Shares of Core Laboratories (NYSE:CLB) are down 10.5% at 1:08 p.m. EDT on Monday, after trading down as much as 15% during morning hours. Core Labs stock is moving in the opposite direction of most large oil and gas equipment and services companies today; the SPDR S&P Oil & Gas Equipment & Services ETF (NYSEMKT:XES) is up 2.3% on a relatively quiet day for the oil and gas industry. Beyond a handful of penny stocks in the sector (companies that are in serious financial trouble and at risk of bankruptcy), many of Core Labs' peers are up at least modestly today.
Today's big sell-off for Core isn't underpinned by any big news. The company issued no press releases and filed no documents with the Securities and Exchange Commission recently. There's also no big industry news, either today or over the weekend, that's the clear catalyst for today's sell-off.
Core Labs shares have been intensely volatile this year. The coronavirus pandemic has wreaked havoc in the oil and gas industry, sharply driving down demand for both oil and gas, crushing prices, and causing massive losses. This has resulted in producers slashing their spending budgets to stem those losses just to ride things out.
Companies like Core Labs are some of the first to bear the brunt of those cuts as producers have pulled back on development of new resources. But investors have been hopeful that demand would recover quickly as more of the global economy reopened. As a result, Core shares have been like a roller coaster this year, falling more than 75% from the peak and regaining much of that value even as the economy and the conditions in the oil patch deteriorated:
Which brings us to today: It's a bit of a continuation of the sell-off that started about a week ago, bringing Core Labs shares down 29% over that period as sentiment has shifted back to the negative. At one point, Core stock was up more than double; today's selling could be nothing more than just some investors who've profited from such a large run-up realizing those profits.
Investors who own Core should just accept that this sort of volatility will continue through at least the rest of this year. Worries that a second wave of COVID-19 has already started in the U.S. has many investors concerned that the economic impact will last longer and be worse than expected; the Federal Reserve just last week indicated that its outlook for a full jobs recovery was years, not months.
The good news is that, when you look beyond Core Labs' stock price and focus on the business, the company is in solid financial shape. Management has already taken steps to lower expenses and expects to generate positive free cash flow in 2020, even through what looks likely to be the worst downturn in the oil market in many decades.
I expect Core Labs should come through this downturn in solid shape, and the services it provides will once again be in high demand. It just could be a really, really rough ride over the next year. Buckle up.