Core Laboratories (ticker: CLB) presented at EnerCom’s The OilServices Conference 14 in San Francisco on March 9, 2016. Core Laboratories is a leading provider of proprietary and patented reservoir description, production enhancement, and reservoir management services used to optimize petroleum reservoir performance.
David Demshur began the company remarks for Core Lab by commenting on last years The OilServices Conference prediction that the decline curve on oil production in the U.S. would be down 7.8%, which amounted a very accurate prediction. Core foresees the drop in production as being just over 10% for 2016 in the U.S., and 3.3% globally which will help to rebalance the market.
Mr. Demshur also discussed some of the new efficiencies being brought to market aided by Core Lab technology. Pioneer Natural Resources is looking at drilling a 60 stage frac at over 12,000 lateral feet. This would be among the first frac jobs to reach that length.
In the company’s year-end release, Core reported free cash flow of 144% of net income for the year as the company continues to offer top-tier ROIC. That point was reiterated during the company’s presentation by Dick Bergmark, Core Lab’s CFO. Dick pointed to the fact that Core’s free cash flow has exceeded net income in 10 of the last 14 years of operation. The major focal points of their financial policy are free cash flow, return on invested capital, and the return of money to shareholders. Core utilizes three strategies to return capital to shareholders; share buybacks, special dividends, and common dividends.
What drives the value in Core Lab is their focus on picking the best uses of capital and making sure those projects are done well. Mr. Bergmark mentioned the belief of Core Lab is that spending large amounts in capital was a detriment to business. Keeping the reigns on spending at Core Lab allows them to grow the company faster and more responsibly.
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