Good morning and welcome to the National Oilwell Varco Earnings Call. My name is Kevin, and I'll be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions given at that time. I will now turn the call over to Mr. Loren Singletary, Vice President, Investor & Industry Relations. Mr. Singletary, you may begin. Loren Singletary - Vice President-Investor & Industry Relations: Thank you, Kevin. And welcome, everyone, to the National Oilwell Varco third quarter 2015 earnings conference call. With me today is Clay Williams, President, CEO and Chairman of National Oilwell Varco, and Jose Bayardo, our Senior Vice President and Chief Financial Officer. Before we begin this discussion of National Oilwell Varco's financial results for its third quarter ended September 30, 2015, please note that some of the statements we make during this call may contain forecasts, projections and estimates including, but not limited to, comments about our outlook for the company's business. These are forward-looking statements within the meaning of the Federal Securities Laws based upon limited information as of today, which is subject to change. They are subject to risk and uncertainties, and actual results may differ materially. No one should assume that these forward-looking statements remain valid later in the quarter or later in the year. I refer you to the latest Forms 10-K and 10-Q National Oilwell Varco has on file with the Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information in regarding these, as well as supplemental financial and operating information, may be found within our press release, on our website at www.nov.com, or in our filings with the SEC. Later on this call, we will answer your questions,…

Thank you. We will now begin the question-and-answer session. We ask that you please limit yourself to one question and one follow-up. Our first question comes from David Anderson of Barclays.

Great, thanks. So, Clay, I was struck by the commentary. You said extraordinary opportunities rising from this downturn. Can you help me understand a little bit of how you're thinking about this? You have a lot of product lines out there. Are you talking about adding new product lines or do they expand out the current ones? And I guess I'm also wondering, are you willing to look outside of the traditional upstream oil and gas market, or do you see other opportunities potentially emerging, say maybe midstream, downstream or maybe even industrials? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, David, I'm going to stay away from getting too specific, but I will tell you we take a pretty broad view and look both at enhancing our existing product lines. We report four reporting segments and those are comprised really of 15 business units that make those up. And I would say all 15 we continually look for opportunities to enhance and expand. And then beyond that, the great thing about oilfield services is it's composed of dozens and dozens and dozens of interesting subsectors. And so we're continually looking across those for opportunities to deploy capital and develop our business. We also have some great industrial product lines and businesses in markets that we serve. Usually those are characterized by some sort of overlapping competence that that we have in the oilfield. We make a product, for instance, if the oilfield needs it, it also goes into other industrial segments. So usually there is some sort of overlap or synergy that's embedded in those sort of opportunities. But, yeah, we're taking a very expansive view. The reason for the comments obviously is a lot of parts of – well, really all parts of oilfield services and manufacturing are under stress in the current environment and landscape shifting. And so at the low points in the cycle is where we frequently see the best opportunities. And as you know, we have a long history of executing acquisitions. And both National Oilwell and Varco came out of private equity roots. And through the years, between our two organizations, we came together about 10 years ago, we've done probably in excess of 300 transactions. So this is becoming a buyer's market and we're pretty excited about that.

Now, Clay, you mentioned three smaller acquisitions during the quarter. Can you just help us understand a little bit where those fit in? Obviously, you didn't announce any numbers here behind it. But just maybe just more qualitatively what these businesses are? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, actually it was four, David. And they are between our Wellbore Technologies and our Completion & Production Solutions; both those segments picked up smaller deals. And these are the sort of bolt-on things that we do continuously here. I think in last quarter I mentioned we had a half dozen or so Letters of Intent out there, and this was a completion of four of those. And we still have a number of smaller things that we're looking at. But as we move into this kind of market, we're looking at some larger things and really looking across the board.

Great. And I guess a follow-up would be on your cost initiatives and some of the internal stuff that you're doing there. You've talked in the past about pulling in-house some of – I think actually Jose even mentioned this, about pulling some of your outsourced manufacturing. I think you have said something like 52% was outsourced before. Can you tell me where you stand on that front? And I guess also secondarily, we're hearing from some of the subsea guys that forging costs are not really coming down because of strengths in other markets. Are you faced with that same issue that maybe you can't squeeze as much out of your suppliers as you're hoping to? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, we do have sort of an outsourcing model. Basically we recognized all of the things that we manufacture serve cyclical industries, so demand rises and falls. So we're trying to avoid scaling up to internally manage peak demand. And over the past few years, a number of our business units have done more outsourcing. So as you go with the other way and things sort of cycle down, we really try to bring more in house, keep our core teams busy. And we're doing that, moving machining hours to our plants. As Jose mentioned, that takes a little more inventory to accomplish. On the steel cost front, it varies by product line. We've seen dramatic deflation in pipe prices, for instance. On castings and forgings, yeah, I think we're seeing the same thing others are, which is a little less deflation. But really across the entire supplier network, we're pressing for lower pricing and continually trying to become more efficient.

Thanks, Clay. Clay C. Williams - Chairman, President & Chief Executive Officer: Thanks, David.

Our next question comes from Jim Crandell with Cowen. James Crandell - Cowen & Co. LLC: Good morning. And congratulations, Jose, on joining NOV. Jose A. Bayardo - Chief Financial Officer & Senior Vice President: Thank you. It's great to be here. James Crandell - Cowen & Co. LLC: Clay, how do you see your non-Rig Systems business trending in the first half of the year if oil prices remain where they are today? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, Jim, like a lot of companies, moving into the fourth quarter, we're doing more detailed planning around what 2016 is going to look like. And we always reach out to our customers to get their guidance. And what we're finding is they don't know what they're going to spend. So generally, though I think the first part of 2016 is going to continue to be really challenging and, as I said in my prepared remarks, our expectation is activity is going to trend lower. I think like everybody in this industry that we remain hopeful we'll get a little bit of commodity price help and relief and then maybe in the second half of the year we start to see maybe some activity pick up a little bit. But I don't have a lot of data to point to this as to why that would happen. Jose and I were chatting earlier and, Jose, you mentioned the fact that producers come under a lot of pressure when they start facing production declines. And so I think there'll be an impetus, at least across North America, to get back to drilling as soon as they can. Of course, that will take a while. A lot of the equipment that's out there has been depleted of spare…

Our next question comes from Bill Herbert with Simmons & Company. William A. Herbert - Simmons & Company International: Thank you. Good morning. Hey, Clay, to clarify, did you prophecy or guide for Rig Systems revenue out of backlog in 2016 at $2.4 billion? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, that is out of the $8 billion that we currently have in our backlog, that's things that are scheduled to flow out in 2016 without benefit of orders that we will continue to win in the fourth quarter and into the first part of 2016, Bill. William A. Herbert - Simmons & Company International: Got that. Thank you. And then back to your use of the term extraordinary, and I'll ask the question a little bit differently. I understand that that encompasses the prospect of enhancing existing product lines, but really what I'm most interested in is you're extolling the attractive economic propositions given the adjustment in price. But I'm also curious as to what's the subset of opportunities that you're looking at which are really transformational to NOV and whether or not they at least potentially fundamentally redefine National Oilwell Varco if your aspirations are consummated? And adding to that, does this entail significantly increased service content? Does it entail possibly significantly increased non-energy exposure? I'm just curious as to how expansive your view is. Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, you want stock symbols alphabetically? William A. Herbert - Simmons & Company International: Yeah, please. Thank you. And also price, too. Clay C. Williams - Chairman, President & Chief Executive Officer: Well, Bill, I know you'll appreciate if I don't precisely give a roadmap in terms of what we're thinking over here. And I tried to touch on…

Our next question comes from Jeff Tillery with Tudor, Pickering, Holt. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: Good morning. Clay C. Williams - Chairman, President & Chief Executive Officer: Hi, Jeff. Jose A. Bayardo - Chief Financial Officer & Senior Vice President: Morning. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc.: Clay, it's a relatively broad question, but as you look at the relatively short-cycle businesses that you have and obviously the customers are consuming what they have, but could you just walk us through what you perceive to be the customer inventories in terms of when we ultimately do see an uptick in activity, whether it be spare parts for rigs or some of the consumables in the other product lines, how much of a lag before you think your business starts to improve? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, it's a great question, Jeff. And unfortunately it's driven by rig count and really the inverse of rig count, which are stacked rigs, because the stacked rigs, as activity goes down, then it frees up a string of drillpipe, it frees up the downhole tools that otherwise would be working on that working rig. And so it's very fluid and very difficult to tell, frankly, until we hit bottom on activity and we see a little time pass beyond that. Very difficult to tell where that's going to lie. We're seeing customers be far more aggressive I think in this downturn with regards to cannibalizing their equipment, about repositioning it. If they have a particular piece of equipment in a different region, there's a cost to repositioning that; there's freight, there's – they have to invest in that just to move it and maybe to get it back…

Our next question comes from Jud Bailey with Wells Fargo.

Thank you. Good morning. I wanted to follow up on the comment on revenue out of backlog and try to dig a little deeper in that, if I could. Could you tell us, does that number include any revenues from Brazil-related projects or does that exclude anything from SA (51:17)? Clay C. Williams - Chairman, President & Chief Executive Officer: Minimal revenue out of Brazil.

Okay. And in helping us think about book-in-turn for the year, what was that number a year ago, to help us calibrate how to think about your revenue out of backlog as we go through next year? Do you have that? Clay C. Williams - Chairman, President & Chief Executive Officer: I don't have that at my fingertips, Jud. But, yeah, right now based on what we have on the books, that's what we foresee.

Okay. All right, that's fair. And then my follow-up question is on Rig Aftermarket. I wanted to just follow up. You said Aftermarket would be up slightly in the fourth quarter. And I may have missed, what exactly is driving the uptick in the fourth quarter for Aftermarket? Clay C. Williams - Chairman, President & Chief Executive Officer: There's usually some seasonality in Aftermarket, a little bit in Q4, one. Two, we're seeing rising inquiries around stacking service and equipment things, and then some specific SPS things that are happening out there that we're working on. So that's what gives rise to our outlook for Rig Aftermarket.

Okay.

Our next question comes from Marshall Adkins with Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, guys. I want to come back to the margin thing. I think we're all surprised at how good a job you all did at holding up margins. In the commentary you've given so far today, it sounds like, at least on Rig Systems and Aftermarket you think that the margins will be fairly resilient. Is that... Clay C. Williams - Chairman, President & Chief Executive Officer: Yes. J. Marshall Adkins - Raymond James & Associates, Inc.: Am I reading that correctly? Clay C. Williams - Chairman, President & Chief Executive Officer: Yes, yeah. And, again, we pulled up from quantifying that, but... J. Marshall Adkins - Raymond James & Associates, Inc.: Right, right. Clay C. Williams - Chairman, President & Chief Executive Officer: But high level of outsourcing, the flexibility opening up there and we've got a great team there working on that question. J. Marshall Adkins - Raymond James & Associates, Inc.: Subject to a few things, one of those you included was pricing. I assume pricing is holding up fairly well? Clay C. Williams - Chairman, President & Chief Executive Officer: I would say everything we do is under pricing pressure, Marshall. J. Marshall Adkins - Raymond James & Associates, Inc.: Okay. A last one from me. Your orders in Rig Systems are a little higher than I thought they would be given the current commodity environment. What are floater people ordering right now? Clay C. Williams - Chairman, President & Chief Executive Officer: We're still seeing interest out there, mostly from international markets, mostly from drilling contractors that are working closely with national oil companies. And I think this quarter was around half land, half offshore. But even in the worst of times, there is an ongoing level of demand for components for rigs. Things burn up, they break, they have to be replaced, they have to be upgraded. And so that hits a pause when you first hit a downturn and customers will look at pulling off of other rigs. And we're certainly seeing that. But rigs are working. And as I said in my comments, when they work, they consume mechanical components. So, that's what we're seeing out there. J. Marshall Adkins - Raymond James & Associates, Inc.: Good stuff. Thanks, guys. Clay C. Williams - Chairman, President & Chief Executive Officer: You bet. Thank you, Marshall. Loren Singletary - Vice President-Investor & Industry Relations: Thanks.

Our next question comes from Bill Sanchez with Howard Weil.

Thanks. Good morning. Clay C. Williams - Chairman, President & Chief Executive Officer: Hey, Bill.

Good morning, Clay. Good morning, all. I know you all dedicated some time in terms of just the revenue out of backlog number, Clay, for next year, $2.4 billion. I was just curious if you could help us. Could you maybe talk about given the deliveries you've seen push the right, maybe just how much revenue maybe you've had slide here that you thought you would've booked in 2016 out a backlog that's now moved into 2017? And I guess, given that, is it too early for you guys to have a 2017 number in terms of revenue from backlog? Clay C. Williams - Chairman, President & Chief Executive Officer: Yeah, well, what that encompasses is, as we said over the last couple of calls, we've worked with our customers to push certain deliveries out and you've seen some announcement. So this is the latest estimate including all of those shifts. And as I just said, it includes pushing out a lot of Brazilian revenue as well. And so it's the latest and greatest. We're continuing to work this. It remains a little bit fluid, but this is what we're looking at right now.

Got you. And it didn't sound like anything in terms of the terms in which you agreed to with these customers, nothing's really changed on these delayed deliveries. Is that fair? Clay C. Williams - Chairman, President & Chief Executive Officer: Well, no, no, no, and I would add, there's a little bit of upside. I don't want to overstate this, but we're picking up incremental maintenance work around this equipment. If it's going to be in a shipyard for an extra 12 months, then it needs some OEM maintenance and care, extension of warrantees, those sorts of things. So we're being compensated for this. And then operationally, the added benefit is that we're able to execute these projects at lower cost and better margins. And specifically, if we slow down the pace of work on some of these, then we're able to avoid overtime, for instance, we're able to execute these with the best part of our supply chain, our top-tier suppliers and the like. So, that's the benefit for NOV.

Great. One more, Clay, if I could ask, for you. As far as the buyback is concerned, you finished that up. You've talked about a focus on M&A, but that really being more of a 2016 event it sounds like, just given the bid/ask spreads out there right now. Was there any thought or is the board going to reexamine a new authorization here and possibly seeing some repurchases take place in 4Q? Or is the buyback for now just shelved? Clay C. Williams - Chairman, President & Chief Executive Officer: The recommendation from management – we're going to be talking about this with our board here through the fourth quarter, but I really want to really be focused on M&A. We're fortunate to have both I think as attractive applications of capital and we can always put a buyback back in. But I think given the emerging things that we're seeing in the M&A space, as we said in our opening comments, that's probably a better use of our capital right now. So if that starts to diminish a little bit, if we feel like we're not going to get bids and asks to converge, then we can go back to buying back shares. But I would say here I think we're going to see more attractive opportunities emerge in the M&A space.

I appreciate the time. Clay C. Williams - Chairman, President & Chief Executive Officer: You bet. Bye-bye. Loren Singletary - Vice President-Investor & Industry Relations: Thanks, Bill.

Ladies and gentlemen, this does conclude today's question-and-answer session. I would now like to turn the call back over to Mr. Williams for closing remarks. Clay C. Williams - Chairman, President & Chief Executive Officer: Again, we really appreciate you joining us this morning. And I look forward to speaking to you in February 2016. Thank you very much.