Core Laboratories NYSE: CLB executives said first-quarter 2026 results were significantly affected by geopolitical and weather-related disruptions, with the escalation of military conflict in the Middle East creating meaningful project delays, halting some hydrocarbon production, and disrupting maritime transportation routes that support the company’s global crude assay laboratory network.
Middle East conflict and severe weather weighed on first-quarter performance
Chairman and CEO Larry Bruno said the conflict “closed many client offices and resulted in project delays,” while the “suspension of maritime hydrocarbon transportation from the Middle East region forced operators to halt hydrocarbon production.” Bruno added that the disruption extended beyond the region into Core Laboratories’ global assay network tied to “the maritime transportation and trading of crude oil, natural gas, and refined products.”
Bruno said the biggest impacts were felt in Reservoir Description and the service side of Production Enhancement, which support reservoir rock and fluid characterization, completion diagnostic programs, and hydrocarbon assay work that depend on predictable client activity and field access for sample acquisition. He said Production Enhancement completion products were “comparatively less affected,” though shipments of energetic products into the region were delayed or temporarily suspended.
Beyond the Middle East, management cited continuing impacts from the Russia-Ukraine conflict on crude assay demand, severe cold weather in North America that affected onshore completion activity and temporarily closed manufacturing facilities, and Storm Harry in the Mediterranean, which suspended lab service demand and damaged one facility. Bruno said Core Laboratories was still restoring service at the damaged location.
Revenue fell sequentially; profitability declined as activity slowed
Chief Financial Officer Christopher Hill reported first-quarter revenue of $121.8 million, down 12% from the prior quarter and down 1% year-over-year. Hill said the company typically sees a seasonal decline from the fourth quarter to the first quarter, but results were also “negatively impacted by the escalation of the conflict in the Middle East, along with severe weather events in North America and Europe.”
Service revenue totaled $94.3 million, down 12% sequentially and 1% year-over-year, with Hill noting that crude assay services and regional studies were affected by geopolitics—“particularly in the Middle East this quarter”—and weather disruptions. He said demand for well completion diagnostic services increased, “particularly in the Gulf of Mexico,” helping offset part of the decline.
Product sales were $27.5 million, down 12% sequentially and down 3% year-over-year. Hill said international product sales, which are often larger bulk orders, declined versus the fourth quarter, partially offset by higher U.S. product sales.
On costs, Hill said cost of services (excluding items) rose to 81% of service revenue from 75% in the prior quarter, primarily due to the Middle East conflict driving a sharp revenue decline while costs remained. Cost of sales (excluding items) was 94% of revenue, roughly flat sequentially, as the company faced “increased costs for raw materials and logistics,” some of which it absorbed.
EBIT (excluding items) was $6.6 million, down from $15.7 million in the fourth quarter, producing an EBIT margin “of over 5%,” Hill said. On a GAAP basis, EBIT was $1.9 million. Hill also noted first-quarter results included a $3.7 million non-cash stock compensation charge tied to performance shares for certain retirement-eligible employees and $600,000 in additional costs related to exiting certain facilities as the company optimizes its global footprint.
Net income (excluding items) was $2.7 million, down 72% sequentially and down 59% year-over-year. Earnings per diluted share (excluding items) were $0.06, compared to $0.21 in the prior quarter and $0.14 in the year-ago period. On a GAAP basis, Core Laboratories posted a net loss of $800,000, or a loss per diluted share of $0.02.
Balance sheet, cash flow, and capital allocation
Hill said receivables fell to $108.3 million, down about $5.3 million from the prior quarter, while days sales outstanding increased to 74 days from 69 days due to the Middle East conflict impacting revenue and slowing collections. Inventory rose to $57.8 million and inventory turns declined to 1.8 from 2.1, which Hill attributed primarily to lower international bulk sales.
Long-term debt was $117 million at March 31, 2026, with cash of $22.8 million resulting in net debt of $94.2 million, up $3.9 million sequentially. Hill said leverage was 1.2 times, compared to 1.1 times the prior quarter. He also reiterated that the company drew $50 million on a term loan under its credit facility and retired $45 million of senior notes in January 2026, which contributed to higher interest expense due to the higher interest rate on the new term loan.
Operating cash flow was $4 million. After about $3.5 million of operational capital expenditures, free cash flow for the quarter was $500,000, Hill said. He added that capital expenditures to rebuild a U.K. facility damaged by fire are covered by property and casualty insurance and are excluded from free cash flow calculations; those rebuild-related capital expenditures were $1.4 million in the quarter. Excluding the rebuild spending, the company expects 2026 capital expenditures of $15 million to $18 million, aligned with activity levels.
Bruno said the company returned cash to shareholders through its quarterly dividend and repurchased more than 51,000 shares for $900,000 during the quarter, marking the sixth consecutive quarter of buybacks. He said Core Laboratories intends to continue using free cash flow for dividends, growth opportunities, and “opportunistic share repurchases.”
Segment results and technology updates
Reservoir Description revenue was $82 million, down 11% from the fourth quarter of 2025, while operating income (excluding items) was $5 million versus $13 million in the fourth quarter, yielding operating margins of 6%, Bruno said. He attributed the margin pressure to the Middle East conflict and severe weather in North America and the Mediterranean. Bruno also said the company continued to face headwinds in lab services tied to the trade and transportation of crude and refined products amid geopolitical conflict and sanctions enacted in 2025.
In Reservoir Description, Bruno highlighted progress on the company’s integrated digital data strategy through delivery of reservoir datasets via the proprietary RAPID platform. He said the effort is designed to standardize and digitize reservoir data, improve accessibility and integration into client workflows, reduce friction in data transfer, and improve turnaround times. Bruno also described the RAPID Database as providing structured geological, petrophysical, and engineering data that could serve as a foundation for artificial intelligence initiatives by the company and its clients.
Production Enhancement revenue was $40 million in the first quarter, down 7% year-over-year, with operating income (excluding items) of $2 million and operating margins of 5%, Bruno said. Management cited softer sequential U.S. land activity and severe cold weather that reduced U.S. completions and temporarily closed manufacturing facilities, as well as the Middle East conflict reducing regional client activity and delaying energetic product shipments. Bruno said diagnostic services benefited from strong demand in complex U.S. land completion designs and offshore projects in domestic and international markets.
Bruno cited two examples of technology deployment during the quarter:
- GTX-SPAN casing pack solution: Bruno said a national oil company in the Middle East used Core Laboratories’ GTX-SPAN extreme high-temperature casing pack solution to address excess water production in multiple wells. He said the installation reduced water cut from 99% to 40%, lowering water disposal and environmental remediation costs, and led the client to initiate a 10-well campaign using the technology.
- Flow Profiler solid oil tracers: Bruno said an independent operator in the Permian Basin deployed Flow Profiler tracers across a 30-stage horizontal well to evaluate stage-by-stage oil contribution. He said analysis showed the strongest contribution from heel and toe sections with lower mid-lateral contribution, informing future drilling targets and completion designs, and the client planned to deploy Flow Profiler in five additional wells.
Second-quarter guidance and outlook
Senior Vice President and Head of Investor Relations Gwendolyn Gresham said the company maintained a constructive multi-year outlook, citing projected 2026 crude oil demand growth from the IEA, EIA, and OPEC of roughly 600,000 to 1.4 million barrels per day. She also pointed to longer-term risks from natural decline rates in existing fields and said disruptions such as the closure of the Strait of Hormuz and damage to refining infrastructure reduced global crude supply by about 20%.
Gresham said Middle East instability, sanctions, evolving trade policies, and OPEC+ decisions were likely to continue driving volatility and complicating the timing of an activity recovery in affected areas. She said Production Enhancement products were less affected than services, though energetic system shipments into certain countries experienced delays, and noted that costs for some imported raw materials used in Production Enhancement continued to rise and remained subject to tariffs and supply chain volatility.
For the second quarter of 2026, Core Laboratories forecast:
- Reservoir Description revenue of $77.5 million to $82.5 million and operating income of $3.5 million to $5.4 million
- Production Enhancement revenue of $45.5 million to $48.5 million and operating income of $2.8 million to $4.7 million
- Total company revenue of $123 million to $131 million and operating income of $6.4 million to $10.2 million, implying operating margins of 7%
- EPS of $0.06 to $0.12
Gresham said guidance excludes foreign exchange gains and losses and assumes an effective tax rate of 25%.
During the Q&A, Bruno told analysts there was “no damage to any of our infrastructure” in the Middle East and said the company expected a “strong rebound” in oil movement and related assay work once conditions stabilize, though he cautioned the timing depends on factors outside Core Laboratories’ control. He also said clients outside the region had approached Core Laboratories about increasing production and running PVT fluids testing to understand how faster depletion might affect reservoir behavior.
Bruno closed by reiterating Core Laboratories’ focus on maximizing free cash flow and returns on invested capital, while continuing dividends, buybacks, balance sheet strengthening, and investments in growth opportunities.
About Core Laboratories NYSE: CLB
Core Laboratories N.V. is a global provider of proprietary and patented reservoir description and production enhancement services to the oil and gas industry. The company applies specialized expertise in core and fluid analysis, advanced petrophysical interpretation, and reservoir engineering to optimize hydrocarbon recovery. By integrating laboratory testing with field services and digital analytics, Core Laboratories delivers insights that help operators maximize production and extend the life of their assets.
The company's portfolio spans two primary service lines: reservoir description and production enhancement.
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