Greetings, and welcome to Newpark Resources First Quarter 2018 Earnings Conference Call. 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, Ken Dennard. 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 first quarter 2018 results. With me today are Paul Howes, Newpark's President and Chief Executive Officer; Gregg Piontek, Chief Financial Officer; Phil Vollands, President of the Fluids business; and Matthew Lanigan, President of The Mats business. Following my remarks, management will provide a high-level commentary on the financial details of the first quarter and outlook before opening the call up for Q&A. Before I turn the call to management, I have a few housekeeping details to run through. There will be a replay of today's call. It will be available by webcast on the company's website which is newpark.com. There will also be a recorded replay available until May 11, 2018 and that information or access is in yesterday's release. Please note that the information reported on this call speaks only as of today, April 27, 2018, and you are therefore advised that time-sensitive information may no longer be accurate as of the time of any replay listening or transcript reading. 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 Newpark's actual results, performance or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read the 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. The comments today may also include certain non-GAAP financial measures. Additional details and reconciliation to the most directly comparable GAAP measures are included in the quarterly release, which can be found on the Newpark’s website. And with that behind me, I'd like to turn the call over to Newpark's President and CEO, Mr. Paul Howes. Paul?

Thank you, Ken and good morning everyone. We’re very pleased to report another solid quarter for both businesses with consolidated revenues increasing 11% sequentially to $227 million in the first quarter of 2018 generating EBTIDA of $25 million, and net income of $0.08 per diluted share. Overall, the first quarter operational performance was relatively inline with our outlook as discussed on the February call. In fluids, I’m pleased to highlight that we are continuing to make meaningful progress in the execution of our long-term strategy. Last quarter, we noted that our Kronos system was being used for the first time in an offshore drilling application. It is an important step in our commercialization effort to penetrate the deepwater Gulf of Mexico. I’m pleased to report that this project was completed successfully during the core and based on the performance of Kronos system we now have a second well underway with its independent operator. Following this initial success, we also have our Kronos technology now running with two additional customers, including the Woodside project in off shore Australia where we are partnering with Baker Hughes GE. And more significantly, we recently been awarded our first deepwater well with a major IOC in the Gulf of Mexico using the Kronos system. On the deepwater market conditions that remain challenging, we are very pleased with the efforts of our team and the achievement of this major milestone. Turning to the segment’s operational performance, first quarter fluids revenues came in at $177 million reflecting our highest quarterly revenues since 2014. The 9% sequential growth in revenues is largely driven by the seasonal strength in Canada which contributed $9 million of sequential revenue growth while our U.S. business tracked fairly inline with market activity. Internationally, despite the anticipated pullback in Brazil, revenues increased by 5%…

Thanks, Paul and good morning everyone. As I approach my first anniversary as President of the Fluids Systems business, I’d like to take a moment and discuss our long term fluid strategy, highlight some of the recent developments and provide my thoughts on the near term and longer term priorities. As we’ve discussed in the past, we intend to take the actions necessary to become a recognized player in deepwater drilling and completion fluids markets. During this cycle, our conviction didn’t waver. We completed our capital investment project in Fourchon, and we remain committed to near technology development, launching Kronos, our Low ECD fluids system, developed specifically to meet the needs of the operators in the deepwater Gulf of Mexico. Although this market remains challenged, we have made steady progress towards our vision. Our Industry leading facility has been used by multiple IOCs over the past year allowing us to demonstrate the facilities capabilities and performance. Meanwhile, we made steady progress in qualifying our Kronos fluid system. This system is deployed in a complex PNA operation last year and has now drilled its first well in the first quarter. During this time, we’ve also been working diligently with major IOC through the arduous qualification process for our brand-new offshore fluid. This is no doubt been a painstaking process but a very necessary component to ultimately gain customer acceptance. And as Paul touched on, I am proud to announce that we are starting our first complete well in the Gulf of Mexico using the Kronos system with a major IOC. This well is anticipated to be completed by the end of the second and contribute $3 million to $5 million of revenue. As we have discussed in the past, given the high regulatory and rigorous qualification standards, we see our first…

Thanks Phil and good morning everyone. I'll begin by discussing the details of our operating segments before finishing with our consolidated results. The fluids system segment generated total revenues of $177 million in the first quarter of 2018, reflecting a 9% sequential increase from the fourth quarter and a 30% improvement year-over-year. In the U.S. revenues were $92 million, up 3% sequentially relatively in line with the 5% increase in U.S. rig count. On a year-over-year basis U.S. revenues have increased 41% from Q1 of 2017 outpacing the 30% improvement in average rig count. In Canada, although we began to see the impact of spring break up late in the quarter, first quarter revenues were $23 million reflecting a 70% sequential improvement from Q4 significantly outpacing the 32% increase in rig count over the same period. On a year-over-year basis revenues improved by 17% despite the 9% year-on-year decline in market rig count. The strong performance relative to market activity levels is primarily driven by elevated mud losses as well as growth in stimulation chemical sales. Turning to our international regions, revenues in the Eastern Hemisphere were $54 million in the first quarter reflecting an 11% improvement from Q4. The sequential comparison primarily reflects the impact of strong performance from our Romanian operation which benefited from complex wells completed by a key customer as well as ongoing product sales to a large integrated service company and support of their offshore project with Total. In addition the region benefited from a $2 million contribution from the start of the Woodside project in offshore Australia, as well as a modest lift from currency rates. On a year-over-year basis revenues from the Eastern Hemisphere improved by 29% primarily benefiting from stronger activity levels in Romania as well as $3 million lift from currency…

Thanks, Gregg. 2018 is off to a good start with both businesses delivering solid performance in the first quarter. Is there more work to be done? Absolutely. But our strategy remains unchanged and our performance is driven by our strength of focus. In fluid, that focus has enabled Newpark to capture global share and expand our relationships with customers both in North America and around the world. We are particularly pleased with our continued relationship building with IOCs as well as the progress made in expanding our technology portfolio. With the acceptance of Kronos by a large IOC for deepwater well in the Gulf of Mexico. A long time coming but a significant milestone for Newpark in its goal of being a recognized technology leader in deepwater. Also we are building upon a reputation for service quality, a characteristic that continues to be recognized through independent customer satisfaction metrics. As a result of our focus and our efforts we now stand as the number three drilling and completion fluids provider in the world. I believe we are on the right path and gaining momentum. In our mat business, our focus and strategy remains unchanged. We continue to grow the business, diversify revenue streams expanded new market segments and drive innovation. This focus is key to unlocking new potential improving operating efficiency in the field, providing a one-stop approach, utilizing product lines acquired in the acquisition and enhancing our customer service capabilities. And with the recent acquisition of wealth services and utility access solutions we are seeing our customer base expand providing new opportunities to solve problems and bring innovative access solutions. Acquisition integration is a difficult and challenging but when they are done successfully it takes the business to new level of performance. Our strength of focus is solidifying our position as a leading provider of access solutions across multiple industries. I would like to close the call by thanking our employees for their hard work and dedication in Newpark, but most importantly I like to thank them for their continued focus on safety. With that, we'll now take your questions. Operator?

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

Hi. Good morning guys.

Good morning.

I guess we could start on the international fluid side where certainly we've seen oil prices improve and it sounds like there are some more tendering opportunities now, but can you give us a sense as to how your customers and how tendering you expect – do you expect that to kind of roll forward at higher paces as your customers get more comfortable with the oil price or -- and are you seeing any signs of that today?

Hey, Praveen, its Phil here. Yes. I think that's a reasonable assumption currently tendering activity is fairly strong. And I'd say regionally Middle East continues to show some favorability and Eastern Europe as well.

Okay. Got it. I guess turning bit to the mat side in the T&D, really focusing on the T&D side. You have certainly your T&D market share or T&D sales stayed very stable over the past several quarters. So can you give us a sense, is this growth in the number of customers, is this more related to current customers taking on more mat. How do you think about that? And if you could are there any regional pockets of strength or is it more broad-based across the fleet?

Hey, Praveen its Matthew. I'll answer that. Look, I think in answer to the first place it is both, I think we are expanding our customer base pretty much across the U.S. and with that comes incremental opportunities for specific projects, so we're seeing momentum on the ground with more customers how I'd clarify. With respect to geographies, I think it is broad based across most of the U.S at this point.

Okay, perfect. And I guess one last one. You guys seem like you're on pace to generate some pretty solid free cash as move to the back half of this year into 2019. Can you talk about how you think about that capital allocation strategy as we move into that? Do we prioritize further growth in acquisitions? Do we share buybacks on the table? Is it debt reduction? How do you guys think about that?

Sure. This is Gregg. I'll take that. Yes. You're correct in terms as you look at the back half of the year, the free cash flow profile does look strong. As we prioritize it first of all we do have an opportunity to reduce our debt, currently we have over 100 million on the ABL that would be the first priorities reducing that a little bit. Obviously we talked about the capital needs of the business, CapEx expectation has increased and its more heavily weighted on the mat side and really supporting the growth strategy there. Be on that, again, the M&A that's always something that's on the horizon, always something that's open and you evaluate the opportunities, but again it has to have a very clear strategic fit. And then you get to the last element there is to extend that you're able to fund all of your needs as well as maintain a comfortable capital structure that's when you would then revisit the whole thought of share buyback.

Okay, perfect. Thank you very much guys.

Our next question comes from the line of Jacob Lundberg with Credit Suisse. Please proceed with your question.

Hey, good morning, guys.

Good morning.

Phil, to start off in the fluids business you guys have talked about adjacencies the last couple of call, so I assume you're predominantly referring to incompletions fluids. But I was wondering if you could in general talk about how you guys are thinking about some adjacencies in that business, timing, potential breadth of offerings and may be initial geographies that you would look to step into.

Sure. Happy to take that, Jacob. You're right, there are -- there's natural adjacent technologies from drilling fluids into completions fluids and then beyond that, the stimulation fluids, stimulation chemicals, in particular. We've started to build some organizational infrastructure around that and defining our portfolio and so on. In terms of timing, I'd say that realistically, it's more of a 2019 timeframe to see some meaningful revenue there.

And then in terms of focus, this is Paul, on the completion; certainly, we do have some work today in the EMEA region and completions. But we certainly see an opportunity in deepwater Gulf of Mexico being able to bundle our drilling fluids, completion fluids together. With respect to stimulation, in terms of focus, obviously, the North American market is the one that we'd be focusing on.

Okay, got it. And then I guess sticking on fluids, in light of your comments kind of referring to during the downturn, you maintained some of the cost structure there in order to prepare for the upturn. If we see sort of increased traction in the Gulf of Mexico, which it seems like momentum is starting to build there, what sort of incremental margins do you think we could potentially see going forward, may be in 2019 when you kind of have a full year of momentum there and some years in the past going pre-downturn, you showed some very strong year-over-year incremental margins. I guess how you guys are thinking about that?

Yes, this is Gregg. I'll take that. In terms of the incremental margins on the deepwater, I think you kind of hit a key point there is, as you get going into 2019. I think as you look out that far, that's where you see the incremental margins more in the range of what our typical experience is. Our typical range is in that 20s and I would expect that to be no different. You -- there's an important subtle point there is, as you first getting going, there's some natural cost that go into the early work that cause those early incremental margins to be a little on the weaker side. But overtime, you'd think you'd get a little bit more economy.

Got it. And then last one for me on the first deepwater well in the Gulf of Mexico with the IOC. Is that sort of a trial well, a one-off tieback or is this part of a larger program?

Well, I think it's fair to say that we take this one well at a time. And for us to be successful in a market such as this, which is fairly flat still, for us to take share, it really is one well at a time. So, we're focusing on this well. So, far things are going well and we'll go from there.

Got it. And just to be clear, I wasn't very clear there. Referring more for -- from the operator side.

On the operator side? Yes--

Yes, this is development well, certainly. And if things go well, we would expect to get a second well.

Got it. Some quarter good guys. Thanks a lot.

Thank you.

Our next question comes from the line of George O'Leary with Tudor, Pickering. Please proceed with your question.

Good morning guys.

Good morning.

On the fluids guidance side for Q2, I understand the Canadian seasonality definitely impacts Q2 numbers consistently, but it sounds like U.S., you'll expect to see some nice growth and we just look at headline rig count. But if it stops growing today, you'd be up 5% on average quarter-on-quarter. International, kind of flattish. I guess are you expecting a more pronounced spring break up? Or did spring break up start a little earlier than expected? And any color on the magnitude of the dip in Canada would be super helpful.

Okay. It's Gregg. I mean in terms of the activity that we're seeing in Canada, I don't think there's anything, particularly unusual about the spring break up. Right now you look at the rig count, again down a little north of 60% from Q1 levels. That's pretty consistent with what you typically see and so we're not noticing anything that's out of line with kind of the historical seasonality.

Yes, I think it would lean slightly towards a better break up. We're holding a reasonable rig count. I think the bottom of the breakup, if I can say that, is in the rearview mirror now and we'd start to climb our way out of it now.

Okay, okay. I was just -- it seems like there's some tailwind on the fluid side and we are modeling the quarter down slightly. Giving color there is super helpful. And then on the international side, it sounds like bidding and tendering activities up. In discussions with customers, I guess could you frame how that pricing discussion is going? It seems like some of the larger peers just broadly for international services work might be being a little aggressive, but I don't know if that translates into the fluid side. So, how would you characterize international bidding activity from a pricing activity for you all?

Yes, it remains a competitive environment and so we continue to promote new technology wherever we can to overcome that.

Yes, I think that's the real key, right? Our whole focus is to try to compete on differentiated technology, driving operating efficiency and so we'll continue to do that as we bid on tenders.

Got it. And I'll sneak one more if I could. The Saudi data point, while it sounds like it's smallish in the near-term, it's certainly an encouraging one, given that would be an area you'd expect to see at least stable activity. You can take market share and probably nothing else on the gas side increasing activity in that market. So, may be any color on, through time, how big that market could to potentially get for you? Or what you view as the overall market opportunity and then we can make our own market share assumptions. I realize it's a longer-dated potential earnings upside, but just kind of framing that opportunity would be great.

Yes, it's tied to the size of the lot, really, in terms of what we would realize there. It's premature to offer additional insight.

Yes, I mean -- Saudi is, as we all know, is the largest market in the Middle East. And so we would hope that again, as we begin to penetrate that country, we would be able to emulate some of the success we've had in Kuwait, where historically, we've gone head-to-head against the large service companies, so.

That's helpful. And may be just what the overall drilling and completions fluids market is there just to frame the overall market of his we not going to assume you guys take a lion's share of that or anything, but.

As in your Saudi you're talking about specifically?

Yes.

Yes, I don't think that there's -- I don't recall any data on that, but certainly, you can look at the number of rigs that they're drilling with and give you a comparison to countries like Kuwait. It's significantly larger.

Great. Thanks for the color guys. Good quarter.

Thank you.

[Operator Instructions] Our next question comes from the line of Ken Sill with SunTrust. Please proceed with your question.

Hey good morning. You guys spent a fair amount of the -- a good portion of the press release talking about the Sonatrach award and how that's -- they're limiting the size. I'm just wondering if you could give us may be a little bit more color on is Sonatrach planning to kind of split this up and have more providers so the odds of you at least getting a piece of this are pretty good? Or I guess the risk is what are the odds that you might lose the whole thing? I know that's a tough question to answer, but looking for some color there.

Yes, thanks for the question. The big packages have been opened, hence our indications, but -- so we do expect to win an award. There are multiple lots. The sizable lots, the first three lots, the winners of those can only win a single lot. So, the process is still playing out. We expect to win, although, there are still, obviously, no guarantees as the process plays out.

And I would just add to that, again going back to the commentary in the press release, the big change is that under the previous tender, we had two lots; lot one and lot three and the approach that they followed here for the procurement process is limited to major service providers to a single lot.

Okay. That actually is very helpful. It helps us kind of quantify that. Another one, we've had a very cool dance snowy spring so far in the Midwest. I'm wondering if that holding over in April or if it continues in May, June, I mean what kind of impact does that have for you guys considering the integration of the new operations up in the Midwest?

Yes, Ken, it's Matthew. Look, I think kind of piggybacks off earlier question penetration into the T&D markets. I think that's a particular region where there's substantial opportunity and we're looking to continue to leverage new customer relationships and projects that are on in that area to negotiate.

And certainly as it relates to whether, when it -- wet weather and rain that certainly helps the rental revenues, so we'd see that as an uplift.

Is there particular part of the region that we should kind of be more that have on our radar screen, so to speak? Or is it pretty much the whole alley valley area.

I don't think it could be limited. I think the projects are popping up throughout the network based on what we're seeing at this point, Ken.

Okay. All right. Thank you.

Our next question comes from the line of Bill Dezellem with Tieton Capital. Please proceed with your question.

Hi. Thank you. I'd actually like to continue the Sonatrach discussion, if we may. Would you help us understand what their logic was for only awarding one lot?

Yes, it's really hard to say how -- why they go in the direction. I mean it's not unusual for NOCs to change their bidding practices as they go forward in time. So, we just see this as a standard change that they're going through.

And then secondarily, on the last call, it felt like you were being a bit cautious on the Gulf of Mexico opportunity, simply due to the lower level of activity. And this quarter, it seems as though maybe you're feeling a bit more favorable. Is that due to market share gains and further anticipated gains? Or are we simply misinterpreting your view?

Well, the award of this first well with this major IOC really is good news. And the duration and rigor of the testing over the last 18 months that they've put our fluids through has been significant, but it now serves us very well. Both the fluid and operations have, as a result, their credibility has increased in the eyes of other operators. And so yes, you're sensing an increased sense of optimism.

And this particular well that you're -- or this rig that you're on, what is the duration of the program that, that rig is anticipated to complete?

We said in the script that we expect the well to be finished within the quarter, but it's a deepwater well and there's uncertainties around such operation.

Yes, I mean the rig is deployed to this IOC. I don't know what the length of the contract is. I don't think it's a short-term contract. But again, as I mentioned that we've got the one well. If done successfully, we believe there will be a second well behind that.

And the reason I was posing the question is I did is my understand correctly that there are some real switching cost if -- to take you off of the rate, so if you do a good job that as long as that rate is running, you are likely going to stay on the rig. Is that a correct interpretation?

Yes. Yes, within reason. And so it's great that this IOC has switched to us and that we're taking off this well with them.

Yes, I mean certainly doing a good job is what we do everywhere we operate. But again, with our new Kronos technology, we think there's some really unique value in terms of the low ECD. So, we'll do an outstanding job servicing the account, and we're hoping that the customer really sees the value of the new technology and wants to continue to run with it and expand.

Actually, Paul, for those of us who are neophytes, would you please share with us what those advantages are?

The key there is the low ECD equivalents are down right, though, so those are the big thing, especially the new regulatory climate in the deepwater Gulf of Mexico. And so that's the key. Do you want to add some comments, Phil?

Yes, so it limits pressure down when you're drilling very tight, narrow pressure windows.

Thank you both.

Thank you. We have no further questions at this time. I would now like to turn the floor back over to management for closing comments.

Sure. Thank you once again for joining us on the call and for your interest in Newpark and we look forward to talking to you again next quarter.

Ladies and gentlemen this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.