Core Laboratories Q2 Earnings Call Highlights

Key Points

• Core Laboratories’ Q2 revenue rose 2% sequentially to $124.6 million, although it fell 4% year over year as geopolitical conflicts disrupted Reservoir Description services. Production Enhancement revenue grew 15% sequentially, supported by stronger completion-product sales and improved margins.
• Adjusted EPS increased to $0.11 from $0.06 in the prior quarter, while free cash flow reached $3.1 million. The company repurchased $2.7 million of shares and ended the quarter with $93.6 million in net debt.
• Management forecast Q3 revenue of $128.5 million to $135.5 million and adjusted diluted EPS of $0.12 to $0.20, with growth expected from Africa, Brazil, Asia-Pacific, Europe and modestly improving U.S. completion activity despite ongoing geopolitical risks.

Core Laboratories NYSE: CLB reported second-quarter 2026 revenue of $124.6 million, up more than 2% from the prior quarter but down 4% from a year earlier, as stronger completion-product sales partly offset disruptions to its service business from conflicts in the Middle East and Russia-Ukraine.

Chief Executive Officer Larry Bruno said the company continued to invest in technologies aimed at solving client problems and expanding its market opportunities, despite project delays, logistical disruptions and reduced activity in affected regions. Reservoir Description, the segment most exposed to field operations, crude transportation and sample acquisition, faced the greatest effects from the conflicts and the closure of the Strait of Hormuz.

“Operating conditions improved in several other geographic markets during the second quarter, and client engagement strengthened outside the Middle East,” Bruno said. He added that Production Enhancement was comparatively less affected, with energetic product sales improving as operators adopted the company’s completion technologies in U.S. and international markets.

Financial Results and Segment Performance

Core Lab’s service revenue was $94.3 million, flat sequentially and down 2% from the second quarter of 2025. Chief Financial Officer Chris Hill said crude assay services and regional studies remained affected by geopolitical disruptions, though growth in other regions offset part of the decline. The company also cited improving demand for reservoir rock and fluid analytical programs in international exploration markets and continued strength in U.S. completion diagnostic services.

Product sales totaled $30.3 million, rising 10% from the first quarter but declining 11% year over year. Hill said both U.S. and international completion product sales increased from the prior quarter. The year-over-year comparison reflected a large laboratory instrumentation sale in the prior-year quarter that did not recur, partially offset by stronger perforating-product sales.

• EBIT excluding items was $9.4 million, compared with $6.6 million in the first quarter, producing an approximately 8% margin.
• Net income excluding items was $5.1 million, up from $2.7 million sequentially but down from $8.8 million a year earlier.
• Adjusted diluted earnings per share were $0.11, compared with $0.06 in the first quarter and $0.19 a year earlier.
• On a GAAP basis, net income was $6 million and diluted EPS was $0.13.

Reservoir Description generated $79 million in second-quarter revenue, down 4% sequentially, with operating income excluding items of $3.7 million and a 5% operating margin. Bruno said disruptions to cargo movements through the Strait of Hormuz, delayed project execution and reduced activity across the Middle East weighed on assay work and margins. Expanded sanctions and military action affecting oil and gas infrastructure in Russia and Ukraine also created headwinds.

Production Enhancement revenue rose 15% sequentially and 5% year over year to $46 million. Operating income excluding items was $5 million, producing a 12% margin, compared with a 5% margin in the prior quarter. The improvement reflected higher energetic-product sales, increased adoption of proprietary completion technologies and manufacturing efficiencies, according to management.

Cash Flow, Capital Spending and Shareholder Returns

Cash flow from operating activities was $7.8 million, nearly double the first-quarter level, while capital expenditures for operations totaled about $4.7 million. Free cash flow was $3.1 million for the quarter.

The company said elevated capital spending supported a recently signed multiyear Asia-Pacific contract and the rebuilding of Mediterranean facilities damaged by weather in the first quarter. Separately, Core Lab spent $1.1 million rebuilding a U.K. facility damaged by fire; those expenditures were covered by property and casualty insurance and excluded from its free-cash-flow calculation.

At June 30, the company had $116.4 million in long-term debt and $22.7 million in cash, resulting in net debt of $93.6 million. Its leverage ratio was 1.3, compared with 1.2 in the previous quarter.

Core Lab repurchased more than 214,000 shares, valued at $2.7 million, during the quarter, marking its seventh consecutive quarter of buybacks. Bruno said the company intends to continue using free cash flow for its quarterly dividend, growth investments and opportunistic repurchases while maintaining its balance sheet.

Technology Deployment and International Activity

Management highlighted growing activity in offshore reservoir characterization, including work in West Africa, Namibia and Côte d’Ivoire. Core Lab began a reservoir characterization program supporting Murphy Oil’s offshore Côte d’Ivoire discovery, using its Dual Energy CT technology at its Houston Advanced Technology Center.

The company also cited expanded deployment of its InPulse perforating technology in U.S. unconventional basins. Bruno said the technology produces a secondary pressure pulse after the initial perforation event, which is intended to improve near-wellbore connectivity, reduce breakdown pressures and support faster completion-stage execution.

In the United Arab Emirates, Core Lab received regulatory approval related to its SPECTRASTIM and SPECTRASCAN technologies, according to Bruno. He said the approval allows the company to store and deploy isotopes locally for diagnostic applications.

During the question-and-answer session, Bruno said offshore activity was gaining momentum in Africa, Brazil, the South Atlantic margin and Asia-Pacific. However, he noted that the timing of a broader recovery remains uncertain because of geopolitical conditions and prior exploration disappointments.

Third-Quarter Outlook

Core Lab expects third-quarter revenue of $128.5 million to $135.5 million and operating income of $10.5 million to $15 million, implying an operating margin of about 10%. The company projected diluted EPS of $0.12 to $0.20, excluding foreign-exchange gains and losses and assuming a 25% effective tax rate.

Reservoir Description revenue is expected to range from $81 million to $84 million, while Production Enhancement revenue is expected to be $47.5 million to $51.5 million. Gwen Gresham, senior vice president and head of investor relations, said expected sequential growth is primarily tied to Africa, Brazil, Asia-Pacific, parts of Europe, modestly improving U.S. land completion activity and international product sales.

Management said the Middle East and Russia-Ukraine conflicts are expected to continue affecting project timing, logistics and client operations in the third quarter, with a greater impact on Reservoir Description and the service component of Production Enhancement than on its completion-product business.

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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