Core Lab Reports Q1 2009 Results
Excluding foreign exchange losses that equaled
Operating income for the first quarter of 2009 reached
Free cash flow, defined as cash from operations minus capital expenditures, reached an all-time quarterly high of
First quarter results were supported by year-over-year first quarter revenue and operating profit gains for Reservoir Description operations and revenue gains for Reservoir Management operations. Both operating segments have significant international operations and projects, which include deepwater exposure on both southern Atlantic coastlines. Production Enhancement operations, with greater exposure to North American natural gas markets, posted slightly lower first quarter revenue and operating profit totals. Increased market penetration by, and acceptance of, recently introduced Production Enhancement services and products largely offset the significant decline in North American drilling activities.
Segment Highlights
Core Laboratories reports results under three operating segments: Reservoir Description, Production Enhancement, and Reservoir Management.
Reservoir Description
Reservoir Description operations reported quarterly revenue of
Reservoir Description margins benefited from de-emphasis of its Russian operations and downsizing of its Mexican, Venezuelan, and Nigerian operations over the past three years, as the Company focused on development and production-related crude-oil projects almost to the exclusion of more cyclical exploration-related activities.
During the quarter, Reservoir Description continued large-scale core analyses studies, reservoir fluids phase-behavior projects, and crude oil and derived petroleum products characterization studies on a global basis. Significant projects continue in the
Production Enhancement
Production Enhancement operations posted first quarter 2009 revenue of
Given that North American drilling activity was down over 27% from the first quarter of 2008, Production Enhancement operations performed relatively well, primarily because of continued market penetration by the Company’s HERO(TM), SuperHERO(TM), and SuperHERO Plus+(TM) line of perforating charges and Core’s patented and proprietary fracture diagnostic services. Because these products and services are more focused on high-end well completion and stimulation programs, mainly in the Barnett, Haynesville, Fayetteville, Marcellus, and Muskwa/Montney shale plays, increased demand for Core’s specialized services outpaced the significant decrease in drilling of lower-end, vertical natural gas wells. The HERO line of charges continued to increase its market penetration and accounted for 65% of all perforating charges sold by Core in the first quarter.
In addition, the Company has successfully introduced a SpectraChem Plus+(TM) service. This enhanced service enables natural gas producers to determine the efficiency and effectiveness of frac fluid flowback from a stimulated formation. This new service also determines whether reservoir formation fluids are present in the returned fluids. The presence of reservoir formation fluids in the frac fluid returns can lead an operator to perform excessive reservoir cleanup, which increases costs and could lower productivity.
Reservoir Management
Reservoir Management operations recorded first quarter 2009 revenue of
The Company has six ongoing joint-industry projects and studies in the western south Atlantic margin offshore
Core also continues to expand joint-industry projects in its North American Gas Shales study, now with 62 companies, and is conducting subset studies in the Haynesville Shale for 33 companies and the Marcellus Shale for 22 companies.
Free Cash Flow, Cash, and Share Repurchase Program
For the first quarter of 2009, Core generated approximately
During the first quarter of 2009, Core repurchased approximately 121,605 shares for approximately
In addition to share repurchases, Core could use its free cash flow and cash balances to repurchase debt, fund internal growth, make strategic acquisitions, or pay dividends to the Company’s shareholders. Core intends to allocate cash to those activities that the Company believes will yield the highest overall return for its shareholders.
Implementation of FSP-APB 14-1
The Company has implemented FASB Staff Position No. APB 14-1 (APB 14-1) in the first quarter of 2009 as mandated by the FASB. APB 14-1 determines accounting treatment for convertible debt instruments that may be settled partially, or fully, in cash. Core currently has approximately
This new accounting results in a 7.48% total effective interest rate, which produced a non-cash interest expense of approximately
Q2 2009 Earnings Guidance
For the second quarter of 2009, Core expects revenue to range between
Adjustment to Convertible Notes Exchange Rate
On
The Company has scheduled a conference call to discuss this quarter’s earnings announcement. The call will begin at
Core Laboratories N.V. (www.corelab.com) is a leading provider of proprietary and patented reservoir description, production enhancement, and reservoir management services used to optimize petroleum reservoir performance. The Company has over 70 offices in more than 50 countries and is located in every major oil-producing province in the world.
This release includes forward-looking statements regarding the future revenues, profitability, business strategies and developments of the Company made in reliance upon the safe harbor provisions of Federal securities law. The Company’s outlook is subject to various important cautionary factors, including risks and uncertainties related to the oil and natural gas industry, business conditions, international markets, international political climates and other factors as more fully described in the Company’s 2008 Form 10-K filed on
CORE LABORATORIES N.V. & SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except share and per share data)
(UNAUDITED)
Three Months Ended
31 March 2009 31 March 2008
REVENUES $178,876 $179,437
OPERATING EXPENSES:
Costs of services and sales 116,032 119,473
General and administrative expenses 9,274 8,289
Depreciation and amortization 5,708 5,239
Other expense, net 1,243 2,065
132,257 135,066
OPERATING INCOME 46,619 44,371
INTEREST EXPENSE 3,800 4,782
INCOME BEFORE INCOME TAX EXPENSE 42,819 39,589
INCOME TAX EXPENSE 13,580 12,739
NET INCOME 29,239 26,850
NET INCOME ATTRIBUTABLE TO NON-CONTROLLING
INTEREST 47 103
NET INCOME ATTRIBUTABLE TO CORE
LABORATORIES N.V. $29,192 $26,747
Diluted Earnings Per Share: $1.26 $1.11
WEIGHTED AVERAGE DILUTED COMMON SHARES
OUTSTANDING 23,210 23,998
SEGMENT INFORMATION:
Revenues:
Reservoir Description $102,523 $100,501
Production Enhancement 63,100 67,024
Reservoir Management 13,253 11,912
Total $178,876 $179,437
Operating income:
Reservoir Description $24,752 $23,018
Production Enhancement 18,324 21,940
Reservoir Management 3,478 4,227
Corporate and other 65 (4,814)
Total $46,619 $44,371
CORE LABORATORIES N.V. & SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(amounts in thousands)
(Unaudited)
ASSETS: 31 March 31 December
2009 2008
Cash and Cash Equivalents $73,036 $36,138
Accounts Receivable, net 131,557 144,293
Inventory 32,976 34,838
Other Current Assets 20,792 20,376
Total Current Assets 258,361 235,645
Property, Plant and Equipment, net 100,582 103,463
Intangibles, Goodwill and Other Long Term
Assets, net 184,343 182,427
Total Assets $543,286 $521,535
LIABILITIES AND EQUITY:
Accounts Payable $27,218 $41,588
Other Current Liabilities 59,429 54,102
Total Current Liabilities 86,647 95,690
Long-Term Debt 198,106 194,568
Other Long-Term Liabilities 49,602 42,992
Total Equity 208,931 188,285
Total Liabilities and Equity $543,286 $521,535
CORE LABORATORIES N.V. & SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOW
(amounts in thousands)
(Unaudited)
Three Months Ended
31 March 2009
CASH FLOWS FROM OPERATING ACTIVITIES $50,118
CASH FLOWS FROM INVESTING ACTIVITIES $(3,247)
CASH FLOWS FROM FINANCING ACTIVITIES $(9,973)
NET CHANGE IN CASH AND CASH EQUIVALENTS 36,898
CASH AND CASH EQUIVALENTS, beginning of period 36,138
CASH AND CASH EQUIVALENTS, end of period $73,036
Non-GAAP Information
--------------------
(Unaudited)
Management believes that the exclusion of certain income and expenses
enables it to evaluate more effectively the Company's operations period-
over-period and to identify operating trends that could otherwise be
masked by the excluded items. For this reason, we used certain non-GAAP
measures that exclude these items; we felt that presentation provides the
public a clearer comparison with the numbers reported in prior periods.
Reconciliation of Operating Income
(amounts in thousands)
Three Months Three Months
Ended Ended
31 March 2009 31 March 2008
Operating Income $46,619 $44,371
Foreign exchange 1,888 (746)
Gain on sale of building - (1,054)
Severance - 758
Non-income related taxes - 5,030
Operating Income excluding specific items $48,507 $48,359
Reconciliation of Operating Income
(amounts in thousands)
Three Months Ended 31 March 2009
Reservoir Production Reservoir
Description Enhancement Management
Operating Income $24,752 $18,324 $3,478
Foreign exchange loss 1,676 270 195
Operating Income excluding
specific items $26,428 $18,594 $3,673
Three Months Ended 31 March 2008
Reservoir Production Reservoir
Description Enhancement Management
Operating Income $23,018 $21,940 $4,227
Foreign exchange (gain) loss (557) 20 (18)
Gain on sale of building (1,054) - -
Operating Income excluding
specific items $21,407 $21,960 $4,209
Reconciliation of Diluted Earnings Per Share
Three Months Three Months
Ended Ended
31 March 2009 31 March 2008
Diluted Earnings per Share $1.26 $1.11
Foreign exchange (net of tax) 0.05 (0.02)
Gain on sale of building (net of tax) - (0.03)
Severance (net of tax) - 0.02
Net impact of non-income related taxes - 0.15
Diluted Earnings per Share excluding
specific items $1.31 $1.23
Free Cash Flow
--------------
Core uses the non-GAAP measure of free cash flow to evaluate its cash
flows and results of operations. Free cash flow is an important
measurement because it represents the cash from operations, in excess of
capital expenditures, available to operate the business and fund non-
discretionary obligations. Free cash flow is not a measure of operating
performance under GAAP, and should not be considered in isolation nor
construed as an alternative to operating income, net income, earnings per
share, or cash flows from operating, investing, or financing activities,
each as determined in accordance with GAAP. You should also not consider
free cash flow as a measure of liquidity. Moreover, since free cash flow
is not a measure determined in accordance with GAAP and thus is
susceptible to varying interpretations and calculations, free cash flow
as presented may not be comparable to similarly titled measures presented
by other companies.
Computation of Free Cash Flow
(amounts in thousands)
Three Months
Ended
31 March 2009
Net cash provided by operating activities $50,118
Less: capital expenditures (2,655)
Free cash flow $47,463
SOURCE Core Laboratories N.V.