CLB

Strategic Priorities and Long-Term Financial Tenets

• Core long-term strategic objectives: introduce new products and services in key geographic markets; maintain a lean, focused organizational structure; return excess free cash flow to shareholders while preserving a strong balance sheet.
• Core long-standing financial tenets: maximize free cash flow; maximize return on invested capital; return excess free cash to shareholders.
• Maintain a disciplined capital deployment strategy aligned with the company's asset-light business model, where capital expenditures have historically averaged 2-4% of total revenue.

Shareholder Return Activities

• Returned free cash to shareholders via quarterly dividend and share repurchases in Q2 2026: repurchased more than 214,000 shares for a total value of $2.7 million, marking the seventh consecutive quarter of share buybacks.
• The company intends to continue using free cash flow to fund the quarterly dividend and share repurchases while maintaining a strong balance sheet.

Reservoir Description Operational Highlights

• Secured new project work for offshore exploration, appraisal, and carbon capture and storage projects across multiple non-conflict regions, with notable growth in West Africa.
• Awarded a reservoir characterization contract for a successful offshore Namibia exploration well, and initiated a reservoir characterization program supporting Murphy Oil's discovery offshore Cote d'Ivoire, utilizing the company's proprietary dual energy CT technology for accelerated core analysis.
• Provided specialized laboratory testing for solvent-assisted thermal recovery projects for a Canadian heavy oil operator, generating critical data to evaluate solvent injection system effectiveness and maximize oil recovery.

Production Enhancement Operational Highlights

• Growing adoption of the newly commercialized Impulse perforating technology across North American unconventional basins: the technology generates a secondary pressure pulse after initial perforation to improve near-wellbore connectivity, reduce breakdown pressures, and speed up stage completion. It has applications in conventional/unconventional reservoirs and geothermal wells in both domestic and international markets.
• Expanding adoption of the company's completion diagnostic tracer technologies across the development cycle: projects included identifying high-yield landing intervals in West Texas, confirming sustained gas production from long lateral well toes in Louisiana, and evaluating multilateral water shutoff programs in Western Canada, helping operators refine completion designs and optimize production.

• Q3 2026 total revenue is projected to range from $128.5 million to $135.5 million, representing sequential growth driven by improvements in non-conflict international regions including the South Atlantic margin and Asia Pacific.
• Q3 2026 Reservoir Description revenue is projected to range from $81 million to $84 million, with operating income of $5.5 million to $7.9 million.
• Q3 2026 Production Enhancement revenue is estimated to range from $47.5 million to $51.5 million, with operating income of $4.8 million to $6.9 million.
• Total Q3 2026 operating income is projected to range from $10.5 million to $15 million, for an approximate operating margin of 10%. Q3 2026 diluted EPS is expected to range from $0.12 to $0.20.
• Full year 2026 G&A (excluding unusual items) is expected to total approximately $43 million to $45 million. Full year 2026 capital expenditures (excluding UK facility rebuilding costs covered by insurance) is projected to range from $15 million to $18 million.
• Management expects long-term demand for hydrocarbon exploration and production investment to remain strong, driven by natural production decline rates, the need to replenish drawn-down global inventories, and renewed focus on energy security, with a projected rebound in global oil demand growth in 2027. Management expects a meaningful rebound in offshore reservoir characterization project activity by late 2026 or early 2027. All guidance excludes foreign exchange gains/losses and assumes a 25% effective tax rate.

CORE Labs has two operating business segments.

1. Reservoir Description: Q2 2026 revenue was $79 million, down 4% sequentially from Q1 2026 and down 9% year-over-year from Q2 2025. Operating income was $3.7 million, with an operating margin of 5%, down 100 basis points sequentially. This segment accounts for 63.4% of total Q2 2026 revenue.
2. Production Enhancement: Q2 2026 revenue was $46 million, up 15% sequentially from Q1 2026 and up 5% year-over-year from Q2 2025. Operating income (excluding unusual items) was $5 million, with an operating margin of 12%, up 700 basis points sequentially. This segment accounts for 36.6% of total Q2 2026 revenue. Total company Q2 2026 revenue was $124.6 million, up 2% sequentially and down 4% year-over-year. Adjusted EBIT was $9.4 million with an 8% margin, up 210 basis points sequentially. Adjusted diluted EPS was $0.11, compared to $0.06 in Q1 2026 and $0.19 in Q2 2025.

• The ongoing military conflict in the Middle East (starting Q1 2026) has caused project delays, logistical disruptions, and reduced crude assay and reservoir characterization activity due to the closure of the Strait of Hormuz and widespread disruption to global maritime hydrocarbon transportation. The Reservoir Description segment has seen the greatest negative impact from this conflict.
• Escalating attacks on energy infrastructure and evolving sanctions in Russia and Ukraine have created additional operational headwinds, negatively impacted service revenue, and created complicated regulatory navigation with conflicting requirements from different governments.
• Geopolitical conflicts have lengthened collection timelines for receivables in affected regions, and created sustained extra costs for the company that have increased year-over-year cost ratios for service segments.
• Near-term global crude oil demand has been revised downward by major energy agencies due to the conflicts, higher energy prices, and constrained product availability. The timing of recovery in Middle East markets remains highly uncertain, and further escalation of geopolitical tensions could continue to negatively impact results.
• Crude oil price volatility has also reduced demand for conflict-region services tied to crude oil trading and transportation.

Q: Don Christ (Johnson Rice) asked how much non-conflict regions have offset reduced crude assay activity from the Middle East and Russia/Ukraine, and whether offshore project activity is seeing increasing client conviction after years of projected growth. He also asked if a previously mentioned recovery-boosting product tied to initial completions is the newly discussed Impulse technology.

A: Management noted CORE earns revenue at both the loading and destination ends of crude cargo shipments, so reduced shipments out of the Strait of Hormuz hits revenue at both points. The company is executing a targeted cost reduction plan for the affected assay business while retaining experienced staff to be ready for when activity rebounds. Management confirmed growing client conviction for offshore projects, and expects a strong rebound in offshore reservoir characterization activity by late 2026 or 2027, after some delayed projects from dry hole results in 2025. Management explained the previously mentioned product could refer to either Impulse, the new perforating technology that improves near-wellbore access to boost recovery, or enhanced oil recovery laboratory services that validate techniques to increase unconventional recovery, which depend on effective initial completion stimulation.

Q: Sean Mitchell (Daniel Energy Partners) asked for additional context on the recent UAE regulatory approval for SpectraSTEM and SpectraSCAN, and asked about normalization trends in the Middle East and rising exploration activity outside the region.

A: Management explained the UAE approval opens regulatory access to deploy the company's isotope-based diagnostic technologies for additional upstream projects, expanding service offerings for existing clients in the region. Management noted that after a temporary ceasefire, some tanker activity resumed but has not rebounded to pre-conflict levels, and field operations for subsurface projects that were restarting have pulled back again following renewed escalation. Management confirmed that exploration activity is clearly rising outside the Middle East, with growing activity in West Africa, the South Atlantic margin (Brazil), and Asia Pacific, with additional unannounced projects expected to come to fruition in coming quarters.

Q: Sofia Vallecio (Bank of America) asked whether the sequential Q3 growth projected in guidance comes from any normalization in the Middle East/Russia-Ukraine, or entirely from growth in other regions offsetting conflict impacts, and asked for early visibility into Q4 2026 results.

A: Management explained the projected Q3 growth is driven entirely by mid-single-digit growth in Reservoir Description from non-conflict regions (Africa, Brazil, Asia Pacific, parts of Europe), with only marginal improvement in the Middle East. For Production Enhancement, Q3 growth is expected to come from modest sequential improvement in US land activity, plus slight growth in international product sales driven by the Eastern Hemisphere and Africa. Management noted it is too early to provide Q4 guidance, as the timing and resolution of the ongoing Middle East conflict is unknowable, and navigating conflicting sanctions requirements in Russia and Ukraine remains very challenging, hence the wide projected range in Q3 guidance to account for different conflict outcomes.