IF CORE LABS IS GOING DOWN, OIL IS GOING UP

Keith Schaefer
1

Surprisingly…….the most bullish recent piece of news for the price of oil in 2020 DID NOT come from the Middle East.

Not that the massive escalation of Middle East issues with the killing of Iran’s top general isn’t hugely bullish news for oil.

However, the bomb that the oil service company Core Labs (CLB:NYSE) dropped on New Year’s Eve is even bigger and should have the attention of all investors — because it gives us a very clear view as to what is coming in the oil market in 2020.

Core Labs is #1 worldwide in reservoir tweaking–they’re in most every oilfield in the world and have one of the best views as to how oil production is going.  They’re right beside the oil producers in the field.  They know how much oilfields activity is declining or moving up before the public does.

And from what they told the Market–let me tell you friends–I haven’t been this BULLISH ON OIL STOCKS for a decade!

That last time I was this excited my portfolio was loaded with triple digit winners within six months.  The only difference is that this time energy stocks are even cheaper.

 
Ugly, Ugly, Ugly – Unless You Are Long Oil

Core Labs is an important bellwether, or more specifically a leading indicator, for where oil prices are going.

If business is bad for Core Labs, it is telling us that supply is likely to lower, and oil prices are going up.

And while the news isn’t pretty for Core Labs, it most definitely is pretty for oil bulls.

Core Labs share price ended December 30 at $46.46.

After releasing a press release on that day after hours……the stock opened a shocking 21% lower on December 31.

Core Labs didn’t disappoint the market, it shocked the market.

For a press release to have that kind of impact for a company this well known the news has to be more than bad, it has to be distressingly bad……as in far beneath what was believed to be the plausible “worst-case” scenario.

What Core Labs did was hit the market with a hat-trick of painful cuts (1):

Painful Cut #1 – Cut guidance for the last quarter, Q4 2019

Painful Cut #2 – Cut guidance for the next quarter, Q1 2020

Painful Cut #3 – Cut the amount they pay to shareholders, their sacrosanct dividend

Yep, they covered pretty much everything…….Core Labs told investors that most recent results are far worse than expected, results will get worse going forward and that they can no longer afford to pay the current dividend.

The cut to Q4 2019 earnings and earnings per share was 15%.  That is shockingly large considering that initial guidance came out almost a full month into the quarter at the end of October.

In two months business has fallen apart, and remember this isn’t a company that has walk-in traffic.

Customers must be backing out of agreed-upon-business for this kind of surprise to happen.

Business must be rapidly deteriorating if they cut to the dividend — which will immediately be slashed to 25 cents per share from 55 …read more

Source:: Keith Schaefer