Good day, ladies and gentlemen, and welcome to the Halliburton Second Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kelly Youngblood, Halliburton's Vice President of Investor Relations. Sir, you may begin.

Good morning, and welcome to the Halliburton Second Quarter 2015 Conference Call. Today's call is being webcast and a replay will be available on Halliburton's website for seven days. Joining me today are Dave Lesar, CEO; Christian Garcia, acting CFO; and Jeff Miller, President. Mark McCollum, Chief Integration Officer, will also join us during the question-and-answer portion of the call. During our prepared remarks, Dave will provide an update on the pending Baker Hughes transaction. However, due to ongoing discussions, we will not be taking any questions today related to regulatory matters. Some of our comments today may include forward-looking statements reflecting Halliburton's views about future events. These matters involve risks and uncertainties that could cause our actual results to materially differ from our forward-looking statements. These risks are discussed in Halliburton's Form 10-K for the year ended December 31, 2014, Form 10-Q for the quarter ended March 31, 2015, recent current reports on Form 8-K and other Securities and Exchange Commission filings. We undertake no obligation to revise or update publicly, any forward-looking statements for any reason. Our comments today include non-GAAP financial measures. Unless otherwise noted in our discussion today, we will be excluding the impact of these items. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our second quarter press release, which can be found on our website. We had several moving pieces this quarter, so let me help you walk through the numbers. As announced in our press release, our adjusted earnings per share for the quarter was $0.44, excluding restructuring costs of $0.30 and acquisition related costs of $0.08. However, as required by Generally Accepted Accounting Principles, included in our results was a $0.06 benefit related to the cessation of depreciation expense associated with the assets we are…

Thank you. And your first question comes from James West from Evercore ISI. Your line is now open. Please go ahead.

Hey, good morning, guys. David J. Lesar - Chairman & Chief Executive Officer: Morning. Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Good morning.

It looks like contrary to, I guess, popular belief on Friday, you guys did not have to work all weekend to change what you were going to say today, so congratulations on a good quarter. David J. Lesar - Chairman & Chief Executive Officer: Yeah, thanks, James. Yeah, I had a stress-free weekend, that's for sure.

Good to hear. A quick question on the North American margins. So, the 300 basis points to 400 basis points of extra cost that you're holding on to right now, is that just Halliburton related costs or are you actually adding to your cost structure in anticipation of the Baker Hughes transaction? And if so, will you have all the railcars to handle those facilities, et cetera, that you need once the transaction closes later this year? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Yeah, thanks, James. This is Jeff. The – I mean, we have the best operating platform in North America. So when we look at that and anticipate adding a second story basically to the house, our management structure, the operating basis that we have, the logistics infrastructure, including things like Battle Red, and our business development we know are critical to delivering the synergies and delivering them quickly. So as we manage our business, we continue to invest in those things that support that sort of in spite of the market. So the answer is managing our investment in new things, but obviously retaining those things that we know are important.

Okay. Okay. Fair enough, Jeff. And another question, a follow-up for me related to that one. On the synergy number for the Baker Hughes proposed transaction, it sounds like you're very confident still in that $2 billion number. However, both companies have taken cost reduction efforts. Is that – I mean, are you synthetically raising that synergy number then if you're already – both companies are already going through cost cutting right now? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Yeah, I mean, that's a way to look at it, but I think what's most important to take away is that the – while market adjustments are required, we want to be crystal clear that the current activities do not impact our view and confidence in the $2 billion worth of post-acquisition synergies.

Got it. Thanks, Jeff.

Thank you. Our next question comes from Angie Sedita from UBS. Your line is now open. Please go ahead.

Thanks, guys. Indeed, a solid quarter, particularly given the market. I guess to (35:56) look forward into 2016 on the U.S. pressure pumping market and just your thoughts on the outlook, not thinking about oil prices, but just the outlook for scrapping of equipment by some of your peers, maybe laying down equipment that's going to be cannibalized and not returning. When you think about 2016, how do you think the pressure pumping market will play out ignoring the oil price scenario? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Yeah, thanks, Angie. I mean, 2016 looks better than 2015, but I'd like to reframe your question as how really does attrition play out. And for example, I was just out in the Southern region looking up. When I travel, I look at our locations and competitor locations, and I see more equipment than required showing up on competitor locations to compensate for the lack of maintenance and the lack of capital investment. In some cases, two times as much is what would be required. Now, that's attrition in action. And capacity can tighten very quickly, and we saw that in 2014, how quickly attrition – or actually, capacity tightened. So, I mean, that's why we're so committed to Frac of the Future. I mean, it clearly performs in the downturn and it's even more valuable as the industry recovers.

Okay. That's helpful. And then I was actually kind of surprised on the BlackRock side, the transaction. Can you give us a little detail there, further details on how that will play out, the logistics of the arrangement and just some color? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Well, yeah. I mean, what we see is this is a foundation for growth, and demonstrates our belief that the market grows. And it's clear that the technology enables returns. It also lays the groundwork for us to move quickly at scale. And the short answer is it's set up around a three-year sort of window, I mean, it provides a lot of flexibility for us to act quickly.

Thank you. Your next question comes from Jud Bailey from Wells Fargo. Your line is now open. Please go ahead.

Thanks. Good morning. Dave, in your prepared comments, you noticed that service pricing is generally unsustainable across all product lines. I was wondering, given the potential for attrition in the industry and given how low pricing is, how do you think – do think pricing can normalize back up to a more reasonable level before we fully utilize the fleet, given the amount of stacked capacity? Or how do you see that first step in pricing playing out given how depressed pricing is and given how much idle capacity there is? Should it normalize a little bit quicker because there is so much stacked capacity and people are investing in their fleets, or is going to take just as long as it has also prior troughs and up cycles? David J. Lesar - Chairman & Chief Executive Officer: No, I think the – certainly, it's not going to pop back up to where it was even a year ago today. It'll normalize in an incremental fashion, and it's going to be a combination essentially of pricing increases, equalization or equilibrium in terms of equipment across the board, and also allowing the input costs to continue to catch up with where we are. So it's going to be a lot of blocking and tackling, and it's just going to go step-by-step.

Okay. Thank you for that. And then my follow-up is on international pricing. Christian, you noted in your prepared comments that taking into account you have a full quarter of lower pricing rolling through, how should we think about in the fourth quarter, have you already adjusted? Are you already seeing a lot of the new pricing rolling through the P&L? Or are we going to have more of an effect as more contracts reprice in the fourth quarter as well? Christian A. Garcia - Senior Vice President-Finance & Acting Chief Financial Officer: Jud, the fourth quarter, it's still early to call what the fourth quarter will look like, but if you think about it, we will still continue to have pricing pressure impacting the fourth quarter. However, we would have the usual seasonal uptick that we experienced on the – during the end of the year.

Okay. Is it too early to see if you think those can kind of offset each other by the fourth quarter? Christian A. Garcia - Senior Vice President-Finance & Acting Chief Financial Officer: At this point, we think that the seasonal uptick will offset the – any sort of additional pricing impact that we might have in the fourth quarter.

Thank you. And your next question comes from Bill Herbert from Simmons & Company. Your line is now open. Please go ahead. William A. Herbert - Simmons & Company International: Thanks. Good morning. I just wanted to drill down a little bit further on BlackRock and also kind of broaden the discussion with regard to business models. So with regard to BlackRock, what are they bringing to you that you can't do on your own? Is it simply balance sheet? And then moreover, what exactly are you sort of purporting to do with regard to pursuing the refracs? Are you underwriting the cost of the refracs? Who are you targeting, et cetera? And then secondly, more broadly speaking, in terms of that – the evolution of your business model, are you willing to put your balance sheet to work and make use of your robust holistic value proposition with regard to underwriting the cost of drilling and completing a well, even a new well? David J. Lesar - Chairman & Chief Executive Officer: Yeah, Bill, (41:23) questions in there. Let me try to synthesize an answer sort of one at a time. Think about what a service company brings to the table is sort of the people, process and technology. And what we're looking for is sort of revenues and margins today. What a BlackRock brings to the table is they're looking for an income tail that goes out a number of years. So in my view, it sort of dovetails together very nicely. To specifically answer your question, yes, we believe in our technology, we believe in the refrac market going forward, and we believe that we can make a difference. And so we would leverage our balance sheet to ramp that part of the business up. But what BlackRock gives us is an ability to lever beyond that, look at additional ways of doing business with our customers, different business models, push beyond where we have been today or where we might be going in the future. But we're not going to lay those out for you here on the call because I think those discussions are going to be with specific customers in specific circumstances and will remain confidential between us. William A. Herbert - Simmons & Company International: Okay. And who are – what type of customer are you targeting? I mean, it's not, I would assume, just the E&Ps under duress, but who else are we targeting? David J. Lesar - Chairman & Chief Executive Officer: No, we're not targeting marginal assets here. We're targeting good sets of assets that for whatever reasons are not being able to get accessed by our customer base today.

Thank you. And your next question comes from Scott Gruber from Citigroup. Your line is now open. Please go ahead.

Yes, I want to reiterate great quarter, especially with regard to those international profit margins. I'm curious as to your opinion on when the domestic industry could see some friction in rehiring labor if this recovery gains momentum. I realize that you're in a great position given that you're one of the very few companies that actually has the ability to carry extra labor and extra costs today. So the question for you is really, at what rig count do you think you could see competitors become more aggressive in trying to steal your employees simply because there's a dearth of quality labor on the sidelines? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Yeah, I mean, that's probably less of a rig count question, more of a capacity question as things start to tighten. And I think we've demonstrated through the last cycle, our ability to ramp up very quickly with people. So not particularly concerned about that.

For the industry, more broadly though, do you think it would happen this cycle at a lower rig count relative to the past, because – given the service intensity trends? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Well, I think tightness could occur at a lower rig count most certainly, and I think that the lack of investment in the industry today could drive that tightness at a lower rig count.

And do you think the equipment burn rate is going to be an issue before labor or vice versa? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: I think the equipment precedes labor.

Got it. Thanks.

Thank you. And your next question comes from Kurt Hallead from RBC Capital Markets. Your line is now open. Please go ahead.

Yes. Good morning. Just a follow-up to the prior question there. In one of your earlier comments, you mentioned that industry capacity for frac are fully (44:50) 40% or 50% excess at the moment. But when you factor in the (44:56) perspective, the attrition, what would you say the net effective excess capacity in the marketplace might be? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: I think it's – Kurt, this is Jeff. I mean, it's – If you think about attrition, it's happening all of the time, but it's not necessarily apparent all of the time. And by that, I mean it's – you don't see it until there's a call on the equipment, and we really saw this last time. So as competitors consume more equipment on location to do the work, you don't feel the tightness. But as that equipment is called on for even a little bit of incremental activity, that's when it's seen. So recalculating the 50% overhang is difficult to do until there's a call on it, but we're certain that it's happening today.

Okay. And then for my follow-up, Christian was mentioning some continued pricing pressures or lingering effects of pricing pressures going out into the fourth quarter. Just wondered if you might be able to give us some general sense, are the pricing pressures going to be roughly equivalent in North America and international? I would be under the impression that the pricing elements would have largely abated during the third quarter if rig count's going to stabilize. Just give us some more color on pricing dynamics on a regional basis, that'd be helpful. Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Well, I think pricing internationally, all the customers ask for discounts, but the reality is there's not much to give. We never recovered from the 2008 cycle internationally. And so the better discussion there – and it moves to this discussion – is around how to deliver better efficiency and reduce costs, and that leverages precisely what we do at Halliburton. North America, as we've said, we see the price decline rate, maybe a description, decelerating, but nevertheless, still some pressure as we move through the quarter.

Thank you. And your next question comes from Jeff Tillery from Tudor, Pickering & Company. Your line is now open. Please go ahead. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: Hi. Good morning. I guess I'm curious to hear how the last few weeks have impacted the customer discussions, whether it'd be – I mean, I imagine it's mostly focused on North America, but it did feel like completion activity was finding a floor and then the oil price rug gets pulled out from everyone. So I'm just curious how the – your view around the third quarter has evolved over the last three weeks. Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Well, over the last three weeks, it hasn't changed that much. I mean, we think about the rig count, it has puts and takes. And so it was seeing some improvement, but then Friday, I suppose those gains were erased. So I would describe where we are today as scraping along a bottom. And scraping along a bottom means that we don't anticipate dramatic change of any sort, certainly over the very near term. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: My follow-up just on the profit pressures in North America. Should we expect Halliburton's North American business in Q3 to stay profitable? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Most certainly. Christian A. Garcia - Senior Vice President-Finance & Acting Chief Financial Officer: Right. So, obviously, there's still uncertainty on the depth and length of the cycle. However, we are doing everything possible to make sure that our North America will be profitable. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: Okay. Thank you, all.

Thank you. And our next question comes from Dan Boyd. Your line is now open. Please go ahead.

Hi. Thanks. So, a lot of focus on the attrition rate in pumping this call, but how about on the demand side? You mentioned that you're seeing the average job size increase significantly year-over-year. How should we think about sort of the pressure pumping intensity of the rig count? Is there a rule of thumb that we should think about? And how is that changing? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Well, the demand for equipment and the – the increasing demand on equipment is really a function of the increasing job sizes. And so we see more and more of the capital spend on completions, and I don't see anything that dials that back. Obviously, technology that we deliver is focused on making better wells sort of within the current job sizes. So I don't think job size growth is not infinite because it starts to have an impact on neighboring wells and other things, but the quality of the fracs will continue to improve.

I guess, said another way though, if you think about the job sizes increasing, is there something that we could tie to a rig count? I know the rule of thumb used to be sort of four or five rigs per pressure pumping crew. Is it something lower than that today that you're experiencing in your fleet? Or are the increased efficiencies that you're able to realize offsetting that? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Well, I would think more in terms of well count than rig count today driving completions. And from our perspective, the basis for the Q10 and Frac of the Future is for us to be able to do that, which we are doing with substantially less capital on location. So that's clearly part of our competitive advantage. David J. Lesar - Chairman & Chief Executive Officer: Yeah, and I would say just one additional thing is although the rig count has been decimated this year, the rigs that are running today, keep in mind, are the most efficient rigs that are out there. And therefore, they are drilling more wells sort of per rig than we've ever had in the past. So I think the fixation on rig count, yes, it's important to the industry, but I think well count is another thing that folks need to look at and concentrate more on, because it's the well count that ultimately drives how much completion work is done.

Thank you. And your next question comes from Brad Handler from Jefferies. Your line is now open. Please go ahead.

Thanks. Hey, guys. Maybe first question relating to the international activity. There were some references, maybe several references particularly in Europe/CIS/Africa, related to product sales. Should we read anything into that? Is it – was there a bit of catch-up from buyers that weren't buying, say, in the fourth quarter of last year in the downturn? But was there some sort of truing up to a normalized level? And I guess what I'm hinting at is perhaps there's some falloff as guys have caught up a little bit in their product purchases – as your customers have caught up in their product purchases. Does that undermine the third quarter outlook at all? David J. Lesar - Chairman & Chief Executive Officer: No. I think what we're trying to say, service work is fairly consistent and fairly predictable, product sales sort of come lumpy all the time. And so when you get a product sale, it might push your margin and revenues up or down, but I wouldn't – other than sort of a fourth quarter push around Landmark and things like that, product sales do happen throughout the year. We just like to be transparent and point out when they've helped. But they're going to help nearly every quarter. But it just depends on sort of what the location is, what the geography is and perhaps, in some cases, what the product line is.

Okay. That's helpful. Unrelated follow-up, maybe it's my – I'm not that strong in the accounting side and I don't want this to devolve to an accounting lesson, but I was a little surprised to see the stoppage of depreciation without things getting pulled into some sort of a discontinued state as the assets were held for sale. Does that happen or what's the trigger point for the businesses to be pulled out and put into a discontinued state? Christian A. Garcia - Senior Vice President-Finance & Acting Chief Financial Officer: Right. So, Brad, obviously, don't want just an accounting lesson, but accounting standards...

Right. Christian A. Garcia - Senior Vice President-Finance & Acting Chief Financial Officer: ...call for a business that planned to be divested to be classified as assets held for sale when they meet certain criteria, and we met those, those are – there are six conditions. To be reported as a discontinued operation, well, you have to put the results of that business in a separate line item, that business needs to represent a strategic shift by the company, and that's what the accounting standards require. And clearly, this is not the case in this situation because we will continue to be in those businesses for drilling services and drill bits. So our treatment is consistent with other merger situations that require a sale of overlapping businesses.

Thank you. And your next question comes from Rob Mackenzie from IBERIA Capital. Your line is now open. Please go ahead.

Thank you. A quick question for you. Coming back to the North American margin impact, commenting about 300 basis points, 400 basis points of excess cost you're bearing, I guess I'm a little bit curious with your viewpoint for a muted recovery and uncertainty well into 2016. Why carry so much incremental cost here? David J. Lesar - Chairman & Chief Executive Officer: Well, it's pretty simple. I mean, I think we have a superior delivery platform in North America. We know where we are going to be adding a tremendous number of people and assets to it, and in my view, it'd be crazy to get rid of it. If you look historically, the cost to carry something ultimately outweighs the cost to have to replace it, go out and get people, retrain those people, rebuild your infrastructure and all of that. So it's a decision I made. It's on me if you disagree with it, but I think that it's easily defendable and I think it's certainly the way we need to go here, and I'd tell you, it's going to pay off once we get this deal done.

Great. Thanks, Dave. And then on the international margin (54:51) this quarter obviously up sequentially, I guess, in every geomarket. I get you're guiding that down slightly again going into Q3. Can you give us a little more color on the Q2 performance? Obviously, some of that was the contract status in Brazil and elsewhere, but it seems like there's a fair bit of cost cutting that went into that, that should carry forward, correct? Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Yes. The – I mean, the Eastern Hemisphere team and international group's absolutely executing, and executing on the strategy we laid out, which is to manage costs over the near term, and they have done that, taking out quite a bit of costs, while at the same time, looking through the cycle. And we like the contracts that we've won and we've got some very strategic wins that are continuing to go on in places like Scotland and Brazil and other places. So it's just really just execution, world-class execution in the international business. Christian A. Garcia - Senior Vice President-Finance & Acting Chief Financial Officer: But if I can add to that, in terms of our outlook, our Eastern Hemisphere margins were 19% in the second quarter and we are expecting this to come down a little bit into the upper teens. This would then suggest that our margins are being sustained at a higher level than what they were in the first quarter.

Thank you. At this time, I would like to turn the call back to management for closing remarks. Jeffrey A. Miller - President, Director & Chief Health, Safety and Environment Officer: Thanks, Danielle. And I'd like to wrap up the call with just a couple of comments. First, there's no question that this is a tough market. In markets like this, Halliburton's operational execution becomes an even more valuable source of differentiation, which was demonstrated by our second quarter results. I'm confident that our team will stay dead focused on delivering both best in class service quality, along with our long-term strategies in deepwater, unconventionals and mature fields. Secondly, we're pleased with the progress of the Baker Hughes acquisition on many fronts, including the regulatory process and the divestitures. We are confident that we can achieve the cost synergies of nearly $2 billion independent of the current market related actions by either company and are excited about closing the acquisition. We look forward to speaking with you next quarter. Danielle, please close the call.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Everyone, have a great day.