Oct. 21, 2009 (PR Newswire) --
AMSTERDAM, Oct. 21 /PRNewswire-FirstCall/ -- Core Laboratories N.V. (NYSE: CLB) reported third quarter 2009 earnings per diluted share of $1.33, down 13% from third quarter 2008 totals, on revenues of $167,802,000, down 17% from the year-earlier quarter. Net income in the quarter decreased to $30,988,000 from $36,834,000 while operating income decreased 20% to $44,199,000 from year-earlier third quarter totals. Foreign currency exchange gains and a lower effective tax rate accounted for $0.18 of the quarterly earnings. Therefore, excluding the impact of these items, Core Lab operations generated $1.15 per diluted share in third quarter 2009 earnings. Third quarter operating margins, defined as operating income divided by revenue, were 26%.
The Company has established an internal performance target of achieving, every quarter, a return on invested capital (ROIC) in the top decile of the 35 companies listed as its Bloomberg Peers. Based on Bloomberg's calculations for the second quarter of 2009, which is the latest comparable data available, Core's returns were the highest of its top 35 peer oilfield services companies and more than three times the Peer group average ROIC .
For the third quarter of 2009, Core's Reservoir Description operations, which focus on international crude-oil-related projects, posted modestly lower year-over-year quarterly revenue while operating income totals increased. Project mix and expense reductions generated higher year-over-year quarterly operating margins. Large-scale core analyses and reservoir fluids projects continued in Asia-Pacific, the Middle East, and the deepwater areas offshore West Africa and Brazil.
Production Enhancement operations had higher revenues and operating income in the third quarter than in the second quarter of 2009. Increased North American activity and increased penetration of international markets bolstered results.
Reservoir Management operations, also internationally focused, reported slightly higher quarterly revenue and increased operating income and margins compared with the third quarter of 2008. The Company received the first set of gas-shale cores from recent drilling in central Europe and performed additional work on potential lower Tertiary reservoirs in the deepwater Gulf of Mexico.
For the first nine months of 2009, Core reported revenue of $513,940,000, down 11% from the first three quarters of 2008, and net income of $89,987,000, down 6% year-over-year for the period. The Company earned $3.88 per diluted share for the first three quarters of 2009 compared with $3.97 per diluted share for the same period last year.
Cash at the close of the first nine months of 2009 totaled a record high of $137,225,000, or approximately $5.90 per diluted share, up 33% from second quarter 2009 levels and up from third quarter 2008 totals by $78,950,000. During the quarter, the Company also paid out almost $20,000,000 in regular and special dividends. Year-to-date free cash flow, defined as cash from operations minus capital expenditures, reached a record $134,900,000, or $5.81 per diluted share. This compares with free cash flow of $124,000,000, or $5.19 per diluted share, that Core generated during the entire year of 2008.
Segment Highlights
Core Laboratories reports results under three operating segments: Reservoir Description, Production Enhancement, and Reservoir Management.
Reservoir Description
Reservoir Description operations reported quarterly revenue of $101,475,000, down 9% from last year's third quarter, and operating income of $26,792,000, up 5% from the year-earlier quarter. Operating margins were 26%, up 300 basis points from last year's third quarter margins.
Reservoir Description margins continued to benefit from expense reductions and the downsizing of its Venezuelan and Nigerian operations over the past three years. The Company has focused on international development and production-related crude-oil projects almost to the exclusion of more cyclical, exploration-related activities. Moreover, as Company policy precludes direct participation in risk-inherent, lower-margin, integrated management projects, the Reservoir Description segment has no exposure to Chicontepec projects in Mexico.
Large-scale core analyses, reservoir fluids phase-behavior, and crude-oil testing, inspection, distillation, fractionation and characterization studies continued in the international markets. Specifically, in the Asia-Pacific region, large projects continued in Malaysia, Indonesia, Australia, and in India, where the Company initiated a multimillion-dollar waterflood study. Middle East operations in the United Arab Emirates, Qatar and Kuwait realized large increases in demand for Reservoir Description services. Numerous major projects, one of which included more than 5,000 feet of carbonate cores, continued in both southern and northern Iraq, as international oil companies built the databases needed to evaluate fields for an upcoming licensing round. Iraqi reservoirs are very complex and will require extensive data sets to evaluate projected production rates and ultimate hydrocarbon recovery factors. Critical to the successful redevelopment of Iraqi fields will be increasing the ultimate hydrocarbon recovery rates as many fields are currently projected to yield relatively low recovery rates.
Recent high-profile discoveries and developments in the deepwater offshore West Africa resulted in higher work loads for Reservoir Description operations, especially for post-salt projects in offshore Angola blocks 1, 10, 14, 15, 18, and 31, and offshore Gabon. Core also is active in the recently announced potential Cretaceous turbidite and submarine fan plays offshore Ghana and the Ivory Coast. These plays could extend westwards, then northwards, into sedimentary basins offshore Liberia, Sierra Leone, and Equatorial Guinea. Statistically, turbidite and submarine fan reservoirs make up some of the most prolific petroleum reservoirs worldwide.
Production Enhancement
Production Enhancement operations posted third quarter 2009 revenue of $54,398,000, down 31% from the year-earlier quarter but up 5% sequentially from the second quarter. Operating income also increased sequentially by 1% to $14,627,000, and operating margins were 27%.
Given that North American drilling activity was estimated to be down approximately 50% from the third quarter of 2008, Production Enhancement outperformed its focus market. Increasing market penetration by the Company's HERO(TM), SuperHERO(TM), and SuperHERO Plus+(TM) lines of perforating charges and concentrated focus on the Haynesville, Marcellus, and Eagle Ford Shale developments were the primary contributors to the segment's relatively strong performance. Core's recently introduced SpectraChem Plus+(TM) service also continues to gain market acceptance, especially in multi-stage completions in the Bakken oil-shale play.
Outside North America, Production Enhancement operations are providing perforating charges and gun systems to numerous international and national oil companies for use in the completion of oil-producing and potential oil-producing zones throughout Asia-Pacific. Core's unique line of perforating charges and gun systems has proved very effective in the various types of clastic and carbonate reservoirs that are prevalent throughout the Asia-Pacific region.
Reservoir Management
Reservoir Management operations posted modest year-over-year third quarter increases in revenue, operating income, and operating margins, reflecting Core's emphasis on potentially high-return developments and international-related projects. Revenue increased to $11,929,000, and operating income reached $3,498,000. Operating margins for the third quarter of 2009 were 29%.
During the quarter, the Company began to receive shale cores from potential gas-shale developments from central Europe. Basins to be evaluated range from the United Kingdom to the Ukraine and south to Turkey. Reservoir Management operations initiated its Global Gas Shale Study to examine gas shale potential in central and southern Europe, North Africa, India, China, South America, and Australia, among other regions. Currently eight international oil companies are participating in the Global Study, and many other companies are reviewing the technical proposal.
