Core Lab Reports EPS of $1.51 Ex-Items for Q2 2008, Increases 2008 EPS Guidance,...

Core Lab Reports EPS of $1.51 Ex-Items for Q2 2008, Increases 2008 EPS
Guidance, and Initiates Dividends

AMSTERDAM, The Netherlands, July 23 /PRNewswire-FirstCall/ -- Core
Laboratories N.V. (NYSE: CLB) reported second quarter 2008 net income of
$33,711,000 and earnings per diluted share (EPS) of $1.38, including a
one-time, non-cash, after-tax charge of approximately $3,200,000, related to
its 2006 issuance of $300 million Senior Exchangeable Notes (the "Notes").
Excluding the charge for the Notes, Core's operations generated net income of
$36,940,000 and EPS of $1.51 during the quarter, both increases of 28% over
year-earlier second quarter totals. Year-over-year quarterly revenue
increased 17% to a record $197,688,000, and operating income increased 31% to
a record $55,019,000. Second quarter operating margins, defined as operating
income divided by revenue, increased approximately 300 basis points over
second quarter 2007 levels to a record 28%. Year-over-year quarterly
incremental margins, defined as the quarterly change in operating income
divided by the quarterly change in revenue, were 45% for the second quarter of
2008.
The record second quarter results were due to increased demand for the
Company's Reservoir Description services, especially those related to
internationally based crude-oil developments, and increased demand for Core's
Production Enhancement technologies used to optimize reservoir performance for
tight gas sand and gas-shale developments in North America. In addition,
Core's Reservoir Management operations initiated a detailed joint industry
project to evaluate the potential of the Haynesville gas shale and laterally
equivalent sequences at the request of 12 major acreage holders in the area.
For the first six months of 2008, Core's revenue increased 16% to a record
$377,125,000, while net income and operating income, excluding the effects of
one-time gains and charges, increased 30% and 32% to $70,066,000 and
$104,021,000, respectively, from year-earlier totals. Operating and
incremental margins for the first six months, excluding the effects of
one-time gains and charges, reached 28% and 48%, respectively.
Segment Highlights
Core Laboratories reports results under three operating segments:
Reservoir Description, Production Enhancement, and Reservoir Management.
Reservoir Description
Reservoir Description operations posted record levels of revenue and
operating income for the second quarter of 2008. Quarterly revenue was
$114,157,000, an increase of over 22% over second quarter 2007 totals. The
22% growth rate was the highest for Reservoir Description in over a decade.
Quarterly operating income increased 35% to $28,969,000, and operating margins
increased 250 basis points from second quarter 2007 levels to 25%.
Reservoir Description operations experienced increased demand for
technologies related to crude-oil developments in Asia Pacific and especially
in the Middle East, where the Company continues to expand its operations. At
the request of Saudi Aramco, Core is sending additional advanced rock
properties testing equipment to perform more sophisticated dynamic flow tests,
the results of which are used to enhance daily oil production and ultimate
hydrocarbon recovery factors. Asia-Pacific operations continue to receive
large volumes of work from Malaysia, Indonesia, India, and Australia, among
other countries.
In North America, the Company continues to process more than 55 miles of
oil-sand core in Canada, while expanding its ability to process increased
amounts of core from gas shales. The Company continues to build "The Canadian
Center for Unconventional Oil and Natural Gas Evaluation" in Calgary in
expectation of over 70 miles of oil sand core and large amounts of shale core
to be cut in the Muskwa and Utica developments later in 2008 and into 2009.
The Center is scheduled to open in early December to meet client demands
expected during the 2008 - 2009 drilling season.
Production Enhancement
Production Enhancement operations also posted record levels of revenue and
operating income for the second quarter of 2008. Quarterly revenue was
$71,706,000, an increase of 18% over second quarter 2007 totals. The 18%
growth rate for Production Enhancement was the highest since the fourth
quarter of 2006, and it confirms the increasing demand for Core's fracture
diagnostic technologies and SuperHERO(TM) perforating charges when it is
compared with the year-over-year rig count increase in the United States of
only 7%. Because of growing demand for these proprietary technologies,
operating margins increased approximately 550 basis points from second quarter
2007 levels to 32%. Operating income increased to $23,182,000, up 43% over
year-ago second quarter totals.
Core Lab technologies are proving to be critical components of completion
and fracture stimulation programs in tight gas sands and especially in
gas-shale reservoirs. SuperHERO charges are not only producing superior
perforations and elongated perforating tunnels, but they are significantly
lowering formation breakdown pressures, thereby reducing the costs of frac
programs. The Company reports that it has upgraded both its HERO(TM) and
SuperHERO perforating technologies through its continuous technology
improvement process. Changes have been made to the Company's patented HWM(SM)
powdered metal liner compositions and designs that have improved formation
penetration by as much as 15%.
Core's ZeroWash(R), SpectraScan(TM), and SpectraChem(TM) fracture
diagnostic technologies are helping to optimize the superior performance of
multi-staged simultaneous fracs. In addition, these proprietary tracer
technologies are being used to evaluate oblique stress fields that are created
in the reservoir zone using alternating and diagonal -- rather than offsetting
-- staged frac patterns. The effectiveness of these so-called "zipper fracs"
is currently being evaluated for multi-staged frac programs in the Barnett and
several other prominent gas-shale reservoirs. Frac sequences with as many as
10 to 15 stages are proving to be very effective in reservoirs with certain
geomechanical and petrophysical properties. Core believes that the success of
large-scale, multi-staged simultaneous and zipper frac programs will not be
limited to gas-shale reservoirs, but will be applicable to all silica-rich,
hard rock reservoirs worldwide.
Reservoir Management
Reservoir Management operations reported second quarter 2008 revenue of
$11,825,000 and operating income of $2,962,000, both lower than results from
the second quarter of 2007, during which several large contracts were
completed in Venezuela. Operating margins were 25% for the quarter.
Core Laboratories initiated a new gas-shale study entitled Reservoir
Characterization and Production Properties of the Haynesville and Bossier
Shales at the request of 12 major acreage holders in northwestern Louisiana
and northeastern Texas. The study will be similar to the Marcellus Shale
Study currently being conducted for 18 companies in the Appalachian region.
The Company has also added two participants to its Reservoir Characterization
and Production Properties of Gas Shales study, the industry's largest and most
comprehensive study of the potential of gas-shale plays throughout North
America. The total number of companies participating in the Gas Shales study
now totals 60.
Caspian Region Acquisition
In July 2008, Core Laboratories acquired for cash Catoni Persa, an
Istanbul, Turkey-based petroleum testing laboratory specializing in the
characterization of crude oil and its derivative products. Catoni, with 2007
revenues of over $7 million, will expand Core's reservoir fluids and
analytical testing capabilities in the greater Caspian region. Istanbul
provides a regional base with a good infrastructure and a talented workforce
to bolster growth in the region.
The Company is expanding its presence in this region where an increasing
number of crude-oil and natural gas developments are underway. Moreover, Core
has recently been awarded thousands of feet of core from carbonate reservoirs
in Iraq. Many additional projects are slated for Iraq as stability returns to
its petroleum-producing provinces.
Initiation of Quarterly Dividend; Declaration of Special Dividend
On 15 July 2008, the Company announced the initiation of a quarterly cash
dividend equal to $0.10 per share of common stock. On an annualized basis,
the quarterly cash dividend would equal a payout of $0.40 per share of common
stock. The initial quarterly cash dividend will be payable on 25 August 2008
to shareholders of record on 25 July 2008. Dutch withholding tax will be
deducted from the dividend at a rate of 15%.
Core's Board of Supervisory Directors also has declared a special cash
dividend of $1.00 per share of common stock, payable on 25 August 2008 to
shareholders of record on 25 July 2008. Dutch withholding tax will be
deducted from the special dividend at a rate of 15%. Any determination to
declare a future quarterly or special cash dividend, as well as the amount of
any such cash dividend that may be declared, will be based on the Company's
financial position, earnings, earnings outlook, capital expenditure plans,
ongoing share repurchases, potential acquisition opportunities, and other
relevant factors at the time.
Share Repurchase Program; Free Cash Flow
At Core's Annual General Meeting on 28 May 2008, the Company received
shareholder authorization to repurchase up to 10% of its outstanding shares
until 28 November 2009. With the authorization, Core could repurchase up to
approximately 2,300,000 shares over the next 18 months. The Company believes
that its ability to combine recently announced quarterly and special dividends
with additional share repurchases provides greater opportunity for the Company
to maximize shareholder value.
During the second quarter of 2008, Core Laboratories generated $39,924,000
in free cash flow, defined as cash from operations minus capital expenditures.
This free cash will be used to pay the quarterly dividend of $0.10 per share,
which amounts to a total of approximately $2,300,000, and to pay the special
dividend of $1.00 per share, which totals approximately $23,000,000. The
remainder of the quarter's free cash was used to fund the Catoni Persa
acquisition. Since virtually all of the second quarter free cash was allotted
to paying dividends and the funding of an acquisition, no shares were
repurchased during the quarter.
Non-Cash Charge For Notes
During the second quarter of 2008, Core's shares traded above $123.19 for
more than 20 of the final 30 trading days, thereby exceeding the conversion
price of $94.76 by 30% and enabling an early conversion option for the
Company's existing $300 million Senior Exchangeable Notes. Therefore, per
U.S. GAAP, the Notes, which are expected to mature in 2011, were reclassified
from a long-term to a short-term liability. Consequently, transaction costs,
which were being amortized over the expected life of the Notes, were recorded
as a non-cash expense in the quarter. This resulted in a non-cash,
non-recurring after-tax charge of approximately $3,200,000 in the second
quarter of 2008.
Third Quarter and Full-Year 2008 Guidance
For the third quarter of 2008, Core expects revenues to range between
$200,000,000 and $210,000,000, an increase of 18% to 24% over last year's
third quarter total. Earnings per diluted share are expected to range between
$1.55 to $1.61, up 20% to 25% from the $1.29 reported for the third quarter of
2007. The third quarter 2008 guidance assumes year-over-year incremental
margins exceeding 40%.
For the full-year 2008, Core now anticipates revenue in the $785,000,000
to $795,000,000 range, up approximately 18% over full-year 2007 results. Core
expects full-year 2008 earnings per diluted share to range between $6.05 and
$6.15, an increase of up to 26% over year-earlier totals, excluding the
effects of non-recurring charges. The new higher 2008 guidance assumes
incremental margins of more than 40%. Previous annual earnings guidance
ranged from $5.90 to $6.05 per diluted share.
Capital expenditures for 2008 are expected to be approximately
$25,000,000, down from the $25,000,000 to $30,000,000 reflected in previous
guidance, as several projects have been completed under the original budgeted
cost level. These expenditures will be used primarily for the build-out of
"The Canadian Center for Unconventional Oil and Natural Gas Evaluation."
Other significant 2008 capex projects include the construction of a large
laboratory facility to consolidate US Gulf Coast operations and the continued
expansion of Core's operations in the Middle East and Asia-Pacific regions.
The Company has scheduled a conference call to discuss this quarter's
earnings announcement. The call will begin at 7:30 a.m. CDT on Thursday, 24
July 2008. To listen to the call, please go to Core's website at
http://www.corelab.com.
Core Laboratories N.V. (http://www.corelab.com) is a leading provider of
proprietary and patented reservoir description, production enhancement, and
reservoir management services used to optimize petroleum reservoir
performance. The Company has over 70 offices in more than 50 countries and is
located in every major oil-producing province in the world.
This release includes forward-looking statements regarding the future
revenues, profitability, business strategies and developments of the Company
made in reliance upon the safe harbor provisions of Federal securities law.
The Company's outlook is subject to various important cautionary factors,
including risks and uncertainties related to the oil and natural gas industry,
business conditions, international markets, international political climates
and other factors as more fully described in the Company's 2007 Form 10-K
filed on 22 February 2008, and in other securities filings. These important
factors could cause the Company's actual results to differ materially from
those described in these forward-looking statements. Such statements are based
on current expectations of the Company's performance and are subject to a
variety of factors, some of which are not under the control of the Company.
Because the information herein is based solely on data currently available,
and because it is subject to change as a result of changes in conditions over
which the Company has no control or influence, such forward-looking statements
should not be viewed as assurance regarding the Company's future performance.
The Company undertakes no obligation to publicly update any forward looking
statement to reflect events or circumstances that may arise after the date of
this press release.

CORE LABORATORIES N.V. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(amounts in thousands, except per share data)
(UNAUDITED)

Three Months Ended Six Months Ended
30 June 2008 30 June 2007 30 June 2008 30 June 2007

REVENUES $197,688 $168,393 $377,125 $324,116

OPERATING EXPENSES:
Costs of services
and sales 130,910 113,349 250,383 220,598
General and
administrative
expenses 7,159 9,720 15,448 17,759
Depreciation and
amortization 5,276 4,897 10,515 9,475
Other expense
(income), net (676) (1,473) 1,492 (2,336)

OPERATING INCOME 55,019 41,900 99,287 78,620
Interest expense 5,076 635 5,720 1,267

INCOME BEFORE INCOME
TAX EXPENSE 49,943 41,265 93,567 77,353
Income tax expense 16,232 12,462 30,523 23,288
NET INCOME $33,711 $28,803 $63,044 $54,065

Diluted Earnings
Per Share: $ 1.38 $ 1.18 $2.60 $ 2.22

WEIGHTED AVERAGE
DILUTED COMMON
SHARES OUTSTANDING 24,452 24,413 24,206 24,367

SEGMENT INFORMATION:

Revenues:
Reservoir Description $114,157 $93,798 $214,658 $176,961
Production Enhancement 71,706 60,761 138,730 119,568
Reservoir Management 11,825 13,834 23,737 27,587
Total $197,688 $168,393 $377,125 $324,116

Operating income
(loss):
Reservoir Description $28,969 $21,426 $51,986 $38,199
Production Enhancement 23,182 16,200 45,123 32,252
Reservoir Management 2,962 4,117 7,189 7,814
Subtotal 55,113 41,743 104,298 78,265
Corporate and other (94) 157 (5,011) 355
Total $55,019 $41,900 $99,287 $78,620

CORE LABORATORIES N.V. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands)

ASSETS: 30 June 2008 31 December 2007
(Unaudited)

Cash and Cash Equivalents $54,628 $25,617
Accounts Receivable, net 149,142 137,231
Inventories, net 31,648 29,363
Other Current Assets 42,581 28,488
Total Current Assets 277,999 220,699

Property, Plant and Equipment, net 95,256 93,038
Intangibles, Goodwill and Other Long Term
Assets, net 181,171 191,053
Total Assets $554,426 $504,790

LIABILITIES AND SHAREHOLDERS' EQUITY:

Accounts Payable $38,683 $39,861
Senior Exchangeable Notes 300,000 --
Other Current Liabilities 51,611 58,179
Total Current Liabilities 390,294 98,040

Long-Term Debt and Lease Obligations -- 300,000
Other Long-Term Liabilities 54,850 44,607
Shareholders' Equity 109,282 62,143
Total Liabilities and Shareholders'
Equity $554,426 $504,790

CORE LABORATORIES N.V. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
(amounts in thousands)
(Unaudited)

Six Months Ended
30 June 2008

CASH FLOWS FROM OPERATING ACTIVITIES $73,403

CASH FLOWS FROM INVESTING ACTIVITIES (24,053)

CASH FLOWS FROM FINANCING ACTIVITIES (20,339)

NET CHANGE IN CASH AND CASH EQUIVALENTS 29,011
CASH AND CASH EQUIVALENTS, beginning of period 25,617
CASH AND CASH EQUIVALENTS, end of period $54,628

Non-GAAP Information

Management believes that the exclusion of certain income and expenses
enables it to evaluate more effectively the Company's operations
period-over-period and to identify operating trends that could otherwise be
masked by the excluded items. For this reason, we used certain non-GAAP
measures that exclude these items; we felt that presentation provides the
public a clearer comparison with the numbers reported in prior periods.

Reconciliation of Operating Income
(amounts in thousands)

Six Months Ended
30 June 2008

Operating Income $99,287
Gain on sale of building (1,054)
Severance 758
Non-income related taxes 5,030
Operating Income excluding specific items $104,021

Reconciliation of Net Income
(amounts in thousands)

Three Months Ended Six Months Ended
30 June 2008 30 June 2008

Net Income $33,711 $63,044
Gain on sale of building (net of tax) -- (709)
Severance (net of tax) -- 510
Net impact of non-income related taxes -- 3,771
Debt acquisition costs related to Notes 3,229 3,450
Net Income excluding specific items $36,940 $70,066

Reconciliation of Diluted Earnings Per Share

Three Months Ended Six Months Ended
30 June 2008 30 June 2008

Diluted earnings per share $1.38 $2.60
Gain on sale of building -- (0.03)
Severance -- 0.02
Net impact of non-income related taxes -- 0.16
Debt acquisition costs related to Notes 0.13 0.14
Diluted earnings per share excluding
specific items $1.51 $2.89

Free Cash Flow
Core uses the non-GAAP measure of free cash flow to evaluate its cash
flows and results of operations. Free cash flow is an important measurement
because it represents the cash from operations, in excess of capital
expenditures, available to operate the business and fund non-discretionary
obligations. Free cash flow is not a measure of operating performance under
GAAP, and should not be considered in isolation nor construed as an
alternative to operating income, net income, earnings per share, or cash flows
from operating, investing, or financing activities, each as determined in
accordance with GAAP. You should also not consider free cash flow as a measure
of liquidity. Moreover, since free cash flow is not a measure determined in
accordance with GAAP and thus is susceptible to varying interpretations and
calculations, free cash flow as presented may not be comparable to similarly
titled measures presented by other companies.

Computation of Free Cash Flow
(amounts in thousands)
(Unaudited)

Three Months
Ended
30 June 2008

Net cash provided by operating activities $47,963
Less: capital expenditures (8,039)
Free cash flow $39,924

SOURCE Core Laboratories

Richard L. Bergmark of Core Laboratories, +1-713-328-2101, Fax,
+1-713-328-2151