Replies to post #5919 on The Rising Influence of Rising Affluence

[DewDiligence]

CLB—Some of the measurement techniques are extremely primitive so the only way i think anyone could make money on those measurements is thru volume.

Well, we know from CLB’s financial statements that the business has high margins. In 3Q12, the operating margin in the Reservoir Description segment was 30% and the operating margin in the Production Enhancement segment was 31% (#msg-80740915). The overall operating margin in 3Q12 was 30%.

This is not what I would call a volume-oriented business.

[DewDiligence]

CLB—The market-share concerns from 3Q12 (#msg-80145914) appear to have disappeared into thin air. CLB now seems to be firing on all cylinders; on the 1Q13 CC, no analyst was able to poke a hole in the business model.

[DewDiligence]

Morningstar gushes about CLB:

http://news.morningstar.com/articlenet/article.aspx

Core Laboratories (CLB) operates under a simple premise: The better that oil companies understand their reservoirs, the more oil they will ultimately produce. Core facilitates better understanding by providing the descriptive analysis of the geological and fluid characteristics of reservoirs to increase production both in the immediate term and over the life of the asset. Core's services are unique and highly valuable--the firm generates the highest returns on invested capital in the oil services industry and shows no signs of slowing down.

No argument about CLB’s stellar return on capital; however, the uniqueness of what CLB does (or the lack thereof) has been broached in prior threads on this board.

Understanding a reservoir involves three components: the qualities of the rock, how the fluids (oil, natural gas, and water) will flow through the rock over time, and how to prevent or mitigate damage to the reservoir, which could impair recovery. Core provides services for all three, on a piecemeal as well as an integrated solution basis. It is the only independent service company in the world to offer many of these services globally (although some of the international oil companies do comparable work internally), and its accumulated knowledge and capabilities have served as a substantial barrier to competition.

Again, this has been the subject of debate on this board.

We believe Core's [competitive] moat is as wide as they come.

Ditto the comment above. All told, CLB is clearly a great oil-services company, and I’ve made good money by owning it. However, the greatness of the company’s business model is largely or fully reflected in the valuation, IMO. Comments welcome.

p.s. CLB set an all-time high today. It is up 10-fold from its 2009 low (split-adjusted).

[DewDiligence]

Charlie, I’d be interested in knowing how your view of the competitive landscape for CLB has changed (it at all) in the past 18 months. Regards, Dew