Welcome to the Oil States International Third Quarter 2012 Earnings Conference Call. My name is Anthony and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note that this conference is being recorded. I would now like to turn the call over to Patricia Gil. Ms. Gil, you may begin.

Thank you, Anthony. Welcome to Oil States' third 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 please note that we are relying on the Safe Harbor protection 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 our other SEC filings. I will now turn the call over to Cindy.

Thank you, Patricia. Thanks to all of you for joining our call this morning and to all our friends on the East Coast we wish you the very best as you recover from Hurricane Sandy. To get started, Oil States generated another quarter of year-over-year growth with third quarter earnings totaling $1.87 per diluted share reported on $1.1 billion in revenues and $104 million of net income. These results were net of an unfavorable $7.5 million pretax or $0.10 per diluted share after-tax non-cash accrual adjustments recorded in our tubular services segment. Excluding this non-cash charge, our diluted earnings per share totaled $1.97. The accommodation segment was a notable contributor to our strong year-over-year results. Occupancy at our major oil sands lodges and Australian villages remained at very high levels during the third quarter, boosting RevPAR in this segment. The number of average available rooms grew 615 rooms or 3% sequentially to 18,644 rooms. We continue to make investments and expand our room count in areas where our activities are generally supported by long-term customer contracts. In our offshore product segment, backlogs at another record growing to $597 million at September 30, 2012. Bidding and quoting activity continued at an active pace with particularly strong demand for our subsea pipelines and floating production facility products being bid on a global basis. Over well site services segment performed well during the third quarter and showed improved results on a sequential basis despite reductions in the rig count during the quarter. The number of rental tool tickets issued and revenue per ticket generated increased when compared to the second quarter of 2012. At this time, Bradley will take you through more details of our consolidated results and financial positions and then I will conclude our prepared remarks with a discussion of each of our segment and will give you our thoughts on the current market outlook.

Thank you, Cindy. During the third quarter of 2012, we reported operating income of $154 million on revenues of $1.1 billion. Our net income for the third quarter of 2012 totaled $104 million or $1.87 per diluted share. This included a $7.5 million pretax or $0.10 per diluted share after-tax non-cash accrual adjustments for customer credits and return to inventory caused by ERP system design implementation issues in our tubular services segment. The comparable third quarter 2011 results were $144 million of operating income on revenues of $903 million. The third quarter 2011 net income totaled $92 million or a $1.57 per diluted share. The year-over-year increases and profitability resulted from our organic growth initiatives and our accommodation segment, increased sales of deepwater capital equipment and growth in our well site and tubular services segments despite softening rig counts. During the third quarter of 2012, we reported cash flow from operations of a $195 million which included $28 million of cash flow generated from working capital reductions. During the quarter, we invested a $132 million in capital expenditures primarily related to the ongoing expansion of our accommodations business, the addition of proprietary rental equipment and the acquisition of land in Brazil to expand our offshore products segments. Our net debt at the end of the third quarter totaled $1 billion and our debt cap ratio approximated 33%. As of September 30, 2012, the company had approximately $710 million of combined availability under our credit facilities along with $154 million in cash. On the financing front, our Australian credit facility was increased to $300 million from a $150 million during the quarter to allow for further financing flexibility to take advantage of organic expansion opportunities in the region. In terms of our fourth quarter 2012 guidance, we expect depreciation and amortization expense to total $61 million and our net interest expense to approximate $16 million. Diluted shares are expected to total $55.5 million in fourth quarter 2012 and we currently forecast our fourth quarter 2012 effective tax rate to be 27.8%. Lastly, we currently expect full year 2012 CapEx to range from $500 million to $550 million. This is down from our prior estimate of between $600 million to $700 million as the timing of some of our spending is expected to shift into the first half of 2013. 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.

I will start with accommodations since it’s our largest segment. Occupancy levels at our major oil sands lodges and Australian villages remained strong during the third quarter of 2012. Accommodations revenues increased 20% year-over-year and EBITDA improved 23% year-over-year in this segment primarily due to the 17% increase in average available rooms due to contributions from our new lodge and village investments made in 2011 and year-to-date during 2012. On a sequential basis, our accommodations segment revenues increased 5% primarily due to strong RevPAR which increased to a $126 per day, up from a $123 per day in the second quarter of 2012 and high occupancy levels continued at our major lodges and villages. Results during the third quarter were partially offset by lower activity at our U.S. accommodation site due to declining rig counts primarily in the Bakken region. During the third quarter, we announced the extension of our contract at our Wapasu Creek lodge which will keep this key asset contracted through the third quarter of 2015. Additionally, we were awarded a 10 year contract to accommodate permanent staff personnel who will be working on the Kearl project. In our offshore products segment, we generated a $189 million of revenues and $32 million of EBITDA in the third quarter. Sequentially, EBITDA decreased 23% largely due to a $2.9 million unfavorable margin adjustment on a subsea pipeline project in Brazil which was substantially completed in 2010 and 2011. Excluding this adjustment, EBITDA margins for the third quarter of 2012 would have been 18%. We booked over $220 million in new orders during the third quarter of 2012, representing a book-to-bill ratio of 1.2 times and achieved a new record backlog level of $597 million at September 30, 2012. During the quarter noteworthy backlog additions included subsea pipeline orders in…

(Operator Instructions) Our first question comes from Jeff Tillery of Tudor Pickering & Holt. Jeff Tillery - Tudor Pickering & Holt: For the offshore products business, so revenues in the fourth quarter are up a lot. I mean $250 million quarter how tax would you say that your foot print is, how is that compared versus what you could theoretically do from the capacity standpoint.

Well, we do have pretty good built-in sequential growth coming out of the third quarter. In my comments I mentioned we did have some slippage in a lot of our activity as PLC based our percentage completion day such that that gives you a more steady trend. However a lot of our large OD conductor casing orders are booked as revenue upon shipment, and so really the swing that we are talking about is not so much capacity or throughput driven as it is timing of those shipments which of course is often difficult to predict at quarter end. So that's going to be the major variation kind of between Q3 and Q4. We are ramping in kind of our Houston and Houma operations largely because we've been successful building backlogs built it in areas where we were really had flak in our capacity. Areas like the UK, Singapore, Arlington and others, Brazil are very tight. So it’s kind of hard to measure absolute capacity in this business, but we feel pretty comfortable with our forecast for Q4 again as long as the timing of those shipments works out as we forecast they will. Jeff Tillery - Tudor Pickering & Holt: And then for accommodations there's been kind of lot of handling over Australian CapEx like what's your exposure down that it does. Are there contracts and contract wins that you could point to say even in the last quarter in Australia that have increased your visibility around 2013 and 2014 utilization there?

You know, again if you think back to our earlier comments Jeff entering into the year a lot of our growth in Australia is what we call Brownfield expansion, the expansions of kind of existing facilities, existing customers. So there's not going to be a notable headline. This is a brand new contract. You see that I'm [staying] on that but I will tell you that you know over 50% to maybe two-thirds of our room count expansions in the third quarter were made in Australia and so there's obviously still ongoing growth in the country. We are about to go deeply into our planning phase but I would be remorse if I didn't acknowledge to you and to everybody else on the call that a lot of the met coal price softening, we are still evaluating the impact. We still expect growth but I would say growth at a little bit of a reduced pace and we are just going to have to pull that together in terms of our projected next year’s room count adds as well as the CapEx spend to come with that. But again so far, if I look at it across really all of my major accommodation facilities including those in Australia, we are holding up very well. We think about two facilities in Australia softened just a little bit in terms of overall utilization but again recall these are subject to long-term take or pay type contracts where they are really committed to take the rooms and the variation in the revenue or the top line really comes from actual people that are in the facilities and eating meals on a daily basis. Jeff Tillery - Tudor Pickering & Holt: So kind of the early look at room count is up and in kind of all three as a major regions just not wanted to talk about this point kind of quantifying that is it fair for 2013?

Well, like Cindy said, we will continue to firm up our plans on 2013. There is still an opportunity to add some rooms in Australia. We will have to quantify that as we get through the budgeting process. We will have some room additions in the US as we finish off the expansion, the Three Rivers location we're hopeful that in the near-term we will get the Permian Basin in [Texas] location up and running and we have some preliminary plans on some expansions in the Western Bakken region. So as it relates to Canada, most of the growth as we’ve highlighted previously going forward at least in the near-term is going to be driven. A lot of the growth that we’ve seen out of the mobile camp business year-to-date in 2012 has been utilizing mobile camps to support (inaudible) customers and we hope to see some continued growth in that area. On the mining side, we're very pleased to get the Kearl contract extension as well as the permanent staff residence contract which gives very strong utilization and occupancy to the two largest assets, or two of the largest assets we have up in the mining section of the oil sands region which is Wapasu and Henday. So it’s still a little early for us to really narrow that down as you can imagine. It's a fairly dynamic global economic outlook as well as specific to our region. So we don’t want to misguide people as we start to get further clarity as we work through the budget season. We get a little more clarity on customer spending forecast. We will certainly firm that up in February. Jeff Tillery - Tudor Pickering & Holt: But last question I had just on well side services. The margin declined in the fourth quarter, I would presume it's a little bit more pronounced in the (inaudible) of drilling businesses given the utilization fall off, any color on expectations around pricing and margins for the rental tools business?

You are absolutely right in terms of the sequential decline being more tied to drilling even though drilling is not that terribly significant for us overall. I am kind of reading my book here and it looks like we are not going to be we don’t think we are going to be down too much in terms of the rental tools business.

We think there is some margin decline in rental tools but most of the margin decline in the guidance is related to drilling.

Thank you. Our next question comes from Blake Hutchinson of Howard Weil. Please go ahead.

Just kind of getting into guidance, the guidance for accommodations for 4Q, if we look into kind of build up from base up if we look at the other revenue progression from Q2 to Q3, I am assuming that your thoughts for Q4 as you don’t get much of a seasonal bump from Canada not much change in the US given that Three Rivers is not going to be doing much more in 4Q, so is that a pretty flat assumption for the other revenue line?

That’s right.

And then given the room count and where you have been at RevPAR, it would seem that is the kind of commentary around holiday occupancy kind of more just a follow through of you have been enjoying extended utilization that we shouldn’t necessarily bake in but when does that turn into you kind of calling just a more sustained demand at higher levels here I mean its been several quarters of enjoying the extended occupancy here, or we just seeing room shortages out there in your opinions, discontinues as we look pass the holiday season?

We have enjoyed through the second quarter and third quarter particularly in Canada very strong occupancy levels. I would like to say that they can be sustained but in particularly in a couple of cases with some certain customers they had some of their targets they are trying to reach and as such they are keeping very high occupancy levels in order to achieved their project goals and timing. I don't think that continues into 2013 and so we should see more normalized occupancy levels in Canada. Cindy commented earlier that we are seeing some lower occupancy levels to particularly at a couple of villages in Australia as the met coal prices have impacted overall customer activities particularly late in the third quarter. So I do expect RevPAR to be down in fourth quarter.

And then just thinking about the OCTG business refreshes historically, you’ve talked about the levels of customer commitment, is there any time in which they are required to take the delivery of inventory or timeframe once its in your yard and in your possession?

Yes and no, I mean, on occasion they are programs that demand timeframe for taking that but on balance you got to realized returning inventory kind of 3.5 to 4 times a year, not so much of a significant issue for us in that time.

And I tag onto that one of the reasons that we didn't see as much deepwater pipe go out in the third quarter, it was Hurricane Isaac had delayed some of the drilling and completion plans in deepwater in the Gulf of Mexico and we are starting, we've already started to see some of that deepwater pipe go out here through October. So expect that the deepwater pipeline will start to turn and we will start to see some of that inventory move out of the door.

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

Two questions really, the first, I guess you are going to continue to sort of (inaudible) where you kind of [bust] the trend in the stability of your North American businesses, I mean do, especially on the rental tool side, are you seeing signs that that persist going forward and I understand the land drilling but on the well side, I mean how are you thinking about it over the next couple of quarters?

We are watching it incredibly closely. There is no debate about that and we've always told you guys, we kind of got a mix of proprietary products where we really haven't seen the, not only not seen the capacity encroachment but with the high end type completions that we are doing we've seen increased demand. So that's a very good mix for us in a stable pricing environment. There are other what I would call more commoditized product lines in our suite given that we are so broad around completion and production services that have definitely seen activity declines in price pressure. So we are watching it really, really closely to lay on a basin-by-basin look and we are watching our costs very closely because if you don't stay ahead of that you can have some pretty negative surprises in our guidance embedded and so if you go to the midpoint as we mentioned the topline and EBITDA could be down 5% or so, but I still say that on a relative performance basis that very strong based on everything I am kind of hearing from a lot of the other service companies that are out there. But the wild card as we always go into this fourth quarter is holidays, and its kind of been a question mark now to the lot of the operators who are laying down rigs early because of running out 2012 budget money, but every (inaudible) are willing to rig, but if there are many of these that go down obviously its going to impact the service side as well. So it’s a bit fluid, but overall I think we've performed exceedingly well and we are just managing it really closely.

Thank you. And then as a unrelated follow-up I guess to the extent your accommodation growth is potentially a little delayed than you have, obviously you are in a pretty good liquidity position, would it be something more aggressively, on your share repurchase side or other ways to give cash back to shareholders, does that come up if the delays persist or how we should think about that?

Well, I don't necessarily tie the two together. We like to be very opportunistic with our share repurchases as I'm a big believer in the value of share repurchases and it really does depend upon the organic growth possibilities that we have, the acquisition possibilities that we have. So I just wouldn't link them and say that (inaudible) automatically, completely shift focus to share repurchases. But I think its one alternative and I view it as a very good alternative that we would do, I think even if we have good growth in our accommodations, we got plenty of liquidity to take advantage opportunistically of what we think are good values for buying back our shares.

Thank you. Our next question comes from Marshal Adkins of Raymond James. Please go ahead.

On the offshore side, we’ve had a lot of volatility this quarter and it seems like one of the stuff just got pushed back a little bit and it's going to hit in the fourth quarter. Help me to understand or give some flavor for ‘13, I would suspect that Q4 is going to be abnormally high and we shouldn’t think about that as a run rate going forward, but overall for the year, it should be up nicely, is that a fair statement?

Yeah, I think that’s clearly a fair statement. So when you have a global footprint manufacturing as we do, you can get tied in some areas and have capacity in other areas, but we've been really working this and working the supply chain now for two or three years in anticipation of a lot of the backlog build that we've been getting. There is still a lot of organic initiatives because we're very bullish. I am incredibly bullish on kind of the deepwater production infrastructure side of it. It has got a lot of running room in my view and I don’t necessarily think of this as kind of a cyclical type business because it is complex. These projects are long-term in nature. So a good, steady, growth rate on the topline I think is very reasonable to expect.

Okay, you addressed on the well site, obviously that was a lot stronger than all of and you addressed your rental tools a minute ago, but (inaudible) also a lot better, and these aren’t exactly the highest end rigs, and I think you gave some specifics on you are going to stack some and may be more, but margins have held up, what’s going on there?

Well, we like our rigs and I don’t know you kind of gave them a little bit of ding in your comment, but I will tell you we have got a very new fleet that yes they are vertically drilled generally speaking; we have got a handful three to four that can drill that horizontal stuff, but as you know the majority of work in the Permian is still vertical and we have got a long standing reputation in that market life long before I was ever associated with this company or these assets and we have got legacy of very strong customers a lot of those are very, very large independents that are our customer base. And we do have a smattering I am going to call it of private businesses, private group sets ramp the rigs particularly some of the smaller ones and right now that was the three had gone down at this particular site and it’s kind of odd to call a trend with that. But you are right, we are almost effectively full utilization of all of our rigs both in the Permian and Rocky Mountain region, but it we would be admitting something if we didn’t say that it’s softening as we head into the end of the year.

Right, so it sounds like just you got a very niche opportunity and that’s what’s allowed you to outperform here?

Well, guiding the factors that earlier in the year in a couple occasions we took advantage of working with our customers to upgrade a couple of rigs that not only got those two rigs under contract, but another four with one customer and then got another two or three under the contract with a second customer and so having for our business which as you know has historically been affectively all spot to have some more around a third of our fleet contracted has really helped this year.

Last one from me and you have might addressed this already Bradley and full part of it. But I am just a dumb engineer and when we say non-cash grow for ERP systems on implementation that kind of goes over my head. So you explain that in layman’s term?

Yeah, we implemented a new ERP system in our tubular services segment at the very end of 2011. There was some change management that obviously you need to take place because the things that processes that we used to do under the old system needed to be quite frankly improved and involve to see the new system. And doing so certain of the processes where and part of the implementation was not perfectly executed as a result as we move kind of about 9 to 12 after such we realized that some of the accruals that we are making for customers returns were not appropriate and have to make an adjustments. Customers return pipe all the time whether it’s a dry hole or access pipe or didn't expect out, and as a result we were accept the pipe back immediately but then it takes sometime to determine how much credit the customer should do to give back and we are making accrual every month for that the profits for making that accrual was incorrect and we discovered that at in August and then made the adjustment in September.

And if I can just add on to that, what this was certain accounts and transactions were mapped in to an account that served as a basis for a manual journal entry and that's a truly non-cash meaning this was just a journal entry that had the impact of over siding inventory under siding costs of goods sold. It had nothing to do with routine cash transactions at all. We will correct the math in problem and everything should be fine. I think we detected it fairly soon particularly given the size of the revenue base in this business line. So I'm pretty pleased about that and you shouldn't expect to see this again. I think again just being very clear here though the one impact to focus on is the fact that our nine months gross margins looks more like 5.5% now. That's really what's the most relevant of all of this.

Little more steady state from where it was. And I assume, don't read into this anything associated with customers giving you back more pipe.

Absolutely no.

No. These are routine transactions that Cindy’s point the basis for making the accrual for unprocessed customer returns was incorrect and that caused us to have to make the correction this quarter.

Our next question comes from Daniel Burke of Johnson Rice.

Maybe just a couple of questions around the periphery of accommodations. Bradley any sense for what winter drilling or Canadian winter season occupancy will look like as you step through Q4 into Q1. I know this year you enjoyed a pretty healthy season. Do you have any indications yet.

At this point things look pretty good. So what we will have to see, it’s a little early in the sale cycle, those commitments typically will start to come in this month meaning November as people prepare for the winter drilling season we will have to see then as it always is in Canada, when does winter come, when do things freeze up and when do the assets get deployed which as always a timing issue. So I’ll caveat that, but so far it looks pretty good.

And then another one, was curious in terms of sort of the CapEx shift or spillover into first half of ’13. Anyway to bracket what portion of that is accommodations versus maybe other business lines, just given that you guys don't build accommodations unless you got that customer commitment behind.

I'll kind of talk generally and I'll ask Bradley maybe to talk specifically to your question. But we came in with a very robust budget for CapEx, and you've heard us on the road, everybody knows that we've had some permitting delays and issues here and there in the US and otherwise, and I would also say you know even in rental tools while we had committed really all of our budget we did so at a slower pace making those commitments because we are watching what the US market is doing. We didn't want to go overlap and then have a greater correction than what we thought we were going to have; as it relates to offshore products you know we've got some initiatives underway in Brazil. I would say, those were a little bit delayed too largely in terms of closing on land acquisition and doing all the due diligence and environmental work that we needed to do before we close, but my major message here is, there's really I don't think a negative takeaway. I can't think of a single material project that we had in our thoughts and plans that has been canceled. These are really shifting more from the latter half of this year into the first half of next year that helped and my sense is that it’s a little bit of every segment but I am looking at broadly kind of validate that.

From a dollar perspective, the majority in [slippages] are getting accommodations that you can expect.

Our next question comes from Kurt Hallead of RBC. Please go ahead.

I just wanted to follow on, to make sure I understand, and I am clear on what you are indicating on the accommodations front, specifically as it relates to Canada. So I think, Bradley, you mentioned room utilization will, make sure I understand this correctly. The room utilization, room growth were going to be primarily driven by [Seg D]?

It was room growth.

Room growth? Okay, so I think Suncor was out today. You know, they indicated a couple of projects that they're still going to move forward with and a couple of others they were still evaluating. I am not quite sure if you have an opportunity to take in or absorb what Suncor has indicated yet but can you maybe put in to context what your expectations might be as it relates to some of the oil sands projects and whether or not the Suncor decides to postpone some of these things, what kind of impact that might have?

You know, Suncor/[Total], they are in kind of a joint venture if you will. They got the notable really mining projects out there for (inaudible) and Voyager. We have not had time to digest any information. We typically watch it fairly closely. They have what I would call slow play these projects throughout 2012 with our thinking that they would likely move forward and they said so publicly move forward with these about mid-year 2013. So we will just honestly I will just have to catch up with and see if there is any new news on these projects that we are not aware of yet, but we don’t really see from discussions with our ops people up there we hadn’t seen any change.

So if I understand correctly, what were you guys have indicated is upon your call and pricing in context of discussions that we have had over the past six months or so, is the only real potential change that you are seeing out there to the occupancy rates and or room growth primarily being driven by the met coal situation in Australia and not that there is nothing that’s all that disconcerting about what’s going on in Canada would that be a fair assessment?

It’s a very fair assessment and even in Australia, again, it’s kind of a nominal type utilization decline. Again, we are 93% covered I think on a take or pay basis in the facilities that, there is a couple of facilities that have rooms available. I would say that it is contrast to Canada right now which feels pretty robust. But I think Bradley highlighted right now if you are going to look at major mining initiatives you are going to look to fund foreign hotels, they are kind of a big guy the street but when you talk about this shift towards (inaudible) which we know it’s coming you got a lot more customers out there and so there is going to be some very good opportunities.

Okay, so not all that concerned about Canada?

No.

(Operator Instructions) Our next question comes from Cole Sullivan of the ISI Group. Please go ahead.

Most of my questions have been answered, one of those being the Suncor deal, what was the revenue guidance on well side services again, I think I may have missed it?

It was the $170 million to $175 million.

Okay and then just the real quick just ballpark idea of what the rental tools breakout looks like between the oil and gas segments in the US?

Generally our rental tool business [attract] pretty closely to the overall US rate count. The team has been very adapt and flexible at shifting those equipments as well as personnel between the basins and so given our footprint of over 50 locations that really touched each of the material basins generally that the revenues attract fairly closely with the overall US rate count.

Thank you. (Operator Instructions) Our next question comes from Doug Garber of Dahlman Rose. Please go ahead.

I wanted to ask you about your long-term guidance range for the accommodations margin of 42% to 43%. I guess two parts, one is when do you anticipate kind of get it back into that range and second, what RevPAR does that equate to the 42% to 43%?

As we stated we expect to be in 42% to 43% in the fourth quarter. In terms of RevPAR its generally because we can manage our cost effectively and we have been at lower RevPARs, RevPAR even as low as 110, 115 on a consolidated basis we've been able to produce EBITDA margins in that if you let me widen it 41% to 43% range. So I think that, we can still have RevPAR or specifically occupancy far below we are right now and still maintain what I feel is a fairly attractive margin in the segment.

And also I think you touched on this earlier, the fourth quarter offshore products revenue guidance, you think that's a good sort of run rate into ’13 or do you think it will kind of come back down to a lower level for run rate?

I think that there's no such thing as consistency quarter-to-quarter because we got a portion of revenues base that's tied to shipments. What I have encouraged everybody to do is kind of look a little longer-term than the quarter; look at the year-over-year both on top line growth and in terms of margin expansion. I think you will get a better read of overall activity in the sector but I'm not ready to tell you that every single quarter would be sustained at this higher level, yes. But again, it’s still a very favorable environment, very tied to timing of shipments on some of our products.

Thank you. And at this time, I'm showing no further questions.

Well, great. Thanks to all of you for dialing in. I know this is an incredibly busy day and busy week particularly given all the delays coming on the East Coast and as we said earlier, we are thinking about everybody, all of our friends and hope a speedy recovery from the Hurricane and we will be in touch then. Thank you.

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