Why Core Laboratories shares fell 6% today

What happened

Light active energy service provider actions Main laboratories (NYSE: CLB) fell about 6% in morning trading on Tuesday. There was no major news from the company, but there were some notable energy sector volatility that is likely to blame.

So what

Oil and natural gas prices have no direct impact on Core Laboratories’ financial results, as it is not an exploration and production (E&P) company. But raw materials are indirectly vital to its bottom line and bottom line, as Core Labs offers its technology-driven well improvement services to E&P, who themselves are affected by rising and falling energy prices. .

When prices increase, E&P tend to increase their capital expenditure plans; they usually do the opposite when energy prices fall. They were down today, and as such investors also sold shares of Core Laboratories, assuming that lower industry spending would essentially mean less demand for the company’s services.

Image source: Getty Images.

While the reason for the stock’s decline today is most likely that simple, it’s important to note that Core Labs stocks have been very volatile over the past year or so. They have tended to rise and fall dramatically as energy commodities rise and fall – sometimes far more than the prices of its E&P customers.

That said, over the past 12 months, the stock has risen 200% as oil prices have recovered from their lows caused by the pandemic. In the end, investor sentiment is increasingly positive, although it is used to changing course quickly at any time.

Now what

Core Laboratories is probably not the best choice for conservative investors interested in the energy sector. It takes a strong stomach to handle the inherent volatility of the stock. That said, it is still down about 25% from its pre-pandemic highs following the recent drop in energy prices. More aggressive long-term investors who are bullish on oil prices might be drawn to the lure of the turnaround here. But this attraction depends heavily on the strengthening of oil prices.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

About Roberto Frank

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