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M* does not have a moat/trend rating on CLB.

I agree that the employees are quite useful, so perhaps classify that as intangibles moat source versus a low-cost advantage for instance. However, it's very hard to argue, as you mention, that CLB's employees are that much smarter or their employee base is larger than HAL/SLB/BHI without numbers that usually are not disclosed.

I think your last line may capture things more directly though.

Deep sea and shale are tough environments and CORE has data and patents that put them slightly ahead of competition.

My impression is that these studies are fairly unique within the industry (at least HAL/SLB/BHI doesn't advertise them), which promotes a sort of interesting network effect. The customers have provided their data to CLB as part of a consortium in exchange for CLB's analysis of all of the data provided by the members. Therefore, the customers are probably much more likely to rely on CLB's insights in the future.

More importantly, CLB now has a huge base of data/analysis to use to analyze similar wells in the future for the same customers or to attract new customers with its unique well insights. That kind of data set strikes me as hard to replicate, particularly if it includes data that SLB/HAL/BHI might not have routine access to (or can retain for themselves) when they drill the wells. Alternatively, SLB might have to provide services for all 1,000 wells in the data set (for example) to capture the same amount of data that CLB received as part of the consortium.

On the flip side, SLB/HAL/BHI are probably involved in tens of thousands of wells every year, versus CLB's exposure to a smaller data set. That said, I recall that CLB mentioned at one time that they saw 1/3 of all shale gas data worldwide, but I don't recall the exact quote.

The business strikes me as attractive, but we need to look at these consortium a a bit more, as I think they are the more likely direct source of CLB's ongoing competitive advantages. Depending on the nature of the consortium, we'll have a better idea whether the business really does have a moat, or if it happens to operate a very asset-light business model that generates lucrative ROICs but doesn't have any true competitive advantages.

From 10-K:

We also develop and provide industry consortium studies to provide critical reservoir information to a broad spectrum of clients in a cost effective manner such as our multi-client regional reservoir optimization projects for both North America and international studies, especially studies pertaining to unconventional reservoirs such as our ongoing global shale study that examines the shale potential in central and southern Europe, north Africa, India, China and Australia among other regions and a joint industry project evaluating the petrophysical, geochemical and production characteristics of the Eagle Ford shale in South Texas. Additional studies being performed are our long running deep water Gulf of Mexico studies, a worldwide characterization of tight-gas sands, with special emphasis in the Middle East region, deepwater studies off the coasts of West Africa and Brazil and a study on the petroleum potential of offshore Vietnam and a global gas shale study.


Operating income for this segment increased to $21.9 million in 2011 compared to $19.8 million in 2010 and $14.6 million in 2009. The increase in operating income in 2011 as compared to 2010 was primarily related to increased interest in our consortium projects such as the Global Gas Shale Project, the Marcellus Shale Evaluation study and the Eagle Ford Shale study along with the continued participation in our North American Gas Shale Study and our new Worldwide Oil and Natural Gas Shale Reservoir Study. The increase in operating income in 2010 from 2009 was primarily related to the increased interest in our proprietary studies, including studies of offshore Ivory Coast, Ghana and Nigeria, a gas-shale reconnaissance project in Indonesia and detailed proprietary reservoir studies for several companies active in the Wolfberry play in West Texas.
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