Good day, ladies and gentlemen, and welcome to the Halliburton First Quarter 2016 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 may be recorded. I would now like to introduce your host for today's conference, Lance Loeffler Halliburton's Vice President of Investor Relations. Sir, you may begin.

Good morning, and welcome to the Halliburton first quarter 2016 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. During our prepared remarks, Dave will provide commentary on the termination of the Baker Hughes transaction. 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, 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 and unless otherwise noted, in our discussion today, we will be excluding the impact of impairment charges and other costs. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our first quarter press release which can be found on our website. Now I will turn the call over to Dave. David J. Lesar - Chairman & Chief Executive Officer: Thank you, Lance and good morning everyone. Our prepared remarks today will be brief, leaving more time for the question-and-answer period. We would like to start by providing some background on our mutual decision with Baker Hughes to terminate our merger agreement. From the time we announced the deal in November 2014, we knew that putting together two companies with the global size and scale of Halliburton and Baker would be no small task. But we believed that we could close the deal and do so in a timely manner because…

Thank you. One moment for questions. Our first question comes from Jud Bailey with Wells Fargo. You may begin.

Thank you, good morning. David J. Lesar - Chairman & Chief Executive Officer: Good morning.

A question, maybe for Jeff, maybe circle back a little bit, you touched on it in the opening comments, but the elevated cost structure you were carrying waiting for the Baker acquisition to close, could you maybe talk a little bit more and quantify that the cost cutting opportunities you see, the timing it could take to whittle that down? And I guess also, is some of that included in Christian's guidance for the second quarter margins? Jeffrey Allen Miller - President & Director: Sure, Jud, thanks. Let me provide you with some color on where we are regarding cost savings. In North America, we've been carrying around 300 basis points of added costs, which we started to dismantle in Q1. Now that process is going to continue through the end of the year and we expect to eliminate 100 basis points per quarter. Now that's just in North America. So we're also looking at doing the same in the Eastern Hemisphere and Latin America as well as in all of our product service lines and corporate structures. So we're scrutinizing every cost, from manufacturing, to supply logistics, to field operations and we're doing this on a global basis. So, overall, we'll be reducing our structural costs by about 25% or maybe said another way, we'll lower our annual run rate on costs by around $1 billion by the end of the year, but with little of that happening in Q1. So these structural reductions are on top of volume-related cuts as we continue to adjust our operations for the market. Now, the structural changes, by definition, are stickier. And all this doesn't come without a cost. But looking ahead – we are thoughtfully looking at how we work, what makes us more effective in the way that we go to market as we make these reductions. And in many ways, we're more effective now than we were before, or at least certainly in terms of safety and service quality. So for those reasons, the changes we're making, in my view, do not impact our ability to scale in a recovery. And at the same time, positioning Halliburton to outperform through the cycle. Christian A. Garcia - Senior Vice President of Finance & Acting Chief Financial Officer: And, Jud, this is Christian, it is included in my guidance.

Okay. Thank you for that, I appreciate it. And my follow up is, maybe for Dave, you mentioned it, again, in your comments, you're having discussions with customers on lowering costs, but I'm curious, with commodity prices poking their head up this quarter, are you having any more dialog from your customers on potentially going back to work in the third or fourth quarter? Or are they still taking a more cautious tone towards the back half of the year at this point? David J. Lesar - Chairman & Chief Executive Officer: No, I think that clearly they're marginally more optimistic about things. I don't think we've seen that optimism translated into any set plans to actively increase the rigs in the back half of the year, certainly those discussions are taking place. I think if you look at our release we put out last week, we thought the rig count would bottom in Q2, I think we still believe that's the fact. But certainly, with the oil prices a little higher, people are more optimistic and we do think that potentially we'll see an upswing in the rig count in the back half of the year.

Great, thank you.

Thank you. Our next question is from James West with Evercore ISI. You may begin.

Hey, good morning, guys. David J. Lesar - Chairman & Chief Executive Officer: Hi, James.

Hey, Dave and Jeff, maybe for you guys, so Baker is done and not going to happen and it is what it is, and you guys have seen my written comments about the DOJ overstepping their bounds here, but you still have some, I guess portfolio gaps, if you will, in production chemistry, artificial lift, how do you think about – where does Halliburton go now? What's the Halliburton of a year from now, two years from now look like? David J. Lesar - Chairman & Chief Executive Officer: Okay, let me handle that, James. I guess before we talk about what we're going to look like going forward, I think it's really important that we really review where we are today. First and foremost, we're an integrated global oil services company, and I think in order to make that claim, you have to have a broad portfolio, offer every service to every customer in every market. And if you are an integrated company, you essentially can't pick and choose where you provide, who you provide it to, where you operate and what customers you work for. If you look at our individual product lines, our current portfolio is actually pretty good. We're in a number one market position in fracturing, in cementing and completions. Our drill bits is number one in North America. Sperry, Wireline, Baroid and Landmark are all in strong number two positions. And you referenced the ones that we need some help in and certainly the Baker Hughes transaction would have helped in artificial lift and production chemicals. In those areas clearly we're not in any sort of a market-leading position, and I said that in my prepared remarks. But we have an ability to grow product lines. I think a great example of that is our testing business, where just over the last several years, we've gone from essentially a startup to almost a number two in the market position and with the contracts that we've won, we believe we'll very soon get into a number two position there. So I like where we are, we certainly have the ability, as I said in my remarks, we are going to invest in those product lines where we're a little bit weak and we'll look at selective acquisitions to round them out. I think as far as then what comes next, from a shareholder standpoint, I want to reiterate, we are continuing to be dead focused on our growth, margin and returns and leading the industry in those areas, get the billion dollars out of the business that Jeff just referenced and then take advantage of the North America rebound when it comes. So yes, we are disappointed, but we've got a good portfolio, we're going to continue to execute our strategy and we're going to be fine.

Okay, got it thanks, Dave. And then on the North American market, it looks to us at least, and we're fairly bullish on oil prices, that cash flows for your customers will be up next year versus this year and certainly that will go back into the ground in drilling wells and could be a pretty significant recovery. As I understand, there's no translation on the current oil prices to pick up actively now, but are you starting to have conversations, Dave at your level or Jeff at your level, with your clients about their 2017 outlook? And they're going to have, in my view, they're going to have to get back after it or their production is going to go down, but are they starting to have those conversations about a pickup in activity? David J. Lesar - Chairman & Chief Executive Officer: Yeah, certainly as I said earlier, they're more optimistic because of where prices have gone back to. There's clearly been a re-basing, a re-setting of breakeven points through a combination of, obviously, service costs coming down, and I would argue, coming down to certainly an unsustainable level.

Right. David J. Lesar - Chairman & Chief Executive Officer: There's going to be an element of balance sheet repair that has to go forward, but clearly, that is going to be offset by what should be some pretty significant production declines that these guys are going to see. And I think given the nature of these companies and they are independents, they're very confident in their own skill set, they're confident in the acreage they have and I think that when they believe that the time is right to start drilling, they will do it. And generally, I think what we've seen is they'll be able to get the money to do that either through commodity prices, or through going back into the equity markets or the debt markets. So, yeah, they are feeling better and I think they're trying to survive to 2017 and then get on with things.

Got it, thanks, Dave.

Thank you. Our next question is from Angie Sedita with UBS. You may begin.

Thanks. Good morning, guys. David J. Lesar - Chairman & Chief Executive Officer: Good morning.

Clearly, I'll start off by saying, clearly a year-and-a-half ago no one would've expected conditions to deteriorate so severely, so it's very good to see the market react as well as it did and see that the best move for Halliburton was actually pulling away from the deal given the current market conditions. The question I would have for you, Dave, is we'll go to the bread and butter of the U.S., on the frac side, there's a lot of discussion on the attrition side. And so therefore, I wanted to hear your thoughts, or Jeff, on how much attrition do you think is merely replacing capital goods versus true attrition of equipment that could not come back? And how old you think equipment needs to be before you see it as no longer committed, or the customers see it as no longer actually competitive? And how much of equipment out there is that? David J. Lesar - Chairman & Chief Executive Officer: Yeah. Sure, Angie. And certainly Jeff and Jim Brown live this every day, so I'll let Jeff handle this one. Jeffrey Allen Miller - President & Director: Angie, our thoughts are that about half of that equipment is idle today and that idled equipment is not being maintained. We hear companies talking publicly even about cannibalizing equipment that is stacked, and that's equipment that really doesn't go back to work. It gets rained on, it sits there, it's more and more difficult to bring back. So I think that is continuing all of the time. From our perspective – actually interestingly enough though, the volumes pump which probably has more impact on equipment continued to increase, so we saw 17% increase in sand volume on a per well basis which says that the equipment has to work harder than it ever has. And so for that reason, we are really happy with our Frac of the Future configuration in the Q10 pumps just because they handle it so well. So, again, I think the equipment is out of the market, much of that equipment is probably out to stay.

And then do you have any thoughts on the range of horsepower that that would be? Jeffrey Allen Miller - President & Director: That's probably, we estimate in the 30% range.

Okay. Okay. And then as a follow up of our discussion here on the DUC thesis, on it potentially or maybe not tightening up the frac market. So any thoughts there on what oil prices you think we would need to see for those to start to be completed? And the timeframe and horsepower needed to complete these extra DUCs in the market? Jeffrey Allen Miller - President & Director: I think the DUCs right now are we estimate around 4,800 to 5,000, some of those are seasonal. We don't see volume continuing to build and in fact it's kind of being worked off in the stream of work that's out there today. So I don't see them as impactful, all at one time. We continue to describe them as deferred revenue for us as they get done. As far as price, I think it's more a sentiment than it is a price per se. It needs to be confidence around a price is probably as important as whatever a price may be.

So then you don't see the completing of these DUCs as a tightening of horsepower? It's not enough to actually make a difference on or a meaningful difference on demand versus supply? David J. Lesar - Chairman & Chief Executive Officer: No I don't think so.

Okay. Okay. Thanks. I'll turn it over.

Thank you. Our next question is from Sean Meakim with JPMorgan. You may begin.

Hey. Good morning. David J. Lesar - Chairman & Chief Executive Officer: Good morning.

So just to continue on that line of thinking a little bit, when we get to a recovery scenario, is there one in which... David J. Lesar - Chairman & Chief Executive Officer: Sean, can you turn – it sounds like you've got your speaker on in the background, so we're getting a double....

Sorry about that. David J. Lesar - Chairman & Chief Executive Officer: Here we go. Okay.

Sorry about that. Thanks. Just on that line of thinking, in a recovery, is there a scenario in which some of your pre-Q10 horsepower goes back to work? Or do we think next cycle effectively your fleet is going to be fully Q10 irrespective of the slope of the recovery? Jeffrey Allen Miller - President & Director: Our target was to be fully Q10, and I think what we continue to believe that that performance out of the Q10 is differential and so that would be a target. That said, the equipment that we have, our older equipment is still better than what's available in the marketplace. So I'm always comfortable bringing that equipment back to the extent it fills the gap. So I feel like we're very well positioned in terms of responding to the market from an equipment standpoint.

Got it. Think you. And then just on the balance sheet side, Christian, you noted the plan to continue to spend within cash flow. Following the breakup fee payment, may be an update on how you're prioritizing cash uses considering the more levered balance sheet that you are going to have? Christian A. Garcia - Senior Vice President of Finance & Acting Chief Financial Officer: Right. So we estimate that we need somewhere around $1 billion to run the company, so we're carrying more than enough cash, as I pointed out in my prepared remarks. Our use of cash is prioritized, first, with ensuring that we have the resources to take advantage of organic opportunities as they come. Second, the bolt-on acquisitions as well as any sort of ventures that we need to make to execute the strategy, cost per BOE strategy that Jeff laid out. And third would be any excess cash after that will be delivered back to the shareholders through buybacks.

Okay, Fair enough. Thanks for your time.

Thank you. Our next question comes from Dan Boyd with BMO Capital Markets. You may begin.

Hi. Thanks, guys. David J. Lesar - Chairman & Chief Executive Officer: Hey, Dan. David J. Lesar - Chairman & Chief Executive Officer: Dave, you have a very strong track record of outperforming the rig count in the U.S. in down markets and in up markets, and as we look forward here, the one thing I'd like to get an update on is, your utilization sounds very high on your frac equipment, especially the Q10 pumps, just given what you are experiencing in your completion revenue in U.S. versus what peers are reporting. So in order for you to continue to outperform as the rig count increases, is that going to need to come from price increases? Or do you expect to get further market share gains and on the further market share gains, is that going to require potentially unstacking some of the equipment that you recently impaired? David J. Lesar - Chairman & Chief Executive Officer: I think. Dan, it's actually a good question, it's one we talk about a lot internally. I think you have to go back to the basic strategy that we follow in North America and that is to be in every basin, to be with the right customers in those basins and have the right relationships with those customers. So there's a number of ways to outperform the rig count when it comes back. And obviously, I won't give a detailed roadmap as to how you do that but, certainly, by being and having the right customers as your bread and butter from a revenue stream, they generally are the ones that are more financially secure. They have the better acreage, and they are the best positioned. They are likely the ones to put the earliest rigs up. And therefore, it's a natural…

Okay. And somewhat related, when I look at your CapEx, it's coming down quite a bit this year and it's really running about mid-single-digits at least of my revenue estimate and that's down from low-double-digits in the past. As the cycle snaps back, as you say and we start to get in that recovery mode, will CapEx get back to that level of near double-digit or are we at a structurally lower level? David J. Lesar - Chairman & Chief Executive Officer: No, I think at least in the near term we're probably at a structurally lower level. If you look at our release that we put out a week ago, clearly the whole industry is overcapitalized at this point in time, and it's overcapitalized with some really good equipment. So I think that as it flexes back and the rig count comes up, customer start to spend more money, the need to spend on capital, if in fact you are maintaining your equipment, maintaining your tools, which is what we are doing. We're not cold stacking stuff and letting it deteriorate, it's really just going to be an issue of getting the people to man that equipment as it comes back. So I don't really see us getting back to that level unless the market got really frothy like it did last time. Hey, that would be a great position to be in, I just don't see it at this point though.

Yeah. Absolutely. Thanks for the time.

Thank you. Our next question is from Michael LaMotte with Guggenheim. You may begin. David J. Lesar - Chairman & Chief Executive Officer: Hey, Mike.

Thanks, guys. A lot of questions on the operation side have been answered. I wanted to just ask a quick one on capital structure. You talked about, Christian, the priorities of use of cash, but how do you think about the mix of debt versus equity right now and into the next couple, three years? Christian A. Garcia - Senior Vice President of Finance & Acting Chief Financial Officer: So one of the metrics that we use, Mike, is the way we look at our leverage is through – is the ratio of net debt to net cap, and we expect that ratio which is about 30% to go into the mid-40%s, so it is still very manageable. But you're right, we have to look at ways to delever the balance sheet and we're putting on plans to do that. Now having said that, Mike, and you know this, we are an investment-grade company and even though much like the rest of the industry, we are being reviewed by the credit rating agencies, we fully expect that after the smoke clears that we will remain an investment-grade company. So we will have ample liquidity and the financial flexibility to do whatever we need to do to make sure that we continue to add value to our stakeholders. David J. Lesar - Chairman & Chief Executive Officer: Yeah. I think, Mike, this is Dave, we'll have an obvious quick decision or quick opportunity to assess things. We have a $600 million debt repayment due in the fall and whether we just pay that off with the excess liquidity we have or look at the total capital structure, that's something that we'll be doing over the summer and into the fall. As Christian said in the call, even after the dust settles, we're going to have over $3.5 billion of cash sitting on the balance sheet. That is actually too much given where we are in the cycle and the fact that it costs us about $1 billion to sort of run the company. So we actually have that problem sitting in front of us right now, great problem to have. And we'll spend the balance of the second quarter here watching the market. There could be additional acquisition opportunities come up. As Christian said, we would consider buybacks, and any of the whole range of options. So we're in a good position to just sit back right now, make that decision, but clearly capital structure is on the top of our priority list right now

Great. Thanks so much guys. David J. Lesar - Chairman & Chief Executive Officer: Okay.

Thank you. Our next question is from James Wicklund with Credit Suisse. You may begin. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Good morning, guys. David J. Lesar - Chairman & Chief Executive Officer: Hey, James. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): By everybody's agreement, North America is going to come back first. In the international sector, I'm just kind of curious how you guys see how long it takes for international to come back, and which markets to come back first? Jeffrey Allen Miller - President & Director: Thanks, Jim. The international cycles are just longer, and so they are longer on the way down because structurally the contracts are longer, they're also slower on the uptick as well. So, I don't expect to see improvement internationally until we see some improvement in North America. That timeframe has usually been six months to a year in terms of the lag between North America and the rest of the world. I think if we look around the world though, the... David J. Lesar - Chairman & Chief Executive Officer: Hang on, hang on – hey, Jim, just like a couple guys ago, you've got your speaker on in the background, so we're getting an echo I suspect everybody is too. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Okay. I will try and fix that. Thank you. David J. Lesar - Chairman & Chief Executive Officer: Okay. Jeffrey Allen Miller - President & Director: Internationally, it does not have the same overcapitalization that we saw in the U.S., so I think that that will help it react more quickly. As far as markets returning, I think the mature fields part of the business is the first to tighten back up, would start with the…

Thank you. Our next question is from Rob MacKenzie with IBERIA Capital. You may begin.

Thank you, guys. I had a question, followed up on Baker's call and tying it into what you guys said about this morning, Dave, about weakness, obviously, in artificial lift and production chemicals. Can you foresee a return to Baker perhaps selling those product lines through Halliburton in an integrated type offering? David J. Lesar - Chairman & Chief Executive Officer: I'm not going to speculate on that.

Okay. Well, that was my question, thank you. I will turn it back. David J. Lesar - Chairman & Chief Executive Officer: Believe me, I've got lawyers shaking their heads at me like crazy right now.

Okay. Well, then – I guess, my follow-up then would be, how do you see based on Baker's, if you can comment, based on Baker's strategy change, how do you see the competitive dynamic changing in a lot of particularly international markets but also in the U.S., say, pressure pumping market where they seem to be pulling back largely from that business? David J. Lesar - Chairman & Chief Executive Officer: Yeah. I think let me just stipulate, I did not listen to Baker's call this morning, so I really don't know what they said. So I can just sort of respond to what we see in the marketplace. I think that pressure pumping, in my view, to be successful at it in the U.S. you have to have the U.S. wide business because so much of the advantage you get in that business is through scope and scale. It's being the biggest procurer of sand, it's having the infrastructure, it's having the rail cars, it's having the transload centers, it's having the ability to spend on technology, on chemistry, on footprint, on downhole capabilities. And I think pulling back into a limited number of basins just doesn't allow you to have that scope and scale. So our strategy has always been one that you have to be, if you're committed to being an integrated services company, you have to take the benefit and the downside of that. And in a market like this, there is some downside because you are operating in some markets, you are operating in some product lines that maybe are not giving you the kinds of returns that you want. But at the end of the day when it does bounce back and you're making hay from a margin standpoint, it's way better to be essentially in every basin with every product line, so that's our strategy. As I said, I don't know what was said this morning, but our strategy is to be a full-service company, integrated across our product lines in every place that our customers want us to work.

Great. Thank you very much.

Thank you. Our next question is from David Anderson with Barclays. You may begin. David J. Lesar - Chairman & Chief Executive Officer: Hey, Dave.

Thanks. Just following on the same line of thinking, bundling of services was a big subject of last few years before the downturn, I'm wondering if anything has changed in your philosophy in North America. Obviously the low-cost operator you talked about, the vertical integration; nobody is going to be more efficient than you guys. Is that still the thought that we're going to lead with the pressure pumping, that efficiency is pulling the rest of this technology and that's where margins come from in North America? Has anything changed with this downturn in that line of thinking? David J. Lesar - Chairman & Chief Executive Officer: No. In fact, I think bundling and the ability to bundle, will be even more important as we come out of this for one simple reason. This thing finally got so bad that our customers had to lay people off, and by basically reducing their G&G capabilities, their engineering capabilities, their exploration capabilities, their drilling departments, they don't have those people internally that maybe were basically not as interested in bundling as they may have been in the last go around. So as this thing turns back up, they are going to be also more stressed from a people standpoint, and the conversations we're having with them today is about the advantages of bundling, from not only an efficiency standpoint, but from a cost standpoint.

So if we just think about your Q10 pumps, obviously you're talking about kind of hydrating your all equipment with all the Q10s. Can you help us understand a little bit on that fleet? I'm not sure how you measure the bundling. I think in the past you've talked about maybe two or three product lines that are pulling through. Can you give us sort of, I don't know, a measurement of where we stand right now on that? Jeffrey Allen Miller - President & Director: Look, the Q10 is a key component of how we go to market, it drives our cost down most certainly. So we see just more things bundled around the wellhead. There is not as clear a measure around that. I think, it's more we bundle to the degree it drives lower cost for BOE for our clients, and those things become clearer as the activities around the completion start to pile up. And that's clearly an advantage for us because the equipment works together, or people work together and ultimately it does deliver a lower cost per BOE.

Great. Thanks guys.

Thank you. Our next question is from Marshall Adkins with Raymond James. You may begin. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, guys. A quick question on the asset impairments. How many pressure pumping horsepower was that that was impaired? Christian A. Garcia - Senior Vice President of Finance & Acting Chief Financial Officer: We're not going to provide that level of detail, Marshall, but just to give you a flavor of the restructuring. Of that, C&P was two-thirds of that amount and one-third is D&E. That's probably what the level of detail that we're going to provide. J. Marshall Adkins - Raymond James & Associates, Inc.: Right. It helps. And what happens to that horsepower once it's written down? Is it just scrapped or what do you see happen there? Christian A. Garcia - Senior Vice President of Finance & Acting Chief Financial Officer: Well, the way we've impaired the assets, there's really two buckets. One that is actually written off and therefore we're going to get rid of it. And then there's a portion of the assets that actually are idled, cold-stacked and we did an impairment analysis on that amount. Those are the larger components of our restructuring charge around fixed asset impairments. J. Marshall Adkins - Raymond James & Associates, Inc.: Okay. One last just quick one on labor. You all mentioned labor issues, and recrewing these crews. Could you give us a little more color on that because I've been hearing the same thing from different industry sectors. And where do you see the limitations on labor as we ramp back up over the next couple of years? Jeffrey Allen Miller - President & Director: This is Jeff, I think we're differentially advantaged there, just because as Dave mentioned, we stay in the market and we keep experienced people, and know how to hire those kinds of people. If we look back just to 2014, we hired 21,000 people at Halliburton during that year, absolute adds. So we do know how to add people to the payroll when we need to. So those people are out there, it's not easy to recruit them, but we certainly know how to recruit them and I think we've demonstrated our ability to do that.

Thank you. At this time, I would like to turn the call back to management for closing remarks. Jeffrey Allen Miller - President & Director: Okay. Thanks, Shannon. So I'd like to wrap the call up with just a couple of comments. So first, while we are disappointed about the outcome of the Baker Hughes transaction, we are excited about the future and our differentiated strategy to maximize production at the lowest cost per BOE for our clients. We are having productive conversation with clients around how we do this in the current marketplace. Second, we are systematically removing structural costs to address the current market outlook while retaining our ability to rebound quickly when activity turns up. We remain dead focused on revenue growth margins and returns, and clearly believe that Halliburton will be best positioned to outperform when the market recovers. So thank you, I look forward to speaking with you next quarter. Shannon, you can end 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.