Earnings reports are coming in, and Core Laboratories (CLB) -- one of the world's most popular oil consultants -- has made its call.
In this video segment, The Motley Fool's Sean O'Reilly, Taylor Muckerman, and Tyler Crowe go over Core Labs' 2015 low numbers and how they stack up against the rest of the sector, explain some of the reasons for the downturn, and outline 2016's prospects.
A transcript follows the video.
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This podcast was recorded on Jan. 28, 2016.
Sean O'Reilly: We've gotten a decent number of earnings reports out for the energy and industrials sector. I want to just dive in and see if any stood out to anybody. Taylor, anybody sticking out to you so far?
Taylor Muckerman: Yeah, Core Labs is a company I own, so I pay attention to it whenever they report, not just because I own it, but because they typically have a pretty good understanding of what's going on in the oil and natural gas --
O'Reilly: Basically, for our listeners who don't know, they're the world's favorite oil consultant, drilling and ...
Muckerman: Yeah. They use data, technology, science, chemistry, all these different mechanisms --
O'Reilly: Mad datas.
Muckerman: -- to determine the best way to produce oil or natural gas from individual wells across the world. Not only originally produce, but also production enhancement is a big part of their business, and that's the part of the business that suffered the most in this last quarter. You look and total revenue down 7.5%, but enhanced production segments revenue down 13%. So, almost double --
O'Reilly: That doesn't sound that bad. Correct me?
Muckerman: No. That's also going up a relatively tough comp in 2014. So, we're done with the hard 2013 comps, where oil prices were soaring. We're starting to see comps against a rough 2014.
O'Reilly: And that's why it doesn't seem so bad.
Muckerman: Yeah, because they were essentially flat in the third quarter of 2015, down 7.5%. So, quarter after quarter, they are down. A little tougher for them. And production enhancements segment deals mainly with shale and offshore, so we're talking about some of the more expensive oil to produce at the moment. Obviously, those are two segments that are going to see some decline if oil prices remain at $30 a barrel.
O'Reilly: Now, Core Labs CEO has been one of the more bullish CEOs, and he just talks about decline rates all day long. Did you catch anything new from him at all?
Muckerman: Not necessarily on decline rates, but he did say that he expects a V-shaped recovery to begin in the back half of this year. So look for it maybe late third quarter, early fourth quarter -- in his mind -- to see some recovery. And not just a slow U-shaped recovery. They either go V or U in the oil markets; that's all people ever refer to. So, he's looking for a relatively sharp recovery.
Taylor Crowe: There's nothing in between. It's either a V or a U recovery. You can't have anything else.
O'Reilly: It's all black and white.
Muckerman: No W, no Y, no X.
O'Reilly: No Js, none of that [laughs].
Muckerman: No. So, he's expecting a sharp recovery relative to what other people are expecting, including Schlumberger, who Tyler, I think, is going to talk about a little bit.
