AMSTERDAM (17 April 2013) - For the first quarter of 2013, Core Laboratories N.V. (NYSE: "CLB US"
and NYSE Euronext: "CLB NA") posted its most profitable quarter in Company history, with record results
driven by worldwide deepwater hydrocarbon developments. The Company reported a year-over-year
12% increase in first quarter net income, when compared to the first quarter of 2012, ex-items, to a
record $56,516,000 and record earnings per diluted share (“EPS”) of $1.22. First quarter 2013 revenue
increased 11% year-over-year to a record $260,927,000, while operating income increased 14% to a
record $79,037,000, yielding operating margins that improved 50 basis points to over 30%.
First quarter 2013 free cash flow (“FCF”), defined as cash from operations less capital expenditures,
reached $59,815,000, an all-time high for any first quarter in Company history, as Core converted almost
one of every four revenue dollars into FCF. During the quarter, Core returned over $62,565,000 to its
shareholders via dividends of approximately $14,820,000 and share repurchases totaling approximately
$47,746,000. Core repurchased 364,541 shares during the first quarter of 2013, lowering the Company's
current outstanding diluted share count to 46,276,000 - a 15-year low. Now exceeding a 10-year
duration, Core's share repurchase program has reduced its share count by over 37,000,000 shares and
the Company's Shareholder Capital Return Program has returned over $1.4 billion via diluted share count
reductions and special and quarterly dividends.
The Company's improved year-over-year and sequential quarterly results reflect Core's continued focus
on international crude-oil developments, especially those in deepwater, unconventional tight oil plays in
North America and evaluation of several high potential international unconventional crude oil and natural
gas opportunities.
Core's Reservoir Description operations continued to analyze reservoir rocks and fluids from virtually
every deepwater development area, including the emerging prolific, but technologically challenging,
Lower Tertiary trend in the Gulf of Mexico (“GOM”). Production Enhancement operations' completion
and fracture diagnostic technologies continued to evolve to meet the demands of clients in deepwater
Lower Tertiary stimulations and completions in the GOM, as well as ultra-deep shelf developments
offshore Louisiana. Reservoir Management operations continued to add to deepwater projects in the
“Golden Triangle”, focusing on potential pre-salt hydrocarbon systems offshore Angola southwards
through Namibia. During the quarter, Reservoir Management also was awarded its largest ever
proprietary project which will evaluate both conventional and unconventional opportunities in the
Wolfcamp and related sequences in the southern Delaware Basin of West Texas.
As reported in previous quarters, the Board of Supervisory Directors (“Board”) of Core Laboratories N.V.
has established an internal performance metric of achieving a return on invested capital (“ROIC”) in the
top decile of the service companies listed as Core's peers by Bloomberg Financial. Based on
Bloomberg's calculations for the latest comparable data available, Core's ROIC was the highest in its oilfield services Comp Group. Moreover, the Company had the highest ROIC to Weighted Average Cost
of Capital (“WACC”) ratio in its Comp Group.
Segment Highlights
Core Laboratories reports results under three operating segments: Reservoir Description, Production
Enhancement, and Reservoir Management.
Reservoir Description
Reservoir Description operations, which focus on deepwater and international crude-oil developments,
reported first quarter 2013 revenue of $125,245,000 and operating income of $34,851,000, both
establishing records for any first quarter in Company history. Quarterly revenue increased 8% and
operating income increased 9% over first quarter 2012, ex-items, even though the international rig count
increased only 3% over the same period. Operating margins reached 28%, marking the tenth
consecutive year-over-year quarterly increase for Reservoir Description.
Core's focus on deepwater developments worldwide, especially the Lower Tertiary trend in the GOM,
drove the record first quarter results. Many of the Lower Tertiary reservoirs are highly undersaturated in
natural gas - an important production drive mechanism - and consequently the estimates of their ultimate
hydrocarbon recovery rates are relatively low, ranging from 10% to 15%. Therefore, these fields, some
of which have billions of barrels of original oil in place (“OOIP”), pose a technological challenge to
operating companies to increase recoverable reserves. In cooperation with the major Lower Tertiary
operating companies, Core has been developing reservoir-fluid-based phase behavior technology related
to High Pressure (“HP”) miscible gas displacements designed to increase initial recovery rates and
improve secondary and tertiary recovery projects. Laboratory scale, reservoir condition HP dynamic flow
tests using combinations of lean hydrocarbon gases, nitrogen, carbon dioxide and natural gas liquids
have yielded encouraging results. Long-term HP injections of various miscible and inert gases and
liquids into undersaturated reservoirs will be needed to significantly boost total hydrocarbon recovery.
Core, an industry leader in HP enhanced oil recovery (“EOR”) testing, believes that the evolution of its
proprietary HP EOR technology could boost recovery levels of the OOIP to 20% or higher in Lower
Tertiary fields in the GOM.
Similar HP EOR technology also could be applied to boost hydrocarbon recovery rates for
undersaturated reservoirs in pre-salt sequences in the deepwater offshore Brazil. Current recovery rates
for several Santos Basin fields are projected to be below the worldwide average of 40%.
In other deepwater developments, the Company continued to analyze core samples, and more
importantly, reservoir fluids samples from fields offshore Norway, eastern South America, West and East
Africa, the eastern Mediterranean, and northwestern Australia. Understanding the fluid phase behavior
relationships of the three reservoir fluids - natural gas, crude oil, and water - has become mission critical
for maximizing daily hydrocarbon production, and especially ultimate hydrocarbon recovery from these
multi-billion dollar deepwater field developments.
Production Enhancement
Production Enhancement operations, which focus on North American unconventional and deepwater
developments, reported first quarter 2013 revenue of $107,431,000 and operating income of
$34,238,000, increases over year-ago first quarter results, ex-items, of 11% and 15%, respectively, in
spite of a North American rig count that was down over 10% for the same period. Both revenue and
operating income were the highest totals for any quarter in Company history. Operating margins
increased to 32%.
Core, working in cooperation with major operators developing the Lower Tertiary trend in the GOM, has
upgraded its patented and proprietary completion and fracture diagnostics technology to withstand higher
pressures and temperatures for longer periods of time. These technological advancements are being
employed by clients running single-trip frac packs over multiple reservoir zones, thereby reducing
completion costs by tens of millions of dollars. Among the improved technologies being applied on
Lower Tertiary completions are SpectraMarkTM, SpectraStimTM, SpectraChem® - including SpectraChem®
Plus and SpectraChem® ExpressTM - SpectraScan®, and PackScan® completion and fracture diagnostics
technologies.
Core's HTD-BlastTM, HTD-Blast XLTM and Ultra HPHTTM perforating gun technologies continue to achieve
greater market acceptance and penetration. During the first quarter of 2013, a record number of HTDBlast
and HTD-Blast XL systems were used in some of the industry's longest lateral wellbores in
unconventional tight-oil wells. HTD-Blast XL technology has proved to be very effective and efficient in
recompletions and refracs. One particular recompletion and refrac program in the Oklahoma Woodford
basin has wells yielding superior flow rates when HTD Blast XL technology has been combined with
Core's fracture diagnostics technologies. Some wells are now flowing at nearly three times the rate that
resulted from the original completion and stimulation program. Core continues to recommend more
closely spaced stages, and the use of more proppant per stage, which reduces un-stimulated reservoir
volume and improves the effectiveness of the stimulation programs.
The Ultra HPHT system has been designed to perforate Lower Tertiary reservoirs both on the shallow
shelf and in the deepwater GOM. Ultra HPHT systems have been used to successfully perforate
reservoir intervals at 25,000 psi and 330°F, environments similar to those expected in Lower Tertiary
GOM reservoirs.
Reservoir Management
Reservoir Management operations reported its most profitable quarter in Company history, with operating
income totaling $9,846,000 on record quarterly revenues of $28,251,000. Operating margins were 35%.
A total of 14 major deepwater joint-industry projects are now underway or completed in the Golden
Triangle area bounded by eastern South America, West Africa, and the GOM. The Golden Triangle
studies collectively represent the evaluation of tens of thousands of feet of potential reservoir sequences
and have over 100 participating companies. These projects include the GOM Lower Tertiary Provenance
Study, used to project reservoir quality and thickness, and most recently the offshore Namibia and South
Africa - North Orange, Walvis, and Namibe Basins Study, where the first deepwater wells are now being
spudded. Also during the quarter, Reservoir Management completed its Pre-Salt West Africa Carbonate
Reservoir Study. This reservoir-rock based study will enable operating companies to better understand
these complex carbonate reservoirs and the geological controls on reservoir quality and productivity.
In addition to joint-industry projects, Reservoir Management was awarded its largest proprietary project
ever during the first quarter of 2013. Core has been tasked with generating numerous petrophysical data
sets and integrating all data from regional well performance into one data base that will be digitally
available through cloud computing sites hosted within Core's RAPIDTM/SpotfireTM systems. The ultimate
objective of the “big data” study will be to evaluate conventional and unconventional hydrocarbon
opportunities in Wolfcamp and related sequences in the southern Delaware Basin for one of the most
successful operating companies in the Permian Basin.
Free Cash Flow, Share Repurchases, Dividends, Capital Returned To Shareholders
During the first quarter of 2013, Core Laboratories generated $68,258,000 of cash from operating
activities and had capital expenditures of $8,443,000, yielding $59,815,000 in FCF. Therefore, in the first
quarter of 2013, Core converted almost one of every four revenue dollars into free cash flow, the highest
conversion rate of all major oilfield service companies.
The FCF in the first quarter, along with borrowings from the Company's revolving credit facility, was used
to pay $14,820,000 in cash dividends and to repurchase 364,541 shares at an average price of
approximately $131.00 per share. Core's current outstanding diluted share count of 46,276,000 is at a
15-year low. Core has reduced its diluted share count by over 37,000,000 shares and has returned over
$1.4 billion to its shareholders via diluted share count reductions, special dividends, and quarterly
dividends since implementing its Shareholder Capital Return Program over 10 years ago.
On 11 January 2013, the Company's Board announced a quarterly cash dividend of $0.32 per share of
common stock that was paid on 22 February 2013. This amount represented a 14.2% increase over the
quarterly dividends of $0.28 per share that were paid in 2012 and, if paid each quarter of 2013, will equal
a payout of $1.28 per share of common stock. Dutch withholding tax was deducted from the dividend at
the rate of 15%.
On 15 April 2013, the Board announced a quarterly cash dividend of $0.32 per share of common stock
payable in the second quarter of 2013. The quarterly $0.32 per share cash dividend will be payable on
24 May 2013 for shareholders of record on 26 April 2013. Dutch withholding tax will be deducted from
the dividend at a rate of 15%.
Return On Invested Capital
As reported in previous quarters, the Company's Board has established an internal performance metric
of achieving an ROIC in the top decile of the oilfield service companies listed as Core's peers by
Bloomberg Financial. The Company and its Board believe that ROIC is a leading performance metric
used by shareholders to determine the relative investment value of publicly traded companies. Further,
the Company and its Board believe shareholders will benefit if Core consistently performs in the highest
ROIC decile among its Bloomberg peers. According to the latest financial information from Bloomberg,
Core Laboratories' ROIC was the highest of any of the oilfield service companies listed in its Comp
Group. Several of the peer companies failed to post ROIC that exceeded their WACC, thereby eroding
capital and shareholder value. Core's ratio of ROIC to WACC is the highest of any company in the Comp
Group.
Comp Group companies listed by Bloomberg include Halliburton, Schlumberger, Carbo Ceramics, FMC
Technologies, Baker Hughes, Cameron International, Oceaneering, National Oilwell Varco, and Oil
States International, among others. Core will update the ROIC for the oilfield services sector for the first
quarter 2013 in its second quarter 2013 earnings release.
Second Quarter 2013 and Full Year 2013 Earnings Guidance
The Company's outlook for 2013 remains positive after reporting its most profitable quarter in its history.
With continued support from robust Brent crude pricing and the expected delivery of additional deepwater
drilling rigs and drillships, Core believes that it will continue to work increasingly in more established
fields, as well as new field development projects. In addition, as it has consistently done in the past
decade, the Company plans to enter in new fields where it currently does not have operations and to
offer new technologies and additional services in 2013. These new technologies and services will be
focused on increasing daily production and ultimate hydrocarbon recovery rates from deepwater fields
and liquids-related unconventional reservoir developments worldwide. Specific technological
developments currently underway are designed to increase in hydrocarbon recovery rates in
undersaturated reservoirs similar to Lower Tertiary reservoirs in the deepwater GOM and several pre-salt
fields in the Santos Basin offshore Brazil. Therefore, Core believes that its business model, whose goal
is to achieve a revenue growth rate of 200 to 400 basis points above the increase in worldwide activity
directed towards producing fields, remains intact, with incremental margins positively impacting operating
margins.
Core expects 2013 FCF to range from $230,000,000 to $240,000,000 and with the Company's clientdirected
capital expenditures program to be equal to, or slightly greater than, that of 2012. The Company
increased its quarterly dividend in the first quarter of 2013 while expanding its Shareholder Capital
Return Program in the quarter.
Going forward, Core still anticipates 2013 North American activity levels to stabilize at first quarter 2013
levels and international activity levels to increase approximately 7%, yielding a worldwide activity
increase of approximately 5%. The Company expects its revenue to grow at a rate faster than its
anticipated change in worldwide industry activity by approximately 200 to 400 basis points. However, as
was the case during the first quarter of 2013, if worldwide activity levels exceed Core's anticipated level
of activity, the Company's revenue growth could be higher.
Therefore, for the second quarter of 2013, Core expects revenue of approximately $264,000,000 to
$269,000,000, after taking into account seasonal effects, and EPS in the $1.29 to $1.36 range.
For the full year, Core expects revenue to range between $1,060,000,000 and $1,075,000,000 with
operating margins averaging approximately 31% and incremental margins ranging from 35% to 45% for
the full year of 2013. This operations guidance excludes any foreign currency translations, and a 25%
effective tax rate is assumed for the year. This would increase the midpoint EPS range to between $5.06
and $5.26 and the midpoint to $5.16. The midpoint of revenue guidance suggests revenue growth of
approximately 9%, up to 10%. EPS guidance suggests earnings growth will be higher than previously
guided and is now expected to be approximately 14% in a range up to 16% over full-year 2012 levels.
The Company has scheduled a conference call to discuss Core's first quarter 2013 earnings
announcement. The call will begin at 7:30 a.m. CDT / 2:30 p.m. CET on Thursday, 18 April 2013. To
listen to the call, please go to Core's website at www.corelab.com