cash the to conversion and returns capital. in company to better service positioned industry-leading optimization our invested of focused free

team So of Lab. in give Laboratories and results analysts that employees cover worldwide closing, we to special our have We're associated thank to thanks the that the achievements. Board continuing the these executive Core made be of a Core with The and all appreciate and possible. management proud our shareholders

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

Operator

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

disconnect. may You now

Core Laboratories (CLB) 22 Oct 202020 Q3 Earnings call transcript