Core Laboratories Inc (CLB) 2009 Q1 法說會逐字稿

Good morning. My name is Connie and I will be your conference operator today. At this time, I would like to welcome everyone to the Core Laboratories 2009 first-quarter earnings conference call.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions)

I would now like to turn the call over to Mr. David Demshur, President, CEO and Chairman of Core Laboratories. Sir, you may begin your call.

Thank you, Connie. I would like to say good morning in North America, good afternoon in Europe, and good evening in Asia Pacific. We would like to welcome all of our shareholders, analysts, and most importantly our employees to Core Laboratories' first-quarter 2009 earnings conference call.

As usual, I am joined by Dick Bergmark, Core's Executive Vice President and CFO. Also this morning, we are again joined by Core's COO, Monty Davis, who will present the detailed operational review.

The call will be divided into five segments. First, 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. Then we will have a couple of comments regarding Core's strategic operational and technological positioning for the second quarter and the remainder of 2009. Dick will then follow with a detailed financial overview and additional comments regarding second-quarter 2009 revenue and earnings guidance. Then, Monty will go over Core's three operating segments, giving details of our progress and discussing the continued successful introduction of new Core Lab technologies and services, and then highlighting some of Core's operations. Then finally, we will open it up for Q&A.

I will turn it back over to Dick for some comments regarding forward-looking statements. Dick?

Thanks, David.

Before we start the conference this morning, I will 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 market, 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 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 of some of the foregoing risk and uncertainties, see Item 1A, "Risk Factors" in our annual report on Form 10-K for the fiscal year ended December 31, 2008 as well as the other reports and registration statements filed by us with the SEC.

With that said, I will now pass it back to David.

Okay, thanks, Dick. We'd like to look at a consolidated company overview.

Core's operations once again outperformed the global marketplace, as we posted the highest quarterly first-quarter EPS results for the Company in our 73-year history. It was a good quarter, and we congratulate our operations team and all of our hard-working employees. The remainder of 2009 will present a challenge, but Core's operations are well-positioned, both technologically and operationally focused for this difficult operating environment.

Let's remember Core's long-term operational and technological focus has been outside of North America, as 70% of the Company's revenue originates from petroleum reservoirs located outside the United States. 70% of the Company's revenues originate from crude-oil-related projects, and over 85% of the Company's revenues originates from development and production-related operations. For the past 15 years, Core has believed that exploration-related activities are just too volatile, risky and cyclical to base any long-term growth strategies on.

Also, the Company's top five clients -- ExxonMobil, BP, Shell, Chevron, and Total -- will continue in 2009 with large internationally-based crude oil developments that should provide a stable operating base for our international operations.

Also of note internationally has been Core's decision to deemphasize Russian operations several years ago, which culminated in the Company selling our real estate holdings in Russia over a year ago for a large gain and significantly downsizing our Venezuelan, Nigerian, and Mexican operations. However, recently, our Reservoir Description segment has been doing more and more work for Mexico in our Houston Advanced Technology Center and would look to reestablish operations there once again if the workload, and more importantly operating margins, would support the investment.

Also in North America, Core's primary operational focus has been on Deepwater crude oil developments in the Gulf of Mexico, and our technological focus has been on the big five unconventional natural gas developments.

In the deepwater Gulf of Mexico, Core has worked on or is currently working on projects relating to nearly every deepwater development, including the emerging and exciting lower tertiary play in the ultra-deepwater offshore Texas and Louisiana areas. Core first referenced this play in our Q3 2004 earnings release, so almost five years ago, when little was known of this potentially giant to super giant play.

Also in North America, Core's technological focus is been on the big five unconventional natural gas shale plays, those being the Barnett, Fayetteville, Haynesville, Marcellus, and Muskwa/Montney in Canada. Core believes these shale plays can be economically developed at current natural gas prices and decreased drilling and completion costs over the next several quarters will boost future returns.

Core's proprietary and patented completion and stimulation technologies have gained market acceptance and continue to gain market share, which is helping to mitigate the severe downturn in North American drilling. This was evident by Core's first-quarter results for our Production Enhancement segment.

On the corporate side, Core's low capital expenditure requirement provides the Company with additional flexibility during these industry downturns. In 2009, Core's CapEx needs will be less than 3% of the Company's revenues against long-term industry averages of more than 10% of revenues.

Our $20 million in CapEx for 2009 will fully fund maintenance to our existing capital base and fund projects that have the best growth prospects over the next several years. Almost all capital will be focused outside of North America. Moreover, our $20 million in CapEx will be about $3 million less than our anticipated depreciation total for the year, adding to our free cash flow generation.

The Company will continue to stress free cash flow and returns as we recognize these attributes are the most sought after by Core Lab shareholders. To this end, Core generated over $47 million of free cash flow in the first quarter, the highest quarterly total ever recorded by the Company. This compares with, in total, $124 million of free cash flow for all of 2008. We've already heard from several of our large shareholders, and they are more than pleased with our Q1 free cash flow totals.

Speaking of shareholders, Core's executive and senior management and members of the Company's Board of Supervisory Directors collectively still hold over 5% of the Company's outstanding shares. This is among the highest for a publicly traded oilfield service companies. This aligns us with all company shareholders worldwide.

Looking ahead for Q2 of 2009, Core's operation C activity levels and workflows outside of North America to remain essentially constant from Q1; operating income margins for the Company to range between 26% and 27%, approximately equal to Q1 levels, indicating that our global pricing structure and platform remains constant. North American markets will continue to come under pressure from lower natural gas prices and seasonal disruptions in Canada. Finally, the Company cannot at this time give third or fourth-quarter guidance with a high degree of confidence, so we will delay until our crystal ball becomes a little clearer.

So with that, I will turn it back over to Dick for a detailed financial review.

Thank you, David.

If we look at the P&L, revenues were $178.9 million in the first quarter versus $179.4 million in the first quarter of last year and $201.2 million last quarter. So revenues were virtually flat year-over-year, but an interesting side note is that, on a constant-dollar view, our revenues would have been more than 5% higher versus last year's first quarter. From what we've seen, this compares very favorably to the members of the OSX would have reported so far this quarter with revenues on average being down.

Sequentially, our revenues followed the more typical seasonal patterns with the first quarter being lower than the prior fourth quarter. Of these revenues, services for the quarter were $141.7 million. It was actually up year-over-year when compared to $138.4 million in last year's first quarter, so an increase of $3.3 million or 2.4%.

Product sales for the quarter were $37.2 million, down 9.4% when compared to $41 million in last year's first quarter. Remember that our product sales have the greatest exposure to the North American market, the market where average rig count was down over 27% from last year's first-quarter activity levels. So you can see that our sales have held up very well in this declining market, as we suggested they would on our call last quarter.

Moving onto cost of services, for the quarter they improved to 62.3% from 65.9% year-over-year first quarter and 64.8% for all of 2008. The improvements over prior year were primarily driven by the continued growth over incremental margins as a result of additional revenues running through our cost structure.

Cost of sales in the first quarter, our cost of sales were 74.6% of revenues versus 69% in last year's first quarter and 69.7% for all of 2008. This increase in cost of sales is reflective of lower product sales being run through our manufacturing cost structure.

G&A at $9.3 million was the same as last quarter's $9.3 million. On a year-over-year basis, G&A was up by about $1 million. For 2009, we expect G&A to come in around $32 million.

Depreciation and amortization for the quarter was $5.7 million, up from $5.2 million incurred last year in the first quarter, which reflects increased levels of capital expenditures during '07 and '08. We expect depreciation in '09 to total approximately $23 million to $24 million.

Other expense this quarter is in the amount of $1.2 million, which includes FX losses of $1.9 million. We have removed this amount from our adjusted earnings for comparability discussion purposes, as our guidance given last quarter excluded any FX movements.

EBIT for the quarter, after excluding the FX impact, was $48.5 million, which was in line with our guidance for the quarter and better than our first-quarter adjusted earnings in 2008 of $48.4 million.

Now, let's talk about margins. Our first-quarter adjusted EBIT represents operating margins of 27.1% year-over-year. They are slightly higher than the 27.0% from last year's first quarter. The industry group, however, has reported, on average, margins that contracted, not expanded.

Interest expense for the implementation of APB 14-1 for the first time this quarter, as we discussed in detail on our two prior earnings calls, was $3.8 million for the quarter, down from last year's first-quarter amount of $4.8 million as reported on this same APB 14-1 basis. We expect interest expense in 2009 to be approximately $15.2 million with $14.6 million of that being non-cash.

Income tax expense was $13.6 million, which is an increase over the prior year's first-quarter expense of $12.7 million. That is primarily due to higher taxable earnings in this quarter.

Our tax rate in the quarter was 31.7%. We expect our effective tax rate for the remainder of 2009 to be in the 31% to 32% range.

Net income for the quarter, as adjusted, was $30.5 million, ahead of last year's first-quarter adjusted income of $29.5 million.

Earnings per share, as adjusted, was $1.31, in line with First Call's mean Street estimate. This also compares to the $1.23 earned on that same comparable basis in the first quarter of last year, so earnings are up around 7% year-over-year.

Now, if we go over the balance sheet, cash was up by $36.9 million to $73 million compared to the prior year-end balance of $36.1 million. We plan to use our cash for continuing the stock-repurchase program, paying cash dividends to our shareholders, and perhaps repaying some of our indebtedness. We continue to lean towards being a bit more cautious in these current economic times.

Receivables stood at $131.6 million, down from $144.3 million at the prior year-end, primarily due to sequentially lower revenues this quarter. DSOs in the quarter remained strong and were 66 days.

Inventory was down $1.9 million from our year-end balance of $34.8 million. There were no material changes in other current assets, PP&E, or intangibles, goodwill and other long-term assets.

So now if we go to the liability side of the balance sheet, our Accounts Payables were $27.2 million, down from the prior year-end balance of $41.6 million. That's primarily due to the runoff of capital items which were committed towards the end of last year, as well as just the timing of general vendor payments. Other current liabilities increased $5.3 million to $59.4 million from the 2008 year-end balance due to an increase in tax liability.

Long-term debt changed only due to the implementation of APB 14-1. Debt now stands at $198.1 million, although the face value, or amount actually owed the note holders, is still $238.7 million, the difference being the new accounting treatment.

Our coverage ratio has continued to improve, from 10 times in 2008 to 14 times in the first quarter of 2009.

Other long-term liabilities ended at $49.6 million, up from $43 million from the prior year end, primarily due to an increase in unearned revenue of $6.6 million.

Equity ended the quarter at $208.9 million, up from the prior year-end balance, caused in most part from net income generated during the quarter, offset partially by our share-repurchase program. Using annualized net income for the first quarter, our return on equity is approximately 56%. This is certainly one of the highest returns earned in the industry.

Capital expenditures for the quarter were $2.7 million, down from $5.6 million in the prior year's first quarter. We expect CapEx in 2009 to be approximately $20 million, reflecting the decrease in expected industry activity.

Now, looking at cash flow, cash flow from operating activities in the quarter was $50.1 million, and after paying for our $2.7 million in CapEx, our free cash flow, as David mentioned, was $47.4 million, which is up 139% from $19.8 million in free cash in the prior year's first quarter. On a per-share basis, our free cash flow in the quarter equaled $2.04 per share, up from $0.83 in the first quarter of 2008, so more than a 145% increase in free cash per share year-over-year. The annualized per-share yield at quarter end on this quarterly cash flow is approximately 11.2%.

During the quarter, we used our free cash flow to pay $2.3 million in dividends to our shareholders and repurchase $7.9 million in shares.

Now, with that, I will turn the call over to Monty Davis, who will go into further detail on our strong operational results.

Thank you, Dick. We had a very good first quarter as earnings per diluted share were up over our record first quarter of 2008. Our employees have done a great job positioning our business units in this market through great customer service, advanced technology products, and a focus on bringing value to our clients. We thank them for this performance.

Revenues of $178.9 million were $0.5 million less than Q1 2008, and operational earnings, excluding foreign exchange effects of $48.5 million, were almost equal to the adjusted operational earnings for Q1 2008. Overall, we earned 27% operating margins, which is on par with Q1 2008.

Our Reservoir Description revenues of $102.5 million were up over Q1 2008. Operating margins for this segment increased 440 basis points to 25.7%, yielding $26.4 million in operating earnings.

We experienced strong demand for our reservoir fluids analysis, enhanced recovery studies, gas shale studies, and tight gas sands in the Middle East more than offsetting a serious decline in Canadian oilsands projects. What late last summer looked like a very robust 2008-2009 oil sands season fell substantially when oil prices dropped. We will process only about 43% as many cores in this season as we processed in the 2007-2008 season.

Q1 saw major improvement in reservoir fluids projects, and crude oil and derived petroleum chemical products and characterization studies on a global basis.

On the international front, the major client in Indonesia had to make important decisions on the makeup of drilling mud, specifically solid sizing, for an upcoming drilling campaign. For this, he needed four throat size distribution values of the formation. The only data he could provide were laser particle size analysis of drill cuttings from a previous well. The client realized he had insufficient data for his purpose and approached Core Labs to solve his problem. We were able to provide the information he needed using a proprietary analog database which generates capillary pressure information from laser particle size values. From the capillary pressure data, four throat sizes could be attained in the proper drilling mud design to minimize his formation damage.

Also in Asia-Pacific, a client in India was concerned that the oil-based mud being used in his high-pressure, high-temperature gas wells was damaging the formation and restricting productivity. Return permeability tests were performed on representative cores at reservoir condition with specialized high-pressure, high-temperature equipment. Results indicated the mud was non-damaging. Subsequent investigations indicated that the solution to his problem lay in improving completion strategies.

We performed a complete core analysis study for a client in Malaysia that involved sedimentological, description, cartography, routine and advanced core analysis to help properly describe his reservoir and optimize production strategies in his gas field. Important information was determined using proprietary techniques and subsequent data interpretation. This information included the existence of specific sweet spots as completion targets and the likelihood that aquifer movement and subsequent gas trapping would be suppressed by the existence of [poor-lining] plays and subtle stratification of the formation.

Production and enhancement revenues declined $3.9 million or 5.9% from Q1 2008, compared to a North American rig count decline of 27%. Production enhancement operating profits were $18.6 million in the quarter. Operating margins were 29.5% for the first quarter of 2009.

Our patented HERO, SuperHERO and SuperHERO Plus+ ultra-low debris perforating charge systems continue gaining market share and are now 65% of all perforating systems that we sell. A major operator in the Marcellus Shale recently tested Core's SuperHERO charges in three wells. The results were significant improvement in their well economics, and they had specified the HERO, SuperHERO liner charges for their next 40 well completions.

Our family of stimulation diagnostic services experienced continued strong demand in Q1. We continue to serve clients in the Haynesville, Marcellus, Muskwa and Montney gas shale plays with diagnosing the effectiveness of their fracture programs. The fracturing of these reservoirs is key to optimizing production in these still-active natural gas plays.

We were also very active in the Bakken oil shale play in North Dakota and Montana. Core Labs' SpectraChem service is critical in understanding fracture fluid flowback and the connectivity of fractured formation between wells.

Our new SpectraChem Plus+ service analyzes the produced contribution from fracture fluids compared to reservoir fluids. This tells the client the transition point from cleanup of frac fluids to production of fluids from the reservoir, which is very important to long-term production from natural gas reservoirs.

Reservoir management revenue of $13.3 million grew 11% over the first quarter of 2008. Operating profits of $3.7 million were down $0.5 million from Q1 2008. Operating margins were 27.7%, down from a year ago. This was caused by a different mix of work performed within our Consortium projects.

Our Haynesville gas shale consortium continues to be very strong, adding 7 members in Q1 to bring the total to 33 members.

GMX Resources Inc., a successful independent natural gas producer developing unconventional resources operating in East Texas and based in Oklahoma City, is traditionally topping their peer group when it comes to finding and development costs, production and reserve growth. President, CEO and Chairman of the GMX Resources, Ken Kenworthy, Junior, states, "One of the keys to our success has been the ability to leverage the technical expertise in unconventional resources evaluation available through Core Labs' reservoir management team and their joint industry projects. We joined the North American gas shale project in 2006 while developing the Haynesville lower Bossier Shale from 20 vertical wells. We used the study to help us get up the learning curve of shale plays and to recognize the potential of this new shale reservoir in our operating area when compared to other, more mature shale developments. The experience prompted us to be the first member company to sign onto Core Labs' Haynesville gas shale study currently supported by over 30 companies. The projects have been invaluable in optimizing our exploitation of this reservoir."

We also completed Phase I of a project for Saudi Aramco and five joint venture partners to study tight-gas sands in Saudi Arabia. This base concentrated on the petrophysical properties to identify reservoirs that would be commercial. Phase II should begin shortly to determine the best completion and stimulation methods, taking into account fluid compatibility, rock properties, and geology of these reservoirs.

We will now open the call for questions.

Connie, you can go ahead and open the line for questions.

(Operator Instructions). James West, Barclays Capital.

Good morning, guys. Monty, I wanted to follow up on some comments you made towards the end of your commentary just a minute ago. If we think about the Middle East this year, this has been an area of growth for you over the last several years. It looks like, based on CapEx spending, outlook for most countries are going to be up, excluding Saudi Arabia. You did mention that you are seeing some growth or additional contracts in Saudi.

I guess could we talk about that market for a minute if we break out the reservoir management and then think about your other segments and services in your business? Are you seeing any type of a downturn in that business?

Well, James, we see a continued growth in the Middle East in general. Saudi Arabia -- you have to remember we just got started there with the new lab last year for the first full year, and we expect that to continue going nicely. I think we will see growth there. I'm not saying that the overall market there will. But I think our positioning there will see growth.

These tight-gas sands are very important to them. They need natural gas to power their industries, their desalination and others. So they have taken what is a new step for them, bringing in these IOCs as partners. We are in the middle of that, working with them to help come up with the best ways to develop and produce from these tight-gas sands.

So for us, maybe a little different from other people, I think we will see a little growth in Saudi Arabia and we are looking at growth in the other parts of that region as well.

Yes, James, I think, just in general, what I think a lot of the national oil companies have recognized is that they need technological supports when looking at trying to support existing production, and they will need a lot of it if they want to expand over existing production. So that is a demographic that is working for us throughout the Middle East and those reservoirs in trying to maintain and in some cases increase production.

Okay, that's very helpful. Does that comment include Iraq? I know Weatherford won a contract yesterday or today there. There's a number of major awards that are coming down the pipeline there for that market. I am not aware that you have a big position there yet, but is that something you're looking at for the future?

Well, we've consistently actually worked in Iraq and right now we have teams, technological teams, putting some of our technologies to work in the southern [Ramallah] complex. So actually Iraq, we've had a presence for an extended period of time. Right now, we are enjoying good workflows from that region.

Okay, and then just one last question from me. On the Production Enhancement business, the margin has come in a touch here. Clearly, that's due to North America. I know you made a general comment about pricing, but I think, if we hone in on that business, are you seeing pushback or are you giving up ground on pricing in your charge business, given the downturn that we are seeing in North America?

James, it is really more unit as opposed to pricing.

Okay, that's great. Thanks, guys.

Rob MacKenzie, FBR Capital Markets.

Good morning. I wanted to build on that last question if I can little bit, Dick and David, and ask you -- with the declines you are seeing in the (technical difficulty) rig count which as we know do have a big impact on your Production Enhancement business, what kind of cost-containment steps are you guys contemplating in the next quarter or two to try and support those margins?

We have taken some actions, in the manufacturing plants, to reduce staff, and we are reducing the number of shifts that we are working there. We don't want to be building inventory that isn't selling. So we are doing that to bring the cost down.

We've got several other initiatives that we're looking at that would lower our cost structure, which is important protection, but that's all I'm willing to say at this point until we have firmed up some things.

Okay. On the Reservoir Description side, can you characterize or give us a feel for what region is the weakest? Would that be characterizing stuff in the North Sea right now? (technical difficulty) there?

Our business in the North Sea primarily revolves around a lot of fluids business, so that business has actually stayed pretty robust for us. I would say that, just in general, when we look at probably our weakest market in Reservoir Description, it would have to be tied to Canada. As Monty mentioned, we would look for more robust oil sands seasoned. Although we're still going to process miles and miles of oil sand core, it is not going to be what we expected. Hopefully, we get some Muskwa and Montney shale in there to do some replacement. So I would say the North American market is certainly the weakest in Reservoir Description.

Okay. Then a final question hitting on what you just talked about, David, oil sands core is in Canada. It's my impression that the majority of that activity is from ongoing producing projects with a very small portion from potential new projects. Is that fair? Can you give us a handle on how that would fare from these ongoing projects going forward?

Yes, that is correct, Rob. We're looking at cash costs somewhere around $30 to $35 a barrel. So you are absolutely right. We are adding a lot of our work from ongoing projects, not blazing ahead for new projects.

That is correct. We are seeing some delays in projects, and that's what has been the difference in what we expected to happen based on our last summer's client contacts and indeed contracts. But if they don't take the cores, there's nothing to be done. So those have been delayed. Several companies you know have announced delays in their projects up there. So new projects, I think they're going to wait until they get a little firmer oil price.

The projects are ongoing, do have a wide range of costs to produce a barrel. That depends on the type of project they have, whether it is a mining project or a steam-assisted gravity drainage project. But if you've got -- the companies that have the infrastructure already in place for their upgraders and so on, it is still an economic play and that's where our work is coming from.

Great. Thank you, guys. I will turn it back.

Terese Fabian, Sidoti.

Thank you and good morning. I have a question on your international contracts. Can you talk a little bit about -- I know that they are longer-term, but about their length and when they would roll over? Do you think you will be seeing any kind of pricing pressure or volume drop at that time?

Well, these international projects, Therese, tend to be a lot longer in duration, three to five and in some cases longer than that. We don't have individual contracts per se. What we find, once we go to work in an oilfield, we tend to be pretty sticky. So we don't have a rollover of a contract that has pricing, per se.

So when we look at our international operations, we feel pretty confident that our pricing will remain constant, certainly over the next quarter. Since we don't have a lot of any projects rolling off in any given quarter, that consistency we hope will last throughout 2009.

In looking at the Middle East where you have a considerable amount of work, do you see any base price for oil there that would cause companies to cut back on the work?

From Core Labs' standpoint, no, not at all. Their lifting costs are so low that they realize that their emphasis has to be on expanding their production capacity.

As we have discussed in the past, we feel that the globe has plateaued at a crude oil production capacity of about 87.5 million barrels, and with any economic growth going forward, we will soon be bumping into that once again. So, I think those producers long-term do eye that they need to raise productive capacity. Certainly, they need to maintain productive capacity, something that has been very difficult for them to do even over the last five years.

Okay, good clarification. On your acquisition last year of the Turkish-based company, Catoni Persa I think, are you seeing any momentum there based on that acquisition? Is that going to give you increased reach into the Caspian area? Do you have much going on there now?

We've just acquired that towards the end of last year, but they are performing well, as we expected. Yes, we do think that will bring a platform for us to work in some new areas in the Caspian region.

Okay, and just one last question on deepwater. You mentioned work in the Gulf and also the southern Atlantic margin. Can you talk a little bit about what that is, and also as a percentage of your revenue, what is deepwater? Where does that stand?

Well, when we look at all over deepwater for the Company, somewhere probably low teens, maybe 10% to 12% total company revenues. So, we really have no one big area that is a revenue generator for us. But when we look at deepwater projects, certainly the southern Atlantic margin has been very good to this company.

We referenced, in Reservoir Management, they've had a long history there where they've got six objects on the African side, five on the Brazilian side and also in Reservoir Description. This feeds a lot of revenue from the rocks and fluids into Reservoir Description.

So we virtually think that all deepwater developments worldwide, we've either worked on the cores or on the fluids from those fields. So deepwater developments (technical difficulty) very important revenue source for us. More importantly, we tend to generate higher margins from those projects.

Okay, and just a last question -- are you seeing any change in momentum there in terms of the work you are doing?

In deepwater, no.

Okay, thank you.

Cindy Du, Jefferies & Co.

Good morning, guys. I had a question on the international regions within Reservoir Description. Monty had talked about some clients in the Asia-Pacific region and the Middle East is definitely growing strong. Can you give us a sense of the geographic exposure, per region, in that segment?

We generally, Cindy -- this is Dick. We generally talk about geography in the global sense, because our segments are broken down by business units, not by geography. So we can talk generally for the Company. Asia-Pacific is around 5%. It has grown actually on a year-over-year first-quarter basis up to 8%. So as we talked on previous calls, that has kind of been the sleeper for growth. While a lot of people talk about the Middle East growing, Asia-Pacific has been a strong grower for us.

Have there been any delays or customers talking about delaying projects in Asia-Pacific, or is that still going strong?

It is still going strong from our end at least. We are not seeing any significant delays. Most of the production in that region is needed urgently, and we see it going ahead pretty strongly (inaudible).

Okay. How much does the Middle East account for total revenues?

The Middle East is about 5% for work that is done in the Middle East. Remember, a lot of the work is brought out of region and perhaps could be done here in Houston.

With respect to that, Dick, we do a considerable amount of work from the Middle East here in this building in Houston, so as Dick said, those would be GAAP numbers being reported. We would know that Asia-Pacific and -- because some Asia-Pacific work gets done here as well -- and in other laboratories around the world, the actual total would be higher than that.

Okay. I know, in your presentations, you typically talk about the number of fields that you are working on. Can you give us a sense of how many fields you've added in the first quarter on a year-over-year basis?

I have no idea. Right now, we estimate that we are working on about 950 of those. We kind of update those on a one time on the year basis. So sometime later this year, Cindy, we can give you an update on that.

Okay, sure. Then my final question has to do with the second-quarter guidance in terms of the revenue. What are the moving pieces there, your assumptions for the Description side versus the Production Enhancement? Then I guess a step further on incremental or decremental margins, if you can?

Cindy, if you just look at -- our guidance was for companywide, and essentially, in our prepared notes, we said international would be pretty consistent with what we saw first quarter. Any falloff in revenue would probably be associated more with North America than anywhere else. I think, if you just run the numbers on that and look at a midpoint of those numbers, the decrementals you're going to generate are somewhere between 30% and 40%.

Okay, thanks.

(Operator Instructions). Veny Aleksandrov, Pritchard.

Good morning, gentlemen. My first question is related to the North America gas shale studies that you are conducting. You touched basically a little bit on these, but can you give us further updates in terms of new companies joining, what is the level of interest and have (inaudible) joining (inaudible) lately?

I can tell you, again, the Haynesville is the most popular one. It gained seven members in Q1. We have pretty close to finalized two more since the end of Q1. So, that one is still moving ahead with a lot of strong interest.

In the Marcellus, it is moving ahead strongly. We have a lot of interest in that, and we might have a few new product offerings in the second and third quarter that we are just not in a position we want to disclose right now, but there are some other areas that we're looking at.

I will just touch on the Muskwa and the Montney Shale plays in Canada. Those are in the early stages, but we are receiving cores and working on them, working with the clients in our studies up in Calgary in our new center, Canadian Center for Unconventional Oil and Gas Evaluation.

Thank you. Just another question on the SpectraChem Plus+ service and new service that you just introduced -- can you give us a little bit of more details, which areas was it introduced into, what kind of interest do you see from clients, just a little bit more details about the service?

Yes. Primarily, this new service introduction has been with the gas shales and, as Monty mentioned, the Bakken up in North Dakota and Montana. It's a brand-new service, and so we would prefer to get a couple of quarters behind us, then we will give you some read on the acceptance and penetration of that service into the workplace. I think probably last quarter it generated less than 0.5% of our revenues. So as it matures, we can give more information on that. But basically, it is using and looking at the ionic composition of the return fluids, because that of the reservoir fluid is much different than that of the frac fluid. So as we are able to tell the differences between the ionic compounds in the frac fluid versus the reservoir fluids, we can tell when the reservoir fluids start to return. That's kind of it in a nutshell.

Thank you so much. I appreciate it. Those were my questions.

(Operator Instructions)

Okay, Connie, I think we will go ahead and wrap it.

In summary, Core's operations posted a good quarter for the first quarter. We have never been better operationally and 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 oil field services sector. This positions Core well for the challenges that await during the remainder of 2009.

So, in closing, we would like to thank all of our shareholders, the analysts that follow Core, and especially all of our hard-working employees for spending their morning with us, and we look forward to our next update. Thanks, and good-bye.

This concludes today's Core Laboratories 2009 first-quarter earnings call. You may now disconnect.