Core Laboratories N : 2022 Semi-Annual Report

CORE LABORATORIES N.V.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

PREPARED IN ACCORDANCE WITH IAS 34,

"INTERIM FINANCIAL REPORTING"

Semi-Annual Report for 30 June 2022

Van Heuven Goedhartlaan 7 B

1181LE Amstelveen

The Netherlands

CORE LABORATORIES N.V.

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

SEMI-ANNUAL REPORT FOR 30 JUNE 2022

TABLE OF CONTENTS

	Page
Semi-Annual Report of the Directors	2
Interim Consolidated Statement of Financial Position (Unaudited) as of 30 June 2022 and 31 December 2021	12
Interim Consolidated Statement of Profit or Loss (Unaudited) for the Six Months Ended 30 June 2022 and
2021	13
Interim Consolidated Statement of Other Comprehensive Income (Unaudited) for the Six Months Ended 30
June 2022 and 2021	14
Interim Consolidated Statement of Changes in Equity (Unaudited) for the Six Months Ended 30 June 2022
and 2021	15
Interim Consolidated Statement of Cash Flows (Unaudited) for the Six Months Ended 30 June 2022 and 2021	17
Selected Explanatory Notes to the Condensed Interim Consolidated Financial Statements (Unaudited)	18

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SEMI-ANNUAL REPORT OF THE DIRECTORS

Currency - United States Dollars ("USD", "$")

Our Company

Core Laboratories N.V. ("Core Laboratories", "Core Lab", the "Company" "we", "our" or, "us) is a Netherlands limited liability company and is publicly traded in the United States on the New York Stock Exchange ("NYSE") and in the Netherlands on the Euronext Amsterdam Stock Exchange ("Euronext Amsterdam"). We were established in 1936 and are one of the world's leading providers of proprietary and patented reservoir description and production enhancement services and products to the oil and gas industry. These services and products can enable our clients to evaluate and improve reservoir performance and increase oil and gas recovery from their new and existing fields. As of 30 June 2022, we have over 70 offices in more than 50 countries and have approximately 3,600 employees.

At Core Laboratories we take our commitment to our employees, clients, shareholders, suppliers and the communities in which we operate very seriously. With our global presence and impact, we are committed and accountable for promoting a culture focused on the health and safety of people and the environment, and we take pro-active approaches in identifying and managing risks through recognition, evaluation and education. Our continued success depends on maintaining a high level of integrity, ethical and safety standards which is the foundation of our reputation in getting the right results the right way. Our Company culture and mission also drive our commitment to our Environmental, Social and Governance ("ESG") sustainability efforts.

Industry Outlook and Expected Development

The events associated with the COVID-19 pandemic that began in 2020 continued in 2021 and 2022. Certain international countries continued mandated shut-downs, home sheltering and social distancing policies that initially caused uncertainty in the demand for crude oil and associated products, however demand for these products has recovered more quickly than global production causing crude-oil commodity prices to increase significantly. Although U.S. land drilling and completion activities continued to show improvement during 2021 and strengthened in the first six months of 2022, activity still remains well below pre-pandemic levels. Additionally, international activity continued to be adversely impacted by increasing infection rates associated with new variant strains of the COVID-19 virus during 2021 and 2022, which has continued to cause business disruptions associated with government mandated shut-downs, travel restrictions, quarantine protocols and worksite closures in various international regions.

The geopolitical conflict between Russia and Ukraine that erupted in February 2022, has also resulted in current disruptions to traditional supply chains associated with the movement of crude oil, primarily reducing the level of crude oil sourced from Russia and being imported into various European ports. However, the supply chains associated with the movement of crude oil have begun and are expected to continue realigning to new logistical patterns, as we expect Europe will find new suppliers of crude oil to import into the region. These events have resulted in elevated energy prices throughout Europe, and the current global demand for crude oil and natural gas has remained at a high level; thus, Core Lab expects supply lines to realign, and the Company's volume of associated laboratory services to increase commensurate with the trading and movement of crude-oil into Europe and across the globe. In March 2022, completion product sales delivered through our Production Enhancement segment into Ukraine were suspended and continue to be limited due to disruptions in freight transport services.

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We are actively monitoring the situation in Ukraine and assessing its impact on our operations in the region, including our business partners and customers. We have not experienced any material interruptions in our infrastructure, supplies or networks needed to support our operations. However, the situation is rapidly evolving and the United States, the European Union, the United Kingdom and other countries may implement additional sanctions, export controls or other measures against Russia, Belarus and other countries, regions, officials, individuals or industries in the respective territories. We have no way to predict the progress or outcome of the conflict in Ukraine or its impacts in Ukraine, Russia or Belarus as the conflict, and any resulting government responses, are fluid and beyond our control.

Crude-oil commodity prices remain volatile and continued to increase significantly during the first six months of 2022, as a result of the Russia-Ukraine conflict and the additional uncertainty in supply of crude oil and natural gas. The activities associated with the production of oil and gas are expected to increase for the remainder of 2022, however growth may be moderated by limitations in personnel, equipment, supply chain disruptions, as well as the allocation of capital resources by oil and gas producing companies. As a result, it is anticipated that crude-oil commodity prices for the near term will remain elevated and supported by increasing demand with only moderate growth in production levels. If crude-oil commodity prices remain at current levels or increase, our clients' activities associated with the energy markets are also expected to increase for the remainder of 2022 depending on the outlook for the global economy, the pace of recovery from the COVID-19 pandemic and considerations associated with the Russia-Ukraine conflict.

Core Laboratories has continued to operate as an essential business with timely delivery of products and services to our clients during the COVID-19 pandemic. The disruptions described above have primarily been associated with operational workflows stemming from travel, product delivery, as well as suspensions and delays in client projects. The global supply chain challenges have resulted in certain disruptions to our workflow, however, the impact to our operations has been minimized by carrying higher levels of inventory, and currently, we do not anticipate significant disruption in our key supply chains for the remainder of 2022. We also continue to follow an established continuity plan across our global organization to protect the health of employees while servicing our clients. In addition, the continuing inflationary impact that began in 2021 and worsened in the first six months of 2022, which has resulted in increased costs of raw materials, transportation and shipping, and personnel, has negatively impacted profit margins on both product sales and services revenue.

Our major clients continue to focus on capital management, return on invested capital, free cash flow, and returning capital to their shareholders, as opposed to a focus on production growth. The companies adopting value versus volume metrics tend to be the more technologically sophisticated operators and form the foundation of Core Lab's worldwide client base. As oil and gas commodity prices are expected to remain elevated in the near to mid-term, the Company expects our clients' activities associated with increasing oil and gas reserves and production levels will continue to increase in the coming years. Additionally, some of our major clients have begun investing and developing other sources of energy, including renewables, and focusing on emission reduction initiatives. Some of these initiatives include deployment of technologies associated with hydrogen or lithium-based batteries, and carbon capturing and sequestration. Considering a longer-term strategy, we expect to be well positioned as our clients continue their focus on employing higher technological solutions in their efforts to optimize production and estimated ultimate recovery in the most cost efficient and environmentally responsible manner.

We believe some oil and gas operators will continue to manage their capital spending within free cash flow and maintain their focus on improving and maintaining a stronger balance sheet, which could constrain future growth in activities associated with the production of oil and gas.

As part of our long-term growth strategy, we continue to expand our market presence by opening or expanding facilities in strategic areas and realizing synergies within our business lines consistent with client demand and market conditions. More recently, we have expanded our laboratory capabilities in Qatar, Saudi Arabia and Brazil. We believe our market presence in strategic areas provides us a unique opportunity to serve our clients who have global operations, whether they are international oil companies, national oil companies, or independent oil companies.

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Financial Performance

Results of Operations

Services Revenue

Services revenue is primarily tied to activities associated with the exploration and production of oil, gas and derived products outside the U.S. For the six months ended 30 June 2022, service revenue of $170.1 million remained flat compared to $170.2 million for the six months ended 30 June 2021. The moderate increase in activity levels in the U.S. market was substantially offset by the decline in activity levels in international markets impacted by the Russia-Ukraine geopolitical conflict and business disruptions associated with elevated levels of COVID cases, as discussed above.

We continue to focus on large-scale core analyses and reservoir fluids characterization studies in the Eagle Ford, the Permian Basin and the Gulf of Mexico, along with Guyana, Suriname, Malaysia and other international locations such as offshore South America, Australia, and the Middle East, including Kuwait and the United Arab Emirates. Analysis of crude oil derived products also occurs in every major producing region of the world.

Product Sales Revenue

For the six months ended 30 June 2022, product sales revenue of $66.1 million increased compared to $56.9 million from the six months ended 30 June 2021. Rig count is one indicator of activity levels associated with the exploration and production of oil and gas. For the six months ended 30 June 2022, the average rig count for U.S. land and international markets increased approximately 62% and 14%, respectively. Despite the increases in the average rig count in both the U.S. land and international markets, our sales revenue increased moderately by approximately 16% primarily due to the suspension of our products sales into Ukraine, as a result of the Russia-Ukraine conflict, and delays in freight transport services in delivery of our products.

Cost of Services

Cost of services increased to $141.5 million for the six months ended 30 June 2022 compared to $137.8 million for the six months ended 30 June 2021. Cost of services expressed as a percentage of services revenue increased to 83% for the six months ended 30 June 2022, compared to 81% for the six months ended 30 June 2021. The increase in cost of services during the six months ended 30 June 2022, was due primarily to restoring employees' compensation and benefit plans in 2022, from the cost reduction initiatives implemented during the last two years.

Cost of Product Sales

Cost of product sales of $59.8 million for the six months ended 30 June 2022 increased when compared to $47.2 million for the six months ended 30 June 2021. Cost of product sales expressed as a percentage of product sales revenue was 91% for the six months ended 30 June 2022, compared to 83% for the six months ended 30 June 2021. Higher cost of product sales as a percentage of products sales revenue in the six months ended 30 June 2022 was primarily due to the increased employees' compensation costs as discussed above and higher costs of materials and shipping costs caused by inflation.

Operating profit

Operating profit for the six-month period ended 30 June 2022 of $13.2 million compared to $27.1 million for the same period of 2021. In addition to the increase in cost of services and product sales discussed above, general and administrative expenses also included the acceleration of stock compensation expense of $3.9 million for the six months ended 30 June 2022 for retirement eligible employees compared to a charge of $0.8 million in the same period of 2021. General and administrative expenses for the six months ended 30 June 2022 were also impacted by the full restoration of employees' compensation cost and certain benefit plans, as discussed above. These increases in cost were partially offset by the reversal of $3.3 million in stock compensation expense previously recognized associated with unvested performance share awards which are scheduled to vest on 31 December 2022, as the associated performance conditions were determined to be unachievable. Other income (expense) for the six months ended 30 June 2022 included a charge of $3.3 million for severance and other charges for a

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