Shares of Core Laboratories NV (CLB, Financial), the premiere provider of reservoir description and production enhancement services in the oil and gas industry, also declined in the quarter. Despite the challenging operating environment, management delivered earnings results that were slightly ahead of adjusted expectations. However, COVID-19 related disruptions and delays in existing projects are expected to pressure margins near-term. In response, CLB is executing on prudent enhancements to the existing cost reduction plan, which include limiting cash outflows to achieve its free cash flow targets and reducing debt levels. Looking ahead, we believe the headwinds this asset-light business is experiencing will soften and expect CLB to experience modest growth in reservoir description. We also think CLB will see increased activity in fracturing rock, which should increase output in well completions and fuel longer term growth of the production enhancement sector.
From John Rogers (Trades, Portfolio)' Ariel Fund third-quarter 2020 commentary.
