Margins, ex-items, expanded approximately 320 basis points sequentially and 590 basis points year-over-year. Incremental margins were over 100% sequentially and over 90% year-over-year, nicely reflecting the operational leverage in this segment. The segment’s financial performance is an indication of improving client activity across our global network. Now for some operational highlights from reservoir description. During the third quarter, Core Lab’s advanced reservoir characterization team embarked on an expansive multi-well study aimed at evaluating a tight carbonate reservoir in the Middle East. This comprehensive study entailed the collection and synthesis of substantial volumes of laboratory and well-logged data. These datasets were then employed to develop petrophysical models, enabling the assessment of production variations across a suite of lateral wells.
An integral component of this study involved the application of Core’s D-Code service. D-Code is a proprietary geological and petrophysical modeling application in which readily available drilling data are used to determine key reservoir parameters. These high-resolution interpreted logs offer a detailed profile of the rock properties in the drilled intervals, which is especially beneficial in scenarios where obtaining sufficient material from physical laboratory measurements proves to be operational challenging. Also in the third quarter of 2023, Core’s Middle East clients continued their plans to expand future production capacity, increasing the need for evaluation of complex unconventional reservoirs. For these unconventional plays, determination of the in-situ Gas-Oil-Ratio is critical.
Given the complex fluid and fluid flow of behaviors of these low permeability reservoirs, the Gas-Oil-Ratio determined from traditional downhole fluid samples may not be representative of the in-situ fluid proportions that exist in the reservoir. In line with these challenges, and under a collaborative agreement with Corsyde International a team of Core Lab Reservoir Optimization Specialists executed a successful, multi-well pressure core campaign for a Middle East national oil company. Pressure cores allow for intervals of the target reservoir zone to be cut and safely brought to the surface, all while maintaining in situ reservoir pressure. This technology ensures that all three reservoir fluid phases are captured and maintained at reservoir pressure within the core barrel.
Upon reaching the surface, Core Lab and Corsyde specialists orchestrated a meticulously controlled depressurization process enabling the systematic capture of all reservoir fluids. The captured reservoir fluids were then quantified and comprehensive compositional analyses were conducted. The process enabled Core Lab specialists to accurately determine the in-situ Gas-Oil-Ratio as well as other hydrocarbon properties. This pressure core data will improve reservoir models, yield more accurate reserve calculations and allow the operator to optimize completion and production strategies. Now moving to production enhancement where Core Lab’s technologies continue to help our clients optimize their well completions and improve production. Revenue for production enhancement came in at $40.2 million, down approximately 10% sequentially and 14% year-over-year.
Operating income, ex-items, was $1.6 billion and operating margins were 4% for the third quarter of 2023 down from 10% in Q2 of 2023. As Chris and Gwen mentioned, Q3 felt the impact of lower international product sales which can vary from quarter-to-quarter and a sequential 10% decline in U.S. land completion activity along with some Gulf of Mexico work that pushed to the right. Now for some operational highlights. In the third quarter of 2023, Core’s production enhancement segment was engaged by a client in the North Sea to provide plug and abandonment technologies to efficiently perforate hot, heavy walled 13-3/8 inch diameter casing for the cement wash process that is needed in preparation for the plugging operations required for well abandonment.
Core leverages its expertise and energetics as an alternative to traditional casing section milling which is both slower and more costly. Capitalizing on Core’s proprietary Plug and Abandonment Perforating system or PAC technology, the company’s ballistic engineering design team created a system to address the additional depth of controlled penetration required to create communication in the annular space between the 13-3/8 inch diameter casing and the 20-inch diameter outer casing string. Core’s new PAC extended range energetic system successfully accomplished the task. Importantly, the extended range PAC technology was delivered with a 4.5 inch gun, eliminating the need to run a secondary retrieval operation to remove the downhole restrictions that would have been required for a larger diameter gun system.
