The following discussion summarizes the financial position of Core Laboratories N.V. and its subsidiaries as of September 30, 2009 and should be read in conjunction with (i) the unaudited consolidated interim financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q and (ii) the consolidated financial statements and accompanying notes to our Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

General

Core Laboratories N.V. is a Netherlands limited liability company. It was established in 1936 and is one of the world's leading providers of proprietary and patented reservoir description, production enhancement and reservoir management products and services to the oil and gas industry. These products and services can enable our clients to improve reservoir performance and increase oil and gas recovery from their producing fields. Core Laboratories N.V. has over 70 offices in more than 50 countries and employs approximately 4,900 people worldwide.

References to "Core Lab", "we", "our", and similar phrases are used throughout this Quarterly Report on Form 10-Q and relate collectively to Core Laboratories N.V. and its consolidated affiliates.

Our business units have been aggregated into three complementary segments, which provide products and services 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. We provide analytical and field services to characterize properties of crude oil and petroleum products to the oil and gas industry.

* Production Enhancement: Includes products and services relating to reservoir well completions, perforations, stimulations and production. We provide integrated services to evaluate the effectiveness of well completions and to develop solutions aimed at increasing the effectiveness of enhanced oil recovery projects.

* Reservoir Management: Combines and integrates information from reservoir description and production enhancement services to increase production and improve recovery of oil and gas from our clients' reservoirs.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Certain statements contained in this Management's Discussion and Analysis of Financial Condition and Results of Operations section, including those under the headings "Outlook" and "Liquidity and Capital Resources", and in other parts of this Form 10-Q, are forward looking. In addition, from time to time, we may publish forward-looking statements relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. Forward-looking statements can be identified by the use of forward-looking terminology such as "may", "will", "believe", "expect", "anticipate", "estimate", "continue", or other similar words, including statements as to the intent, belief, or current expectations of our directors, officers, and management with respect to our future operations, performance, or positions or which contain other forward-looking information. These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, no assurances can be given that the future results indicated, whether expressed or implied, will be achieved. Our actual results may differ significantly from the results discussed in the forward-looking statements. While we believe that these statements are and will be accurate, a variety of factors could cause our actual results and experience to differ materially from the anticipated results or other expectations expressed in our statements. Such factors include, but are not limited to, the risks and uncertainties summarized below:

- general and economic business conditions;

- prices of oil and natural gas and industry expectations about future prices;

- foreign exchange controls and currency fluctuations;

- political stability in the countries in which we operate;

- the business opportunities (or lack thereof) that may be presented to and pursued by us;

- changes in laws or regulations;

- the validity of the assumptions used in the design of our disclosure controls and procedures; and

- the financial condition of our client base and their ability to fund capital expenditures.

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Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in the forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of some of the foregoing risks and uncertainties, see "Item 1A - Risk Factors" in our Annual Report on Form 10-K for the fiscal year ended December 31, 2008, as well as the other reports filed by us with the SEC.

Outlook

We continue our efforts to expand our market presence by opening facilities in strategic areas and realizing synergies within our business lines. We believe our market presence provides us a unique opportunity to service customers who have global operations in addition to the national oil companies.

We have established internal earnings targets for 2009 that are based primarily on market conditions existing at the time our targets were established. Based on discussions late in 2008 with our clients and our view of the oil and gas industry, we anticipated that, in 2009, spending by our international clients would soften and North American spending to decrease significantly. Given the sharp declines in commodity prices at that time and announced reductions in capital expenditure programs by certain of our clients, we did not expect oilfield activity levels to grow at the same rate as earlier expected, and in all likelihood would decrease on a year over year basis. For example, the average North American rig count for the third quarter was down 50% year over year. Based on recent developments, we believe that the current level of activities, workflows, and operating margins outside North America will remain essentially constant and that North American activity levels will increase slightly in response to natural gas prices stabilizing. Recent natural gas production data indicates that the North American supply is now decreasing and may continue to decrease over the next several quarters. In addition, the North American rig count has recently increased slightly.

Results of Operations

Our results of operations as a percentage of applicable revenue were as follows
(in thousands):

(Unaudited)                                 Three Months Ended September 30,                  % Change
                                            2009                         2008                  2009/2008
REVENUES:
Services                          $  133,819            80 %    $ 154,297            76 %            (13 %)
Product sales                         33,983            20 %       48,226            24 %            (30 %)
 Total revenues                      167,802           100 %      202,523           100 %            (17 %)
OPERATING EXPENSES:
Cost of services*                     85,792            64 %      100,264            65 %            (14 %)
Cost of product sales*                26,383            78 %       33,941            70 %            (22 %)
 Total cost of services and
product sales                        112,175            67 %      134,205            66 %            (16 %)
General and administrative
expenses                               6,637             4 %        6,857             4 %             (3 %)
Depreciation and amortization          6,023             4 %        5,562             3 %              8 %
Other expense (income), net           (1,232 )          (1 %)         726             -             (270 %)
Operating income                      44,199            26 %       55,173            27 %            (20 %)
Interest expense                       3,895             2 %        4,593             2 %            (15 %)
Income before income tax
expense                               40,304            24 %       50,580            25 %            (20 %)
Income tax expense                     9,189             5 %       13,643             7 %            (33 %)
Net income                            31,115            19 %       36,937            18 %            (16 %)
Net income attributable to
non-controlling interest                 127             -            103             -               23 %
Net income attributable to Core
Laboratories N.V.                 $   30,988            19 %    $  36,834            18 %            (16 %)

*Percentage based on applicable revenue rather than total revenue

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(Unaudited)                                 Nine Months Ended September 30,                  % Change
                                           2009                         2008                  2009/2008
REVENUES:
Services                          $ 410,182            80 %    $ 446,700            77 %             (8 %)
Product sales                       103,758            20 %      132,948            23 %            (22 %)
 Total revenues                     513,940           100 %      579,648           100 %            (11 %)
OPERATING EXPENSES:
Cost of services*                   258,489            63 %      291,315            65 %            (11 %)
Cost of product sales*               78,715            76 %       93,273            70 %            (16 %)
 Total cost of services and
product sales                       337,204            66 %      384,588            66 %            (12 %)
General and administrative
expenses                             22,595             4 %       22,305             4 %              1 %
Depreciation and amortization        17,637             3 %       16,077             3 %             10 %
Other expense (income), net          (6,002 )          (1 %)       2,038             -             (395 %)
Operating income                    142,506            28 %      154,640            27 %             (8 %)
Interest expense                     11,535             2 %       17,375             3 %            (34 %)
Income before income tax
expense                             130,971            26 %      137,265            24 %             (5 %)
Income tax expense                   40,653             8 %       41,034             7 %             (1 %)
Net income                           90,318            18 %       96,231            17 %             (6 %)
Net income attributable to
non-controlling interest                331             -            283             -               17 %
Net income attributable to Core
Laboratories N.V.                 $  89,987            18 %    $  95,948            17 %             (6 %)

*Percentage based on applicable revenue rather than total revenue

Operating Results for the Three and Nine Months Ended September 30, 2009 Compared to the Three and Nine Months Ended September 30, 2008 (unaudited)

Service Revenues

Service revenues decreased to $133.8 million for the third quarter of 2009, down 13% when compared to $154.3 million for the third quarter of 2008. For the nine months ended September 30, 2009, service revenues decreased 8% to $410.2 million compared to $446.7 million for the respective period in 2008. The decrease in revenue was the result of a significant decline in oil and gas prices from record highs reached in 2008. Although activity in North America is significantly down from 2008 levels, we have seen a recent increase in activity as a result of additional work on potential lower Tertiary reservoirs in the deepwater Gulf of Mexico. Additionally, our penetration of international markets improved in 2009 as we received the first set of gas-shale cores from recent drilling in central Europe. Our large scale core analyses and reservoir fluid projects combined with our fluid and derived products inspection, calibration and assay work continue to provide meaningful revenue streams in the Middle East, Asia-Pacific, offshore deepwater regions of the Gulf of Mexico and the southern-Atlantic margins off the coast of West Africa and Brazil.

Product Sale Revenues

Revenues associated with product sales decreased to $34.0 million for the third quarter of 2009, down 30% from $48.2 million for the third quarter of 2008. For the nine months ended September 30, 2009, product sale revenues decreased 22% to $103.8 million compared to $132.9 million for the same period in 2008. Our product sales revenues were impacted by the significant decline in the North American drilling activity; however, our revenues declined at a much lower rate compared to the 52% and 43% decrease in the average North American rig count year over year third quarter and year to date, respectively. Our revenues have not been as severely impacted as we have continued to gain additional market share primarily through the acceptance of our specialized optimizing technologies introduced over the last three years. These specialized optimizing technologies are focused on high-end well completion and stimulation programs mainly in the Haynesville, Marcellus and Eagle Ford shale plays and in multi-stage completions in the Bakken oil-shale play.

Cost of Services

Cost of services expressed as a percentage of service revenue was 64% for the quarter ended September 30, 2009, down from 65% for the same period in 2008. For the nine months ending September 30, 2009, cost of services expressed as a percentage of service revenue was 63% as compared to 65% for the same period for 2008. The decline in the cost of services relative to service revenue was primarily a result of proactive expense control actions put in place to protect against potential market declines.

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Cost of Product Sales

Cost of product sales as a percentage of product sales revenues was 78% for the quarter ended September 30, 2009, up from 70% for the same period in 2008. For the nine months ending September 30, 2009, cost of product sales expressed as a percentage of product sales revenue was 76%, up from 70% for the same period in 2008. The reduction in margins came primarily from reduced manufacturing efficiencies associated with lower production levels as a result of the significant decline in North American drilling activity.

General and Administrative Expenses

General and administrative expenses totaled $6.6 million for the third quarter of 2009, down 3% from the $6.9 million incurred in the third quarter of 2008. For the nine months ended September 30, 2009 and 2008, general and administrative expenses were comparable, at $22.6 million from $22.3 million, respectively.

Depreciation and Amortization Expense

Depreciation and amortization expense increased to $6.0 million for the third quarter of 2009, up 8% when compared to $5.6 million for the third quarter of 2008. For the nine months ended September 30, 2009, depreciation and amortization expense was $17.6 million, an increase of $1.6 million from the nine months ended September 30, 2008. This increase in depreciation and amortization expense was due to the expansion of our capital expenditure program throughout 2008 in support of our internal operational growth.

Other Expense (Income), Net

Other expense (income), net consisted of the following at September 30, 2009 and
2008 (in thousands):

                                             Three Months Ended September 30,           Nine Months Ended September 30,
                                                2009                  2008                2009                  2008
                                                        (Unaudited)                               (Unaudited)
(Gain) loss on sale of assets              $            33       $          (125 )   $          (312 )     $        (1,719 )
Foreign exchange loss (gain)                          (859 )               2,364              (1,868 )               1,885
Interest income                                        (17 )                (392 )              (115 )                (685 )
Non-income tax accrual                                   -                     -              (2,500 )               5,030
Other, net                                            (389 )              (1,121 )            (1,207 )              (2,473 )

During the first quarter of 2008, we revised our estimate of a contingent liability associated with non-income related taxes, and as a result, a charge to income of $5.0 million was recorded. During the second quarter of 2009 we released $2.5 million of the contingent liability as a result of finalizing a settlement agreement. Additionally in 2008, we recorded a gain of $1.1 million in connection with the sale of a small office building.

Foreign exchange losses (gains) by currency are summarized in the following table (in thousands):

                                            Three Months Ended September 30,        Nine Months Ended September 30,
                                                2009                 2008            2009                  2008
                                                      (Unaudited)                             (Unaudited)
Australian Dollar                          $         (168 )       $       384     $      (446 )       $           353
British Pound                                         105                 308            (127 )                   320
Canadian Dollar                                      (815 )               498          (1,582 )                   774
Euro                                                   35                 241            (178 )                  (153 )
Mexican Peso                                           (2 )               195               -                     102
Russian Ruble                                         (35 )               283             189                      22
Other currencies, net                                  21                 455             276                     467
 Total loss (gain)                         $         (859 )       $     2,364     $    (1,868 )       $         1,885

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Income Tax Expense

The effective tax rates for the three months ended September 30, 2009 and 2008 were 22.8% and 27.0%, respectively. The lower effective tax rate reflects the change in activity levels between jurisdictions with different tax rates in addition to an adjustment to correctly state income tax expense and deferred tax liabilities associated with monetary assets and liabilities of our foreign subsidiaries. The adjustment decreased Income Tax Expense by $2.2 million, increased Net Income by $2.2 million and increased Earnings per Diluted Share by $0.10 for the three months ending September 30, 2009. The impact to prior periods and to estimated income for the full fiscal year is immaterial for the effect of the adjustment.

The effective tax rates for the nine months ended September 30, 2009 and 2008 were 31.0% and 29.9%, respectively. The slight increase is attributable to the change in activity levels between jurisdictions with different tax rates, the establishment of valuation allowances in 2009 against deferred tax assets in tax jurisdictions where we no longer anticipate having sufficient taxable income to fully utilize these deferred tax assets, the recording of discrete tax benefits and liabilities and the aforementioned adjustment in 2009.