Core Laboratories Inc. /DE/ — Interim / Quarterly Report 2013

Aug 5, 2013

CORE LABORATORIES N.V.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IAS 34, "INTERIM FINANCIAL REPORTING"

Semi-Annual Report for June 30, 2013

Herengracht 424 1017 BZ Amsterdam The Netherlands

CORE LABORATORIES N.V.

CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS SEMI-ANNUAL REPORT FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2013

TABLE OF CONTENTS

Semi-Annual Report of the Directors Interim Balance Sheets (Unaudited) as of June 30, 2013 and December 31, 2012 Interim Income Statements (Unaudited) for the Six Months Ended June 30, 2013 and 2012 Interim Statements of Other Comprehensive Income (Unaudited) for the Six Months Ended June 30, 2013 and 2012 Interim Statements of Changes in Equity (Unaudited) for the Six Months Ended June 30, 2013 and 2012 Interim Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2013 and 2012 Notes to the Condensed Consolidated Interim Financial Statements

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Semi-Annual Report of the Directors

Currency - United States Dollars (“$”)

Business review

Core Laboratories N.V. is a Netherlands limited liability company. It was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description, production enhancement and reservoir management products and services to the oil and gas industry. These products and services can enable our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. Core Laboratories N.V. has over 70 offices in more than 50 countries and employs approximately 5,000 people worldwide.

References to "Core Lab", "we", "our" and similar phrases are used throughout this Semi-Annual Report and relate collectively to Core Laboratories N.V. and its consolidated affiliates.

Our business units have been aggregated into three complementary segments, which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields.

• Reservoir Description: Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry.

• Production Enhancement: Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

• Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs.

Financial Review

Revenue

Services Revenue

Services revenue increased to $370.2 million for the six months ended June 30, 2013, up 9% when compared to $338.4 million for the same period of 2012. The increase in services revenue was primarily due to our continued focus on worldwide crude-oil related and large natural gas for liquefaction projects, especially those related to the development of deepwater fields offshore West and East Africa, the eastern Mediterranean, and the Gulf of Mexico.

Product Sales Revenue

Revenue associated with product sales increased to $153.9 million for the six months ended June 30, 2013, up 8% from $142.8 million for the same period of 2012. The increase in product sales revenue was due to projects providing permanent reservoir monitoring systems and greater market penetration of our patented and proprietary perforating technologies despite the decline in drilling activity in North America. The average rig count in North America was down over 10% during the first half of 2013 compared to the same period in 2012.

Operating expenses

Cost of Services

Cost of services expressed as a percentage of services revenue was 61% for the six months ended June 30, 2013, an improvement when compared to 62% in the same period in 2012. During 2013, we continued to recognize the benefits of a lower fixed cost structure.

Cost of Product Sales

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Cost of product sales expressed as a percentage of product sales revenue was 72% for the six months ended June 30, 2013, down from 75% during the same period in 2012. The decrease in cost of sales as a percentage of product sales revenue was primarily due to the growing demand for our new technologies which led to an overall increase in sales, which improved absorption of our fixed cost structure.

Operating margin

Operating margin for the six month period ended June 30, 2013 was 35.4% an increase of 90 basis points over the 34.5% for the same period of 2012. Our margins expanded as a result of an improved mix of services and products sold as well as from higher revenues generated through our fixed cost structure.

Cash Flow

The following table summarizes cash flows for the six months ended June 30, 2013 and 2012 (in thousands):

Cash provided by/(used in): Operating activities Investing activities Financing activities Net change in cash and cash equivalents	Six Months Ended June 30,	Six Months Ended June 30,	% Change
	2013	2012
			33% 40% 19% 167%
	$ 3,994	$ (5,924)

The increase in cash flows from operating activities for the first six months of 2013 compared to the same period in 2012 was primarily attributable to an increase in net income and changes in current liabilities, prepaid expenses and other current assets.

Cash flows used in investing activities were higher during the first six months of 2013 when compared to the same period in 2012 primarily due to an increase in capital expenditures. Capital expenditures were $17.9 million and $14.9 million for the six month periods ended June 30, 2013 and 2012, respectively.

Cash flows used in financing activities increased for the first six months of 2013 when compared to the same period in 2012. During the first six months of 2013, we repurchased 742,510 shares of our common stock for an aggregate purchase price of $100.4 million compared to the repurchase of 403,383 shares for an aggregate purchase price of $50.2 million during the same period in 2012. In the first six months of 2013, we increased the amount outstanding on our Credit Facility by $16.0 million as compared to reducing it by $18.7 million during the first six months of 2012.

Equity

During the six months ended June 30, 2013, we repurchased 742,510 of our common shares for $100.4 million. Included in this total were rights to 26,333 shares valued at $3.7 million that were surrendered to us pursuant to the terms of a stock-based compensation plan in consideration of the participants' tax burdens that may result from the issuance of common shares under that plan. Such common shares, unless canceled, may be reissued for a variety of purposes such as future acquisitions, nonemployee director stock awards or employee stock awards.

In February and May 2013, we paid a quarterly dividend of $0.32 per share of common stock. In addition, on July 9, 2013, we declared a quarterly dividend of $0.32 per share of common stock which will be paid on August 19, 2013 to shareholders of record on July 19, 2013.

Segment Analysis

Our operations are managed primarily in three complementary segments - Reservoir Description, Production Enhancement and Reservoir Management. The following tables summarize our results by operating segment for the six months ended June 30, 2013 and 2012 (in thousands):

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Revenue: Reservoir Description Production Enhancement Reservoir Management Consolidated Operating income (loss): Reservoir Description Production Enhancement Reservoir Management Corporate and Other1 Consolidated	Six Months Ended June 30,	Six Months Ended June 30,	% Change
	2013	2012
			5% 11% 23% 9% 2% 13% 15% NM 9%
	$ 524,066	$ 481,197
	$ 71,307 71,281 17,217 (514)	$ 70,179 63,030 14,998 (2,680)
	$ 159,291	$ 145,527

(1) "Corporate and Other" represents those items that are not directly related to a particular segment

"NM" means not meaningful

Reservoir Description

Revenue from the Reservoir Description segment increased 5%, or $11.9 million, to $254.5 million for the six months ended June 30, 2013, compared to $242.6 million in the same period of 2012. This segment’s operations, which focus on international crude-oil related products, continued to benefit from increased activity in large-scale core analyses and reservoir fluids characterization studies in the Asia-Pacific areas, offshore West and East Africa, the Eastern Mediterranean region, the Middle East, including Iraq, Kuwait, and the United Arab Emirates, and deepwater Gulf of Mexico.

Operating income increased by 2%, or $1.1 million, to $71.3 million for the six months ended June 30, 2013, compared to $70.2 million for the same period of 2012. Operating margin for the six months ended June 30, 2013 was 28%. This increase is a result of higher sales, including a better mix of projects aimed at more complex reservoirs. This segment emphasizes technologically demanding services on internationally-based development and production-related crude oil projects rather than the more cyclical exploration-related projects.

Production Enhancement

Revenue from the Production Enhancement segment increased by 11%, or $21.4 million, to $217.6 million for the six months ended June 30, 2013, compared to $196.3 million in the same period of 2012. The revenue increase was primarily due to demand for our diagnostic services, both for fracture diagnostics in North America and flood diagnostics internationally, and our patented perforating system technology.

Operating income increased by 13% to $71.3 million for the six months ended June 30, 2013 over the same period of 2012. Operating margins increased to 33% in the six months ended June 30, 2013. The increase in operating income from 2012 to 2013 was primarily driven by increased demand for the company's proprietary and patented hydraulic fracture and field-flood diagnostic technologies, such as SpectraChem™, ZeroWash[®] , and SpectraFlood™ tracers in North America and internationally.

Reservoir Management

Revenue from the Reservoir Management segment increased by 23% to $52.0 million for the six months ended June 30, 2013 compared to $42.3 million for the same period of 2012. The increase in revenue was due to instrumenting two permanent reservoir monitoring projects and ongoing interest in several of our existing multi-client reservoir studies such as the Duvernay Shale Project in Canada and the Tight Oil Reservoirs of the Midland Basin study as well as our new industry project to evaluate the potential of the Pearsall shale, which underlies the shallow portions of the Eagle Ford shale in South Texas.

Operating income was $17.2 million for the six months ended June 30, 2013 compared to $15.0 million for the same period of 2012. Operating margins were 33% in the six months ended June 30, 2013. The increase in operating income in 2013 was primarily a result of additional participants in our joint industry projects, including the Utica, Duvernay, and Mississippi Lime

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studies and the Marcellus, Niobrara, Wolfcamp and Eagle Ford plays, and the installation of additional permanent reservoir monitoring systems.

Risk Factors

The oil and gas industry is highly cyclical and demand for the majority of our oilfield products and services is substantially dependent on the level of expenditures by the oil and gas industry for the exploration, development and production of crude oil and natural gas reserves, which are sensitive to oil and natural gas prices and generally dependent on the industry's view of future oil and gas prices. There are numerous factors affecting the supply of and demand for our products and services, which are summarized as:

• general and economic business conditions;

• market prices of oil and gas and expectations about future prices;

• cost of producing and the ability to deliver oil and natural gas;

• the level of drilling and production activity;

• mergers, consolidations and downsizing among our clients;

• coordination by OPEC;

• the impact of commodity prices on the expenditure levels of our clients;

• financial condition of our client base and their ability to fund capital expenditures;

• the physical effects of climatic change, including adverse weather or geologic/geophysical conditions;

• the adoption of legal requirements or taxation relating to climate change that lower the demand for petroleum-based fuels;

• civil unrest or political uncertainty in oil producing or consuming countries;

• level of consumption of oil, gas and petrochemicals by consumers;

• changes in existing laws, regulations, or other governmental actions;

• the business opportunities (or lack thereof) that may be presented to and pursued by us;

• availability of services and materials for our clients to grow their capital expenditures;

• availability of materials and equipment from key suppliers; and

• cyber attacks on our network that disrupt operations or result in lost or compromised critical data.

Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see our Annual Report and Financial Statements for the fiscal year ended December 31, 2012.

Outlook

We continue our efforts to expand our market presence by opening or expanding facilities in strategic areas and realizing synergies within our business lines. We believe our market presence provides us a unique opportunity to service clients who have global operations in addition to the national oil companies.

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We have established internal earnings targets that are based on market conditions existing at the time our targets were established. Based on recent activity levels, we believe that the current level of activities, workflows, and operating margins within North America will remain similar to that experienced in the first half of 2013, but we believe activity outside North America, particularly those relating to oil development projects, will grow moderately throughout 2013.

Cautionary Statement Regarding Forward-Looking Statements

This Semi-Annual Report contains forward-looking statements. In addition, from time to time, we may publish forwardlooking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. Forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "believe", "expect", "anticipate", "estimate", "continue", or other similar words, including statements as to the intent, belief, or current expectations of our directors, officers, and management with respect to our future operations, performance, or positions or which contain other forward-looking information. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, no assurances can be given that the future results indicated, whether expressed or implied, will be achieved. While we believe that these statements are and will be accurate, our actual results and experience may differ materially from the anticipated results or other expectations expressed in our statements due to a variety of risks and uncertainties.

Statement of Directors' Responsibilities

In accordance with the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht), section 5:25d, paragraph 2 sub c, we confirm that, to the best of our knowledge:

• the condensed consolidated interim financial statements for the six months ended June 30, 2013 have been prepared in accordance with IAS 34, "Interim Financial Reporting" as adopted by the European Union and give a true and fair view of the assets, the liabilities, the financial position and the profits or the loss of Core Laboratories N.V. and its consolidated companies (jointly referred to as "the Group"); and

• the interim management report for the six months ended June 30, 2013 gives a true and fair view of the information required pursuant to section 5:25d, subsection 8 and, as far as applicable, subsection 9 of the Dutch Act on Financial Supervision.

Amsterdam, The Netherlands, August 5, 2013

/s/ Richard L. Bergmark Richard L. Bergmark Executive Vice President, Chief Financial Officer, and Supervisory Director

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CORE LABORATORIES N.V. INTERIM BALANCE SHEET (In thousands of USD, except share data)

ASSETS NON-CURRENT ASSETS Property, plant and equipment Intangible assets Investment in associates Deferred income tax asset Other financial assets Other assets TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories Prepaid expenses and other current assets Income tax receivable Accounts receivable Cash and cash equivalents TOTAL CURRENT ASSETS TOTAL ASSETS SHAREHOLDERS' EQUITY Common shares, EUR 0.02 par value in 2013 and in 2012; 200,000,000 shares authorized, 47,899,584 issued and 45,709,251 outstanding at 2013 and 47,899,584 issued and 46,349,411 outstanding at 2012 Additional paid-in capital Retained earnings Other reserves Treasury shares (at cost), 2,190,333 at 2013 and 1,550,173 at 2012 TOTAL SHAREHOLDERS' EQUITY Non-controlling interest TOTAL EQUITY LIABILITIES NON-CURRENT LIABILITIES Borrowings Income tax payable Deferred income tax liabilities Employee benefit obligations Provisions TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES: Accounts payable Borrowings Income tax payable Other taxes payable Payroll and social security contributions Unearned revenues Other accrued expenses TOTAL CURRENT LIABILITIES TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES	Ref. 6 7 8 9 11 10 9	June 30, 2013 (Unaudited) $ 130,829 220,258 1,817 27,098 23,994 4,266 408,262 54,831 19,002 11,183 190,867 23,220 299,103 $ 707,365 $ 1,233 5,375 489,875 (9,527) (259,432) 227,524 6,165 $ 233,689 $ 248,127 17,546 13,014 53,756 2,963 $ 335,406 $ 55,928 35 12,157 10,288 30,618 16,458 12,786 $ 138,270 473,676 $ 707,365	December 31, 2012
			$ 125,418 218,638 1,851 31,748 21,753 3,198
			402,606 49,265 17,675 17,943 184,774 19,226
			288,883
			$ 691,489
			$ 1,233 4,111 404,358 (9,154) (171,845)
			228,703 5,683
			$ 234,386 $ 231,908 15,941 18,439 50,837 3,013
			$ 320,138 $ 55,168 40 9,542 11,787 35,413 13,968 11,047
			$ 136,965
			457,103
			$ 691,489

The accompanying notes are an integral part of these Consolidated Interim Financial Statements.

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CORE LABORATORIES N.V. INTERIM INCOME STATEMENT (In thousands of USD, except share and per share data)

REVENUES: Services Sales TOTAL REVENUES: OPERATING EXPENSES: Cost of services Cost of sales GROSS PROFIT General and administrative expenses Other (income) expense, net OPERATING PROFIT Finance income Finance costs Finance costs, net Share of profit (loss) of associates PROFIT (LOSS) BEFORE INCOME TAX EXPENSE Income tax expense PROFIT (LOSS) FOR THE PERIOD Attributable to: Equity holders of the parent Non-controlling interest EARNINGS PER SHARE INFORMATION: Basic earnings (loss) per share Diluted earnings (loss) per share WEIGHTED AVERAGE COMMON SHARES OUTSTANDING (in thousands): Basic Diluted	Ref. 12 13 13 13 13	Six Months Ended June 30,	Six Months Ended June 30,
		2013 2012 (Unaudited) $ 370,157 $ 338,418 153,909 142,779 524,066 481,197 227,386 208,254 111,031 106,765 338,417 315,019 185,649 166,178 25,542 22,083 816 (1,432) 159,291 145,527 (590) (15) 4,532 4,367 3,942 4,352 185 247 155,534 141,422 39,700 34,744 $ 115,834 $ 106,678 $ 115,352 $ 106,664 482 14 $ 115,834 $ 106,678 $ 2.51 $ 2.24 $ 2.49 $ 2.23 46,020 47,539 46,313 47,868	2012
			481,197 208,254 106,765
			315,019
			166,178 22,083 (1,432)
			145,527 (15) 4,367
			4,352 247
			141,422 34,744
			$ 106,678
			$ 106,664 14
			$ 106,678
			$ 2.24
			$ 2.23
			47,539
			47,868

The accompanying notes are an integral part of these Consolidated Interim Financial Statements.

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CORE LABORATORIES N.V. INTERIM STATEMENT OF OTHER COMPREHENSIVE INCOME (In thousands of USD)

Profit (loss) for the period Pension actuarial gain and (loss) Income taxes on pension actuarial gain and loss Net income (loss) recognized directly in equity Total comprehensive income (loss) for the period Attributable to: Equity holders of the parent Non-controlling interest	Ref. 11 11	Six Months Ended June 30,	Six Months Ended June 30,
		2013 2012 (Unaudited) $ 115,834 $ 106,678 (497) 155 124 (38) (373) 117 $ 115,461 $ 106,795 $ 114,979 $ 106,781 482 14 $ 115,461 $ 106,795	2012
			117
			$ 106,795
			$ 106,781 14
			$ 106,795

The accompanying notes are an integral part of these Consolidated Interim Financial Statements.

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CORE LABORATORIES N.V. INTERIM STATEMENTS OF CHANGES IN EQUITY

(In thousands of USD, except share data)

(Unaudited) BALANCE, January 1, 2012 Comprehensive income: Profit (loss) for the period Other comprehensive income: Pension actuarial gain Total other comprehensive income Total comprehensive (loss) Transactions with owners: Stock options exercised, net of capital taxes Stock-based compensation Tax benefit related to stock-based awards Repurchases of common shares Other Dividends paid BALANCE, June 30, 2012	Ref.	Number of Shares Outstanding 47,629,472 — 1,042 139,620 — (403,383) 2 — 47,366,753	Common Shares	Additional Paid-In Capital $ 87,290 — (60) 760 3,466 — — — $ 91,456	Retained Earnings	Other Reserves $ (5,512) — 117 — — — — — — $ (5,395)	Treasury Stock $ (107,406) — 65 8,413 — (50,160) — — $ (149,088)	Non- controlling Interest $ 3,752 14 — — — — — — $ 3,766	Total Equity
	11		$ 1,376 —		$ 257,941 106,664				$ 237,441 106,678 117
									117 106,795
	8 8 8 8		— — — — — —		— — — — — (26,624)				5 9,173 3,466 (50,160) — (26,624)
			$ 1,376		$ 337,981				$ 280,096

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(Unaudited)

BALANCE, January 1, 2013 Comprehensive income: Profit (loss) for the period Other comprehensive income: Pension actuarial gain Total other comprehensive income Total comprehensive (loss) Transactions with owners: Stock options exercised, net of capital taxes Stock-based compensation Tax benefit related to stock-based awards Repurchases of common shares Dividends paid BALANCE, June 30, 2013	Ref. 11 8 8 8 8	Number of Shares Outstanding 46,349,411 — 12,000 90,350 — (742,510) — 45,709,251	Common Shares	Additional Paid-In Capital $ 4,111 — (1,411) 322 2,353 — — $ 5,375	Retained Earnings	Other Reserves $ (9,154) — (373) — — — — — $ (9,527)	Treasury Stock $ (171,845) — 1,494 11,335 — (100,416) — $ (259,432)	Non- controlling Interest $ 5,683 482 — — — — — $ 6,165	Total Equity
			$ 1,233 —		$ 404,358 115,352				$ 234,386 115,834 (373)
									(373) 115,461
			— — — — —		— (327) — — (29,508)				83 11,330 2,353 (100,416) (29,508)
			$ 1,233		$ 489,875				$ 233,689

The accompanying notes are an integral part of these Consolidated Interim Financial Statements.

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CORE LABORATORIES N.V. INTERIM STATEMENT OF CASH FLOWS (In thousands of USD)

CASH FLOWS FROM OPERATING ACTIVITIES: Profit (loss) before income tax expense Adjustments to reconcile income to net cash provided by operating activities: Depreciation Amortization Equity in (earnings) loss of associates Stock-based compensation Finance costs (Gain) loss on sale of assets Gain on insurance recovery Fair value (gains)/losses on other financial assets Changes in assets and liabilities: Accounts receivable Inventories Other assets Accounts payable Accrued expenses Other long-term liabilities Cash provided by operating activities Interest paid Income tax paid Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures Patents and other intangibles Acquisitions, net of cash acquired Cash in escrow Proceeds from sale of assets Proceeds from insurance recovery Interest received Net cash used in investing activities CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of debt borrowings Proceeds from debt borrowings Stock options exercised Repurchase of common shares Dividends paid Debt financing costs Net cash used in financing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, beginning of period CASH AND CASH EQUIVALENTS, end of period	Ref. 6 7 9 9 8 8 8 9	Six Months Ended June 30,	Six Months Ended June 30,
		2013 2012 (Unaudited) $ 155,534 $ 141,422 11,379 10,384 610 576 (185) (247) 11,330 9,172 3,942 4,352 (531) (313) (545) (101) (1,456) (622) (5,548) (2,090) (5,566) (4,967) 3,457 (4,677) 2,081 (5,285) 2,569 (9,077) 3,860 5,263 180,931 143,790 (3,892) (3,557) (40,302) (37,176) 136,737 103,057 (17,935) (14,894) (2,229) (684) — (556) — 2,188 697 379 — 101 590 15 (18,877) (13,451) (35,025) (48,744) 51,000 30,000 83 5 (100,416) (50,160) (29,508) (26,624) — (7) (113,866) (95,530) 3,994 (5,924) 19,226 29,332 $ 23,220 $ 23,408	2012
			143,790 (3,557) (37,176)
			103,057
			(14,894) (684) (556) 2,188 379 101 15
			(13,451)
			(48,744) 30,000 5 (50,160) (26,624) (7)
			(95,530)
			(5,924) 29,332
			$ 23,408

The accompanying notes are an integral part of these Consolidated Interim Financial Statements.

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CORE LABORATORIES N.V. NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS PREPARED IN ACCORDANCE WITH IAS 34 JUNE 30, 2013

1. DESCRIPTION OF BUSINESS

Core Laboratories N.V. ("Core Laboratories", "we", "our" or "us") is a Netherlands limited liability company incorporated and domiciled in The Netherlands. The address of the registered office is Herengracht 424, 1017 BZ Amsterdam, The Netherlands. We were established in 1936 and are one of the world's leading providers of proprietary and patented reservoir description, production enhancement and reservoir management services to the oil and gas industry. These services are directed toward enabling our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. We have over 70 offices in more than 50 countries and had approximately 5,000 and 5,000 employees in 2013 and 2012, respectively. We are listed on the New York Stock Exchange ("NYSE") and on the NYSE Euronext Amsterdam Stock Exchange.

Our business units have been aggregated into three complementary segments which provide products and services for improving reservoir performance and increasing oil and gas recovery from new and existing fields: (1) Reservoir Description, (2) Production Enhancement and (3) Reservoir Management. These business segments provide different services and utilize different technologies.

• Reservoir Description : Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry.

• Production Enhancement : Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

• Reservoir Management : Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these condensed consolidated interim financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated and are consistent with those of the previous financial year.

Basis of Preparation

Our condensed consolidated interim financial statements for the six months ended June 30, 2013 have been prepared in accordance with IAS 34, "Interim Financial Reporting" ("IAS 34"). The condensed consolidated interim financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities at fair value through profit or loss. The condensed consolidated interim financial statements have not been audited and should be read in conjunction with the annual financial statements for the year ended December 31, 2012, which have been prepared in accordance with IFRS.

The accounting policies adopted are consistent with those of the previous financial year except as described below.

Estimates

The preparation of financial statements in conformity with IAS 34 requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying our accounting policies. The significant judgments made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the consolidated financial statements for the year ended December 31, 2012, with the exception of changes in estimates that are required in determining the provision for income taxes.

Current and Deferred Income Taxes

Income tax expense is recognized based on management's estimate of the weighted average annual income tax rate expected for the full financial year. See Footnote 15, "Income Taxes".

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New and Amended Standards

The following standards, amendments, and interpretations to existing standards have been published which are mandatory for our accounting periods beginning on or after January 1, 2013 or later periods and have been applied to our financial statements:

• Amendment to IAS 19, Employee Benefits (effective for annual periods beginning on or after January 1, 2013 and was endorsed by the EU). This standard eliminates the corridor approach and calculates finance costs on a net funding basis. We have evaluated the impact of this new standard and it will have no impact on our financial statements or results of operations.

• IAS 1, Financial Statement Presentation (effective for annual periods beginning on or after July 1, 2012). These amendments require entities to group items presented in "other comprehensive income" (OCI) on the basis of whether they are potentially reclassifiable to profit or loss subsequently (reclassification adjustments). These amendments do not address which items are presented in OCI and therefore will have no effect on our financial statements.

• IFRS 13, Fair Value Measurement (effective for annual periods beginning on or after January 1, 2013 and has been endorsed by the EU). This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRS standards. The requirements do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards and therefore will have no effect on our financial statements.

3. FINANCIAL RISKS AND RISK MANAGEMENT

The condensed consolidated interim financial statements do not include all financial risk management information and disclosures required in the annual financial statements; they should be read in conjunction with the Group's annual financial statements as of December 31, 2012.

4. SEASONALITY OF OPERATIONS

The operations of the Group are only slightly impacted by seasonality effects from quarter to quarter.

5. SEGMENT REPORTING

We operate our business in three reportable segments: (1) Reservoir Description, (2) Production Enhancement and (3) Reservoir Management. These business segments provide different services and utilize different technologies.

• Reservoir Description : Encompasses the characterization of petroleum reservoir rock, fluid and gas samples. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry.

• Production Enhancement : Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

• Reservoir Management : Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs.

Results for these business segments are presented below. We use the same accounting policies to prepare our business segment results as are used to prepare our condensed consolidated interim financial statements. We evaluate performance based on income or loss from continuing operations before income tax, interest and other non-operating income (expense). Summarized financial information concerning our segments is shown in the following table (in thousands):

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(Unaudited) June 30, 2013 Revenues from unaffiliated customers Inter-segment revenues Segment income (loss) Finance costs Share of profit (loss) of associates Total assets Capital expenditures Intangible asset expenditures Depreciation and amortization June 30, 2012 Revenues from unaffiliated customers Inter-segment revenues Segment income (loss) Finance costs Share of profit (loss) of associates Total assets Capital expenditures Intangible asset expenditures Depreciation and amortization	Reservoir Description $ 254,467 1,475 71,307 — 185 315,592 11,853 110 7,224 $ 242,568 1,296 70,179 — 247 306,113 6,146 18 6,992	Production Enhancement $ 217,630 1,677 71,281 — — 272,377 3,939 1,612 3,614 $ 196,280 1,083 63,030 — — 266,153 4,268 662 2,500	Reservoir Management $ 51,969 823 17,217 — — 52,051 1,036 507 380 $ 42,349 804 14,998 — — 42,562 440 4 342	Corporate & Other1 $ — (3,975) (514) 3,942 — 67,345 1,107 — 771 $ — (3,183) (2,680) 4,352 — 74,731 4,040 — 1,126	Consolidated
					$ 524,066 — 159,291 3,942 185 707,365 17,935 2,229 11,989 $ 481,197 — 145,527 4,352 247 689,559 14,894 684 10,960

(1)"Corporate and other" represents those items that are not directly related to a particular segment and eliminations.

Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated third parties.

Segment assets consist primarily of cash and cash equivalents, trade and other receivables, inventories, property, plant and equipment and intangible assets. Unallocated assets in Corporate and Other is comprised of deferred taxation and miscellaneous assets related to the corporate function.

Capital expenditures comprise additions to property, plant and equipment.

Our general and administrative costs are allocated to the segments on a proportional basis relative to each segment's costs of sales.

6. OTHER FINANCIAL ASSETS

Other financial assets are primarily comprised of life insurance policies with cash surrender value which have been purchased by us to assist in funding deferred compensation arrangements with certain employees. These policies are carried at market value and the gain or loss recognized is the difference in the fair value actuarially calculated and the value recorded in our general ledger. The fair value of the life insurance policies increased by $1.5 million during the six months ended June 30, 2013.

7. INVENTORIES

Inventories consisted of the following at June 30, 2013 and December 31, 2012 (in thousands):

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Finished goods Parts and materials Work in progress Inventories, net	June 30, 2013 (Unaudited) $ 43,598 9,086 2,147 $ 54,831	December 31, 2012
		$ 38,572 8,818 1,875
		$ 49,265

The balances above are net of valuation reserves of $3.5 million and $3.3 million at June 30, 2013 and December 31, 2012, respectively.

8. EQUITY

Share capital

The authorized share capital of the Company as at June 30, 2013 amounts to EUR 4 million and consists of 200,000,000 ordinary shares with a par value of EUR 0.02 each.

Issued and paid in share capital amounts to $6.6 million and consists of 47,899,584 issued ordinary shares with a par value of EUR 0.02 each. Repurchased ordinary shares amounts to $259.4 million and consists of 2,190,333 ordinary shares with a par value of EUR 0.02 each.

The movements in the number of shares for the six months ended June 30, 2013 and 2012 are as follows:

(Unaudited) Balance at January 1, 2013 Issue of ordinary shares for stock options Issue of ordinary shares for stock based-awards Repurchased own shares Balance at June 30, 2013	Ordinary Shares 47,899,584 — — — 47,899,584	Repurchased Ordinary Shares (1,550,173) 12,000 90,350 (742,510) (2,190,333)	Shares Outstanding
			46,349,411 12,000 90,350 (742,510)
			45,709,251

(Unaudited) Balance at January 1, 2012 Issue of ordinary shares for stock options Issue of ordinary shares for stock based-awards Repurchased own shares Other Balance at June 30, 2012	Ordinary Shares 49,037,806 — — — 2 49,037,808	Repurchased Ordinary Shares (1,408,334) 1,042 139,620 (403,383) — (1,671,055)	Shares Outstanding
			47,629,472 1,042 139,620 (403,383) 2
			47,366,753

Treasury Shares

During the six months ended June 30, 2013, we repurchased 742,510 of our common shares for $100.4 million, at an average price of $135.24 per share which included rights to 26,333 shares valued at $3.7 million, or $141.40 per share, that were surrendered to us pursuant to the terms of a stock-based compensation plan, in consideration of the participants' personal tax

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burdens that may result from the issuance of common shares under this plan. Subsequent to June 30, 2013, we have repurchased 123,500 shares at a total cost of approximately $18.7 million.

At the annual meeting of shareholders on May 16, 2013, the shareholders approved the cancellation of 1,149,582 shares of our common stock then held as treasury stock. These treasury shares were cancelled on August 1, 2013, after the expiration of the waiting period required under Dutch law. We will charge the excess of the cost of the treasury stock over its par value to additional paid-in capital.

Dividends

In February and May of 2013, we paid quarterly dividends of $0.32 per share of common stock totaling $29.5 million. On July 9, 2013, we declared a quarterly dividend of $0.32 per share of common stock which will be paid on August 19, 2013 to shareholders of record on July 19, 2013.

9. BORROWINGS

Debt at June 30, 2013 and December 31, 2012 is summarized in the following table (in thousands):

Senior Notes Credit facility Capital lease obligations Deferred debt acquisition costs Borrowings, net	June 30, 2013 December 31, 2012 (Unaudited) $ 150,000 $ 150,000 100,000 84,000 48 73 (1,886) (2,125) $ 248,162 $ 231,948	December 31, 2012
		$ 231,948

Our available capacity at any point in time is reduced by borrowings outstanding at the time and outstanding letters of credit and performance guarantees and bonds which totaled $18.7 million at June 30, 2013, resulting in an available borrowing capacity under the Credit Facility of $181.3 million. In addition to those items under the Credit Facility, we had $21.9 million of outstanding letters of credit and performance guarantees and bonds from other sources at June 30, 2013.

We do not have any exposure to sub-prime lending or collateralized debt obligations. We believe we are in compliance with the covenants on our existing debt. We believe our future cash flows from operating activities, supplemented by our borrowing capacity under existing facilities and our ability to issue additional equity should be sufficient to meet our contractual obligations, capital expenditures, working capital needs and to finance future acquisitions.

10. PROVISIONS FOR OTHER LIABILITIES AND CHARGES

Provisions consist of accrued amounts related to claims from clients, and amounts due under certain service agreements and contractual commitments.

Claims from clients occur from disputes that may arise from the providing of services. These are investigated and resolved once a determination is made. The timing of any potential settlement varies for each claim.

The movement of provisions for the six months ended June 30, 2013 is as follows (in thousands):

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At January 1, 2013 Charged/ (credited) to the income statement: Additional provisions Used during the year At June 30, 2013	$ 3,013 400 (450)
	$ 2,963

11. PENSIONS AND OTHER POSTRETIREMENT BENEFIT PLANS

Balance sheet obligations for: Pension benefits Post employment benefits - termination benefits Post employment benefits - deferred compensation Liability on the balance sheet	June 30, 2013 (Unaudited) $ 7,130 11,720 34,906 $ 53,756	December 31, 2012
		$ 8,013 13,024 29,800
		$ 50,837

Termination Benefits

Termination benefits represent an accrual for future payouts guaranteed to employees upon departure from the Company. In 1998, we entered into employment agreements with our senior executive officers that provided for severance benefits. The value of the long-term liability for the benefits due upon severing the employment of these employees is approximately $7.7 million at June 30, 2013. The remaining $4.0 million balance is for the non-executive employees of the Company.

Deferred Compensation

Deferred Compensation relates to additional retirement liabilities for certain employees of the Company. The benefits under these contracts are fully vested and payment of benefits generally commences as of the last day of the month following the termination of services except that the payment of benefits for select executives generally commences on the first working day following a six month waiting period following the date of termination.

Defined Benefit Plan

The components of net periodic pension cost under this plan for the six months ended June 30, 2013 and 2012 included (in thousands):

Service cost Interest cost Expected return on plan assets Net periodic pension cost	Six Months Ended June 30,	Six Months Ended June 30,
	2013 2012 (Unaudited) $ 784 $ 572 831 853 (640) (610) $ 975 $ 815	2012
		$ 815

The net periodic pension cost of $1.0 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively was recognized in Cost of Services in the consolidated income statement.

12. INCOME TAXES

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Income tax expense is recognized based on management's estimate of the weighted average annual income tax rate expected for the full financial year. The estimated average annual tax rate for 2013 and 2012 were 25% and 25%, respectively. The effective tax rates for the six months ended June 30, 2013 and 2012 were 26% and 25%, respectively.

13. EARNINGS PER SHARE

The following table summarizes the calculation of weighted average common shares outstanding used in the computation of diluted earnings per share (in thousands):

Weighted average basic common shares outstanding Effect of dilutive securities: Stock options Contingent shares Restricted stock and other Weighted average diluted common and potential common shares outstanding	Six Months Ended June 30,	Six Months Ended June 30,
	2013 2012 (Unaudited) 46,020 47,539 2 12 105 124 186 193 46,313 47,868	2012
		47,868

14. COMMITMENTS AND CONTINGENCIES

We have been and may from time to time be named as a defendant in legal actions that arise in the ordinary course of business. These include, but are not limited to, employment-related claims and contractual disputes or claims for personal injury or property damage which occur in connection with the provision of our products and services. Management does not currently believe that any of our pending contractual, employment-related, personal injury or property damage claims and disputes will have a material effect on our future results of operations, financial position or cash flow.

In connection with an audit of the 2008 and 2009 U.S. federal income tax returns of our U.S. consolidated group, the U.S. Internal Revenue Service has proposed that certain transfer pricing positions taken by the Company be adjusted, which could result in additional federal income tax of approximately $11 million plus interest for this two year audit period. We believe that these transactions are valid as originally recorded, and we are appealing this proposed adjustment. It is our belief that we will prevail on this issue; consequently, we have made no additional income tax accrual for this proposed adjustment.

We do not maintain any off-balance sheet debt or other similar financing arrangements nor have we formed any special purpose entities for the purpose of maintaining off-balance sheet debt.

15. RELATED PARTIES

In 2013 and 2012, 26,333 shares valued at $3.7 million and 38,590 shares valued at $4.9 million, respectively, were surrendered to the Company pursuant to the terms of a stock-based compensation plan, in settlement by the participants of their personal tax burdens that may result from the issuance of common shares under this arrangement. These shares were surrendered at the then current market price on the date of settlement.

In 2013 and 2012, we granted stock to each of our non-employee Directors in the amount of 1,088 and 1,141 shares respectively. These shares will vest, without performance obligations, on March 31, 2016 and 2015, respectively.

We had no other significant related party transactions for the six month period ended June 30, 2013.

16. SUBSEQUENT EVENTS

At the annual meeting of shareholders on May 16, 2013, the shareholders approved the cancellation of 1,149,582 shares of our common stock then held as treasury stock. These treasury shares were canceled on August 1, 2013, after the expiration of the waiting period required under Dutch law. We will charge the excess of the cost of the treasury stock over its par value to additional paid-in capital.

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On July 9, 2013, we declared a quarterly dividend of $0.32 per share of common stock which will be paid on August 19, 2013 to shareholders of record on July 19, 2013.

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