Good morning, and welcome to the Core Laboratories' Third Quarter 2021 Earnings Conference Call. [Operator instructions] 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 Debbie. 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 third quarter 2021 earnings call. This morning, I'm joined by Chris Hill, Core's Chief Financial Officer; and Gwen Schreffler, 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 Q3 performance. In addition, we'll review Core's strategies and the three financial tenets that the company 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 Core Lab technologies as well as highlighting some of Core's operations and major projects worldwide. We'll then open the phone for a Q&A section. 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 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 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 other rules. For a more detailed discussion of some of the foregoing risks and uncertainties, please see Item 1A-Risk Factors in our most recent annual report on Form 10-K as well as other reports and registration statements filed by us with the SEC and the AFM. Our comments include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing our Q3 quarter results. Those non-GAAP measures can also be found on our website. With that said, I'll pass the discussion back to Larry.

Thanks Gwen. Our thoughts remain with all those that continue to be affected by the global pandemic. During the third quarter, global caseloads rose and approach the highest levels recorded over the course of the pandemic. This negatively and unevenly impacted global commerce and continue to pose headwinds to oilfield activities. Still, global demand for hydrocarbons continues to rise and inventories continue to decline, signaling positive trends for future oilfield activity. Virus related issues are still complex, still causing unpredictable schedules in our clients' activities, travel complications and logistical hurdles for field services and product shipments. A number of countries across our global operating network saw increasing COVID case counts and many countries maintained, enacted, reenacted or expanded precautionary measures during Q3. Despite these hurdles, Core remains ready to fully service our clients' needs. And we see a gradually improving landscape for client activity. During the third quarter, tropical weather systems resulted in disruptions in and along the Gulf of Mexico, significantly reducing client activity for several weeks. Multiple Core Lab offices along the Gulf Coast were affected by storm related closures and subsequent power outages many lasted for weeks. I'm happy to report that all of our employees are safe, and that there was only minor temporary impact on the company's physical infrastructure. We appreciate the hard work of our employees along the Gulf Coast to both mitigate damage and spool of operations as quickly as possible. Looking at Core Lab's performance in the third quarter of 2021, the company saw increased cash from operations and increased free cash flow. In addition, operating margins expanded in both segments during the quarter. At the same time, Core continued to execute on its strategic financial objectives by strengthening its balance sheet, reducing net debt and improving its leverage ratio compared to…

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 20%. So accordingly, our discussion today excludes any foreign exchange gain or loss for the current and prior periods. Additionally, the financial results for the third quarter of 2021 include a charge of $6.5 million for non cash stock compensation expense associated with the future vesting of performance shares for certain employees who have reached their eligible retirement age. Although, these performance shares, share awards continue to be subjected to future vesting schedules and company financial performance metrics; full recognition of the expenses required by US GAAP for employees when they attain their eligible retirement age. Now, let's review the income statement. Revenue from continuing operations was $118 million in the third quarter, comparable to $118.7 million in the prior quarter and up 12% year-over-year. Geographically, the US market continued to grow. This was offset by a sequential decrease in international revenue. Year-over-year international revenue for the quarter is up 9% and the US is up almost 20%. As Larry mentioned earlier, there continues to be challenges with supply chains and workflow disruptions associated with the pandemic have also continued to have an impact on progression of projects in our international operations and on international shipment of products. The third quarter results were also adversely impacted by the severe weather events in the Gulf of Mexico. Of this revenue service revenue, which is more international was $84.8 million for the quarter down slightly from $86.3 million last quarter. The decrease in service revenue is primarily associated with the ongoing disruptions and delays caused by the pandemic in many regions outside the…

Thank you, Chris. The global crude oil market continues to tighten as demand for crude oil approaches pre COVID levels, resulting in noticeable increases in the crude oil commodity prices. Current crude oil commodity prices should also support a higher level and more accelerated pace of investment and international offshore crude oil development projects for 2022 and beyond. These crude oil market fundamentals are reflected in the gradual increase in the international rig count with more oilfield equipment coming under contract as the cycle strengthens in IOCs, NOCs and independent expand their investments in maintenance of existing fields, and development of new fields or field extensions. We anticipate operators to increase capital spending by 15% to 20% for North America, and double digits for international in 2022. Core is well positioned to capitalize on this growth opportunity given our global presence and proprietary technologies. With Core Lab having more than 70% of its revenue exposed international activity, both business segments remain active on international projects. As additional field developments emerge, wells need to be drilled and reservoir rock and fluid samples before reservoir description more fully participate in the cycle. As disruptions from the pandemic abate, the expansion of international development provides growth opportunities for both segments into 2022 and beyond, with a particular focus on the South Atlantic margin, Latin America and the Middle East. As Chris mentioned, international revenue was up 9% year-over-year for the third quarter. For the fourth quarter 2021, Core expects continued growth and year-over-year international revenue. Additionally, growth in US activity is projected to moderately progress 2021 comes to a close. Core projects fourth quarter revenue to range from $121 million to $124 million and operating income of $13 million to $15.5 million yielding operating margins of approximately 12%. As previously discussed in Core's prior earnings calls, financial performance and incremental margins will be temporarily impacted as some cost reduction measures announced in 2020 continue to be rolled back. Once these costs are fully restored, Core expects its historical incremental margin performance to return as client activity expands. EPS for the fourth quarter of 2021 is expected to be approximately $0.18 cents to $0.22. In summary, Core remains committed to its strategic plan of expanding market penetration by introducing new technologies and targeting new market opportunities. Core remains focused on generating free cash flow and reducing net debt while maximizing return on invested capital. As part of Core's 2021 strategic focus, the company will continue to invest in targeted client driven technologies that aim to both solve problems and capitalize on Core's growth opportunity. The company remains well positioned to meet the needs of its clients as the energy industry cycle unfolds. The company's fourth quarter 2021 guidance is based on projections for underlying operations, and excludes gains and losses in foreign exchange. Fourth quarter 2021 guidance also assumes an effective tax rate of 20%. Now I'll turn it back over to Larry.

Thanks Gwen. First, I'd like to thank our global team of employees for providing innovative solutions, integrity, and superior service to our clients. The team's collective dedication to servicing our clients has been very visible during the current challenges, and it's the foundation of Core Lab success. Turning first to reservoir description. For the third quarter, revenue came in at $79 million, up slightly sequentially. Operating Income ex-items was $8.6 million, up 14% sequentially and operating margins ex-items improved to 11%. The segment improvements occurred despite disruptions caused by Gulf Coast storms and the global pandemic. By the nature of the business reservoir description's performance historically has lagged directional changes in client activity. As industry activity recovers, reservoir description will respond more slowly than say oilfield service companies with direct exposure to well construction and other early cycle client spending. As we look ahead, we see the growing international rig count is a harbinger of an improving landscape for reservoir description. A trend that we project will play out throughout 2022 and beyond. Now to some operational highlights. During the third quarter of 2021, Core's Advanced Technology Center in the United Kingdom launched an analytical program to provide both Core and Fluid Analysis on a client - for a client operating in the North Sea. Conventional core was recovered from sandstone strata in the targeted reservoir interval. Once the core reached the rig floor upon recovery from the subsurface, they were stabilized using proprietary Core Lab techniques that ensured that the natural rock fabric and pore fluids were retained during handling and transportation. Upon arrival at the laboratory, the core was scanned using Core's proprietary non-invasive testing and reservoir optimization technologies branded as NITRO, NITRO includes proprietary dual energy, computed tomography and high resolution spectral gamma logging. The results quickly…

[Operator Instructions] The first question comes from Ian Macpherson with Piper Sandler.

Good morning, everyone. Larry, when we think about the upstream spending growth rates that you're contemplating for next year, which are in the fold of what others are saying, if not a little bit more conservative, we know that service pricing needs to increase pretty substantially to recover the inflation that you're experiencing. And so when you think about total spend minus OFS pricing, it doesn't seem to leave enough dollars left in the piggy bank for the requisite activity increase that we need to balance oil markets next year. So curious on your thoughts on how this unfolds with pricing recovery for Core Lab and how you think those spinning growth rates that you talked about should translate toward your revenue opportunity next year in this inflationary context?

Yes, okay. Good question, Ian. So first maybe frame where we think we're kind of what we're seeing today with our client conversations about our outlook come and going into next year for 2022. So we'd say US activity likely to grow 15% to 20%, still some conversations going on with both our domestic and international clients. But we think that's a reasonable growth rate that's going to occur in the US. And then on the international side, from what we see today, we're comfortable saying that it's going to grow double digits. And so I think we'll dial that in, I think one of the things that certainly, I think a need across the industry for improvement in pricing. I think that'll come. I think one of the unique situations with Core Lab is we've got a lot of operational leverage in our organization, in that with the automation that we put into the system, we can generate a substantial amount more revenue without having to grow our headcount proportionally. So while I do think prices will firm up as demand and activity levels pick up, I think the way we've structured the company coming out of this call it period of upheaval, has us well positioned to see incremental margins start to trend back toward our traditional levels, it won't happen overnight, and it won't happen in one or two quarters. But we'll see that start to rise back into the call it 50% for reservoir description, and call it 20% to 30% or a little bit more on the product side.

That's really helpful. Thanks Larry. Now that you've - the road is - obviously your margins need some time to normalize, but just from a total health of the market and demand growth respect of things normalized. So you've gotten your balance sheet on more solid footing than last year. How are you thinking about the opportunities strategically for the company with respect to M&A or other strategic opportunities for Core Lab in a market that's now positioned for growth rather than contraction?

Sure, I'd say first of all, our attention is always drawn toward our internal pipeline for technology development. It is a foundation for where we go we've got a number of very intriguing technologies, some including nuclear physics sort of revolutionary approach to how we'll address core analysis in the future. And then on a product side, a number of innovations both on diagnostics and an energetic systems. So first, our attention goes to growth opportunities, we have an investment opportunities we have there, we're always looking and always listening to opportunities on the M&A side, I can say that we go through a rather rigorous evaluation of the technical and financial consequences of M&A. As we look at things, we, as you mentioned, we now have called the balance sheet flexibility to act on those things. The one thing I would say in terms of M&A as we look over the landscape of opportunities that are out there, the Core Lab acts on an M&A opportunity. It'll be something that you look at and go, well, that makes sense that sticks close to Core Lab's wheelhouse of things we know. What you won't see us do is get adventurous into things that have you scratching your head is why is Core Lab think they know anything about that?

Great answer. Hey, thanks Larry. I'll pass it over.

Okay, sure. I think we've got a pretty full earnings release agenda this morning with other companies going so since there are no more questions we'll wrap up here. In summary, Core's operational leadership continues to position the company for improving client activity levels in both the US and international markets in 2022 and beyond. 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 generating free cash and returns on invested capital, in addition to our quarterly dividends will bring value to our shareholders. The growth opportunities driven by both the introduction of problem solving technologies and new part market penetration. In the near term, Core will continue to use free cash to strengthen its balance sheet. 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 has now concluded. Thank you for attending today's presentation. You may now disconnect.