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Core Laboratories N.V. (CLB) cut its view for the upcoming quarter owing to lower North American rig counts.
The Amsterdam, Netherlands-based oilfield service company now expects its third quarter 2012 earnings in the band of $1.09 to $1.13 per share on the back of consolidated revenues of $240 million to $245 million.
Earlier – during its second quarter earnings release – Core Laboratories had projected earnings in a range of $1.17 to $1.25 per share and revenues of about $250 million to $260 million. It was based on a flat North American rig count, besides factoring in improving activity outside North America.
But since the end of the second quarter 2012, the U.S. land rig count of Baker Hughes Inc. (BHI) has slipped by approximately 6%, or by 112 units, with the Canadian rig count 30% below the year-ago level. This level of low activity has affected Core Laboratories' Production Enhancement segment.
Core Laboratories now expects third quarter 2012 revenue for this segment to be roughly $100 million, reflecting a minor sequential improvement.
The company anticipates activity levels for the balance of the year to be similar to the third quarter. With this, Core Laboratories would expect fourth quarter revenues and earnings to be similar to the third quarter.
Core Laboratories’ deep portfolio of proprietary products and services positions it to operate successfully in the current environment of low commodity prices and growing maturity in the global hydrocarbon reserve base. Additionally, the company’s strong presence in the emerging shale plays and its global footprint – including markets in the Middle East, Asia Pacific, and East and West Africa – facilitate steady growth rates going forward.
However, the company’s business is not immune to gas/oil price volatility, exploration and production spending patterns, costs, geo-political risks, competition and the advent of new technologies.
We expect Core Laboratories to perform in line with the broader market and, therefore, maintain our Neutral recommendation. However, the company retains a Zacks #4 Rank, which is equivalent to a Sell rating for a period of one to three months.