Earnings call transcript Q3 2022

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Operator

Good morning and welcome to the Core Laboratories Third Quarter 2022 Conference Call. All participants will be in the listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Mr. CEO. and Chairman Bruno, Larry Please, go ahead.

Larry Bruno

to morning Thanks XXXX importantly in in our Americas. our earnings like afternoon employees to third the Africa Faizan. Asia analysts and quarter most We'd evening call. Good Europe, good the Good and of Laboratories in Middle and all welcome Core Pacific. shareholders, East

and Financial Gresham, Core's Gwen morning joined I'm and by This Relations. Vice Chris Head President Officer; Investor Hill, Core's Chief of Senior

will high-level start divided statements. Core's be call important Gwen regarding some six The factors making into forward-looking by segments. We'll opening will remarks comments review in have then performance. including QX a of

then Core's additional that addition, employs shareholder value. to regarding will review three will financial the long-term shareholder the a and overview strategies give In comments detailed have company tenets financial build we Chris and value.

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

to I'll call remarks the over statements. for now forward-looking turn on Gwen

Gwen Gresham

to a our to risks include some would the outlook. the any morning, start results forward-looking projections, forward-looking forward-looking of business include conference during Before we this may This statements are These I'll of mention number this company's of subject uncertainties that that the of call statements. make discussion other we estimates information. and from cause that types and differ materially actual could statements

publicly Annual statements the or of as as are revise result forward-looking us the filed uncertainties whether other otherwise. undertake to discussed reports statements, any update and recent Report Form events on XX-K, or registration a and well We obligation SEC information, risks as by new with no and future AFM. in our These most

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

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

Larry Bruno

Gwen. Thanks,

XXXX, For sequential in operating X%. increased flow, EBIT Lab Core EPS margins. quarter the revenue, third revenue Year-over-year, and operating cash free by of improvement margins, income, achieved

the margins the XX% and margins quarter For grew both third full sequentially EBIT business company for in to operating improved segments.

operational incremental Core QX's strong devaluations once for after grew of Sequentially, XX%, even Lab, British per incremental to euro for over the by QX the sequential margins, global and sequential to available EBIT currency activity grew as Following share EBIT XX% to the leverage pound, full accounting $X.XX ex-items. improves. margins reinforcing again company XX% EPS

realign. we in European quarter, our a to demand global Ukrainian modest lab trade work as patterns third saw the continue and for in sequential operations, Russian In improvement

and this the in anticipate Russian, trend sales While European uncertainties we pose situation Ukrainian volatility will the company's for does services potential markets. both lab continue, product and and

to its segments focused Aside organization; for from the key lean we and a XXXX. on key strategic in to continues both improvement maintaining arenas and geographic products Core and delevering commitment in of continued a by: these new maintaining into XXXX across business services US the expect international markets; introducing and objectives one, two, and the in execute company. three, remainder uncertainties,

operational latest innovations which as this The company. in leveraging value that review the history culture, of to on relies Core served section Core a innovation, dedicated some Core more to traded of about problems publicly Lab's resilient employees and solve interest review technology service. has call. I'll clients by and tenets the customer financial shareholder be strategies year well talk over our our will and always our shareholders, of XX-plus to Now used Lab's build

on focused pursue returning excess and challenges will and our return being remain current long-term capital tenets, to invested the maximize free financial through navigate to maximize cash long-standing, we on free opportunities, company flow, its cash While three growth those shareholders. the

and moving clients' for Before for loyalty commitment adaptability needs meeting all in for on, and all of shown prepare more employees that active and we our a of the I want thank our dedication, the as their many to have moment market. navigate

now it review. for to I'll turn Chris financial over the detailed

Chris Hill

Thanks, Larry.

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

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

continuing million was increase in X% sequential third international US in in at X% by driven Revenue prior the up in income was looking statement. operations the the quarter over $XXX year-over-year. The the quarter, both and revenue million now growth and almost markets. from $XXX.X So from up

in However, the nice of expand in devaluation the which by the and multiple the pound, international partially growth offset has later in I will underlying operations discussion. regions been British on euro

Ukraine. X% quarter in disruptions has last continues by million the we conflict adversely in revenue recovery service multiple from from the sequentially some service this the million up regions. more to is for come revenue was although have this caused international Ukraine-Russia some international service seen $XX.X regions Additionally, which from $XX.X quarter, quarter. growth affected improvement, the conflict revenue, Of impact revenue including The in

to was movements compared versus negatively While rates first to additional $X same million prior continues have been exchange last revenue quarter in would period approximately service of compared these months dollar. $X.X year. foreign when compared million was US impacted constant XXXX $X.X QX international an the currency translated by The the into the additional activity of the international year. grow, dollar, an US to underlying when nine revenue currency million, service Using last to our a of and during impact

and X% over year. and are XX% the for over XX% and for activity Product to up up sales sales, the over quarter up were which equally year-over-year. US up $XX.X international from sequentially were more US quarter, tied sequentially million last product XX%

the bulk orders US we're and year. be over another, to the last which XX% sequentially but and approximately from up larger third product typically year-over-year. sales, markets primary to over up product XX% continues X% can sales and vary decreased International are to XX% when compared up one quarter quarter were sequentially, driver over Our energetic into

quarters to and services, the year. quarter in Moving of quarter third last a from quarter improvement XX% last with in below growth ex-items ex-items primarily rate which line be XX% absorption by sales. improved quarter. for cost little improvement XX% in projected sales were from product last service of efficiencies from sales. on XX% the anticipate to in future in We manufacturing manufacturing of quarter XX% revenue driven also this US gains was improved and the revenue, Cost higher was The in of and

was $X.X million, down EBIT, and XX% XXX quarter up an relatively up flat $X.X a little G&A, ex-items is amortization $XX last anticipated from quarter. quarter EBIT basis the and quarter, ex-items G&A, year ex-items for million margin of compared million million quarter be for approximately to XXXX. yielding full of quarter. the million, was to from was for Depreciation $XX sequentially. last $XX.X the last for million the $X.X and points over

the marked sequential the highest incremental This pandemic. company's COVID-XX since quarter margin

unamortized million, was $X.X $XXX,XXX facility with the up expense EBIT GAAP basis, debt includes ex-items million million of costs in $X.X credit million, renewing quarter. from which was $XX.X was quarter. writing GAAP interest our a for the off during last associated $X.X On the Interest expense quarter.

currency the ex-items for expense foreign to taken for was million Higher quarter steps reduce the currency expense denominated exchange effective The mitigate on foreign quarter associated with impacted future quarter. foreign tax basis currency tax at unrealized where gains subject to was primarily $X.X further type rate of million this US tax in a XX% dollar tax largely tax additional by expense risk an receivables Income the rates. for are UK the gains of GAAP company with locally. foreign and has associated $X.X was to

rate to will earnings somewhat each be items sensitive discrete continue to mix across tax to and impact quarter. of the globe geographic of the the Effective

to continue quarter million, was over million tax from for the project the $X.X $X.X company's continuing we up ex-items the XX% effective approximately XX%. quarter. to However, operations Income last rate from be or

income share On diluted up operations quarter. basis, quarter, for and $X.XX ex-items Earnings earnings the per $X.XX was quarter quarter. $X.XX a the million the from recorded for last operations from we continuing GAAP per continuing for diluted was $X.X from GAAP of share

the balance sheet. $XX.X from million Receivables to were and Turning quarter. up slightly prior $XXX.X in the million

third of September in for the quarter $XX.X days approximately the at for to $X.X up DSOs end. last from compared X.X million XXth, Our quarter turns quarter last as improved the from were days, quarter. Inventory which at X.X quarter. XX last Inventory million were was XX

increase in into the highlighted, go previously continues company As inventory. cost experience an that to

inventory improvement to we continue to we at chain mitigate the Additionally will turns help challenges larger We XXXX disruptions. so XXXX. as through the in amount of supply a levels similar anticipate of with remainder and some into inventory the persists, remain progress carry

the was the the ratio million, slight quarter. our was debt $XXX XXth, considering at cash At And net compared our side long-term at debt of X.XX $XX end or last improved slightly of of On quarter the $XXX decrease was September and leverage million third balance sheet, quarter. X.XX liability a from to million, end. last

XXXX. a our the leverage projecting improvement are with of significant through year-end quarter to more improving continue in We ratio first

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

Looking after $X.X quarter the $X.X operating quarter, third was free from $X.X at And flow, of million in million or XXXX, of the flow activities up the flow paying from was last for $X.X quarter. million. cash cash CapEx for cash million our

for to free capital growth the future from strengthen company generate operations expect to quarters. We in flow and moderate cash positive to in working cash the

be to remainder XXXX. will continue in capital activity managing with the of We for line expenditures levels

light capital the XXXX, the year capital model at expenditures million targeted expect of million. we and $XX growth primarily $XX will be its of operating discipline capital Core expenditures with For strict to to business opportunities efficiency and initiatives. range asset full in continue

the historically of continues company's laboratory Capital of profitability financial company's cash and intellectual flow significant comparing is and revenue models flow operational free minimum capital X% in infrastructure, believe generate ability of results valuations. cash and those particularly with growth. to a level to That when same We discounted ranged free shareholders shareholders projecting to X.X% have from for requirements. revenue during assess for Lab's leverage flow cash Core to who evaluating grow metric an for exists and periods to even provide leverage important the expenditures utilize ability business yield today. property

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

Gwen Gresham

Thank you Chris.

and pressures near the to to crude As response imposed XXXX anticipates oil lockdowns to of the global oil remain and economic growth, the slowing current fluctuate inflationary uncertainties price levels, fourth commodity in supply may government related Core unfolds, crude quarter demand COVID-XX China. in but

the limitation in crude supply to long-term the as projected oil growth production tighten many prolonged regions is underinvestment Over to globe. faces due around

expects upstream leading indicators with international what Core for operators and in most outlook their recovery. crude XXXX sees result, fundamentals offshore a into across emerging Core's a are plans spending supporting international expand strengthening As multiyear oil These activity continued as regions. onshore to improvement for Core projects

Turning focused remain remain operators to discipline constrained. modestly steady activity the of as availability and to onshore grow US be expects drilling frac rigs and Core on crews US may and capital additional in XXXX

associated by Description As be conflict near-term a to two in growth momentum to affected result, the flat delays. segment project volatility fourth Reservoir may be while Core's quarter XXXX continues client-driven to slightly, projected and factors: build revenue for Russia-Ukraine activity geopolitical is international up with the of

is to continues. growth international US estimated mid-to land increase to is digits single high steady as remain revenue by segment projected Enhancement and Production activity

million, to fourth improvement recent quarter remain For stable XXXX, deepwater offshore and international to quarter and the of US revenue range and trends to million the expected fourth fourth income margins Core approximately projects the markets to for activity $X.XX $X.XX. to XX%. $XX to from $XXX Core $XX EPS of million continue. operating of in projects be $XXX quarter operating is to million yielding

assumes also rate guidance underlying operations quarter losses is gains effective fourth based of for excludes exchange. and projections Fourth foreign quarter company's in an and guidance tax XX%. on The

to Now I'll Larry. discussion back pass over the

Larry Bruno

Thanks Gwen.

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

first to Reservoir Description. Turning

revenue QX million approximately for US XXXX year-to-date British XXXX. and currency devaluations consider compared and million revenue came to pound. up when X% it QX. million, for compared Reservoir third by revenue at the quarter $X.X as the These translated devaluation for looking euro the $XX to to to is growth lowered For quarter sharp $X in the by compared When Description Description into in of Reservoir at dollars the important approximately

Description income mentioned Even after still incremental and million ex-items for for the devaluations XX%. were currency were I just Description Reservoir accounting Operating operating $X.X was margins Reservoir over sequential XX%. for margins quarterly

growing we play of ahead still years well will out look East, the below Description count for an most and America improving we that international while South landscape particularly Middle harbinger see next regions. the trend rig and several As North levels as we a for project in reservoir the pre-COVID other a

targeted Optimization Orange Lab's leverage multi-well the Reservoir stratigraphic program Core some fluid NITRO. from offshore Technologies samples evaluate as proprietary for its located from third core to for Now deepwater global intervals reach, and operational reservoir technologies Basin Core branded expertise the from using scanned Conventional highlights to Non-Invasive a Namibia. core quarter. were continued in recovered and exploration

range were Lab's and of generated the delivery time-honored are measurement rapid techniques early-time A innovative pay laboratory Core assessment of strata. program for measurements. using wide recovered and parameters allowing delineation progressing traditional of through petrophysical Selected physical modeling of samples now for the critical data

renewed rocks from in and of interest offshore Namibia. Lab's have generated Recent regional Namibia Core study successes seal in reservoir

of study just wells. of XX multi-well, Namibia in conducted with This study Company offshore Africa. basins than the This collaboration studies conducted on has is from samples geological of one Oil that analysis National more Lab Core sedimentary multi-company includes XX

joined of Core's the Core Sequestration Partners and XXXX, is announce membership to In Management bringing Trace Consortium, to third and total Capture other Midstream Lab that developments, Carbon eight participants. Energy Quantum pleased quarter during

enhance members capture exposure midstream carbon the and new both equity engagement consortium's These expertise the in sequestration to private emerging operations market. and

projects consortium characterization. analyze with and the leveraging and sequestration entities is site evaluation. challenges of require govern subsurface risks carbon that Regulatory extensive associated to sequestration Core's objective geologic The carbon expertise

permitting monitoring COX ensure are are for and that applicable the on injection process. technologies simulation and Core's models sequestration built the robust and of sets for data

Moving Lab's now and Core optimize both completions. helped in diagnostics where energetic customers systems to strengths Production Enhancement well completion their

at for sequential up and margins quarter $X.X incremental in XXXX income came XX% was Enhancement were Operating X% year-over-year. million. the Production $XX XX%. margins for and third Operating Revenue million, of up sequentially ex-items XX% were

oil quarter gas third which Lab its XXXX, continued build success of Abandonment the called PAC Plug abandonment is During well proprietary System used the Core to & on for of Perforating and programs.

leverage to the is successfully technologies slower as solutions alternative which traditional in costly. over provides more casing Core Sea. that energetics Lab far in milling, wells its expertise XXXX, Thus and in an in North PAC Core deployed XX its

solutions Core's permanent technique creating between establish cement strings, to pathways Cement for PAC used in often circulation setting required in Perf annular the energetic Wash abandonment. selectively thereby are casing space the enables operator well applications. the plugs This for

continue XXXX. offshore quarter service expertise Enhancement, the of operators leverage third in diagnostics of on Over for completion side Production during to the Core's wells

single wells of Core dual and SpectraStim, pack evaluate to in and Miocene SpectraScan, were imaging downhole Gulf deepwater frac utilized completions. PackScan technologies Mexico zone

assess Mexico production to FLOWPROFILER Gulf in those completions. multi-zone Core's reservoirs involving oil to technologies, ultra-deepwater of used the addition were diagnostics In

with associated properly is completing wells these high stakes production contributing as the frac configured costs necessitates each pack deepwater in confirmation per each The zone wells completion targeted that plan. is and multiple oil

were on Recently, confirmed produced in Core's zones. techniques Core's of analytical was team to tracer oil frac zones each four a proprietary Enhancement contributing laboratory unique four production. FLOWPROFILER that deploy Production pack all completion tasked diagnostic samples to

them would reservoir. how without procedures adjust the responding achieve to damaging reservoir helped flowback optimize production was the also the FLOWPROFILER that drawdown understand pressures operator the allowing to

executed away were the of from or thousands determining downhole Core' completion wellhead. for many even thousands feet a planned whether are completion of diagnostics successfully tens critical programs tool

the That participation operational appreciate review. and questions. for now We your Faizan open we'll concludes call our

Operator

Thank you very much.

now begin from Gengaro Corporation. We will ahead. session. the first go The Financial question comes Stifel Stephen question-and-answer [Operator Please Instructions] from

Gwen Gresham

Stephen. morning, Good

Stephen Gengaro

Thanks. Thanks good morning, everybody.

the headwinds. and in get think on but we the be we likely. I'm growth cusp the Should of mean in two of is we XXXX I sense and that I'm to about puts from would large should thinking don't even and consistently Description hearing for strong how And history you environment? sort we're in me, questions kind the When and issues we what start consistent side business from here. start should are could if trying that a international double-digit to E&Ps growth takes Reservoir on kind companies I service understand I XXXX put and rate How of to reasonable, year-over-year -- growth pretty we business. other the mind. together just And of if be FX see trying RD to looking at seem the look. that

Larry Bruno

think that really into for -- It's -- benefit Yeah, we're right. going Description. is Reservoir to multiyear heading starting a up agree I that's that we we're Stephen -- cycle off

all with As Description to COVID companies lag We've tends service discussions. analysts exposed bogey aligns Reservoir and going Description we've and international Reservoir an more forward. count saying being of a other went increased well in and very that when -- down very construction while. talked with nature you indicators a with a rig hit of in directional for very sharply. It about been see were and investors. held is very those well. held That lot to And activity We for well that that really trends. traction. by gaining leading well good that the now client our its the

think terms double-digit and it so were upcycle into start nice as And beginning it's that be its Description going would nice linear any there think Reservoir getting QX. or which of what we some to as we back of is making not of And like, in may for a margins. margins so headway but XX% the us

Stephen Gengaro

margin the on look of seems business sales but the we offerings of side, When strong on good third quarter seems in sort the underlying North helpful. a evolved. it quarter sort integrated be a really the there. have of the positives that really market, Great. about of And in product lot US the land some at of you Can you had talk obviously there was to side. the quarter? the drove America in Thanks. That's to And Energetics sort

Larry Bruno

Sure. of details don't here. get the some why you Gwen, into

Gwen Gresham

Stephen. Yeah,

though With but of other completions spite completion a anemic I in mean both energetic of kind spreads increased markers our bit, sales, frac a our So as little quarters. there. the compared outperformed was the activity bit and activity to it we

with so XX% year-over-year. sequentially And up we sales about our and US were XX%

So that's energetic penetration internationally. that And recall have. then into And as pretty those can move did the and our those can products quarter-to-quarter. existing you market are pretty -- with bulky they well be we we also

we had shipments there QX in so And well. some as nice

Stephen Gengaro

real front anything around that just now the business quickly the on And Energetics America? North pricing on right in front,

Gwen Gresham

some Getting Yes. pricing improvements.

was we've since market pretty COVID. modest let's company know you hard date. seen been wireline during and hit to area the operators working that improvements say As we've with of nice And pricing some

Stephen Gengaro

Thanks the color. for Great.

Larry Bruno

might which seeing energetic, for demand I to always has penetration our Stephen products premium And really we business. of and that Okay. nice add of the bulwark that are been sort our

Stephen Gengaro

helpful. Okay. No, that’s

Operator

next from comes Thank Daniel Please Energy question Partners. Daniel The you. proceed. John from

Gwen Gresham

John. Hey,

John Daniel

Hi, for me guys. put Thanks in.

this you for morning. questions two Just

the at large? long of into does for look purchases, for how and You in back the And noted renewed you I'm as more some curious that or interest business whether translate you and rise you've study reviewing seen for industry historically interest studies. just

Larry Bruno

Yeah.

participants resale deliver program. that we have the -- on John. model we a on on their We original the collaborate collaborate national So studies. complete that with we right And analytical We when international And the companies. to we retain those those then oil data. interesting

we a pretty when that. was off-the-shelf some which yields cabin do high margins So sale, it

studies of our up quarter We're quiet offshore a oil years But is or -- a with sharing collaborative sudden so. would Africa partner of what pretty say that's I Africa companies. we those the offshore picked last interest in the those these usually market with see all on national the after nicely several in from

look the So at are reconnaissance turbulent shelf activity we industry. phase might during where we're a to have in of opportunities early that reengage had the they period in on and think starting the people

John Daniel

commentary Okay. then Fair wells success it enough. the in I of sounds PAC on it's design for And the a like the And that, as P&A also noted offshore process? more you of system read the system.

Larry Bruno

the Yes well programs on market in abandonment there's what -- would and do the use abandon I correct. It's the this the there's wells, strings. land and the on offshore that's transition upside that to going the aspect offerings take to our and abandonment business. to but this. decades have big an times of Primarily energy plug we wells been are we efforts some we referred But at us for focus have big is multiple complex is all offshore and sort plug And casing to drilled. that of on that

new still The being And very a ones. so added. are It's wells we're rig long count is adding nice new up be to going horizon. going

focused sure efforts innovative on we to with some so making there represented that are And technologies. we our well

John Daniel

kind about emphasis ask P&A a field to doing around E&P reason just when curious these since and of just it time they'll drive the I -- the you bid is And lot folks of times when well. ESG market onshore the it's things given goes typically in talk I'm company days say The low the to I and right. Okay. on

adoption thoughts? or That's sophistication see moving somehow of What's onshore you picture when forward. it a comes greater technology big P&A your to If question.

Larry Bruno

Yes.

evolve I still with don't efforts I priced the system task. wells like well approach on bit other there our very a the hate And But costs your that the It's complicated with offerings. is strings of on the offshore disagree and PAC the we highly on going simple, focused not. that's effectively. I there's multiple and these -- a plug to doing much of to our what a assessment more abandonment certainly complicated that's to use have multiple because casing design a to completion zones. onshore to compared word and think and

those to rig to strings from client and mill casing energetic plug and going our using trying be to to steel by the then those set. We communication casing and in time all some very those and pathways saved cement the out allow create the having dollars hard pull substantial systems

So using to costs we're cost and and is time. help our right, you're a lower yes technologies save priority

John Daniel

Awesome. Thanks, Okay. Larry. Gwen. Thanks,

Larry Bruno

Yes.

You’re John. welcome,

Operator

you. Thank

Johnson from Please Crist proceed. from Don comes question Rice. Next

Larry Bruno

Don. Hey,

Don Crist

How are you? morning. Good

Larry Bruno

Good.

Don Crist

ask I Africa, one another? about might I And geographic more seeing wanted Brazil, cetera. there for et be just the are to cetera? have et to obviously, leverage up Africa, going leverage. mean, we're pick where that than West rigs you Brazil Middle area versus you better geographic East, in activity Is should we all West monitor into

Larry Bruno

Not particularly, footprint. John. I have really international mean we I a think broad

And Brazil. so in we have operations

countries operations have We multiple Middle the throughout in East.

Pacific. in have We Asia operations

in so And -- and Africa.

So we well positioned. are

Now times you. that during works against tough

You've you times kind benefit really in good the got holding when of industry. in that's there the But during sprawling that turbulent during times harvest of infrastructure.

forefront And we're of you East so I at pickup I would color, say a a as say in the the what Middle is seeing to give would more activity. little

don't countries. into because different too we of only countries, in much those client. one four Now have are in those I I get some about detail

can and little an those say, you a the than other assessment out geographic a mover and places. But bigger is we're earlier so Middle are. seeing in do where I'd East And mover figure

also last Mexico. number Core South maybe also We of improving. of operations the keep eye Lab Certainly good years been for on for it Atlantic it's both looks an I in very the like the Gulf would of actually Brazil. sides and margin has expanded

opportunity some there is I there. think

interest been mentioned while. but also offshore a kind quiet plays. for I the in to Africa people for reevaluate renewed some earlier as Africa And call West as think has And particularly, onshore I opportunities, us of start

Chris Hill

that fluids thing I the mobile. mind Yes. The would are keep and only is other rocks in

pretty for it's come advanced they'll often testing. So one centers technology of our more that advanced to the

Larry Bruno

us The has well. hub served and spoke very structure

So activity to the to major those samples ship we maximize the of centers. utilization to around our close And be is. our our technologies we'll to where want then

Don Crist

work still of on assay your I just crude hurt here the in Europe we're if decision me. a that correct i.e. tension But And final the point is quits Russia there's on going Russia will X. today completely Obviously, that detail. appreciate coming you one not all And with one up of lot situation. for a on model crude that a Is out statement? forward? December exporting Russian that

Larry Bruno

want activity. don't crude. I that I'd we take that their in -- us guess, that to That clients be perspective I think that's part correct. No, a includes of Russian clients I mean, I have both European needs included that going still flowing of to out see and their of in the think that's Russians going not the a we're keep If prices. sides to Russia. need to oil crude the come that globe rest spike the oil

question crude for from but for long. to that be supply us. And it's that for for mid-term, crystal But going of I a demand think what's to optimistic that be the -- to flowing. oil the think there allow I potentially what uncertainties But there'll the kind could -- excluded of and the will very in so impact near I accommodation see think happen happen things ball we've we realities the kind risk to we that are don't oil Russian is keep of some tried to we're assess of some

Don Crist

the appreciate turn I I Okay. you. color. back. will it Thank

Larry Bruno

Okay.

Operator

next you. Thank from from The question Galligani proceed Awilco. comes Simon Please

Gwen Gresham

Hi, Simon.

Simon Galligani

Hi. morning. Good

a question. Just brief

guys You the later you. you in ATM Can announced on you Thank the elaborate debt early your June and thoughts current announced refinancing. ATM? the then on

Chris Hill

This Chris. Sure. is

need any under sell say we shares not We have any not sold unless I to. to would we're ATM. the planning shares

we've And come are of in during or million that notes we're with out working how going improve from $XX and whatnot you happened what those. we're put first the sort think and to next of liquidity have was company do we in conflict retire that mind partially due year. that. how and recovered I see the But that refinance quarter to that So keep there the the but impacted in us

So open, multiple to the but utilizing try it we're options without ATM. keeping going we're to do

Larry Bruno

point next was due And XX-year expand that note. on a that $XX to million comes September just note one

to be happens in coming So it a just set different due up now. time, but

needed And options we so and ATM. shares Chris under have but the as the we to mentioned wanted if sold not have I to,

Simon Galligani

Okay much. Thanks very

Larry Bruno

welcome. You’re

Operator

next The Kutz Stanley. you. Dan Please Thank proceed. from question comes Morgan from

Gwen Gresham

Good morning, Dan,

Dan Kutz

Good morning, Gwen.

just So of maturity that up times. year, of the follow guess, the target the capital on out of there kind of to you put if kind next wanted you questioning. leverage considering X.X I a I have allocation lot

that between you what kind dividend see comfortable starting wondering, So calculus would thoughts factors. to thoughts of returns, those generally, or two help or could dividend? would what some just presence, increases feel and to appreciating shareholder in you your buybacks be potential raising And was need us kind your returns think around be would are I of the your through if shareholder Just consider great. that? around special normal to

Chris Hill

think that message really has consistently. don't to We've that changed. I Sure. tried

think think way it's raising the I about when So we a in sustainable. to want do dividend, that we we where think

start cash as if get little will, a think buyback more I you we is raise committing with shareholders, consideration to ratio I sort we the to and bit recovery But once to down that's the and that, get would leverage with we're dividend. -- a what into provide flexibility Initially, respect return does think the you versus comfortable we to see us So our a dividend. would to it forecast way through consider the of program. not

Dan Kutz

the helpful think. two I added progress color. really release in you in that I saw the press guys Consortium That's, making Great. CCS members And then,

us could on, for market? us prospects you're in give medium- space update the anything could CCS if you in you. Lab. the the you that the what remind Core terms opportunities Just an Thank longer-term wondering, kind And of you've said of seeing -- be could in if or that

Larry Bruno

Yes.

process. the very it's early I in think

I on our actually were skis profitably activity. wait not to until, We generating Lab in Core think wanted out getting over we this. revenue this on focused maybe,

we so multipronged And approach. a took

you Talos. If go look signed from back alliance we while little and earnings see the strategic a ago, you'll release at a with

be a through and is gas upstream had side. CCS production a I great and positioned relationship their think leader Talos production, in projects well we our oil activity them going forward with to on

was us. a that so fit And natural for

-- focus on XX, XX, COX react with where to of collaboration has in understanding, to try expertise University going with Core going the is rocks. fluids, when And to then it's Houston try this what people ground, its put really longer an Lab react happens put we consortium, of applicable put the it's the XX we in and when the that to years with volumes or to for large poor together

If water, COX fluid-fluid through more rock-fluid bubble that's issues. you create water and going the acidic to and gets compatibility

that's rock evaluating we're the So to on, the what the engagement of COX. containment sensitivity side seal focusing formation of and the injecting technical and our kind

saying that still see this So about over dollar a Lab's I XX% matures this perspective, concrete we yet. Core and as more become X% let's think a that business from not we are see some building. to We've in board could we've companies of But we're there are projects future time, that way. projects talking than it now, than projects more this there. that got point, doing more actually position put engagement done We're our to on

Dan Kutz

Thanks. Gwen, Larry. and Thank you, I’ll Chris turn it Great. back.

Larry Bruno

Okay.

You’re Dan. Thanks, welcome.

Gwen Gresham

Dan. Thanks,

Operator

question Pickering comes next The you. Smith from David Advisors. Energy proceed. Please from Thank

Gwen Gresham

David. Hi,

David Smith

Good my morning. you Thank question. taking for

a late. I the So jumped apologies on little call

Production I US missed for I that or Did this. if that revenue was up reference sequentially, Enhancement Energetics? a hear XX% was Sorry just

Gwen Gresham

Energetics. a was for reference That

Chris Hill

up sequentially. The XX-plus US percent sales were product

Gwen Gresham

Yes.

David Smith

FX Yes. just even for was US decline level maybe kind sequentially in impact. if would details a any of And international suggest wondering gave if because I the product that was growth up the on segment. that just total with lines you growth I that total – the wondering just of

Chris Hill

Yes.

So this is Chris.

we over But up orders those of that PE and from international was bulk And XX% sequentially. about down US quarter-to-quarter. be larger lumpy when can they So sales were a are little quarter. out talk this product

service those the – FX and are Europe to impact not through subject that are coming whatnot. revenues like in our as usually dollars. and are So Those billed

So Production they segment. our in don't there's – much as currency impact not Enhancement

year-over-year. little can that the quarter-to-quarter put sales sequentially. product They're up and you're a to looking in just international were Just down perspective lumpy XX% be when

David Smith

Is production incremental solid margins perfect quarter. function And kind expect? to Energetics the a this question for a Makes it. would better enhancement the segment of getting normally Got follow-up that mix margins Is is the with sense. you the incremental just growth? of that

Chris Hill

some but is up some traction. as that up. those efficiencies to up manufacturing model some incremental of pricing when can of but for the combination margin it's expands benefits primary we inflation some picking I kind manufacturing had pricing nice pickup think say which isn't we product with quarter the it keeping the in don't have and manufacturing also then had a I a from the market But we efficiencies, Well, would levels. We US, nice so manufacturing pricing really forward. going a get have nice

Larry Bruno

think we margins the side. manufacturing look at more consistently I on would

that product look incremental company, in the On at the XX% entirely which of margins. almost for is side to XX% PE,

Chris Hill

had Right. And side of segment our that also growth nice services some too.

can start service they margins improve margins on stronger talk segment when as to sequential so the side pick incremental up, can actually incremental about the the it well. the be for So we

Larry Bruno

Right.

a on of enhancement So to margin is manufacturing service margins margins. be clear blend the production incremental the and the

David Smith

could you. Thank in? it. Got sneak one more I If

Larry Bruno

Sure.

David Smith

work to saw But Did release. provide QX? in numbers relative could the revenue the you rough in modest on improvement. any if just press you wanted characterization any improvement SA of the I the provide QX I to referenced mean ask

Larry Bruno

mid-single up Yes digits.

Chris Hill

Right.

David Smith

so you Thank much.

Chris Hill

Yes, sure.

Operator

Thank next Please ISI. Evercore Samantha proceed. you. question The Hoh from from comes

Samantha Hoh

guys. Hey,

what just quick for a like seems some just timing $XX year? the maybe where roll also days? Just towards it the CapEx you into just these initial to it guide, year. issue? kind CapEx the And million it to million this down The guide talk housekeeping. work from of is going next And that? Can is I driving way your a mean of Is $XX for

Larry Bruno

Yes.

lighter. It's So a don't maybe think major bit little any there. I change

I We to Lab are – it extremely Core think investment. comes when trying we – we to at capital thrifty are

rational very idea move of no see through But good to said, up appropriate approved to sort and responsibilities unfunded. being no returns make is grown have Lab sort my that never my idea of network a goes having us reason good -- goes Core forward. We the in lab

with -- geographic And so consolidated to the locations that footprint so, and had our that some rationalized we of into we might have are some have facilities. CapEx also there that's reduce put helped to

so think compared of We to to lot -- don't a oilfield big overtime, other service as asset-light. types the in we businesses. it's replace some of And have no of rusting that, change staying metal benefits I one of

our And cognizant thoughtfulness that reorganizing natural world. our so of have company efficiencies, I and generate, and that expenditure de-levering capital footprint also around and to through the trying operational think it's about free combination to as be trying cash re-geographically we're restructuring the some come of balancing a we on focus

Gwen Gresham

terms that that about you at about could modeling their the when to no go two-thirds goes in want you new one-third towards good unfunded of towards laboratory technology environment. that with goes And look Sam where things in numbers in of maybe point you idea -- of if the and life the dollars terms that Larry's there's lose going

Samantha Hoh

Okay. the that on okay, of some interesting you're really private switching That's Consortium partners. to see maybe super then, to equity helpful. newer you're stuff And midstream doing, the adding CCUS that it's and

field Curious online studies a there? partners your -- in early get sort after on, if to has -- where this of and tend bringing projects to actually the that starts happened some start you're do non-upstream later something involved to that project if involved mature other is sort or or get they of of with members is this like past

Larry Bruno

Yeah.

subsurface clear, evaluation. done that done done. to all studies multi-company Everything focused we've project over the that of been decades have we've else reservoir this So hundreds consortium first be is the we've on non-upstream characterization seal that

implications and design upstream Basin how most rocks some in get on one the the and first out to fluids say all Some the on the have in evaluating completion of the focused and that. Permian This is not application. that's had

The EOR oil CCS still that upstream gas not Consortium and is in focused production. it a example, was upstream for focused on and like technology on oil Unconventional but So, study was gas production.

see We're and very a develop it that opportunities initiatives respected I midstream nameplates of CCS economic a very gas discourse on to projects. private engagement here for or become how on in a think I that to the for also broadens for arena, are to CCS some either us very operator but would own the and some effective models going blend getting side oil call well-known companies nice player seeing happy are in equity their

Chris Hill

The private in our thing remember with the type bought don't projects Yeah. assets only in, equity changing were studies midstream traditional add those companies historically have past. buying but I as I is firms would that there any hands

Larry Bruno

That's correct.

Samantha Hoh

work space? seems fit wheelhouse. into surprised, that in you that would a is you would a right. -- involved trend there guys an be kind is mention All haven't to there opportunity Can that And that of your I'm heard guys then elaborate? one I thing just maybe is That for get you geothermal. there think And I to

Larry Bruno

Sure.

fluid what this So few only warm would call and two really the conversation. geothermal. We the left. hot ones broad could long have a categories minutes rock rock warm there's, a But ones. be There's of hot I fluid

the project. rock very long-term The overtime hot Geysers pretty ones like most Those of geothermal projects. California are in say the

not where of for areas the I that feet of to tens steam hot provide a generate warming thousands from fluids and shallow to hundreds earth relatively that shallow allow by and create water and -- deep So are this they feet environment of mean thousands deep, of electricity.

-- occasion surface. to get we've We to tectonically in those some involved tend active those where in be Indonesia. for example so They in the projects. hot on tend hot areas They to close do rock rocks done are

of complications One about it's is, XXX tough pretty there Core to talking when temperature. XXX or the you're degrees wells

of on us. offerings of not at rock a compatibility not business fluid and looking coring and in so And the there big we'll projects but whole sometimes some so for do evaluate those the a they'll We core we -- do lot flanks rocks. have

Samantha Hoh

so much guys. Okay, Thanks great.

Larry Bruno

Okay.

of beyond. leadership and up summary, there. improving client levels wrap both to the continues I US international company we'll for in for think the remainder markets position XXXX the Core's operational In and activity

global the help company our and been optimize needs. uniquely remain focused never the their client reservoir have technologically to or base, We evolving We technologically their positioned most reservoirs, better optimization are advanced and operationally sector. focused client in oilfield service address to

The company on free and on invested focused will returns remain maximizing cash capital.

new and solving opportunities technologies to opportunities. to will investing the always the introduction problem market balance continue of dividends, cash by addition near-term, value while we'll penetration. use our shareholders In strengthen growth In to quarterly via its driven free our to Core in bring sheet growth

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

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

Operator

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

You disconnect your may now lines.

Core Laboratories (CLB) 27 Oct 222022 Q3 Earnings call transcript