CLB Core Laboratories Inc

Oilfield service company Core Laboratories NV (CLB) reported excellent financial result in third-quarter 2013. The record performances – revenue, earnings and net income – were primarily on the back of the production enhancement segment, which benefited from employment of new technologies and associated services.

Adjusted earnings per share (EPS) came in at $1.36, surpassing the Zacks Consensus Estimate of $1.34. Moreover, the bottom line increased 20.4% as compared with a profit of $1.13 per share in the year-ago quarter. The year over year EPS hike is the highest in the last five quarters.

Total revenue was $273.2 million, up 11.3% from $245.4 million in the prior-year quarter. The top line also came ahead of the Zacks Consensus Estimate of $267.0 million.

Segment Performance

Reservoir Description Segment: Revenues from the Reservoir Description segment (which focuses on international crude oil related projects) increased 5.9% year over year to $131.5 million in the third quarter. However, adjusted operating income from the unit decreased marginally by 1.0% year over year to $36.2 million. Operating margin was 28.0%. Increased general and administrative expenses hurt the operating result.

Production Enhancement Segment: Core Labs’ Production Enhancement revenues grew 18.5% year over year to $119.5 million in the quarter and adjusted operating income increased 37.7% year over year to $42.6 million. Operating margin was 36.0%. Maximization of the recovery rates of hydrocarbon from unconventional oil plays in North America, owing to the successful employment of improved technologies, aided the results.

Reservoir Management Segment: Quarterly revenues from Reservoir Management operations were $22.1 million, up 8.4% year over year, while adjusted operating income moved up 9.0% year over year to $6.5 million. Operating margin was 29.0%.

The primary catalysts for the segment were impressive study results that have attracted many projects. Core Labs has undertaken a number of reservoir analysis ventures in onshore and offshore plays, which boosted the segment’s results.

Balance Sheet & Free Cash Flow

As of Sep 30, 2013, Core Labs had cash and cash equivalents of $22.2 million. Capital expenditures for the third quarter were $9.1 million. The company generated free cash flow of $65.1 million. The debt-to-capitalization ratio of the company is 58.1%,

Quarterly Dividend

On Oct 8, 2013, Core Labs’ board of directors declared fourth-quarter 2013 common stock dividend of 32 cents per share ($1.28 per share annualized). The dividend will be paid on Nov 20, to shareholders of record as of Oct 18.

Outlook

Amsterdam, the Netherlands-based Core Labs provided a positive outlook for 2014, reflecting the favorable Brent crude pricing along with the arrival of additional deepwater drilling rigs. These will enable the company to take up new projects and operate in other rich oil and gas acreages. Core Labs also plans to use advanced technologies and add services aimed at boosting the daily production and hydrocarbon recovery rates.

For the fourth quarter, Core Labs forecasts total revenue in the $278.0 million to $281.0 million range. Earnings per share will likely be between $1.39 and $1.40.

Zacks Rating

Core Labs currently retains a Zacks Rank #2 (Buy), implying that it is expected to outperform the broader U.S. equity market over the next one to three months.

Apart from Core Labs one can look at other oilfield service firms like Exterran Holdings Inc. (EXH), Schlumberger Ltd (SLB) and Seacor Holdings Inc. (CKH) that offer value. All the stocks sport a Zacks Rank #2 (Buy).

 
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