Are you seeing more conviction from customers regarding offshore projects moving forward, compared to previous years?

Yes, the intensity of conversations has picked up. While there were 'dry holes' in 2025 where projects didn't proceed, things are now lining up for a strong rebound in offshore reservoir characterization projects late this year and into 2027. “I think things are lining up for a very nice rebound in activity on offshore reservoir characterization projects late this year, but certainly into 2027.”

Is the 'Impulse' product discussed this quarter the same as the product mentioned a few quarters ago that boosts recoveries if done on initial completion?

Impulse is a perforating technology that pre-stimulates the near wellbore, reducing breakdown pressures and improving completion efficiency. This is distinct from Enhanced Oil Recovery (EOR) laboratory processes, which also benefit from increased surface area in the near wellbore. Both Impulse and EOR projects are gaining acceptance, with EOR validating thermodynamic processes, though containment remains a client challenge. “Impulse, which we just talked to again here, where that's a perforating or energetic technology that kind of pre stimulates the near wellbore area so that the charge goes off, penetrates the casing and then right behind that... a very powerful secondary charge rubblize the area in the near wellbore.”

Can you provide additional color on the UAE regulatory approval for SpectraStim and SpectraScan, and any read-through from peers on Middle East normalization?

The UAE approval opens the door for using isotope-based diagnostic techniques, allowing storage and deployment for diagnostics. In the Middle East, not just assay work but also subsurface reservoir characterization and completion diagnostics are impacted by field operation suspensions. While a ceasefire announcement led to some tanker movements, it was not as significant as hoped, and subsurface projects have pulled back again. Sanctions in Russia/Ukraine are also tightening. “So on the UAE, the technology that we're talking about there involve using isotopes. And so it's a technique that we are using in some other parts of the Middle East, we've got licensing... but now we have another tool in our belt if you will, to address other diagnostics.”

CLB

Core Laboratories (CLB) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Jul 30, 2026

Source: earnings call transcript

Executive summary

Core Laboratories Q2 FY26 — Geopolitical Headwinds Offset by International Growth and Shareholder Returns

Core Laboratories navigated a challenging Q2 FY26 marked by significant geopolitical conflicts impacting its Reservoir Description segment and service revenue. Despite these headwinds, the company demonstrated resilience with sequential growth in Production Enhancement, driven by technology adoption and international activity. Management remains focused on strategic technology investments, operational efficiency, and consistent shareholder returns through dividends and share repurchases, while anticipating a rebound in global oil demand in 2027.

Highlights

Production Enhancement revenue up 15% sequentially to $46 million, with operating margins expanding to 12%.
Energetic product sales improved, driven by increased operator adoption of advanced completion technologies in the U.S. and international markets.
Cash flow from operating activities almost doubled sequentially to $7.8 million.
Repurchased over 214,000 shares of company stock, valued at $2.7 million, marking the 7th consecutive quarter of buybacks.
DSOs improved slightly to 73 days from 74 days in the prior quarter.

Concerns

Reservoir Description revenue down 4% sequentially to $79 million and 9% year-over-year, with operating margins at 5%.
Ongoing military conflict in the Middle East and escalating attacks in Russia/Ukraine continued to affect operations, causing project delays and logistical disruptions.
Global crude assay work and reservoir characterization projects impacted by closure of the Strait of Hormuz and disruptions to maritime hydrocarbon transportation routes.
Product sales down 11% year-over-year, primarily due to a large laboratory instrumentation sale in Q2 2025 not repeating.
Net income ex-items down to $5.1 million from $8.8 million in Q2 FY25.

Guidance & targets

Category	Target	Timeline	Confidence
Q3 FY26 Revenue	$128.5 million to $135.5 million high materiality	Q3 · FY26	Medium
Q3 FY26 Operating Income	$10.5 million to $15 million high materiality	Q3 · FY26	Medium
Q3 FY26 EPS	$0.12 to $0.20 high materiality	Q3 · FY26	Medium
Q3 FY26 Reservoir Description Revenue	$81 million to $84 million medium materiality	Q3 · FY26	Medium
Q3 FY26 Reservoir Description Operating Income	$5.5 million to $7.9 million medium materiality	Q3 · FY26	Medium
Q3 FY26 Production Enhancement Revenue	$47.5 million to $51.5 million medium materiality	Q3 · FY26	Medium
Q3 FY26 Production Enhancement Operating Income	$4.8 million to $6.9 million medium materiality	Q3 · FY26	Medium
Full-year FY26 Capital Expenditures (excluding UK facility rebuild)	$15 million to $18 million medium materiality	FY26	High
Full-year FY26 G&A ex-items	approximately $43 million to $45 million low materiality	FY26	High
Global Crude Oil Demand Growth	rebound by approximately 1.7 million to 2 million barrels per day high materiality	CY27	Medium
U.S. Crude Oil Production	approximately 13.8 million barrels per day medium materiality	FY26	Medium
Effective Tax Rate	approximately 25% low materiality	Ongoing	High

Segment performance

Segment	Revenue	YoY	QoQ	Margin
Reservoir Description Revenue was down sequentially and year-over-year, primarily impacted by reduced crude assay work due to disruptions in the Strait of Hormuz and delayed project execution/reduced client activity across the Middle East. Expanded sanctions and military action in Ukraine and Russia also negatively impacted operations. Partially offset by continued investment in reservoir characterization programs in other international regions.	$79 million	-9%	-4%	5% operating margin
Production Enhancement Revenue increased sequentially and year-over-year, driven by improved energetic product sales across both U.S. and international markets, as well as increased market penetration for diagnostic services. Operating margins benefited from higher product sales and the resolution of previously recorded tax matters. Sequential incremental margins: 59%	$46 million	5%	15%	12% operating margin

Deals & partnerships

Major international operator Reservoir characterization activities

Core Lab was engaged to support reservoir characterization activities following a successful offshore Namibia exploration well.

Murphy Oil Reservoir characterization program

Core Lab initiated a reservoir characterization program supporting Murphy Oil's recently announced discovery offshore Cote d'Ivoire, utilizing dual-energy CT technology.

Major international operator Laboratory testing of solvent-assisted thermal recovery techniques

Core Lab's Advanced Technology Center in Calgary is supporting a heavy oil operator with laboratory testing to improve recovery from existing producing assets.

Operator in West Texas Completion diagnostic services (FlowProfiler)

Utilized Core's FlowProfiler oil and water tracer technology to identify highest quality landing intervals and highest producing completion intervals in horizontal wells.

Major operator in Louisiana Completion diagnostic services (gas tracer technology)

Utilized the company's gas tracer technology to evaluate production performance across extended length horizontal laterals, confirming sustained gas contribution from the toe of the well.

Leading independent operator in Western Canada Completion diagnostic services (water shutter program evaluation)

Core's diagnostic technologies confirmed water bypassing the isolation packer, allowing the operator to refine completion design for a complex multilateral water shutter program.

Capital programs

Asia Pacific Multiyear Contract Investment underway

Investments to support a recently signed multiyear contract in the Asia Pacific region, contributing to elevated capital expenditures in Q2 FY26.

Mediterranean Facility Rebuilding underway

Start: Q1 FY26

Rebuilding facilities in the Mediterranean region that incurred weather-related damage in Q1 FY26, contributing to elevated capital expenditures in Q2 FY26.

U.K. Facility Rebuilding underway

Period spend: $1.1 million

Funding: company's property and casualty insurance

Capital expenditure associated with rebuilding the U.K. facility, which was damaged by fire. These costs are covered by insurance and excluded from free cash flow calculation.

Risks & headwinds

Geopolitical conflicts in Middle East and Russia/Ukraine Ongoing (Q2 FY26 and expected Q3 FY26)

Reservoir Description revenue down 4% sequentially and 9% YoY; global cargo movements down 16% post-conflict; service revenue flat sequentially but down 2% YoY.

Mitigation:Focus on cost reduction initiatives in affected regions; maintaining experienced staff for future rebound; leveraging global network and diversified technology portfolio; growth in other international regions.

Disruption to crude assay work and reservoir characterization projects Ongoing (Q2 FY26 and expected Q3 FY26)

Impacted by closure of Strait of Hormuz and widespread disruption to maritime hydrocarbon transportation routes.

Mitigation:Growth in other regions (Africa, Brazil, Asia Pacific) partially offsetting impacts; continued investment in reservoir characterization programs in unaffected international areas.

Evolving sanctions and military action Ongoing (Q2 FY26 and expected Q3 FY26)

Negatively impacted company's operations in Ukraine and Russia; tying hands on who can and cannot be worked for.

Mitigation:Executing a cost reduction plan for the Russia/Ukraine business; managing cost structure effectively.

Volatility in crude oil prices Ongoing

Disrupted regional operations and reduced demand for crude assay services.

Mitigation:Asset-light business model; diversified technology portfolio; focus on maximizing operating efficiency.

Lumpy product sales Q2 FY26

Product sales down 11% YoY due to a large laboratory instrumentation sale in Q2 2025 not repeating.

Mitigation:Improved sales of perforating products in both U.S. and international markets partially offset the decline; focus on manufacturing efficiencies and cost control initiatives.

What to watch in Q3 FY26

Middle East Market Recovery

Next quarter

Current Timing difficult to predict; some marginal improvement in subsurface projects.

Target Clear signs of recovery in client activity and project timing.

Why it matters

The Middle East conflict significantly impacts Reservoir Description and service revenue; recovery is key to overall performance improvement.

While the timing of recovery in certain Middle East markets remains difficult to predict, core believes, long-term fundamental support, future growth and exploration activity levels.

Find out whether CLB delivers this. Inve re-checks your case every morning.

Q&A highlights

How much has the pickup in oil movement in other parts of the world offset the decline in assay work from the Middle East and Russia/Ukraine?

Global cargo movements are down 16% post-conflict. Core Lab has revenue opportunities on both ends of a transaction (loading and landfall). Management is focused on cost minimization without dismantling experienced staff, acknowledging volatility. Volatility in crude oil prices also slows down trading activity. A cost reduction plan is being executed for the Russia/Ukraine business.

“I can tell you that we look at pre-conflict cargo movements versus post-conflict cargo movements and those are down 16% globally.”

asked by Donald Crist · answered by Lawrence Bruno

2 min read 6 chapters

Detailed narrative

Geopolitical Impact and Operational Resilience

Core Laboratories experienced continued operational challenges in Q2 FY26 due to the ongoing military conflict in the Middle East and escalating attacks in Russia/Ukraine. These conflicts led to project delays, logistical disruptions, and reduced demand for crude assay services, particularly impacting the Reservoir Description segment.

Despite these headwinds, the company maintained focus on technology development and operating efficiency, leveraging its global network to support clients and partially offsetting impacts with growth in other regions.

Strategic Focus and Financial Tenets

The company reiterated its long-standing strategic objectives: introducing new product and service offerings, maintaining a lean organization, and returning excess free cash to shareholders while preserving a strong balance sheet. Core Lab emphasized its three core financial tenets: maximizing free cash flow, maximizing return on invested capital, and returning excess free cash to shareholders, which have guided its value creation for over 32 years as a public company.

Reservoir Description Performance and Highlights

The Reservoir Description segment reported Q2 FY26 revenue of $79 million, down 4% sequentially, with operating income of $3.7 million and a 5% operating margin. The decline was primarily attributed to disruptions in crude oil cargo movements through the Strait of Hormuz and reduced client activity in the Middle East, along with impacts from sanctions in Ukraine and Russia.

Growth in international reservoir characterization activity, particularly in West Africa, Namibia, and Cote d'Ivoire, partially offset these challenges, with new projects secured for offshore exploration, appraisal, and carbon capture and storage.

Production Enhancement Performance and Highlights

Production Enhancement revenue increased 15% sequentially to $46 million in Q2 FY26, up 5% year-over-year, with operating income of $5 million and a 12% operating margin. This improvement was driven by increased energetic product sales and market penetration for diagnostic services, despite only modest improvement in U.S. completion activity.

The newly commercialized Impulse perforating technology saw growing deployment in North American unconventional plays, and FlowProfiler and gas tracer technologies expanded applications in reservoir appraisal, completion optimization, and water management programs.

Macro Outlook and Energy Demand

Core Lab highlighted revised 2026 global crude oil demand forecasts from IEA, EIA, and OPEC, reflecting near-term negative impacts from geopolitical conflicts. However, these agencies project a demand growth rebound of 1.7 million to 2 million barrels per day in 2027.

The company emphasized the long-term need for investment in new resources and maximizing recovery from existing fields due to accelerating decline rates and energy security concerns, noting that 90% of upstream investments since 2019 have been for maintaining existing production.

Shareholder Returns and Capital Discipline

Core Lab maintained its commitment to shareholder returns, funding its quarterly dividend and repurchasing over 214,000 shares for $2.7 million in Q2 FY26, marking the seventh consecutive quarter of buybacks. The company plans to continue using free cash for dividends, growth opportunities, and opportunistic share repurchases.

Capital expenditures for operations were $4.7 million, with full-year FY26 CapEx (excluding UK facility rebuild) projected at $15 million to $18 million, reflecting a disciplined, asset-light business model.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.