CLB 2018 Annual Report

18 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Core Laboratories N.V. is a Netherlands limited liability company. 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, primarily through client relationships with many of the world's major, national and independent oil companies. We operate our business in two reporting segments. These complementary segments provide different services and products and utilize different technologies 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 to increase production and improve recovery of oil and gas from our clients' reservoirs. We provide laboratory-based analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry. We also provide proprietary and joint industry studies based on these types of analyses. • Production Enhancement : Includes services and products relating to reservoir well completions, perforations, stimulations and production. We provide integrated diagnostic services to evaluate and monitor the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects. General Overview We provide services as well as design and produce products which enable our clients to evaluate reservoir performance and increase oil and gas recovery from new and existing fields. These services and products are generally in higher demand when our clients are investing capital in their field development programs that are designed to increase productivity from existing fields or when exploring for new fields. Our clients' investment in capital expenditure programs tends to correlate over the longer term to oil and natural gas commodity prices. During periods of higher, stable prices, our clients generally invest more in capital expenditures and, during periods of lower or volatile commodity prices, they tend to invest less. Consequently, the level of capital expenditures by our clients impacts the demand for our services and products. The following table summarizes the annual average and year-end worldwide and U.S. rig counts for the years ended December 31, 2018, 2017 and 2016, as well as the annual average and year-end spot price of a barrel of WTI crude, Europe Brent crude and an MMBtu of natural gas: 2018 2017 2016 Baker Hughes Worldwide Average Rig Count (1) 2,211 2,029 1,593 Baker Hughes U.S. Average Rig Count (1) 1,032 875 510 Baker Hughes Worldwide Year-End Rig Count (2) 2,244 2,089 1,772 Baker Hughes U.S. Year-End Rig Count (2) 1,078 930 634 Average Crude Oil Price per Barrel WTI (3) $ 65.23 $ 50.80 $ 43.29 Average Crude Oil Price per Barrel Brent (4) $ 71.34 $ 54.12 $ 43.67 Average Natural Gas Price per MMBtu (5) $ 3.15 $ 2.99 $ 2.52 Year-end Crude Oil Price per Barrel WTI (3) $ 45.15 $ 60.46 $ 53.75 Year-end Crude Oil Price per Barrel Brent (4) $ 50.57 $ 66.73 $ 54.96 Year-end Natural Gas Price per MMBtu (5) $ 3.25 $ 3.69 $ 3.71 (1) Twelve month average rig count as reported by Baker Hughes, a GE Company - Worldwide Rig Count. (2) Year-end rig count as reported by Baker Hughes, a GE Company - Worldwide Rig Count. (3) Average daily and year-end West Texas Intermediate crude spot price as reported by the U.S. Energy Information Administration. (4) Average daily and year-end Europe Brent crude spot price as reported by the U.S. Energy Information Administration. (5) Average daily and year-end Henry Hub natural gas spot price as reported by the U.S. Energy Information Administration. The prices for both WTI and Brent crude oil showed improvement during 2017 and continued to strengthen through most of 2018; however, they decreased significantly during the last quarter of 2018 to end the year at levels not seen since mid-2016.