Core Laboratories' (CLB) financial results continued their steady improvement in the first quarter. While the company faced some headwinds from seasonality that caused results to flatten out versus the fourth quarter of 2017, they were still much better than the year-ago period. That progression should continue for the foreseeable future given the increasingly optimistic outlook for the oil market.
Core Labs results: The raw numbers
|
Metric |
Q1 2018 |
Q1 2017 |
Year-Over-Year Change |
|---|---|---|---|
|
Revenue |
$170.0 million |
$156.6 million |
8.6% |
|
Adjusted net income |
$25.2 million |
$18.1 million |
39.3% |
|
Adjusted earnings per share |
$0.57 |
$0.41 |
39% |
Data source: Core Labs.
Image source: Getty Images.
What happened with Core Labs this quarter?
Core Labs hit the mark:
- Revenue came right in the middle of the company's $168 million to $172 million guidance range, rising nearly 9% year over year, but largely flat sequentially due to seasonality.
- Driving the improvement was the company's production enhancement business, where sales surged 34% year over year and 6% sequentially to $69.2 million, thanks to strong demand for the company's products and services from unconventional shale producers.
- Partially offsetting this strong result was the company's reservoir description business, where revenue slumped 4% both sequentially and year over year to $100.8 million mainly due to seasonality and the continued weakness in the offshore market.
- Earnings, likewise, were right in the middle of the company's $0.56 to $0.58 per share forecast. Overall, earnings rose sharply year-over-year, thanks to higher revenue and improving margin, but slipped a $0.01 per share sequentially due to seasonality.
- Core generated $18.7 million of free cash flow during the quarter, which it used to pay the quarterly dividend and buy back more than 30,000 shares.
What management had to say
Core's management pointed out in the press release that "sales of Core's perforating systems increased 19% sequentially during the first quarter of 2018, while the Energy Information Agency reported that U.S. completions were up 9% sequentially." This result implied that Core "continues to gain market share" as it helps drillers complete better shale wells. Overall, Core has noticed that clients are increasingly turning toward using more of its technologically advanced tools to finish wells because they deliver higher returns on capital than more commoditized options.
Looking forward
With the seasonally slower first quarter behind it, Core Labs expects its financial results to reaccelerate in the second quarter. The company sees revenue coming in between $177 million and $179 million and earnings landing in the range of $0.64 to $0.66 per share.
Furthermore, the company noted that after several years of underinvestment, activity in its international markets should pick up in the second half of the year and into 2019. The company pointed out that oil and gas producers sanctioned 20 projects last year and could give the green light on 25 to 30 more this year, which suggests that more work should flow its way in the coming quarters as these projects get off the ground.
