Welcome to the Oil States International First Quarter 2012 Earnings Conference Call. My name is John and I will be your operator for today's call. (Operator instructions) Later we will conduct a Question and Answer Session. Please not that this conference is being recorded. I will know turn the call over to Ms. Patricia Gill. Ms. Gill, you may begin.

Thank you, John. Welcome to Oil States' First Quarter 2012 Earnings Conference Call. Our call today will be led by Cindy Taylor, Oil States' President and Chief Executive Officer and Bradley Dodson, Senior Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward-looking statements to the extent the remarks today contain information other than historical information, we are relying on the Safe Harbor Protections afforded by Federal law. Any such remarks should be weighed in the context of the many factors that affect our business including those risks disclosed in our Form 10-K and other SEC filings. I will now turn the call over to Cindy.

Thank you, Patricia and thanks to all of you for joining our call this morning. The first quarter of 2012 was a great quarter for Oil States. We generated record earnings of $2.43 per diluted share on $135 million of net income and $1.1 billion in revenue. First quarter results did include a pre-tax benefit of $17.9 million or $0.23 per diluted share after tax, related to a favorable contract settlement in our U.S. Accommodations business. All of our business segments performed well and strong activity continues. Highlights from our first quarter 2012 included record accommodations revenues and EBITDA due to strong Canadian Mobile Camp results and continued strength in occupancy levels and revenues at our lodges and villages. Our offshore product segment delivered a very good quarter with continued strong financial results, margins and new bookings into backlog. We reported record shipments in our Tubular Services segment with improved pricing and margin and we delivered solid performance in our Well Site Services segment as margins and volumes held up well despite the shifting of U.S. drilling and completion activity between dry gas and oil basins. Our Accommodations business continues to grow providing strong revenue visibility for our company through our long-term accommodations contracts. In our Offshore Products segment, bidding and quoting activity remains robust particularly for our subsea equipment and for proprietary floating production facility content, for delivery and installation into Brazil, West Africa and Southeast Asia. In North America, oil-directed drilling and completion activity continued to strengthen, substantially offsetting the weakness in natural gas drilling. Demand for our rental tools and service personnel was strong, particularly in the Bakken, Eagle Ford and Permian Basin markets. Customer demand for tubulars remains robust due to strong overall U.S. land drilling activity, coupled with increased activity offshore in the Gulf of Mexico both deep-water and on the shale. At this time Bradley will take you through more details of our consolidated results and financial position. And then I will conclude our prepared remarks with a discussion of each of our segments in more detail and will give you our thoughts as to the current market outlook.

Thank you, Cindy. For the first quarter of 2012 we reported operating income of $204 million on revenues $1.1 billion. Our net income for the first quarter of 2012 totaled a $135 million or $2.43 per diluted share. This included a pretax benefit of $17.9 million or $0.23 per diluted share after-tax related to a contract settlement. The comparable first quarter of2011 results were $95 million of operating income on revenues of $760 million. First quarter of 2011 net income totaled $62 million or $1.13 per diluted share. The year-over-year increase in profitability were primarily due to organic growth initiatives, strong occupancy levels in our Accommodation lodges and villages, increased deep-water spending and higher U.S. drilling and completion activity. During the first quarter we reported cash flow from operations of $67 million which was net of $122 million investment in working capital. The first quarter working capital investment was driven by higher activity levels in our Tubular services, our Accommodations and Offshore Product segments generating higher accounts receivable and inventory balances at March 31, 2012. During the quarter we spent a $101 million in capital expenditures. The majority, of which, were spent on the expansion of our accommodation lodges and villages. Our net debt at the end of the first quarter totaled $1.1 billion and our debt-to-Cap ratio was 36%. As of March 31, 2012 the company had a proximately $738 million of combined availability under our credit facilities along with $71 million in cash. In terms of the second quarter 2012 guidance, we expect depreciation and amortization expense to be $53 million and net interest expense to approximate $19 million. Diluted shares are expected to total $55.6 million in the second quarter of 2012 and we currently expect our second quarter 2012 effective tax rate to approximate 28.5%. We continue to expect to spend approximately $600 to $700 million in capital expenditures during the calendar year of 2012. At this time I would like to turn the discussion back over to Cindy who will review the activities in each of our business segments.

Thanks Bradley. I'll lead off with Accommodations since this is our largest segment, contributing 58% of our EBITDA in the quarter. Occupancy levels at our major oil sands lodges in Australian villages were exceptionally strong during the first quarter of 2012 despite some seasonal flooding in Australia. Accommodations revenues increased 53% year-over-year and EBITDA increased 98% year-over-year primarily due to the 36% increase in average available room, along with high occupancy levels. We received the full-quarter benefit of new lodges and villages construction in 2011, mainly Calliope and Narrabri in Australia and our Henday lodge in Canada. On a sequential basis, our Accommodations revenues increased 27% primarily due to strong Canadian Mobile Camp activity, a 3% increase available rooms in our major lodges and villages and a 12% sequential increase in revenue per available room due to seasonally high occupancy levels. In our Offshore Product segment, we generated $186 million in the first quarter continuing the strong performance from fourth quarter of 2011. We reported $36 million of EBITDA in the first quarter of 2012 compared to $38 million of EBITDA in the fourth quarter 2011. This 4% sequential reduction in EBITDA was due to high revenues from our Houston facility in the fourth quarter of 2011. Reported EBITDA margins for the segment remained at historically strong levels of 19.5% reflecting strong industry demand for our proprietary higher margin products and services. We booked approximately $180 million of new orders during the first quarter of 2012 maintaining a near record backlog level of $529 million as of March 31st 2012. Significant backlog additions during the quarter included a major subsea pipeline equipment order in Brazil for our Houston operation. Our Well Site Services segment generated revenues of $183 million and EBITDA of $59 million in the first quarter of 2012…

Thank you, we will now begin the Question and Answer session. (Operator instructions) Standing by for questions. Our first question comes from Jeff Tillery from Tudor, Pickering, Holt. Please go ahead.

Hey, good morning.

Good morning, Jeff

Good morning, Jeff

Hi. Cindy and Bradley, in the Accommodations business, I mean, obviously, the second quarter, you see some seasonal decline in the non-lodge portion of it. The revenue guidance, does that imply that we could see that cut in half sequentially? Is that reasonable? Alternatively, it means some of the RevPAR improvement we saw in the first quarter unwinds in the second quarter.

The answer is both. The guidance implies from first quarter to second quarter a couple things. One, that obviously we don't have the contract settlement repeat. That's not going to happen. The mobile camp business should decline roughly $25 million to $30 million. And then lastly to your point, we do historically show higher RevPARs in the first quarter, as Canada, particularly at the Conklin Lodge, has higher occupancy levels. So it's a combination of all of the above.

And so it seems like in the second quarter you may see a little bit bigger fall off than you saw last year in the RevPAR? I guess perhaps Conklin was busier this year than it was last.

Well, it's not just Conklin. Again we've got a large mobile camp fleet. When you look at the investor presentation we focus on the semi-permanent lodges, but as you know we actively support [SAGD] drilling activities generally with large open camps that are mobile, and then we also support conventional drilling activity, as well. You may see a little more year-over-year decline simply because we did a lot better this first quarter of this year on a relative basis in terms of penetrating the mobile camp market in support of growing SAGD operations and a fairly active conventional drilling market in the first quarter of this year.

That makes sense. CapEx for the year, Bradley, didn't change, what you guys talked about before, only got kind of fraction they were in the first quarter. What big bumps should we expect in the course of the year? Is it going to be second half weighted or in second quarter do you start to catch up with kind of an annual $600 million to $700 million run rate?

We should start to catch up in the second quarter. Obviously, the largest driver of CapEx is the accommodation segment. We've got a handful of expansionary projects that are underway, and that growth has been forecasted to be fairly second half weighted. And as a result, we'll start to see the CapEx pick up in that segment in the second quarter as we start to deploy capital then for the rooms to come online in Q3 and Q4.

And then my last question is just around the Tubular Services business. With inventories building there, what should we interpret that to mean around what you guys can see and feel for rig count over the next three to six months?

Well, we've kept consistent our buying patterns, and when we buy tubular inventories it's normally responsive to customer orders. We have a very high degree or high level of committed inventory i.e., backed by customer orders. So take that as a bullish sign. An increase in inventory just means that our customers are requesting more pipe, so it's a good sign.

Thank you guys, very much.

Thanks, Jeff.

Our next question comes from John Daniels from Simmons & Co. Please go ahead.

Hey, guys, great quarter.

Thanks John.

Just two from me. You have had two really strong quarters now for offshore products and the Q2 guidance is really good. If you look into that crystal ball beyond Q2 given the strong quoting activity, do you see revenue staying at these levels into the second half or growing from here? Just some quick thought.

Well, it's just a very robust, bullish outlook for offshore products generally. And as long as we maintain consistently high backlog levels I think you should infer that our revenues are going to hold up at high levels consistent with Q4 of 2011 and Q1 of 2012. Mixes that we are bidding is very favorable and the mix in backlog remains positive. I have nothing negative to say at all about the business. There is always the risk, of course, that things are lumpier if you will, in the sense that it's an incremental backlog going to hit in Q2 or will it be Q3 or Q4. There is always a little of that but if you just step back and look at the picture which is relevant in this business, it's a very favorable outlook. We are also, obviously, if we continue to see the growth that we are sensing in the marketplace, we will have to continue to address our capacity to handle that as well. Thus far I think we have managed all of those dynamics very effectively.

I was writing feverishly as you were going through your prepared remarks but you said something about the pricing pressures in Well Site Services and can you elaborate on which product lines and where? Is it just the gas, heat markets or is it capacity issues, just any additional color would be helpful.

The additional color I'd offer you as we look at our sequential performance from Q4 to Q1, I thought we did very well in light of a lot of movement between basins. But no surprise that areas like the Barnett and the Haynesville were sequentially down. And when you're doing that, a lot of that capacity is being relocated into basins such as the Eagle Ford and others. We've seen some modest pricing pressure, nothing significant in our wire line support equipment in some of our fluids business, but nothing really material there. If you look at our guidance for Q2, we are expecting and seeing in April, a little more downward pressure in the Marcellus. For us the Marcellus held up pretty well Q4 to Q1 but we are beginning to see some dropoff there. And so, we really haven't taken our revenues, our margin outlook down too much. I think what will contribute to that for Q2 is the Marcellus.

Okay, but drilling's holding up?

Yes.

Drilling's been great, so yes. Right.

Okay. Thanks guys.

Thank you, John.

Our next question comes from Stephen Gengaro from Sterne Agee. Please go ahead.

Thanks. Hi, Cindy and Bradley.

Hi.

Two things from me please. First, Cindy any updates on any of the contracts out there for new accommodations units up in Canada?

What we are seeing right now is just very heavy occupancy levels in all of our major lodges. If you look at, as you know, Henday and Wapasu are contracted long and they've been very full for quite a long time. But even in those we can get some improved levels if our customers are efficient. Meaning, there's headcount in the facilities commiserate with efficient schedule rotation. So you can get a little of upside there. Where we tend to have more variability in our demand is in Beaver River and Athabasca, and they were essentially fully. And we added some capacity in the first quarter to those facilities. I can look at my customer list and I don't always know all the projects that they're working on. Again, it's a varied customer base in that region. My sense is at least a portion of that is associated with some early works on some of the incremental projects that are on the drawing board and other work is just associated with existing projects that are ongoing in the region. Really, again, the notable shot-in-the-arm big projects are in Suncourt's hands. They really not come out with yet, with any definitive timing associated with Fort Hills, Joslyn or Voyageur, if that's the question. I kind of believe that some of our existing facilities may be benefitting from some early planning work associated with those projects already.

Great, that's helpful. Then, as I look at the offshore products business, is the mix in the backlog in some of these big projects, they are obviously supportive of existing margins it sounds like. How would you think about those margins unfolding over the next four to six quarters based on the visibility you have from the backlog?

Our backlog mix continues to be very good. We've said that all along. A lot of the drivers for us in terms of the larger awards are subsea pipeline work particularly export pipelines. And if you'll recall, our Houston operation had a good award in the fourth quarter. That was an 18-inch export pipeline on the Lula field and in the first quarter of this year we got a strong award as well on the subsea pipeline side associated with a 24-inch export line, also in Brazil. Those are good content for us and we have pretty good margins on that type of work always subject to performance but we should do well there. And floating productions facilities, both FPSOs and TLPs are in our backlog currently. Again, a very favorable mix and then, importantly, a lot of the bidding and quoting acitivity is around FPSO work, TLP work and subsea pipeline work. Now, in addition to that, we'll always have somewhat of a recurring service work, repair work, crane manufacturing, and our large OD conductor casing as well. All of those have differing margin mix, so if we have an exceptionally strong revenue generation associated with one or another, those margins can ebb and flow within that guidance range that we gave you, but I think the overall message is, everything looks good.

Great. That's helpful. Thank you.

Our next question comes from Collin Gerry from Raymond James. Please, go ahead.

Hey. Good morning. I'll let go everybody's congratulations on an outstanding quarter really. My first question is regarding the OCTG business. We've seen some capital markets' activities. An MNA and an IPO of similar businesses, and what looked to be pretty good multiples. Does that have any impact on your strategic thinking in terms of the Tubular division and its kind of long-term future within Oil States?

Well, Collin, I'm just kind of smiling because what that tells me is that these people are beginning to appreciate that it's pretty good business. Right? Then, the evaluations are reflecting that. I think for us, the key is, does this somehow help people understand our business, and therefore, value it more appropriately in Oil States’ holdings as it should? So, it's either upside to our stock as it is or clearly if nobody can kind of figure that out, then yes, I mean, we'll also always assess what's right for our shareholders.

Absolutely. I guess, maybe a little bit more specifically, with some of the activity we've seen here recently, does that make the internal conversation or the decision? Has that changed things or just kind of perked your interest at all? Or has it always been the same, you'll continue to monitor what's best for shareholders on a quarterly basis or however it's been, historically?

It's more the same. We're very cognizant of making sure that we're valued appropriately with a long-term view. This is more in our minds, confirmatory of what we thought the value of that business is, and we'll certainly assess whether or not people value that end to us or whether or not we need to assess it further.

All right. Switching gears. Clearly the Accommodations business is doing really well here. You've made some acquisitions in that space. I was wondering if we take a historical look, maybe you could compare to us how tight and how active that market is, maybe to the peaks we saw last cycle in the '07/'08 time frame. Are we back to those levels? Is there more room to grow? Just maybe describe to us in a little more detail the buzz in Canada right now?

Well, I really have to give the team credit up in Canada, and Australia for that matter, but in particular, Canada in the first quarter. There was literally not a room available. We basically had zero vacancy at the major lodges in the first quarter. I thought Australia performed very well. It is the wet season. We had some flooding down there. It didn't have an impact on our operations and that's more a testimony to our team down there, and their efforts. But I would say that kind of tightness is fairly comparable. We used to experience that every first quarter in the '07/'08 time frame. This is back to a time of very strong activity.

That certainly provides a good outlook going forward. I'll wrap up there. Thanks guys.

Thanks Collin.

Thanks Collin.

[Operator Instructions] Standing by for questions. Our next question comes from Anthony Walker from Barclays. Please go ahead.

Good morning. Congrats on the good quarter. Drilling down into the Accommodations business a little more, it sounds like a good percentage of the out performance in Q1 was the mobile fleet in Canada. Can you update us on the outlook for U.S. mobile fleet? Has the permitting environment improved? And how many units do you think you could add for the balance of the year in places like the Bakken, Eagle Ford and Permian, where labor seems to be particularly tight?

We're working very diligently on that. We've had the State of Texas into our manufacturing facilities in Canada as well as Colorado, to advance our ability to get those permits in place. We've kind of shifted our thinking in terms of first rooms, working and available, from Q2 to Q3, in the south Texas market. And we're working diligently with areas in the Bakken, particularly Williston and adjacent areas. Again, I would say that we've made progress. We don't have rooms out and rented yet, but we've made substantial progress. We've opened the manufacturing facility. I was just up there last week. It's a great facility that I think we're going to be very proud of and we'll make a very high quality product. So I'd say we've made a lot of headway, but it's still more like a Q3 type of thing.

Okay. And as a follow-up on Accommodations, any change to your view of visible demand, in terms of how many rooms you could potentially add during 2012?

No. I think that the overall outlook remains very strong. The Australian market is doing very well. I think we'll have opportunities. We've got Krafit [sp] that we're adding rooms really at the end of the 2nd quarter, really getting operational in the third quarter, that's 200 rooms. Our team is in active discussions with customers are at really all of our existing villages to add rooms there, whether it's 100 rooms there or 200 rooms there it's multiple customers. The outlook there remains very good and it's starting to set-up for 2013 to look good. In Canada, I think Cindy covered it pretty well. The activity is very strong. We are starting to early occupancy from some of the next wave of projects but the timing of when their sanctioning and their awards will come is still somewhat in question. Imperial continues to be very active. They are obviously a major customer at our Wapasu Creek lodge. They sanctioned Phase 2 of Kearl which is obviously very encouraging for us. Our current Wapasu contract for Imperial expires at the end of the first quarter of 2013 but we have a great deal of confidence that we will see an extension thee for that lodge. All in all, I think things look very good. And really of the Canadian rooms, we already planned ground field expansions of Henday, Athabasca and Beaver River that account for already 600 rooms for us, so things look pretty good.

Okay, great. And then last one for me, you've talked a lot recently about the visible demand in Australia on the coal and iron ore side of the business. Can you update us on your discussions around potentially adding opportunities for adding deep-water and LNG customers?

Well, as you know, one of the areas that we are focused on is the Northwest Shelf. We are working currently on our Caracas facility which is the lead, if you will, into that market. We have had quite a lot of active and positive discussions with the customers around the broad opportunities in that area that are deep-water but it's also that Pilbara iron ore mining region. There's LNG opportunities along the Shelf. And the Calliope village that we opened up, already is supporting early work around LNG development on Curtis Island. So I would just generally say those are underway and I would be shocked if two years from now those facilities aren't meaningfully larger than their original room count.

Sure. Okay, thanks guys. I'll turn it back.

Thank you.

Our next question comes from Mark Urness with Credit Agricole and Securities. Please go ahead.

Yes, good morning, Cindy and Bradley. Very surprisingly, good quarter, I appreciate that. I just have two questions. I apologize if this one's already been asked I had to jump off the call for a minute. In terms of expanding accommodations outside of Canada and Australia, I know you have a full plate in terms of expansion in those areas. But, are you beginning to investigate sort of a third leg to the stool?

Yes. We are beginning to investigate that. There are some target markets out there we are looking into, most of which I'd say the immediate focus is in South America, generally. But we kind of cautioned everybody. Don't expect a big acquisition like the MAC because we just haven't found that quality of an operation really anywhere else around the globe. So I think what we'll do is either buy a foothold through a manufacturing concern or a service-oriented concern. Then develop and transition into our own develop-own-operate model in those markets. I really don't expect us to do anything until late this year or early next year, would be my read today.

My second question relates to Well Site services and drilling. In general, your North American results were maybe better than most of your peers. I'm wondering how you managed the shift from gas to oil and why you were able to manage through it without much pain when everyone else seems to have experienced a bit of pain.

We go back and we hit on this we think. We have a very broad network of operating locations. We have a group of service personnel that are used to rotating and are fairly flexible about shifting from one basin to the other. We've got very good strong footholds in areas like the Eagle Ford, the Permian, the Bakken which are strong markets. When activity goes down in Shreveport and Tyler and north Louisiana, these people want to work. So they're eager to go take a job down at the Eagle Ford or in the Permian or wherever the work is, even in the Bakken. I think the nature of our equipment makes it a little bit different, possibly. We're not moving enormous frac relief. We're moving more pressure control equipment. We do have issues around DOT, transportation, managing hours. We've brought on some contract personnel to buffer some of the limitations around that. I do give credit to a lot of the team. Chris Craig [SP], in our office leads that operation. He's gone through a reorganization, integration, rebranding. So a lot of people are focused on the business and enthusiastic about delivering high quality services to our customer base. Thus far, we've done pretty well. The other thing I'll tell you is that some of our equipment is backed by proprietary technology, particularly our isolation equipment. You don't see the capacity encroachment that you see in some of the other product lines. Generally, with our high pressure equipment we do fairly well in terms of maintaining pricing. Even during times of shifting. If you're in some 10k type equipment that's a bit more commoditized, some of our wire line equipment. Again, you're seeing a little bit of pricing pressure. But it's kind of a combination of all those things, Mark.

One final question related to OCTG inventories up to a very high level. You indicated that's kind of customer driven but the rig counts flat and that would imply to me that the oil driven plays are more pipe intensive, if you will. Is that correct?

I don't know that's it's necessarily oil. Just the general trend of moving towards extended laterals on the horizontal leg. It requires not only incremental footage but they're also generally, going to thicker walled product because of the intensity of the fracking work and the pressure work that's going on not to mention all the bending and such in terms of setting the casing in those horizontal legs. So I think that's one thing. But notably, we're gone from a dead Gulf of Mexico and granted we're not near to kind of peak activity levels and it's going to be a while to get there, but you're coming off of base of almost nothing and terms of deep-water and shelf demand so that has some impact as well.

Thank you very much.

Thanks Mark.

Our next question comes from Steven Gengar from Sterne Agee. Please go ahead.

Thanks. Just one follow up, I'm sorry if you answered this. Any update or am I still thinking right about about 3,000 room additions between year-end '11 and year-end '12?

That's the goal.

Okay, great. Thanks.

(Operator Instructions)

John it sounds like-, do you have another question?

Oh, no. We have no further questions at this time.

Well, thanks John. We didn't see anybody in the queue on the screen either. It's an incredibly busy week of earnings release. I appreciate all of you that follow our company, are interested in our performance and took the time to call in today and I do think we'll probably see a lot of you at OTC next week. So, look forward to it and appreciate your time.

Thank you ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.