Greetings, and welcome to the Newpark Resources’ First Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard, Investor Relations for Newpark Resources. Thank you, Mr. Dennard. 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 2021 results. Participating from the Company in today’s call are Paul Howes, Newpark’s President and Chief Executive Officer; Gregg Piontek, Chief Financial Officer; David Paterson, President of Fluids business; and Matthew Lanigan, President of the Industrial Solutions business. Following my remarks, management will provide a high level commentary on the financial details of the first quarter results and near-term outlook before turning the call over to Q&A. And then before I give the call to management, I have a few housekeeping details to run through. There’ll be a replay of today’s call and will be available by webcast on the company’s website at newpark.com. There also be a telephonic recorded replay available until May 12, 2021 and that information is included in yesterday’s release. Please note that the information reported on this call speaks only as of today, May 5, 2021 and therefore you’re 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 press release, which can be found on the Newpark website. And now, with that behind me, I’d like to turn the call over to Newpark’s President and CEO, Mr. Paul Howes. Paul?

Thanks, Ken and good morning, everyone. With underlying fundamentals improving in both segments, I’m pleased with our overall performance in the first quarter, highlighted by the solid performance in the Industrial Solutions segment, growth in Stimulation Chemicals and the strong cash generation in debt reduction. Consolidated revenues improved 9% sequentially to $141 million, while operating income return to positive territory and EBITDA increased to $10.9 million for the first quarter, which included $800,000 loss on the repurchase of convertible bonds. In our Industrial Solutions segment, revenues improved 6% sequentially to $53 million in the first quarter, benefiting from the ongoing recovery in customer activity, most notably from the utility sector. Site and Access Solutions product sales contributed $20 million of revenue in the first quarter, benefiting from pent-up demand from the utility sector following the deferral of customer capital investments in 2020. With the stronger revenue, our Industrial Solutions operating margins improved to 25% in the first quarter. The rebound in our Site and Access Solutions business over the past two quarters is especially noteworthy as it demonstrates the value of our efforts to diversify our business and expand into markets that we believe will benefit from the energy transition. While revenue and profitability levels in this business have recovered close to 2019 levels. It’s important to highlight the significant shift in revenue mix over the past two years, specifically revenues attributable to our expanding presence in the utility sector and other industrial markets, both in the United States and in the United Kingdom, have grown approximately 60% from the 2019 run rate largely offsetting the revenue decline from our historical upstream oil and gas customers. We are also encouraged by our progress in industrial blending as we build upon our early success in this new market and continue to…

Thanks, Paul and good morning, everyone. I’ll begin by covering the specifics of the segment and consolidated financial results for the quarter before providing an update on our near-term outlook. Total revenues from the Industrial Solutions segment increased 6% sequentially to $53 million in the first quarter, primarily attributable to a 14% improvement from the Site and Access Solutions business, which contributed first quarter revenues of $49 million. The sequential improvement includes a $6 million increase in direct sales activity, as we experienced some level of pent-up customer demand in the utility sector as COVID delayed infrastructure projects moved forward. Rental and service revenues were relatively flat on a sequential basis, coming in at $29 million for the first quarter, with the benefit from the broader recovery in the utility sector and the improving E&P market more than offsetting the elevated activity from Hurricane driven repairs that benefited the previous quarter. The Q1 results reflect the impact of the post-COVID resumption of activity across industries in the U.S. with the utility sector remaining our most significant end-market, contributing roughly half of our total Q1 rental and service revenue. As Paul touched on, our industrial blending revenues pulled back sequentially from the fourth quarter, declining $3 million to $5 million in the first quarter, impacted by a lower demand forecast and product changeovers, for our primary customer. Benefiting from the stronger revenues, the Industrial Solutions segment operating income improved $4 million sequentially to $13 million, contributing $18 million of EBITDA in the first quarter. Comparing to the first quarter of last year, revenues from these Site and Access Solutions business increased $17 million or 54%. This increase is largely driven by a $16 million improvement in direct sales with COVID uncertainty suppressing prior year sale activity, while the pent-up demand provided…

Thanks, Gregg. The first quarter marked another step forward in the execution of our long-term strategy. Most notably, the quarter’s performance further demonstrates the value of our industrial solutions diversification, a strategic effort that has been underway for several years. With improving market awareness of the unique value proposition that we provide within the multi-billion dollar utilities market, 2021 is off to a strong start. Our Industrial Solutions segment contributed 38% of our first quarter revenues and we intend to continue leaning into this market opportunity going forward. We remain committed to expanding our geographical reach and investing necessary capital, to grow this segment of the company. As the energy transition gains momentum, it’s clear that the utility infrastructure across the globe will require significant expansion and upgrade. And we are well positioned to participate in this meaningful growth. In Fluids Systems, we are extremely proud of the progress we’ve made over the past year to reshape the business, reducing our cost structure, harvesting cash in the balance sheet and reducing our net capital employed, while at the same time improving our market position and enhancing customer satisfaction. But despite the accolades, we recognize that we have an obligation to our shareholders to deliver consistent returns on capital and we acknowledge that there is more work to be done on this front. Over the past decade, we’ve made meaningful growth investments in both our infrastructure and capabilities positioning Newpark as a market leader in the fluid space. Yet, we recognize that the market outlook today is dramatically different than it was when these investments were made. As the oil and gas industry normalizes, we will continue to evaluate the performance and outlook of every aspect of our Global Fluids business. We will continue to optimize our working capital investments, rationalize…

Thank you, ladies and gentlemen. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Daniel Burke with Johnson Rice & Company.

Let’s see, I think on the international Fluids side, Paul, I think I heard you referred to the potential to get back to pre-COVID revenue levels by end of year. I wanted to check on that and affirm that meant sort of high ‘40s million run rate or just make sure I understood that trajectory a little better sound of constructive.

Hey, Daniel. This is David Paterson. Yes. International has been subdued the last two quarters, we’re starting to see some real -- I’d say increases in activity across the board. I think the tender pipeline is strong, so it certainly positions us to get back to pre-COVID levels. I would say late Q3, Q4. And as you’ve alluded to that would result in the sort of mid to high 40 ranges as we exit the year.

Yes. I would just add to that. This is Gregg. The one thing that has been -- the difficulties to predict through all of this has been the COVID implications on these markets, so obviously we maintain a very close eye on that.

Yes. Danny to that point, I’d just like to make two of it. We look at the Middle East as an area that we expect a lot of growth as we look at the current administration’s focus on slowing down the drilling activity here in the U.S. and so the win in Bahrain, I think it’s a very strong statement in terms of our capabilities in that part of the world.

Got it, okay. No, that’s a helpful sign post for the model. And then on maybe to pivot then to, I guess the Mats side of the business, again, with all caveats around COVID impacts potentially lingering, nice to hear a guide towards double-digit growth in Q2. Is there anything that would impede the thought that growth could continue at that type of trajectory in the second half of the year?

Yes. I’ll answer that one Daniel, it’s Matthew. Look, I think, based on what we’re seeing right now with closing activity domestically and large infrastructure projects internationally, particularly in the U.K. where there are substantial long-term investments being made by the government that is, there is nothing really on the right now that would suggest that things are going to slow down materially, so we’re quite encouraged.

Okay, got it. And then I guess maybe just to finish up with one, the working capital harvest in Q1 is certainly impressive. Don’t want to get wrong footed here though, I’d imagine maybe there is some room for you guys to give back a little in working capital here in the near term. Any considerations, I’ll keep this question maybe specific to the near quarter here in Q2, that we should think about regarding working cap.

No, you hit it spot on. Yeah, we did have a very strong quarter, really the outliner there is on the DSO side, very, very strong quarter. We expect that to normalize, rough order of magnitude, our receivables came in nearly $10 million below what is kind of a normalized level. So yeah, I would expect to get back there.

Okay. All right, guys. I’ll leave it there.

[Operator Instructions] Our next question comes from the line of Marshall Adkins with Raymond James.

Couple of quick questions. You talked about the supply chain. Could you elaborate on issues that you may be facing there, whether it’s resiner or bariter [ph], LIBOR, which you also mentioned, talk a little bit about that. It seems like everyone in the world is experiencing supply chain issues, I just wanted to get your take on what you guys are seeing.

Yes. Marshall, it’s Matthew, I’ll take it from the I guess the matting side first. Look a little primary thing we’re seeing is resin price inflation. I think in the first quarter, we were up over 40% in that area. The other issue that starting to play out as growth returns is attracting LIBOR back to the market. I think a lot of people are writing out the stimulus checks before they rejoin the workforce. So that would be the other area for us.

And Marshall. Good morning, David Paterson. So from the Fluids perspective with the sudden jump in oil price is definitely driven inflation in our supply chain, ocean freight is a big contributor. Ocean freight rates are up probably 20% to 30%, bigger impact in the international business than the North America business. We’re also seeing cost inflation in raw materials for our products, mainly on the oil derivatives that we are seeing it on our polymers as well. And even in the U.S., we’re starting to see some tracking Inflation in the domestic routes.

Yes. So I think as you stated. Marshall, it’s what we’re seeing is I think pretty consistent with what’s very broadly being seen by everyone in the market.

Right. And this maybe quick follow-up to that, your ability to pass on those prices. I assume again since it’s happened, not just in our industry, but every industry is fairly good to pass on those price increases.

Yeah, so we’re working on right now absolutely.

All right. One last quick one from me. Gulf of Mexico, oils in the mid ‘60s, that’s obviously a big deal, gas looks pretty good. Intuitively that you would think that’s going to lead to pickup in the Gulf, but offsetting that you kind of we have an administration that’s going to anti-oil and gas out there. So give me you all’s outlook for the goals and what you see -- how do you see that evolving giving the forces that are acting upon that market?.

Hey Marshall, this is David again. I think the Gulf is -- Q1 was quite slow, I think that was quite slow across the boards. The rig count is stable. What makes me feel positive with the Gulf of Mexico is the longevity of a lot of the rig contracts. There are some long contracts on the higher end floater work that exists in the Gulf of Mexico. So I think that’s a strong commitment to the Gulf of Mexico, and we’re starting to see some of the independents getting back to activity. How that’s going to shake out for year-on-year type of activity evolution. I think it’s early in the year, Marshall, on how we see that, but I think the Gulf is going to remain steady through 2021 and I know there are some other projects queuing up down the road. So I’m still I’m still quite buoyant on the Gulf of Mexico. But we’re obviously watching the dynamics very closely given some of the federal winds that are blowing.

[Operator Instructions] There are no further questions in the queue, I’d like to hand the call back to management for closing remarks.

All right, well 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. Thank you for your participation, you may disconnect your lines at this time and have a wonderful day.