Good day, ladies and gentlemen, and welcome to your National Oilwell Varco Third 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 conference is being recorded. I would now like to introduce your host for today's conference, Loren Singletary, Vice President of Investor and Industry Relations. Sir, you may begin.

Thank you, Esther, and welcome everyone to the National Oilwell Varco third quarter 2016 earnings conference call. With me today is Clay Williams, President, CEO and Chairman of National Oilwell Varco, and Jose Bayardo, Senior Vice President and Chief Financial Officer. Before we begin this discussion of National Oilwell Varco's financial results for its third quarter ended on September 30, 2016, 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 on 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 filed with the Securities and Exchange Commission for a more detailed discussion of the major risk factors affecting our business. Further information 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. Please be aware of our use of the term "EBITDA" throughout the call this morning will correspond with the term "adjusted EBITDA" as defined in our press release. We also use the other non-GAAP measures as described in the press release. Later, on this call, we will answer your questions, which we ask you to limit to two in order to permit more participation. Now, let me turn the call over to Clay.

Thank you, Loren. During the third quarter, National Oilwell Varco began to see some improved demand in certain of our businesses, mostly in North America where the rig count grew 28% sequentially. For the first time since the downturn began, we posted top line growth in our wellbore technologies and completion and production solutions segments. We also saw our cost reductions began to outpace the steep declines in revenues we've seen through the past seven quarters, as three of our four segments posted higher margins due to aggressive cost reductions. Since the downturn began in late 2014, our revenues have declined 71% reflecting the severe stress, the oil and gas industry has been under. Our customers have slashed spending to the lowest levels possible and the oil and gas industry has delayed or canceled future projects totaling over 7 million barrels of oil per day. 2015 saw the lowest level of new reserve discoveries globally since 1947; only about 10% of the average annual discovery volumes through the past 50 years according to Wood Mackenzie and in 2016, the U.S. is forecast to see the lowest number of wells drilled since 1933. The 2.2 million barrel per day decline in non-OPEC production since 2014 has been fully offset by rising OPEC production which achieved record levels this summer along with Russian production which achieved record levels in September. Overall, we believe OPEC to be producing at near maximum levels with little remaining excess capacity cushion which has delayed the inevitable rebalancing of the world oil markets. Nevertheless, time is on our side as OPEC faces rising challenges to grow production further and as dwindling oil field expenditures accelerate production declines through the rest of the world. Faced with extraordinary revenue declines and significant price discounting in all areas of our…

Thank you, Clay and good morning everyone. For the third quarter of 2016 National Oilwell Varco reported a net loss of $1.36 billion or $3.62 per fully diluted share on a U.S. GAAP basis. Excluding other items totaling $1.09 billion net loss for the quarter was $128 million or $0.34 per share. Total company revenues for the third quarter of 2016 were $1.65 billion down 5% from the second quarter of 2016 and down 50% from the third quarter of 2015. EBITDA was $68 million, an improvement of $43 million from the second quarter as our efforts to reduce costs and optimize our operations outpaced the decline in revenues. Our Completion & Production Solutions segment generated revenues of $543 million during the third quarter of 2016, up $5 million sequentially and down $255 million compared to the third quarter of 2015. Revenues increased on incremental sales coiled tubing and completion related equipment partially offset by fewer sales of primarily offshore oriented production equipment including offshore conductor pipe connectors and flexible pipe. EBITDA for the segment was $43 million or 7.9% of sales, a decrease of $14 million from the previous quarter and an $82 million decline from the prior year. The decrease in sequential EBITDA was primarily attributable to changes in revenue mix and certain inventory and receivable charges. In the third quarter, we recognized $319 million in revenue from backlog, down $14 million from the second quarter of 2016. New orders were $184 million, down $85 million or 32% sequentially, resulting in a book-to-bill equal to 58% and a quarter ending backlog of $812 million. Our Wellbore Technologies segment generated $526 million in revenue during the third quarter, up 3% sequentially from $511 million and down 37% from the third quarter of 2015. As mentioned in our press release,…

Thank you, Jose. I'll offer some additional color and guidance for each of our segments beginning with our Completion and Production Solutions segment, which as Jose mentioned saw its book to bill fall to 58%. This was due to sharply lower orders for conductor pipe connections and subsea flexible pipe. This was partly offset by higher demand for fiberglass pipe, which was up 39% sequentially, and completion equipment which was up 47% sequentially. International demand picked up nicely for fracture stimulation equipment and wireline units but North American demand generally remains very low, outside of some budgetary equipment quotes and some rising demand for aftermarket spares for well stimulation equipment. We noted in the press release, our record 2-5/8 inch coiled tubing string manufactured in the third quarter and we're seeing increasing interest in larger diameter coiled tubing units and strings that can traverse longer laterals in North America. We also believe that international markets are keenly focused on hydraulic fracture techniques pioneered in North America, so the stage is set for more widespread application of these enabling technologies overseas in 2017. Within our fiberglass pipe unit we saw rising demand for flowlines in North America offsetting lower marine offshore pipe demand in Asia. Our fiberglass flowlines offer corrosion proof solutions for well tie-backs, and the rising level of drilling activity in West Texas as well as continued large sales into Saudi Arabia and elsewhere in the Middle East lifted this group's backlog 14% sequentially. The new completion tools business we acquired in July is off to a great start, with wins in Canada and Russia where we secured a pilot project for our Bulldog annulus Frac system to run this quarter. And we believe our cemented sliding sleeve technology and burst port system offer a superior solution for multi-stage…

Thank you. Our first question is from the line of Ole Slorer with Morgan Stanley. Your line is now open. Ole H. Slorer - Morgan Stanley & Co. LLC: Thank you very much and congrats where there's some good execution in a tough market.

Thank you, Ole. Ole H. Slorer - Morgan Stanley & Co. LLC: I think also the debate will be around rig technology over the next, say, several quarters as you implement or see the full effect of your very substantial cost reductions and in-sourcing on one hand. But on the other hand, I presume there is still a lot at near-term that just can't be done, given that you have a substantial backlog that still needs to ship before I presume you can truly optimize your production infrastructure. So could you talk a little bit about sort of these two crosscurrents and how you expect them to play out over the next couple of quarters? As well as how much of the manufacturing infrastructure that's typically used for offshore that can get filled with components for onshore activity?

That's a great question, Ole. I know you're aware of this, but other listeners may not be: the same infrastructure makes top drives, iron roughnecks, pumps, all manner of equipment for both land and offshore. What we've been doing is, since demand has been down in both areas, we've continued to shrink our capacity and reduce our infrastructure, scaling down in view of the market demand. But simultaneously, we are seeing a shift in our mix away from offshore, which really dominated our order book for the last decade plus, to land in 2017, 2018. And as we mention in our remarks, I think cause for some optimism there. Conversations are beginning. Tenders for land equipment are starting to be let. And it's very early days, but that's certainly a good and welcome relief. And that showed up in our orders in the third quarter, which grew off of some pretty low levels of orders in the preceding quarter. So what we're facing is a shift towards the land business for kind of the next up-cycle. Right now, it's very, very cost-competitive. We're having to get very aggressive. And so the margin impact is certainly not positive early on in the cycle. But as this blossoms and as we get back into full recovery, we're much more optimistic. So right now, the business is executing kind of a shift in that direction. What I would in particular highlight to you, though, we have a terrific management team that runs our rig business. They've been responding aggressively and in real-time to the lower levels of demand. In the third quarter, our business was down 82% from where we were two years ago. So considering that the business posted double-digit EBITDA margins on 18% of the revenue we saw two years ago is an amazing accomplishment. What I, I'd like to offer more quantitative guidance around margins and rig, but, frankly, at this point in the cycle and given kind of the shift is underway; we're not able to really quantify the margins. But I do have an abundance of confidence in the ability of our team to continue reduce costs in the face of a more challenging market. Ole H. Slorer - Morgan Stanley & Co. LLC: Okay. So, maybe with that in mind, I can maybe ask a margin question in a different way. A number of your competitors and some of the other big service providers were talking about 800 rigs to 1,000 rigs in North America being the new 2,000 rigs. That's kind of the activity level that they expect will take out the old highs in terms of their onshore-centric revenues and profits. How do you think about that? You have a very large position in North America shale. What rig count do you think of as the rig count that will take out the old revenue and margin levels?

Well, the rig count is going to depend on a lot of things: the outlook, commodity prices, et cetera, et cetera, et cetera. So, not really prepared to jump out there with a number on the rig count. I think the important trend that underlies all of this is that the shale revolution really prompted the U.S. to be the major source of incremental growth for oil between 2011 and 2014 globally. And that was really enabled by better rig technology. You've got the vast majority of oil produced in other regions around the globe. We have a lot of customers overseas looking at the impact of better rig technology in the U.S. And so as I look to sort of the next upturn, I think overseas markets are going to begin to adopt these AC rigs, higher-tier rigs. We're getting a lot of inbound interest on that. What's interesting about NOV is we are really prepared to sort of offer the next generation of rigs. We have had great success using wire drillpipe, closed-loop automated drilling to let software machine-learning technologies drive those rigs to even higher levels of efficiency. And that's what has sparked a lot of interest and a lot of intrigue amongst our customer base, not just in North America, but elsewhere around the world. So I think a lot of opportunity there. I think a lot of opportunity even upgrading the 800 AC rigs or 900 AC rigs across the North American market to be more pad-capable. As we mentioned in the prepared remarks, 7,500 psi mud systems, higher torque packages. That's anywhere from $1 million to $4 million sort of opportunity for NOV per rig. So, a meaningful opportunity to upgrade. Ole H. Slorer - Morgan Stanley & Co. LLC: Okay, thanks. I'll hand it back.

Our next question comes from the line of Tom Curran with FBR Capital Markets. Your line is now open. Tom P. Curran - FBR Capital Markets & Co.: Good morning, guys.

Hi, Tom. Tom P. Curran - FBR Capital Markets & Co.: Clay, curious, following-up on one of Ole's questions. You know, I know a lot of rig systems infrastructure can be allocated to either offshore or onshore projects. But if you were to take your total PP&E heading into this down cycle and then look at it exiting this quarter, what percentage of it roughly would you say is solely dedicated to onshore?

You know, if you think about what we have, we have fabrication operations, we have machining operations. They can – I would say virtually all of it can be directed one place or the other. I mean, we – the only exceptions to that would probably be some key site facilities adjacent to a couple of our customers in Asia. But I would say largely just about everything we do can be redirected to land versus offshore. And, for that matter, machine shops can be repurposed to make completion tools, and downhole tools and other things as well. So, there's a lot of that underway, Tom. But a lot of the PP&E, I would characterize it this way, a lot of the PP&E that we have across our system is multipurpose and can be used to manufacture really whatever the oil field needs. Tom P. Curran - FBR Capital Markets & Co.: Okay. And then as you have continued to make onshore infrastructure-oriented investments, could you share some color on the location and nature of that spending? As we've moved through the down cycle, where might we not appreciate the enhancements you have made that are onshore-directed?

Good question. And what I would tell you is a lot of focus on investment opportunities in Saudi Arabia, where we've opened new facilities and have plans to continue to do so in Russia. Both of those regions have more focus on local content. And that's, have been two areas where we've invested. Generally, though, if you look at our CapEx, it was about $60 million this quarter. It's been working its way down. So the investments that we are making there are small and targeted to get a little more local content. But, we're lately we've been all about reducing capacity, not adding capacity. Tom P. Curran - FBR Capital Markets & Co.: Sure. Understood that that's been the overall consolidated trend. Then following up on Russia then. Both you and Jose highlighted positive trends there in your opening remarks. I'm curious, now that the Kostroma plant has been up and running for a while, what impact have you noticed that's had? And what role would you expect Russia to play over the course of this next up-cycle? Do you expect it to become a meaningfully larger percentage of your international revenues?

Well, yeah, it's an important market. I think it's a great market opportunity. It's a market that I think would benefit from some of the technologies that we've highlighted on the call. We cut the ribbon on our Kostroma plant I was there in, I think, May or June to actually kick that off. And since then, as I mentioned, we have rebuilt a couple top drives. I think we've done some solids control manufacturing. We are building a rig there for a customer. We are making downhole tools there. So, yes, we're off to a good start. And Russia is moving more towards local content requirements for oilfield service companies. And, so it's an important market for us in a place that we expect more growth from. Tom P. Curran - FBR Capital Markets & Co.: Okay. Thanks, Clay. I'll get back in the queue.

You bet. Thank you Tom.

. Our next question comes from line of Jud Bailey with Wells Fargo. Your line is now open.

Thanks good morning. Question, I think for Jose. Jose, on the last-quarter call you highlighted about $40 million of cost cuts you expected to achieve over the subsequent quarters and outlined by segment what you expected to achieve in the third quarter. Could you maybe update us, how much -- how successful were you in achieving those cost cuts you outlined on the last call? And kind of where are you in achieving that $400 million run rate in annual cost savings?

Sure, Jud. Thanks for the question. Look, as it relates to the $400 million in annualized cost savings that we talked about last quarter, with the performance that we had in Q3 it's apparent that we exceeded our expectations in terms of how much of that $400 million that we would realize in Q3. It's not a perfect science for getting to the number, but we estimate that we captured about $240 million to $250 million of that $400 million in annualized cost savings during the third quarter. So the team has done a tremendous job of not only cutting costs from the system, but as we have highlighted several times really using that opportunity to streamline the operations and make things more efficient translating into further margin improvement. So more to come on that front unfortunately because those actions are painful. But the team is doing a tremendous job.

Okay. Thanks for that. I guess expectations on achieving the incremental $150 million or so, is that something you can wrap up in the fourth quarter or does that stretch into the first quarter of 2017?

Yes, I think when we talked about it last quarter; our expectations were that it would take several quarters to play out. A number of the actions that we take are in jurisdictions where it just takes time to get those costs out of the system. Once you -- once you take the action, the time between taking the action and actually getting the costs out takes a considerable amount of time. So it's a -- we still have a few more quarters to go on that front.

Jud, I think in the – I also think in the prepared remarks I mentioned 286 facilities that we've closed or are closing. The number of facilities that we're closing now is starting to flatten out a bit. But the size and impact of those closures that we've announced are getting more meaningful. So it gets tougher quarter by quarter. But, again, I just can't say enough good things about the resolve that our management teams that run these businesses have around making sure that they are continuing to adjust costs in view of a very tough marketplace.

Okay, great. And my follow-up, if I may, is I want to just follow up on Wellbore. Clay, I think you mentioned that revenue would be perhaps down slightly in the fourth quarter. I was a little surprised given the growth you saw in the North America business in the third quarter. Could you maybe give a little more color perhaps on why we wouldn't see growth given the U.S. seems to be continuing to grow and international is stabilizing? Maybe a little comment on that.

Well, we expect U.S. to grow. What I would tell you, though, is we are continuing to suffer from international headwinds in certain markets. So international will partly offset U.S. growth. But the big move sequentially is going to be drillpipe sales and then the coating of drillpipe within our Tuboscope unit. They had a great quarter Q3, as I mentioned. Excellent mix of premium pipe. But we expect Q4 -- we're entering Q4 with kind of a depleted backlog for drillpipe. And, so that's going to offset top-line growth. However, I also highlighted in the opening comments a lot of cause for optimism around 2017 in terms of new technologies, larger pipe that we see demand for, wire drillpipe that we see demand for, the enhancement of drillpipe with RFID chips. There's just a lot of technology going on in that space. So, but that's still at least a few quarters out.

Okay, great. I'll turn it back. Thank you.

You bet.

Our next question comes from the line of Marshall Adkins with Raymond James. Your line is now open. J. Marshall Adkins - Raymond James & Associates, Inc.: Good morning, guys. Clay, thanks for all the detail. I know we have spent a lot of time talking about the cost-cutting. You guys done a phenomenal job there. But given my fairly bullish outlook on the industry and oil and whatnot over the next few years, I'm actually more worried about your ability to respond in an upturn. And I know this probably doesn't come up a whole lot given the last two years, but help me understand how you guys will be able to respond in an upturn. Particularly, you've had a lot of inventory drawdowns, I would presume, in the wellbore arena. If we see a big surge in demand there, if we run out of frac trucks, what's our ability for you and the industry as a whole to respond to the up-cycle?

Well, first and foremost, we are really, really looking forward to solving those problems, and so, looking forward to that happy day of being faced with those challenges. I've said it many times before, and I'll repeat it, the two skill sets you have to master in oilfield services are rapid aggressive cost reductions when the market dictates and then rapid profitable growth when the market dictates. So this is a very highly cyclical business. It swings widely. And I've seen our team do it before, responding to the upturns. And so, again, I have an abundance of confidence in the talented management team that I get to work with here in terms of responding to that day. With regards to your inventory comment, what I would tell you is that, frankly, our inventory is – we still have too much. And so we have ample inventory, I think to respond to our customers' needs. And so that's not really the issue. What the upturn will look like, the scarcest resource in every upturn pretty quickly becomes people. And so, but I think we have a great team here at NOV. It's been very tough to reduce the size of our workforce. But, we're getting down to kind of our core team and looking forward to responding to the upturn. I would add to, though, that responding to an upturn is not unique to NOV. Our customers face that as well. So a lot of our products and strategies really are around trying to bring technology to help them navigate the challenges as well. So, closed-loop drilling, for instance, that I mentioned a moment ago we believe will help drilling contractors when they are called upon to put a much larger portion of their fleets back to work drilling. That sort of technology can drive a lot of efficiency and learning curve effects that would otherwise take much longer to accomplish. J. Marshall Adkins - Raymond James & Associates, Inc.: And margins in an upturn? Early in the up-cycle, I assume they're going to be kind of wobbly because you're still, U.S. is battling international, U.S. rising is battling, international still falling near-term. But are you going to be able to push pricing and push margins like we normally see in an up-cycle? And how do you see that playing out?

Yeah. Early on, I mean, we're discounting everywhere a lot of pricing pressure, trying to keep volumes to load our plants. Prior upturns, if prior upturns are our guide, that begins to change. And as demand kind of starts to accelerate, in this industry it can really rocket quickly. We've been -- begin to use pricing to sort of manage demand versus available capacity. And so pricing leverage can be pretty stout in the industry. I would add to that, that psychologically when you have a workforce and an organization that's gone through a significant downsizing like we have, there's a hesitancy to add people. And so we all naturally try to do more with less on the upturn. And so that drives -- there's just a high level of efficiency that gets put into the organization through a downturn. So when you get the upturn, you really benefit from that. So, again, really looking forward to that and -- but very, very confident we'll be able to navigate our way upwards. J. Marshall Adkins - Raymond James & Associates, Inc.: One last quick one. How the hell do you move around 150,000 pound 2-5/8 coiled tubing string?

The biggest coiled tubing trailer you ever saw. J. Marshall Adkins - Raymond James & Associates, Inc.: I don't think Ford makes a 75-ton pickup, so I was just curious about that.

If they did, you would own one. J. Marshall Adkins - Raymond James & Associates, Inc.: Thanks, guys.

Bye.

Thanks.

Our next question comes from the line of Kurt Hallead with RBC. Your line is now open.

Hey. Good morning.

Good morning.

Hi, Kurt.

I'm also looking forward to that day when we can start talking about some really good things. So, in the -- Clay, in the context -- of your experience in this business and some of the changes that are going on, I'm just, wanted to get a sense from you when you look out at the Rig Systems business, you look out at the potential for the land rig -- rig orders and the equipment orders and so on. Do you think that we can continue to see an order uptake in Rig Systems? Or is it a viewpoint of yours that we may just kind of bounce around between where we were in the second quarter and where we are in the third quarter?

Yes, I would say the latter in the near-term, Kurt. The -- you know, we had a pretty good -- we had a better quarter for orders in the third quarter in a couple rigs that we highlighted. We do expect to sell a rig or two in Q4, but not quite as large. What's more encouraging to me are the tenders and the interest that we see overseas. So I'm just back from the Middle East, and had a number of conversations there, a lot more happening just in the past few weeks. We had tenders going on in Latin America -- elsewhere around the globe. So the conversations are starting. But I would caution everybody, those international tenders tend to move slowly. So this is still probably at least a few quarters away. But the good news is that there's a lot of talk, there's a lot of interest in drilling capability and technologies. I think NOV is the kind of the go-to source in terms of the latest, greatest next-generation rig.

Right. And then, you spent a lot of time referencing a lot of new technologies, I guess, and services and products that you guys are introducing throughout the course of the downturn. Can you give us some perspective on what you think these new businesses or technologies and products could mean in terms of percent of revenue on a go-forward basis? Like, when you think about new technologies or developments, is it 10% of potential revenue, 20% of potential revenue? How could we think about the impact from this?

Well, I'm not really prepared to give a number per se, other than to once again kind of highlight our view of the future. We think the next upturn is going to see a lot more application of shale technologies elsewhere around the globe. And when you think about what are shale technologies, it starts with a Tier 1 land rig, high-torque capability, high-torque top drive, higher level of automation and mechanization around pipe handling. It includes premium drillpipe that's able to handle higher torques and to drill out laterals that extend 10,000 feet, 15,000 feet or more. It includes PDC bits, downhole drilling motors, rotary steer holds we've invested in. MWD to geo-steer those wells into the best parts of the shale, to drill smooth wellbores where you don't have later production ponding problems and areas of the wellbore that hold up solids. It includes sliding sleeve completion technologies that we think will grow in application in the next upturn. Hydraulic fracture stimulation technologies, coiled tubing for plug-and-perf. Flow iron mixtures, blenders – okay, we make all of that and we're market leader across all that. So I think we're very well-positioned for an upturn that has a lot more sort of shale technology to it. And we've – our M&A strategy and our internal development of new products and technologies that you ask about really are all targeting sort of that view of the world. And that's in addition to the FPSO in offshore steps that we've taken, because we also see significant improvements in that arena. So we're continuing to enhance our portfolio to develop better technology, recognizing that our customers need, need these technologies to improve their marginal cost-per-barrel standing. And, look forward to helping them do that. In terms of condensing that down to a percent of revenues, not prepared to do that right now. But we're continuing to, we're focused on deploying capital into the areas that we see the highest potential growth put in.

Yeah. I really appreciate your thoughts on that. Thanks.

You bet. Thank you, Kurt.

Our next question comes from the line of Waqar Syed with Goldman Sachs. Your line is now open. Waqar Syed - Goldman Sachs & Co.: Thank you. My question relates to the offshore rig market and aftermarket business. Do you expect aftermarket business as it relates to the offshore kind of bottom out in line with rig activity, floater rig activity? Or you think that it will bottom out ahead of that, or there will be a lag with activity?

Hey, Waqar, it's Jose. I'll take this one. But, obviously, it's very challenging environment to really predict and forecast exactly what's going to happen with the aftermarket business. A couple factors make that challenging. With the continuation of cancellations of contracts by operators and rigs being stacked or scrapped, that's continuing to challenge our market opportunity on that front. Additionally, while we believe that drill contractors have really taken their spare parts inventories down to levels which are really beyond their comfort zones, we continue to be very surprised by how resilient they are and how effective they are in terms of being able to cut back their need for expenditures. So I think for us to really be able to call bottom, the process of rebalancing the market, particularly as it relates to just stopping the decline in the overall offshore rig count, needs to come to an end. But hopefully we are not too, too terribly far away from that. And obviously our rate of decline in that business has been slowing. So, good long-term outlook; but here near-term, still a little cautious. Waqar Syed - Goldman Sachs & Co.: Okay. And then just as a follow-up, you talk about predictive maintenance and monitoring. Are you seeing any interest from your offshore customers in adding a sensors to their existing fleet of BOPs?

Yes, yes, we are. And as I mentioned, we are monitoring subsea BOPs right now and have on 11 different occasions been -- we've notified our customers that we've seen a signal that indicates they are within two weeks probably of a regulator valve failure. And so we are achieving real operational success. We are able to avoid real unplanned lost time in those operations and so that's certainly garnering some interest. And then, as I also mentioned in the prepared remarks, we are now developing top drive and mud pump failure mode predictive models as well. So we think this has a bright future. You know, the Internet of Things has come in the oilfield, and so far I think NOV is in the lead. Waqar Syed - Goldman Sachs & Co.: Now, what kind of revenue opportunity is that incremental when you're selling, or is that in the sensors? Is there any meaningful opportunity for revenue? Or is it more the service model that's the opportunity? Or how should we be thinking about that from a revenue perspective?

It's both because it requires sensors to be installed on the equipment as well as ongoing sort of maintenance -- or, sorry, ongoing monitoring services that we offer. So what I would tell you is that right now, it's still -- this is a product we just introduced in the second quarter, and we've got new pilot products that really aren't even commercial yet being introduced. So it's not a big deal mover just yet, but we are very optimistic about the, one, the impact to NOV in the future. But also the impact on improving our customers' operations; we really think we can help them improve their rig efficiency using this technology. Waqar Syed - Goldman Sachs & Co.: Okay, great. Thank you very much.

Thank you.

Thank you, Waqar.

Our next question comes from line of Stephen Gengaro with Loop Capital Markets. Your line is now open.

Thanks. Good morning.

Hi, Stephen.

Good morning.

Two quick ones. One, on the following the charges, can you give us some sense for D&A going forward? But also maybe talk about within Rig Systems, how do you think -- do you think margins can stay around 4Q levels next year or do you think you continue to see a little degradation on volumes?

Hey, Stephen, I'll jump in on the -- related to the DD&A question that you asked initially, I think Clay can take the margin question on Rig. As it relates to the charges that we took, the vast, vast majority, $972 million of that was non-cash, goodwill impairment charge. That did not really include anything in the way of intangibles. So it really shouldn't have any sort of an impact to our DD&A expense. So I anticipate that would stay relatively flat here for the next several quarters.

And Stephen, I think the second part of your question was around Rig Systems margins into 2017, and as much as I would like to guide to double-digit EBITDA margins in 2017, I don't think that's realistic. And the reason for that is we've been benefiting from high-margin, offshore rig construction projects that were won in kind of a different era, and carried a very large backlog of that into this current downturn. And what we've been seeing is a continued mix shift that I described earlier towards land equipment that's being priced in a very aggressive way to win that work. So there's sort of an overall margin shift underway. And, again, our team is fighting hard to reduce costs to get as high a margin as we can given that mix shift backdrop. But, realistically, I think we're probably going to see margins -- we guided down a bit for Q4, and I think that's probably closer to what we expect to see in 2017 across Rig Systems.

Great. Thank you. And, then maybe one follow-up on the acquisition. Can you elaborate a little bit on the impact you see as we go forward from the acquisition?

Yes, the Fjords acquisition, as we mentioned, fits well within our Completion & Production Solutions Group and our process flow technology business unit within that. But very excited about it. They are about 50% land, 50% offshore fluid processing modules; a lot of specific technologies around sulfur removal units, around glycol units for gas, electrostatic coalescers. That's very additive to a number of technologies that we have, and really provide a new channel to market for valves and pumps and composite pipes and other things that we already make here at NOV. So it's a great synergy. What's interesting about Fjords too is that it's predominantly an Eastern Hemisphere business. And so we really think NOV can help open up new geographic markets to that business. So, very excited about it. Looking forward to getting it closed in Q4. And, again, further sort of cements NOV's pivot towards things other than rig building. So, here's another investment in production-related technologies that we think have a very bright future.

Great. Thank you.

Our next question comes from the line of Chuck Minervino with SIG. Your line is now open.

Hi good morning.

Hi, Chuck.

Good morning.

I just wanted to follow up on that question related to Fjords. I don't know if you can give us quantitatively at all kind of what kind of impact that can have on your 4Q numbers or annually what kind of financials they bring to the table there. And then also, does your 4Q guidance for that Completion & Production segment include that coming in or is that added in as it closes?

Hey, Chuck, it's Jose. I guess, response to that last question, as Clay mentioned in his prepared remarks, we're anticipating the transaction will close right about at year-end. So, guidance does not include any impact from that transaction. But we are very much looking forward to, as you mentioned, welcoming the team from Fjords Processing into the NOV family in early 2017. As it relates to specific numbers on -- related to that operation, those numbers are available in Akastor's public finance filings. But basically if you look at it at a trailing 12 month basis, they did about $255 million in revenue. And you can look up some of the other details if you'd like, or we can follow up after the call.

Okay, thanks. And then just on the Completion & Production Solutions segment, the order levels there. I know that your orders there will likely kind of lag some of the rig count recovery. Do you think that 3Q was the bottom there for orders? And do you expect to start seeing that turn higher here going forward?

You know it's hard to say, what happened in Q3 was a downturn mostly in offshore-related products coming out of Completion & Production Solutions. And that business is broad brush strokes. It's about 44% offshore, 45% offshore revenue-related. But the backlog is much higher mix of offshore products, because the offshore products tend to remain in backlog much longer than quicker-turned land things. So, the backlog and the order rate really is much more, frankly, offshore-focused than the revenue stream for Completion & Production Solutions, if that makes sense? And while we do expect that to pick up, offshore demand to pick up in Q4 based on some specific things, we do view the offshore market as continuing to face some pretty challenging levels of demand as we enter 2017. So it's very difficult to say at this point.

Thanks a lot.

You bet. Thank you.

Our last question comes from the line of David Anderson with Barclays. Your line is now open.

Great. Thanks. So Clay, this acquisition that you guys put on the processing side, so is this kind of one of the final pieces of that FPSO kit that you put together between you and GE? Are there more of these that you still need to fill in? That's kind of my first question on that subject.

You know, that's a really, really good question, David. What I would tell you is this fits our FPSO strategy really well, but, frankly, that's not why we did the deal. We have already a very good portfolio of production technologies related to processing -- progressing cavity pumps, some artificial lift products, some separation equipment, some things that we sort of have been building out along the way. And while a portion of Fjords' business is related to FPSO, it's really driven by just kind of your bread-and-butter processing skids for land, processing skids for offshore, fixed platforms, that sort of thing. So, yes, that was sort of an adder, the fact that it does support our FPSO strategy. But that really wasn't the driver for it, honestly.

So it's a little bit more mid-streamy in that business, that revenue mix?

Well, no, it's upstream but it's -- oil and gas and water are processed in all parts of the oilfield...

Yeah.

...around the globe. And in fact, arguably there's more processing demand in many mature basins where you have higher water cuts, you get solids production challenges. Gas, glycol units for gas, those sorts of things. So this is much more broad-based than FPSOs. The nice thing about it is, it could can stand on its own without a lot of FPSO incremental revenue for it. And anything we when win for FPSOs, this will be additive to.

All right. So sticking on that subject, you had highlighted one of the studies you're doing there with GE on the FPSO business. We've heard from a couple others that there is an expectation that as many as 10 big projects that people are looking out at. You could start to see maybe three big projects, five big projects go the second half of next year. How are you thinking about that? Are you guys involved in those discussions there? When do you think realistically you could see your first FPSO order or kind of major feed studies along those lines?

Well, what I highlighted in my remarks were around our small FPSO, the Minibee, Honeybee concept. And we got a paid feed study won in Q3 – actually a pre-feed study, more accurately to look at the application of that technology into some specific opportunities. The other conversations, yes, NOV sells lots of important kits into FPSOs, big and small, so, flexible pipe. We've added to our offering of subsea components with the Kongsberg acquisition, which brought a lot of connectors – subsea connectors. And that's in addition to our Seabox water processing technology that we acquired last year. So we do a lot in this space, Torque mooring systems, FPSOs and the like. So we're out there doing our best. However, like I said earlier, the deepwater faces some challenging return hurdles at $50 crude. And so we're very hopeful that these projects do move forward in 2017, but we remain – I'm going to remain cautious in my outlook.

That's great. Thanks, Clay.

You bet. Thank you, David.

Ladies and gentlemen, this does conclude our Q&A session for today.

Great, Esther. Thank you very much. Thank you all for joining us, and we look forward to speaking to you in February.