Good morning. And welcome to Exterran Corporation’s Third Quarter 2017 Conference Call. With me today are Exterran’s President and CEO, Andrew Way; and CFO, David Barta. During this conference call, management may make statements regarding future expectations about the company’s business, management’s plans for future operations or similar matters. These statements are considered forward-looking statements within the meaning of U.S. securities law and speak only as of the date of this call. The company’s actual results could differ materially due to several important factors, including the risk factors and other trends and uncertainties described in the company’s filings with the Securities and Exchange Commission. Management may refer to non-GAAP financial measures during this call. In accordance with Regulation G, the company provides a reconciliation of these measures in its earnings press release issued yesterday available on the company’s website. With that, I will now turn the call over to Andrew Way.

Thanks, Greg, and good morning, everyone. Q3 was another excellent quarter for Exterran, despite some challenges and interruptions from Hurricane Harvey. One in seven of our Houston-based employees were impacted by Harvey. Our thoughts continue to be with the team and their families, as they continue to rebuild their lives following the devastating storm. Despite the challenges of Harvey, we maintained our focus and executed well across the company, which led to higher gross margins in our Oil and Gas Product segment, continued strength in orders and ongoing progress in cash and working capital management. Some of our process improvements we’ve discussed on prior calls are being realized and the signs of productivity are encouraging. We will discuss these and other initiatives later in the call. In Contract Operations, our third quarter performance was in line with our expectations. We continued to renew existing contracts at the same high rate we’ve experienced in the past and we continued to deliver excellent service to our customers. Our Aftermarket Service business is gaining traction. We saw revenue and profits grow in both Latin America and Asia Pacific during Q3, on the back of some large transactional wins. Aligned with our focus to provide more higher value-added services in our AMS segment, we reached agreements on four long-term operation and maintenance service projects, two of which are renewals and two are new projects with new customers. These four opportunities are across all of our major operating regions and represent a diverse customer base of both onshore and offshore rotating equipment services and reflect our transition to a longer term O&M provider. Whilst these projects in total represent approximately a quarter’s worth of AMS revenue on an annual basis, they helped transform our legacy AMS business from a transactional business model to a long-term capital light model, with committed revenue streams consistent with our Contract Operations business model. In Product Sales, from an order standpoint, we recorded our fourth consecutive quarter of bookings in excess of $200 million and our fifth consecutive quarter of building backlog. During the quarter, we booked gas plant orders capable of processing 1 Bcf per day of natural gas. In fact, year-to-date North America gas plant orders represent more than 3 Bcf per day of gas processing capacity, reflecting the strong growth in midstream infrastructure this year. To summarize the quarter, we built a solid backlog of Product Sales revenue to wrap up the year and into the first half of ‘18. Our Contract Operations renewals delivered in line with expectations. Our pipeline of new ICO opportunities continues to grow setting us up for a strong finish to the year. I’ll turn the call over to Dave for the financial review, our fourth quarter outlook, as well as our early thoughts on 2018.

Thanks, Andrew. As I discuss our segment results, I will again make comparisons to sequential quarterly performance. So starting with the Contract Operations segment, revenue decreased 3% to $93 million and gross margin decreased to $59 million. We did, however, maintained a gross margin percentage of 64%, consistent with Q2 driven by productivity. Revenue was lower in part due to contractual recoveries from Q2 that did not repeat in Q3 and the re-scoping of our legacy project in Latin America due to changing well conditions, as certain wells produced more liquids and less natural gas. As you’ve seen in our financial results throughout the year, re-scoping allows us to protect our margins but a revenue decline is inevitable as a result of a lower flow in our foot mix change. In the Aftermarket Service segment, revenue was $30 million or 23% higher than Q2. Our gross margin was $8 million, a 13% increase. This resulted in the gross margin percentage of 26%, compared to 29% in the second quarter. The decrease in gross margin percentage was due to the increase in part sales, which tend to be at lower margins as compared to services. Revenue in the Oil and Gas Product Sales segment was impacted by Harvey, which led to decreased revenue of 3% to $192 million, while gross margin improved 2% to $21 million, resulting in the gross margin percent -- percentage of 11%. Productivity and mix were key drivers of the rate improvement, which resulted in this offsetting the dollar margin impact from Harvey. Geographically, the revenue split was roughly 88% from North America and 12% from international markets. Oil and Gas Product Sales bookings were $245 million, translating into book-to-bill of nearly 130%. Our Oil and Gas Product Sales backlog was $560 million at the end of…

Thanks, Dave. So to summarize our fourth quarter outlook, we should finish the year on a solid note. I am proud of the accomplishments we’ve made as a team throughout this year and not just the results you see in our financial statements. We’ve come a long way in a short period of time, but we have primarily been focused on business fundamentals, so all of our stakeholders can trust and rely on us. More recently, we have begun to focus on building upon the strong foundation we’re establishing, the type of company we aspire to be, so we may continue to create greater value for all of our stakeholders in the future. At the center of this process is our strategic growth plan, while we are in the early process, a few themes have emerged that we’re developing. Our strategic themes are centered around two drivers. The first is the secular growth in global natural gas is real and continues to be confirmed by our global customers and by countries set on turning to natural gas as a source of power for residential, industrial and commercial uses. This provides a tailwind for the core of Exterran’s business. A second driver is our ability to expand beyond our current core. Exterran has the opportunity to bring more solutions and value to customers beyond the current core business, accelerating our growth beyond just what we sell today. We have spent a great deal of time analyzing the market and the customer opportunities. This process has been in two parts. The first is to analyze our current product and services portfolio to ensure our portfolio aligns with our long-term strategic and financial goals. The goal of that review is to prioritize product lines, with a higher growth and return profiles. This would…

Thank you. [Operator Instructions] Our first question comes from the line of Jim Wicklund of Credit Suisse. Please proceed with your questions.

Good morning, guys. You have a very ambitious strategic plan you laid out and I am really interested in the different international segments that you’re breaking out now and you mentioned you’re working on supply chain in those countries, I am curious, a couple of questions if I could. Is there one region that you expect to be better or better sooner than others and can you talk a little bit about the infrastructure that’s going to be required and the in-country supply chains that you’re going to have to develop as a result of that?

Hi, Jim. Thanks for the question. We’ve said quite -- for quite some time that we’ve been very pleased with the commercial activities and the work that we’ve been able to accomplish in a pretty short space of time in the Middle East. If you think about the former Exterran, we had a large amount of volume in Latin America associated with ICO, AMS was a little more, I’d say dispersed between Asia Pacific and Latin America. But we have, as a result of the strategic review really started to see the opportunities coming through at a greater pace than we would have maybe a year or two ago. Partly because we won some projects and executed really well and that’s generating a lot of interest in the region. We’ve also seen an increased interest in the design, own, operate model that Exterran provides and as a result of the exit of the Belleli that Dave alluded to, we doubled down at the early part of the year and decided to transition from a Belleli facility in Dubai to Exterran. So now we have a team that’s been developing plans in the background for both design, manufacturing of processing equipment, project management skills, we recently put a new regional leader in-country reporting integration the services role and so we’re bullish on that region. And there are a number of countries in that region that we see significant opportunities over the next couple of years. Dave mentioned in his prepared remarks that we see pipelines today of more than $2 billion of backlog opportunity and some of those will obviously come through in the Middle East. So that’s the region that we’re focused on and we see a lot of opportunities to continue to improve there.

Okay. That -- then that is a share from Latin America but then everybody seems to be gravitating towards the Middle East, which is positive. There have been several companies that operate internationally that have said that activity declines and overall capital spending by international have stopped going down and then you started to see recently some activity moves up. Are you seeing increased activity overall in addition to you guys just winning contracts, because of your business model, is it a double win, if I could or is right now activity somewhat flat and you’re just gaining because of your capabilities?

No. I think -- let me answer the first part, Latin America is still important to us and we certainly see opportunities over the course of next six months and just recently came back from that region and was very encouraged with some signs that I am seeing also in Latin America. I’d say, for the Middle East, we have definitely seen more opportunities and more activity, but it’s the classic elongation of sort of the cycle time to close deals. They are not improving in any shape of form and we’re starting to see more opportunities taking a little longer to close. But we’re encouraged, Jim, at the level of appetite by country and I think there is a trend certainly towards more of a smaller production focus as opposed to the larger gas processing and we’re very, very encouraged that the own operating model that we are seeing come through today. So that pretty much summarizes.

Pretty much. And I look forward to further development of the strategic plan, I guess, you’ve got a great deal of ambition and best of luck.

Thanks, Jim.

Our next question comes from the line of David Havens of Deutsche Bank. Please proceed with your question.

Yeah. Good morning, guys. Two questions, first on the international side, if you look the own and operate business, can you give us -- can you share with us any details in terms of the difference between a state or national client versus that some of the oil and gas majors, I mean, I assume the Middle East is going to largely state on national, but kind of broadly around the world, who do you find embraces that model faster?

I think, we’ve obviously had success in countries around the world where there is a larger either an independent oil company or international oil company that have access to fields beyond their current territory. And so by nature, what I’ve seen over the last two years is regions where we have opportunities and we’re currently providing either AMS support today or ICO support, as they migrate into other regions, we’re also seeing that model pull-through. So I’d say the IOC model, it really depends customer by customer, basin and field by field, but we’re certainly seeing pull-through opportunities where we’re producing support in one country that’s also showing up in other countries. But, for sure, right now particularly in the Middle East, we’re certainly seeing, as you defined, NOCs that are really latching onto this model to help them produce gas faster and so that’s really our goal is to get gas to market as fast as they require and that model is providing to be very successful from right now. So we see both, but certainly in the regions right now where we’re seeing the growth opportunities is led by mostly the NOCs.

Okay. And then, can you just shift over to the process and treatment some of your larger compression job. What percent of your business now would you say is coming from pull-through from prior contracts, where you’ve already done trains 1, 2 and 3 versus new customers?

Yeah. It’s a great question. I was kind of working through this the other day with the team. We’ve sold year-to-date about 16 gas plants in North America. We’re continuing to see more opportunities but I’d say slowing a little bit in terms of the fourth quarter and just some of our customers taking a pause and working through their budgets for next year. We sold a significant amount of train 1 and train 2 in the third quarter as been the case year-to-date, about 70% of what we sold year-to-date would be greenfield with over 90% of the production we sold has the ability for multi-train beyond the scope of what we’ve supplied and so Q3 was a great quarter in relation to train 1s and 2s, but equally we sold train 11 for one particular location that we provided the prior 10. So it’s a mixture of both. But we have certainly some exciting basins in the North America market over the next two years to three years that will require additional capacity. The question is when and how that will come online, which we’re obviously pacing very carefully right now.

Do you generally have good visibility on the projects where you’ve done trains 1 and 2 and maybe even 3 on how big ultimately those projects can be, I mean, kind of give us some scope is 11 average, is that high end, how do we think about that?

Yeah. That’s certainly on the high end of what we’ve seen for that particular customer in that particular basin. But to give you a sense of visibility, we’re already working on projects for ‘19 and ‘20 in terms of our customers plans. It’s a question of, obviously, CapEx that they put into play and whether that market will move into more of an own -- ownership model as we see internationally. It will be decided over time. But we certainly see basin by basin, location by location, we track both the current trains operating, where we put in capacity and then ultimately there’s typically a lag in communication externally where our customers will announce that plant is up and running and fully producing the gas that they required. So, we certainly see ‘19 and ‘20 opportunities. It is a question of getting the capital across the line and making it happen. So, we’ll give you a little bit more of an update on that when we see our plans play out here in the fourth quarter and early part of next year.

Okay. Thank you. That’s it for me.

Our next question comes from the line of Joe Gibney of Capital One. Please proceed with your question.

Thanks. Good morning, guys. David, just a question for you on some margin baseline within Oil and Gas Product Sales, so just curious, I know this is difficult to sort of triangulate, but impacts from Harvey, I think, you called out aggregate company-wide $20 million revs and $3 million gross profit impacts propounded to that in Product Sales. So I am just trying to get a sense, you guys posted a strong margin here, it’s lifting, you’re getting better absorption, you’ve got a lot of efficiency you used. So what’s your baseline, I know you called out 11% for 4Q somewhat flat, but what 3Q have been ex- Harvey, I know it’s a sort of difficult triangulation with a lot of moving pieces, but just curious there.

I don’t think the Q3 impact was really as much rate as it was more topline. Our facilities here in Houston were down. I think we took out about seven production days because of the impact of the storm. So it was more of revenue. I think we said about $20 million of revenue that was impacted. But from a rate standpoint, not a significant driver, we frankly, what little impact you had have from seven days of production on the rate due to absorption, we made up in productivity, so not, obviously, not an impact.

Okay. And fourth quarter in terms of your call back there, obviously, some of those potentially lost, obviously, it’s dispersed maybe over a couple of quarters, just trying to get a sense of what revenue recoupment is in that fourth quarter guide than on Product Sales topline?

Yeah. Our assumption again about $20 million of revenue that was pushed out of Q3 and roughly half of that for sure we’ll get in Q4 and the other half will be Q1 and doing everything we can to certainly get everything back on schedule for all of our customers. But, obviously, that’s a rough view of how that would rollout just given the production we have.

Okay. Okay. That’s helpful. On the AMS side, the longer term renewals you talked about and two additional customers. Just curious when these begin to sort of fold in and what is the short typical duration of this, Andrew, as you focus on maybe this more expansive move again getting away from transactional to this long-term model you’ve alluded to for some time? How does this long-term through operating and maintenance aspects kind of flow in here, just kind of curious on the rate of acceptance by your customers and how quickly we should think about that kind of a revenue stream, I think you referenced a quarter worth of revenues on an annualized basis, correct me if I am wrong, I think you said…

Yeah.

… all four not just the two, just some color there would be helpful.

Yeah. That’s fair. And I think, we’ve had a lot of success in the past at selling AMS more of a transactional -- on a transactional way, in the same way as you sell a Product Sale. What the team has refocused this year is, our longer term goal is that we start talking about AMS in the same way as we talk about ICO, so longer term contracts locked down. We’ve seen a breakthrough in Q3, where we saw a little bit more of a two-year look. , so we were able to see contracts that were able to lock down for sort of two years. We’re working on some right now for three years. I don’t think at this stage we’re seeing the 10-year type contracts we’ve seen in ICO. But we certainly are seeing a change and that’s really two parts. One, we’ve got a sales force that’s now focused on it and we’ve kind of changed a little bit how we go to market. And then, secondly, we’ve been able to bring a lot of the benefits we’ve seen in ICO to our customers and show the importance of maintaining equipment and how they can really get the same benefits of reliability and availability, as we see in ICO, the only difference is they own the asset. So we’ll see those contracts coming on in Q1. They’re across all four regions. We had a real good sense of wins in the third quarter and we continue to see a good pipeline going forward. But what we should be in a position to longer term, Joe, is to really talk about backlog in AMS in the same way as we need to get to for ICO, so you’ve got to sense that long-term stable recurring revenue at the margins that we enjoy today and so that’s the transition that we’re going through to really provide that to be a long-term cash flow model for us also.

Okay. Helpful. And last one from me and then I’ll turn it back. The $2 billion project pipeline view in ICO that you referenced, just for someone to the baseline looking into next year, I am curious what that project pipeline looked like for you guys as you were looking at 2017, there’s a lot more cross currents obviously with where we were in the market, but you also had booked over $400 million in Middle East bookings this year pretty sizable. What was that project pipeline view last year versus the $2 billion you’re talking about now looking into the next year, would just be helpful? Thanks.

Yeah. So we’ve taken a weighted view on the $2 billion. There are two things that we have to work through. First of all, I -- as I explained a number of times this year, we operate at a very early stage with many of our customers at the development of the field and once the reserves are being prudent and there’s an element of what they need to produce, we’ll work very early often developing work scopes and trying to understand with the customer how best to monetize their fields. So we have good visibility into fields that may haven’t come down the pipe yet for a formal tender process. And so I’d say on that front, we’ve gotten a lot better in 2017, I think, if I compare how I saw on the earnings call sort of a year ago coming into ‘17, I’d say our confidence of the pipeline today is probably 2 times what we saw coming into ‘17 and that $2 billion is kind of a weighted look based on what we think will go ahead. The pipeline is bigger than that. But what will go ahead we believe over the next few quarters is certainly in the magnitude of that kind of level. Now the big question is, when it will happen? And that’s the real challenge that we’ve been working on. We’re not in a position today to give some CapEx guidance for ‘18. As we come through the back end of the year, we’ll obviously give a more of an updated view in the early part of next year but it will be higher than this year. So we are confident at the projects that we’re looking at right now and we’re seeing some encouraging signs for projects also through ‘19 and ‘20. And so, this ICO business is a long term play, I’d say, as Dave described ‘18 is sort of transitioning with modest growth. We’ve got projects coming online in ‘18, we have already announced, but we really see this setting up for a real strong ‘19 and ‘20 the way that we’re looking at the business going forward, which of course, having a pipeline is important to do that. So, the good news is, we see a great pipeline across a number of regions and very encouraged by it.

All right. Thanks, guys. Appreciate it.

Our next question comes from the line of James Spicer of Wells Fargo. Please proceed with your question.

Hi. Good morning. So wondering if you could just provide a geographic breakdown of what basins are really driving your Product Sales at this point and how that looks into 2018?

Yeah. So we’ve had a little bit of a change in Q3, I’d say, from our first half of the year, where West Texas was mostly the primary focus that we saw both across the different locations in the different areas. But we saw in Q3 year-to-date a little bit of a trend change so the Marcellus in the Northeast particularly picked up for us, the way that the overall processing capacity is shaken out right now a little more in the Northeast than in the Permian and the West Texas about 20% to 25% of the volume in the stack the sooner the Anadarko Basins. And then in terms of the basins that we’ve seen, I know you guys track a lot of the midstream and so it wouldn’t be a surprise to see some of the basins that we are see in activity. Mentone, for sure, Ramsey, Sherwood, Latham, Ola, Stateline, Harmon Creek, they are some of the basins that we’ve seen along with some others activity this year and so really no -- nothing from last field. It’s pretty straightforward in terms of where you’re seeing a lot of the midstreams talking about capacity increases and where we’re seeing some of that volume come through.

Okay. That’s helpful. Thank you.

Our next question comes from the line of Daniel Burke of Johnson Rice & Company L.L.C. Please proceed with your question.

Hey. Good morning, guys. Andrew, not in any way trying to take you into a quarter, but I wanted to make corner, I wanted to make sure I understood the comment on the $2 billion ICO pipeline. So is the $2 billion without pinning you to a quarter, are the -- is that the magnitude of projects you guys think will be awarded with in any set period of time, say, by the end of ‘18 or just trying to understand how far forward that period of visibility really goes?

Yeah. It’s a great question. And one I don’t have a quarter that I can pin down right now. I’d say, over the course of the next 12 months there will be projects that will close that we feel that will really set up ‘19 and ‘20. And so, I think, here in the next couple of months we should start to see some projects getting to the stage where they are awarded. We’re in the process of, obviously, putting our capital plan together as we speak for both ‘18 and ‘19. But, over the course, I’d say, through ‘18 and into the first half of ‘19 there are a number of projects that by the nature of what they are will be required for the aspirations and the goals of those countries and mostly some of the decrease have already been made in those countries. And so, I’d say, over the next 12 months to 18 months we will start to see those projects coming to fruition and I hope we’re in a position over the next couple of months to announce one or two of these awards.

Okay. That’s helpful. And then, Dave, maybe I missed one, I think, I know what the answer will be, but could we get on the Oil and Gas Product Sales side bookings split for the third quarter, maybe I missed it just North America versus international?

Yeah. I think the off the top that cover that the North American was 88% and 12% from international.

Okay. So, okay, bookings and revenue were pretty similar, I misheard that part...

But -- but…

Yeah.

Within a couple…

That was basic, that was actually revenue.

Couple percent.

Yeah.

Within a couple percent.

Yeah.

Got it. Got it. And then maybe just a little piece of a follow-up to that one, I appreciate the way you all sort of highlighted some of the main considerations underpinning the 2018 outlook and there will be more specificity next quarter. But one element I didn’t hear mentioned really was sort of the international side of Oil and Gas Product Sales, and obviously, that’s been a small piece of the business on a relative basis for most of this year. But any updated commentary on how that portion of the business looks into next year, what the considerations might be?

Yeah. We have -- we certainly have project visibility for ‘18 for some of the countries. It’s a very different animal for Exterran as you know from a -- the activity levels in North America around gas plants is pretty staggering. What we sold year-to-date in North America is the size of some countries’ entire production and so we’re talking a whole different level of activity opportunity. And so, what I’d say in ‘18, there are a couple of big projects that we’re seeing today that hopefully we can convert to ICO, but if not may come through as Product Sales. And then has been our intention this year to put additional focus in the regions and we’ve made a lot of traction on AMS coverage and product coverage in countries where we really haven’t had a lot of scope. And so I am hopeful that ‘18 will yield more opportunities for us and that we’ll close more deals and then really ‘19 as we get into our strides and have an organization that’s really regionally focused. It will help to uncover more opportunities and help drive more orders, revenue and sales in those regions and countries. And so that’s the transition that we’re heading to, to have real leadership in those countries and regions that can help us grow and we’ll see how that plays out here over the next 12 months.

Okay. Great. All right, guys. Well, that does it for me. Thank you, Andrew. Thank you.

Thanks, Daniel.

[Operator Instructions] Our next question comes from the line of John Watson of Simmons & Co. Please proceed with your question.

Good morning, guys.

Good morning.

A quick one from me on Product Sales, are you currently selling any enhanced oil recovery units, are you having discussions with potential customers regarding enhanced oil recovery?

Well, I think, there’s a lot of flavor right now on this, the terminology that the industry is using this huff and puff. I’d say we are in the very early stages of looking at that. We have put a white paper together on the implications what it means for our business for more of the higher pressure rated compressors. So it’s something that we are working through. It’s part of our program that we’re looking at, as I alluded to, with our growth plan that we’re looking at with the different adjacent markets and there’s certainly some interest that we’ve seen coming through, but again, we’re in the very early stages right now of being able to put some solutions together and work through what it means for Exterran.

Understood. Thank you for that. And then, I guess, related follow-up and what percentage of sales made to North America are for 3 stage compressors versus 2 stage or 1 stage?

I would have to get back to you on that. I know the, I mean, certainly the trend has been the case this year has been more of the higher horsepower. I could take a guess, but maybe I’d be wrong. So, I think, what we’ll do, Greg, will follow-up with you and we’ll get you that data. But certainly the trend that we’ve seen towards the higher horsepower hasn’t really changed in the third quarter. We’re still seeing more opportunities on the heavier product, and I think, that will be continued for certainly the foreseeable future.

Okay. Great. Thanks for taking my question. I will turn it back.

Thank you, John.

There are no further questions over the audio portion of the conference. I would now like to turn the conference back over to management for closing remarks.

Thank you. So, once again I’d like to thank everyone for your interest in Exterran today. Appreciate you dialing in and have a great day. Thanks.

This concludes today’s conference. Thank you for your participation. You may disconnect your lines at this time. Have a wonderful rest of your day.