Good morning, ladies and gentlemen, and welcome to the KLX Energy Services Fourth Quarter 2018 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. [Operator Instructions] As a reminder, this conference call is being recorded. I’d now like to turn the conference over to your host, Mr. Michael Perlman, Treasurer and Senior Director of Investor Relations. Sir, you may begin.

Thank you, Bridgette. Good morning and thank you for joining us. Today we are here to discuss KLX Energy Services financial results for the full year and fourth quarter period ended January 31, 2019. The company’s earnings news release was issued earlier this morning presents these results. If you haven’t received it, you’ll find a copy in our website. During 2018 management completed the merger of the Aerospace Solutions business with KLX Inc, a Boeing Company; the spin-off of the Energy Services business, an independent public company; the amendment of the $100 million asset base lending facility; the issuance of $250 million of senior secured notes due 2025; the acquisition of Motley Services. Company incurred approximately $30 million of onetime costs associated with these activities, approximately $2 million of which was incurred in the fourth quarter. Company will therefore report both GAAP results and financial results adjusted to exclude the costs associated with the aforementioned activities, which are collectively referred to as costs. We will begin with remarks from Amin Khoury, Chairman and Chief Executive Officer of KLX Energy Services. Also on the call this morning is Tom McCaffrey, Senior Vice President and Chief Financial Officer. For today’s call, we have prepared a few slides to help you follow our discussion. You can find our presentation on the Investor Relations page of the KLX Energy Services website at klxenergy.com. In addition, copies of the slides are posted on our website for you to refer to. Before we begin, we have some additional information to cover. Any forward-looking statements that we make are subject to risks and uncertainties. And as always in the prepared remarks and our responses to your questions, we will rely on Safe Harbor exemptions under the various securities acts, and our Safe Harbor statements from the company’s filings with the Securities and Exchange Commission. We will address questions following our prepared remarks. At that time, with operator we'll provide Q&A instructions. Now, I’ll turn the call over to Amin Khoury.

Thank you, Michael, and good morning, everyone. I'm pleased to report financial results for our first full fiscal quarter as a standalone public company. During the quarter, we successfully completed the integration of the recently acquired Motley business in just 90 days, which speaks volumes with respect to our organizational structure and our powerful IT resources and systems. In addition, we made important progress in the commercialization of our newly launched proprietary tools. In fact, fourth quarter organic downhole production solutions revenues, which includes our proprietary dissolvable plugs, debris-less flotation collars, composite plugs, wet shoe bypass sub, toe sleeves and liner hangers increased about 43% over the same period in the prior year, and increased approximately 16% as compared to the third quarter. During the quarter, we also completed the divestiture of certain excess assets in our Northeast/Mid-Con segment, resulting in an approximate $4 million gain, which was largely offset by new product introduction and Motley integration costs. As a standalone public company, KLX Energy Services is recognized as a premium service provider of a broad range of services to top tier E&P operators. The company’s expanding footprint of high quality, differential equipment and highly competent personnel supported by an integrated platform is beginning to enable the company to deliver best-in-class solutions across all major U.S. onshore geographic regions, and allows customers to simplify their operational planning and execution by sourcing from one provider. For the full year, we delivered strong revenue growth of approximately 55%, which was driven by a double-digit percentage increase in the number of new customers and a significant increase in the breadth of services provided to existing customers. In addition, we successfully introduced a number of new product service lines, or PSLs, and delivered a significant earnings turnaround. Excluding the costs associated with the Boeing…

Thank you, Amin. I'll now turn the call over to Bridgette for the Q&A portion of today's call. Bridgette will provide instructions on how to ask the questions. Bridgette?

[Operator Instructions] Our first question comes from the line of Brad Handler with Jefferies. Your line is open.

Amin, thank you for the detailed -- the thought process going forward does seem pretty clear. But maybe, I'll ask you to retrace just a little bit. If we circle back to three months ago, you've launched -- you gave some guidance for EBITDA for the fourth -- for your fourth fiscal quarter. I know things came in a little bit light, the circumstances, obviously, makes -- that make a lot of sense. But how should we think about how important it is in your guidance for things to get back to normal, if you will, right, for that 8% growth in completed wells to take place? I'm just trying to get a sense for how the risk --. And since how you're thinking about handicap of the risk associated with the guidance you are giving today, considering the fourth quarter did come in a little bit lighter than you expected it to be.

Brad, you are correct. I mean the fourth quarter results did fall short of our expectations. However, the commodity prices were clearly below our guidance dependant range, right. So with fourth quarter oil prices dropping by about 45% from $76 a barrel, on 3rd of October, down to $42 a barrel on Christmas Eve. The way we think about this is that unless oil prices remain in the approximate range of about $55, and gas prices around $275, that our guidance would be impacted if oil prices dramatically decline. I mean, if our customers drilling complete fewer wells and they lay down rigs and they don’t require our services, then our revenues will be negatively impacted. So, however, I would say that the fourth quarter showed a terrific improvement, as compared to the same quarter of the prior year. And we delivered solid EBITDA, $32 million of EBITDA in a challenged fourth quarter. So, I think if your point is that our guidance must necessarily be dependent on the health of the market and commodity prices, clearly, you're correct. So the way we think about it is that, for the full year the company has a wonderful year and an excellent earnings turnaround with the company reporting $65 million increase in adjusted net earnings. Now we had an $8.6 million loss last year. And we have reported a $57 million profit in 2018, and ended the year with the $164 million in cash, and an undrawn $100 million credit facility. And we delivered ROIC of 16%. I mean, a really good year and a terrific performance compared to the fourth quarter of the prior year albeit that you're absolutely correct that our fourth quarter did fall short of our guidance. And our guidance was dependent upon stable oil and gas prices, which weren't in the fourth quarter.

I appreciate you just sort of flushing that out. Okay. As a follow-up question, maybe a couple a multi-cart one as it relates to Motley, please. I think in terms of growth plans for coiled tubing we heard about three on order. Can you please confirm that that's still the capital asset add plan for '19?

No. Actually it's about to double that. We are getting a real pressure from some of our customers to introduce coiled tubing services. And we will be putting two spreads in the Rockies and two spreads in the Mid-Con, during 2019, and we are increasing our capacity in the Permian. So of our $100 million in CapEx, you should think about it that’s almost half that amount is for coiled tubing spreads.

And then just on the fourth quarter performance from Motley, can you comment how much was it impacted by the slowdown in the overall environment? Or did you hit that $30 million? I think you were targeting roughly $30 million in [Multiple Speakers]

No. Motley was -- I can't give you the whole thing because Motley's business has been integrated into our business. But I can't tell you about coiled tubing, because it’s a specific product line. And coiled tubing services were down substantially in the fourth quarter, obviously, negatively impacted by the reduction in completion during the quarter.

[Operator Instructions] Our next question comes from the line of John Watson with Simmons Energy. Your line is open.

The full year guidance implies $47 million to $48 million of adjusted EBITDA per quarter for the year. Can you walk us through the quarterly progression how we get there and maybe just other leverage you can pull to move from the $32 million in this past quarter to $48 million per quarter and for the year?

Yes. We are not guiding to $48 million per year. We are guiding to $190 million for the …

Excuse me, $48 million per quarter.

Yes. Well, you are talking about EBITDA now. Yes.

Yes. That’s right.

Yes. So for the first half of the year, we have all of the mobilization costs associated with the introduction of these services into the Mid-Con and the Rockies, and we don't have the revenues associated with the coiled tubing services and the services that they pull-through. So our year will be a much larger second half, which is also aided by the increase in takeaway -- that the reduction in the takeaway capacity constraints in the Permian. So our year is starts out with a slower first quarter, building in the second quarter with very strong third and fourth quarters as all of the new assets, which we are investing income on stream.

And one of your competitors mentioned pricing concessions in several business lines thus far in Q1. Do you expect to experience some more pricing concessions or margin pressures for wireline or coil in Q1 apart from the costs that you have mentioned?

I think wireline pricing is somewhat challenged. Our pricing is generally -- is substantially -- generally and significantly higher than the market. Okay. So we do sell our services at a premium. We have excellent equipment, really well trained people, a broad range of services that we provide to customers. And I mentioned on the call, the increase in the number of customers now spending $5 million a quarter or $3 million a quarter with us. That number is growing rapidly as the breadth of services that we provide increases with respect to each customer. And customers are willing to pay us a premium. You've mentioned wireline services. And we do feel substantial pressure. We have made some price concessions. But our prices are substantially above market. And so, obviously, I don’t know which company you are referring to, but we don't expect to have a decline in margin as a result of pricing concessions during the period. And we are not feeling those same pressures, at least not at this point, with respect to our other service lines.

And maybe one last one for me. You mentioned dissolvable plugs in the prepared remarks and in the release. Can you give us some more color on the rollout of that product line and the reception of your customers thus far?

Yes, I think, I mentioned a number of customers and a number of wells like 30 and 90. And we've done a lot of head-to-head sort of competitions with multiple wells on the same pad where our plugs were compared to the others, and all of the others were eliminated in the competition and our plugs were the only ones remaining in all of the wells on a going forward basis. So performance has been really good over a pretty broad range of temperatures up to about 275 degrees Fahrenheit. And the revenue growth rate from the third quarter fourth quarter was about 16%. So we are spending a lot of money on it, introductions and well testing, we have got lot of operating people and sales people and our technical people, all involved with the customers. So we are spending a hell of a lot of money introducing the products. But it’s a successful introduction. And the outlook is for continued growth in the revenues of those products.

I'm not showing any further questions. I'll now turn the call back over to Mr. Perlman for closing remarks.

Thank you to everyone participating on this morning's call. We look forward to speaking you again next quarter. Have a good day.

Have a good day everyone.

Ladies and gentlemen, this does conclude the program. You may now disconnect. Everyone have a great day.