Good day and welcome to the Core Laboratories Third Quarter 2023 Earnings Conference Call. [Operator instructions] 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 Larry Bruno, Chairman and CEO of Core Laboratories. Please go ahead.

Thanks, Merlis. Good morning in the Americas, good afternoon in Europe, Africa, and the Middle East, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts, and most importantly, our employees to Core Laboratories third quarter 2023 earnings call. This morning I'm joined by Chris Hill, Core's Chief Financial Officer; and Gwen Gresham, Core's Senior Vice President and Head of Investor Relations. The call will be divided into six segments. Gwen will start by making remarks regarding forward-looking statements, we'll then have some opening comments including a high-level review of important factors in Core's Q3 performance. In addition, we'll review Core's strategies and the three financial tenets that the company employs to build long-term shareholder value. Chris will then give a detailed financial overview and have additional comments regarding shareholder value. Following Chris, Gwen will provide some comments on the company's outlook and guidance. I'll then review Core's two operating segments, detailing our progress, and discussing the continued successful introduction and deployment of Core Lab’s technologies, as well as highlighting some of Core’s operations and major projects worldwide. Then we'll open the phones for 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, I'll 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 company's business outlook. These types of forward-looking statements are subject to a number of risks and uncertainties that could cause 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. 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 third quarter results. Those non-GAAP measures can also be found on our website. With that said, I'll pass a discussion back to Larry.

Thanks Gwen. Moving now to some high-level comments about the third quarter of 2023, Core continued to build on the operational momentum established over the past few quarters. While revenue was down slightly compared to Q2, we achieved sequential and year-over-year improvements in operating income, operating margins, and earnings per share. Ex-items, operating income for the third quarter was $16 million, up 2% sequentially, and up 20% year-over-year. Operating margins were 13%, up from 12% in Q2 of 2023, and up from 11% in Q3 of 2022. Third quarter 2023 operating margins, as well as year-over-year and sequential incremental margins, were particularly strong in reservoir description, where demand for rock and fluid analysis across our global client base continues to rise. Ex-items, operating margins for reservoir description, improved to 17%, the highest since Q2 of 2020. These improvements in reservoir description were partially offset by declines in revenue and operating income in production enhancement, largely reflecting lower than anticipated U.S. land completion activity, which was down 10% sequentially, along with some project delays in the Gulf of Mexico and some international product deliveries that were pushed into Q4. Production Enhancement operating margins, ex-items, came in at just over 4% for the third quarter, which was down both sequentially and year-over-year. Demand for reservoir description, assay work on crude oil and derived products continued to stabilize throughout the quarter, as trading patterns have relied in response to sanctions. However, the ongoing Russia-Ukraine conflict and associated sanctions, as well as the emergent political turmoil in the Middle East that began in early Q4, still leave volatility in some uncertainties and the demand for these laboratory services. Lastly for the full company, EPS was $0.22 per share, ex-items, up from $0.21 in Q2 of 2023 and up from $0.18 in Q3 of 2022.…

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 third quarter of 2023 include a charge of $1.1 million associated with the termination of our ATM program, and secondly, facility exit costs, which are aligned with our continuing efforts to improve operational efficiencies. These items have also been excluded from the discussion of our financial results. So now looking at the income statement, revenue was $125.3 million in the third quarter, down 2% compared to the prior quarter, and flat year-over-year. Activity associated with international upstream projects continue to expand, however, lower than expected activity in the U.S. and a lower level of product sales to international clients has offset the growth in other regions. Of this revenue, service revenue, which is more international, was $92.9 million for the quarter, flat sequentially, and up 6% from last year. Committed work volumes for traditional reservoir rock and fluid analysis, as well as carbon capture and storage projects, continue to build across our global laboratory network. However, revenue from our diagnostic services were down this quarter due to a decrease in U.S. onshore activity and some projects in the Gulf of Mexico moving from the third quarter into the fourth quarter. Additionally, service revenue associated with crude assay work was stable during the third quarter of this year, but down a little when compared to the third quarter of last year, which was elevated in our European operations ahead of the sanctions that became effective late last year.…

Thank you, Chris. Based on ongoing dialogue with our global client base, we maintain our constructive outlook on international upstream activity for 2024 and beyond, as increasing levels of investment will be required to maintain and grow hydrocarbon production. The company anticipates operator spending on long cycle upstream projects in both onshore and offshore environments will continue to expand displaying an added level of sustainability for this upcycle. In the near term, the global crude oil market may remain volatile due to global recession fears, the extent and timing of China's economic recovery, and the uncertainties related to conflicts in Russia- Ukraine, and the Middle East. Globally, crude oil production growth continues to face constraints due to prolonged underinvestment as well as the loss of production due to natural decline from existing fields. We continue to anticipate a multiyear international recovery supported by increased spending on exploration in many regions across the globe and expanded development of existing fields to fortify crude oil and natural gas reserves. This underlies Core’s outlook for continued improvement in international onshore and offshore activity with ongoing projects around the globe, most notably across the Middle East, South Atlantic Margin, certain areas of Asia Pacific and West Africa. Turning to the U.S., onshore activity in 2023 has been lower than expected as reflected by the decreased U.S. rig and frac spread counts. Core sees sequential onshore completion activity to be slightly down due to typical yearend seasonality as operators complete their 2023 spending plans. Based on these factors, we project reservoir description’s fourth quarter 2023 revenue to range from $84 million to $86 million, an operating income of $11.6 million to $13.3 million, while we expect reservoir description’s international revenue to increase sequentially in several geographic regions. The ongoing Russia-Ukraine conflict and more recent conflict…

Thanks Gwen. First, I'd like to thank our global team of employees for providing innovative solutions, integrity, and superior service to our clients. The team's collective dedication to servicing our clients is the foundation of Core Lab’s success. In October, the IEA updated its forecast for crude oil demand for 2023 to average a record high of 101.9 million barrels per day. That's up by approximately 2.3 million barrels per day from 2022, even after assessing current global financial forecasts. This continues to bode well for increasing demand for the reservoir description services that will be required to grow production and replace the natural decline of existing producing fields. As we look ahead, we see the rising international rig count over the past year as a harbinger of an improving landscape for reservoir description, a trend that we project will play out for the next several years, particularly in the Middle East, North and South America, as well as most other regions. Early movers in the oilfield service sector that are more exposed to well construction have already felt the impact of this cycle shift. Production enhancement also has growing opportunities in international areas, such as with unconventional plays in the Middle East and emerging conventional plays in a number of regions, as well as plug and abandonment programs in mature offshore basins. Now let's review the third quarter performance of our two business segments. Turning first to reservoir description, for the third quarter of 2023, revenue came in at $85.1 million, up 2% compared to Q2, and up 8% year-over-year. Operating income for reservoir description, ex-items, was $14.1 million, and operating margins were 17% the highest margins since Q2 of 2020. Margins, ex-items, expanded approximately 320 basis points sequentially and 590 basis points year-over-year. Incremental margins were over 100%…

Since there are no questions posed at this moment, I would like to turn the conference back over to Larry Bruno for closing remarks. Go ahead.

Thanks, Merlis. Okay, we'll wrap up here. In summary, Core’s operational leadership continues to position the company for improving client activity levels in both the U.S. and international markets for 2023 and beyond. We have never been better operationally or technologically positioned to help our global client-based optimize their reservoirs and to address their evolving needs. We remain uniquely focused and are the most technologically advanced client-focused reservoir optimization company in the oilfield service sector. The company will remain focused on maximizing free cash and returns on invested capital. In addition to our quarterly dividends, we'll 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. The Executive Management Team and the 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.

And the conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect.