Core Laboratories N.V.(NYSE: CLB) stock lost over 6.1 % on July 25th, 2017 (as of 10:14 AM EDT; Source: Google finance) post their weak guidance. The stock lost over 12.5% in the last three months.
As per Baker Hughes, crude prices were volatile with the prices decreasing during the quarter leading to $46.29, by the end of the quarter. The group expects a flat U.S. land-based rig count in the second half of 2017 if the crude oil price continues at the present level for a long period of time. The U.S. land-based rig count might contract in the second half of 2017 if crude remains below $50 per barrel, as this could be pressure on operators. Moreover, the group is already facing the current market and transitory industry shortages of U.S. labor and completion equipment, while this is estimated to be ongoing this year. Rising DUCs, shows that completions are not able to match the pace of drilling, as per EIA this year. The group’s U.S. revenue is related correlated with completion and stimulation events and large-scale reservoir rock and reservoir fluid characterization studies, as compared to immediate increases in rig count.
Accordingly, Core Laboratories expects a revenue in the range of over $165,500,000 to $170,000,000 in the third quarter of 2017 while forecasts incremental operating income margins of up to over 60% early in the activity recovery phase, while historical incremental operating income margins would be over 35% to 45% well into the recovery phase. Operating income would be in between $30,900,000 and $33,500,000 yielding during the quarter leading to an operating margins estimate of around 19%. EPS will be in the range of $0.54 and $0.56.
Moreover, the revenue for the second quarter of 2017 is below their earlier guidance hurt by the shortages of completion crews and equipment which led to lower than forecasted completions. The top line enhanced over 4% to $163,900,000, as compared to first quarter 2017 revenue. Operating and net income reached $29,400,000 and $22,700,000, respectively. Excluding foreign currency translations EPS rose 24% to $0.52, while operating income enhanced over 20% to $29,800,000. Operating margins rose >250 basis points to over 18% during the quarter from the last quarter driven by higher technology services and products being requested by the group’s client base. These better margin services were mainly from the production maintenance projects and enhanced oil recovery (“EOR”) studies in unconventional reservoirs. Rising demand for the group’s HERO®PerFRAC perforating systems drove their product sales margins.