Core Laboratories NYSE: CLB reported higher third-quarter revenue, operating income and earnings per share from the prior quarter, while geopolitical disruptions in the Middle East and Russia-Ukraine continued to constrain parts of its international services business.
Third-quarter revenue totaled $132.1 million, up 6% sequentially but down 2% from a year earlier. Net income excluding certain items was $7.4 million, or $0.16 per diluted share, compared with $5.1 million, or $0.11 per share, in the second quarter. On a GAAP basis, the company reported net income of $5.4 million, or $0.12 per diluted share.
“Compared to the second quarter, operational performance improved nicely with higher revenue, operating income, operating margins, and earnings per share,” Chairman and CEO Larry Bruno said.
Geopolitical disruptions weighed on service activity
Bruno said the military conflict in the Middle East, which began in the first quarter of 2026, delayed projects and disrupted logistics across several countries where Core operates. Reservoir Description was the most affected segment because its crude assay and reservoir-characterization work depends on field operations, maritime hydrocarbon trade, sample acquisition and access to client facilities.
Intermittent closures of the Strait of Hormuz and wider disruption to hydrocarbon shipping routes affected crude cargo movements globally, the company said. While shipment activity improved during the final weeks of the quarter, it remained below pre-conflict levels at quarter-end. Military actions affecting energy infrastructure in Russia and Ukraine, along with sanctions, added further pressure.
Service revenue was $96 million, increasing 2% from the second quarter but declining 5% year over year. Chief Financial Officer Chris Hill said the year-over-year decline largely reflected lower crude assay activity and proprietary studies tied to the conflicts, though growth in other international markets partially offset the effects.
Cost of services, excluding specified items, was 78% of service revenue, improving from 80% in the prior quarter but rising from 74% a year ago. Hill said the year-over-year increase reflected costs the company continued to carry in regions most affected by geopolitical disruptions.
Product demand supported Production Enhancement
Product sales rose 19% sequentially and 8% year over year to $36.1 million. Core said it saw stronger demand for completion products and increasing adoption of proprietary completion technologies in U.S. land markets. International product sales increased 31% from the second quarter, while laboratory instrumentation sales also improved.
Production Enhancement revenue was $47.8 million, up 4% sequentially and 3% from a year earlier. Segment operating income excluding items was $4.4 million, producing an operating margin of more than 9%.
The margin declined from 12% in the prior quarter because product sales represented a greater portion of revenue than higher-margin diagnostic services. The company also said several large Gulf of Mexico diagnostic projects scheduled for the third quarter were postponed because of changes in client schedules, though it expects those projects to begin in the fourth quarter.
Bruno said U.S. land-market improvement has been driven mainly by smaller and private operators. He characterized larger operators as generally continuing to execute their existing budgets without substantial changes.
Reservoir Description results and project awards
Reservoir Description revenue was $84.3 million, up 7% from the second quarter but down 4% year over year. Operating income excluding items was $8.1 million, compared with $3.7 million in the preceding quarter, and operating margin improved to 10% from 5%.
During the quarter, Core secured a carbon capture and storage project in Malaysia for a major international operator evaluating long-term carbon dioxide injection into a depleted natural-gas reservoir. The company said its analytical program will assess storage capacity, formation-damage risks and seal integrity.
Core also won work supporting an offshore operator in the Black Sea, providing a mobile laboratory with on-site sampling and analytical services as the client advances toward first hydrocarbon production.
In Production Enhancement, the company said it developed and deployed an integrated water shut-off solution for a national oil company in Southeast Asia. Following qualification testing and an offshore deployment that achieved what the company described as 100% operational success, Core was awarded a five-year contract for the operator’s continuing water shut-off program.
Cash flow, capital returns and fourth-quarter outlook
Cash flow from operating activities was $5 million in the third quarter. After $3.3 million in operational capital expenditures, free cash flow was $1.7 million. Core repurchased approximately 88,000 shares for $1.1 million during the period, marking its eighth consecutive quarter of buybacks, while continuing to pay its quarterly dividend.
Long-term debt was $114.8 million at Sept. 30, while cash totaled $21.4 million, resulting in net debt of $93.4 million. The company’s leverage ratio was just under 1.5, compared with 1.3 in the second quarter.
For the fourth quarter, Core expects total revenue of $128.5 million to $134.5 million and operating income of $10.7 million to $15.1 million, implying an operating margin of about 10%. The company forecast earnings per share of $0.12 to $0.20, excluding foreign-exchange gains and losses and assuming a 25% effective tax rate.
Reservoir Description revenue is projected at $81 million to $85 million, while Production Enhancement revenue is expected at $47.5 million to $49.5 million. The company expects overall revenue to remain relatively flat sequentially as Middle East disruptions continue, although increased Production Enhancement service activity is expected to support sequential growth in that segment.
Looking toward 2027, Bruno said discussions with customers point to a broad-based increase in global capital spending, particularly for longer-cycle projects that may be less sensitive to short-term oil-price movements.
About Core Laboratories (NYSE:CLB)
Core Laboratories N.V. NYSE: CLB is a global provider of proprietary reservoir description and production enhancement services and products for the energy industry. The company helps oil and natural gas producers evaluate reservoirs, improve well performance, and optimize the recovery of hydrocarbons.
Its reservoir description activities include geological and geochemical analysis, petrophysical services, core and fluid analysis, and laboratory testing used to characterize subsurface formations.
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