e Laboratories (US:CLB)2022-04-28 20:29Financial Data and Key Metrics Changes - For Q1 2022, revenue from continuing operations was $115.3 million, down approximately 7.9% from $125.1 million in the prior quarter, but up 6.4% year-over-year [20] - Service revenue was $84.7 million, down approximately 5% sequentially, while product sales were $30.6 million, down 14.7% sequentially but up over 25% year-over-year [22][23] - EBIT ex-items for the quarter was $7.2 million, down from $14.2 million last quarter, yielding an EBIT margin of over 6% [27] - Income from continuing operations ex-items for the quarter was $3.6 million, down from $9.3 million last quarter [29] Business Line Data and Key Metrics Changes - Reservoir Description revenue was $74.8 million, down 7% sequentially, with operating income ex-items at $3.9 million and operating margins at 5% [42] - Production Enhancement revenue was $40.5 million, down 10% sequentially but up 27% year-over-year, with operating income ex-items at $3.1 million and operating margins at 8% [50] Market Data and Key Metrics Changes - The U.S. land market showed strength, with service revenue in the U.S. increasing 8% sequentially [22] - International operations were disrupted more than expected due to COVID-19 and the Russia-Ukraine conflict, impacting demand for services [20][11] Company Strategy and Development Direction - Core Laboratories continues to focus on introducing new product and service offerings, maintaining a lean organization, and deleveraging the company [14] - The company aims to maximize free cash flow, return on invested capital, and return excess free cash to shareholders [16] Management's Comments on Operating Environment and Future Outlook - Management noted that global demand for hydrocarbons continues to rise, indicating positive trends for future oilfield activity [10] - The outlook for the remainder of 2022 remains positive, with expectations for sequential improvement in the second quarter and further acceleration in the second half of the year [40] Other Important Information - The company has initiated a joint industry carbon capture and sequestration consortium to analyze geological risks associated with subsurface carbon sequestration [47] - Core Lab is expanding its penetration of carbon capture and sequestration opportunities, with a strategic alliance with Talos Energy Inc. [48] Q&A Session Summary Question: How should we think about your Reservoir Description business in the context of macro growth? - Management indicated that while they align with industry expectations, the international market's outlook is softened due to the Russia-Ukraine conflict [54][55] Question: Can you provide details on the business in Russia and how it's being handled? - Historically, Russia and nearby regions accounted for 5% to 8% of the business, with expectations for a rebound in demand for crude oil assay work as supply patterns realign [56][57] Question: What is the visibility on margin improvements going forward? - Management expressed confidence in improving margins as employee compensation is restored and top-line growth is expected [59][60] Question: What is the outlook for Production Enhancement margins? - Management expects margins to expand in the range of 25% to 30% on products, with improvements anticipated as manufacturing disruptions are resolved [64] Question: What is the next step for carbon capture and sequestration projects? - The focus is on execution, with a growing client base for CCS projects and an increase in planned projects [68][69] Question: Can you elaborate on the GoTrace technology? - GoTrace allows for simultaneous perforation and tracer placement, providing more granularity in completion diagnostics, which is a competitive advantage for the company [71][73]