Shares of asset-light energy services provider Core Laboratories (NYSE: CLB) fell about 6% in morning trading on Tuesday. There was no material news from the company, but there was some notable energy sector volatility that’s likely to blame.
The prices of oil and natural gas don’t directly impact Core Laboratories’ financial results, since it isn’t an exploration and production (E&P) company. But the commodities are indirectly vital to its top and bottom lines because Core Labs offers its technology-driven well-enhancement services to the E&Ps, which themselves are affected by rising and falling energy prices.
When prices rise, E&Ps tend to increase their capital spending plans; they usually do the opposite when energy prices fall. They were falling today and, as such, investors sold Core Laboratories shares as well, assuming that lower industry spending would basically mean less demand for the company’s services.