Greetings, and welcome to the Newpark Resources Second 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, sir. 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 second quarter 2018 results. With me today are Paul Howes, Newpark's President and Chief Executive Officer; and Gregg Piontek, Chief Financial Officer. Following my remarks, management will provide a high-level commentary on the financial details of the second quarter and outlook before opening the call 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 at newpark.com. There will also be a recorded replay available until August 10, 2018 and that information is included in yesterday's release. Please note that the information reported on this call speaks only as of today, July 27, 2018, and therefore you are advised that time-sensitive information may no longer be accurate as of the time of any replay 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 that 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.

Thank you, Ken, and good morning to everyone. We're very pleased to report another solid quarter with both segments continue to make meaningful strides in the execution of our long term strategy. Consolidated revenues increased 4% sequentially to $236 million for the second quarter, driven by improvements in both operating segments. Benefiting from the stronger top line performance, second quarter EBITDA improved at $30 million, while net income improved to $0.12 per diluted share. Last quarter, we noted that in Fluids, our Kronos system was being used for the first time by an IOC in the deepwater Gulf of Mexico, an important step in our efforts to penetrate this market. To that point, I'm pleased to report that this well was completed successfully for Shell Oil during the second quarter. And based on the performance of our Kronos system as well as our overall service quality, we now have our engineers working in-house with the customer preparing for a second well which we expect to be completed in the third quarter. Meanwhile, we are also continuing our efforts to qualify the Kronos system with other IOCs. As we stated in the past, the deepwater Gulf of Mexico remains an important target not only in terms of opening up the significant new market opportunity, but also in terms of establishing our credibility more broadly among IOCs around the world. We continue to make meaningful progress, expanding our revenues generated from targeted IOCs and NOCs which serves to provide greater stability to our Fluids business. To that point, I'm pleased to highlight that revenues generated from IOC customers combined with our two key NOCs in Algeria and Kuwait now represent approximately one third of our total Fluids revenue. In terms of Fluids operating performance, second quarter revenues for the segment came in…

Thanks Paul, and good morning, everyone. I'll begin by discussing the details of our operating segments before finishing with our consolidated results. The Fluids Systems segment generated total revenues of $180 million for the second quarter of 2018, reflecting a 1% sequential increase from the first quarter and a 19% improvement year-over-year. In the U.S. revenues were $104 million, up 13% sequentially outpacing the 8% increase in U.S. rig count benefiting from a modest improvement in market share along with the deepwater project with Shell. On a year-over year-basis, U.S. revenues have increased 18% from Q2 of 2017, modestly outpacing the 16% improvement in average rig count. In Canada, revenues fell the typical seasonal pattern through spring break up coming in at $11 million for the second quarter. This reflects a 51% sequential decline which compares favorably to the 60% sequential rig count decline from Q1. On a year-over-year basis, revenues improved by 52%, despite a modestly lower market rig count over the same period. The strong performance relative to market activity levels is primarily driven by changes in our revenue mix, which is now more heavily weighted towards areas that drill through the spring break up. Turning to our international regions, revenues from the Eastern Hemisphere were $55 million in the second quarter, reflecting a 2% improvement from Q1. The sequential comparison primarily reflects the improvements in Australia, Kuwait and Albania, largely offset by the anticipated pullback in Romania, as well as reductions in Algeria and India. On a year-over-year basis, revenues from the Eastern Hemisphere improved by 19%, primarily benefiting from stronger activity levels in Romania and the contribution from the Baker Hughes Integrated Services project in Australia, partially offset by a decline in Algeria. In Latin America, second quarter revenues came in at $9 million, primarily with…

Thanks, Gregg. We’re very pleased with our second quarter results with both businesses delivering solid performance in the quarter, while continuing to make meaningful strides in the execution of our long term strategy. In Fluids, we remained focused on becoming that recognized global technology leader. We continue to build upon our share and key markets and expand our presence of the IOCs and NOCs around the world. And as Gregg mentioned a moment ago, we are now moving forward with capital investments to support expansion in both completion fluids and simulation chemicals, as we look to leverage [Technical Difficulty] drilling fluids provider in North America. In our Mats business, our focus and strategy remains unchanged. We continue to grow the business, diversify revenue streams, expand in two market segments and drive innovation. On that note, I’d like to make an initial save the date announcement that we’ll be contacting an Analyst Day on November 29, 2018 at our Mats manufacturing and R&D facility located just outside of Lafayette, Louisiana. Our management team is looking forward to providing a high level strategy update on both of our segments, as well as a more in-depth review of our Mats business including a tour of both our state-of-the-art manufacturing facility and R&D center. Stay tuned for more information the coming months from Ken and his team at Dennard Lascar, our Investor Relations who have long served as our IR firm. With that, I’d like the close the call by thanking our employee for their hard work and dedication in Newpark, as well as continued focus on safety. 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 line of George O’Leary with Tudor Pickering. Please proceed with your question. George O’Leary: Good morning, guys.

Good morning. George O’Leary: I guess not trying to steal anything from the Analyst Day, but I know you guys have been doing a lot of work on the non-oil and gas Mats side of the equation both from a strategic perspective and market size perspective. I’m curious if it’s maybe – you could frame based on the work you’ve done today to date, how – what percentage of that market you guys you have believe you already captured to maybe help kind of frame up the market opportunity for us?

Yeah, this is Gregg, I’ll take that. In terms of the current share in these markets and again the primary markets that we’re targeting are the utility transmission distribution as well as the pipeline markets. And in both of those markets, our share today still remains in the low single-digit range. So you just do some simple math that you can get to a rough size of those markets and obviously that indicate markets size that are significantly larger than the traditional oilfield market that we’ve been in historically. George O’Leary: Great. That’s helpful. And then on the Fluids side, make me to understand what kind of drove the margins higher in terms of the mix there? On a Mats side the equation was, was there any change or uplift in pricing in that business or is this more so just stay throughput and increase in rentals driven margin improvement quarter-on-quarter for the second quarter?

Yeah, I’ll take that one as well. I guess starting with the Mats, no real change in the pricing dynamic. This is really an uplift that was as we talked about pretty broad based across all components of Mat sales as well as the rental and services side, as well as when you look at it by geography and by end markets, it was kind of a consistent uplift that we saw across the board. In terms of the Fluids margin lift and the mix issues that we had, we did see – as you know historically, we’ll see periods where we’ll see some ebbs and flows in terms of the mix of the products that are sold and it just so happened that this quarter was a stronger quarter in that sense particularly in the Eastern Hemisphere. So we would expect that to return to a more typical mix here in the third quarter, which is somewhat what offsets the impact of the higher revenue expectation. George O’Leary: Okay. That’s very helpful. One more if I could. Obviously making nice progress on the deepwater side of the equation, Woodside in Australia where you are working alongside date huge, some work in the Gulf of Mexico and kind of working to get increasingly qualified with operators in the U.S. government in particularly I’m sure elsewhere in the globe. I guess can you remind us what that process are getting qualified looks like from a timing and majestic standpoint, I’m sure that varies but any color on the duration?

Okay. Yeah, I mean certainly the process can be fairly extensive when you’re running the first wells in deepwater with a major IOC and that we announced today that was with Shell Oil. That a long period of time. However there was other IOC that were on that well. And so we’ve been working with those other partners for the last two years. We’ve get the facility towards our Fourchon operations down as well as our technology center and they’ve been testing our technology as well in their laboratories. So we’ve been at work with other IOCs that’s been ongoing for some period of time. George O’Leary: Got it. Thanks very much for the color Paul and Gregg.

Thank you.

[Operator Instructions] Our next question comes through line of Bill Dezellem with Tieton Capital. Please proceed with your question.

Thank you. I actually have three questions today. First of all, would you please give a more detailed update on the Gulf of Mexico deepwater please?

Sure, Bill. This is Paul. We were very pleased with the first well that we drilled with Shell Oil. It certainly met all of our expectations and not just from a technology perspective, but also from operations perspective, we’ve got an outstanding team of people in the Fourchon facility. They did a great job in delivering the technology. And as a result of that work, we’re going to be doing additional well with Shell Oil. And as we start to link together several wells, we’ll start to talk more about the trends in what we’re seeing.

And then I’d like to shift to Saudi Arabia if I may. Would you provide an update on your activities there and what the prognosis is for additional work with Aramco or in-country?

Yeah, I mean it’s – we mentioned that we won a small contract there we continue to work on putting together the engineering and the preliminarily stages of construction. But beyond that there’s no additional update at this time.

And if I may go back to Gulf of Mexico real quick with Shell, will that well be drilled here in the third quarter or when are you anticipating it?

Yeah, we expect the second well will be completed here in the third quarter.

Great. Thank you. And then lastly, there was a reference to increased severance charges in Q2, would you give us some detail around that please?

Yeah, I guess the way I would characterize that is it’s not as though we have a much broad based reduction of any form. But one of the challenges here as an organization is as you grow and continue to optimize your cost structure, here you’re always continuing to evaluate your structure and making changes accordingly.

Thank you, both.

Our next question comes from the line of Praveen Narra with Raymond James. Please proceed with your question.

Hi, morning, guys.

Morning.

I guess, I just want to ask a clarifying question on the Gulf of Mexico second well. At this point I guess and I know it’s just a one incremental, but at this point are we following the same rig or has Shell moved you to a different location or different rig?

I believe it's with the same rig.

Okay. So I guess when we think about it going forward, the potential for capturing this rigs or going forward would be the most likely or most probable incremental contracts awarded or?

Well that’s certainly our goal right. And again our job is to continue to replicate the performance we saw in the first well, so.

Great. Okay, perfect. When we think about pricing, I know it’s one of the things we don’t usually talk about propose but we have kind of recently. Can you talked about the progress for gaining pricing traction even within the North American market?

Yeah, that continues to be an area of focus. I would say we’re making progress but it’s slow in that area. We’re making pretty modest progress, but as we talked about somewhat last quarter, we’ve recognized that it must remain a continued area focus as part of the return to double-digits story there and definitely the key to it.

Right. Okay. And one more for me. I guess just on the balance sheet and particularly the DSOs and working capital, certainly took a pretty good move down to this quarter. Can you talk about how much or can you kind of scale where we are in terms of capturing where receivables can be and where we can get that working capital squeeze out?

Yeah, as you noted, we saw some improvement here in the second quarter where despite growth in overall revenues, receivables actually came down. So it headed in the right direction. We probably have another call it 5 days or so of DSOs that we’re targeting as far as what that translates to what’s challenging is you’re – it’s really negating the need to invest more as you’re offsetting by growing revenue.

Awesome. Great quarter, guys.

Thank you.

Thank you.

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

Hey, good morning, guys.

Good morning.

I was wondering if we could just get a little more color on sort of the effort around building out stimulation chemicals and completion fluid, so you mentioned you’ll be putting some CapEx for that. Just curious where you’re investing and I don’t know if it’s too early for any timeline but sort of thoughts around when you might be able to commercialize some products out of that effort would be great?

Sure. On the stimulation area where we’ve been making investments, we started first with personnel, we brought in the Global Vice President to manage that product line. Then we’ve been bringing in lab technicians, some product line managers below the Global Vice President, so we’ve adding resources there, which obviously have some effect on the margins within the fluids business as we are yet to have any real revenues in that segment. But from an investment perspective, obviously the largest stimulation market is here in the North American region, that’s where we would look to make those initial investments. But in terms of timing, I would agree it’s premature at this point to comment on timing.

Okay. Great. And then just I guess following-up on that, so you’re carrying those costs in the fluids business which is impacting margin, any sense that you can give us for the magnitude of that?

Yeah. We talked a little bit about that last quarter and there was roughly a point of margin deterioration associated with the areas that included the completions, the stimulation as well as the deepwater, the broader deepwater cost structure. Now obviously, we’re starting to see the deepwater revenue generate, but there’s no question that that’s still far from the capacity that were built for.

Okay. Got it. And then I guess switching gears. On the well that you'll drill deepwater Gulf of Mexico in 3Q, is similar scope to that it terms of revenue opportunity to one that you drill them in – whether you provided in 2Q?

Yeah, absolutely.

Okay, great. And then I guess on the Mats side, so you're investing some incremental capital into the rental fleet, just wondering in the Mats business, how do you think about return hurdles for incremental CapEx?

Well, you know the Mats business is an area that has continued to perform above our weighted average cost of capital. And you know that's always the barometer that we gauge our investments on, so with the performance of that business, you know we're obviously continuing to invest in the fleet and we'll continue to manage the utilization levels of the fleet to ensure that we're getting those proper returns.

Okay. And do you have a sense for payback on those investments?

Well, again that kind of depends on where it's going the pricing in specific markets and that's getting into detail that we don't disclose.

We're pleased with the returns but.

Okay, understood. Thanks for the color guys. Good quarter.

Okay, thanks.

Thank you. It appears we have no further questions at this time. I would now like to turn the floor back over to management for final comment.

All right, thank you once again for joining us on the call and for your interest in Newpark Resources and we look forward to talking to you again after the third 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.