AMSTERDAM, Sept. 20, 2016
/PRNewswire/ -- Core Laboratories N.V. (NYSE: "CLB US") (Euronext
Amsterdam: "CLB NA") announces that our Chairman and Chief
Executive Officer, David M. Demshur,
will be speaking at the Johnson Rice Energy Conference in
New Orleans, Louisiana on
Wednesday, September 21, 2016. At the
Conference, he will be delivering our standard corporate
presentation, which is presently available on our website,
http://www.corelab.com/investors, and related remarks as well as
providing prepared answers to a series of questions submitted by
the Conference. Mr. Demshur's corporate presentation and
remarks are scheduled to start at 10:30 a.m.
CDT and will be broadcast in real-time on our website,
http://www.corelab.com/investors, and the prepared answers to the
submitted questions are attached to this press release and are
posted on our website, http://www.corelab.com/investors.
Core Laboratories N.V. (www.corelab.com) is a leading provider
of proprietary and patented reservoir description, production
enhancement, and reservoir management services used to optimize
petroleum reservoir performance. The Company has over 70 offices in
more than 50 countries and is located in every major oil-producing
province in the world.
This release includes forward-looking statements regarding the
future revenues, profitability, business strategies and
developments of the Company made in reliance upon the safe harbor
provisions of Federal securities law. The Company's outlook is
subject to various important cautionary factors, including risks
and uncertainties related to the oil and natural gas industry,
business conditions, international markets, international political
climates and other factors as more fully described in the Company's
2015 Form 10-K filed on 12 February
2016, and in other securities filings. These important
factors could cause the Company's actual results to differ
materially from those described in these forward-looking
statements. Such statements are based on current expectations of
the Company's performance and are subject to a variety of factors,
some of which are not under the control of the Company. Because the
information herein is based solely on data currently available, and
because it is subject to change as a result of changes in
conditions over which the Company has no control or influence, such
forward-looking statements should not be viewed as assurance
regarding the Company's future performance. The Company undertakes
no obligation to publicly update any forward-looking statement to
reflect events or circumstances that may arise after the date of
this press release.
Johnson Rice Energy Conference
Core Laboratories - Question and Answer
Session
New Orleans –
September 21, 2016
This document contains, and has materials that contain,
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E or the
Securities Exchange Act of 1934, as amended. The words
'expected', 'will', 'may', 'should' and similar expressions are
intended to identify forward-looking statements.
Core Laboratories' expectations regarding any specific matter is
only its forecast regarding the matter. A forecast may be
substantially different from actual results, which are affected by
various factors that are either enumerated on each page or in the
Company's various filings with the Securities and Exchange
Commission.
Core Lab (CLB) Moderated Group Meeting Discussion
Topics/Questions:
1. With regards to Core's macro outlook, any update to your
expectations in light of the recent domestic drilling activity and
the EIA's most recent increase to its projected exit-rate '16 US
production +152k bpd (vs. prior month) implying ~625k bpd decline
on y/y basis with revisions reflective of higher drilling activity,
efficiency and well level productivity?
a. In late July on the 2Q16
conference call, we heard Core discuss expectations for '16 US
onshore production to decline ~1.1mm BOPD partially offset by
Gulf of Mexico gains in the ~160k
BOPD – yielding a net decline of ~940k BOPD and net decline curve
of ~10.1%. Globally, Core's most recent anticipated worldwide
net decline curve was 3.3% increasing modestly earlier this year
from 3.1%.
Answer. To put the recent drilling activity into perspective, in
2014 we had approximately 38,000 wells drilled and in 2016 we
expect less than 10,000 wells will be drilled with ~470 rigs in the
US today. So adding approximately 70 rigs YTD is not a
substantial increase and the additions are
in the core of the major resource plays with activity given
today's commodity price. For example, we believe we will need
approximately 900 rigs drilling in the lower 48 for a 12-18 month
period to stabilize crude production. In the Bakken, about
132 completions per month are needed to stabilize crude oil
production levels, today there are less than 40 completions per
month. So if you are a producer with premium locations within
the basin, $45/barrel may work but
outside that in a tier 2 or 3 area, it likely does not.
Certainly, a number of independents have commented regarding
improved well productivity at today's commodity price and those are
likely in the core and users of Core's technologies.
2. How does the recent rig count activity trend domestically
factor into potential domestic decline projections as we look ahead
into '17? Recent EIA projections were increased for '17 as
well suggesting '17 US production flattish on an exit-rate basis
y/y vs. '16. Also, any willingness to offer early projections
for Gulf of Mexico production in
'17?
Answer. We continue to believe that tighter crude markets will
prevail in the second half of 2016, leading to increases in energy
prices that should drive increased client activity which ultimately
should boost demand for Core's unique technology-related services
and products beginning in 2017. Core sees U.S. land
production continuing to fall in 2017 at current drilling
levels.
With the Middle East being near
maximum production, which may not be sustainable and there being no
real adds elsewhere – Angola,
China, Colombia, Indonesia, Mexico, Venezuela, and the US all down, we remain
bullish. We have to remember from a decline curve perspective
that these wells are linear in time and logarithmic in
behavior.
GOM 2017 production could increase another 100 KBOPD from last
of legacy projects started years ago. Core sees 2018 GOM
production falling.
3. From a global macro perspective, we know that you all are
more supply focused, so possibly absent a change in projected
global crude demand projections, what do you all see as the largest
and/or most underappreciated risks to your supply outlook and
overall trajectory of activity level recovery globally?
Answer. Inventories play a pretty strong role, so we need crude
oil inventories to continue reducing as a result of production
declines and increased demand.
4. In our view, EOR remains a
growing and sizable opportunity for Core where we expect there has
been increasing demand from operators particularly in the tight-oil (shale) plays with the
implementation of miscible gas flooding as you all have
highlighted. Can you elaborate on recent trends and
commentary on the ability to push average recovery factors from
unconventional reservoirs of ~9% into the low-to-mid teens in
percentage driving significant ROI improvement for
operators?
a. In addition, last quarter you
mentioned you were in the experimental stage for specific
reservoirs and crude oils on the correct "cocktail", so wanted to
get an update on any new findings and a progress report on those
recent projects?
Answer. We currently have six projects underway with various
clients whereby we are conducting experiments with EOR techniques
in unconventional reservoirs. These experiments for tight-oil
reservoirs are being conducted at reservoir pressures and
temperatures. We are cycling various fluids through the
reservoir rock that include various gases and liquids which has led
to additional hydrocarbon production of lighter oils from the
fracture network, followed by oils from the matrix porosity.
Through Core's technology, we have the capability to tell the
client the moveable oil to gain the actual reserves, use that
information to formulate the type of gas to cycle and at what
pressure and temperature needed in order to displace the oil.
Further, through our PVT testing we can determine the pressure and
temperature needed to further recover the oil which today is not
produced.
Different from conventional EOR, by changing the viscosity of
the oil when mixed with light or heavy hydrocarbon gases or CO2,
EUR can be increased because the oil is now thinner and will have
the capability to move through the fracture network (both natural
and what was created via the completion process) with greater
contributions from matrix porosity.
5. From the perspective of recent industry activity, we have
seen a visible inflection in activity across the Permian in the
Midland and Delaware basins among
operators given attractive economics. Additionally, we
recently heard about Apache's Alpine High discovery in the Southern
Delaware. Can you discuss the reservoir dynamics in the
region and how that plays into Core's role in the region currently
and longer term?
Answer. Core Lab has done extensive work through-out the Permian
and southern Delaware Basins including the entire sedimentary
complex, especially the Barnett, Woodford, Bone Springs and
Wolfcamp series of tight oil reservoirs. Apache was one
of Core's largest clients during their evaluation of the Alpine
High resource play.
6. While Core's revenue exposure to exploration activity remains
limited (~15%), what is your outlook for deepwater exploration as a
portion of the operator spending this upcycle and how will the
possible multi-year pullback in offshore exploration spending
impact Core longer term?
Answer. From a macro view, 85% of our revenues come from the
producing fields around the world. 30% is produced offshore
while 40% of CLB revenues come from offshore work. 10% of oil
is produced in deepwater while 20% of our revenues come from
deepwater. A couple of things to remember, related to CLB and
why we continue to experience offshore and deepwater activity
(albeit overall activity is down) is the investment is greater by
the operator, the nature of the work is more complex and the
operator wants more data and information given the investment
size. Core continues to receive reservoir fluids
characterization work from already producing deepwater
fields. This work is related to oil company opex budgets and
not related to deepwater capex budget expenditures
Operators such as BP have publicly discussed the costs that have
been removed from these types of investments/projects and with that
continuing we should begin to see new projects kick-off. For
example, BP has discussed Mad Dog II kicking off at $60 Brent when originally it was $110 Brent.
7. Within the Production Enhancement segment, which is North
American land focused, you all have taken significant costs out of
the business through the downturn. Can you speak to the
anticipated performance of the segment relative to the rig count
recovery in light of the segment's leverage to longer laterals,
increasing stage count, etc.?
a. Additionally, how should we
think about incrementals near-term and throughout the recovery in
relation to the historical 60%+ profile in a recovery?
Answer. When you think about
Production Enhancement, consider completions and stage count versus
rig count. Every completion is a revenue opportunity and
every stage with that completion is a revenue opportunity.
Within the group of operators that have historically used science
(pre-cycle), we have not seen a change in behavior other than
an increased focus of using science
to create better completions as well as using our technology to
understand the completion performance. The learning has been
to understand how much oil may be left behind in these
reservoirs. That's where our unconventional EOR studies come
into play, but it is also connected to the longer lateral, more
stages with tighter clusters and greater proppant volume. The
better fracture network created in the completion process, the
better EURs to be gained.
With emerging completion techniques on the rise, the amount of
unstimulated rock can be addressed. In addition to the
lateral, stage and cluster techniques, we also see pad drilling
which is about efficiency and creating the capability to better
communicate with a higher degree of stimulation.
Production Enhancement incremental margins are still expected to
range in the mid sixty percent range during the uptick in activity
levels.
8. Last quarter, Core mentioned the Reservoir Description
segment should be expected to recover later in the spending upturn
given the timing of new wells drilled and the subsequent core/fluid
analysis. That said, is there any change to the near-term
~20% EBIT margin target for the segment and how lagged do you
anticipate a meaningful inflection in the business should be
expected relative to Production Enhancement this upcycle?
Answer. There is no change to the ~20% EBIT margin discussion
for this segment. We expect this segment to behave just as it
has in prior cycles – augmented however, by recent trends of our
clients in understanding the importance of fluids testing which has
resulted in a shift to fluids now representing 60% of the revenues
in this segment. So we will need to see the correction of
crude-oil supply, which is happening today - the commodity price
will follow in the second half of 2016 and activity levels to
follow that – beginning in 2017.
9. Focusing on domestic US activity levels, much discussion has
been made of HAL's declaration that "900 is the new 2,000" in the
next North American cycle from a rig count efficiency
standpoint. Core has been a long proponent of the trend
toward longer lateral lengths and greater stage counts per well, so
with that said interested to get your take on that comment?
Answer. Certainly, efficiencies have been gained and operators
with the best reservoir rock are able to produce profitably at
today's commodity price. For our clients, the users of
science, they have had an historical tendency to try different
things – that's why they are able to produce at today's
price. Consequently, the learning that has been created from
the experimental behavior tells us oil was being left
behind.
In the unconventional reservoirs, and we have experienced this
with our clients, is to make
every well completion better than the last. The objective is
to stimulate as much rock as possible and understand stage by stage
how much was stimulated. Those two things are the essence of
Production Enhancement.
Our completion products support creating a better fracture
network resulting in deeper penetration, significantly less debris,
which creates larger tunnel volume. As operators continue to
optimize their wellsite efficiency and reservoir production, Core
Laboratories' KODIAK Enhanced Perforating System™ and HERO® line of
perforating charges have been used increasingly in North American
shale plays. These Production Enhancement technologies have been
successfully used by operators to increase production by as much as
15%. In the last 12 months, the PerFRAC-HERO™ system has received
significant market acceptance, with a 23% increase in utilization,
even while the North American rig count has fallen 57%.
During the first quarter, Core Lab conducted testing utilizing
its cutting-edge computerized tomography scanning facilities to
evaluate the HERO charge performance against other perforating
technologies. The testing was conducted under simulated reservoir
conditions and revealed that the HERO patented technology achieved
15% to 40% deeper penetration compared with competitive charges,
and it created significantly less debris, resulting in larger
tunnel volume. The combination of deeper penetration, minimal
debris, and larger tunnel volume increases frac flow efficiency
with lower breakdown pressures and fewer screen-outs. That gives
operators lower stimulation costs and higher production
rates. Post completion, our tracer diagnostics, such as
FlowProfiler, are used to evaluate which stages have been
communicated with and are producing oil. That was the
original use, now with pad drilling, our clients use the diagnostic
technology to also understand placement of the wells from the pad -
how far apart horizontally as well as vertically to space wells so
that you effectively stimulate the entire reservoir block. We
run FlowProfiler tracers and by analyzing the produced fluids we
can calculate the movement and volume between each well on a
pad.
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SOURCE Core Laboratories N.V.