Good morning and welcome to the Core Laboratories Fourth Quarter 2015 Earnings Conference Call. All participants will be in listen-only mode. . After today's presentation, there will be an opportunity to ask questions. . Please note this event is being recorded. I would now like to turn the conference over to David Demshur, Chairman, President and CEO. Please go ahead. David M. Demshur - Chairman-Supervisory Board, President & CEO: Thank you, Andrew. Good morning in North America, good afternoon in Europe, and good evening in Asia-Pacific. We would like to welcome all of our shareholders, analysts and, most importantly, our employees to Core Laboratories fourth quarter 2015 earnings conference call. This morning, I am joined by Dick Bergmark, Core's Executive Vice President and CFO; Core's COO, Monty Davis, who'll present the detailed operational review; and Chris Hill, Core's Chief Accounting Officer. The call will be divided into five segments. Chris will start by making remarks regarding forward-looking statements; then we'll come back and give a review of the current macro environment, updating worldwide crude oil supply thoughts, and then quickly touch on Core's three financial tenets by which the company employs to build long-term shareholder value. Chris will follow with a detailed financial overview and additional comments regarding building shareholder value, followed by Dick Bergmark commenting on Core's first quarter 2016 outlook and a general industry outlook as it pertains to Core's prospects into 2016. Then Monty will go over Core's three operating segments, detailing our progress and then discussing our continued successful introduction of new Core Lab technologies, as they relate to completing, stimulating and producing wells, and then highlighting some of Core's operations in major projects worldwide. Then we'll open the phones for a Q&A session. I'll now turn it over to Chris for remarks regarding forward-looking statements.…

The first question comes from Rob MacKenzie of IBERIA Cap. Please go ahead.

Thanks, guys. Dick or Chris, did I hear you correctly that you expect to have paid down the revolver to $370 million by Friday? Chris Hill - Chief Accounting Officer & Head-Investor Relations: Well, the revolver balance at the end of the year was $283 million, and we expect to pay it down to $275 million by Friday.

Okay. Got it. Okay. And then the other tranche of your long-term debt remains unchanged? Chris Hill - Chief Accounting Officer & Head-Investor Relations: Yeah. That is fixed debt at $150 million.

Right. Okay. And so, it seems to me you guys have shifted now; is this a policy change to suspending buybacks here in order to protect the dividend and preserve liquidity? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: I wouldn't say it's a policy change. I think it's probably following our policy. Remember, we talked about the dividend being extremely important to us. We want our investors to feel comfortable with it to be able to put it in their valuation models. So for us, the dividend is always first and then the opportunistic nature of our share buybacks would come second. So we don't see a change in that policy.

Okay. And what about the prospect of acquisitions in this downturn? Clearly, there are a lot of companies in distress. Is there anything out there that you think might be an interesting bolt-on that would help you be better positioned in the next up-cycle? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Rob, one thing about down cycles is better valuations do not make bad companies into good companies. So, our perspective is we haven't seen good companies to acquire that fit our three segments. So, this recent change in valuation really hasn't changed that. So, we don't see acquisitions really adding to this at this moment.

Great. Thanks. And then, turning to decremental margins. I totally understand your comment about how long it takes to reduce the head count. Given that though, shouldn't we expect to see decremental margins lighten up, perhaps in the second quarter as projects wind down and head count is further reduced? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Yeah, I think the analogy is look at last year. So first quarter last year same thing, high decrementals; second quarter, we'd gotten the cost out, actually we showed incrementals, in Q3 as well. So, I think that's what we're seeing is a replay of that as a result of this next leg down, so we need to adjust our cost structure. We'll get those costs out in the first quarter. And if activity levels begin to flatten, I think you're going to see an improvement as we go forward.

Great. Thanks. I'll turn it back. Chris Hill - Chief Accounting Officer & Head-Investor Relations: Okay, Rob, thanks.

The next question comes from the Ole Slorer of Morgan Stanley. Please go ahead. Ole H. Slorer - Morgan Stanley & Co. LLC: Thank you and just following up on that note, Dick. So, you highlighted the usual sort of seasonal pattern once we get out of the first quarter, Canada down a little bit but margins normalizing, costs out. You highlighted, David, incrementals as of last year. Does that mean that the second quarter should be the trough or is there a chance that the first quarter from an earnings standpoint was the trough? David M. Demshur - Chairman-Supervisory Board, President & CEO: It could be second quarter is trough depending on the activity levels that we see as a result of the Canadian break-up. But if it's light, this could be the trough quarter. Ole H. Slorer - Morgan Stanley & Co. LLC: Yeah, I suppose the silver lining here is that probably not going to be much of a Canadian break-up this year, given there's very little to break up? David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah, not much to break up. Ole H. Slorer - Morgan Stanley & Co. LLC: So, can we get back to some of the comments you made on the macro side. You highlighted Latin America as a source of declines, biting hard at a new production coming on. What's your – have you changed your view at all about the Middle East. There seems to be an enormous debate at the moment about spare capacity in that region and the ability to open taps and let things slow for a very long time without any negative impact to be seen on CapEx cuts. So, what's your latest view here? David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah, Ole, on the Middle East, we see spare capacity there across the Middle East at a very low amount. Actually long-term spare capacity, we see near zero. You could probably generate another million barrels or 1.5 million barrels on a short-term basis. But on a long-term basis, we would put spare capacity nearing zero. In South America, we see continued declines in production, in Venezuela and Colombia, and in Ecuador, with maybe some flattening of production in Argentina. Ole H. Slorer - Morgan Stanley & Co. LLC: Okay. Well, thanks for that. And thanks for the clarification around the quarter. I'll hand it back here. David M. Demshur - Chairman-Supervisory Board, President & CEO: Okay, Ole. Thank you.

The next question comes from Chase Mulvehill of SunTrust. Please go ahead.

Hey. Good morning, fellows. David M. Demshur - Chairman-Supervisory Board, President & CEO: Morning, Chase.

Hey, bear with me, I'm losing my voice. So, apologize about that. So, I guess the first thing I want to hit, first quarter margin guidance, 16%, 17% kind of seems to be the implied guidance. Can you help us kind of understand the moving parts when we look at sub-segments? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Yeah. When you think about the three segments that we have, Reservoir Description being the most international. And so, when we gave our broad directional views by segment, you could see it being the least impacted of the three segments. But our Production Enhancement group, clearly more North America focused, that's where we're seeing or expecting the largest decline in revenues and we suggested maybe 9% on a sequential basis in Q1 for Production Enhancement. And then our Reservoir Management group, remember these are consortium studies, joint industry projects for the most part, because they are very discretional in nature by our oil company clients, we are expecting that group to probably fall in the 25% sequential. So, broadly speaking, add that all up together, around a 10% decline in revenues sequentially.

Okay. And so, how confident are you that Reservoir Description margins remain above 20% in the first quarter? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: I'd say we're pretty confident. David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah. And Chase, as Dick said earlier, I think we see a bit of a replay from last year where we may have trough margins Q1, trough revenues Q2 or maybe not depending on, as Ole said, the size of the break-up in Canada. One of the downside of giving guidance on a quarterly basis, as I think we're one of the few companies that do that. We have confidence that we know what our business is going to track for the next 90 days out, where a lot of companies will not give that guidance for the pure reason is their businesses are not known enough for them to be able to make that projection. So for us, the projection that we give, and our history will bear this out, that usually the guidance that we gave is either smack on or little bit on the light side.

Okay, all right. Last one for me is I've gotten a lot of questions around the dividend and the sustainability of the dividend through the downturn. It sounds like that you guys are defending it and so, I guess – I get the question about, what's your comfort level and when we look at leverage metrics and we think about the dividend? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Yeah so, just a little background for those who're not necessarily up to speed on it. Our covenant metrics for our bank facility is 2.5 times EBITDA, is our debt limit. But remember that that's not a necessarily a GAAP EBITDA number, there are your normal, customary and usual pro forma adjustments to that. So, we're seeing when we look out through the rest of this year, we're not coming close to that 2.5 times. So, we don't see a need to go to our bank group to increase that ratio, because if we do, it means our pricing grid is going to go higher. So, we'll have to pay more in interest for the amount of debt that we have outstanding. We're not interested in doing that. So, we're going to manage the business to stay below that 2.5 times and we'll be able to protect the dividend at the same time.

Okay. And so, just to be clear, if you were to remain at what you guided to for the first quarter in EBITDA through 2016, you would not come close to the 2.5 times covenant, is that fair? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Yeah, that's right. So, you could use that as a stress test. Remember what Chris said, we're doing it on Friday, we're paying down debt. So, remember, we generate free cash, so we have the ability to pay down debt as well. That dramatically impacts that ratio. So, don't think of that our ratio as being only one variable in it. For us, there're two; we can pay down debt. Chris Hill - Chief Accounting Officer & Head-Investor Relations: Yeah. And Chase to your point, if you apply that stress test, you could get all the way up to $350 million of room on the borrowing side for our revolver. So, we will not – even if you use that stress test, we'll not approach those limits.

Okay, awesome. Great to hear. Thanks, fellows. Chris Hill - Chief Accounting Officer & Head-Investor Relations: Thanks. Yep.

The next question comes from Blake Hutchinson of Howard Weil. Please go ahead.

Good morning, guys. David M. Demshur - Chairman-Supervisory Board, President & CEO: Morning, Blake. Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Hey, Blake.

Wanted to touch on, I guess a couple of themes within the segments that have been highlighted in the last couple of earnings releases. I guess starting with Reservoir Description and the Digital Rock Characterization. All this is highlighted, what does it mean, I guess, commercially to Core Labs, just to be clear? Is this protecting your coring share? Is it enhancing kind of the need or desire for clients to core in areas where they may have abandoned taking new core? Is it driving a need to redefine cores that are already pulled, and is all that kind of – are you telling us that that maybe offsets an erosion or some of the erosion or what had been a static kind of coring contribution to your overall Reservoir Description segment? Monty L. Davis - Chief Operating Officer & Senior Vice President: This is Monty. The Digital Rock Characterization service that we're offering is a very hi-tech, in depth, microscopic look into the small samples of rock, which can come from a core or can come from in some case from cuttings, and we look at those and can give the customer a quick determination of some basic characteristics that they are looking for to let them know about the reservoir they have drilled into. This is not a replacement for a detailed in-depth core analysis, where we're looking at flow under reservoir conditions. It doesn't replace the hi-tech core analysis that we're doing. What it does is gives them a quick look at what they've got, which is important for their programs to continue on or deviate into other areas. This has been well received, it is a growing service. It is also a nicely profitable service. It's a very good margin business for us. We've expanded it…

Okay. That's great and thanks, Monty, that was exactly what I was looking for in terms of the descriptive of where this is really applied. And then, just switching over to the Production Enhancement segment, the last couple of quarters really highlighting some charge successes and very high volumes. I just want to be clear that, I think we all understand that the content per well is increasing in terms of your charge franchise. Would you say that the material you're selling per stage is also gaining in intensity? Monty L. Davis - Chief Operating Officer & Senior Vice President: Well, the charge is where the technology in this business lies, in the perforating end of the business. And we have done extremely well in production charge sales, charge development. With the new charges, we're constantly coming up with new technology. And that part of the business is doing very well compared to the more hardware parts of the business, which is a lower technology. Not that it's not important, it's just not got the technical levels and there's more competition in that area. So, we're gaining share, we believe, in the charge part due to technology.

Okay. Thanks. Thanks for that. And just, if I can speak one quick one on the severance side in the Reservoir Description business. How much would you characterize as being a pure kind of need for skill or reduction versus the shift to automation and multi-skilling and the weighting of that? And thanks for the time. I'll hang up and listen. Yeah, Blake, both of those are going to certainly come into play. We certainly have seen productivity gains from automation worldwide, both on the rocks and the fluid side, also with the multi-skilling programs in there. But just from the sheer amount of work that we're not seeing on the rock side, we need further reductions and we'll scale to that level and hopefully get there by the end of the first quarter.

The next question comes from Quirijn Mulder of ING. Please go ahead. David M. Demshur - Chairman-Supervisory Board, President & CEO: Good afternoon, Q.

Yeah, good morning, folks. Here Quirijn from Amsterdam. A couple of questions. My first question is about the decremental margin of 65%. Is also the incremental margin then 65% or should we look at it differently, that's my question for Richard. And then my question for David is, your estimate about a 3.1% depletion rate. I do not exactly understand it, because if the U.S. is producing less and the U.S.is a typical high depletion area including Gulf of Mexico, but especially shale, how do you come then to 3.1%? David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah. Go ahead, Dick. You go first on the decremental. Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: On the incremental side, think about a recovery. We'll have incremental revenues, but we will not be adding cost at the beginning of recovery. And in previous recoveries, we have had incrementals in that range, and we've talked about that in the past, that we're not aware of any reason why that would not repeat itself, because we will not add cost but we will have incremental revenues. And for us to create that incremental test in a laboratory environment it's really the cost of the consumables. So the chemicals, the glassware, the gases that are used to create the test results, that's really our only cost. So, we would expect incrementals to mirror that on the upside of a cycle. David M. Demshur - Chairman-Supervisory Board, President & CEO: And Q, on the new net decline curve rate worldwide, we had originally used a 2.5% net for several years. But when you look at adding in substantial amounts of a high decline curve rate net from the U.S., essentially you have using around the world a 2.5% net on about 73 million barrels and a 7.8% net on about 9 million barrels out of the U.S. When you average weight that in, that brings you to a new global net decline curve rate of about 3.1%. So, it's up 60 basis points for what we used about a year ago.

Okay. Thank you. David M. Demshur - Chairman-Supervisory Board, President & CEO: Okay, Q.

And the final questioner today will be at Darren Gacicia of KLR Group. Please go ahead.

Hi, guys. Good morning. I wanted to ask, Reservoir Description, always known it to be a business that was much more development versus exploration oriented. So, when I think about the kind of guide down in high single-digits, where does that come from? Is it people sort of shifting mix to the lower end of the pricing book? Does it come from a reduced – does development activity directly correlate, because it seems like once you're in a field, you're sticky. So, I'm just trying to understand like kind of the more granular mechanics of where business kind of falls off when that starts turning to downside. So, maybe I can even understand how things turn right back up on the upside? David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah. Good observation there, Darren. Certainly, you are correct. Reservoir Description is very much more engaged in the development and production maintenance of fields worldwide and tied in to enhanced oil recovery projects. What we're finding is that a lot of the maintenance CapEx that usually is plowed into fields worldwide has significantly – our projection is – that will be significantly down when we look at the first quarter, second quarter of next year. Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: And one of the other things, Darren, to remember is there are less development projects underway. So, those are good projects for us, and we're seeing some of those being pushed to the right and waiting for the right...

So... Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: ...time just to make them work.

So, when the maintenance goes down, is that generally kind of lower calorie business versus maybe some of the more leading edge things that may be at the higher end of your price book? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: No, that's pretty much spread out throughout the price book. So, it's just an incremental job that generates high incremental margin. So, when you lose that work, of course the decrementals until you get those costs out are going to be pretty biting.

And so, when you think about cost, are we talking about kind of closing roofline type of changes or people because it strikes me that if you have a V-shape recovery starting in the second half, there may be a lag in terms of when activity comes, but activity may come back within a 12-month to 18-month period. How do you manage around that considering you're trying to kind of cut costs at the front end of the forecast if you will? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Yeah, correct. No roofline closures contemplated, it will just be, again, a high-grading of talent. We're certainly going to keep the capacity to go ahead, and ramp back up when the V-shape does occur. Monty? Monty L. Davis - Chief Operating Officer & Senior Vice President: We also – Darren, we use a furlough, we've talked about this on a few calls. We have a furlough mechanism that we use when appropriate. And what this does is puts people a certain amount of time off without pay. So, we can use that in the U.S. and in Canada. We use that system so that the people don't lose their job, they're just working nine days instead of 10 days or four days instead of five days, whatever the furlough mechanism that's needed or sometimes they'll be a week or two weeks at a time depending on what works for the employee. So, we use that as well as to try and maintain our structure and our technology, which is in our people.

That's smart. One last kind of nitpick question. With regard to the covenants and the calculation of EBITDA, Dave, you mentioned there's a couple of standard kind of adjustments in the reqs. You may not be able to get super granular numerically. But can you give me kind of a broad – like a little bit more of an overview of what goes into those adjustments, just as we may think about trying to run that math in our models, how do we want to think about that? David M. Demshur - Chairman-Supervisory Board, President & CEO: Well, they tend to be your non-cash items.

Got you. All right. Thank you for your time. I really appreciate it. David M. Demshur - Chairman-Supervisory Board, President & CEO: Okay, Darren. Andrew, we'll take one more question.

Thanks very much. And we have that question from John Daniel from Simmons & Company. Please go ahead. John Matthew Daniel - Simmons & Co. International: Guys, thanks for squeezing me in. David M. Demshur - Chairman-Supervisory Board, President & CEO: Hey, John, yeah, good morning. John Matthew Daniel - Simmons & Co. International: Dave, real quick. On your expectations of the second half recovery in your operations, is that based more on your view that oil prices start rising higher in the second half, thus activity follows. Or at this point, do you have specific customers telling you that they have deferred near term, but they're picking up definitively in the back half of the year? David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah, a little bit both. I would say more weighted towards – we're a scientific company, we just look at the laws of physics and thermodynamics. We know this crude oil market has to balance, that firms up pricing, leads to price increases. So, I would say we would wait more towards the natural balancing of the markets in pricing. And we do have some large clients that are looking to commence some development projects during the second half of 2016. So, it's a blending of both. I would weight it 60% to price stability and increasing and 40% from client input that those projects will take place. John Matthew Daniel - Simmons & Co. International: Fair enough. Okay. And then, Dick, just one for you on the margins, hopefully you can answer this. But assuming we do see the sequential recovery in the back half of the year, at what point do you think we could see your segment margins return to the Q4 2015 levels. Could that be a 2016 event or is that more 2017? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: If you do have that recovery in the second half of 2016, which tends to be gathering a view that that's what's going to happen, you can begin to see those margins expand sequentially as we get into the second half of the year. David M. Demshur - Chairman-Supervisory Board, President & CEO: Yeah. Because our incrementals coming out of that because we have cut cost will certainly be higher than the decrementals going in and history will bear that out. John Matthew Daniel - Simmons & Co. International: Right. I'm just curious if at this point you have the confidence, if you will, to see get to the Q4 levels again this year? Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: If it plays out like we think will balance in the crude oil markets, certainly distinct possibility. John Matthew Daniel - Simmons & Co. International: Okay. Thank you, gentlemen. Richard L. Bergmark - CFO, Member-Supervisory Board & EVP: Okay, John. David M. Demshur - Chairman-Supervisory Board, President & CEO: Bye, bye.

This concludes our question-and-answer session. I would like to turn the conference back over to David Demshur for any closing remarks. David M. Demshur - Chairman-Supervisory Board, President & CEO: Thank you, Andrew, good job. In summary, Core's operations continue to position the company for lower activity levels in the first half of 2016 and we know these challenges await. We have never been better operationally or technologically positioned to help our clients maintain and expand their existing production bases. We remain uniquely focused and are the most technologically advanced reservoir optimization company in all the oilfield services sector. This positions Core well for the challenges ahead. The company remains committed to industry-leading levels of free cash generation and returns on invested capital, with all excess capital being returned to our shareholder via dividends and opportunistic share repurchases. So, in closing, we'd like to thank all of our shareholders and the analysts that follow Core. And as already noted by Monty Davis, the executive management of Core and the Board of Directors of Core Laboratories give a special thanks to our worldwide employees that have made these results possible. We are proud to be associated with their continuing achievements. So, thanks for spending your morning with us, and we look forward to our next update. Good bye for now.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.