Good day ladies and gentlemen and welcome to Halliburton's Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, there will be a question-and-answer session and instructions will follow at that time. [Operator instructions] And as a reminder, this conference call is being recorded. I would now like to turn the conference over to Abu Zeya, Head of Investor Relations. Sir, you may begin.

Good morning and welcome to the Halliburton second quarter 2019 conference call. As a reminder, today's call is being webcast and a replay will be available on Halliburton's website for seven days. Joining me today are Jeff Miller, Chairman, President, and CEO; and Lance Loeffler, CFO. 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 31st, 2018; Form 10-Q for the quarter ended March 31st, 2019; 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 also include non-GAAP financial measures that exclude the impact of impairments and other charges. Additional details and reconciliation to the most directly comparable GAAP financial measures are included in our second quarter press release and can be found in the Quarterly Results section of our website. After our prepared remarks, we ask that you please limit yourself to one question and one related follow-up during the Q&A period in order to allow time for others who may be in the queue. Now, I'll turn the call over to Jeff.

Thank you, Abu. Good morning everyone. Commodity markets navigated some choppy waters during the second quarter. On the one hand, there are global oil demand concerns largely attributed to the uncertainties surrounding the outcome of the U.S.-China trade talks. On the other hand, oil prices have recently been buoyed by supply side reaction to the extension of OPEC plus production cuts, ongoing output declines in Venezuela, U.S. sanctions on Iranian oil exports, and political instability in Libya and Sudan. Against this backdrop, Halliburton's execution in the second quarter was outstanding and I am very pleased with our results. We continue to build on the growth momentum internationally and successfully managed the market dynamics in North America. Before we dive into the details, here are a few highlights for the second quarter. Total company revenue was $5.9 billion and adjusted operating income was $550 million, representing increases of 3% and 29% respectively compared to the first quarter of 2019. Our Completion and Production division grew revenue 4% and operating income 28% sequentially. Improved completion activity in North America land and our solid execution globally resulted in delivering better-than-expected margins. Our Drilling and Evaluation division grew operating income 18% quarter-over-quarter with strong improvements coming from our Sperry Drilling and Wireline and Perforating product service lines. Overall, D&E division incremental margin was 44%. North America demonstrated solid performance this quarter, delivering 2% revenue growth despite the dropping rig count. International revenue grew 6% sequentially, led by activity increases in the Eastern Hemisphere. And finally, we generated approximately $450 million in operating cash flow as well as positive free cash flow in the second quarter. Now, I'd like to provide some regional commentary beginning with the international markets. I'm excited by what I see internationally, a continued broad-based recovery across multiple geographies, primarily driven…

Thank you, Jeff. Let's begin with an overview of our second quarter results compared to the first quarter of 2019. Total company revenue for the quarter was $5.9 billion and adjusted operating income was $550 million, representing increases of 3% and 29% respectively. Now let me turn to our divisional results. In our Completion and Production division, revenue was $3.8 billion, representing an increase of $143 million or 4%. Operating income was $470 million, an increase of $102 million or 28%. These improvements were primarily driven by increased Cementing activity and completion tool sales internationally, higher artificial lift activity in North America, increased stimulation activity in North America and the Middle East/Asia and increased pipeline services in Europe/Africa/CIS. These results were offset by reduced stimulation activity in Latin America. In our Drilling and Evaluation division, revenue was $2.1 billion, an increase of $50 million or 2%. Operating income was $145 million, an increase of $22 million or 18%. These improvements were primarily driven by increased wireline activity globally, improved drilling activity in North America, Latin America and Europe/Africa/CIS and higher project management activity in Middle East/Asia. Partially offsetting these increases were reduced fluids activity in Latin America and North America and lower software revenue globally. Moving on to our geographical results. In North America, revenue in the second quarter of 2019 was $3.3 billion, a 2% increase. Improvements were primarily driven by higher stimulation artificial lift and wireline activity in North America land and higher drilling activity in the Gulf of Mexico. These results were partially offset by a lower software revenue across the region and reduced fluids activity in the Gulf of Mexico. Latin America revenue was $571 million, a 3% decrease sequentially, resulting primarily from lower software revenue and reduced fluids activity throughout the region, as well as…

Thanks, Lance. To summarize our discussion today, momentum is building internationally and activity improvement should continue into 2020. Leading edge pricing is trending upward as equipment supply and demand balance tightens in various geographies. Halliburton has the footprint and the expanded technology portfolio to capitalize on this international growth. We recognize the changing behavior of our North American customers and are executing a new playbook to keep generating returns and free cash flow. Halliburton is taking the right actions to be successful in this market. We have cut overall CapEx in 2019 and plan to do so in 2020 as well. This is driving the right capital allocation decisions and pricing and returns discussions. We are reducing our operating costs. We have restructured our North American organization and are also partnering with our premier supply chain and logistics organization to reduce our input costs. We have stacked additional equipment throughout the quarter and will continue to do so with a focus on returns. We are strategically growing our share of services per well by increasing the competitiveness of our non-hydraulic fracturing product service lines. And finally, we're developing technologies that will improve well productivity, a requirement of a mature unconventional market. We remain focused on delivering consistent execution, generating superior financial performance and providing industry leading shareholder returns. And now let's open it up for questions.

Thank you. [Operator Instructions] Our first question comes from James West with Evercore ISI. Your line is open. James, your line is open. Please check your mute button.

James, you there?

Our next question comes from Angie Sedita with Goldman Sachs. Your line is open.

Thanks. Good Morning, guys.

Good morning, Angie.

So I thought I was interested in your comments. Let's start on the international side for a change and the momentum you're seeing going into even 2020. Maybe you can give us a little incremental color on the degree of momentum we could see next year. Could we see similar growth levels for revenue in the international markets as you did in 2018? And then on the pricing side, do you expect it to continue to be region-specific or could it become more widespread?

Yeah. Thanks, Angie. International doesn’t move as fast as for example North America. So, when we see a trajectory, it tends to stay on that trajectory. And I'm encouraged by 2020 because of the number of FIDs and types of things that we're seeing today that really don't get started until 2020. So the Kuwait, for example, doesn't really begin until the middle of next year though it was won now. And so, the FIDs that we're seeing now, give me confidence about the trajectory for 2020. You're early to call growth rates for next year. But yeah, I think you meant 2019 when I see a similar kind of growth trajectory 2019 that carried over into 2020. And yeah that seems reasonable to me.

Okay. Okay, helpful. And then on the North America land market, some -- first kudos for being proactive on stacking equipment in this market versus flighting for share. You commented that you're seeing pricing as stable, and one of your peers said they are seeing some pricing softness. So maybe you could talk a little bit about pricing and then the degree of drop off that we could see in Q3 and even into Q4 as far as activity?

Yeah, Angie let me start with pricing. I mean from our perspective it was stable for us through Q2. That doesn't mean there isn't occasionally something that we see in terms of pricing behavior by a competitor. But on balance, very stable. As we look at the balance of the year certainly from an activity standpoint, I've said it would be down slightly in Q3. Obviously, Q4 always comes with weather seasonality all of that, I suspect given budgets that we would see more step down as well around that. But I think what's really important here is as you described it the way we're approaching the market, I mean our playbook is different. We're very sharp around taking costs out where we see it needs to come out. We've demonstrated that we do stack equipment, will stack equipment and are just dead focused on returns and margins. And so that's kind of the way we see the second half of the year. Obviously customer spend through Q2, we don't know that yet. But when we do know that, I think that will also be instructive on the second half of the year. We talk to our customers, so we know what they're thinking, but the fact is we need to look at where those budgets come out in Q2. And I guess just one follow-up on international pricing you'd ask that question Angie. We're seeing international pricing. It is getting traction. It's getting traction around tool shortages and demand in certainly the North Sea. We've seen it in a few other markets as well. And I think that's part of what we see from our standpoint anyway that the capital discipline that we're driving is driving the right conversations with customers, and quite frankly the right choices by us.

Great. Thanks. I'll turn it over.

Thank you. Our next question comes from Sean Meakim with JPMorgan. Your line is open.

Thanks. Hi, good morning.

Good morning, Sean.

So Jeff, you mentioned that you're working from a different playbook, given this is a different cycle and I certainly agree with that approach. And it seems like your thinking is evolving in terms of how you're looking at CapEx next year. Could you maybe just walk us through a little bit of flex points? I know it's still a bit early in the year, but how you're thinking about some of the flex around putting that budget together. I think one of the most common questions investors are wrestling with now is, for Halliburton, with the largest legacy frac fleet, how electric frac may or may not factor into those thoughts into next year? Could you help, maybe frame that out for us a little bit?

Yes. Thanks, Sean. I mean, we're in the early planning around CapEx for 2020. Clearly, we're in the early planning stages. But I wouldn't have highlighted if it wasn't going to be meaningful. So, just to kind of discuss CapEx 2020, we believe firmly that we don't sacrifice growth and opportunities internationally, and we still have room to grow in North America if customer budgets support that, important, the kind of behavior and decisions that capital scarcity is driving, and we will then continue that into 2020. With respect to electric fleets, this is -- this is something we also we know a lot about and we've been testing those and had a fleet in the field for some time now. So, this isn't new to us. But it's also -- we're going to be thoughtful about where and how we deploy capital. So, as we look at that particular space, that's -- the market is over-supplied. And so, when we get to the end of every year, when we think about CapEx, some part of the fleet rolls off every year and we look at that. And at that point, we're presented with choices and this is around replacement. Do we replace that asset with a quiet fleet or a dual fuel fleet or in this case could be an electric fleet? So, I mean, I see that lift from our standpoint as an evolution, but we don't see customers willing to pay more for that today. So that's kind of how we frame electric right now.

I appreciate that. Thank you for that feedback. And then Lance, I mean, can we talk a little bit more about working capital? You mentioned the inventory build in the first half of the year and your expectation that that will convert to a source of cash in the back half. How would you characterize collections across the different operator types at this stage? Are we in a fairly normalized environment or there's still some challenges here? How would you frame out that impact as we look at the back half of 2019?

Yes. Sean thanks for the question. So, look over the last two years, we've generated over $1 billion of free cash flow and I expect that that trend continues in 2019. Now we've got work to do in the second half of the year, but the path to that free cash flow generation first starts with sort of margin improvement in 2H, particularly with our D&E business, right? But it also includes making progress on collection. We saw DSO improvement from Q1 to Q2 and I suspect that that will continue throughout the course of the second half of the year. In terms of inventory that you mentioned, it is true. We've invested a considerable amount in inventory in the first half of the year as we continue to deploy iCruise and our Sperry technology deployment as well as I expect us to burn that down in the second half of the year in addition to the normal traditional completion tool delivery that we expect in the back half of the year. So, I think both of those will be momentum adding to our free cash flow. Now, I'd also point out too, our rate of spend in CapEx was heavier in the first half of the year which is not unusual. We reiterated our guidance around the $1.6 billion of spend in this year. So it will have a slower rate of spend in the second half as well.

Got it. Thank you for all the details.

Thank you. Our next question comes from James West with Evercore ISI. Your line is open.

Hey, good morning, guys.

Hi James.

So you can hear me now, right?

Yes. We can hear you.

Okay. Good. All right, good. Sorry about that. That was a phone issue today. So my first question Jeff, international here we're starting to see some acceleration. As you look out into 2020 likely to see volumes at or maybe even above kind of current growth levels, plus you're going to get some offshore, plus you got some pricing. Could we be in a scenario where we start to dip into the kind of double-digit type of growth internationally in 2020?

Yes. I mean James, I'm not ready to call 2020 at this point, but there's no reason not to believe that's possible. I think, the thing we're going to stay dead focused on though going into 2020 are going to be margins and we want profitable growth. And I think, we demonstrated with where we are we can grow and we've grown quite a bit internationally. But we're going to again keep a sharp eye on margins as that market unfolds.

Okay. Good. Fair enough. And pricing obviously is a big part of that margin profile. What's the level -- when you're having these conversations, I know you're on the road a lot in the international markets, what's the level of push back on pricing, or is the market now understanding hey, we're tight. Equipment's tight and you need to generate adequate return?

Well it's a mixed bag. I mean I would say that our state customers look at that scenario and realize that service pricing isn't adequate and returns aren't adequate and need the work done well and we have a lot more success with those customers and that's a bigger group of customer. It gets to be a bigger group of customer all of the time. It also helps when we say or demonstrate that tools are sold out and we can do that by making choices and so that also helps. Our service quality that Halliburton has is a level quite frankly I've never seen it before. And so what we have to offer is a fantastic product and so we're very comfortable talking about pricing today.

Got it. Thanks Jeff.

Thank you. Our next question comes from Scott Gruber with Citi.

Yes, good morning.

Good morning Scott.

So I wanted to come back to e-frac. I realize it's early days for the technology, but assuming that a strong demand pull does materialize for the technology, would you look at e-frac capacity at a rate that approximates your share in the market relative to the industry build-out? Would you look to invest more slowly to enhance free cash flow even at the risk of seeing your share within e-frac that it's smaller than your current share? How do you think about balancing e-frac share with free cash flow and is that an important factor for you?

Look returns are first and foremost for us. And so we looked at all of this in terms of returns. From a share perspective, the pace that I'm describing actually is perfectly adequate if we're happy with the returns and the technology deployment to keep up with where we are in the market. That's just sort of a normal replacement schedule that we're already on. It's just how we make those choices around what we replace. From our perspective it's going to have to be a more efficient lower capital endeavor or somehow make better returns than what's out there today or it doesn't proliferate. That's not saying we don't participate, but what I'm saying is I want to make certain that the Halliburton approach around really power and pumps, we love the pumps that we have together are making a return. And at least where we see it today it's not a -- it's more capital for the same or less returns so that's not really where we want to be.

Got you. And then just turning to D&E. Lance based on the guidance that you provided it does look like a more material ramp in revenue and margin that's required in 4Q to achieve the flattish year-on-year. Something like almost maybe over 100% incrementals. Not sure if that's possible. I'm just trying to play around with some numbers and using mid-single-digit growth. But that rate it looks like the incrementals would have to be quite large. How are you thinking about 4Q shaping up from a revenue and incremental perspective if the elements are still there for flattish margins on the year-over-year basis?

Look I think we'll see -- we'll continue to see continued momentum in terms of the activity that we're doing in places like the North Sea and India. We're also going to have in the fourth quarter we've got visibility this year just given the strength of the international recovery more than we've had in prior -- in the last several years around software sales that will also be a tailwind to that. But I think to come back to it, look D&E produced 44% I believe incrementals just 1Q to 2Q. I think that clearly the international recovery helps that business and what we've been talking about. But what we're trying to describe right in terms of the tale of two halves is a business that, while it was weighed down by certain things or from certain timing perspectives as we continue to deploy our new Sperry technology is that you're going to see a market difference in the two halves of the year. And I think that's the message that we're trying to communicate to The Street.

Got it. Appreciate the color.

Thanks.

Thank you. Our next question comes from Bill Herbert with Simmons. Your line is open.

Thanks good morning. Lance just sticking with D&E for a second here. So get the fact. I mean you've been consistently persuasive with regard to the difference between first half and second half in terms of what drives D&E margins. But just trying to get -- is the -- to reiterate the question, is the conviction relatively high and we're going to be in the neighborhood of flat margins year-over-year for D&E second half which implies kind of 13% to 14% margins in Q4? Sorry to beat a dead horse here.

Yes. Look I think Bill, I said on the prior call that we'd be sort of flattish or in the ballpark. I think look, there's a lot of stuff that we've got to go out and execute but the tailwinds behind what we have looking forward for D&E for the second half of the year paint a very different picture in terms of margin profile than they did in the first half.

That means, Bill the mobilizations we clearly see those and those are finishing, finishing now. Sperry technology implementation certainly helps. There are other D&E technologies that we're rolling out. They're equally helpful. I talked about some of them on the call velocity guns other things ramping. And then the visibility around not just software but year-end product sales is better than it's been in the past. And so, I think we're confident around -- the catalysts are intact. We can't prescribe the cadence necessarily, but certainly second half ramps up.

No, right. Thank you. And again I get the conceptual build influx. I'm just trying to get to a specific number within reason, but I hear you. Second question for me kind of multifaceted, first, if you could rank the C&P margin improvement, contribution quarter-on-quarter. And what I'm trying to get as is to what extent did product sales drive the margin improvement? And then also what percentage of your frac fleet is stacked now? Thank you.

I'll sort of start with sort of your question around sort of the allocation on C&P margins. But I think look -- Completion Tools had a great, great quarter. But I think the majority of what we're doing in terms of making sure that we're managing costs in North America is reflected in some of the C&P performance as well. I mean, we're being decisive or moving quickly and we're seeing the results and I think that's what's important.

Okay. And with regard to the percentage of your fleet that's stacked?

Yeah. Bill, I mean, we're not going into competitive specifics. I think you're in the market so you have a sense of what that is. I think the point is that we are continuing to stack equipment when it doesn't make sense. And I think that will come with slightly lower revenues, but certainly higher margins.

Okay. Thank you, sir.

Thanks, Bill.

Thank you. Our next question comes from Chase Mulvehill with Bank of America Merrill Lynch. Your line is open.

Hey, good morning. So, I guess, I wanted to talk a little bit about the preassembled perf gun solution that you mentioned earlier on the call. Could you talk about the solution that you have and maybe compare it to some of the market leaders out there? And then maybe just kind of talk about how this impacts the integrated frac solution that you're trying to push out into the market?

Yeah. So this is very competitive tool. In fact, we're fortunate, because we've got a solid manufacturing business in Alvarado, Texas where we've been building and making charges for years. So as velocity guns go into the market highly effective. We have the ability to tailor those as required for different configurations, which is a benefit certainly to us. And it's also part of bringing down in my view the overall, I'd just say cost. This is the effectiveness around integrated wireline in North America. So we can change actually the way that we work to get to a lower cost and better performance, which is different than just having two things sitting out there together. It changes the -- not just the number of people, but who is doing what allows us -- the velocity guns allow us to change the certainly the technical content on-location reduces the number of misruns or misfires. And I'm really excited about the volume. I mean, we described it as 40% of the goal gun shot by Halliburton, which is a lot of guns. But we see actually the potential to continue to drive unit cost of those guns down as the volume continues to grow. So that -- it's one of the things that just gets more competitive over time.

Okay. All right. That makes sense. Appreciate the color. And then coming back to Sperry a little bit, I mean, obviously you guys have been investing a lot in Sperry. Could you talk about when we think about Sperry and potentially leveraging and working closer with land rig companies and the opportunity to kind of have a better penetration to some of your kind of leading edge Sperry technology?

Look, those are all things we look at. I think the really the rotary steerables and motors are very different animals in the marketplace. What we're doing in rotary steerables is really exciting for many. I mean, this is a fantastic piece of kit, and it's very integrated into sort of data and real-time and not just real-time, but automation, so, really excited about that. I've always been clear that we didn't want to be aligned with just one, for example, contractor. I believe that if you look at North America, it's an open architecture market, and there is a lot of choice that can be exercised by customers. So, we've always been really careful to make sure of what we put in the market is functional with lots of providers. And so that's sort of a one thing certainly around the rotary steerables. In the motor, I talked last quarter about our Motors Center of Excellence. And I'm really excited about that, because it allows us now to customize solutions for our clients around motor performance. So there is a lot of variability in terms of the rock and performance of motors. And having that in-house allows us not only to do the customization, but also retain the learning and bake that into a very efficient sort of turnaround in 24-hour type business. So that's something that how we align it with operator is interesting, but the way I think more about it is, how does it from a value proposition standpoint work best for us and I think we've got it there now.

All right. I appreciate the color. Very helpful. Thanks Jeff.

Thanks.

Thank you. Our next question comes from Kurt Hallead with RBC. Your line is open.

Hey, good morning.

Good morning, Kurt.

Good morning, Kurt.

Hey. So I have first question. I appreciate the color in the context of you guys stacking equipment and being capital disciplined on as it relates to U.S. frac-related businesses. Wondering if you guys can give us some sense on what the attrition dynamics might be, whether that's industry or as you look at your own frac fleet? How are you thinking about stacking equipment versus let's just say retiring equipment?

Yeah. I think the -- we're always managing the fleet, I guess, is the way I would say that. And there's clearly always -- when we have a big fleet it gives us the ability to retire, replenish, repair, and in my view replace and so we take all of that together. Some equipment that stack is ready to go back. Some equipment that comes out of the system is actually the equipment I was describing that is being retired where we have choice around how we replace that equipment and at what pace. So, I think the -- we're really careful with the fleet that way. There's no question that equipment is working harder and attrition is occurring in the marketplace. We don't see capital spend going up. We just don't see new equipment coming into the market and we know how hard it's working. So, all of that conspires to drive attrition. As I've always said it's hard to see the pace of attrition until there's a call on the equipment. I suspect there will be at some point, but I do know that the physics of pumping fluid and sand through steel is having its effect on broadly the fleet in North America, all fleets in North America.

Yeah. That's great color. Appreciate that, Jeff. And then maybe for Lance. You gave some really good additional color on the D&E margin dynamics for the rest of the year. I was wondering if you'd maybe give us some insights as well on Completion and Production. And typically when you see a revenue decline in a certain business segment the margins would decline along with it. You guys have given specific data points here that suggest that even though revenues are going to decline for C&P in the third quarter margins are going to kind of hold flat. Do you think they have that kind of internal business momentum where your cost structure is down, your efficiencies are at such a level that even if C&P were to decline again in the fourth quarter you can -- your margins could be stable?

Yeah. I mean that's a good question, Kurt. Look I think, obviously, we've got one quarter out so I'll save any of the specificity for next quarter's call in the fourth quarter. But I mean that's the intent. That's what we're working towards right? I mean that's what we talk about in terms of continuing to manage cost in North America and controlling what we can control. But we'll give a better view when we get to the third quarter call on what fourth quarter looks like for C&P.

Okay. That’s great. Nice, really appreciate the color. Thank you.

Thanks.

Thank you. Our next question comes from David Anderson with Barclays. Your line is open.

Hey, Jeff I was just wondering if you could maybe just dig into a little bit on the evolution of this new playbook in North America. I know you have a new head of Western Hemisphere, Mark Richard in there who is I think been putting his view in there as well. But as far as -- as long as I can remember HAL always sought market share during the downturn now you're stacking equipment. It sounds like EBITDA per fleet may be improving as well. I guess -- is that almost early confirmation of the playbook? But probably if you can just give us a little background as to how you arrived at this new playbook?

Yeah. Just to cut to the chase, yes. The answer is yes. What you're seeing is that new playbook in action. But the -- what we recognize is there's a change in the customer spending patterns. And when that changes it has to -- we want to address the best returns. And so what was the right playbook several years ago when there was a different cadence and pace of customers spend today needs to change and so that's what you're seeing in action. And so we're going to be super sharp around capital into the downturn. I say the downturn but what we see is slowing activity that I described for Q3. What we want to make sure is that we are -- if it's slightly down we want to be slightly there with our CapEx. But most importantly -- not our CapEx our capital equipment. But what's most important to us is that we're not waiting on the spring back. We've demonstrated we know how to add people back to the system and equipment back when it's required, so I'm quite comfortable that reflects down when the prices go below something that is making a return for us and we'll let somebody else do that at below return cost. So I hope that's clear. But that's the way we're thinking about – that’s not how we're thinking about it that's how we're executing on the new playbook.

So in this new playbook, do you view each of your product lines and service lines separately? In other words each one of them have to basically hit certain return hurdles? How are you viewing -- because in the past we've talked about bundled models and integrated model and whatnot, but this sounds like we'll get more defining each one of our product lines has to stand on its own. Is that fair to say?

Yeah, that's fair. Though I would say we like integrated work and we do a lot of that in the North Sea, we do a lot of that around the world and we're happy doing that when it's available in North America. But at the same time, yes, everything has to make a return. And part of the reorganization in North America was around cost, but equally so was around speed of decision-making and executing each of those service lines. And I'm really pleased to report with the North America spend down in the first half of the year, our non-frac revenue per rig was up 13% year-on-year. So, that's evidence of that sharp focus around all of those service lines.

So, one of those service lines you called out is Artificial Lift and you talked about that being a driver of the higher NAM revenue. I was just wondering if you could just talk about that market in general in lift and how that compares -- how other lines product lines are trending. How is the spend and the pace of lift installations? How has that trended this year? We all know about the ESP capital that's -- what it's doing to drilling completions. But what's going on with lift? Is that still kind of holding up pretty well? Do you expect it to hold up well? Could you just provide a little color on how the market is trending.

Yes. Dave I mean I feel like that's OpEx spend by clients and it's really important that they produce and support production and that means every well needs to work. And that's part of the reason we've talked about growing our production business. And I say growing and building out production because OpEx and production matters a lot to our customers. And I think that's what you're seeing in the ESP business because it's an effective way for clients to prove production. But chemicals in some ways falls along the same lines so excited about those businesses.

Okay. Thanks Jeff.

Thanks, Dave.

Thank you. This concludes the question-and-answer session. I would now like to turn the conference back over to Jeff Miller for closing remarks.

Yes. Thank you, Shannon. Before we close, I'd just like to reemphasize a couple of points. First, I'm excited about the international recovery, the growth for the balance of 2019, and the momentum that's building into 2020. In North America, we plan to execute our new playbook reducing costs, stacking fleets, and reducing CapEx that drives better margins and free cash flows for 2019 and 2020. Our focus on non-frac service lines is a terrific opportunity for Halliburton and our organization is well-positioned to deliver profitable growth. Look forward to talking to you again next quarter and Shannon, please close out the call.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining and have a wonderful day.