e Laboratories (US:CLB)2020-01-30 20:17Financial Data and Key Metrics Changes - Revenue from continuing operations was $157 million in Q4 2019, down over 9% from Q3 2019, primarily due to a decline in U.S. onshore activity [17] - Service revenue was $115.2 million, down about 4.5% sequentially, also impacted by U.S. onshore activity decline [17] - Product sales were $41.6 million, down 21% from Q3 2019, with international product sales seasonally down in Q4 [18] - Free cash flow in Q4 was $16.6 million, marking the 73rd consecutive quarter of positive free cash flow [15][31] - Income from continuing operations ex-items for Q4 was $17.1 million, down 24% from the previous quarter [23] Business Line Data and Key Metrics Changes - The Reservoir Description segment saw a decline in activity due to seasonal factors and project delays, but is expected to improve in Q1 2020 [51][52] - Production Enhancement remains focused on completions, with a split of roughly two-thirds products and one-third services [83] Market Data and Key Metrics Changes - U.S. crude oil production is approximately 12.5 million barrels per day, with a downward revision of expected growth for 2020 from 700,000 to 200,000 barrels per day [12][14] - The Eagle Ford play is believed to be in permanent decline, while the Bakken is near peak production [13] Company Strategy and Development Direction - The company emphasizes free cash flow and returns on invested capital, with a focus on shareholder value through dividends and share repurchases [9][15] - Core Lab projects international activity to grow by mid-single digits in 2020, while U.S. land activity is expected to moderately improve [34][35] Management Comments on Operating Environment and Future Outlook - Management noted that the crude oil market is expected to tighten in the second half of 2020, supporting capital investment in long-term international projects [34] - The company anticipates a continued focus on free cash flow and capital discipline, with plans to reduce outstanding debt and opportunistically repurchase shares [30][66] Other Important Information - The company reinitiated its share repurchase program in January 2020 and plans to reduce debt on its revolving credit line [16][30] - Cost of services for Q4 was 72% of revenues, with ongoing cost reduction initiatives yielding positive results [19] Q&A Session Summary Question: What is driving the sequential improvement in Reservoir Description? - Management indicated that projects pushed from Q4 to Q1 can mitigate seasonal declines, contributing to the guidance for improvement [52] Question: How is the adoption of GoGun technology progressing? - Management reported increasing penetration of GoGun, particularly in the Permian Basin, with production line expansions in place [53][54] Question: What are the expectations for offshore activity influencing business? - Management sees upside in offshore activity, which is expected to improve performance in Reservoir Description [56] Question: How will the company balance cash flow between debt reduction and share buybacks? - Management plans to use excess cash flow for debt reduction while also considering opportunistic share repurchases [65] Question: What is the outlook for ReFRAC technology? - Management believes there is a significant opportunity for ReFRAC, with many existing wells being candidates for additional hydrocarbon production [88]