Core Laboratories Inc (CLB) 2007 Q2 法說會逐字稿

Good morning. My name is Phyllis and I will be your conference operator today. At this time, I would like to welcome everyone to the Core Labs Second Quarter 2007 Earnings Conference Call. (OPERATOR INSTRUCTIONS.) Mr. Demshur, you may begin your conference.

Thank you, Phyllis. Good morning in North America, good afternoon in Europe, and good evening in Asia Pacific. We'd like to welcome all of our shareholders, analysts, and most importantly, our employees, to Core Laboratories Second Quarter 2007 Earnings Conference Call. As usual, I am joined by Dick Bergmark, who is Executive Vice President and CFO. Also this morning we are again joined by Core's COO, Monty Davis, who will present a detailed operational view, as Monty has been the chief architect of Core's recent operational successes.

The call will be divided into five segments. Dick will start by making remarks regarding forward-looking statements. Then we will come back and give a brief consolidated Company overview, touching on some financial and operational highlights. Dick will then return and give a detailed financial overview, followed by Monty going over Core's three operating segments, detailing our progress, and discussing the continued successful introduction of new Core Lab technologies and services, and then highlighting some of Core's operations.

And then, finally, we'll open the lines for Q&A. I'll now turn it back over to Dick for remarks regarding forward-looking statements.

Thanks, David. 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 relating to the oil and gas industry, business conditions, international markets, international political climate, and other factors, including those discussed in our '34 Act filings that may affect our outcome. Should one or more of these risks or uncertainties materialize or should any one of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For a more detailed discussion on some of the foregoing risks and uncertainties, see Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as well as the other reports and registration statements filed by us with the SEC.

Now with that said, I'll pass the discussion back to Dave.

Well, thanks, Dick. I'd like to give a consolidated Company overview. Core's operations, once again, hosted the most profitable quarter in the Company's 70-plus year history. It was an excellent quarter, but our operations believe that they can still do better, so stay tuned.

During the second quarter, Core's operations under the direction of Monty Davis delivered all-time quarterly records for revenue, operating income, net income, earnings per diluted share, and most importantly, free cash flow and free cash flow per share. The quarter marked the ninth consecutive quarter in which Core's operations hosted record revenues and the sixth consecutive quarter for posting all-time quarterly highs for net income, operating profit, and EPS.

During the last nine quarters, Core spent approximately $49 million for capital expenditures during which time the Company has generated over 262 million of operating income from continuing operations. In addition, during the last four-plus years, Core's share prices increased in 16 of the last 17 quarters, including being up each of the last 10 quarters. The only blemish over this four-plus-year history has been a 4% decrease in our share price during the fourth quarter of 2004.

Core's low CapEx needs - our CapEx usually equals or is slightly higher--or is slightly lower than our annual depreciation - plus the leverage and scalability of Core's worldwide operations has enabled the Company to generate these significant amounts of free cash flow and free cash flow per share. Yet once again in 2007, CapEx will total less than 4% of Core's total annual revenues against an industry average of about 12% of their 2007 revenues. This CapEx will be invested to grow international operations in the Middle East, North Africa, and Asia Pacific.

Over 70% of Core's revenue is sourced from the international [theater] and we expect that to grow even higher in future years. We believe that with Core's current infrastructure that the Company can generate annual revenues in excess of $9 million, up $100 million from our prior estimates. Core's future opportunities continue to be international and crude oil related, although the development of non-conventional natural gas reservoirs worldwide will play an important role in future growth, as will the development of the oil sands plays in Canada.

On the new technology front, we continue to be pleased with the increasing market acceptance and market penetrations of Core's recently introduced technology. Most interesting is the effectiveness of the combination of Core's new technologies. This effectiveness can be seen with coupling of Core's SuperHERO, our ZeroWash, SpectraScan, and SpectraChem technologies being used in multistage hydraulic fracs, stimulations of horizontal wells and gas shale reservoirs, such as the Barnett Shale.

The sequence in which Core Lab technologies are being introduced into these plays are, first, Core's SuperHERO perforation technology is used to create a superior perforation tunnel into the shale formation. Then, during the multistage frac, Core's ZeroWash tracer and SpectraScan technologies are used to ensure the effective and efficient placement of proppant to fracture the formation. This is followed by the use of Core's SpectraChem technology to ensure maximum frac job cleanup of the frac zone.

These four technologies are being used to ensure maximum hydrocarbon flow and ultimate recovery from nonconventional natural gas reservoirs, such as the Barnett Shale of North Central Texas. Simply put, Core Lab helps our clients maximize their cash flow from nonconventional natural gas reservoirs.

Monty will give a more technical update on Core's new promising SuperHERO technology, which generated its first revenues just a quarter ago. Our pipeline for new reservoir optimizing technologies and services remains strong, which indicates a bright future for Core.

I will now turn the call back over to Dick for the detailed financial review. Dick?

Okay. Thank you, David. If we look at revenues, they were 168.4 million in the second quarter versus 140 million in the second quarter of last year and 155.7 million last quarter. So revenues were up 20% year-over-year, or 8% sequentially. So we continue to see the positive impact on earnings from our focus on higher margin services and from the leverage we can squeeze from our international-based fixed cost structure.

Of these revenues, sales for the quarter were 42.2 million, up when compared to 33.7 million last year, or an increase of 8.5 million, or 25%. Services for the quarter, 126.2 million, up 19% when compared to 106.3 million last year. Cost of sales in the second quarter improved to 69% versus 74% last year, primarily due to growing demand for our new higher margin products and continuing efforts to improve our manufacturing efficiencies.

The cost of services for the quarter, an improvement to 67%, compared to 71% for last year. Our cost structure has remained relatively fixed as revenue growth continues to drive incremental margins. G&A for the quarter, 9.7 million, up from 8.7 million in last year's second quarter, primarily due to an increase in salaries and incentive compensation relating to our improved performance and additional accounting services related to the conversion of our local Dutch statutory financials from Dutch GAAP to international financial reporting standards.

All that being said, G&A in the first half was lower than in last year's first half. For 2007, we continue to expect G&A to come in around 35 million.

Depreciation and amortization for the quarter, 4.9 million, slightly higher than the 4.1 million incurred last year in the second quarter, as we continue to spend capital in support of our organic growth objectives. And as David mentioned, our depreciation as a percent of cost of sales and services is only about 4.3% compared to others in the sector whose depreciation can run 10% as they must employ tremendous amounts of capital in the face of lower returns in their competitive space.

We expect depreciation in 2007 to total approximately $20 million. Other income this quarter is in the amount of 1.5 million, which primarily resulted from interest income of 500,000, 490,000 for gains on FX, an assortment of other smaller items netting to about 480,000. And this compares to a similar amount, 1.5 million, in last year's second quarter.

Operating income was 41.9 million. These earnings are up 13.3 million, or 46% compared to the second quarter of last year, and is up 5.2 million, or 14% sequentially with last quarter. This operating income represents operating margins of 24.9%, up almost 500 basis points compared to margins of 20.4% in last year's second quarter.

Our continued improvement in margin has been driven by our new technologies and services, along with our focus on obtaining commercial contracts that deliver higher product and service margins, thereby creating higher levels of incremental margins earned on those revenues. And combine this with better utilization of our cost structure, the results are clearly demonstrated in our expanding margins.

On a year-over-year basis, our incremental margins for the quarter Company-wide were 47%. Interest expense was 635,000 for the quarter, down from 1.5 million in last year's second quarter, and this reflects a lower rate of interest on our new .25% fixed rate convertible notes. We expect interest expense in 2007 to be about $2.5 million.

Income tax expense was 12.5 million for the quarter, compared to 8.1 in the prior year's second quarter, and that's primarily due to higher taxable earnings in this quarter. And as mentioned on the prior call, the annual effective tax rate is expected to be in the 30% range for all of 2007.

Net income for the quarter was 28.8 million, compared to last year's second quarter's income of 19 million. Net income was up 52% on a year-over-year basis. Earnings per share for the quarter was $1.18.

I would like to point out that this is $0.10 above First Call's Main Street estimate of $1.08 just prior to earnings pre-release. So it's--it is not just a one cent [beep]. This compares to the $0.70 earned in the second quarter of last year, so earnings are up 69% year-over-year. Sequentially, EPS is up 14%--$0.14--excuse me--or about 13.5%.

If we look at the balance sheet, cash is virtually unchanged from the year-end balance of 54.2 million. Receivables stood at 128.7 million, up by 5.9 million from the first quarter, and by 16.6 million, if you compare it to the year-end balance. Importantly, DSOs remained consistent at approximately 69 days for the quarter versus 71 days for the full year of 2006, so an improvement there.

Inventory was 31.9 million, down 600,000 from the first quarter, but up 1.7 million, if you look at the year-end balance. And all of that is in line with our increasing product sales, so inventory turns remained consistent with 2006 levels at 3.5.

Other current assets were up by 3.6 million from the prior year-end balance of 29.1 million, due to a tax benefit recorded this quarter on stock-based compensation. And there are no material changes in PP&E. Intangibles, goodwill, and other long-term assets are up 3.6 million from year-end as a result of an increase in long-term deferred tax assets.

On the liability side of the balance sheet, accounts payable were up about 10.8 million when compared to the prior year-end balance of 37.5 million, primarily due to the timing of vendor payments. Other current liabilities were virtually unchanged from the 2006 year-end balance. Long-term debt was unchanged, reflecting our 300 million .25% coupon convertible debt.

Other long-term liabilities were 49.7 million, up 700,000 from last quarter, but up by 9.3 million from the prior year-end, primarily due to an increase of 4.1 million in deferred revenues and the recording of 4.2 million adjustment in the first quarter due to the adoption of FIN-48.

Shareholders equity ended the quarter at 76.9 million, up from the prior year-end balance of 71.8 million. And this increase is primarily due to net income, shares issued for stock options, and tax benefits on stock-based compensation, partially offset by the continued repurchases of Core's shares under its share repurchase program.

Our annualized return on equity for the quarter was 140%, up from 115% in 2006. Capital expenditures for the quarter were 5.1 million, down from 5.6 million for the second quarter of last year. And for the first half of this year, we have spent 8.6 million. We expect CapEx in 2007 to be in the $20 to $22 million range. This level of spending, as David mentioned, equals something less than 4% of our revenue, substantially lower than the 10 to 15% that others must spend due to higher asset content that is often required by many of them.

Given our more true service oriented business model, we are able to continue with our global build-out in support of our organic growth objectives, while at the same time delivering to you, our shareholders, some of the industry's highest returns on invested capital or capital employed. And because we have one of the industry's more disciplined approaches to capital, our depreciation as a percent of cost of sales and services is one of the lowest in the industry at 4.3%.

So instead of comparing the valuation of the Company by the use of simplistic price to EBITDA multiples used for asset intensive peer companies, which in fact does reward those firms that have lesser capital discipline, we would suggest a more rigorous analysis based on returns on invested capital or discounted cash flows should be used to properly evaluate the worth of the Company.

Looking at cash flow, cash provided by operations in the quarter was 40.6 million. And after paying for our 5.1 million in CapEx, our free cash flow was over $35 million. And annualizing that second quarter free cash flow, the cash yield would be almost 6%. And according to industry research reports that we have read, that cash yield is one of the highest in the industry.

Now, to the stock buyback program. During the second quarter and continuing into this third quarter, we reduced our basic share count by 443,000 shares at a cost of just over $45 million. This number of shares equaled 1.9% of our outstanding share count. From inception of the program we have reduced our basic share count in the aggregate by 14.4 million shares at a cost of 518 million, and that represents more than 40% of the shares outstanding at the time the program began in October of 2002.

This has been a very successful program for our shareholders and has contributed to our shares increasing in value over 12-fold since the inception of the program. So the return to our shareholders from inception has been over 1,100%, significantly higher than the [OSX], which rose 285%, or the S&P 500, which has risen only 89% over that same time period.

So now, let's go to our internal financial targets. Our revenue target for the full year 2007 is in the range--excuse me--has been increased to 665 to 675 million, or 16% to 17% higher than in 2006. This reflects growth in excess of the projected increase in the worldwide activity levels of our clients by about 300 to 400 basis points.

On the last call, we increased our earnings target for 2007 to the $4.30 to $4.50 EPS range. Our view now is that earnings should improve further in '07, perhaps into the range of 4.60 to 4.75 per diluted share. This represents an increase over last year's results of 3.07 per share by 50 to 55%. As was the case last quarter, these projected earnings assume incremental margins, taking a conservative view of up to 40% for the remainder of the year. And if things continue to roll out for the year, they could indeed be higher.

For the third quarter, our revenue target is in the $170 to $175 million range, and this target is up 17 to 20% above last year's third quarter revenues of 145.5 million. And for EPS, we expect to earn between $1.20 and $1.25 per diluted share. These results, if attained, would reflect a 45% to 51% increase in earnings per share over the $0.83 earned in the third quarter of last year.

And now, Monty will provide a more in depth operational review.

Thanks, Dick. Our employees continue to do an excellent job servicing our oil company customers' needs and making Core Lab a better company. The financial records that we're breaking are achieved only through the performance of our employees, and I thank them on behalf of all our shareholders.

Our reservoir description segment helps our oil company customers reach their goals using Core Lab technologies and expertise to describe the reservoir system, which is comprised of the porous and permeable rock of the reservoir, and the three fluids contained within the reservoir, those being natural gas, crude oil, and water.

Quarterly revenues for this segment reached a new all-time high of 93.8 million, which is 17% growth over Q2 of 2006 and 13% growth over Q1 2007. Operating margins reached 22.8%, an improvement of 500 basis points over Q2 2006.

Unlike reports from some other oil field service companies, Core's Canadian operations were a bright spot in Q2 of 2007 as we continue to provide differentiating technologies to our clients. For example, during the 2007 winter drilling season, Core Lab analyzed over 40 miles of Canadian oil sands core from the Athabasca area in Northeast Alberta, Canada. Working closely with many of the largest energy companies, Core has developed numerous proprietary technologies for analyzing rock and fluid samples from this vast resource.

With the increased interest in investment from international sources, oil sands activity will increase substantially, and Core expects to do over 52 miles of core, or an additional 30%, approximately, in 2008. To handle this increase and allow for future growth, we have increased our warehouse space by 50%, doubled the size of our oil sands freezer capacity, and this is important because the core must be stored at a minus 20 degrees C to maintain its integrity, and we're adding another bitumen extractor.

Analysis of Core is used to quantify the bitumen in place and to determine the grade and quality, essential data for optimizing the mining operations and an in situ extraction placement of the SAGD steam-assisted gravity drainage paired horizontal wells, plus extraction and upgrading operations. We also have sand size analysis that is essential for the optimal design of the bitumen transport and upgrading facilities, if the sediment and blockage occurs because the grains are too large, or erosion will occur in the pipe and vessel walls if the sediment--if the grains are too small. Fluid analysis includes identification of water sensitive swelling clays used to design [tailings] ponds in which clay-size material settles from the water used in extraction and upgrading, and the determination of soluble ions required for optimal design of the bitumen extraction.

Our Middle East operations continue to be very active in Saudi Arabia and Qatar. The outlook is very good for both of these operations. We are adding two new technologies for advanced rock properties in Saudi Arabia, and have added a fifth offshore laboratory in Qatar. We also are expanding our reservoir fluids lab in Abu Dhabi, due to demand for enhanced oil recovery studies throughout that region.

Our production enhancement segment helps our employees--helps our clients optimize production from their reservoir over the life of the reservoir. Revenue from this segment was 60.8 million, which is 18% growth over Q2 2006 and a new record quarterly revenue. Operating margins were 26.7%, a 200 basis point increase over Q2 2006. Revenue from our new SuperHERO perforating charges are increasing at a high rate as we expand the size range. These charges are performing at levels that exceed our engineering expectations with penetration 15 to 30% better than our HERO charges.

We're able to perforate to significantly greater depths while maintaining the very low debris characteristics of the HERO charges. This makes the SuperHERO the deepest penetrating load of recharge in the market.

Our stimulation diagnostics technologies are helping customers maximize their fracturing of gas shales across North America. Our ZeroWash tracers and SpectraChem diagnostics--SpectraScan diagnostics determine the effectiveness of fracture projects, while our SpectraChem tracer services are being used to diagnose any communication between the wells and cleanup of the fracture fluids and gels from the fractures for optimal flow of the hydrocarbons.

Our reservoir management group integrates the technologies to provide unique solutions for customers, either on a proprietary or consortium basis. This group posted all-time high revenues of 13.8 million, slightly higher than Q1 2007, and a 68% growth over Q2 2006. Operating margins reached 29.8%, that's a 1,000 basis point improvement over Q2 2006.

We are installing record numbers of ERD sensors and patented [CT-More] and [More-C] systems in the high temperature environment of the Canadian Oil sands. We have the most reliable temperature and pressure permanent monitoring systems available for high temperature reservoirs. Our high temperature sensors are assisting oil sands operators to maximize production from ESP produced wells. Operators realize that reliable temperature--high temperature sensors are required to optimize pump performance in the SAGD development projects.

Our reservoir characterization and production properties of gas shale study has increased to 48 industry participants. Each of these participants will be submitting at least three wells for inclusion in the study, and likely several more for analysis outside of the study on a proprietary basis. The study covers all major existing and emerging gas shale reservoirs in North America. The recommendations from this study are being used by these clients to optimize their drilling, completion, and stimulation programs in gas shale reservoirs throughout North America.

Due to the success of the gas shale study and numerous requests from the participating company, the Company plans to expand its petroleum geochemistry services by adding and upgrading analytical capabilities for total organic carbon, pyrolysis yields, vitrinite reflectance, and kerogen typing. In addition, Core plans to expand field services related to the collection and processing of gas shale cores and to add analytical capabilities to determine gas disorption associated with kerogen and adsorption isotones for gas storage capacity as a function of the reservoir pressure.

Our tight gas sands of North America fracture stimulation optimization study has 31 participants. And due to client demand we are starting a phase two study that will encompass the international market for tight gas sands.

In summary, Core Lab has established ourselves as the leader in reservoir characterization of unconventional gas reservoirs and in the oil sands of Canada.

We will now open the conference call to questions.

Phyllis, you can go ahead and open the lines for questions.

(OPERATOR INSTRUCTIONS.) Your first question comes from the line of James West with Lehman Brothers.

Hey, good morning, guys.

Good morning, Jim.

I had a question about competition. Two of your I guess competitors--I mean, competitor is probably the wrong word--they're very low end core analysis type companies--have been taken out in the last several quarters by a larger oil service company with capital with a technology prowess. It seems like they're making a run at the--your base business. And I wanted to get your sense on how this changes the dynamics in that piece of the business for you, if this is a real competitive threat, or if the technology there is just different and more low end than what Core Labs is really known for.

Yes. James, I think from that standpoint, we do not consider them competitors in our high tech end of our business, which is the driving force behind Core Lab. These are companies that provide really low levels of technology. We consider our main competitors, which are also our main clients, are the major oil company technology centers. And when we look at the services provided by those two low level technology providers, we do not feel that that is a competitive edge that is gained by any of the larger capitalized companies.

Okay, understood. That's what I figured. A second question on the Middle East. Not a quarter goes by where you and I don't discuss it. It's mentioned in your conference calls. It's on your annual report. But this is obviously a big region for Core Labs going forward. What's the approximate size of that business now? And how big--given the investments you're making at this point, how big do you think that could be one to two years out?

I'll turn that question over to Monty because he's just visited the region once again and met with officials from Qatar and Saudi Aramco once again. So, Monty?

We--first off, the region is probably our third biggest area of revenue. And that region we expect has a lot of growth potential and that's why we've been talking about it in our conference calls. The Saudi entry is a new entry. It is a change of philosophy for Aramco and there is a lot of work to be done there in the future.

So we're very pleased with that entry into that market and it's picking up substantially every quarter. The--Qatar is a totally new project for us and it's already an expanding project, so we're very pleased with that one as well. When we look at the region in the larger scope of things, we are in Kuwait, we are in Oman, and we are in the Emirates. And those areas--each of those areas are growing at maybe not the rate of the new entries into Saudi and Qatar, but they are growing at a pretty substantial rate as well. We've expanded our advanced technology center in Abu Dhabi to be able to offer more services and certainly more volume of services to the region. So we've got really high hopes for that area for some time to come.

Yes, James, collectively, year-over-year, Middle East revenues are up about 30%.

Your next question comes from the line of Rob Mackenzie with FBR Capital Markets.

'Morning, guys.

Hello, Rob.

Marty, my question actually was for you, and it's surrounding the combination that David highlighted as the SuperHERO, the ZeroWash, et cetera. And I wanted to get a better handle on the potential productivity gains and/or recovery gains from these tight shale formations, which typically don't yield that much of their gas by using this in conjunction and perhaps even using the information gained from the log afterwards to better determine well placement.

Well, Rob, we--as you know, we've got a pretty comprehensive area of coverage there starting with the study that we have in place where we are doing a study of exactly the completion and fracture technologies and the best practices for each of the shales, which by the way, are different. This is not a homogenous across North America. Each shale play reacts a little bit differently, needs a little bit different stimulation, different things you have to watch for. Our SuperHERO charges, to be specific on point for your question, by deeper penetration into the shales where they're design was the original design for the shale, deeper penetration, lower debris makes for a much easier and better frac job to follow. Those charges offer a much better completion, and that gives you a better start on your frac job. By using our SpectraChem, you are able to determine where you have intersection of wells, frac jobs. And these wells do on occasion communicate. Sometimes that's a good thing, sometimes that's a bad thing. And it depends on the shale play and our SpectraChem technology is able to point out where that's happening or not happening.

When we go back to our ZeroWash and SpectraScan monitoring of the frac jobs, we're able to tell you how each zone was frac'd. They're often multistage fracs and it's very important to know are you fracing the zone that you think you're fracing the way the engineers and the oil companies have designed the frac job. And we're able to tell them that, which allows them to go in and remediate if it didn't occur as they thought.

So all of those technologies included with our knowledge and the gas shale study are putting together a very powerful package specifically for improving long-term production and immediate production from these gas shale projects.

Yes, I guess my question was actually more targeted on what's the potential incremental recovery you think you can get. And maybe more specifically, in terms of the recovery rate of the original gas in place, can you take that from 15 to 20 to 25 to 30%? What are the early estimates there?

Yes, probably too early days for that, Rob. As the SuperHERO has just been out really a number of weeks now. So I'd want to divert a couple or three quarters until we can get a little bit better handle on that.

Okay. And my follow-up call is for Dick. It looks like you had a bit of a cash build during the quarter, not using all of your free cash flow necessarily to buyback shares here this quarter. Is there some kind of change in philosophy we're seeing here or is it just a lack of availability of the shares--hard to buy them?

Rob, it's just timing on the purchases. We did spend over $40 million in the quarter through today on repurchases, which certainly is greater than our free cash. So we did employ our free cash towards share repurchase.

Okay. And in July how much have you spent?

We've repurchased about 170,000 in Q2 and the remainder of that 440 that I mentioned was in Q3.

Okay. Thank you.

Your next question comes from the line of Robert Christensen with Buckingham Research.

Good morning. What percentage of your revenue is derived from Canada in the quarter?

It was--I want to say somewhere around mid, low teens - 14, 15%.

It was lower than that in the quarter.

Okay.

So it was just below 10%, just a seasonal low.

Yes.

Because last year the full year was like 13%, Bob.

Okay. And then, my follow-on question is what percentage of your revenue is derived from your North American shale study, in effect the cooperative that you have with producers?

It's a fairly small percentage of our overall revenues that go into that study. It used to be a significant thing if you consider the other technologies that are employed in the shale. Then you'd be talking in something around the maybe 10 or so percent.

Yes, but based on the study, probably a couple percent, Bob.

And this is a revenue stream you bill out how? Is it billed out monthly? How are revenues associated--?

--What that involves, each of those companies when they sign up for the study, they sign a contract, they commit so many wells. We have a fee upfront and they pay--most of the companies pay all of that upfront. We don't recognize that as revenue until the work is done. So we have quite a backlog of prepaid, deferred revenue that will be earned over several years.

Beautiful. Thank you very much. I'll get to the back of the line here.

Okay, Bob.

At this time, there are no further questions. Do you have any closing remarks?

Oh, thanks, Phyllis. In summary, Core posted our most profitable quarter in the Company's 71-year history. We have never been better technologically positioned to help our clients expand their existing production base. We remain uniquely focused and are the most technologically advanced reservoir optimization company in the oilfield services sector. This positions Core well for continued growth in 2007 and into 2008.

So in closing, we'd like to thank all of our shareholders, the analysts that follow Core, and especially all of our hardworking employees for spending their morning with us. And we will be updating you at the end of the third quarter of 2007. Thank you.

This concludes today's Core Labs Second Quarter 2007 Earnings Conference Call. You may now disconnect.