Good day, ladies and gentlemen, and welcome to the Forum Energy Technologies' Third Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct the question-and-answer session, and instructions will follow at that time. As a reminder, this conference is being recorded. I would like to introduce your host for today's conference, Mr. Mark Traylor, Vice President of Investor Relations. Please proceed.

Thank you, Terrance. Good morning, and welcome to the Forum Energy Technologies third quarter 2017 earnings conference call. With us today to present formal remarks are Prady Iyyanki, Chief Executive Officer; and Jim Harris, our Chief Financial Officer. Cris Gaut, our Chairman, will also be available for Q&A. We issued an earnings release last night, and it is available on our website. The statements made during this conference call, including the answers to your questions, may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements involve risk and uncertainties that may cause actual results or events to differ materially from those expressed or implied in such statements. Those risks include, among other things, matters that we have described in our earnings release and in our filings with the Securities and Exchange Commission. We do not undertake any ongoing obligation, other than that imposed by law, to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after this call. In addition, this conference call contains time-sensitive information that reflects management's best judgment only as of the date of the last call. Management statements may include non-GAAP financial measures. For a reconciliation of these measures, refer to our earnings release. This call is being recorded. A replay of the call will be available on our website for two weeks following the call. I'm now pleased to turn the call over to Prady Iyyanki, our Chief Executive Officer. Prady?

Thanks, Mark. Good morning, everyone. I'm going to discuss the strategy in focus areas, and provide some operational highlights. Then I'll turn the call over to Jim Harris to provide details on our third quarter financial performance. Our third quarter results were in line with the second quarter due to the impact of Hurricane Harvey and customer and logistical delays. In terms of strategy since our last call, we had several significant achievements that repositioned our portfolio and strengthened our balance sheet. We expanded our Completions portfolio with the acquisition of Multilift and Global Tubing, making Completions our largest segment and increasing our exposure to the North America land recovery. We refinanced our credit facility to increase our liquidity and enhance our ability to take advantage of M&A opportunities. We continue to generate sequential increased bookings in our Completions and P&I segments. Looking forward, we are well positioned to take advantage of a strong growth in North America Completions activity in the fourth quarter and into 2018. Our Completions and Production & Infrastructure segment revenues are now about 80% of our revenue after the Global Tubing acquisition. Our onshore exposure is 85% of revenue. Our North America presence is 80% of revenue. We are now focused on executing three levers to deliver on the opportunities we see in the core markets. We're going to ramp up our manufacturing and supply chain in the Completions and P&I segments to capture the market growth. Second, gain market share in North America land and the Middle East markets. And finally, improve profitability by driving selective price increases in Completions and P&I and further streamlining the cost structure of the Drilling & Subsea segment. Let me give more details on these levers. The Completions segment revenue has grown over 70% from last year, and…

Thank you, Prady, and good morning, everyone. The North America's land, drilling and completions activity remained strong as Forum generated 80% of our third quarter revenues in this market. For the fifth consecutive quarter, we saw an increase in our inbound orders, which is a good indicator of our near-term business prospects. Forum's total orders during the third quarter were $230 million, an 8% increase from the level in the second quarter. The third quarter book-to-bill ratio was 116% for the company as a whole. Orders in our Completions segment increased to $72 million sequentially, resulting in a book-to-bill ratio of 121% due to customer spending on pressure pumping and artificial lift equipment. We expect the demand for our Completions segment to remain strong in the fourth quarter and into 2018. In our Production & Infrastructure segment, orders improved 16% and our book-to-bill ratio was 128%. Orders for our well site production equipment and our downstream Edge II desalter equipment were up 50% sequentially as customers are planning for 2018 activity. Valves achieved a strong level of orders during the third quarter, which were just under the record level of orders received in the second quarter. Orders in our Drilling & Subsea segment were down 8%, resulting in a book-to-bill ratio of 90% in the quarter. Orders for drilling equipment were relatively flat with the prior quarter. And even though the offshore recovery continues to lag, we feel orders for our Drilling & Subsea segment have reached the bottom. Orders for our drilling equipment will more closely follow the domestic and international rig count activity and the upgrading of lower specification rigs. Orders for subsea equipment will be at a low level for an extended period and weighted towards chunky non-oil and gas activity. Our third quarter revenue was $199…

Thanks, Jim. In summary, the macro environment for our Completions and Production & Infrastructure segments, which are now 80% of our revenue base, is robust entering into 2018. Our near-term focus is on executing the following: accelerating our ramp-up in the Completions segment, streamlining our cost structure in the Drilling & Subsea segment, free cash flow positive in the first quarter of 2018. We thank you for your interest. At this point, we will open the line for questions. Operator, please take the first question.

Thank you. And our first question comes from George O'Leary from TPH Company (sic) [TPH & Company] (18:45). Your line is open. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Good morning, guys.

Good morning, George. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Just a quick one from me on the Completions side. Given you, guys, have rolled in the Global Tubing acquisition and Multilift into your results, just curious if you could provide any incremental color on the expected revenue impact for the fourth quarter, kind of point us in the direction there given Global Tubing, in particular, is a pretty big needle mover? And, Jim, your comments were helpful, but just kind of trying to dial in the sequential increase in that Completions business.

Sure. So, George, we've probably given more detailed guidance this quarter than we've ever given in terms of revenue, EBITDA and earnings per share. And we tried in our remarks to give guidance on the incremental – other incremental changes coming through with the depreciation and amortization. So, I think the information should be there, and we can talk about that as we go through. But obviously consolidating Global Tubing having 100% of the revenue coming in that's accounting for a piece of what we're seeing in the fourth quarter. And that's, I'd say, a major contributor to the EBITDA for what we have in the fourth quarter on the incremental basis. But I think we've given sufficient details for you to be able to back into how much is coming in from those acquisitions. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay. Perfect. Just trying to push a little bit more there. But I do appreciate the incremental color. It's definitely very helpful. And then, as we progress into the fourth quarter and it makes a little bit challenging because traditionally folks key off of what rig activity is doing. I think completions activity and well count is a little bit more important of a metric today. The headline rig count is moving lower. I was just curious if you could frame as we're a month into the quarter just how orders seem to be progressing thus far as we move into the fourth quarter earnings, the orders still moving up sequentially? Are we slowing with the rig count following just a bit?

George, this is Prady. What we saw in third quarter were, in spite of the Harvey, we saw the orders up in – across the segments particularly in Completions and also in the Production & Infrastructure. Going to the fourth quarter at least based on what we know in October, that momentum continues in Completions and also in the Production & Infrastructure segments. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay, great. That's very helpful. And then, maybe if I could just sneak in one more. You guys have been active on the M&A front thus far. Are you guys kind of progressing into a digestion mode at this point? Or is the pipeline still robust enough that you guys are still involved and actively looking at acquisitions and then see both kind of downhole tools-oriented acquisitions, although I realize there's the coiled line pipes over the Global Tubing business as well. Is their focus still on completions from here and in particular downhole or are there some other opportunities that are attractive to you guys on the radar?

George, one of the reasons obviously, we have refinanced our credit facility to have more dry powder, and we got $285 million of available cash if needed for M&A acquisitions. I would say, our strategy on the M&A still is intact. Our first area of priority is completions. And I would say our pipeline is still robust on the completions front. And then the second area of priority is, more from a stability standpoint is, any good assets we could get from a midstream, downstream standpoint on the production infrastructure. I think, we'll be open for that too. But our first area of priority is still completions and the pipeline is pretty robust.

And George, this is Cris. I would just add that we do see a very strong market for consumable and replacement items and further growth for the pressure pumping companies. I know you've done some work on this. A very good report you all did, and we agree with your conclusions that that's a very robust market. And so we'll be working hard to address the potential there that we see. George O’Leary - Tudor, Pickering, Holt & Co. Securities, Inc.: Thanks very much for the color, guys.

And our next question comes from Rob MacKenzie from IBERIA Capital. Your line is open.

Thanks, guys. I wanted to dig into Drilling & Subsea here a little bit because that clearly seems to be a drag on what are otherwise some pretty nice growth in your other two main segments. Can you give us a feel for what you expect to achieve in terms of the rightsizing you talked about earlier, Prady, and the timing at which we might consider those businesses will stop bleeding money every quarter?

Yeah. Primarily, Rob, I think it's the upgrades, right. I mean, the mud pump upgrades were very strong in the first half. And as we've telecasted in the last call, we did expect the upgrades to be softened up in the second half, which is what happened. However, looking into the future, even if we look into the fourth quarter, what we expect is flattish to better on the revenue front. But for sure, the margins will improve in 4Q and going to 2018 because of the cost structure and streamlining the operations we are focused on.

So, Rob, and I would add to that. You recall that Drilling & Subsea segment were – it was our largest back in 2014, very complex equipment with a very broad geographic reach. So, they're complicated businesses, but we are taking actions in the fourth to reduce our costs. So, we don't expect those to be a drag going into 2018. We're confident with the strength of those franchises we're going to be able to turn those into a contributor.

The other point I'll make, Rob, is I think the upside to what we just mentioned is there's a strong pipeline in Middle East. And one of the customers is already in the RFQ stage. If any of those materialize early enough, we could see the revenue in 2018. And the second point is we are expecting some chunky orders from subsea, either this quarter or the next quarter, all outside oil and gas, which will position us for 2018. But again, our strategy in the case of subsea in 2017 was to keep it at breakeven EBITDA. With a cost structure reduction, we are looking for positive EBITDA going into 2018.

Great. Thank you. That's very helpful. And then, if you wouldn't mind perhaps sharing, has the mix of revenue from Drilling & Subsea – I guess, it's become much more drilling focused as the year has gone on. I guess, the subsea has been kind of flattish throughout the year, is that correct?

Yes. That's correct. Flattish on the revenue on subsea, yes.

Okay. Thank you. And then going forward with future M&A activity, obviously following Global Tubing, would you guys say you're done or are you're still looking to continue to grow Completions and P&I here at this stage?

Well, listen, our DNA – M&A is our DNA at Forum. For the next two, three months, we want to focus on execution on the Completions side, capitalize the strong market which is in front of us, and also execution on the P&I side with the Saudi Arabia manufacturing plant coming online. But we have a very strong, robust pipeline of M&A opportunities. And as we discussed, Rob, I think our first priority is Completions and our second area of priority is anything in the midstream, downstream side for further stability from a company portfolio standpoint.

Great. Thanks. I'll turn it back for now. Thank you.

And our next question comes from David Anderson from Barclays. Your line is open.

Hi. Good morning. I was wondering if you could expand a bit on that, on the Global Tubing, DNOW agreement you announced this morning as well. Maybe could you describe how the distribution channels are set up currently and how this kind of agreement changes that in terms of maybe like what this does for volumes and how it could potentially increase as a result?

Yeah. Absolutely, David. Coiled line product is a product, which we commercialized about 18 months or 24 months ago. Now, we need to scale that product up because it has been well-received by our customers. As a result, we need partnerships to scale that product up and DNOW with their reach or from a distribution standpoint and their connections with the E&P customers, we've formed that partnership. It's a preferred supplier relationship with Robert and the DNOW team. And we are going to scale that product line up significantly not only in 2018, but on a more-forward basis. Just to give you a little bit more color, in 2014, we had one product line which was the downhole product line. And now, we have two product lines within the Global Tubing. One is the legacy downhole product line and the second is the coiled line pipe product. And the market segment is as big as the downhole segment. So, we got a lot of room here. We're at early stage of capitalizing on that market and we needed a partnership to scale it up much faster.

Now, Prady, this was called a preferred partner in the release and as you just mentioned, but is it exclusive, though? I mean, obviously, there's another big player out there, I think supplies a lot or has also a distribution agreement with DNOW. I'm just wondering how does that all work.

I think, in this case, it's a preferred partnership with DNOW. But again with their scale and with their distribution channels, we're going to scale that product line up significantly.

Okay.

It's not exclusive, David.

Not exclusive. Okay. Thanks, Cris. And just one last question on the Completions side. I was just wondering if you've seen – doesn't sound like, but I was wondering if you – are you seeing any signs of customers curtailing new orders or refurbishment as we head into the year? I think, on the drilling side, we're seeing some of those – some kind of a fall off a bit or at least on the upgrades. I'm just wondering if you're seeing kind of any kind of capital budgets or kind of capital being deployed slowing down on the Completions side as we're heading into the end of the year here?

What I would say on the Completions side there, especially on the frac side of the business, the market is much stronger than the supply chain. So, we are still trying to get every person we could get on board and are trying to ramp up our supply chain, but the market opportunity is very strong in fourth quarter and going into 2018. In the case of drilling, I think, you're right. I think we did see some slowdown on upgrades, primarily the mud pump; however, we had a pipeline, I would say, of second phase of upgrades, which is taking like 1,000 horsepower drill rigs and getting it as close as we can get to 1,500 horsepower state-of-the-art drill rig. We've seen some of those upgrades. The pipeline is pretty strong, but we do see some slowdown on that. But going into 2018, we do have a pipeline of those upgrades.

Great. Thanks, Prady.

Thanks, David.

And our next question comes from Marc Bianchi from Cowen. Your line is open. Marc Bianchi - Cowen & Co. LLC: Hey, thank you for taking my question. I guess, starting with a broader question and we've discussed it a little bit so far, but just want to hear kind of a holistic discussion of it. And if you look at all the businesses that you have between Completions, P&I and Drilling, if the rig count is going to be flat, what's a reasonable expectation for growth for those businesses over, call it, 2018, 2019, it sounds like Drilling might be at the bottom of the list, but can you kind of give us some flavor as to how much each of those growth to rig counts flat?

Yeah. I mean, this is about a little lower than 900 drilled rigs. If you look at on the Completions side, for example, if you take the frac side, probably, we'll end the year depending on what report you read somewhere between 13 million to 14 million horsepower of frac and then going to next year, the range looks like anywhere from 15 million to 17 million horsepower. I mean, that's a lot of horsepower, and it needs lot of consumable items. And in fact, it's getting back to the historic highs of 2014 from a horsepower standpoint, which is going to drive a lot of consumables. If you look at our portfolio, from a Forum portfolio standpoint, 80% of our revenue is going to come from completions and production infrastructure. And in the production infrastructure, we have the production equipment which is also biased towards the well count and the completions activity. So, that's why we are confident that our macro-environment going into 2018, our portfolio is well positioned, and we expect the market activity to continue to be strong on the completions front. Marc Bianchi - Cowen & Co. LLC: Okay. Thanks there, Prady. And I guess, related to that and the investments that you're making to try to get some more market share and improve the supply chain. How should we think about the cost for those investments as it relates to your margin leverage here in the fourth quarter and into 2018? Is there a headwind there that goes away?

I would say the positive side of that, Marc, is we are seeing some pricing realizing into the P&L. And we saw some of that in the third quarter and we expect to see more in 4Q. We had like three revisions of pricing, let's say, on the pressure equipment side. And in the third quarter, we saw some second version of pricing and some still old pricing. But going to the fourth quarter, we're going to see the second revision and third revision of pricing. So, pricing is a tailwind. The margins have improved on Completions. If you look at it for the last 12 months, the margins have nicely improved. Yes, there will be little bit of cost coming in, but it will be offset by the price increases and, more importantly, the revenue increase and the margins coming with it. And also, the mix has changed with the profitable part of the acquisitions, which we've added with Global Tubing and Multilift. Marc Bianchi - Cowen & Co. LLC: Okay. Thanks for that, Prady. So, fair to think about what you're guiding to putting up here in the fourth quarter as a good reflection of what the leverage is in the business?

That is correct. But I think that's what we're seeing in the fourth quarter, the combination of margins improving in Completions and also in Production & Infrastructure, but also the cumulative impact of the acquisitions which are fully baked in.

So, Marc, that trend towards longer laterals, more stages, and that trend continuing and becoming more intense in terms of the service company requirements is the key driver for us going into 2018 much more so than purely just looking at what the rig count is. Marc Bianchi - Cowen & Co. LLC: Sure. Thanks, Cris. Can I just ask one more on free cash flow? For fourth quarter, you mentioned that it'd still be negative, is there an expectation that it improves though from where it was in the third?

Yes. Marc, so what happened to us in the third quarter was not only were we building inventories and hard to know how much of this is just attributable normal operations versus disruption from maybe the flooding, but our customers were slower to pay us. In fact, our DSO has increased five days and our inventory turns slowed by 0.2 turn. So, we experienced that in the third quarter. Don't know how much of that is transitory and will be able to reverse in the fourth quarter but that's what we're focused on. So while we're still building the inventories and the anticipation of continued growth into next year, we are working to arrest that growth so that we can certainly turn cash flow positive as we've said in the first quarter of next year. Marc Bianchi - Cowen & Co. LLC: Right. Right. Well, thanks very much. I'll turn it back.

And our next question comes from Chase Mulvehill from Wolfe Research. Your line is open.

Hey, good morning.

Good morning, Chase.

Good morning, Prady. I guess, firstly, on the 600,000 horsepower of power ends that you noted in the press release, how much of that has been shipped through the end of 3Q, and I guess maybe the timing of the remaining horsepower that will be shipped in 4Q and thereafter?

Yeah. I'd say, most of the 600,000 horsepower, I mean, the horsepower has already been shipped, Chase. But our backlog for our power ends is pretty strong not only for the fourth quarter but also going into 2018.

Okay. And what would you say are the lead times for power ends?

Yeah, great question. Listen, I would say, on the frac side the lead times are increasing and that's one of the reasons why we need to make the working capital investment in the fourth quarter. I would say, the lead times right now for a power end block is anywhere from five to six months. And for the fluid ends, it's about three, four months.

Okay. That's helpful. And then of the 600,000 horsepower that's been ordered so far, do you have a sense of how much of that is for new build fleets versus reactivations versus kind of the normal replacement of the active fleet?

Listen, if you use power end as a data point. That's a capital equipment, the lower you go, probably the mix is more towards refurbishment versus new. But if you look at the power end, at least through second quarter what we saw was, it was half and half, about 50% was new builds and about 50% were refurbished. But, in our case, whether it's refurbished or new build, it's still a new power end. Now, if you go build...

Okay.

...that, if you go to fluid ends in our ends, I think it's more biased towards refurbished versus new build.

Right. That makes sense. Last one, and then I'll turn it back over. On Global Tubing margins, if I did the math correctly that implies about 21% EBITDA margins. If I did it right, that's down from 30% in 2Q. So, I guess, maybe talk to kind of what happened in 2Q or that just kind of restructuring charges or things like that and the – and possibly the opportunity to take cost out in the near term from this business and taken margins back up to 30%?

Yeah. So, Chase, Global Tubing's margins would be better than what you're calculating, in fact, you're hitting close to what Completions would look like for the fourth quarter. So, Global Tubing is definitely accretive to the margins, a little bit better than what you're calculating.

Okay. I guess, I'll run back through the transcript and get those numbers out. All right. I'll turn it back over. Thanks

Thanks, Chase.

And our next question comes from Jim Wicklund from Credit Suisse. Your line is open. James Wicklund - Credit Suisse Securities (USA) LLC: Good morning, guys.

Good morning, Jim James Wicklund - Credit Suisse Securities (USA) LLC: So, you're setting out for a pretty good 2018 from the sound of it. You're going to be cost cutting in D&S. I trust you're going to improve your supply chain 80% from North America. Are you willing to give us an idea of what your incremental margin should be overall for 2018? I know they kind of never hit the expectation of a year or two ago, but now it seems that you're much closer to – we're operating on all eight cylinders. And so, I'm just – go ahead.

Jim, I would say, our last guidance on the incrementals, which were not backing off, were 35% to 40% incrementals. And that's what we would expect to see on a move-forward basis. And obviously in the fourth quarter, it's a little higher because you're coming from a little inefficient quarter in 3Q. James Wicklund - Credit Suisse Securities (USA) LLC: Right. And can you talk a little bit about supply chain? We look at you, guys. We don't look at the supply chains behind you and the other companies. Can you talk about how stressed it's been and how much pricing improvement you're having to give up and what inflation may look like in Q4 and through 2018 on your supply chain?

Well, absolutely, Jim. If you look at our Completions segment, it has grown by about 70% year-over-year. Our frac side of the business by the end of the year it will grow by another, probably year-over-year, by about 100%. And we have gone through inefficiencies in supply chain and getting people on board, and some of the operations – out of the five people, four of them are new. So, we are going through the efficiencies of the ramp-up. Now, going into 2018, there are pretty good critical mass of labor which we recruited. So, on a move-forward basis, that combination could be two out of the five people will be new, but not what we saw in 2017. What we see as a constraint, which we are addressing proactively, is on the supply chain front is with the kind of growth expectations and the horsepower increasing significantly into 2018, supply chain is what we need to address. As a result, we made some moves. We've taken some of the folks who are in the corporate leading all of the procurement efforts, we've put them in completions to address the supply chain issues and whatnot. So that we can capitalize on the market. I mean, today, for sure, the market is stronger than the supply chain. And that's going to get more tighter going into 2018. And we're already seeing, Jim, some customers. It's not across the board, but some customers are already having inventory, one or two months of inventory, on their balance sheet going into 2018. James Wicklund - Credit Suisse Securities (USA) LLC: We need to find out who your biggest suppliers are and recommend buying them too. That's a great idea. Well, last one, if I could, your big push in Saudi over the last couple of years is obviously being successful. Is it where you expected it to be? And can you talk about what – that's everybody's best market for the last couple of years, can you talk about what's going to happen in Saudi with you guys over the next year or two relative to what you've put into it in the last few years?

Yeah. More absolutely. Jim, I think, our plan was in the fourth quarter to get it operational and we are on track for that. We're going to get some first articles and get some customers qualified in the fourth quarter, and all of 2018 will be fully operational. Now, going to 2018, this will be the first year, in fact, we have a pretty good interest from some big customers in the region including the three or four big customers we have in Saudi. So, we're going to start up slow in 2018, and I think we're going to ramp it up pretty fast. But I would say if we just look at from a valves product line, which is where we are initially focused on, it's going to be a significant meaningful revenue increase for these guys in the next two years. And as we become the valve – as we make the valves product line successful, we are looking at other product lines which we could put in Saudi and take the advantage of the local work content and the price premium which we get with it. But so far, the interest from customers has been pretty positive. James Wicklund - Credit Suisse Securities (USA) LLC: That will be a pretty good leverage. Okay, gentlemen, thank you very much.

And our next question comes from Blake Hutchinson from Howard Weil. Your line is open.

Good morning, guys.

Hey, Blake.

Morning, Blake.

Morning. Just trying to get some kind of qualitative thoughts around where we're starting from and some Harvey impacts on 3Q that might – may or may not pertain to 4Q. If we look at your printed order flow for 3Q, would you say that the order flow itself was similarly impacted in terms of delays or absentee of orders for the full period? Was there catch-up, were there areas divisionally where there is more centralized decision making that needs to take place? Or is it more those orders are kind of a what we see is what we get?

No, I would say there were some impact on orders, but obviously lot more impact on revenue and the productivity loss from it. I mean, some of the orders I would say on the Completions segment probably also on the valves front, primarily because if we look at the valves, the Gulf Coast with some of the refineries shutdown and unable to get it back fast enough, there was some impact on the bookings and also on the Completions side, where the well sites were not ready and whatnot. But I would say, more impact on the revenue and absorption than bookings. But I'm sure the bookings would have been a little higher than what we saw in the third quarter.

Thanks. That's great. And then, as you alluded to a little more detail in terms of 4Q guidance and, I guess, historically, the issue that we've run into with Forum for 4Q is kind of the last couple of weeks of the year having some delivery shifts. I mean because of the delays and deferrals caused by Harvey, are we starting the – are we maybe in the – a little more front-end loaded on a 4Q for a change, it might give us a little more confidence in the 4Q guide?

I mean, we've taken the holiday season into account, for sure, Blake. And we've taken, I would say, very little probably push-outs, primarily in the – probably in the case of production equipment in the fourth quarter, I would say – I wish I could tell you that it was front-end loaded, it's not. It's, I would say, evenly loaded. So, I think there are lot of push-outs in the fourth quarter, it could impact us, but we don't expect that. I think probably in the production equipment, we'll see some. But in the case of completions on the frac side, I think the product will be shipped.

Okay. And then one more quick one. I want to make sure we're taking the right approach in terms of your streamlining of Drilling & Subsea or you continued streamlining. Are you trying to tell us essentially that by pushing some spillover of other businesses into that cost structure that that is going to help address the majority of the under-absorption issue or are we kind of just in grade 2 or 3 of a streamlining process? And thanks, and I'll hang up and listen.

Yeah. Well, I would say that what you just said of leveraging D&S manufacturing plants for the Completions and P&I, that impact for us is minimal. Most of the cost-out is coming from taking the structure out and reducing the cost, and sizing it to what our expectations are for the Drilling & Subsea business on a move-forward basis.

And, Blake, I would just add some color to that that, frankly, what we're trying to do is simplify those organizations. When they were much larger, they required a more complex structure. We're looking to simplify the organizations and our aim is to come out of this not only with lower cost base, but a stronger business, more customer responsive, which we think will benefit us going down the road. So, it's not just about cost cutting in Drilling & Subsea, although we're actually – we are actually reducing and simplifying the structure.

Appreciate the help, guys. Thanks.

And our next question comes from Martin Malloy from Johnson Rice. Your line is open. Martin W. Malloy - Johnson Rice & Co. LLC: Good morning. My first question is on the margin side. In the previous up-cycle, you talked about EBITDA margins having the goal of 20%, and I was hoping maybe you could comment on the goal now with the impact of Global Tubing and also do you need D&S to come back to reach that kind of level?

Great question, Marty. If you look at our midpoint guidance of the fourth quarter and the midpoint guidance we've given you for the revenue, we're about 9% EBITDA in fourth quarter with a fraction of revenue of what we saw in 2014. So, first, we don't need the Drilling & Subsea pipeline to get back to the historic highs. With the acquisitions we've done and the way we positioned our Completions segment and the Production & Infrastructure segment being 80% of the revenue, we can get back to the 19% to 20% EBITDA margins and the revenue level being a little lower than the historic highs, right? In fact, I would say, we will exit 2018 with a pretty decent run rate on EBITDA margins, which we'll give you guidance as we go through 2018. Martin W. Malloy - Johnson Rice & Co. LLC: Great. Thank you very much.

And our next question comes from Sean Meakim from JPMorgan. Your line is open.

Thanks. Could you maybe give us a little more detail in terms of orders that you're seeing in the Lower 48 across the different streams for the valves business, and how maybe you see that looking into next year?

I'd say, our valves business is about a third and a third and a third; third upstream, third midstream, third downstream. If I had to give little more color, I would say, the upstream piece is growing nicely with the growth we are seeing in North America. And then if I had to go outside North America, apart from the Lower 48, I would say, the downstream part of the international market is pretty strong. There are a lot of investments being made on the downstream and we're going to capitalize on that front. One of the things we have done in the valve business early part of this year, where we're seeing the results, is going to Middle East and also going to Far East from Southeast Asia, and our bookings have improved nicely from Southeast Asia. I think, what we quoted in third quarter was about 15% of bookings in third quarter came from Southeast Asia. So, I think we are – on one front, we are globalizing our valves business, which is pretty much all market share in Southeast Asia and in the Middle East, because of the upstream growth in North America, we're taking the full advantage of growing the valve business on the upstream.

Could you maybe give us a little sense of in the Lower 48 across mid and downstream kind of mix of larger projects versus kind of smaller book and turn type of things, how to think about the mix there?

I'd say, probably, if I could guess, I just don't have the data in front of me, I would say, it's probably – 60% to 70% is consumable activity-driven kind of business and about 20%, 30% percent is project driven in Lower 48.

Sure. And then I guess the last question then just to be what does the international split look like in terms of, you talked about ...

Yeah. The international split, I would say, is probably about 50/50; 50% project driven, large projects investments being made in downstream and then the other 50% being probably the book and ship business.

And does the stream business look terribly different or the streams internationally?

I'm sorry, I couldn't hear the last question. Can you repeat?

Just the split by stream, internationally, does it look terribly different from the Lower 48?

Yes, it does. I think, more downstream and midstream biased versus upstream international market.

Perfect. Okay.

And the potential we see in Saudi Arabia is process industry driven.

Yeah. Yeah.

Huge investments there in the process industry and that's indicative of what we see internationally, in general.

Correct. And I mean there is a huge petrochemical industry in Saudi and, as Cris said, the process industry. So, more downstream and more on the process side in Middle East.

That's right. Understood. Okay, great. Thanks, guys.

Thanks, Sean.

And our next question comes from Brad Handler from Jefferies. Your line is open.

Hi. Thanks. Good morning, guys.

Good morning.

Could – I suspect this is hard to do, which is probably why you and others haven't really given it, but can you calibrate the revenue impact of Harvey?

So, Brad, we've given the operating income effect. There's no question it was revenue that was pushed out of the quarter. Hard to put a pen exactly on how much that is, but it's in that probably $10 million to $12 million kind of range is the suspicion. Now, there's also some indirect impact that we really can't quantify or have not where we have anecdotally customers telling us they delayed deliveries. We clearly had situations where vendors or suppliers to us due to the transportation difficulties that followed the hurricane. We were unable to get supplies. All of that had an impact on revenue, but very, very difficult to come down to exactly how much that is.

Understand. Yeah. I can see and obviously, there's a question of timing of when you realized it as well, but okay, I appreciate that. Thanks, Jim. Couple more unrelated ones from me, please. Prady, I want to make sure I understand your comments early on your prepared remarks around sort of inefficiencies in your manufacturing and maybe just one way for me to try to understand it is, I now you've made investments along the way in consolidating footprint, and I know you felt fairly confident from a roofline perspective you didn't need to add. But is something or Middle East that's my placeholder of an answer, is something changed as the demand profile shifted in such a way that you actually think there is capital investment coming, so that part of your manufacturing requirements to satisfy some of the completions side will require additional investment?

Brad, what I would say is we have rooftop. So, that's not a constraint. In fact, we can get back to the historic highs and even beyond that with the kind of rooftop we have. I think the inefficiencies we have had and, I would say, just not us, I would say, probably the industry is going through the same inefficiencies is the supply chain disruptions and – from a labor standpoint, right? I mean, if you look at, for example, way we build our some of the frac products and some of the operations, I mean, just to give you the context, out of the five people we had in the plant, four of them are new. So, that causes inefficiencies. It takes for you to go through the training process and make sure from a safety, quality and performance it doesn't impact the product, right? And the same thing probably our suppliers are going through is coming from a severe downturn into a significant upturn and they are struggling to get people as fast as they can, right. Now if I look at, for example, I don't know, for my business, by the end of the year we will double the business, will be 100% grown. But the market is stronger than the supply chain, not only for us but I would say for the rest of the industry. And we just want to capitalize that because our products have been well-received and there's pretty strong momentum going to 2018. And there's more revenue to be had. And that's why you're focused on supply chain and improving the efficiencies so that we can now get significant more revenue going to 2018 and also margins that comes with it.

Sure. So, the emphasis is on continued training presumably and probably working with suppliers?

Correct. Continued training and – correct. Good point and with suppliers. And we need to plan ahead and lock-in some of those material. As we go into 2018, I think the supply chain will be pretty tight and so will the industry be and the frac crews and whatnot. So, I think we'll all go through the tightening process here. We just want to get ahead of it.

Sure. Sure, sure. Okay. And then last one, like as I mentioned, on the Drilling side, so we've seen the falling off of the heavy mud pump upgrade cycle, which obviously it helped you guys in the first half of the year as you warned us about, that's great, were not great for the business, but I appreciated the color. The question is we seem to be kind of morphing to more significant upgrades but fewer of them, and I guess I'm curious how you are able to capitalize on those. If the upgrade starts to look like an $8 million to $10 million dollar one taking rigs and trying to drag them to 1,500 horsepower super spec model, what – or how should we think about that opportunity for you? How are you thinking about it for 4Q and maybe into early 2018 as how much impact they may have on your Drilling revenue?

Yeah. The first point I would make on the Drilling front, Brad, is the number of drilled rigs operational at an average in 2018 is higher than 2017, which is good for our consumable part of the business, right, just because the average rig account is higher. The mud pumps have slowed down, to your point. The rig upgrades you're talking about the ticket item for our customers, could be anywhere from $4 million to $7 million kind of range. Our content could be up to $2 million in that upgrade, which includes moving catwalks, some hauling tools, rig roughnecks, and whatnot including the control systems. So, that is how we will participate, and some of that has already materialized. We have seen that in the third quarter. We're going to see some more in the fourth quarter. But that will be the opportunity for us on the rig grades. But I think the bigger opportunity for us, apart from the rig upgrades, which you're talking about is the pipeline in the Middle East is pretty darn strong. It's almost 180 drilled rigs is what they're talking about.

New?

New capital build drill rigs in Middle East including Kuwait, Oman, Saudi and whatnot. The only one which is already in the eye of few stage which is public information is on the Kuwait. But I think if the oil price stays where it is today a little bit of momentum, we do expect some of those capital-build programs to materialize. And if it's early enough in the year, we will see the impact of revenue going into 2018.

Helpful to focus us. Thank you.

But regardless of the upgrades and the Middle East opportunity, our margins of Drilling & Subsea will be better going to 2018 because of our streamline in the operations.

Yeah, yeah. Understood. Okay. Thanks, guys.

And our next question comes from Joe Gibney from Capital One. Your line is open.

Thanks. Good morning. Just a couple of quick ones on my end, just kind of want to ask Harvey impacts in a different way. So, Jim, embedded in your guidance for the fourth quarter. So, $4 million op income impact in 3Q, sort of what's the – what percentage of that are you recouping here in the fourth quarter. Is it the spill out into the first half of 2018, I know it's a whole host of things that play from a revenue deferral standpoint and the supply-chain issues you alluded to. But sort of what's sort of the ballpark percentage of recoupment you're getting here in the immediate quarter coming off of Harvey?

Yeah. On Harvey, I would say, there's a direct impact and there's an indirect impact. The direct impact, I think, what Jim has quantified, which we're comfortable with is about $10 million, which is a direct impact. And then there's the indirect impact where we have supply chain disruptions, the logistical delays and some of our customers delaying the finished product. But we can't quantify for sure how much of that is Harvey and how much of that is because the well sites are not ready or whatnot, right. So, that's the direct and the indirect impact of Harvey. I would say, some of the revenue is lost just because it's a book and ship kind of the business and some of the revenue we will see in the future quarters and some of that is baked in, into the fourth quarter of 2017.

Okay. So, it sprinkles out a little bit at sort of the bottom line now?

Yes.

From a recovery standpoint, but no damage to our facilities. No lasting negative impact, Joe.

Sure. Understood. Okay. And last one from me, I know this is a smaller piece of the business now given sort of what you're doing on the completion side. But trying to understand the production equipment revenue realization still sort of a moving piece. I know it can be lumpy, your 2Q order flow and P&I, a little bit more valve focused, this quarter a little bit more PEQ focused, but inherently you got the same drivers here on the Completions side well count. But you had flat PEQ revenue quarter-over-quarter. So, help me a little bit in understanding kind of flow-throughs on the PEQ side as I think about 4Q. Is this a one to two quarter kind of realization here on revenue just to – I know it's lumpy, but just trying to get a better sense for them.

Yeah. With bookings in third quarter, we're very strong on the PE front. In fact, I would say, all year long, they've been pretty strong. I would say, perspective to the third quarter, we did see some customer delays in production equipment. And we expect to see some of that in the fourth quarter too where the well sites were not ready for the production equipment. As a result, it was kind of flattish kind of revenue but the bookings continued to be strong and we are taking bookings into 2018. In fact, we're taking bookings now into the second quarter of 2018.

So just not able to get these wells completed fracked to their original schedule. That plus Harvey kind of had an impact on third quarter deliveries, but gets back to the really tightness in the frac market today.

Okay. Helpful. I appreciate, guys. I'll turn it back.

And operator...

And our last...

We'll move into last question.

All right. And our last question comes from John Watson from Simmons & Company. Your line is open. John Watson - Simmons & Company International: Thanks for squeezing me in. As a follow up to David's question. Is there anything else to think about in terms of the power end orders decelerating beyond the supply chain?

Well, listen, I think we are happy where we are on the power ends for 2017 and we expect 2018 to be much stronger than 2017. And we are significantly ramping up our supply chain to meet the demands of the market. But our power ends have done very well in the marketplace. We have a track record of not having any cracks even at the 10,000 hours. As a result, we are not only gaining market share, but gaining a lot of credibility from a customer standpoint and we see strong demand in 4Q, a very strong backlog in 4Q, with strong demand going to 2018.

Yeah. I think, I would be wrong to assume that there's a decline in demand for frac equipment. John Watson - Simmons & Company International: Okay. Yeah. And I just made that comment based on looking at the annual run rate. But that's nice to know that it's more of a blip on the radar screen. And then maybe as a quick follow up to one of Jim's questions. In the past, you've talked about a $75 million annual revenue run rate in the Middle East. How close do you think we could get to that in 2018 now that Forum Arabia will be up and running?

Yeah. Great question, John. I think, what our guidance was is once it's fully operational, it's going to take about three plus years to get to that $75 million mark. So, we are still three years out, but we'll start 2018 with meaningful revenue for the valves guys, and then quickly ramp it up two years after. But, as mentioned, there's very good interest from our customers and they like the local content and there were very few players who can say they have the local content. So, we will take the advantage and scale it up. But we're going to scale it up slowly with the right quality and the right products and whatnot. John Watson - Simmons & Company International: Great. Thanks for the time, guys.

Thanks, John.

Thank you for your interest and we look forward to give an update early part of the year.

Great. Thank you. Goodbye.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a great day.