We are maintaining our Neutral recommendation on Core Laboratories N.V. (CLB) shares with a target price of $91.
Amsterdam, Netherlands-based Core Labs is an oilfield services firm that provides reservoir management and production enhancement services to the oil and gas industry on a global basis. The company operates in over 50 countries and divides its operations in three principal business lines: Reservoir Description, Product Enhancement and Reservoir Management.
We believe that Core Labs’ technology-heavy portfolio of proprietary products and services gives it the opportunity to capitalize on the need to optimize production from new and existing fields. The company remains well positioned in the onshore U.S. region given its strong presence in the emerging shale plays, where activity levels are not affected by the ongoing financial turmoil and commodity-price weakness. Additionally, Core Labs’ global footprint provides for steady growth rates going forward.
However, Core Labs’ business is not immune to a decline in exploration activity or in energy prices, which translates into less work for the company. Though the situation has improved modestly of late (with oilfield service companies seeing more stable demand), we believe that the industry-wide slump is still far from over.
As such, we expect the long-term growth potential of Core Labs to be restrained and expect the shares to perform in line with the market.
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