Greetings and welcome to the Newpark Resources' Fourth Quarter and Full Year 2015 Results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Feldott, Director of Investor Relations. Thank you, Mr. Feldott. You may now begin.

Thank you, operator, and good morning everyone. We appreciate you joining us for the Newpark Resources conference call and Webcast to review our fourth quarter and full year 2015 results. With me today are Paul Howes, our President and Chief Executive Officer; Bruce Smith, President of our Fluids Systems business; and Gregg Piontek, our Chief Financial Officer. Following my remarks, Paul will provide a high level commentary on the fourth quarter and full year 2015, Bruce will provide an update on our Fluids business and Gregg will discuss the mats business as well as the consolidated financial results for the fourth quarter. Paul will then conclude with a discussion of our outlook before opening the call for Q&A. Before I turn over the call, I have a few housekeeping items to cover. There will be a replay of today's call and it will be available by Webcast on our Web-site at newpark.com. There will also be a recorded replay available by phone which will be available until February 26, 2016, and that information is included in yesterday's release. Please note that the information reported on this call speaks only as of today, February 12, 2016, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of the replay. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Newpark's management. However, various risks, uncertainties and contingencies could cause our actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies. And now with that said, I would like to turn the call over to our President and CEO, Mr. Paul Howes.

Thank you, Brian, and good morning to everyone. While 2015 proved to be an extremely challenging year for Newpark and our entire industry, it's important that we don't lose sight of our accomplishments during this difficult time. To that point, I'd like to start by reflecting on 2015 and highlight some of the more significant accomplishments that will enhance our competitive position for the eventual market recovery. As the effect of the downturn set in about 12 months ago, we moved quickly to right-size the organization, particularly in North America. And while these actions are very difficult, they are necessary and unfortunate reality in our industry. Since the beginning of 2015, we reduced our North American work force by nearly 40%, but most of these reductions focused within the Fluids segment. Over the past year, we took swift actions to shore up our balance sheet. We aggressively managed our working capital by collecting receivables and driving inventory levels lower, which generated more than $120 million of operating cash flow in the year and ending the year with $107 million of cash on hand. The strong cash flow and strength of our balance sheet have allowed us to continue to execute on our long-term strategy despite the extremely challenging headwinds in the North American oil and gas market. We have substantially completed key investments in both segments, which provide expanded capabilities and capacity to support our growth well beyond the eventual market recovery. And as I've discussed previously, we have seen a change in the drilling fluids competitive landscape as customers continue to seek out our technical expertise and value added products while the large integrated service companies reduce their focus on drilling fluids. As a result, IOCs and NOCs are increasingly seeking out Newpark to participate in their projects. In…

Thank you, Paul, and good morning. In the fourth quarter, the Fluids Systems segment generated total revenues of $130 million, reflecting a 6% decrease from the third quarter and a 50% decrease year-over-year. In the U.S., revenues were again impacted by the solid decline in rig count. U.S. revenues were $61 million, down 7% sequentially, which compares favorably to the 13% rig count decline over this period. Consistent with the industry rig counts, we experienced a softening across most of our regions within the U.S. The modest performance versus the broader rig count is largely attributable to higher downhole fluid losses while drilling, which tends to benefit revenues but provides minimal bottom line impact. On a year-over-year basis, U.S. revenues were down 65% compared to the 61% reduction in rig count. In Canada, revenues came in at $12 million, down 24% from the exceptionally strong third quarter results, reflecting the impact of the year-end slowdown. On a year-over-year basis, revenues were down 55%, slightly better than the 59% rig count decline. Our EMEA region posted revenues of $46 million, up 10% sequentially. Substantially, all of the increase is attributable to completion product sales into the Republic of Congo supporting the recently signed multiyear contract. On a year-over-year basis, revenues from the EMEA region were up 10%, despite an $8 million headwind from currency translation. Adjusting for currency, the region's revenues increased 30% over last year's fourth quarter, largely driven by revenue gains from new contracts. Our Latin America region posted revenues of $8 million in the fourth quarter, down 32% sequentially, primarily driven by significant reductions in Petrobras spending. On a year-over-year basis, Latin America revenues were down nearly $7 million or 46%, with more than $4 million of the decline driven by the stronger U.S. dollar. In the Asia-Pacific…

Thanks you, Bruce, and good morning everyone. I'll begin by discussing our mats business before finishing with our consolidated results. The mats business reported fourth quarter revenues of $20 million, up 33% from the third quarter, but down 55% year-over-year. Sequentially, the $5 million revenue increase is largely attributable to higher mat sales which came in at $8 million for the quarter, while rental and service revenues remained relatively flat at $12 million. Despite the continued weakening of the E&P markets, the stronger revenue contribution was driven by our efforts to expand into new markets. To that point, customers in non-exploration markets accounted for substantially all of our mat sales in the fourth quarter and nearly half of our rental and service revenues. And while we are encouraged by the recent revenue growth in these markets, it's important to highlight that we are still in the early stages, resulting in an increased level of quarter to quarter revenue variability impacted by the timing of customer projects and to a lesser extent seasonal softness in some of the northern markets during the winter months. Comparing to prior year, the $25 million decline in revenues included a $20 million decrease in rental and services along with a $5 million decline in mat sales. Benefiting from the sequential increase in revenues, the fourth quarter segment operating margin came in at 14%, up from a small loss last quarter but well below the 51% operating margin a year ago. Looking ahead to the first quarter, we expect E&P customer activity will continue to soften, which should be partially offset by a stronger revenue contribution from the non-oilfield markets. While mat sales timing is always difficult to predict, we currently expect mat sales revenues to be a little softer, while rental and service revenues modestly…

Thanks Gregg. 2015 was a challenging year but we met it head on and moved quickly to respond to the rapidly declining North American market. We saw our international business grow in key markets, from Algeria, to Kuwait, to the Congo. We also continued to execute on our long-term strategy by investing nearly $70 million, which includes key capital projects that will position Newpark to emerge a stronger company from the current cycle. In addition, we focused on strengthening our balance sheet by aggressively managing working capital, while continuing to execute on our long-term strategy. Fortunately, we have minimal short-term debt and over $100 million of cash on hand, and with the majority of our strategic capital projects behind us, we expect to see significantly lower capital spending in 2016. As we move through 2016, we will aggressively manage operating expenses to address further market declines as they occur. We are hopeful that we will see a rebound in commodity prices by year-end, but given the significant decline in rig count so far this year, we are preparing for more aggressive cost reductions. We will continue our efforts to penetrate new markets and diversify our revenue streams. We have long been focused on diversifying our fluids business beyond U.S. land, which includes continued international expansion and a meaningful penetration into the Deepwater Gulf of Mexico. And while our ability to expand the mats business beyond the rig site was historically limited by supply constraints, with a sharp decline in U.S. oilfield over the past few quarters, we are moving quickly to deploy our available mats into new markets and diversify the revenue stream. Despite the extremely difficult market conditions, this remains an exciting time for Newpark. In fluids, the changes in the global competitive landscape continue to provide additional opportunities,…

[Operator Instructions] Our first question comes from the line of Praveen Narra with Raymond James. Please proceed with your question.

So thinking about the margin degradation we saw in the Fluids division, I guess the decrementals were a little bit higher than we've seen in the prior quarters certainly. It sounds like 1Q may still be a little bit weaker or on the weak side. How do you think about the levers that you guys can pull to bring that back down and get margins a little bit better or at least keep them steady, and where do you think those kind of shakeout for 2016 in the environment?

Sure, Praveen. It's Gregg. I'll start with a little color on Q4. Bruce had touched on a couple of the items that really impacted the quarter and caused the higher decremental margins in the period. Most notably, there was the activity in Congo we had, not only the fact that the product sales into there were more low-margin commodity products, but then we had about $1 million of startup costs. In addition, on the U.S. side, you had a weaker mix, more fluid losses, which again that's your low-end commodity product that you tend to lose downhole, as well as some pricing pressure particularly on the diesel-based fluids, and that's really what helped contribute to one of the impairments that we took at year-end to write that inventory down. In addition to that, we had some costs in the period that are really more nonrecurring related to the startup of our new manufacturing facility and the relocation and some inventory impairments, year-end reserve adjustments, et cetera. So you boil all those things together, it brings you back to that typical decremental margin that we've seen historically of that 25% to 30% range.

Our next question is from the line of Jim Wicklund with Credit Suisse Group. Please proceed with your question.

This is [Jake] [ph] on for Jim. Just first a question on the mats, so you had highlighted the opportunity in utility sector on the last call, and it sounded like you thought there was an opportunity more for kind of back half of 2016. I guess this one that you've gotten in the fourth quarter, was that a project that you had in mind when you were making those comments in the 3Q call or is this something new that came up during the quarter?

I would say it was in kind of our field-of-view. We've been working accounts very hard and this one we were able to pull forward a little bit. The customer saw the value in our matting technology and felt that they were ready to move forward. So it's one that we saw but we were able to accelerate.

And going back to our previous commentary on that, we see a lot of opportunities for our matting technologies in these segments, but when you're breaking into a new market, the big question is the timing, how long does it take to ramp that up, and that's always difficult to predict.

Okay, understood. And then I guess could you kind of frame the maybe medium-term opportunity in these sorts of wins, maybe relative to – it looks like it was about a $5 million contribution in this quarter. I guess is that the sort of size that we should be thinking for opportunities further out or would they grow bigger? And then I guess how, if you're able to put sort of any quantitative or qualitative metrics around how this win compares to some of the stuff that you are looking out there for 2016 and 2017?

Yes, I really can't put any quantifiable numbers or qualifying the recent sales in mats into the utility sector. I guess what I would say is that, if you look at the utility sector, in infrastructure, power transmission, pipeline, and the use of mats in those segments, and historically we used a lot of wood mats, that segment we believe is significantly larger than the oil and gas space that we've been competing in for the last five to seven years.

Okay, great. And if I could, on the Albania onshore contract with Shell, what is your expected revenue contribution from that? Quarterly run rate or total duration would be great.

It's an interesting contract. Of course, Shell is a major player in almost every area in which we compete. So to be awarded our first contract, major contract, with Shell is very strategic for us. It's a little early at the moment to identify any revenues but we'll get more insight into that as things progress.

Okay, great. And if I could sneak one in more, what were the revenue contributions from Petrobras in the quarter? Just trying to get a sense for what's the potential downside risk in 2016 from that business.

So our revenues in the Latin America region were roughly $8 million in the fourth quarter, and that's substantially all Petrobras, very little other activity going on at the moment.

Okay, got it. Thanks guys.

Our next question is from the line of Marc Bianchi with Cowen and Company. Please go ahead with your question.

Just first off on the fluids business, can you quantify how much of revenue was associated with the downhole fluid loss that occurred?

When you look at the performance of the U.S. fluids, we noted it was down 7% versus the rig count down 13%. That gap that you have there is pretty much, it's predominantly the downhole losses.

Okay, great. And then, Gregg, the 25% to 30% decrementals that you talked about excluded the impact of – would it exclude the impact of price reductions?

That's correct.

Okay.

Yes, the pricing degradation is part of what drove such a strong decremental margin.

Right. Maybe if you guys could offer some comments, I'm sure you've noticed that the news is starting to report that potentially the Baker fluids division is going to be up for sale, and I'm not asking you to comment on whether you'd be a buyer or anything, but just how is your business maybe similar or different to that, where do you overlap, would it be more of a threat or an opportunity if it ended up in somebody else's hands, just curious to hear your thoughts.

Sure. Certainly Bloomberg released that. We're waiting to see when and if Halliburton announces any potential sale of the Baker assets offshore. From our perspective, obviously we see ourselves as a viable competitor in that space, Deepwater Gulf of Mexico, Brazil, other places. So again, we see it as an opportunity if in fact Halliburton moves in that direction. Whether or not it's a competitive threat if it goes to someone else, again I think any time there is changes in the industry it creates confusion. We've been there in the deepwater market playing and making more investments in the Gulf of Mexico. I would see that modestly, even if it went to another player, as benefiting us.

Have you seen any change in the competitive behavior from that business since the merger was announced?

Certainly I think you see more confusion is how I would say and we're seeing that both domestically and in the international market.

Okay, thanks for that. Maybe just one more quick one on working capital release, if I have a starting point for 2016 of the U.S. rig count falling by 40% on average, average to average, what sort of working capital release should we be expecting in that scenario?

So the working capital, I'll frame it up this way, first of all on the inventory side, you look at the back half of 2015 and we've taken out close to $20 million in inventories. We probably have at least that much to go, probably another $20 million to $30 million available to us. In addition, on the receivable side, we run 80-90 days of receivables. So every time you take a [leg] [ph] down on the revenue side, you see that come through on the receivables reduction, which provides additional working capital reductions. And then the other big issue is, as we had noted, on the tax loss carry-backs. So that's another close to $30 million of cash to generate from the balance sheet.

And when would you expect to get that?

We would expect that to be in the first half of the year.

Got it. Okay, thanks. I'll turn it back.

Our next question comes from the line of Neal Dingmann with SunTrust Robinson. Please go ahead with your question.

Paul, obviously you and Bruce have done great job on these international, continue to catch these contracts. Is there something that, I'm just kind of wondering what the strategy or what you guys are doing in, if this trend as far as these number of contracts can continue in the second part of that, does that include some of the Evolution there, or I guess just what you can say about your thought about future international projects with the fluids?

I guess I can catch it in the following terms that because of the confusion in our space with the Halliburton and Baker deal that's been talked about previously, we are finding more and more that the bigger customers, the IOCs and the NOCs, are coming to us more and more asking for our services in different parts of the world. So we'll certainly be using that lever to advance the company geographically internationally as we go forward.

And whether or not we'll be able to continue the string of new contract awards that we had in the past is yet to be determined, but generally speaking there is kind of a wind at our back in that international market because of the confusion of the Halliburton-Baker merger, and again, we are trying to exploit that to our advantage as much as possible.

And just remind me guys, margin-wise, is it pretty similar on international versus some of your prior U.S., how should we think about the margins internationally versus U.S. typically?

Typically the margins internationally are a little bit stronger for a few different reasons. First of all, the competitive landscape is little different. You don't have the same level of regional localized competitors as what you have in North America. And also because of the fact that these tend to be longer-term more stable contracts, it's a lot easier to manage your cost side more efficiently than it is in the North American. So those are really the two drivers to it.

Very good. Thanks guys.

There are no additional questions at this time. I will now turn the floor back to management for any additional comments.

We'd like to thank you once again for joining us on the call and for your interest in Newpark Resources. We look forward to talking to you again next quarter. Goodbye everyone.

Ladies and gentlemen, thank you for your participation. This concludes today's teleconference. You may disconnect your lines and have a wonderful day.