Q1 2022 Core Laboratories NV Earnings Call
His outlook and guidance.
I will then review Core's, two operating segments detailing our progress and discussing the continued successful introduction and deployment of core lab technologies as well as highlighting some of Core's operations and major projects worldwide.
Then we'll open the phones for a Q&A session I'll now turn the call over to Gwen for remarks on forward looking statements.
Before we start the conference. This morning ill mention that some of the statements that we make during this call may include projections estimates and other forward looking information. This would include any discussion of the Companys business outlook. These types of forward looking statements are subject to a number of risks and uncertainties that could cause.
<unk> actual results to materially differ from our forward looking statements. These risks and uncertainties are discussed in our most recent annual report on Form 10-K , as well as other reports and registration statements filed by us with the SEC and the AFM.
We undertake no obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise.
Our comments also include non-GAAP financial measures reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our first quarter results.
non-GAAP measures can also be found on our website with that said I'll pass the discussion back to Larry.
Thanks Quinn of <unk>.
<unk> 2022 begin the global pandemic continues to impact our business landscape during the first quarter Global case loads rose very sharply as the omicron variance spread across all regions. This impacted both our clients and internal core lab operations.
More than 15% of core Lab's global staff tested positive for COVID-19 in Q1, a more than 400% increase in cases, among our employees compared to Q4 and 2021.
In addition, other core lab staff had to quarantine because of either direct exposure to individuals that have tested positive or because of government imposed shutdowns on average infected employees Miss between five and 10 days of work.
Being a business that runs on people more than say equipment rental day rates and mechanical horsepower. The high number of Q1, COVID-19 cases had a meaningful impact on our business the.
The sharp rise in Covid, 19 cases, and the associated quarantine requirements. Among core lab staff increased operating costs as overtime expenses among uninfected staff were incurred to meet project timelines.
Fortunately the recent COVID-19 illnesses experienced by our staff have largely been miles in a short duration with no deaths or hospitalizations reported in Q1.
Cases peaked in January and February and declined throughout March the surge in COVID-19 cases also negatively impacted our clients and continued to pose headwinds to project advancement.
Still global demand for hydrocarbons continues to rise signaling positive trends for future oilfield activity over at least the next several years.
Compounding the Q1 challenges caused by the sharp rise in COVID-19 cases, the military conflict in Ukraine impacted both of core lab's business segments in reservoir description cyber attacks against client facilities in Europe that preceded direct military engagement disrupted demand for crude assay laboratory work and Western Europe .
As well as in Ukraine, and other parts of Eastern Europe .
After military actions commenced sanctions and other crude oil supply disruptions further impacted demand for ambient condition laboratory crude oil analysis.
In Ukraine core lab suspended operations out of concern for our employees safety the suspension of operations is ongoing.
The realignment of traditional crude oil logistical patterns is still impacting demand for analytical services in several countries, particularly in Europe .
Because global crude oil demand has not been fundamentally altered we anticipates a return of client demand for these services and supply patterns realign.
And production enhancement direct product sales for Q1 into Ukraine were halted.
Currently forecasting when or if these sales and previously committed future product orders might be completed is it practical.
Despite these challenges core remains ready to fully service our clients' needs.
Core continues to execute on its key strategic objectives by one introducing new product and service offerings in key geographic markets to maintaining a lean and focused organization and three continuing to Delever the company.
For the first quarter of 2022 core lab's year over year revenue increased by 6% for the remainder of 2022, we expect continued improvement in both business segments in both the U S and most international arenas, although the conflict in Ukraine, and the collateral impact on course European and Russian operations.
Now post headwinds to year over year growth expectations in those areas.
Now to review core lab strategies and the financial tenants. The core has used to build shareholder value over our 26 plus year history as a publicly traded company.
The interest of our shareholders clients and employees will always be well served by core lab's resilient culture, which relies on innovation leveraging technology to solve problems and dedicated customer service I'll talk more about one of our latest innovations and the operational review section of this call.
While we navigate through the current challenges and pursue growth opportunities core will remain focused on its three long standing long term financial tenants those being to maximize free cash flow maximize return on invested capital and returning excess free cash to our shareholders before we move on I want to thank <unk> management team.
And employees for their hard work during the unprecedented challenges of the past two years Q1 of 2022 required great agility and responsiveness to continue to serve our clients' needs I also want to thank them for their dedication loyalty and adaptability in meeting all of our clients' needs and for the personal sacrifices that many have endured as we.
At the moment and prepare for a more active market I'll now turn it over to Chris for a detailed financial review.
Thanks, Larry before we review the financial performance for the quarter. The guidance, we gave on our last call and past calls specifically excluded the impact of any FX gains or losses and assumed an effective tax rate of 20%.
So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods.
Additionally, the financial results for the first quarter of 2022 include a charge of $3 9 million for non noncash stock compensation expense associated with the future vesting of performance shares for certain employees, who have reached their eligible retirement age.
The financial reserves results for the first quarter also include a charge of $3 3 million for severance and facility consolidation expense and bad debt expense of 800000 associated with receivables due from clients in Ukraine.
Severance and facility consolidation expenses are associated with our ongoing efforts to gain operational efficiencies and optimize cores global network.
These items have also been excluded from our discussion of the financial results.
Now looking at the income statement revenue from continuing operations was $115 3 million in the first quarter down approximately seven 9% from $125 1 million in the prior quarter, but up six 4% year over year.
The sequential decrease is associated with typical seasonal decline that we experienced in the first quarter of each year.
Additionally, our international operations were disrupted more than expected due to a strong resurgence of COVID-19 cases during the quarter.
But yes, the Russia, Ukraine conflict also progressed into direct military action during the first quarter, which negatively impacted both product sales and services.
However, the U S land market continues to show strength.
Although completion activity began the year at levels lower than last quarter activity improved and was up nicely as we exited the first quarter.
Of this revenue service revenue, which is more international was $84 7 million for the quarter down approximately 5% sequentially from $89 3 million last quarter.
The decrease in service revenue is primarily associated with typical seasonal declines, but also continued COVID-19 restrictions and disruptions in many regions are.
Our service revenue associated with crude oil assay work, particularly in Europe was also negatively impacted by an elevated level of cyber attacks and the Russia, Ukraine conflict.
Service revenue in the U S increased 8% sequentially, which helped partially offset the decline in international service revenue.
Product sales, which is equally tied to U S and international activity were $30 6 million for the quarter down 14, 7% sequentially, but up over 25% from last year.
Our international product sales are typically larger bulk orders and can vary from one quarter to another.
Last quarter, we delivered several large international orders, which did not repeat in the first quarter as a result international product sales were down 26, 6% sequentially.
This sequential decline also include the suspension of product sales into Ukraine.
Product sales in the U S increased over 4% sequentially and was led by sales of our inner general energetic products, which increased over 7% sequentially.
So for the quarter the improvement in the U S product sales helped offset the sequential decrease in international product sales.
Moving on to cost of services ex items for the quarter was approximately 81% of service revenue up from 78% last quarter.
Cost of services in the first quarter of 2022 increased as the company fully restored employee base salaries.
The company has restored most of the temporary cost reductions established during the pandemic. So as we progress through the remainder of the year, we would expect incremental margins to improve and trend toward historical levels.
Cost of sales ex items in the first quarter was 92% of revenue compared to 76% last quarter.
The increase this quarter is a combination of disruptions to our manufacturing caused by the surgeon COVID-19 reduced manufacturing efficiencies associated with a lower revenue base and rising costs of raw materials, and transportation packaging and labor costs.
We anticipate improvement in the manufacturing absorption rate in future quarters in line with our projected growth in product sales.
G&A ex items for the quarter was $8 7 million a decrease of $2 2 million from last quarter of $10 9 million.
G&A ex items is anticipated to be approximately $40 million for the full year of 2022.
Depreciation and amortization for the quarter was $4 6 million and pretty flat compared to $4 4 million last quarter.
EBIT ex items for the quarter was $7 2 million down from $14 2 million last quarter, yielding an EBIT margin of over 6%.
On a GAAP basis, we recorded an operating loss for the quarter of 400000.
Interest expense was $2 6 million relatively flat from last quarter.
Income tax expense ex items was <unk> 9 million for the quarter and on a GAAP basis, we recorded a tax benefit of $1 2 million for the quarter.
Tax benefit recorded in the quarter includes the release of withholding tax related to Unrepaired curated earnings of our Russian subsidiary, which are not expected to be distributed in the foreseeable future.
The effective tax rate will continue to be somewhat sensitive to the geographic mix of earnings across the globe and the impact of items discrete to each quarter. However, we continue to project the companys effective tax rate to be approximately 20%.
Income from continuing operations ex items for the quarter was $3 6 million down from $9 3 million last quarter.
On a GAAP basis, we recorded a $1 8 million loss from continuing operations for the quarter.
Earnings per diluted share from continuing operations ex items was <unk> <unk> for the quarter.
The GAAP loss per diluted share from continuing operations was <unk> for the quarter.
Turning to the balance sheet receivables were $98 9 million and increased approximately $2 million from the prior quarter. Our dsos for the first quarter were 72 days up from 67 days achieved last year.
We anticipate that our DSO will improve and return to a level of 70 days are lower in future quarters.
Inventory at March 31, 2022 was $48 2 million up approximately $3 million from last quarter end.
Inventory turns for the quarter remained consistent at $2, four which is comparable to last quarter.
As previously highlighted the company continues to experience an increase in cost of raw materials labor packaging and transportation, which are increasing the cost of inventory. Additionally.
Additionally, challenging the supply chain persist.
Persist, which will continue to require carrying a larger amount of inventory to help mitigate disruptions.
Suspension of product sales into Ukraine for orders that were already processed also accounts for some of the increase this quarter.
We continue to anticipate inventory turns will improve as we progress through 2022 in line with improved activity levels for both the U S land and international markets.
And now the liability side of the balance sheet.
Our long term debt was $191 million at the end of the first quarter and considering cash of $22 million debt net debt was reduced to $169 million or a decrease of $3 million from last quarter.
Our leverage ratio was approximately $2 two compared to $2 one last quarter and our debt is currently comprised of our senior notes at $135 million as well as $56 million outstanding under our bank revolving credit facility.
Since the Covid pandemic started in 2020 core lab has reduced net debt seven out of the last eight quarters, maintaining our focus and our stated commitment in reducing the company's leverage ratio. We will continue with our longer term strategy to Delever the company.
Looking at cash flow for the first quarter of 2022 cash flow from operating activities was $5 3 million and after paying for $2 3 million of Capex for the quarter, our free cash flow was $3 million.
We will continue managing capital expenditures to be aligned with activity levels for the remainder of 2022 for.
For the full year, we expect capital expenditures to be in the range of $13 million to $15 million.
Core will continue its strict capital discipline and asset light business model with capital expenditures, primarily targeted at growth opportunities and initiatives.
This also marks another quarter, where core lab generated positive free cash flow and we are projecting to continue generating positive free cash as we look ahead to the remainder of 2022 and beyond.
We believe evaluating our company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing companies' financial results, particularly for those shareholders, who utilize discounted cash flow models to assess valuations.
I will now turn it over to Gwen for an update on our guidance and outlook. Thank you, Chris and the Russia, Ukraine geopolitical conflict continues and the sanctions on Russia have expanded the global crude oil market continues to tighten with demand for crude oil approaching pre COVID-19 level, resulting in higher crew.
Oil commodity prices with consistent elevated crude oil commodity prices and the tightening of crude oil supply. The industry is preparing for an increase in activity driven by demand, resulting in a multiyear cycle.
These crude oil market fundamentals are reflected in the gradual increase in the international rig count with more oilfield equipment coming under contract and expanded capital spending plans for 2000 2020.
Core theses as leading indicators of a growing international market.
With core lab, having more than 70% of its revenue is exposed to international activity both business segments remain active on international projects.
Additional field development projects emerge wells need to be drilled and reservoir rock and fluid sample before reservoir description participate in the cycle.
The expansion in international development, both short and long cycle project provides growth opportunities for both segment into 2000, 2022 and beyond with a particular focus on South Atlantic margin.
Latin America, and the Middle East.
North America revenue is correlated to completion and stimulation events with large scale reservoir rock and reservoir fluid characterization steady rather than with immediate changes in rig count.
Wells need to be drilled and subsequently completed stimulated and cored or have fluid samples collected before we can realize a revenue event.
Or projects to continue benefiting from increased onshore activity, albeit led by private operators and somewhat moderated by capital discipline, our larger publicly traded operators.
For the second quarter of 2000, 2020 team core projects, our business to improve primarily from increasing level activity levels in the U S and moderate improvement in international offshore and deepwater market potentially offset by uncertainty associated with the Russia.
Lane conflict.
For project second quarter.
<unk> 2000, 2022 revenue to range from $119 million to $125 million and operating income of $9 4 million to 11 8 million, yielding operating margins of approximately 9%.
For the second quarter of 2020 team.
As expected to be 12 to.
2016.
The company's second quarter 2022 guidance is based on projections for underlying operations and excludes gains and losses and foreign exchange and.
Our second quarter guidance also assumes an effective tax rate of 20%.
Looking forward core outlet for the remainder of 2000 2022 remains positive with sequential improvement expected in the second quarter, followed by further acceleration during the second half of the year.
Furthermore, we continue to anticipate a multiyear international cycle and folding supported by crude oil market fundamentals.
With that I'll turn it back over to Larry.
Thanks Glenn.
First I'd like to thank our global team of employees for providing innovative solutions to take gritty and superior service to our clients. The team's collective dedication to servicing our clients has been very visible during the current challenges and is the foundation of core lab's success.
Turning first to reservoir description for the first quarter revenue came in at $74 8 million.
Down 7% sequentially.
Operating income ex items was $3 9 million and operating margins were 5% rest.
Restoration of employee costs, along with the Covid related costs and inefficiencies as well as the disruption is tied to the Russia, Ukraine conflict impacted margins during the quarter.
The sharp increase in COVID-19 cases in Q1 slowed the early slowed in the early part of Q2 across many regions, although parts of Europe and Asia Pacific are still experiencing relatively high case loads.
As previously mentioned core lab operations in Ukraine have been suspended and demand for some services in Europe , and Russia are being impacted by the military conflict and the associated sanctions as.
As we look ahead.
While still well below pre COVID-19 levels, we see the growing international rig count as a harbinger of an improving landscape for reservoir description a trend that we project will play out throughout 2022 and beyond particularly in the middle East and North and South America regions during.
During the first quarter of 2022 core conducted a large core and reservoir data analysis workshop for the Kuwait oil company. This comprehensive week long workshop was the culmination of a multi year multi well analytical program that included proprietary core lab technologies and interpretation techniques.
The focus was on hydrocarbon potential and pay recognition and prospective unconventional and take conventional reservoir targets.
Core lab leveraged its proprietary Oracle based web enabled rapid database platform to organize well geological and Petro physical data.
<unk> for analysis and interpretation was conducted utilizing core's proprietary dual energy <unk> scanner services, which allowed for three D visualization of conventional cores and calibration of third party borehole image logs.
Core lab developed advanced Petro physical log models that included fluid flow predictions as well as an assessment of well productivity.
<unk> stated that the workshop was a great success and that their technical teams, we're incorporating and building upon the recently concluded work and.
An expansion of the study is currently being planned to include other KFC fields and also to address additional reservoir challenges core lab is pleased to be assisting kfc's technical experts of these evaluation programs.
And the other first quarter news core lab is expanding its penetration of carbon capture and sequestration opportunities on multiple fronts. During the first quarter core announced the initiation of a joint industry carbon capture and sequestration consortium to analyze geologic risks and challenges associated with subsurface carbon sequestration.
This multi company project in collaboration with Dr. Barreled endurance of the University of Houston will leverage <unk> global expertise in subsurface characterization with a focus on reservoir capacity Inge activity and containment integrity as well as rock fluid and fluid fluid compatibility.
In addition, during the first quarter core was also pleased to publicly announced a strategic alliance with <unk> energy incorporated to provide technical evaluation and assurance for carbon capture and sequestration opportunities.
Along with these recent announcements announcements on carbon capture and sequestration opportunities during the first quarter of 2022 core under the direction of the carpet in that project.
<unk>. The next phase of advanced laboratory testing on conventional core extracted from the <unk> appraisal well located in the Gippsland basin.
Offshore southeast Australia, if successful the carbon that project would bring together multiple carbon capture projects and Victoria's Latrobe Valley transporting <unk>, the shared pipeline and injecting it into deep underground offshore storage sites and the best rates.
A substantial risk in any cotwo sequestration project is failing to properly assess the complexities of the targeted geological subsurface formation and the Institute pore fluids core Lab's 80, plus years of expertise in evaluating subsurface geology and fluid flow through natural poorest media is essential for assessing.
These types of Cotwo sequestration projects now.
Now moving to production enhancement, where core lab strengths in both energetic systems and completion diagnostics help customers optimize their well completions.
Revenue for production enhancement and came in at $40 5 million down, 10% sequentially, but up 27% year over year.
Operating income ex items was $3 1 million and operating margins were 8% for the first quarter of 2022.
For more than 20 years of Core's production enhancement team has been an industry, leading innovator in both energetic system products and diagnostic services, which aimed to improve completions and better monitor well performance leveraging course combined expertise. These two fields core lab is pleased to announce the introduction of its patents.
Ending go traced product solution.
<unk> is an innovative organically developed a technology that directly incorporates core's diagnostic services into the company's energetic system products. The integration of Core's proprietary perforating products and diagnostic and diagnostic tracers into one system allows core's clients to cost effectively introduce unique.
Diagnostic tracers into specific perf clusters and for the first time allows them to do the simultaneous with the perforating process.
Furthermore, by providing diagnostic evaluation at the cluster level go trace reveal significantly more granularity when evaluating completion program as compare to the stage level diagnostic treatment alternatives.
Recently total energies utilized Core's go trace technology and a re completion project in the Barnett shale by.
By deploying the go trace system.
<unk> Energy's was able to determine whether the new perforating clusters, where effectively stimulated core's diagnostic analysis of the re stimulation treatment confirmed the clusters created with <unk>, we're effectively stimulated thus optimizing well performance.
That concludes our operational review, we appreciate your participation and Anthony we will now open the call for questions.
Thank you we will now begin the question and answer session to ask a question on started wanting telephone keypad.
Using a speakerphone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question will come from Steven <unk> with Stifel. You May now go ahead.
Thanks, and good morning, everybody, Yeah, Mark good morning.
A couple of things from me if you don't mind.
What I would start with is when we think about the macro and you sort of.
It seems like a lot of the large integrated oil service aims are talking about mid teens international growth in the back half of 2022.
And.
Honestly, probably for the full year as well how should we think about your <unk>.
D business in the context of of that.
Yes, good question, Stephen I think maybe.
Around the world here so.
I think were in line with those expectations.
But I'll put an asterisk on that now so as we as we look around the planet So for North America.
So outside the U S. No change in our perspective, so in line with the ranges that.
I think pretty broadly held around the industry South America, no change, maybe a little upside there middle East no change, maybe a little upside there.
Asia Pacific No change the Astral I would put on is our view of of the international market as it relates to Russia, Ukraine in Europe .
We'll have to soften those expectations from this point based on what we see today.
So when we add it all up.
I think double digit growth for the segment now.
It becomes more challenging and maybe unlikely.
And.
Have you said or can you give us some color on kind of the.
The amount of business you are doing.
We are doing in Russia, and how youre handling that yes. So what we've said is.
In Russia and the.
Near Russia region that historically has been 5% to 8% of our business.
Okay, great great. Thank you Stephen shortly just one other qualifier on that so beyond the work directly in the region, there in Russia and Ukraine in nearby areas.
We see this realignment as Russian oil is not reaching.
Europe because of sanctions, we think that has to re realign with oil coming from other areas because the demand has not gone down if anything it's probably inching up.
And so we think that has to realign that could pose.
Call it a rebound in the demand for crude oil assay work.
Into Europe that we saw a drop off in the first quarter.
Okay that was going to be one of my follow ups with sort of what youre seeing to offset but thats one of them. Okay. Yes.
And the.
The other the other question just on the.
On the incremental margin front on the margin front going forward.
The headwinds Youre seeing.
Obviously, it looks like in both segments in the first quarter.
How do they sort of start start to fade away as you get into the second and third quarters and you start to get more normal incrementals.
What's the visibility on that and what sort of driving that.
Well this is Chris Stevens.
We do feel more confident going forward now that we've kind of restored employees based compensation. They are still not fully restored theres a little bit coming through if you think about restored the match on retirement plans think of it as four one K plans, but that.
Those are smaller adds back we're also looking at whether or not we need to make sort of annual merit adjustments later this year as well. So we're evaluating that I think as the year progresses, but those are going to be some headwinds, but the big the big things that we've done getting employees back to full.
Pay are kind of behind us so as you start to see top line grow.
We should start to see incremental margins not only improve but start to trend back I think we've talked some about inflation.
That's real not just here in the U S, but around the globe. So costs are going up it's probably impacted our production enhancement group and the inventory.
Or then some of the services, but it's real so.
Some of the headwinds we have.
Okay, and the mentally nothing's changed the leverage is still there in our reservoir description group and we would still expect manufacturing efficiencies and things to improve as you start to expand topline in production enhancement as well.
Thanks, and just one final quick one could you just because you mentioned you said fundamentally nothing's changed the.
The competitive landscape internationally on the R&D business and the way the World has evolved in the last couple of years with Covid and all of the issues. We've dealt with is there any change sort of competitively are fundamentally in your in your international Rd business.
Steve its all on activity levels from clients. So yes.
And their activity.
The pace.
Projects that.
They have been on the drawing board got pushed to the right.
We are seeing things pick up in places.
But it's it's.
It's largely an activity level the operational leverage is still there in the particularly.
Particularly on the R&D side of the business.
Great. Thank you for taking the questions I'm.
Sure. Thanks, David.
Again, if you have a question. Please press Star then one.
Our next question will come from Taylor Zurcher Tudor Pickering Holt you May now go ahead good morning.
Tyler Good morning, Hey, Good morning, Hi, Larry Chris and Glenn.
First question production enhancement.
I'm really just curious.
About the sort of.
Margin road path or glide path forward. So in the back half of last year. I know you were doing pretty solidly in the double digits from an operating income margin perspective, and obviously there were some issues at play here in Q1.
But in the background, you've got a really constructive U S land completions activity backdrops that volumes should be improving quite nicely over the back half of the year and Chris you highlighted some of the inflation dynamics that play, but just curious exiting this year, if we compare that to the second half 2021 or 2021 exit and what that might look like.
For production enhancement this year on a year over year basis.
Yes.
Just first off and then others might have some some stuff to add but.
We're still kind of looking at production enhancement from sort of resetting in Q1.
I would say margins, we would still expect margins to expand in that 25% to 30% on products and they can be a little bit higher on the services side. So if you start to kind of dial that and you can you can take a view on where we might be at the end of the year, but inflation I would say.
That's been the biggest factor we did have manufacturing disruptions in Q1, so there should be some improvement, let's say those disruptions don't reoccur in Q2 and going forward there should be some improvement there, but hopefully inflation sort of starts to stabilize and we don't see that continuing.
Yes, I would add to that to Chris's comments, there and then.
Taylor, Thanks for reinforcing how well our business did last year on the production enhancement side and a real strong year I think outperformed the sector part of that is we had a very strong fourth quarter with international sales.
We tried to get across that point here that those can be a bit lumpy. So we did not have a repeat of that in Q1, we expect that in subsequent quarters. This year plus we had.
Product sales into Ukraine, which obviously.
The plan for the first quarter, obviously didn't happen.
And so I think to echo chris's points there.
We're going to have there's a little bit of a natural lumpiness is as international order ship.
We didn't have that in Q1, we expect them in some of the upcoming quarters. So I think we will see if you look at the trend Youll see it improving performance there over the next several quarters.
Understood and my follow ups on <unk> you highlighted in the script some of the progress you've made during Q1 and I've just got a simple question, which is whats next you've made a lot of progress thus far I imagine, it's going to take time to.
To generate some meaningful revenues from all things <unk> and moving forward recognizing that youre already working on some projects as we speak but I'm just curious what's next on <unk> and how that might look moving forward, yes, I think its I think its execution.
For this it was.
Sure.
Some of it until just maybe refresh some on the audience a little bit.
Is over the past 15 years or so we've done.
With the occasional.
Carbon capture storage.
Evaluation program core and fluid analysis.
Couple of things have changed in the landscape. One is government regulations are driving many more of those projects that existed over the last say couple of decades and the other thing Thats changed is what had been.
I'll call it non traditional clients approaching us about those projects. When they came up is now our traditional oil and gas clients are dialing that into there.
To their portfolio of projects that theyre going to be working on so the.
The inaugural six members of our <unk>.
Ccs consortium study are all oil and gas companies.
That would not have had any carbon capture and storage dialed into their plans several years ago. So.
Across the oil industry and across the non oil industry client base for the Ccs projects is growing.
Most of those are in the planning phase still as those start to go into the assessment phase that's when we hit hit our sort of our stride there when they are actually taken core and fluid samples and now we're very well set up to do that with our strategic alliance with <unk>, a consortium study plus I'll call. It proprietary.
We work that we're doing like the carbon net project.
That's been going on for several quarters Theres more of those in the queue I would say.
<unk>.
Our target board for projects.
Is probably eight to 10 times, what it was just 18% to 20 months ago.
Well that's encouraging thanks for that one last question for me if I can which is on a go trace.
It might be early days, but I just I've never.
It really heard much about that sort of technology out there in the market.
So I'm just curious if you could highlight for us the sort of value add that that technology provide that you highlighted.
Does the work Youre doing with hotel, but Im curious if theres any other anecdotes you can share.
As it relates to customer conversations you might be having.
With customers outside of hotel, but.
It sounds like an intriguing technology and would love to hear a little bit more about it.
So a lot to like about that Boyd talked about our core lab like example of how <unk>.
We run our business and drive innovation, it really motivates a lot of the staff.
To brainstorm problems and so one of the problems with completion diagnostics in the past I will call. It a problem one of the limitations is probably a better way to put it is you would pump in tracers at this stage level and so you did not get the granularity as the number of clusters and stages of gone up you didn't know whether you can.
The stage was contributing but you didn't know the individual clusters. So that that prompted some look at how we might get that granular better granularity more at the cluster level and so we had to figure out whether we could get our diagnostic tracers to survive that very energetic.
Event when the gun is triggered and the energetic goes off so as to not destroy the tracers that we were trying to in place at that same moment and so as I mentioned in the call here for the first time in the industry, there's now an opportunity to pursue.
Great and place the energetics.
Into those perforations all at the same time do that simultaneously.
And so what the clients are seeing there is.
Saving on rig time opportunity.
On this and that way you don't have to perforate and then come out of the well and then pumped down tracers into the.
And to the perforations to see if there and communication.
And so theres an advantage there and the granularity that they're getting and the reason you didn't hear about it was we were holding it pretty quiet and confidential. We're the only company that does both.
Energetics and tracer diagnostics. So we feel like we've got a real competitive advantage that there were just now getting in position where we've got.
I will call it the manufacturing capabilities in the <unk> and on the analytical capabilities all lined up to service that client. So yes early I'll call. It early hours early minutes of the introduction in this more to come on that and we think it's got great promise there is nothing like it in the industry.
Very interesting thanks for the answers.
Sure. Thanks Taylor, Okay, I think we've got a pretty full slate of earnings calls. This morning. So we don't have anything else on our call list. So we'll wrap up here in.
In summary, Core's operational leadership continues to position the company for improving client well activity levels in both the U S and international markets in 2022, and beyond we have never been better operationally or technologically positioned to help our global client base optimize their reservoirs and to address their evolving needs we were.
<unk> uniquely focused and are the most technologically advanced client focused reservoir optimization company in the oilfield service sector. The.
The company will remain focused on generating free cash and returns on invested capital. In addition to our quarterly dividends will bring value to our shareholders via growth opportunities driven by both the introduction of problem solving technologies and new market penetration in the near term core will continue to use free cash to strengthen its balance sheet.
While always investing in growth opportunities. So in closing we thank and appreciate all of our shareholders and the analysts that cover core lab.
<unk> management team and board of core laboratories give a special thanks to our worldwide employees that have made these results possible, we're proud to be associated with their continuing achievements. So thanks for spending time with us and we look forward to our next update goodbye for now.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.