Good morning and welcome to the Flotek Industries Inc. First-Quarter 2014 earnings conference call. (Operator Instructions) This conference is being recorded. At this time I would like to turn the conference over to Mr. Rob Schmitz Vice President and Corporate Controller for Flotek Industries. Mr. Schmitz you may begin.

Thank you and good morning. Today's call is being webcast and a replay will be available on Flotek's website. Our earnings and operational update press release as well as our quarterly report with the US Securities and Exchange Commission were filed and distributed last evening and are also available on the Flotek website. Before we begin our formal remarks, I wish to remind everyone participating in this call, listening to the replay, or reading a transcript of this call, of the following. Some of our comments made during this teleconference may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. And other applicable statutes reflecting Flotek's views about future events and their potential impact on performance. Words such as expects, anticipates, intends, plans, believes, seeks, estimates and similar expressions or variations of such words are intended to identify forward-looking statements but are not the exclusive means of identifying forward-looking statements on this call. These matters involve risks and uncertainties that could impact operations and financial results and cause our actual results to differ from such forward-looking statements. These risks are discussed in Flotek's filings with the US Securities and Exchange Commission. Now I would like to introduce Mr. John Chisholm, Flotek's Chairman of the Board, President and Chief Executive Officer.

Rob thank you. I would also like to welcome each of you to Flotek's First-Quarter 2014 conference call. We are glad you are here. With me today are Rich Walton, Flotek's Chief Financial Officer; Steve Reeves, Executive Vice President of Operations, Chris Edmonds, our Senior Director of Corporate Finance and Strategy; Josh Snively, Executive Vice President of Research and Innovation and President of Florida Chemical; and you just heard from Rob Schmitz, Flotek’s Vice President and Corporate Controller. Last evening, we filed our quarterly report with the US Securities and Exchange Commission. I won't take your valuable time to regurgitate those filings. We will provide a summary of the results, attempt to add some color regarding current operations as well as a sense of our future, and then be happy to answer your questions. However, before doing so, a couple of overarching comments. Since we last visited to discuss our year-end results, Flotek has expanded its presence and enhanced oil recovery with the closing of two acquisitions. First about the time of our year-end earnings call, Flotek completed the acquisition of Eclipse IOR Services or EOGA, a leader in polymer injection technology in enhanced oil recovery and a pioneer in EOR chemistry. Under the leadership of Jay Portwood, EOGA has already had an impact for Flotek's presence in the EOR community and on Flotek's results. Not only is Jay continuing to see growth in the company's polymer systems in the United States, EOGA's business is rapidly growing in Canada. In addition, opportunities in South America are also accelerating with the company currently operating its first job in Columbia. In addition, Jay is an advanced planning for use of our polymer conformance technologies in the Middle East including potential projects in Oman. We cannot be more pleased with the integration of…

John, thank you. As John mentioned, Flotek filed its quarterly report on Form 10-Q for the quarter ended March 31, 2014 with the US Securities and Exchange Commission yesterday afternoon. Flotek reported that revenue for the quarter ended March 31, 2014 was $102.6 million compared to $78.2 million for the quarter ended March 31, 2013. Consolidated revenue for the three months ended March 31, 2014 increased $24.3 million or 31.1% relative to the comparable period of 2013. The increase in revenue was primarily due to the acquisitions of Florida Chemical in May of 2013, and EOGA on January 1, 2014. These acquisitions contributed incremental revenue of $16.8 million during the quarter. Excluding the impact of acquisitions, revenue for the quarter ended March 31, 2014 increased by $7.5 million or 9.6%. For the quarter ended March 31, 2014, the company reported net income of $12 million or $0.22 per share on a fully diluted basis. Compared to net income of $7.8 million, or $0.15 per share on a fully diluted basis for the quarter ended March 31, 2013. Earnings before interest, taxes, depreciation and amortization or EBITDA for the quarter ended March 31, 2014 was $23.1 million compared to $15.5 million for the quarter ended March 31, 2013. Back compensation expense for the quarter ended March 31, 2014 totaled $2.3 million compared to $2.2 million dollars for the quarter ended March 31, 2013. For the first quarter of 2014, nonstock compensation expense represented approximately 10.8% of total selling, general and administrative expense. SG&A for the quarter increased by $3.6 million dollars or 19.7% compared to the same period of 2013. Excluding the incremental SG&A cost of acquired companies, SG&A cost increased $1.2 million or 6.7% compared to the same period of 2013. While overall dollars of SG&A increased as a percentage…

Rich, thank you. As noted earlier, consolidated revenue for the three months ended March 31, 2014 was $102.6 million compared to $78.2 million for the three months ended March 31, 2013. First-quarter enterprise wide gross margins equal 42.6% compared to 41.7% in the first-quarter of 2013 and 39.5% in the fourth-quarter of last year. EBITDA margins for the quarter were 22.5% compared to 19.8% in last year's first-quarter and 21.7% in the fourth-quarter of 2013. Energy chemical technology revenue in the first quarter was $62.4 million an increase of $17.7 million or 39.7% compared to last year and 9.6% above fourth-quarter levels. Quarterly gross margins in the segment were 46.8% compared to 42.8% a year ago, and 47.4% in the fourth quarter. Sales of CnF chemistry continue to grow in the quarter both domestically and internationally. A result of our continued marketing efforts and growing adoption of specially in key domestic basins. In the US, we continue to see solid growth in South Texas with new customers adopting Flotek's CnF completion chemistries as well as new opportunities in both West Texas and the mid-continent. In addition, use in the Rockies remains robust and has recovered from disruptions from flooding in the second half of last year. In Canada, the first-quarter saw a significant increase in the number of customers adopting CnF completion chemistries. A trend the company believes will continue. Resulting in volume growth at the conclusion of the spring break-up season. The Canadian thaw, as typically the case, will have an impact on April and early May revenues in Canada. Internationally, Flotek continues to make progress on several fronts. CnF completion chemistry sales into Argentina, increased consistently in the quarter. Our Middle Eastern initiatives continue to yield steady results with opportunities in Oman, the United Arab Emirates and Saudi…

Steve, thank you very much. Before we take questions I'd like to add a couple of concluding thoughts. Last quarter, I spent a portion of these comments discussing our commitment to research and specifically how our applied research addresses specific challenges and specifically the efficacy of CnF chemistry in the Bakken. As noted then, while we've had success with CnF in many Bakken wells, we also found that some Bakken completions aren't as responsive to CnF chemistry as similar completions in other basins. As we've said, there could be a variety of reasons for the wide range of results in the Bakken including rock type, water saturation, reaction to certain demulsifiers, frac design, or actually a number of other valuables. Since that time, our world-class chemistry team has worked tirelessly with our clients to understand the challenges and address them with new formulations that take into account a number of unique Bakken attributes. While we still have validation were to complete it appears the use of these new formulations should further crack the stimulation code unique to the Bakken. In short, our intense commitment to both molecular and practical chemistry, our deep partnerships with our clients and our quest to provide the best chemistry solutions available, will in short order provide a new level of completion efficacy for Williston basin wells. Something we believe in time will become the standard there of Bakken producers. The key measure of the productivity of our research team is the development of intellectual property. For the first time in Flotek's history, the company has established an internal patent committee to streamline the invention and application process. Flotek researchers are working on multiple unique patent applications which should be filed in 2014. Indeed, we are serious about not only creating value through research, but also…

Thank you. (Operator Instructions) And our first question comes from the line of Michael Marino with Stephens Inc. Please go ahead with your question. Michael Marino – Stephens Inc: Thanks. Good morning, John, and the rest of the team.

Good morning, Michael. Michael Marino – Stephens Inc: John, I wanted to dig in a little bit on the Middle East and the growth potential you got for Flotek that you see. I guess you've been spending a lot more time in the region presumably working with the guys from Gulf and the JV. I guess, maybe help us out a little bit with where you are today from a – just from a revenue standpoint in the region and mix, chemicals versus maybe drilling tools and kind of help frame up how we should think about that region for Flotek over the next year or two.

No, sure. A great question. Let me step back for just a second and give some context. For a company the size of Flotek, we need to look at -- we think these international regions individually as kind of geographic pods. We made a decision that there was a big difference between working with Oman and working in Oman, and that's why we had made the capital commitment to be there in a very US-friendly Middle Eastern country. Now to get directly to your question. Our estimation is that by the end of this year, we should have the Middle Eastern chemistry run rate similar to what it is at the current time in Canada, and Canada is about in the range of $2 million a month. We think the chemistry should somewhere be approaching that by the end of the year. That would have at about, not quite twice as much but certainly more than the downhole tools. The downhole tools right now is driven by Teledrift in Saudi Aramco. That number is going to increase because Saudi Aramco has requested gamma capability on our Teledrift tools. The Teledrift tools now have been outfitted for that, so we'll have more rig exposure inside Saudi Aramco and as we mentioned we’re moving Teledrift into Iraq. We didn't mention it, we're also moving it into Egypt as well. So, hopefully that provides some additional color for you. Specifically there, I think from the other service companies that you follow, they are keenly dialed in to the increase of completions of unconventional gas in the area, in Oman, in Saudi Arabia, and of course we feel that fits quite well with our completion chemistries. Does that help you? Michael Marino – Stephens Inc.: That's very helpful. Thank you John. And as a follow-up, you mentioned in some of the remarks, I guess specifically in the press release, that over the course of the next several weeks, we would become – or some efforts you guys have made would become clearer to us. I was curious if you could maybe give us some hints as to what that might mean and is that something around the international prospects of the Company or is it domestically something on the horizon that we should keep an eye out for?

Yes. So we've – we're going to have planned in June a couple of opportunities to share that with you. One of them will be Investor Day opportunity like we've had in the past. The other one is we're pleased to say that we’ve been asked to be a keynote speaker at the IPAA Media Conference. But that information then will flow out of there as to how we feel we've had a different level of validating the CnF performance. Michael Marino – Stephens Inc.: Okay. Fair enough. I'll reach you and let others get in.

Our next question comes from the line of Georg Venturatos with Johnson Rice. Please go ahead with your question. Georg Venturatos – Johnson Rice & Company: Hey, good morning, guys.

Hi George. Georg Venturatos – Johnson Rice & Company: I wanted to touch on the chemical side of the business. Obviously, impressive margins there continue, gross margins nearly 47%. But I guess as you looking forward, and I know you’ve mentioned things fluctuate quarter to quarter with product mix, but if we think about potential upside to margins here, how would you kind of characterize the drivers in terms of ranking them from increased CnF product mix to the additional supply chain improvements as well as what you highlighted with the increased efficiency out of the Marlow facility, just wondering how we should kind of think about those drivers going forward?

Well, you hit on the three key ones. One isn't talked about a lot, but the variable compensation of our chemistry sales guys is a driven towards CnF sales as you might expect. And that's another way that we can try to influence the behavior of the penetration of that. I think one thing that we stepped back and looked at, and again I think in your understanding of a lot of the service companies’ calls prior to us, there was this disruption in the first quarter of frac sand through rail traffic through Chicago that is even extended into April, and the fact that we were able to increase the CnF revenue by nearly 10% over the fourth quarter in the middle of that sand disruption gives us some real encouragement of our visibility not only through the second quarter, but through the remainder of the year. But you hit on the high points. As you know, there's still – there's pricing overhang due to oversupply of hydraulic horsepower, so our margin improvement that we see coming is not predicated on a price increase, it's on those areas that you talked about that the more CnF sales we get drives the margin, and we've – it is not that you can always see run out of all of the efficiency that you can out of Florida Chemical's supply chain into Flotek. We're still working on that. We think we've got a lot of it embedded into the current margin. But I think all of this feel there is probably another 100, maybe 150 basis points through the course of this year that just by being more efficient we could improve on that. Does that help? Georg Venturatos – Johnson Rice & Company: Yes. No, that's helpful. And second one for me, just to clarify. You'd mentioned obviously the seasonal spring break up impacting chemicals revenue, but it sounds like obviously the positive commentary and the continued activity levels we've seen domestically as well as internationally, we think that will offset any decline for looking at sequential growth opportunities?

Yes. And to be specific on that I think overall you've been around this industry long enough to know that April for everybody as kind of a unique month. It's not just Flotek but whether it's anybody involved in the central North American area. April is always kind of a challenge. But that comment was specifically directed to the spring break up in Canada, which depending on how the year goes, is typically a four-week to six-week event. We haven't seen anything that makes us think it would be any longer than that. That was all baked into our internal planning. So, yes, the visibility we have right now for the second quarter and on we're comfortable with our ability to further penetrate the market. Georg Venturatos – Johnson Rice & Company: Great. Appreciate the answers, guys.

(Operator Instructions) And our next question comes from Mark Brown with Global Hunter Securities. Please go ahead with your question. Mark Brown – Global Hunter Securities: Hi. Good morning. Just wanted to check...

Hi, Mark. Mark Brown – Global Hunter Securities: Hello. Just wanted to check the mix of the CnF versus other energy chemicals in Q1.

Sure. Fine question. The kind of color we put around that is right around 50% of the penetration of the revenue, or actually 50% of the revenue is CnF derived, which is pretty much about what it has been. Just kind of a bit of an increase in visibility and looking ahead. More and more companies are figuring out how to use recycled water. That is a great environmental initiative. However, that recycled water also has what's called a high salinity residual and our friction reducer that we developed a nearly to have years ago actually a little bit ahead of its time, we're having increasing interest in business from that as more and more folks get to this whole recycling of water. We believe there'll be an increase in that in the quarter ahead. So we'll have to see the end of the second quarter how the CnF stacks up from total chemistry sales. But again as we mentioned in our remarks, more people are using CnF today than ever before. Mark Brown – Global Hunter Securities: Okay. Thank you. I was wondering if you could – and I know you talked about the different markets, but if you could quantify how much of your mix is from Canada, the US kind international, and energy in Q1.

Sure. So overall, Canada is a little bit less than 10%. International is 5% on that and the rest is domestic. Roughly, those are kind of broad areas for you. Mark Brown – Global Hunter Securities: Very helpful. Thank you. And just one final question. What are your thoughts in terms of some of the recent news around some of the large pressure pumping service providers disclosing the chemicals used in the frac fracturing process. How does the impact your business?

Well, folks that have been familiar with the Flotek story for the last three or four years know that we are advocates of responsible environmental stewardship and practice. We feel that the recent announcement in particular and you're probably referring to Baker Hughes, is a step in that direction. There's certain things that we have protected, as you know, from intellectual property including patents, other trade secrets. We're comfortable with the approach they've taken that it will not diminishing the value in time we spend on our research and innovation of new products. So we are encouragers of that transparency. Mark Brown – Global Hunter Securities: Excellent. Thank you very much.

Our next question is a follow-up question from the line of Michael Marino with Stephens. Please go ahead with your question. Michael Marino – Stephens Inc.: Thanks. John, I just wanted to digging a little bit more on the weather impact in the quarter. I guess I assume it was – weather was a bigger issue for the drilling technology business, versus chemicals, but I guess you all held margin in drilling technologies. So maybe just tell me understand kind of – Q1, what were the big moving parts and what's more normalized if we think about that drilling business specifically from a margin standpoint, and maybe from a revenue run rate as you exit the quarter?

I'll answer that for just a second, but then it will turn it over to Steve. But with your familiarity of the Flotek, you know that's from a drilling technology standpoint, we've got to that target of a 40% gross margin that's embedded in our DNA with that segment. Our objective is to be over that's, but certainly as causes we can be the first quarter got us right there there versus the fourth quarter. In terms of additional context on the quarter, Steve can help you there.

We had a little bit on that. We had a little bit at the beginning of the year. In January the things that slow down for a because of the bad weather, so January, rates were down a little bit. We do expect the revenue rates, the run rates to improve from first-quarter. And we do expect to the margin holding up almost a 40% margin in the drilling product side is a pretty ambitious goal and we expect to be able to hold of those tight margins. One of the things that is affected us quite a bit in the first quarter of quarter-over-quarter comparisons. As you gone into all of the horizontal drilling, Teledrift, which makes it very solid margins for us, we've had to adjust our minimum days the we were on a well. Before was always five days and up that we could charge for minimums on it. Now, with them going down and pushing down to get to the band quicker and putting the directional companies down, or a major part we're looking at three days and after the deterrents of these wells. So we're doing the same amount of work, we're doing the same number of jobs the but we've had a revenue fall back and a pretty good margin fall back because of the good margins of Teledrift – because of that. As we've gone – as we're going forward holding 40% and increasing our run rate or revenues, we expect to do be to both of those in the second quarter and on an ongoing basis. Michael Marino – Stephens Inc.: And as...

As part of that – yes, a lot of that is the international opportunities. International opportunities become very – we talked about Iraq. One of the things that will be doing in Iraq is not only will we introduce Teledrift as the year goes on, and set of our market, we also start – we're starting to look at putting our other downhole tools drilling technology tools there and that will help us as we go along also. Michael Marino – Stephens Inc.: Okay. So from kind of maybe exit rate levels, Iraq or international exposure of Teledrift as well as maybe the Stemulator or kind of the big growth growth drivers I should think about?

Yes. Those are the things that will push us up in the future and probably in Iraq we won't see it until the end of the second quarter, but we should see some more Aramco start to build as the gamma starts coming in at the end of the second quarter. It's just we're never satisfy sitting here with the timelines. We want them to be today, today. But it just pushes out a little bit. Of on the Stemulator, we had a in March, was our best revenue month, looks like Aprils going to max that. But because we're not happy with where we're at, and because – and that's not to be that were unhappy, just that were never satisfied. Maybe that's a better terminology, there is a great growth expectation and that as the are goes on for the Stemulator. Michael Marino – Stephens Inc.: And on the same lines of – weather in Q1 – how did that impact the chemical technology business, if at all?

Well, yes. I think the way to look at that Michael, is there were two things that affected everyone's business in the first quarter that's connected to the completion side of things. It was the destructiveness of the rail in Chicago. And the slow start in January. That's why – Steve said it right. We may be happy but never satisfied. A 10% first-quarter over fourth-quarter increase in the chemistry sales in lieu of that were certainly happy with but not satisfied. But I think as we mentioned in our commentary a couple of weeks ago, and then here again that was a to our three-week event and the first part of January. I know people have talked about how cold the weather was in February, but we seem to work right through that and March just continue to build. So that's looking at us in kind of the rear view mirror. Like I mentioned, our visibility through the second quarter and the rest of the year is good. Michael Marino – Stephens Inc.: Great. Thank you.

And our last question is from the line of Richard Dearnley with Longport Partners. Please go ahead with your question. Richard Dearnley – Longport Partners: Good morning. The basin supply agreement is now three years into that agreement. Have you exceeded the base revenues, and have you paid out any warrants for the stretch sales goals?

No. Short answer to your question is we've not exceeded the revenue and we have not paid any warrants, nor do we expected to. Richard Dearnley – Longport Partners: Okay. Any reason why?

Yes. I think the overarching region reason for that is that the infrastructure – you know I don't think it's any different than what we've experience. The infrastructure that we put into place from an international penetration standpoint takes you longer than what you many times think and plan for. It was no different with the basin supply infrastructure and the revenue is not able to ramp as quickly as they're best minds tell them what happened. So that's why we not exceeded the revenue. And that's why I say there'll be no warranty distribution for the agreement.

And Mr. Chisholm, there are no further questions at this time. I'll now turn the call but back over to you. Please continue with your presentation or closing remarks.

William, thank you for a great job. Again, thank you for your support of Flotek. We're in the early stages of planning. As I mentioned just be clearly our annual June investor meeting and will communicate more details soon and we look forward to seeing you that and talking to with our second quarter progress. As always, we appreciate your interest and are pleased you joined us. Have a good Tuesday.