Core Laboratories N.V.
) has reported mixed second quarter 2012 results, owing to superior
performances across all the three business units, partially offset
by steeper operating expenses.
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Quarterly earnings per share (EPS), excluding special items, came
in at $1.16, beating the Zacks Consensus Estimate by a penny.
Comparing year over year, EPS increased 28.9% from 90 cents.
The performance was aided by the company's consistent emphasis on
major oil-related and liquefied natural gas projects globally.
Total revenue for the quarter was $247.0 million, up 9.4% from
$225.8 million in the prior-year quarter, on the back of strong
growth across all business units. However, the result was below the
Zacks Consensus Estimate of $252.0 million.
Reservoir Description Segment
Revenues at the Reservoir Description segment (which focuses on
international crude oil related projects) upped 6.5% year over year
to $126.5 million in the second quarter. Operating income for the
unit grew 28.4% year over year to $38.9 million, with the operating
margin coming in at 31%. The improvement was attributable to an
increase in client base along with major deepwater projects in West
and East Africa, the Eastern Mediterranean area, the Middle East,
and Asia-Pacific regions. The company's activities in Gulf of
Mexico and onshore ventures in North America also boosted the
Production Enhancement Segment
Core Laboratories' Production Enhancement revenues leaped 12.1%
year over year to $99.5 million in the quarter while operating
income improved 22.9% year over year to $30.1 million. Operating
margin was an impressive 30%, buoyed by the greater market share of
the HTD-Blast perforating system and high demand for advanced
Reservoir Management Segment
Quarterly revenues from Reservoir Management operations stood at
$21.0 million, up 15.4% year over year while operating income
plunged 2.7% year over year to $7.1 million. Operating margin for
the quarter was 34%. The results were driven by high-quality study
results that have attracted many industry players. In Brazil, Core
Labs, in collaboration with
Petroleo Brasileiro S.A.
), has undertaken a number of reservoir analysis ventures in
onshore and offshore plays of the country.
Balance Sheet, Free Cash Flow & Share Buyback
As of June 30, 2012, Core Laboratories had cash and cash
equivalents of $23.4 million. Capital expenditures for the second
quarter were $7.6 million. The company generated free cash flow of
On July 10, 2012, Core's board announced a cash dividend of 28
cents per share (amounting to an annualized payout of $1.12 per
share) on its common stock. The dividend will be paid on August 20,
2012 to shareholders of record as of July 20, 2012.
On May 16, 2012, Core Labs completed the listing of its shares on
the NYSE Euronext Exchange in Amsterdam, where the stock will trade
under the symbol CLB NA. This move was taken to support the
expanding overseas operations and bring in more international
institutional investors within the company's ownership.
Core Labs expect oil-shale reservoirs revenue to be approximately
$200 million in 2012, aided by higher unconventional oily
reservoirs activities in North America, South America and North
International projects are also expected to provide high returns,
supported by the on-time arrival of additional deepwater rigs
throughout the remainder of the year. 2012 will likely see greater
pre-salt activities in the Kwanza basin offshore Angola as well as
in Iraq and Asia Pacific.
For the third quarter, Core Labs forecasts total revenue in the
$250 million to $260 million range, with the midpoint representing
a year-over-year growth of 10%. Earnings per share will likely be
between $1.17 and $1.25 per share, reflecting an improvement of 21%
from the prior-year quarter level.
We believe that Amsterdam, Netherlands-based Core Labs'
technology-heavy portfolio of proprietary products and services
gives it the opportunity to optimize production from new and
existing fields. The company's consistent attempts to improve its
activities in the deepwater Gulf of Mexico and emphasize
unconventional oil-shale reservoirs operations are expected to
drive results in the coming months. Additionally, Core Labs' global
footprint provides for steady growth rates going forward.
However, we prefer to remain on the sidelines due to the company's
exposure to the volatile oil and gas fundamentals, exploration and
production spending patterns, cost escalations along with
international business risks. Hence, we expect Core Labs to perform
in line with the broader market and therefore, maintain our Neutral
recommendation on the stock.
Core Labs currently retains a Zacks #3 Rank, reflecting a Hold
rating for a period of one to three months.