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The oil-field technology company’s resulted bounced off the bottom, with that recovery expected to continue throughout 2017.
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|
Metric |
Q4 2016 |
Q3 2016 |
Quarter-Over-Quarter Change |
|---|---|---|---|
|
Revenue |
$149.5 million |
$143.5 million |
4.2% |
|
Adjusted net income |
$18.3 million |
$16.7 million |
9.4% |
|
Adjusted EPS |
$0.41 |
$0.38 |
7.9% |
Source: Core Labs.
Core Labs' "V-shaped" recovery appears to be taking hold.
Core Labs' management team noted several factors in its earnings press release that contributed to its stronger-than-expected performance:
In offshore projects, Core continues to perform increasing numbers of reservoir fluid phase-behavior and crude oil characterization studies from producing fields in the Gulf of Mexico and West Africa. Additionally, the company is continuing advanced rock properties studies and will begin extensive reservoir fluid phase-behavior testing on the ExxonMobil (XOM +0.01%) Liza-2 well, offshore Guyana, and on a potential giant field discovery offshore West Africa. Both of these discoveries are world-class in nature, with recoverable crude oil equivalent reserves expected to exceed one billion barrels.
Last year was the industry's worst for new oil discoveries since 1940. That said, Core is playing a significant role in studying the largest finds, such as Exxon's huge Guyana oil discovery, which should continue to drive revenue and earnings for the company in 2017.
Core also noted that it has been working with Pioneer Natural Resources (PXD +0.00%) and another partner over the past 18 months on a technical alliance to develop new applications that will enhance the development of the Permian Basin. The net result is that Core signed an agreement with Pioneer Natural Resources to commercialize the applications developed through their collaboration. These applications should help producers boost production and returns, while driving revenue growth for Core.
Core Labs wrote in its press release that the company's "third-quarter results established the bottom of the expected 'V-shaped' recovery that will continue into 2017." Driving this view is that the oil market shifted from oversupply to undersupply in part because of OPEC's production cuts, which should lead to higher oil prices this year. Improving pricing has already led oil companies from ExxonMobil to Pioneer Natural Resources to increase their activities in North America. However, Core anticipates that international and offshore markets will start recovering in the first half of this year because oil companies are expected to sanction twice as many projects as they approved last year.
That said, the company sees its results flattening out in the first quarter, with revenue of around $150 million and adjusted earnings of $0.42 per share. However, results should reaccelerate in upcoming quarters, thanks to stronger onshore drilling activities and the start-up of several major offshore projects.