Good morning. Welcome to the Exterran Holdings' and Exterran Partners' First Quarter 2015 earnings call. At this time, I'd like to inform you this conference is being recorded, and that all participants are in a listen-only mode. We will open the teleconference for questions after the presentation. Earlier today, Exterran Holdings and Exterran Partners released their financial results for the first quarter 2015. If you have not received a copy, you can find the information on the company's website at exterran.com. During today's call, Exterran Holdings may be referred to as Exterran or EXH, and Exterran Partners as either Exterran Partners or EXLP. Because EXLP's financial results and position are consolidated into Exterran, the discussion of Exterran will include Exterran Partners, unless otherwise noted. Also, the term international will be used to refer to Exterran's operations outside the US and Canada, and the combination of US and Canada will be referred to as North America. I want to remind listeners that the news release issued this morning by Exterran Holdings and Exterran Partners, the company’s prepared remarks on this conference call, and the related question-and-answer session include forward-looking statements. These forward-looking statements include projections and expectations of the company's performance, and represent the company's current beliefs. Various factors could cause results to differ materially from those projected in the forward-looking statements. Information concerning the risk factors, challenges, and uncertainties that could cause actual results to differ materially from those in the forward-looking statements can be found in the company's press release, as well as in the Exterran Holdings' Annual Report on Form 10-K for the year ended December 31, 2014, Exterran Partners' Annual Report on Form 10-K for the year ended December 31, 2014 and those set forth from time to time in Exterran Holdings and Exterran Partners’ filings with the Securities and Exchange Commission, which are currently available at exterran.com. Except as required by law, the companies expressly disclaim any intention or obligation to revise or update any forward-looking statements. Your host for this morning's call is Bradley Childers, President and CEO. I would now like to turn the call over to him. Mr. Childers, you may begin your conference.

Thank you, operator. Good morning everyone. With me today is Jon Biro, CFO of Exterran Holdings and David Miller, CFO of Exterran Partners. As we usually do, we’ll provide a review of both Exterran Holdings and Exterran Partners before we open the call up for questions. So let me start with some comments about our recent results. Despite the challenges of the current market, I'm pleased with how well our businesses performed in the first quarter. While the industry-wide decline in customer spending has impacted our operations, our more production-related businesses, particularly our North America and international service businesses, delivered very good results in the quarter, highlighted by generally flat operating horsepower levels, and increasing gross margin dollars. Although bookings in our service businesses were lower than we experienced in recent quarters, the performance of these businesses continues to demonstrate stability compared to other businesses that are more closely tied to drilling and completions activity. For our fabrication business, the high backlog levels we were able to build late last year positioned us to deliver solid operating and financial performance in the first quarter. Fabrication bookings, on the other hand, were substantially reduced by the sequential and year-over-year basis, leading to a reduction in our backlog. While a reduction in bookings was expected given market conditions, the severity of the drop-off, I believe, reflects both reduced activity levels in response to the decline in oil prices, and extreme caution on the part of our customers as they reset capital budgets and aggressively sought to reduce costs during the first quarter. We expect our customers to increase their activity levels from this very low point, but the timing of that increase is very difficult to predict. As a result, our visibility into the activity levels for our fabrication business in the…

Thanks, Brad. First, I'll provide a summary of the results for the first quarter, and then I’ll provide guidance for Exterran Holdings. Exterran generated EBITDA, as adjusted, of $182 million for the first quarter, consistent with our solid fourth quarter results. Revenues were $725 million for the first quarter, compared to $794 million in the fourth quarter. We also reported diluted net income from continuing operations attributed to Exterran common shareholders, excluding items, of $0.27 per share in the first quarter. This compares with $0.31 per share in the fourth quarter. The first quarter results of $0.27 per share included currency losses of $7.5 million. Those losses were related to the re-measurement of US dollar-denominated intercompany obligations at our foreign subsidiaries. And the primary driver was the substantial weakening of the Brazilian real relative to the US dollar during the quarter. These currency losses, which are included in other income and expense on our income statement resulted in a reduction of about $0.10 per share in the first quarter. Now turning to segment results. North America contract operations revenue came in at $202 million in the first quarter, up 1% compared to $200 million in the fourth quarter. Operating horsepower in the quarter declined slightly by 11,000 compared to December 31, 2014 levels. This decline included the sale of operating units representing 9,000horsepower, primarily to one customer during the quarter. In our North America contract operations business, growth capital expenditures were $77 million in the first quarter, down compared to $83 million in the fourth quarter. Maintenance capital expenditures were $17 million in the first quarter compared to $18 million in the fourth quarter. Now, regarding our international contract operations business. Revenue was $121 million in the first quarter compared to $124 million in the fourth quarter. Gross margin was…

Thanks, Jon. Exterran Partners had a very strong first quarter. As a reminder, we eliminated a need for cost cap reimbursement at the end of 2014, given EXLP’s solid level of distribution coverage. The cost caps provision of the omnibus agreement terminated on December 31, 2014. Cost cap reimbursements from EXH to EXLP were $3.6 million in the fourth quarter of 2014, all of which related to the SG&A cost cap. Our EBITDA, as further adjustment without the benefit of the cost caps for comparative purposes, was $78.7 million in the first quarter of 2015 compared to $76.9 million in the fourth quarter of 2014. Distributable cash flow without the benefit of the cost caps was $51 million in the first quarter of 2015 compared to $49.8 million in the fourth quarter of 2014.Maintenance capital expenditures were $10.1 million in the first quarter as compared to $9.8 million in the fourth quarter of 2014. Our distributable cash flow coverage was a solid 1.42 times in the first quarter of 2015. First quarter ending operating horsepower decreased sequentially by 8,000 to approximately 3.03 million operating horsepower. Revenue for the first quarter was $164.3 million as compared to $161.1 million in the fourth quarter, due largely to higher average operating horsepower in the first quarter, given the growth in operating horsepower during the fourth quarter of 2014. Gross margin was 60% in the first quarter, down from 61% in the fourth quarter, which is a seasonally high margin quarter. Cost of sales per average operating horsepower was $21.48 in the first quarter. This was up 1.5% compared to the fourth quarter of 2014. Cost of sales per average operating horsepower was down 8% from prior year levels, driven by the benefits of our recent acquisitions, organic growth and efficiency initiatives. SG&A expenses…

Thank you. [Operator Instructions] And our first question is from Blake Hutchinson of Howard Weil. Please go ahead.

Good morning.

Good morning, Blake.

Just wanted to look first at your North American contract operations guidance for the second quarter. I guess when we started the year it was your feeling that new capital equipment deployed might roughly match up to the stoppages. In your commentary, you kind of alluded to perhaps the fact that the stoppages were accelerating a bit as we exited the quarter. I guess I'm trying to get a feel for this, or would you point to the type of stoppage activity you had in the first quarter as kind of a good run rate as we look out through the year?

Blake, it’s Brad. So looking out into the year is challenging in the market environment even though we really do believe we have a stable operating business that we’re going to benefit from that performance all year long. We know that historically we see more stop activity in the back half of Q2 and the front part of Q3. It’s a little bit of a seasonal bump that shows up in our data all the time. The challenge in this market is how far to extrapolate that, so there’s uncertainty in the answer, but what we expect is real solid stability. But we know right now that the stop activity levels tend to be a little higher at this time of the year and right into the front part of Q3, and they typically moderate after that. So we stand by the stability comment, I stand by the fact that we can really expect this business to perform with stability throughout the course of the year. But know that there is more uncertainty in this market as to what the buying activities and investment activities of our customers are going to look like. It also is impacted by their cost-savings initiatives, which can translate into higher stop activity. So we need to see how long that continues. That’s the balance of factors that we are weighing and looking at how we think about that business going forward.

And then your international guidance for 2Q as well, we understand sporadically you can have issues, like the cost recovery in Argentina. I guess with the kind of lower guidance for 2Q, is that indicative of the matching up of that contract actually stopping or somebody prepaying out, or is there a currency impact that is a kind of one-time reset of your top line? And then, along with that question, can you talk about when the bulk of the kind of revenue backlog should kind of start to offset that in terms of timing?

Okay. That was a lot in your question. Let me do the best I can. So in ICO what we’re seeing for the revenue reduction is driven by, yeah, the one-time Argentina impact is probably the biggest from a magnitude. You’ll note also horsepower declined modestly in this quarter. That sets up for an incremental decline going forward. And then we have had some price discussions with our customers that we have both anticipated and are working on, we’ve put into our forward guidance as well. So I think you're seeing a summation of those three factors in looking at what our ICO revenue is going to do in Q2.

And then just a commentary on when we should start seeing the backlog kind of trickle in?

Yeah, the project that I referred to in Brazil, we have one that starts up in the second half of 2015, so it’s Q3, Q4 event. And then the other major backlog events don’t occur until late 2015 and the beginning of 2016, primarily impacting 2016.

Okay. Thanks for that. I’ll turn it back.

Sure.

Thank you. Our next question is from Marshall Adkins from Raymond James. Please go ahead.

Good morning guys.

Good morning.

Morning.

You gave us some detail on your costs coming down. I want to delve into that a little bit further. Can you give us a little more color on kind of where the costs are coming down? Is it fuel, for fuel operations at lubricants, or are we seeing some labor reductions just given the overall pullback in the oilfield?

Sure. The biggest driver, and most of that reference felt like it was to NACO, and since we have businesses that operate differently, let me talk to each of them separately. Through the first quarters, you can see from our results, we didn’t see a lot of impact from the drop-off in activity levels and I’ve noted in the past and we’ve discussed in the past that our business really experiences about a six-month lag time between when the real upstream impact is felt, so when we see it in our business. What we’re seeing to date coincides and reinforces that perspective for most of our businesses overall. So it means that activity levels for us did not drop off in Q1, and so we did not take a lot of direct labor out of the field, in fact, our operating horsepower in both ICO and NACO were fairly stable. So that was not the driver. And in our fabrication businesses, again, we had accelerated pull-through and activity in our shops that we benefited from, so you didn’t really see reductions there either. Where the cost benefit did kick in in NACO is we did benefit from lower lube and fuel expense. That was most noticeable. We chased to ensure we were getting that expense through negotiations with our vendors as timely as we could. And we also put in place rapid repricing discussions with our vendors to ensure that the market environment that we’re experiencing gets passed on and they share in it as well as we can also. So we saw some lower materials expense. And then finally, we saw the major impact of lower comp as we flattened out comp for the year and put in a wage freeze across the board early in the year and taken other steps to manage compensation. So those were the main impacts that we saw on the cost savings in the quarter.

So you had a wage freeze, but it doesn't sound like overall wages are coming down like it is for a lot of the other areas upstream.

We haven’t experienced that yet.

Okay. But possible six months down the road?

Sure. Yeah, it’s definitely possible, but I’ll point out that for a lot of the other service companies, they are operating in an environment where the utilization of their equipment and of their overall system and labor has dropped and is a lot lower. What we expect to see is a lot of stability in the utilization of both our equipment and our workforce. Given that environment with our stilled workforce, it remains right now not as competitive as it was certainly at the back half of 2014, but it remains competitive in the marketplace, especially in growth markets for labor and for equipment.

Right, that makes sense. Last one for me. Obviously, the upstream side is getting a lot pricing pressure. Given the stability you referenced, are you seeing any pressure in pricing from your customers or is that holding relatively stable? I'm referring more specifically on the North American side.

So in North America contract ops, we have had pricing pressure and experienced pricing pressure from our customers. What we have accomplished to date is to maintain what I think is still a strong gross margin, revenue contribution and revenue per operating horsepower with the strength of our operations to date. And anything else that we think we needed to reflect, we've baked into our forward guidance. Otherwise, talking about forward pricing is off-limits.

Okay. Thanks guys.

Thank you.

Thank you.

Thank you. [Operator Instructions] Our next question is from Sharon Lui of Wells Fargo. Please go ahead.

Hi, good morning.

Good morning, Sharon.

Sharon, good morning.

To follow up on your previous comment, at this point, are you not able to talk about the magnitude of price - potential price or rate decreases in North America?

Thanks, Sharon. Yeah, the conflict is, just from an antitrust perspective, talking about what we are doing or are seeing from a forward-pricing perspective is not something that's permitted. So from an antitrust perspective we stay away from forward pricing guidance. We try to be very clear in describing what we’ve accomplished and what we've done after we’ve done it. And that’s the divide, Sharon. That’s why. We’re not trying to be cute on this, just trying to make sure we can answer it as fully as we can and comply. So what I’d still say on pricing is that we think we have relatively strong pricing position that we’ve put into - what we accomplished in Q1 and what we’ve put into our Q2 outlook.

Okay. That's helpful. And then just trying to quantify, I guess, the amount of EBITDA still available for drop-downs to EXLP. If I just look at the consolidated 2014 results and the Form 10 filing, can we assume, I guess, the difference in EBITDA of about $52 million before the last drop is a close estimate?

The way to think about it, Sharon, I think is if you look at our horsepower remaining at EXH after this drop-down, it’s kind of around 500,000 horsepower and then I think I would use that to back into EBITDA.

Okay. So at this point the aftermarket service business, are there thoughts about getting a PLR, or what are your thoughts in terms of dropping those assets?

Sharon, it’s Brad. What we said in the past is and I believe most of that AMS business is qualifying income-generating business. We actually believe that and we said it. To date, however, no one has gotten a PLR on that business that would assure that it generates qualifying income, and the IRS has not been in the business issuing PLRs recently. So we don’t have any update on the status of that beyond that.

Okay. And then I guess just a last follow-up on the CapEx spending. You, I guess, reduced the CapEx for North America contract ops. Are there specific regions where you're seeing more weakness than others?

Yes. That definitely is the case. We still see and this is - it’s not a change in the location when we think about the geographic plays that are attracting investment compared to those that are not attractive investment currently. And where see the growth for us and where investment is still going in is the place that you’d expect big in the Permian, the Eagle Ford, the Niobrara and a few of the other plays I listed are still attracting investment. Where we see downturns remain in conventional older legacy plays that are just more expensive to operate in this operating environment. And that includes both dry gas as well as candidly some of the conventional plays that have more rich gas, but are not as cost effective in this commodity price environment. But it’s not a change in the location of what’s attracting investment. It’s really a change in the magnitude.

Okay, great. Thanks for your commentary.

Thanks, Sharon.

Thank you. I will now turn the call back over to Bradley Childers for final comments.

Great. Thank you everyone for your interest in Exterran Holdings and Exterran Partners. We are proud of the quarter we had and we look forward to talking to you again at the end of our second quarter. Thanks very much.