Good day, ladies and gentlemen, and welcome to the Halliburton Third Quarter 2011 Earnings Call [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host today, Kelly Youngblood, Senior Director, Investor Relations. Please begin.

Good morning, and welcome to the Halliburton Third Quarter 2011 Conference Call. Today's call is being webcast and a replay will be available on Halliburton's website for 7 days. The press release announcing the third quarter results is available on the Halliburton website. Joining me today are Dave Lesar, CEO; Mark McCollum, CFO; and Tim Probert, President, Strategy and Corporate Development. I would like to remind our audience that some of today's comments may include forward-looking statements, reflecting Halliburton's views about future events and their potential impact on performance. These matters involve risk and uncertainties that could impact operations and financial results and cause our actual results to differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2010, Form 10-Q for the quarter ended June 30, 2011 and in recent current reports on Form 8-K. Our comments include non-GAAP financial measures. Reconciliation to the most directly comparable GAAP financial measures is included in the press release announcing the third quarter results, which as I have mentioned, can be found on our website. We will welcome questions after we complete our prepared remarks. Dave?

Thank you, Kelly, and good morning, to everyone. I'm very pleased with the overall performance of our business in the third quarter. Total revenues of $6.5 billion and operating income of $1.3 billion are both company records, representing sequential growth of 10% and 15%, respectively. We achieved record revenue levels in our North America, Latin America and Middle East/Asia regions. In North America, revenue and operating income grew sequentially by 13% and 14%, respectively, compared to a U.S. rig count growth of only 6%, and we exceeded $1 billion in operating income for the first time ever. Our international revenue and operating income grew 7% and 23%, respectively, compared to a rig count growth of 2%, driven by a 17% revenue growth in Latin America and more modest growth in the Eastern Hemisphere. Let me talk about North America in a little more detail. Strong activity in the Bakken, Eagle Ford and Permian Basin drove the sequential growth for the quarter, along with the seasonal recovery from the Canadian spring breakup. Sequential incremental operating margin for the third quarter was 32%, which was lower than the elevated level we saw in the second quarter. The second quarter was favorably impacted by the typical spring seasonal rebound, as well as very high level of Gulf of Mexico incrementals. Incremental operating margins in the third quarter were negatively influenced by cost increases for materials, logistics and labor. Incremental margins were also negatively impacted by weather stoppages in the Marcellus due to flooding in Pennsylvania and by water shortages in the Mid-Continent, due to drought restrictions. We anticipate continued inflation on various cost items like labor, freight, chemicals and profits, which we plan to offset through targeted pricing improvements. Historically, the pricing offset of these costs may not be realized in every case…

Thanks, Dave, and good morning, everyone. Let me provide you with our third quarter financial highlights. Revenue and operating income grew 10% and 15%, respectively, from the second quarter. Our results in the third quarter included an impairment charge of $25 million on an asset we're holding for sale as a part of our continuing efforts to right size our business in the U.K. sector of the North Sea. As a reminder, our second quarter results included a charge of approximately $11 million in employee separation costs, which is primarily related to our Europe/Africa/CIS region. And I'll be comparing our third quarter results, sequentially, to the second quarter, excluding both the third quarter asset impairment charge and the second quarter employee separation costs. North America revenue and operating income grew 13% and 14%, respectively, well exceeding the U.S. rig count increase, as we continue to benefit from higher activity levels from capacity additions, increases in service intensity and rig additions, particularly in the oil- and liquids-rich basins. We also saw the usual rebound in this quarter from Canada coming out of their seasonal spring breakup. As Dave mentioned, we continue to expect targeted price increases to help offset cost inflation. As in prior years, we expect to see a moderation of our U.S. land results in the fourth quarter, due to the holidays and lower efficiency levels experienced in the winter months, particularly across the Rockies and Northern U.S. And as a reminder, the third quarter has historically been our strongest quarter of the year, so it's typical to see a slight sequential revenue and margin decline in the fourth quarter. For international operations, our outlook is unchanged. We believe that margins will continue to slowly improve from the third quarter levels due to gradual increases in activity. And while…

Well, thanks, Mark, and good morning, everyone. As Dave mentioned, we continue to be bullish on the development of unconventional resources outside North America. We've reported, previously, on exploration and appraisal activities but the pace of transfer of our technology and capabilities from North America is now more aggressively underway. For example, we've just completed the first multistage horizontal shale well for Apache in Argentina. Ongoing unconventional operations are also underway in Poland, Australia, Mexico and Saudi. We're in the process of mobilizing horsepower to our Europe/Africa/CIS, Middle East/Asia and Latin America regions in support of these developments. Dave also commented on the outstanding growth in Brazil in the third quarter. This underscores our evolving strength in the deepwater segment. With 51 new deepwater rigs scheduled to arrive between now and the end of 2013, we've continued to build infrastructure to support recent wins. Not just in the Golden Triangle, but in emerging frontier markets, with 4 new basins supporting deepwater in East and West Africa, Tanzania, Mozambique, Ivory Coast and Ghana scheduled for completion in the coming quarters. We've also spoken to you about our mature asset strategy and our focus on growth and technology positioning in this segment. The recently closed acquisition of Multi-Chem, a leading provider of oilfield production and completion chemicals, is a key step forward in this effort. Multi-Chem has experienced tremendous growth over the last decade and we're excited to have them as part of the team. As the reservoirs we work in become more complex and improved recovery factors are a stronger focus, our comprehensive approach to production optimization will help us deliver improved well productivity to our customers. Dave?

Thanks, Tim. Just a quick summary then. Despite the turmoil in the equity markets, we continue to have confidence in our North America business. And there are key differences in both the market and our business compared to prior cycles. Two, pricing in international markets remains competitive, but we expect that our results will continue to show gradual improvement as a result of volume increases. And 3, we remain focused on the high-growth markets of deepwater, unconventionals and mature assets to enable continued delivery of strong financial results. So with that, let's open it up for questions.

[Operator Instructions] Our first question comes from Brad Handler with Credit Suisse. Brad Handler - Crédit Suisse AG, Research Division: Could you please speak to -- I guess let's -- maybe let's just stick with the quarter in terms of my questioning. Just speak a little bit more to the North American Drilling and Evaluation results, if you would. You mentioned mix and a little bit of variability in your oil and gas properties, but maybe you can help us quantify kind of the impact in the Gulf of Mexico. I'm just trying to get a sense for that operating income results and then try to bleed through for what it may or may not mean for the fourth quarter.

Okay, Brad, this is Mark. I think -- we're going to not probably get too granular on it. But I think if you think in terms of the Gulf of Mexico, obviously, we had very strong incrementals in the second quarter from the Gulf of Mexico, driven by sort of a return or a large surge in activity between Q1 and Q2. Between Q2 and Q3, not as many rigs came into the market, the margins are already there are fairly strong, and so the incrementals weren't quite as large. But from Drilling and Evaluations results from the Gulf of Mexico, they are actually quite good. We talked about the variability of earnings from some of the oil and gas properties. That was a big factor in the quarter. We do make investments with certain strategic customers and certain strategic properties in a way to not only learn the reservoirs but also test new technologies and techniques, and there are some costs associated with that. If you pulled that out of the numbers, D&E's would have been double-digit in the quarter. The incrementals would have been double-digit. They wouldn't have been as high as C&P's incrementals but they would have been quite nice. Hopefully that helps you. Brad Handler - Crédit Suisse AG, Research Division: Yes. No, that does help. Maybe as far as a follow up, maybe I'll just stick with the notion of the third quarter impacts and let people pursue the future. But could you give us a feel for -- I was just a little surprised at some of the commentary about, for example, Libya being an incrementally worse impact and perhaps Iraq, things got incrementally worse as well. Could you go through the problem countries in the quarter and just suggest -- whereas a couple of the sub-Saharan countries look like they got better. But if you could just identify for us, where was there sequential decline still in the Eastern Hemisphere in the third quarter and a little bit of the drivers behind that?

I think, looking at -- I don't believe that we -- if you took away that we were saying that Libya was incrementally worse or any of these other markets were incrementally worse, I wouldn't necessarily say that. Probably the one that might have been a little bit deeper was Iraq and that's only because -- with the rigs coming in there, there was more cost, as we mobilized for that activity start up this quarter. But otherwise, I think we're making progress in each of those markets. Algeria was better, Sub-Saharan Africa was better, Libya was no worse, and I think even the U.K. sector, the North Sea, was kind of in line with where it was in the previous quarter.

Our next question comes from Bill Herbert of Simmons and Company. William A. Herbert - Simmons & Company International, Research Division: Mark, a question for you here with regard to -- what I'm trying to understand here is, there was quite a few moving parts with regard to Marcellus and Mid-Con waters, shortages, et cetera. I'm trying to get to sort of an understanding of normalized North America and incrementals. Dave touched on some of the constraints, not necessarily constraints on a structural basis, but timing issues with regard to passing through cost inflation items, chemical fuel proppants, et cetera. How should we think about normalized incrementals going forward? Had been thinking about those in the 40% to 45% range with regard to your volumetric incrementals plus some ability to capture net pricing. Is that still the way to think about it going forward?

Well, I don't want to provide too much guidance on this one. I think that your averages on incrementals seems high. The way that I would normally think about it is, when you have capacity additions, those capacity additions come in at the variable margin, which essentially approximates what our gross margin would be, which is probably in the high 30s. But as Dave indicated, we always have working against that delays and the ability to pass through some incremental cost related to increases in chemicals and proppants and other things which, this quarter alone, probably increased in the high-single digits, as well as labor. So we're constantly working against that. And of course, the other factor which I think you're beginning to see with this significant increase that we've seen in 24-hour operations across the U.S. and being essentially sold out and fully utilized, anytime you have any delay whatsoever, whether it's weather-related or the availability of water or a customer delay because their schedule changes a little bit, it has a incrementally negative impact on the margins. And I think that's what you're seeing, experienced. I mean, we're certainly still being able to get price increases to cover cost inflation and our equipment rolling out is going out at higher pricing, then as we re-contract new equipment, it's just not the ability to drive significant net pricing increases, it's probably more muted today than it has been. William A. Herbert - Simmons & Company International, Research Division: And then Dave, with regard to international pricing, I must say you've been consistent, probably more consistent than any of your peers from day 1, with regard to how international has unfolded, and consistent with regard to your prognosis of pricing and you continue to express that international pricing remains very competitive. Can you amplify on that? Where is it competitive? Is it predominantly deepwater? And what's your prognosis for anything on the improvement front?

Well, I think we have been, I would say, very pragmatic about where international pricing is. We live in that world every day, so I see the tender results. And we tried to call it like we see it. I would say that the way to think about international pricing, if it's deepwater or if it's a big project or if it's a multiple year project, then it is very, very competitive today. And so I think, as opposed to -- look across the world geographically, I think if it falls into one of those buckets, it's going to be very sought after and very competitively bid. So I think that as more projects start, and there are a lot of projects on the drawing board that are moving toward being sanctioned, that will absorb some of the capacity that's out there. I think that the pressure to bring margins internationally up, sort of being applied by the management so the various service companies will start to create a bias toward higher pricing. And I think just the general overall, more positive economic outlook, will get people feeling better about their businesses. So at this point in time, like I said, it's still very competitive out there, and I expect that folks' margins, albeit moving up, will move up relatively slowly.

Our next question comes from Ole Slorer with Morgan Stanley.

I wonder if you could give us some color on what is likely to move the needle for you if you look at Middle East/Asia region on one hand or Europe, West Africa, North Africa on the other hand. I mean, how big of a deal is, let's say the drag of Iraq and what's going on in North Africa? And is the key thing to get these things behind us before we can see a similar kind of progress to what you're now making in Latin America or is this the companies like BP becoming more active again and pulling volumes through? Or how should we think about kind of the big factors that will impact your margins in those 2 regions?

Let me address Middle East. I think there are couple of things. First thing I'd say is that we, obviously, have been talking about activity increases in the Middle East, particularly in Saudi for some time. So the announcement has been made for some time. But the reality is, is that turning that into activity is only just now starting. So, for example here at the end of the quarter, underneath we're running on 2 rigs, and we won't be up full strength probably until the end of the first quarter, beginning of the second quarter next year. So I think just sort of thinking about the timing of some of these events would be -- is helpful and we certainly see some activity increases coming, which we like and we feel very positively about. With respect to Iraq, it certainly has weighed heavily on our results. Great potential, I don't think anyone disputes that fact, Ole. But the fact of the matter is there are challenges and have been challenges in terms of getting things up and running on a timely basis for a variety of reasons. And at the end of the quarter, we are operating on 3 rigs. We expect to be operating on 6 rigs by the end of the year, at the end of the fourth quarter, and we will see more activity in 2012. So it's really a question of timing and as I think was mentioned earlier, we've always been fairly pragmatic about it. But we do see these changes being very positive for us as we move into 2012.

So on the Middle East, just seeing big volume increase in areas like Saudi, and Iraq cleared off but -- not yet at least, starting to happen though. But I'm sensing from some of your competitors, let's say that some of the work that they bid in Iraq was bid at a very tough time of the international cycle and that you sort of need to -- to what extent do the industry need to work through contract that are signed at the bad point in the cycle before you can see real improvement in margins?

So Ole, I use -- I'm sorry, just to sort of make sure I'm responsive to your question there. I mean, you're saying that -- you're asking the question around the timing of the bidding process and what it means in terms of delivering the targets?

Yes, I'm asking whether there is a backlog of work that needs to exit the portfolio before margins can move meaningfully higher or whether it's just simply getting going?

I think it's a combination of both in Iraq, to be honest with you. I think that, clearly, there were some aggressive bids in place, to get up and running, get established, and to really get a better understanding of cost and how efficiencies can be driven in Iraq. And clearly, I think, we're all learning how to do that in Iraq. So I think there's scope for margin improvement, both in terms of the existing portfolio of contracts and also obviously, with the increased training of Iraqis, the lowering of overall cost infrastructure, the ability to generate improved margins, arguably at a slightly lower price on contracts in the future.

Let me also remind folks, the nature of some of the contracts that we were awarded had a fairly high component of infrastructure investment that we were responsible for, as well as drilling, because they were greenfield projects. Those are pass-through revenues for us, which we have to record on a gross basis. We record the revenues and the costs, and essentially our margin in the deal relates to our management of the process which is a lower margin. But it's a very, very high return because we're not having to make the investment itself in the capital equipment. And so while it reflects a lower margin for the project itself, as these projects move on, they have a very, very high return component. And as, particularly, we move into the product service line work that we will provide, that those are bid at normalized or close to normalized margins, which are very good returns for us.

Yes. And on Europe and North Africa or Northwest Africa, what is the key there to getting margins up?

I think we talked about the U.K. sector of the North Sea, and at some length, not going to belabor that particular point. I think as we all know, and particularly in West Africa, activity levels have been a little slow to return to Angola as it relates to rig count. That's coming up nicely. I think as we referred to, in the call here, we're installing 4 new bases which we've been incurring costs over the course of the last quarter or so, to support deepwater operations, for work that we won in both East and West Africa. That's stuff that really moves the needle for us. And of course, notwithstanding all of that, we will see some stabilization, we're confident in Libya, over the course of the next 2 quarters. Security's still pretty rough in the West, but as things stabilize, we clearly have almost like a Gulf of Mexico type opportunity there because we're still incurring a significant cost, we have nothing to leverage that against at this point. But when we do -- the incrementals obviously will be very positive.

Our next question comes from Jeff Tillery with Tudor, Pickering, Holt. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Mark, could you talk a little bit about Latin America, where software sales were cited a couple of times as contributing to margin strength. Is that something we're going to see back off the next quarter? Just curious how you think about the sustainability of the Q3 profit levels.

Actually, Landmark's profits are actually a bit lumpy, but the fourth quarter of each year is always their best quarter. Just in the normal customer budgetary cycle, we always see a surge in software and consulting sales as they approach the end of the year, buying license agreements and things of that nature. So we do expect -- if you recall last quarter, we mentioned even on the call, that Latin America's margins had been impacted in Q2 by a couple of one-off events in Argentina and Colombia which did not recur this quarter. And so, we saw not only just an increase in overall activity levels, but a jump to sort of our normalized margins. And so as we look ahead, I think that we do feel that these margins are sustainable. There'll be some seasonality as we go into Q1, but at least for the next quarter, in Q4, we feel pretty good about where they stand right now. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And my second question. Can you just talk qualitatively about the trend you see in the North America business for both 24-hour operations and integrated services? Kind of where are you, as a rough percentage, of total crews out in the field being appropriately [ph] your 24-hours, your integrated services and how has that trended over the last 6 months?

We're well over 50% in terms of 24-hour crews in North America. And I think that we've done a very good job in getting to that point. We'll continue to push that up. What is the natural sort of endpoint for that, not really sure, somewhere above 50%, somewhere below 75%. So that's, I think, an expectation you can look at. So we continue to push that. And Jeff, what was your other -- second part of your question? Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Same question for integrated services.

Integrated services, obviously, we -- I guess the thing that I would say is changing about integrated services is that I think that it was said, sometimes with the right smile, that we were in a great position to push integrated services because we had some leverage from -- particularly from pressure pumping. In some cases, from Drilling and Evaluation, but mainly from pressure pumping. But I think the reality is today, that whilst we continue to do an increasing amount of integrated services the response from of our customer base is incrementally positive about the benefits that they're seeing. So what I think we're doing right now is seeing a shift from perhaps, shall I say, contracted-led integrated projects to those projects by which the customers are really seeing some incremental value. That's very positive, because what it means is it will be -- it's a sustainable model which will prevail over any ups and downs in the market.

Our next question comes from Jim Crandell with Dahlman Rose. James Crandell - Dahlman Rose & Company, LLC, Research Division: Maybe this one's for Tim. Tim, Schlumberger said, at one of our events recently, that there's now some element of performance-based pricing on some 40% or more of integrated and rotary steerable jobs. Can we get your sense on performance-based pricing? How you see it as a differentiator and maybe how much of your work it might account for in those areas?

Jim, performance-based pricing has been around for, obviously, a long time. Both in terms of using motors or rotary steerables or any kind of drilling technology. It's an important tool in our toolkit. I'm not going to disclose what percentage of our contracts are under some sort of performance arrangement, but quite a few. And really, what the issue is, is you've got to have the confidence, obviously, in these positions to able to stand by your ability to drill a certain footage in a certain time, and we're very confident to do that. We believe we've got the technology to stand behind those kind of commitments, and obviously then, generate the returns and the margins that we need as a company. So yes, it's an important trend. I think, Jim, in general, I would say that we would expect to see greater degrees of performance-related contracting going forward than we have as we kind of look back into the rearview mirror. James Crandell - Dahlman Rose & Company, LLC, Research Division: Okay. And second one, just a follow-up for Mark. Mark, I understand some of the contract position of your U.S. fracturing business. But could you characterize what you think are supply/demand conditions in some of the most important domestic basins in the supply/demand and what you see as the trend in spot prices for frac-ing today?

Jim, let me take that one, if you don't mind. Bakken undersupplied; Eagle Ford, undersupplied; Permian, undersupplied; Marcellus, undersupplied; Haynesville, probably oversupplied; Mid-Con, gas, dry gas, probably oversupplied; and Rocky Mountain dry gas, probably at neutral. James Crandell - Dahlman Rose & Company, LLC, Research Division: So, Dave, you hear these, I'm sure you've heard these stories about companies' pricing maybe at small discounts, take it in to range research or Carizzo's, business of in the Marcellus and Goodrich claiming lower frac prices in the Eagle Ford. As far as you're concerned, you really just see these as competitive situations and not really indicative of any sort of balancing or softness in the market?

No, absolutely not, Jim. We hear about these things anecdotally and try to turn the anecdote into what are the facts. And in many cases, it's a small, pumping-only service company that has a frac spread that's been cut loose by some other customer and they're going around looking for work. That's one situation you run into. Another is when a company that has decided to take a crew from the spot market to the contract market, typically, you do give a discount if a customer is willing to tie it up for a longer period of time at a guaranteed level of efficiency. And I think, so a lot of what we are seeing is spot-to-contract market or the one-off frac crew that's been cut loose and is just looking for a new home. But in general, no. The customer base we're looking at, and the people that want to use our equipment, we're just not seeing any softening in pricing at all.

Our next question comes from James West with Barclays Capital.

A quick question about your CapEx, as we think about for 2012. And, Mark, understand that you may not want to talk about the overall size of the budget. But how are you guys thinking about the allocation between North America, where it seems like we still have a pretty robust market, for at least the near term, and in international where volumes are growing. And I know Tim talked about and Dave talked about you're undercapitalized on conventional resources internationally. So how are you guys thinking about the difference between those 2 markets?

No, James, I think that's fine to answer. Just sort of a reminder, really until this past year, over the last 5 years or so, we had biased our capital spend toward international markets, particularly the Eastern Hemisphere as we were growing our business. And we're talking about shades of -- it's not 90-10, it's been more like 55-45, or 60-40, depending on where, what projects we were invested in. This past year that bias had shifted toward the U.S. As we look ahead to 2012, and it really appears to us right now that we are going to be biasing our spend towards the Eastern Hemisphere again. We do anticipate international growth will be coming, particularly as Dave alluded to, for pressure pumping as we begin to focus on unconventional resource development in earnest. Also, with regard to deepwater spend and some of the activities there for the work that we will do. So as we're thinking about it today, it's going to be internationally flavored. The least a majority of it will be and I would say with a bias toward Eastern Hemisphere. We're maintaining flexibility and of course, being an integrated manufacturer of the significant portion of our equipment, that gives us a lot of flexibility.

Sure, fair enough. And is the I guess the bias of the overall budget higher or lower, compared to this year?

It's not going to be any less than this year, I think. But the question is, do we maintain a line? We have been -- continued to operate within our cash flows, being very return focused, and you're not going to see us abandoning that return and the balancing growth and returns focus that we've maintained as we go into '12.

Our next question comes from David Anderson of JPMorgan. John David Anderson - JP Morgan Chase & Co, Research Division: Just a question about your customers in North America. Are they talking about their 2012 plan right now or is it a little bit too early? Are they just kind of focusing on where the oil price is at the end of the year? Obviously, they're going to have their -- oil production is coming up quite a bit. This isn't a credit crisis like you mentioned. I'm just trying to get a sense as to where you think upstream spending, North America, is going to be. Do you see it being up next year, I guess, is the question. And I guess, secondarily, is it basically oil price driven?

A couple of things. I think, first of all, our customers are obviously in the evaluation phase for their 2012 budgets right now. We're monitoring those very closely, Dave, so we can kind of get as much insight as we can into what they plan to do. There are a couple of, sort of, themes which seems to be running around. Obviously, one theme is the introduction of fresh capital from outside, which is still continuing, we're seeing that to happen. Secondly is the relative balance between drill bit spend and also land acquisition. That seems to be shifting in terms of, probably, a greater allocation towards a drill bit in 2012 and away from land acquisition, at least that's sort of the early returns from some of the inquiries that we've had. And I guess, that based on what we see today, I would say that spend next year in terms of drill bit spend, not necessarily overall CapEx, but drill bit spend, looks to be up. But, obviously, we're going to be monitoring that very carefully between now and the end of the year. John David Anderson - JP Morgan Chase & Co, Research Division: And then just to dig in a little bit more on your CapEx side, but let me just focus on North America. You talked about your flexibility and your ability -- you're manufacturing yourselves so you can move things around. I guess a couple of questions on that. Have you shifted that spending mix from first half to second half yet? I mean, Mark, you've often talked about investing countercyclically in North America. So I guess what I'm wondering is, are you guys already shifting kind of that spend kind of away from new additions right now? And I guess, secondarily, are you starting to see that more broadly in the market? Everybody's worried about overcapacity in the market, but it seems to me that it's very possible you could see capacity additions slowdown 6 to 12 months from out. Can you talk about that a little bit?

Yes, Dave, this is Dave. Let me handle that one again. And the answer to your question, the first part of the question is, yes. We have, in fact, biased our additions outside of the U.S. in the back half of this year. And as I travel the world, there hardly is any place I go today that isn't asking for more horsepower. So we've been able to satisfy the horsepower needs and the horsepower requests by shifting some of our production and sending it into the Eastern Hemisphere markets. Because we're not going to end up in a situation where we don't have the horsepower that's needed in a location at the time that the customers are going to need it to drill the wells or complete the wells. And so that part of it is true. And the second part of your question, with regard to people sort of slowing down, I know what we do and we got basically a volume knob in our production and so we can turn it up, we can turn it down as fast as we can. I think a lot of our competitors, because they have got to put orders in and have long lead times on those, I'm not sure that they can slow it down as fast -- certainly, can't slow it down as fast as we can. But I think that everybody's watching the market, and if the returns, the extraordinary returns we're getting today start to moderate a bit for some of those companies, I suspect that there will be less equipment coming into the market.

Our final question comes from Doug Becker of Bank of America Merrill Lynch.

You highlight some of the cost inflation that you're seeing in North America at the same time you're making progress in the efficiency gains and the cost structure improvements. Is it realistic to keep North American margins flat? Maybe with some quarter-to-quarter volatility in the flat rigs count environment in North America.

Yes. I think that it depends on whether you're asking short-term or long-term. Obviously, we're coming into the winter months now, and so I think it's important to sort of separate the dynamics of the U.S. market into a couple of buckets. One, if you look at sort of how these cycles play out historically, you have good pricing power for a period of time. You run your margins up and then your input costs start to catch up with you and then you are in, essentially, a leapfrog game. Your labor goes up, your chemicals go up, your inputs go up, and then you turn around and you get those recovered from your customers. Not, as I said, on a one-for-one basis and not always immediately, and then you sort of reach another plateau and then you move on from there. So and then I think we had sort of the one-offs in Q3, of the weather-related items. We will have weather items. I'm not predicting where winter is going to go, other than we are starting to work in more Northern climes, the Marcellus and the Bakken for instance. But at the end of the day, I like the position that we have in North America. If you look at the fact that it is continuing to, much more, bias right now toward a liquids type of a market. And then don't forget that we've got -- the goal out there is our frac-of-the-future. We're reinventing our service platform. I think that, as Mark has indicated, we're spending $0.02 or $0.02-plus a share per quarter, reinventing how we are going to go to market in the U.S. Now that isn't going to pay off for a couple of years. But you take that reinvention of the platform, you take frac-of-the-future, both of which we're making good progress on, and I think any market that gets thrown at us we will do as good as, if not better, than any of our competitors.

Fair enough. And actually, you mentioned the reinvention. Just how far along in the process would you say you are? I know costs will continue into 2012, but just how far along are we?

I'd say we're probably less than 1/3 of the way into it at this point.

So before we close, we'd like to announce that our fourth quarter earnings call will be held on Monday, January 23 at 8:00 a.m. Central, 9:00 a.m. Eastern Time. Sean, you can ahead and close out the call.

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the conference, you may now disconnect. Good day.