e Laboratories (US:CLB)2019-10-24 17:41Financial Data and Key Metrics Changes - Revenue from continuing operations was $173.2 million in Q3 2019, up 2.5% compared to the previous quarter, driven by higher activity levels on international projects [22] - Service revenue was $120.8 million, reflecting a 2% sequential increase, while product sales were $52.4 million, also up over 2% from the last quarter [22][23] - Income from continuing operations ex-items was $22.5 million, up 9% from $20.7 million in the previous quarter, with GAAP income from continuing operations at $24.2 million [27] - Earnings per diluted share from continuing operations ex-items was $0.50, up 9% from the previous quarter, while GAAP EPS was $0.54 [27] Business Line Data and Key Metrics Changes - The Reservoir Description segment saw a 9% year-over-year growth, primarily driven by international projects, while the Production Enhancement segment faced challenges due to declining U.S. onshore activity [53][38] - The introduction of new technologies, such as the ReFRAC Perforating Technology, has improved operational efficiency and client satisfaction in the Production Enhancement segment [48] Market Data and Key Metrics Changes - Global crude oil production is at an all-time high of approximately 100 million barrels per day, with U.S. production reaching 12.4 million barrels per day [15][16] - OPEC production is at an 8-year low, impacting global supply dynamics, while non-OPEC countries are expected to contribute modestly to supply growth [17][33] Company Strategy and Development Direction - The company is focused on enhancing its asset-light model to support free cash flow and dividend coverage, while continuing to streamline operations through automation [19][31] - Core Laboratories is committed to technological innovation, as evidenced by the acquisition of Guardian Global Technologies and the introduction of the GoGun system [12][19] Management's Comments on Operating Environment and Future Outlook - Management noted that the balance of supply and demand in the crude oil market remains stable, with expectations of declining global crude oil inventories supporting higher prices [34][36] - The company anticipates a decline in U.S. land activity in Q4 2019, impacting both the Production Enhancement and Reservoir Description segments, but remains optimistic about international project growth [38][39] Other Important Information - Core Laboratories generated over $20 million in free cash flow during Q3 2019, marking the 72nd consecutive quarter of positive free cash flow [19] - The company plans to maintain its dividend, emphasizing its importance to investors, particularly in Europe [19] Q&A Session Summary Question: Regarding Reservoir Description's international growth perspective for 2020 - Management indicated a positive project board with a 9% year-over-year growth in Reservoir Description, expecting mid- to high single-digit growth in 2020 [53] Question: Clarification on Q4 guidance and margin erosion - Management confirmed that margin erosion is less pronounced than in Q4 of the previous year due to cost control actions and a transitory reduction in activity [55] Question: Competitive environment for energetics and pricing - U.S. energetics revenue was down slightly by 4.3% year-over-year, but pricing remains stable as the company targets high-end operators [64][65] Question: Impact of wireline companies unbundling products - Management expressed confidence in maintaining market share despite wireline companies offering integrated systems, emphasizing the quality of their energetics [60][79] Question: Future of R&D and market expectations - Management acknowledged potential headwinds in North America but remains optimistic about international offshore revenue growth [82]