Core Laboratories Inc.

Good day and welcome to the CORE Laboratories fourth quarter and fiscal year 2025 earnings webcast and call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on a touch-tone phone. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to Larry Bruno, Chairman and CEO. Please go ahead.

Thanks, Dave. 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' fourth quarter 2025 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 Q4 performance. In addition, we'll review CORE's strategies and the three financial tenets that CORE Lab 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 CoreLabs 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.

Thank you, Larry. Before we start the conference this morning, I'll mention that some of our statements that we make during the 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 fourth quarter results. Those non-GAAP measures can also be found on our website. With that, I'll pass the discussion back to Larry.

Thanks, Gwen. Moving now to some high-level comments about our fourth quarter and full year 2025 results. CORE continued to execute its strategic plan of technology investments targeted to both solve client problems and capitalize on Cora's technical and geographic opportunities. Fourth quarter 2025 revenue was up 3% compared to Q3 of 2025. Full year revenue for the company increased slightly compared to 2024. Fourth quarter performance was driven by strong international demand for Cora's proprietary technologies, which helped offset a seasonally soft U.S. land market. Looking at reservoir description, fourth quarter revenue was up 5% compared to Q3 of 2025 and up 6% from Q4 of last year, reflecting the continued demand for rocket fluid analysis across the company's global laboratory network. Demand for laboratory services tied to the assay of crude oil and derived products was negatively impacted by ongoing geopolitical conflicts and evolving sanctions, which were further expanded during Q4. These geopolitical tensions, along with supply-demand balance concerns, contributed to commodity price volatility during the quarter. Despite these headwinds, fourth quarter operating margins in reservoir description, X items, remained strong at 14%, expanding sequentially by 60 basis points. The company's 2025 performance reflects Core's continued focus on operational efficiency and strong utilization across CoreLab's international laboratory network. In production enhancement, fourth quarter revenue was relatively flat compared to Q3, but meaningfully higher year over year, up over 8%. X items, fourth quarter 2025 operating margins in production enhancement were 7%, down from 11% in Q3, but up from 4% in Q4 of 2024. Sequential results were negatively impacted by a provision for potentially uncollectible receivable in age-specific. This was partially offset by continued strong demand for Core Laboratories' proprietary completion diagnostic services across both onshore and offshore markets. Turning now to some fourth quarter highlights regarding capital allocation, the company continued its longstanding commitment to shareholder returns during the quarter, returning free cash to our shareholders through our quarterly dividend and by repurchasing more than 363,000 shares of company stock representing a value of $5.7 million. For the full year, Core repurchased 1.2 million shares at a value of $15.5 million. Q4 marked the fifth consecutive quarter of share buybacks. Core intends to continue to use free cash to fund our quarterly dividend, pursue growth opportunities, and improve shareholder value through opportunistic share repurchases. As CoreLab celebrates its 90th anniversary, the company's long-term success continues to reflect the strength of its asset-like business model, its global technology leadership, and Core's unmatched client focus. These strengths, combined with disciplined capital deployment, continue to drive long-term value creation for our shareholders. Looking ahead, Core will continue to execute on its key strategic objectives by, one, introducing new product and service offerings in key geographic markets, two, running a lean and focused organization, and three, holding to our commitments to return excess free cash to our shareholders while maintaining a strong balance sheet. The interest of our shareholders, clients, and employees will always be well served by CoreLab's resilient culture, which emphasizes innovation, the application of technology to de-risk our clients' decisions and solve their complex problems, along with dedicated client service. I'll talk more about some of our latest innovations in the operational review section of this call. how to review CoreLab strategies and the financial tenants that have guided the company shareholder value creation through our more than 30-year history as a publicly-created company. While we continue to pursue growth opportunities, the company 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. I'll now turn it over to Chris for the detailed financial review.

Thanks. 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 25%. So accordingly, our discussion today excludes any foreign exchange gain or loss for current and prior periods. The comparison periods for the third quarter of 2025 and fourth quarter of 2024 also include items that were discussed in those calls and highlighted in our earnings release for those periods. These items have also been excluded from our discussion of the financial results today. You can find a summary of those items in the tables attached to our press release for the fourth quarter and full year of 2025. So now looking at the income statement, revenue was $138.3 million in the fourth quarter, up 3% compared to the prior quarter. Year-over-year revenue also increased 7%. The sequential improvement was primarily associated with increased demand for our reservoir rock and fluid analysis, as well as completion diagnostic services in the U.S. and several international regions. For the full year 2025, revenue was $526.5 million, up slightly year-over-year, again driven by growth in our service revenue, however substantially offset by a decline in U.S. onshore completion activity and associated product sales. Of this revenue, service revenue, which is more international, was $107 million for the quarter, up 6% sequentially and 11% year-over-year. Sequentially, we continue to see growth for our reservoir rock and fluid analysis services in the U.S. in several international regions, as well as demand for our completion diagnostic services in the U.S., Year over year, the increase was driven by growth in our reservoir rock and fluid analysis as well as our completion diagnostic services. For the full year of 2025, service revenue was $399.4 million and was up 3% compared to $388.2 million in 2024. Product sales, which is more equally tied to North America and international activity, were $31.3 million for the quarter, which is down 6% from last quarter, and down 4% year-over-year. Our international product sales are typically larger bulk orders and can vary from one quarter to another, and were down in the fourth quarter when compared to the third quarter. Additionally, U.S. onshore completion activity continued to decline sequentially. Looking at year-over-year, the decrease in product sales was primarily driven by lower completion activity in the U.S. onshore market. For the full year of 2025, product sales of $127.1 million were down 6% from $135.6 million in 2024, which again is primarily associated with lower levels of completion activity in the U.S. Moving on to cost of services, X items for the quarter was 75% of service revenue, which increased slightly from 74% in the prior quarter, but improved from 76% in the same quarter in the prior year. The sequential increase was primarily due to increased labor costs and pass-through revenue during the quarter. The year-over-year improvement in cost of services was due to improved absorption of costs on a higher level of revenue in 2025. As discussed in our previous calls, the service side of our business has been more impacted by the geopolitical conflicts and associated sanctions. The volatility in crude oil prices and more recently expanded sanctions continue to cause disruptions to the trading, and maritime movement of crude oil and derived products and the associated crude assay laboratory services we provide. The company will continue to manage its cost structure as effectively as we can through these temporary disruptions in certain regions. Full year 2025 cost of services X items with 76% of service revenue compared to 77% in 2024. Cost of sales X items in the fourth quarter was 94% of revenue compared to 88% last quarter and 90% in the fourth quarter of last year. The sequential increase was due to higher absorption of fixed costs on a slightly lower revenue base in the quarter and a higher level of bad debt expense. As we continue to focus on cost efficiencies, we anticipate the manufacturing absorption rate in future quarters to be in line with projected product sales. For full year 2025, cost of sales X items was approximately 89% of sales revenue compared to 88% in 2024. G&A X items for the quarter was 10.6 million, down slightly from 10.7 million in the prior quarter. Full year 2025, G&A X items was 41.9 million compared to 38.4 million in 2024. For 2026, we expect G&A X items to be approximately 42 to 45 million. It is also important to note that 100% of our corporate G&A expenses are allocated and absorbed into the financial performance of the reported segments. Depreciation and amortization for the quarter was 3.7 million and increased slightly compared to 3.6 million in the last quarter, but remained relatively flat compared to the same quarter last year. EBIT X items for the quarter was $15.7 million, down from $16.6 million last quarter, and yielding an EBIT margin of over 11%. Year over year, EBIT X items for the fourth quarter was flat compared to the fourth quarter of last year. Our EBIT for the quarter on a GAAP basis was $15.8 million. Full year 2025 EBIT X items was $58.7 million, down 10% from $65.3 million in 2024. On a GAAP basis, EBIT was $56.5 million for 2025 compared to $58.6 million in 2024. Interest expense of $2.6 million for the fourth quarter decreased slightly when compared to the prior quarter and comparable to the fourth quarter of last year. For the full year, interest expense was $10.6 million in 2025 and was down from $12.4 million in 2024. The decrease in interest expense for 2025 is primarily attributable to lower average borrowings on the credit facility. In January 2026, we funded the retirement of our 2021 $45 million senior notes by drawing $50 million against a term loan under our credit facility. The interest rate on our term loan is variable and tied to the SOFR, which will be approximately 200 basis points higher than the fixed rate on the retired notes, which was a little over 4%. As such, we expect a slight increase in our interest expense starting with the first quarter of 2026. Income tax expense at an effective tax rate of 25% and X items was 3.3 million for the quarter, On a GAAP basis, we recorded a tax expense of $6 million for the quarter. For the full year 2025, income tax expense on a GAAP basis was $13.4 million with an effective tax rate of 29%. While 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, we project the company's effective tax rate will be approximately 25% for 2026. Net income X items for the quarter was $9.7 million, down 5% sequentially and down 7% from the same quarter last year. On a GAAP basis, we had net income of $7.1 million for the quarter. For the full year 2025, net income X items was $35.4 million, down 15% from $41.6 million in 2024. GAAP net income for the full year 2025 was $31.8 million. Earnings per diluted share, X items, was 21 cents for the quarter, compared to 22 cents in both the prior quarter and the fourth quarter of last year. On a gap basis, EPS was 15 cents for the fourth quarter of 2025. Full year 2025, earnings per diluted share, X items, was 75 cents and down 14% from 2024. And on a gap basis, EPS for the full year 2025 was 68 cents. Turning to the balance sheet, receivables was $113.5 million and increased approximately $3.3 million from the prior quarter. Our DSOs improved in the fourth quarter to 69 days from 71 days last quarter. Inventory at December 31, 2025 was $54.5 million, down $3.7 million from last quarter end. Inventory turns for the quarter improved to 2.1 from 2.0 in the prior quarter. Our team will continue to focus on managing our inventory with anticipation inventory terms will improve over time. And now to the liability side of the balance sheet. Our long-term debt was $113 million as of December 31, 2025. And considering cash of $22.8 million, net debt was $90.2 million. During 2025, net debt was reduced by $18.7 million from the end of last year. Additionally, our leverage ratio continued to improve throughout 2025 and ended the year at 1.09. Since announcing the company's commitment and focus on reducing debt in the fourth quarter of 2019, we have reduced net debt by 205.8 million, or 70%. At December 31st, 2025, our debt was comprised of $110 million in senior notes and $3 million outstanding under our bank credit facility. However, as I stated earlier, on January 12, 2026, we made a single draw of $50 million on a term loan under our credit facility and repaid the 2021 senior notes, which had a principal amount of $45 million. Looking at cash flow for the fourth quarter of 2025, cash flow from operating activities was approximately $8.1 million, and after paying $2.9 million of CapEx for operations, our free cash flow for the quarter was $5.1 million. As discussed in prior quarters, the capital expenditures associated with rebuilding our UK facility, which was damaged by fire in February 2024, are covered by the company's property and casualty insurance and have been excluded from the calculation of free cash flow. For the full year, capital expenditures for operations excluding the CapEx associated with rebuilding the UK facility with $11.2 million. Looking ahead to 2026, we will continue to manage investment in working capital and continue our strict capital discipline and asset-light business model with capital expenditures primarily targeted at growth opportunities. Excluding the capex associated with rebuilding the UK facility, we expect capital expenditures in 2026 to be in the range of $15 to $18 million. CoreLab's operational leverage continues to provide the ability to grow revenue and profitability with minimal capital requirements. Capital expenditures for operations has historically ranged from 2% to 4% of revenue, even during periods of significant growth. That same level of laboratory infrastructure, intellectual property, and leverage exists in the business today. We believe evaluating a company's ability to generate free cash flow and free cash flow yield is an important metric for shareholders when comparing and projecting companies' financial results, particularly for those shareholders who utilize discounted cash flow models to assess valuations. We'll now turn it over to Gwen for an update on our guidance and outlook.

Thank you, Chris. Turning to Coreline's outlook for the first quarter of 2026. The IEA, the EIA, and OPEC Plus forecast global crude oil demand growth of approximately 900,000 to 1.4 million barrels per day in 2026, a slight increase from their previous forecast. As discussed in our third quarter 2025 release, the IEA published a report in September 2025 which noted accelerated accelerating natural decline rates in existing producing fields, which pose a significant risk to long-term supply. This analysis underpins the need for sustained investment in oil and gas development to maintain energy security and market stability. In the U.S., oil production growth is moderating as capital discipline, maturing shale plays, and natural decline rates increasingly offset efficiency gains. As efficiency gains become less impactful, activity levels must increase to maintain or expand U.S. land production. These factors support the ongoing demand for oil field services, and CoreLab is seeing operators prioritize production sustainment, well optimization, and recovery enhancement. International markets continue to exhibit resilient activity levels of a multi-year offshore development. and long cycle investments across key global basins. The company's reservoir description and production enhancement technologies are well positioned to support these ongoing investments. In the near term, tariff pressures and OPEC Plus production policy decisions continue to contribute to market volatility and softer commodity prices. Despite these headwinds, longer term crude oil demand fundamentals remain strong. CoreLab maintains a constructive multi-year outlook and continues to see steady activity across committed long-cycle projects, including deepwater development in the South Atlantic margin, North and West Africa, Norway, the Middle East, and select Asia-Pacific markets. Revenue realization from these projects remains partially dependent on the geologic success rates achieved by Core's clients. Short cycle activities, particularly in the U.S. onshore environment, will remain sensitive to changes in commodity prices. Geopolitical conflicts and associated sanctions, evolving trade and tariff dynamics, and commodity price volatility continue to create uncertainty and demand for poor lives products and services. CORE also expects seasonal patterns to result in the typical sequential decline in activity during the first quarter of 2026. Severe weather events in North America caused freezing conditions in early January that disrupted both reservoir description and production enhancement client activities and CORE lab operations. In addition, adverse weather in Europe and the Mediterranean Sea, also suspended client crude assay work and damaged one of CoreLab's facilities. While client operations have begun to recover, these weather-related disruptions have created additional revenue and margin headwinds for the first quarter. Turning to the U.S. for the first half of 2026, CoreLab anticipates U.S. land completion activity will be down compared to the first half of 2025. However, the company projects completion activity to improve from current levels. Growth and demand for core diagnostic services and technological innovations in the company's energetic systems may partially offset softer U.S. onshore activity during the year. To date, tariffs have not had a significant impact to CORE's reservoir description segment. However, for production enhancement operations, certain imported raw materials are subject to tariffs. While tariffs are increasing supply costs and affecting margins, the company continues to take steps to mitigate their impact. In summary, reservoir descriptions first quarter 2026 revenue is projected to range from $82 million to $86 million with operating income of $6.8 million to $8.2 million. Production enhancements first quarter 2026 revenue is estimated to range from $42 million to $44 million with operating income of $2.8 million to $3.8 million. Corps' full company first quarter 2026 revenue is projected to range from $124 million to $130 million, with operating income of $9.7 million to $12.2 million, yielding operating margins of approximately 9%. EPS for the first quarter 2026 is expected to be 11 cents to 15 cents. The company's first quarter 2026 guidance is based on projections for underlying operations and excludes gains and losses in foreign exchange. The first quarter guidance also reflects a higher interest rate related to a term loan drawn upon on January 12, 2026 in the amount of $50 million. The term loan was used to repay the 2021 Senior Note Series A in the amount of $45 million. This term loan is subject to a variable interest rate in line with our revolving credit facility, which is approximately 200 basis points higher than the fixed rate debt that was retired. Our first quarter guidance assumes an effective tax rate of 25%. With that said, I'll turn the call back over to Larry.

Thanks, Gwen. First, I'd like to thank our global team of employees for providing innovative solutions, integrity, and exceptional service to our clients. As we celebrate our 90th year, the company's granite anniversary, our staff's collective expertise and their dedication to servicing our clients continues to be the foundation of the company's success. Looking at the macro, even as global energy markets work through near-term economic headwinds and volatile commodity prices, the IEA EIA and OPEC all continue to forecast growth in global crude oil demand. These agencies are now projecting demand growth to range between 0.9 and 1.4 million barrels per day for 2026 compared to 2025, a slight increase from their prior guidance. In addition to the forecasted growth in demand, new production will need to be brought online to offset the natural decline from existing producing fields. Combined, these trends will require continued investment in the long-term development of new onshore and offshore crude oil fields. U.S. tight oil production has been by far the largest component of non-OPEC oil production growth since 2010. However, the most recent EIA short-term energy outlook for U.S. oil production projects approximately 13.6 million barrels of crude oil production per day in 2026, essentially flat to 2025, with little or no year-over-year growth. This forecast reinforces a view that incremental U.S. production growth is flattening. Continued growth in global oil demand, combined with constrained incremental U.S. oil production growth, supports the thesis that the balance of future supply growth must increasingly rely on discoveries and field developments outside the continental U.S. Of particular note, During the fourth quarter, the IEA continued to pivot from earlier projections on the need for investment in new oil and gas production. The most recent IEA forecast shows oil demand rising to 113 million barrels per day by 2050 using its current policy scenario. As highlighted in the IEA September 2025 analysis, global field-by-field data show that the natural decline in existing producing fields is accelerating and has become a dominant long-term supply risk. The IEA estimates that absent reinvestment, global oil production would decline by approximately 8% per year due to natural field depletion. As a result, the majority of upstream capital spending globally is now required to just offset decline, not to meet incremental demand growth. The IEA also noted that nearly 90% of upstream investment since 2019 has gone towards sustaining existing production rather than expanding supply. The IEA now states that significant annual investment in oil and gas resource development will be required for many years to come and to ensure energy security and market stability. The U.S. Energy Information Agency's reference case forecast shows even higher crude oil demand by 2050, rising to approximately 120 million barrels per day suggesting even more investment in new oil production will be required. In summary, the current forecast suggests a multi-year cycle in which U.S. onshore production growth slows and future growth in global supply will be driven by capital investment in international, conventional fields and unconventional opportunities in the Middle East, all trends that support increasing demand for core lab services across the globe, particularly for reservoir description. Four is reservoir description and production enhancement technologies are directly aligned with the investment imperatives required to find and develop new oil and gas fields and to improve recovery from existing fields. Now let's review the fourth quarter performance of our two business segments. Turning first to reservoir description, for the fourth quarter of 2025, revenue came in at $92.3 million, up over 5% compared to Q3. Operating income for reservoir description, X items, was $12.7 million, up from $11.6 million in Q3, yielding operating margins of 14%, with incremental margins of 27%. Incremental margins were negatively impacted by three factors, enhanced geopolitical sanctions enacted during Q4, pass-through revenue on a collaborative analytical program that was conducted with another oilfield service company, and increased labor costs. While demand for reservoir description lab services remains strong in several regions across our global network, ongoing international geopolitical sanctions, along with conflicts, along with sanctions that were enacted in early Q1 of 2025 and which were further expanded in Q4 of last year, continue to produce headwinds that negatively impact the demand for laboratory services tied to the trade and transportation of crude oil and derived products. Now for some operational highlights from reservoir description. In the fourth quarter of 2025, CoreLab advanced multiple high-value projects across South America, reflecting the company's expanding regional footprint and the growing demand for integrated reservoir characterization services. In Columbia, Core was engaged by a client to conduct an advanced geomechanics and reservoir characterization study within the Palagua field in the middle Magdalena Valley. The project focused on improving reservoir performance across multiple vertical wells in a complex, low-resistivity contrast reservoir. The study addressed critical subsurface challenges, including mitigating sand production risks associated with planned water flooding operations for enhanced oil recovery. By integrating existing core and petrophysical data with well logs, along with the newly acquired geomechanical laboratory measurements, CoreLab's multidisciplinary team delivered core-calibrated models that provided actionable insights to optimize completions and enable a more efficient water flood program. Also in South America, and leveraging Core's expanding in-country capabilities in Brazil following the recent acquisition of Solentech, Core conducted laboratory services in support of a major carbon capture and storage initiative in the region. For this project, an ethanol producer is working to reduce CO2 emissions. Approximately 100 meters of core from an injector well were evaluated with core's nitro-digital rock tomography technology, which quickly delivered interactive three-dimensional visualizations of the strata along with petrophysical insights into the rock properties. The program also evaluated steel rock capacity and geomechanical attributes of the rocks and determined how CO2 would react with both the rocks and the pore fluids. This work is ongoing and the company's full array of analytical services are being employed, reinforcing CoreLab's role in enabling energy transition projects. Moving now to production enhancement, where CoreLab's technologies continue to help our clients optimize their well completions and improve production. Revenue for production enhancement for Q4 came in at $46 million, up over 8% year-over-year. Fourth quarter operating income for production enhancement X items was $3 million, yielding operating margins of 7%, down from 11% in Q3, but up from 4% in Q4 of 2024. Margins were negatively impacted by a provision for a potentially uncollectible receivable in Asia Pacific. There are no further receivables at risk with this contract. Margins were also impacted by raw material costs that have risen due to tariffs. In the U.S., diagnostic services benefited from strong demand as complex U.S. land completion designs like trimal fracts and extended lateral length horizontal wells become more and more common. Now for some operational highlights from production enhancement. In the fourth quarter of 2025, Coralab supported a plug-in abandonment operation for a national oil company in the Middle East through the deployment of its proprietary pulverizer system. The operation used a tubing-conveyed perforating configuration to support a multi-zone well abandonment program. During the operation, approximately 100 feet of Coralab's pulverizer technology were deployed to rubbleize the annular cement as a prelude to a Perth wash job and the placement of a permanent cement barrier. Following the successful deployment of pulverizer and the installation of the cement barrier, a second deployment of an additional 100 feet of pulverizer was executed uphole. In both of these intervals, the pulverizer system provided a reliable alternative to conventional section milling and plug-in abandonment applications that would have been much more time-consuming and expensive. CoreLab is proud to announce that the company's Pulverizer system received the 2025 Offshore Well Intervention Global Award for Plug-in Abandonment Innovation presented by the Offshore Network, an independent and globally respected industry forum. The award highlights Pulverizer's technical merit, successful field application, and its role in advancing plug and abandonment operations. Commercial adoption continues to expand with multiple international pulverizer deployments scheduled for early 2026. Also in the fourth quarter, multiple U.S. unconventional operators engaged CoreLab to employ diagnostic technologies to evaluate emerging plugless completion designs on their land wells. Plugless completion designs are aimed at reducing cost and improving operational efficiency. Core deployed its proprietary SpectraSTEM prop and tracer diagnostics to assess diverter-based stage isolation and to verify stimulation effectiveness across the multiple stage laterals. Core Labs diagnostic technology delivered clear insight into the prop and placement and confirmed that these test cases, plugless systems successfully stimulated the stages. Moreover, these results demonstrate that CORE's SpectraSTEM technology provides operators with a reliable, cost-efficient method to evaluate new completion designs. Additional, diagnostically evaluated wells will be needed to determine the range of applications that are suitable for plugless completions. That concludes our operational review. We appreciate your participation, and Dave will now open the phone for questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone phone. If you are using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then 2. Our first question comes from Don Christ with Johnson Rice. Please go ahead.

Good morning, Don.

Good morning, guys. Good morning. Hopefully you all are doing well this morning. Larry, the first question for me, and I know it's gotten a lot of headlines recently, but maybe it's calmed down in the last week or two, is on Venezuela. I know it's going to take a lot to go back in there for these operators, but from CORE's perspective, I would assume that you all have a long history there and could benefit if If operators are looking to expand presence there, any comments around Venezuela?

Yeah, Don, good question. It is a common question that is coming up in meetings. So, yeah, so it turns out Venezuela was the first international company that CoreLab ventured into, and we were there for nearly 60 years. And so a lot of experience dealing with very challenging reservoirs in the Orinoco belt, the heavy oil belt, and also our headquarters at the time were in Maracaibo. Our predecessors, I think, made a good call a number of years back when the red shirts showed up and looked like a challenging environment, and we left Venezuela and moved into Colombia. So what we do have is a fair amount of legacy data that we could monetize if there was interest in it from people wanting to get back in and get up to speed on rock and fluid properties. I think for the near term, the bigger advantages are going to be for metal-heavy companies, not CoreLab. And so if you're a wellhead company, if you're into patching pipe, if you're into fixing leaks and environmental remediation, that's probably going to be where the first dollars are made down there. We would probably follow operators into the country, and we have mobile lab capabilities that we can deploy, and we can be present in a yard with some power that we can set up to do rock and fluid analysis, or the basics at least, in country. And we can do that quickly when the need arises. And then over time, we'll look at the landscape and and see if it makes sense to become have a presence back event as well. But I think that's a question that's several, several quarters at least away from having to be addressed.

Yeah, I would agree with that comment. It's probably more of a 27 story than a 26 story, but just wanted to get you know, your your kind of expectation on it. Moving over to the Middle East, we're hearing a lot of commentary about rigs going back to work in Saudi and then good conversations in Algeria and Turkey and other places on the unconventional side. I know it's been a couple quarters since you put out a broader update on your Middle East facility that was built during COVID and kind of had a slow start, but Do you have capabilities there to expand rapidly or would you have to put more CapEx into that facility if, you know, Algeria kicked off in a big way and, you know, later 26, 27 or Turkey or any of these other kind of areas picked up?

Yeah, so let's bifurcate a little bit the Middle East and North Africa. So in the second quarter of 2025, we announced that we expanded our lab capabilities in Saudi Arabia to bring the full suite of analytical technologies that had been developed in our U.S. operation for unconventionals, and we put that into the Middle East. And if you read our earnings release there, we were quickly rewarded for that investment, large expedited project with some very nice returns on that. I think how I would describe We only have one really great client in Saudi Arabia. We did not see the pullback in activity that some of the more drilling-focused companies did. We have ongoing great engagement with Aramco, Saudi Aramco. They're a great client for us and have been for decades. And so throughout the Middle East, we've got opportunities, lab in Qatar, a nice flow of work from there. Oman, Abu Dhabi, and Kuwait. And we're in position with permanent facilities in all those locations. In North Africa, we recently held a technology conference to address opportunities across North Africa from Algeria, Libya, Tunisia, and into Egypt. And we see opportunities developing there. There's a great need for people to assess damaged and underdeveloped fields that have been, I'll call it, wilting under years of neglect. And so there's opportunities for us there. There's unconventional opportunities emerging in that region that we'll have a lot to say about. We currently operate or would service that out of our Aberdeen facility for rock and fluid analysis on reservoir evaluation. And, again, if we have to put in some mobile lab operations to facilitate that, we're ready to roll.

I appreciate all that color. And I guess one for Chris, you know, obviously you shifted around some of the debt as you paid off the notes and put it on the revolver. Can you just kind of frame how you're thinking about future cash flows, free cash flow, and, you know, paying off that revolver debt that has a higher – interest rate versus share buybacks and just kind of your thoughts around that?

Sure. It did. Moving it into this term loan under the credit facility out of the private placement notes does give us more flexibility with that. There's no, you know, penalty to pay down that early. There is some required pay downs. I think it's – 2.5 million a year, if my memory serves me right. We will be paying it down. As far as our use of free cash flow, we still think the stock is undervalued. You've seen us shift over the last five quarters on using some of that towards share repurchases versus paying down the debt. I don't see that changing. We're going to be opportunistic with the share buyback. We see a dip in the market, we might get more aggressive. I see it as a mix between continuing to make sure the leverage ratio kind of stays where we're comfortable, but also using it to buy back shares.

And, Don, I might add to that. Don, there's a quarter of a point click in our favor if we get the leverage ratio below one. And you can see it's within close proximity to where we are. That looks like a smart place to try to get to. as we can. But in the meantime, I think if you look at how we've been allocating capital between debt reduction and share buybacks, that's probably a good optics on where we're going for the near term.

It's all about those basis points. I get it. I appreciate all the color, guys. I'll turn it back.

Thanks, Don.

Appreciate it.

And the next question comes from Josh Jane with Daniel Energy Partners. Please go ahead.

Hi, Josh.

Hello, Johnny. Morning. I wanted to start with something you mentioned in the release and then also on the call. You talked about an increase in regional study sales on Africa and Brazil, highlighting the renewed industry interest in exploration activity. And I feel like there are numerous large operators over the last couple of quarters who've highlighted the need for exploration activity, international and offshore, moving forward. So do you see this sort of as the beginning of of demand accelerating as we move through this year and in the next year? Or do you think it was just, you know, a little small uptick in Q4? Or just how do you see this all playing out?

No, Josh, it's clearly a trend. And I've talked about this a little bit. We think the trend has already started. And last year, we would have seen, I would say, markedly better performance in reservoir description if we hadn't had so many operators come up with dry holes. So, in other words, committed work to CoreLab, a nice stack of work coming up for us, and a series of geologic failures, if you will, by the operators that resulted in no cores, no fluids. And so, we see that trend continuing. We've got a nice portfolio of project commitments in front of us, and I think people are getting further along in their commitment to these larger projects and larger evaluations. We do have CORE coming in. We have folks on location in a number of places over the last quarter or two and today. And we do see an increase in FIDs around the world that are all – I would say they're not indications. They are facts that are showing that an international wave is coming. People recognize that the growth in U.S. production is flattening. And look, there's opportunities in that. We're engaged with, I'll call it, mechanical improvements in production enhancement that might help improve U.S. production, and also thermodynamic lab testing for ways to get those extra molecules out of the ground. We've got experiments going on in the lab for clients. So we're going to work on trying to improve recovery in the U.S., But for the longer term, the trend is clearly in the direction of more international exploration and the bigger structures that can move the needle in terms of reserve replacement, which is a term we've been waiting to come back into the vernacular in the industry, is going to be offshore opportunities. And so the sale of off-the-shelf and ongoing studies that we are able to provide allow people to quickly get up to speed on the geologic variables they're going to encounter as they drill in these offshore environments, whether it's the South Atlantic margin or offshore Africa or Asia Pacific.

Thanks for all that. Maybe we could just move to the – go ahead.

Nope, we didn't have anything.

Oh, sorry about that. Maybe just to move to the U.S., You highlighted the onshore environment and how it's obviously a little bit more sensitive to changing the commodity prices. Could you talk to what those are? So if we sort of break out of this, you know, flat-to-down commodity price range that we've seen over the last couple of months, what it ultimately would take from a commodity price standpoint to sort of materially change the activity outlook in the U.S.? ?

Yeah, I think, Josh, that's probably a better question for some of our operators. I think if I was in their shoes, I'd be looking for some stability in the commodity price. And, you know, you see 8%, 10% swings, you know, $5, $6 bouncing around here. And, look, a lot of the companies have different hedging strategies and all that impact their plans. I think it's best to defer to them on that. But if you look at actions as an indication of their thinking, rig caps down, frack spreads down. And so I would say it's still an environment that they're – and also there's been consolidation in the industry. That's also impacting activity levels as those kind of sort themselves through. I'd hate to put a price on it because I think it varies by company. Our objective is to use our product to help them get more oil and gas out of the ground as cheaply as possible. And then where there are opportunities like enhanced oil recovery and unconventionals to do the lab testing, they give them techniques that they can try to increase the recoverables on these unconventional wells from high single digits, eight, nine, 10%. If we can help them get that to 12, 13% by some laboratory proven techniques, then that'll be good for us and good for our clients.

Thanks for that. And then if I could just squeeze one more. I'm not sure if you explicitly called out the tariff impact in 2025. I know you highlighted it again in Q4 as sort of a headwind. So if you did call it out, I apologize for missing it. But maybe you could talk about the impact in 2025 so that we could think about what the potential tailwind is moving forward in the event that things settle down a bit. Thanks.

Sure. Josh, this is Chris. So I think, you know, in 2025, it started to become more impactful as we got into, I would say, the latter part of the third quarter and then the fourth quarter, because we had previously purchased supplies, you know, think of raw materials for the products, but then also the chemical tracers for the service side. We had supplies that kind of lasted through partway through the third quarter. Those are all imported products. They all attract tariffs. Some are higher than others. I think the impact in Q4 is you're going to see that repeat going forward unless there's a change in the tariffs that are being applied right now. It's probably somewhere in the range of two to three cents each quarter. And it's primarily the production enhancement group, but also some things in reservoir description, but not as impactful for that group.

And Josh, I'd add to that.

Thank you. I'll turn it back.

Yeah, I'd add to that that we're always trying to mitigate this. And so, for example, on the chemicals used for diagnostics, we traditionally had brought those into the U.S., mixed up cocktails of our proprietary blends of these chemicals to be used as tracers. and then ship them out as we needed to to various other regions of the world. Well, if we can ship those directly to the other regions and our expanding footprint like the lab we put into Abu Dhabi, for example, for tracer diagnostics, if we can ship those right to Abu Dhabi going forward, we'll bypass some of the tariff called complications that are presented to us in making up our proprietary tracers. It is an impact for us. I would say the hard part is planning, but steel costs have gone up. Energetic powders have gone up. Chemical tracers and lab supplies have gone up, but we're working hard to mitigate that through our procurement process and how we, let's call it, draw the arrows on where things come from and where they go.

Understood. Thank you for taking the questions.

Thanks, Josh.

This concludes our question and answer session. I would like to turn the conference back over to Larry Bruno for any closing remarks.

Okay, we'll wrap up here. In summary, of course, operational leadership continues to position the company for improving client activity levels in the coming quarters and years. 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 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 dividend, 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 repurchase shares and maintain a strong balance sheet while always investing in growth opportunities and evaluating various methods to increase shareholder value. 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.

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