Greetings and welcome to the Newpark Resources’ Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode and 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. Thank you. You may begin.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast to review our third quarter 2016 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 third quarter. 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 quarter. Paul will then conclude the discussion 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 website at newpark.com. There will also be a recorded replay available by phone, which will be available until November 11, 2016, and that information is included in yesterday’s release. Please note that the information reported on this call speaks only as of today, October 28, 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’d like to turn the call over to our President and CEO, Mr. Paul Howes.

Thank you, Brian, and good morning to everyone. While market conditions remain challenging, we're encouraged by the early signs of recovery in North America, where we've seen for the first time in nearly two years a sequential rig count increase and while these rig additions have tended to focus on less intensive wells, we've seen a steady increase in customer activity over the last four months, following the trough in the second quarter. Revenues in our North American fluids business improved by 22% in the second quarter, benefiting from the improving rig count and customer activity along with our first revenues from our upgraded deepwater facility in Fourchon Louisiana. This revenue represents a major milestone and our long-term strategy to penetrate the Deepwater Gulf of Mexico going head-to-head against the largest oilfield service companies in the world. As we highlighted in the July call, the first phase of our facility upgrade came online early in the third quarter allowing us to begin servicing the international oil companies in this important market. Meanwhile we're continuing the qualification process of other large IOCs that operate in the deepwater Gulf of Mexico. On the international front as expected, fluid revenues declined sequentially, driven primarily by the successful completion of the ultra-deepwater exploratory well in Uruguay. As noted in yesterday's release, we recorded charges in the quarter for the wind down of operations and asset demobilization in Uruguay. While we were naturally disappointed by the unbearable findings from this record-setting deepwater well, we're extremely proud of our contribution on a project that Total recognized as an operational success. I'm also excited to announce that we have won a new international contract in the Latin American region with Enap in Chile. Contract value is estimated at $25 million over a five year period and is…

Thank you, Paul and good morning, everyone. In the quarter, the fluids systems segment generated total revenues of $89 million, reflecting a 7% decline from the second quarter and a 36% decrease year-over-year. Our strongest sequential improvement came from North America, where revenues increased by 22% sequentially to $40 million in the third quarter. In the U.S. revenues were $34 million up 10% sequentially. The third quarter benefited from improvements in most line basins with the Permian being a particular highlight. In addition as Paul mentioned, the U.S. benefited from elevated product sales into the deepwater Gulf of Mexico as we recently brought online the first phase of our Fourchon upgrade. The deepwater revenues this quarter, highlight the strategic importance of the Fourchon investment, which is essential to opening up the sizable fluids market. On a year-over-year basis, U.S. revenues were down 48% currently in line with the 45% reduction in rig count reflecting declines in customer spending intensity and pricing, partially offset by improvements in market share. Revenues in Canada followed the typical seasonal pattern coming out of spring breakup, improving by $4 million over the prior quarter and outpacing the improvement in rig count. On a year-over-year basis, revenues were $9 million as the Canadian market continues to run well below prior-year levels. Despite the improvements in the North American market the revenue gains in this region were not sufficient to fully offset the anticipated decline in Uruguay and the EMEA Region. Our Latin America region posted revenues of $8 million in the third quarter and $9 million from Q2, largely reflecting the completion of the ultra-deepwater project in Uruguay. As we discussed last quarter the Uruguay project contributed $11 million of revenue to Q2. This decline was partially offset by a modest increase in Brazil. On a…

Thank you, Bruce and good morning, everyone. I'll begin by discussing our Mats business before finishing with our consolidated results. The Mats business reported third-quarter revenue of $15 million, down 19% from the second quarter, but flat year-over-year. Sequentially, the revenue decrease is primarily attributable to a $3 million decrease in Mats sales. Rental and services revenues came in at $14 million for the third quarter, down modestly from the second quarter. The decline is primarily driven by the lower revenues from the power transmission markets where we experienced delays in certain projects during the quarter. The delays were driven in part by the heavy demand in the power transmission grid in periods of extreme heat such as those experienced in the South during July and August, which prevent the utilities from taking the infrastructure off-line for maintenance. The lower revenues from power transmission were partially offset by a modest improvement in oilfield markets, which as Paul mentioned, reflects our first quarterly improvement in revenues from the oil field in nearly two years. Overall non-exploration markets contributed approximately two thirds of total segment revenues in the third quarter, including $9 million of rental and service revenues and substantially all of our Mat sales. Comparing to the third quarter of last year, rental and service revenues have increased by $1 million, reflecting a $3 million increase from non-oilfield markets, offset by a decrease from exploration customers. As highlighted in yesterday's press release, the third quarter included a $700,000 charge resulting from our decision to recondition customer Mats that were produced in 2015 as part of our initial startup of the new manufacturing line. The reconditioning was isolated to a single batch of Mats produced from one customer last year addressing quality issue detected in the finished product. Including the impact of…

Thanks Greg. While markets remain soft, we're encouraged by the improvements in North America over the past few months, benefiting from the strength of our unwavering focus through the downturn, Newpark remains well-positioned to capitalize on the improving market conditions. Our focus on managing our balance sheet, cash flow and cost structure has enabled us to continue the execution of our strategic plan. Our strategy relies heavily on the continued advancements in technology and outstanding customer service, where we've make meaningful progress in both segments. In fluids, we continue to focus on introducing new technology, including our Kronos infusion line and driving operating efficiency for our customers and as Bruce touched on, we recently completed an acquisition to further enhance our ability to develop next-generation fluids systems. In our Mats segment, we're also introducing new technologies. As I touched on earlier, we've now launched our patented equipotential zones matting system, which provide an innovative solution to meet customer needs for the power transmission market. In addition to the introduction of new technology, we've also captured additional market share in both segments. Internationally, our fluids share gains in the EMEA region have been a particular bright spot, benefiting from our geographic expansion in the Middle East and increasing market share with NOCs. The most recent contract award with Enap is yet another step in our international market share expansion, building upon our Latin American presence and providing the opportunity for us to highlight the benefits of our technology in a complex horizontal drilling application and it's important to highlight that these share gains are not limited to the international markets. While overshadowed by the market condition, we've also seen a steady improvement in our U.S. market share over the past two years. We believe that our U.S. market share now stands at a record level the number two drilling fluids provided to the U.S. land market. Thus the share increase is meaningful as it provides the foundation for improved financial performance as the market recovers, particularly as activity focuses on unconventional formations for operators drill deeper wells with longer laterals. In Mats, our focus has been on diversifying into new end-user markets where we are seeing meaningful progress. In 2016 non-exploration markets represent over two thirds of our revenue even though we remain early in our penetration of the market. Meanwhile we believe the improving economics of our exploration will bring continued increases in drilling and completion activity, our matting systems have long been the established leader in key exploration markets such as the Northeast positioning us well to benefit in the recovery. In summary, while it appears the worst of the current cycle is behind us, Newpark is not standing still. The strength of focus and our long-term strategy is now more important than ever and to that point, I would like to thank all of our employees for their hard work and continuing dedication during these difficult times. With that, we'll now take your questions, operator.

Thank you. We'll now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Praveen Narra with Raymond James. Please go ahead with your question.

Hi, good morning guys.

Good morning.

Is there deepwater sales out of Gulf of Mexico, I was wondering if you could add a little bit more color on what you’re seeing there in terms of customer mix the reception that you're seeing so far just on the initial stuff that's gone out.

Yes, I will take that one, this is Bruce, historically we've been promoting technology as a driver for operational efficiency on land and offshore and deepwater is no exception to that. So we've been finding during the build-up to our launch of our new facility that customers are particularly excited about the fact that someone else is coming into this market that might be able to do something a little bit different. So we’re very pleased with our early success that we had since commissioning the first phase of our upgraded facilities, so very pleased with that. And in terms of the meaningfulness of it, 50% of the increase in the U.S. revenues came from that deepwater customer and one other question you have is on the customer mix, this is for one IOC predominantly.

Okay. That’s very helpful and then if I could ask a question on the Mat side, we continue to hear about your well size in terms of pad size and in terms of how long the equipment on site. Could you walk through how your value added proposition for the Mats business is increased or how it’s affected by the longer equipment on site near the bigger pad sizes?

Yes, certainly it has a direct correlation to potentially that the mat rental revenue, the market recovers. As you know most of our revenue comes from the Northeast historically. So as they have equipment long run site, larger pads, more pad drilling, that would actually increase our utilization of the Mats and for longer period of time, so would provide an uplift.

In terms of how the customer would view using either you guys or an alternative, does the bigger size add to that proposition from you guys and further displacing other options?

No, I don't think it really changes any of the perspective from the customer's point of view.

Okay, perfect. Thank you very much guys.

Thank you.

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

Good morning guys. Paul you or Bruce just obviously that acquisition, the $4 million acquisition you did this specialty chemicals how that, will you combine that with evolution or how are those two going to be completely separate I am wondering how those two will work together if they will?

However looking at this, the offers are so differentiated chemistry that fits well with what we are doing in a bigger scheme of things and initially the chemistry was on the drilling fluid additive side, but we see the chemistry that they were developing as being able to transition into either other segments of our industry for example may be into completion fluids and we also see that it might travel geographically as evolution did in the early days, but at early stages of this, but we saw them as good add on to the differentiated chemistry format that we’re following.

Yes, so it will be fully integrated into our drilling fluids organization and really into our technology group.

Make sense. Okay, got it Paul and then just lastly just one more just that as you mentioned in your prepared remarks Paul that EMEA region continues to say very resilient and I’m just wondering are there additional parts of that area or more particular additional customers in there that you continue to look at or continue to have conversations with them? Again you guys historically did a great job of over the years developing those markets and developing that market so I’m just wonder ones that you haven't said too much about at this time that could play out in the next year or two.

Yes certainly the two strongest players for us right now or Algeria and Kuwait but the Middle East in general is an area that we've been targeting for some period of time whether its Oman as you know we just picked up a small contract there. That’s normally our way we go in, find a small contract and then find a way to grow. Saudi Arabia is very interesting to as well, Qatar. So we spent a lot of time and effort in the Middle East currently.

That makes sense. Thanks guys.

Thank you.

Thank you. Our next question comes from the line of [Steven Dinger with Loop Capital]. Please go ahead with your question.

Thanks. Good morning gentlemen.

Hey, good morning Steven. How are you doing?

Good. Thanks. So two questions, the first is can you give us some color as I sort of think about incremental margin progression on the fluid side, I think about North American mix you gave us some help there I think with the answer to a prior question but is given the new facility is the land business currently more profitable or is it or not because of the high-end nature of what's offshore?

Yes, it’s Gregg, I will take that. As far as the breakdown in the split of our overall profitability between land and offshore, we don't really break things down and disclose it that way. Obviously where we stand right, now the offshore activity is very limited. We're very early in that, in the stages there, but back to the broader question about your incremental margins however, the expectation that we have is not just similar with the historical progression of that business and that is in that call at 25, 30 range is usually where things go whether it's declining in the decremental or then recovering with the incrementals and that would be our expectation. The one big variable that you have in it is the impact of technology and we saw that a few years back particularly in '14 where we saw really significant penetration with evolution. So, we saw incremental that were well above that so, that's the one variable in it.

And that’s a fluids wide comment, not an North American comment, right.

Correct.

Okay and thank you. As the follow up, would it be as the Gulf of Mexico business hopefully expands for you over the next one to two to three years that should be additive to the overall margin given the higher-end nature of it, is that fair once it becomes a more sizable business.

I think that's fair comment and that’s correct.

Whether you remember about revenue offshore for us is that obviously an offshore rig represents a lot more revenue than the land break.

Yes, yes okay. Great now that's helpful. Thank you.

Thank you.

Our next question comes from the line of Will DelHagen with Titan Capital Management. Please go ahead with your question.

Thank you. I want to start by following up relative to the acquisition you made reference to some chemicals that may be relevant to the completion fluids market and that is not an area you’ve historically addressed, is that something that is -- should be on our radar screen as to your roadmap going forward? How do we think about that please?

Yes, this is Paul, Bill, certainly we have sold completion chemistry before but mostly in our EMEA region and so, little bit of vertical integration but you think about completion chemistry, it is a concentric ring around drilling fluids so, that’s an area we certainly are interested in on a go-forward basis.

What is the timing that we ought to think about?

In terms of the well the acquisition was completed, so we'll continue to take that technology and spread it around the globe for us but that will take time.

Yes and I think it’s -- again it’s important to highlight the overall size of this acquisition as well and while there is a little bit of activity in these other areas at this point it’s pretty small overall.

I’m sorry where I was going with that question is the timing that you might focus more on the completion fluids market.

Well in the EMEA region, we continue to do that as we win new business we're quite often asked by customers to bundle that with drilling fluids, so that’s kind of an ongoing part of our business in that part of the world.

Alright, thank you and then looking at the fluids business you lost less money in the third quarter than you did in the second quarter on lower revenues that is a bit counterintuitive how do you accomplished that.

Well I think you have to normalize that a little bit for as we did have charges in the second quarter but when need to normalize that you will see that the overall margin profile is improving and it’s really a reflection of the fact that we’re seeing the full benefit of the cost, that the breakdown in the cost from all of the cost actions taken prior in the year we’re now on a more normalized level going forward and that’s what we were starting to see that the stronger margin profile in North America.

Great. I'm not used to saying congratulations on losing less money but congratulations.

We understand, but thank you for the comments.

Thank you.

All right.

That concludes our question-and-answer session. I would now like to turn the call back over to management for final 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 next quarter. Good bye everyone.

Ladies and gentlemen thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.