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Rob MacKenzie - FBR Capital Markets

So effectively, as the clients – as operators try these more, they spend the money and time on analyzing it so it’s a net positive for you guys?

David Demshur

That is correct. We’ve got a good example in the Granite Wash, where it was a 21-stage completion. They used the sliding sleeve technology. And after they completed their stimulation, the well flowed exactly what they thought it would flow, so they thought they had a very successful completion and stimulation of all 21 stages. What our tracers did show that the first nine stages did not take any stimulant and all the production was essentially from the last 12 stages. So that client, in the next drilling operation, used plug and perf, and made their best well that they ever have.

So it’s on a case-by-case basis, Rob, but it is providing additional fracture diagnostics services to the company.

My understanding of Core (don't pay super-close attention) here was that the firm's equipment (explosive guns) don't see a huge amount of competition, but this type of analysis above is exactly where SLB/HAL/BHI compete rather fiercely in. The margins are quite high because Core focuses on the analysis/consulting side of things where margins can be very high but the market/dollars available is somewhat small. Alternatively, providing pressure pumping, cementing, fishing, drill bits and the associated equipment can be a lower margin business, but the market sizes are huge and returns can still be well above the cost of capital.

kit - would love to hear your thoughts on Core's moat as well as if you think the moat is expanding or shrinking. This type of analysis would be an interesting value add to your regular company posts.
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