Oil States International, Inc. (OIS) Q3 2013 Earnings Report, Transcript and Summary

Welcome to the Oil States International Third Quarter 2013 Earnings Conference Call. My name is Radha, and I will be your operator for today's call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the call over to Patricia Gill. Patricia, you may begin.

Thank you, Radha. Welcome to Oil States' third quarter 2013 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 that our remarks today contain information other than historical information, please note that 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. Good morning, everyone, and thank you for joining our call this morning. Our results for the third quarter of 2013 improved sequentially due to record quarterly results in our Offshore Products and Well Site Services segments. We also realized sequential growth in Accommodations revenue and EBITDA, despite unfavorable movements in Canadian and Australian foreign currency exchange rates. During the third quarter of 2013, we sold our Tubular Services segment for $600 million in cash and used $160 million of the net proceeds to repay amounts outstanding under our U.S. term loan. In connection with this debt extinguishment, we wrote off $3.3 million, or $0.04 per diluted share after-tax, of previously incurred debt issuance cost. The historical results for the Tubular Services segment, as well as the gain realized on the sale of the business, have all been presented as discontinued operations for all periods reported. Our Accommodations segment reported improved results on a sequential basis, primarily due to additional rooms added in Canada and Australia, along with increased Canadian mobile camp activity. The continued weakening of the Canadian and Australian dollars relative to the U.S. dollar, which declined an average of 2% and 8% respectively, negatively impacted the translation of our foreign Accommodations revenues and profits in the third quarter. However, the negative currency impact was partially offset by the opening of our Boggabri Village, located in New South Wales, Australia, which added 436 rooms late in the quarter, but ahead of schedule. We reported record results from our Offshore Products business during the third quarter, and enjoyed strong demand for our proprietary equipment in our Completion Services business. Offshore Products generated record revenues and EBITDA in the third quarter, while maintaining a book-to-bill ratio of greater than 1x. EBITDA margins in the Offshore Products segment for the quarter were also strong at 19%. Backlog totaled $569 million at the end of the quarter. In our Well Site Services segment, revenues and EBITDA were up sequentially 5% and 12%, respectively, largely due to the 9% quarter-over-quarter increase in job tickets and sequentially improved EBITDA margins in the Completion Services business. At this time, Bradley will take you through more details of our consolidated results and financial position. And then I will provide a detailed discussion of our business segments, as well as give you our thoughts on the current market outlook. Lastly, I will conclude our prepared remarks with an update on our proposed spin-off of the Accommodations business.

Thank you, Cindy. During the third quarter of 2013, we reported operating income of $122 million on revenues of $684 million. Our net income from continuing operations for the third quarter of 2013 totaled $77 million or $1.38 per diluted share. This included $0.08 of after-tax expenses related to the proposed spin-off transaction, as well as debt extinguishment costs related to the Sooner divestiture. Excluding these items, the third quarter EBITDA results would have been $198 million and net income from continuing operations would have totaled $81 million dollars or $1.46 per diluted share. The second quarter 2013 results were $111 million of operating income on revenues of $635 million. Net income from continuing operations in the second quarter of 2013 were $67 million or $1.20 per diluted share. The quarter-over-quarter increase in profitability was the result of record revenues and EBITDA from the Completion Services business and the Offshore Products segment, coupled with improved results due to room additions in our Canadian lodges and Australia villages. These sequential improvements were partially offset by the weakening Canadian and Australian currencies, which negatively impacted the translation of foreign Accommodations revenues and profits, coupled with lower occupancy levels in Australia. With the repayment of the U.S. term loan, and the increase in cash in the balance sheet from the sale of the Tubulars business, our net debt at the end of the second quarter declined 75% sequentially to $231 million. Our net debt-to-cap ratio was 8%, and our trailing leverage ratio is 1.3x. As of September 30, 2013, we had liquidity of approximately $997 million available under our credit facilities and $776 million in cash. During the third quarter of 2013, we reported strong cash flow from operations of $137 million, and we invested $115 million in capital expenditures, primarily related to the ongoing expansion of our Accommodations business in Canada, Australia and the U.S., in addition to incremental proprietary completion services equipment deployed to service the active U.S. shale plays. In terms of our fourth quarter 2013 guidance, we expect depreciation and amortization expense to total $72 million, net interest expense to approximate $17 million. We expect our 2013 effective tax rate to average 26.8% in the fourth quarter. The company currently plans to spend $500 million to $550 million in capital expenditures for the full year 2013, which is lower than our prior estimate of $550 million to $600 million, as the timing of several capital projects in the Accommodations and Offshore Products segments have slipped into 2014. At this time, Cindy will begin a discussion of our segments.

Thank you, Bradley. I'll start off with Accommodations. Sequentially, our Accommodations segment revenues increased slightly by 1% to $246 million, and EBITDA increased 6% quarter-over-quarter to $102 million, primarily due to additional lodge rooms added in Canada and village rooms added in Australia, as well as better Canadian mobile camp utilization, as operations recovered from the effects of breakup. Our Lodge and Village revenue was up 1% sequentially, with the opening of Boggabri Village and additional rooms at Anzac and Beaver River, partially offset by continued softness in occupancy at certain Australian villages, along with the weaker Canadian and Australian currencies. On a constant currency basis, Lodge and Village revenues would have increased approximately 4% quarter-over-quarter with RevPAR flat. Segment EBITDA would have increased approximately 7% quarter-over-quarter on this basis. During the third quarter of 2013, our average available rooms totaled 20,788 rooms, a sequential increase of 587 rooms, with a RevPAR of $105, or approximately $108 on a constant currency basis. Accommodations revenues are expected to range between $265 million and $270 million, as a result of better utilization of our Canadian mobile camps, as winter activity begins, along with a full quarter's impact from rooms added in the third quarter. At this point, we are not forecasting any material improvements in our Australian village occupancy levels. As a result, EBITDA margins are expected to continue to range from 40% to 42% during the fourth quarter. In our Offshore Products segment, we generated $242 million of revenue and $46 million of EBITDA during the third quarter. Sequentially, revenues and EBITDA increased 19% and 10% respectively, with EBITDA margins averaging 19%. During the quarter, we reported $14.8 million of passthrough revenues on a large deepwater equipment project, and otherwise enjoyed a revenue mix that favored our subsea equipment and fixed platform products. We realized strong order flow during the quarter and booked over $250 million in new orders. Reported backlog at September 30, 2013, totaled $569 million, with a book-to-bill ratio of over 1x for the quarter and year-to-date periods in 2013. Noteworthy backlog additions in the third quarter included tendon connector products for a TLP, casing connector products destined for areas like Denmark, China and Indonesia, along with deck equipment orders. For the fourth quarter, we anticipate a higher level of specialty and standard casing and connector product sales, along with drilling and fixed platform product sales, such that revenues are projected to range between $230 million and $240 million. EBITDA margins will depend upon our actual revenue mix, project execution and overhead absorption during the quarter, but are forecasted to be in the range of 18% to 19%. Our Well Site Services segment generated revenues and EBITDA of $196 million and $64 million, respectively, in the third quarter of 2013. These results compare to revenues and EBITDA of $186 million and $57 million, respectively, in the second quarter of 2013, which included a charge of $3 million related to an increase in an acquisition-related contingent liability and a $1.6 million out-of-period revenue accrual reversal. Excluding these nonrecurring items from the second quarter, revenue and EBITDA for the third quarter both increased 4% quarter-over-quarter. EBITDA margins for the segment remain strong at 33% and fell within our prior guided range. Despite the essentially flat sequential U.S. rig count, this segment grew revenues and profits, primarily due to greater service intensity in the active shale basins, particularly in the Rockies and Gulf regions, along with improved activity levels in Canada following spring breakup, which was partially offset by lower activity in the Northeast, coupled with weaker drilling services margins. In our Completion Services business, the number of tickets issued during the third quarter increased 9% sequentially, while revenue per ticket decreased 2% when compared with the second quarter of 2013, as a result of equipment and service mix. In our Drilling business, we experienced some downtime between customer contracts early in the fourth quarter due to permitting delays in the Rockies resulting from the government shutdown. As of today, a total of 6 of our drilling rigs remain stacked, primarily in the Permian Basin. We estimate that fourth quarter revenues for our Well Site Services segment will range between $188 million and $197 million, depending upon the extent of holiday downtime, with EBITDA margins of 31% to 33%. Before I conclude our prepared comments, I'd like to provide you an update regarding the planned spin-off of our Accommodations business. We made good progress on the spin-off transaction during the third quarter. In August, we filed a private letter ruling request with the U.S. Internal Revenue Service regarding the planned spin-off of our Accommodations business. This business will initially be spun off as a C-Corp, which offers a faster path to separation, and is expected to be tax-free to our shareholders. We also made substantial progress during the quarter on the initial draft of our Form 10, which we expect to file with the SEC next week. We expect the review process with the SEC to take until March of 2014 to complete, which will include an audit of the standalone 2013 financial statements of the Accommodations business. In addition, we have begun the additional work necessary to refine our analysis of a potential reelection, which is being evaluated for the Accommodations business. We expect this work to be completed in the first quarter of 2014. Our focus over the next few months will be on identifying our management team, directors and separate company financial structures. We are currently recruiting executives in management roles for both Oil States and the Accommodations business, as well as assessing potential candidates for the Accommodations Board of Directors. It will be a busy few months working on the spin transaction, but we continue to believe that the spin-off of Accommodations will enhance shareholder value for our investors. In closing, each of our 3 business segments reported sequential operational improvements during the third quarter. We continue to focus on our business plan this quarter, with solid execution and a continued focus on technology in our high-end product and service lines. With the completion of the sale of our Tubular Services business, we are well-positioned to return capital to shareholders and take additional strategic steps to further enhance shareholder value. That completes our prepared comments. Radha, would you open up the call for questions and answers at this time, please?

[Operator Instructions] And our first question comes from Sean Meakim from Barclays.

I was hoping that with the, some of the other announcements that have come through in the oil sands, we could just touch on kind of the opportunities for some bigger room count additions in 2014 and 2015? So Fort Hills, Shell had an announcement as well this morning, and I just want to see, kind of what your thoughts are there?

Well, kind of coming into the fourth quarter, we're obviously going through our budget preparation and plans at this point in time. And just on a high-level basis, we have expected more of our growth in 2014 to be weighted to Canada, obviously, as opposed to Australia, given what's going on in the market down there. We were obviously very pleased to see the formal announcement from Suncor and Total on the Fort Hills project this morning. I think everybody knows that this is one of the larger growth projects in the region that we felt like would be sanctioned. But of course, it had been delayed for some period of time. So validation of the investment decision was certainly welcome news this morning. Both clients are good customers of ours, and we've been in obvious ongoing discussions with them. We do anticipate and have told you previously that we expect that their overall room count needs will be split between rooms that are provided internally by them, and ones that will be outsourced. And I think we are in a very good position to supply them, not only with existing rooms that we have deployed to accommodate some of their early works needs, which, in all likelihood, will help us solidify our utilization in existing facilities. But also, of course, we are eager to bid on their expanded needs as well. And so, overall, I'd just tell you I think we're in a very strong position with them. But of course, that work is exciting to everyone in the region, and it will be competitively bid. But on balance, that is certainly very good news. And I think you've seen that a lot of the customers in the region are really enjoying success, the production's growing, there's a lot of emphasis around SAGD developments as well that will help us realize good utilization and growth, I think, in our smaller lodge facilities as well. So again, more positive outlook overall for room count growth in Canada, but it does need to be bid, and obviously, we would have to be successful for that. If I look at Australia, I think I'd guided you in my comments earlier that the met coal market is almost somewhat bouncing along the bottom. We haven't seen material price improvements. And it's hard to envision that we're going to have much of that in 2014. So absent getting kind of that full year contribution for the rooms that we are deploying this year, we're just not forecasting a lot of growth in 2014 as it relates to Australia. Again, we took a lot of care to try to get you to focus on the currency movements in the quarter, it did have fairly material impact, particularly with an 8% sequential decline in Australia. If you stand back and look at the Aussie results, they actually performed well on a sequential basis. And of course, realize this is a separate, full Australian dollar operation. We're not moving money out of the country. So other than kind of translation impacts, right now, the currency moves don't have any real permanent or lasting impacts.

No, it's very helpful. Just, I guess, one kind of follow-up to that. In the press release, you talked about the contracts rolling over in Canada to lower pricing, and Australia, kind of falling occupancy. Can you just help us kind of frame a little bit, kind of percentage of contracts rolling over in '14 or kind of what the magnitude is of the pricing rollover on the Australian side? Are we seeing anything in terms of kind of the extent of which we're kind of on minimums or kind of below minimums for occupancy on some of those contracts?

Well, the comment, as it relates to Canada, has already happened. We have contracts in Canada that have been, since the second quarter of this year, so second and third quarter so far, that had pricing step downs, given the volume of work that the client had provided us under our take-or-pay contract. So that's not a contract rollover, that was just the contracted term. We have said that occupancy levels, as Cindy alluded to, remain challenged in Australia. And I think they will continue to be challenging over the next, I'd say, 6 to 9 to 12 months, given where met coal prices are. But as we go closer to the end of the year, we'll be able to give firmer guidance in terms of 2014 outlook.

[Operator Instructions] And we have a question from Jeff Tillery with Tudor, Pickering, Holt. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: The bookings in the Offshore Products business has been, most of the last year, kind of $200 million-ish a quarter. Obviously, this quarter was a step up. And how do you think about -- I mean, quarter-to-quarter, it's going to vary, but do you think we've stepped up to a range where we can think about kind of 220 to 250 is the range going forward?

As you know, Jeff, as I've told you guys before, it really all depends on the size of the project. And I kind of told you, we kind of have, well, it almost feels like somewhat of a recurring base of revenues right now that we've seen in earlier quarters. I did highlight, or attempted to in my comments, that we were aided with some content on a TLP order. Again, I called those, kind of the shots in the arm that can leverage your bookings, and therefore, your backlog up in a given quarter. There are a lot of things in the bidding and quote side, and several of those have been delayed this year. So they're pushing forward into early 2014. So I'd love to tell you that it's sustained at a higher level, but as you know, there's kind of a lot of lumpiness to it, depending upon these large project awards. There's quite a lot, of course, in Brazil. But I think everybody knows that Brazil, a lot of those things have shifted out. They've been fairly public about that. And ongoing orders, in areas like West Africa, Southeast Asia, Gulf of Mexico, I think that kind of what you've seen in the earlier 3 quarters, is feeling at, again, at these industry levels, at more of a baseline, and then the higher bookings come when we get some of these larger project awards. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. So that base level is kind of the -- maybe not quite the full $200 million each of the quarters, but it's somewhere near that? And then anything, kind of a project nature, would be kind of positive lump sum on top of that?

That's essentially what we've experienced, I think, this year, yes. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And the Q4 shipments and that business is certainly, a positive surprise. You think kind of the Q3, Q4 levels are representative of what we're going to see on average for next year?

Yes, I mean, again, it's a lot of mix-dependent things. But I'll kind of refocus you back to the big picture that for these large projects, we do book on a percentage of completion basis. We've done so successfully for many years, and that does have the tendency to have more normal, recurring revenues than someone that books on a lump sum completed contract basis. And so yes, I feel pretty good about that. I did highlight for you on the call, we have planned shipments of some large OD casing and Connector Services business. Those are more ship and build-type deliveries. So as long as those ship, we feel pretty good about the guided range that we gave you. I did intentionally highlight some -- a higher level of passthrough revenues that we had in the third quarter, just so that you could put Q4 in perspective of Q3 without those, that passthrough content. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: The last question I had, in the Completion Services revenue, margins continue to be quite strong. I mean, doesn't seem like there's anything unusual going on there in the quarter? I mean, anything worth calling out that was unusual, that would have caused margin strength, or is this just representative of the market right now?

I do think we're doing a real good job of execution, and I'm going to give Chris Cragg and his team a lot of credit on that. And the other details of my comments, we had volume increases, i.e. tickets, of about 9%, but we actually had about 2% pricing declines. And some of that is pricing declines on our nonproprietary equipment in selected markets, and some of it's mix. When you're as broad-based as we are, it's kind of hard to always pinpoint what is what, right? But just, when you step back, it is basically this quarter, that sequential growth is activity-based, and again, goes along with the theory of what we're -- the multi-pad drilling, the longer laterals, the number of zones completed, as drivers for activity. But again, there's not much in the way of pricing improvements. In fact, a little bit of modest erosion for us in the quarter. But that's the best picture I could give you.

Our next call, or question is from Stephen Gengaro from Sterne Agee. Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division: So, 2 quick questions. First, on the share repurchase side, you obviously announced the repurchase program when you sold the Tubular business. You also have a lot of cash and your cash flow generation looks good. How should we think about the repurchase program going forward? And are there any restrictions around it, as far as the spin is concerned? And the timing?

I'll start that, and I'm going to look to Bradley to kind of expand on my comments to the extent that I miss anything there, and just realize that in the third quarter, we felt like we were somewhat, well, not somewhat, legally, we were blocked from doing much share repurchase activity because of our knowledge of the pending sale of our Tubular Services business, which we did not complete until, I think it was September 6. So that left a fairly narrow window to execute repurchase activity following the closing of that sale of the Sooner business. Then I'll also tell you, just from a historical standpoint, our stock responded positively following the sale. And so that's just kind of a view of the, kind of the feelings that we had here. Clearly, I think you all know, we're focused on generating strong returns on invested capital, a lot of cash on the balance sheet's not helpful to that, and we did have the loss of earnings for Tubulars, that is a lot of the logic for why we stepped up and enhanced that share repurchase program, to have the capacity available. We obviously have been in a quiet period for earnings. So we're, other than any 10b5 activity, we couldn't be buying right now, anyway. But I think the messaging is that, we, yes, we have strong cash flow, our net debt-to-cap's 8%, we've got a lot of cash on the balance sheet, we believe in the value of the company. And so, again, we plan to -- we don't like the mechanically executed repurchase programs, we prefer to use our judgment, decision making, be opportunistic, and we're going to continue to do that. But we obviously ramped up the level of that program for a reason. Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division: Okay, no, that's helpful. And as far as any restrictions regarding the spin and timing?

No, there wouldn't be any restrictions, other than the normal blackout periods related to full year earnings, which would start January 1. But no. And kind of normal, run-of-the-mill volume restrictions. Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division: Okay. And then, on the Accommodations side, Cindy, you've been pretty sticky over the years with the EBITDA margin expectations. Is there anything that changes that, given what you're seeing in Australia near term? Or do you think your contracted status and the growth in -- the potential growth in Australia -- excuse me, in Canada, should keep us in that range?

We'll definitely firm up our guidance on '14 on the next conference call. But I would say, initially, the margin performance in Australia, despite having some occupancy issues in a couple of locations that we've discussed, the margin's actually were quite good. The operating model of our Accommodations business, the daily costs are very variable, and our team does a really good job when we see lower levels of occupancy in a facility, of managing the staff, labor, the labor cost, as well as the food and utility cost. So the margin performance, honestly, losing the high margin performance of Accommodations, to some degree, next year will hurt the overall margins for the segment, but I think right now, the long-term guidance stands.

And our next question comes from Jim Wicklund with Crédit Suisse. James Knowlton Wicklund - Crédit Suisse AG, Research Division: A question, you had mentioned $14.8 million of passthrough items in subsea and Offshore?

Yes. James Knowlton Wicklund - Crédit Suisse AG, Research Division: And is that going to continue? I know you gave guidance on margins for the fourth quarter, so I'm assuming that you will continue to have passthrough items. Is that a project that goes away in '14? I would think that negatively impacted your margins?

Actually, that project has, it's already on the dock to be loaded out for our Gulf of Mexico project. So most of that impact hit Q3. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Okay. I noticed your tax rate in the quarter and for the fourth quarter is lower than it has been in the first of the year. And since you've got Tubulars now below the line, is that geographic mix or is that structure? Is that anything I should pay attention to?

It's absolutely geographic mix, Jim. It won't shock you to know that the U.S. has the highest corporate tax rate in the world, and the Tubular business was all U.S. And so, what that reflects is that you're going back to a greater mix of lower international tax rates. And so as long as the business stays status quo from a mix standpoint, that's the kind of tax rate you're going to envision. I think Bradley gave you his precise guidance in his comments. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Incredibly precise, Bradley.

It's as precise of a tax estimate as we can give. James Knowlton Wicklund - Crédit Suisse AG, Research Division: I was impressed. You invested $150 million in CapEx in continuing operations, expanding Accommodations and U.S. shale equipment. Can you give us a breakdown how much of that was Accommodations and how much of that was everything else?

Yes, just one second.

Bradley's got a -- as you know, that favorite book, that's about an inch thick... James Knowlton Wicklund - Crédit Suisse AG, Research Division: I'll look it up.

I am talking to him as he kind of...

We spent about $74 million in Accommodations in the third quarter, $32 million in Well Site services, which was mostly Completion Services, and then the balance was in Offshore Products. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. Last question, if I could, both FMC and Cameron have talked about how tree orders next year are going to be down. But more so, Cameron talked about how their V&M engineered valve business has seen lower orders. And Jack said that the surge, the 3-year surge in spending for some of this stuff was kind of ebbing. We get the impression that you're going to see a little bit less in the order rates for deepwater subsea equipment in '14? Do you see that? What do you -- I know the orders have been running fairly steady, but through '14, do you expect them to be steady, or will you be impacted by what those guys warned about?

I think everybody knows, and I'll just say it for clarity, for anybody new, we don't supply subsea trees ourselves. But clearly, they are incredibly integral to subsea developments. But also I'll tell you, to some degree, they may lead subsea developments. Meaning, then you've got to have all the interconnects back from the subsea wellhead to the, either shore, in the case of an export line or the FPSO in the case of something that's floating on the water, and most of our content is more around export lines, interconnects to wells coming online, as well as all the flow lines that go up to the host facility. So I'm looking at my bidding and quoting activity, what's outstanding, I don't see a negative trend for the products that we offer and for our bookings in 2014.

And our last question comes from Chuck Minervino with Susquehanna.

A couple of questions. Number one, on the mobile camp business. I guess there is some transitory issues in the quarter in Canada from the wet weather, but also maybe there's some also, some structural, with the competition in that market. I was wondering if you can touch on the mobile camp kind of outlook for 4Q? And then, how you're thinking about that business over the next 12 months?

Well, the mobile camp business in Canada, and I assume the question's just Canada, in the third quarter, the wet weather, and we had a couple of projects because of the wet weather not get started in the timeframe that we were expecting. So we are hoping for a lift in mobile camp business in Canada in the fourth quarter, as you'd expect, but also because some of the projects we were hoping would -- that would get kicked off in Q3, didn't. As it relates to '14, I think we'll punt that until we have a little bit better view on how the winter shapes up, and a little bit better idea. That bidding activity for our mobile camp business is usually in late November, early December depending on how the weather turns out, as to getting a really firm picture on how the Canadian winter drilling season is going to look. So we'll give you an update as soon as we have a little bit better insight. But at this point, it would be too early.

Okay. And then, I guess the second question. I think you mentioned in the earlier remarks that you might be able to pick up some early demand for Fort Hills through maybe some of your existing facilities. And I'm assuming maybe that's like a Beaver River or Athabasca Lodge. I don't know if you're able to do this or not, but can you give us any sort of idea, kind of what kind of capacity you have at those facilities that's currently available? That can be like that market opportunity on your existing side, that you can kind of pick up maybe, I don't know if we're talking in 4Q or if we're talking in '14, but allow us to maybe quantify that a little bit?

We'd rather not. We're not going to -- I don't even have it at the tip of my fingers, occupancy today at those levels. But as you know, that's the -- those are the kinds of facilities that I think really optimize our activity. We built Beaver River and Athabasca, probably back in 2006 timeframe, and we're all the way into 2013. We support a multitude of clients. And it's not as if you have one major contract necessarily rolling off with a single customer. We have many. That's why we like to just give you the summary data of overall committed rooms 2013, 2014, to kind of give you a visibility and a feel for that. But at any one point in time, we may have multiple rooms or contracts rolling over, particularly in those 2 facilities.

Okay. And is the idea there that we -- that early potential Fort Hills development, understanding that this was just announced today, is something that we can maybe see as early as early 2014? Or would it be more of a later 2014 idea?

It -- a lot of it depends on the activity of the customers. But at -- Fort Hills has been on the drawing boards for quite some time. So I feel fairly sure that they will try to move fairly quickly, now that they've gotten the final investment approval to do so. And again, I, just base it on history, there's always a quick need for early works in the area. It would be very atypical for there not to be some level of demand for existing rooms, where there is availability. And that would be likely in the first half of 2014, and then the longer-term incremental growth needs, likely to come after that.

Okay, great, and then just one last one. You typically, in your investor presentations, kind of update us on percent contracted rooms for '14. I don't know if there's any update to that, or anything new that you can give us for that?

There's really not a material update. I can just give you the most recent statistics. Of course, we're moving close to the end of 2013. So that percentage is at -- in the 90% range, and 2014 is right at 70%. And I'd say that's kind of a typical level of percentage at this stage of maturity in the year.

And we do have a few more questions. Our next question comes from Michael LaMotte from Guggenheim.

Cindy, if I can ask a high-level question on Accommodations. We're all trying to figure out what 2014 looks like in Canada and Australia. But if I think about the fact that, that business will be separated next year and then moving towards, hopefully, a first quarter '15 REIT conversion, one of the reasons you've talked about for doing a separation is to give that business the potential opportunity to diversify into other business lines, other industries. And I'm just wondering, as you go through the '14 planning process for CapEx for Accommodations, if it's too early to start thinking about diversification? Or is that something that we could actually see as a source of incremental room growth next year?

It's too early for me to comment on this call. In fact, we're having an offsite strategy meeting starting on Monday to discuss things like that, in addition to our outlook, our budget planning. So we've got a lot that we're doing. We've got a great business with a strong installed base. We're focused on execution and profitability and what we've got. We will deploy growth capital where it makes sense to do so. We're not going to go crazy in new markets and change the profile of our company. But we do think there's potentially some attractive opportunities. We are in the assessment stage, kind of the evaluation stage and the prioritization of what markets we want to take our people's time to focus on, quite frankly. So I think it's a bit premature for us to give you any commentary on that. And think that to focus on our core competency, enhance our utilization, sustain our rates and our margins and execute on the spin. That is our focus right now through the second quarter of next year. But you can never stop your strategic planning, and we will not do so.

Okay. Well, that's great color on the prioritization. And if I could ask you to just expand upon what's happening in the Permian? There's just been a lot of chatter amongst the E&P companies, an opportunity there. And I know you're building out there, and obviously, the rigs and Well Site Services in particular is strong in that market. Any thoughts on what types of growth we could see, and where it's likely to be focused next year?

I'm going to say, as it relates to the Permian, I'd rather you get that from our customers. There's a broad range, as you know, of projections in the Permian, from ultimate recovery to production capabilities and capacities and the extent of activity. And I don't think I'm in the best position, I think our customers are in a much better position to help you there. But there's a -- what I have seen, from talking to the range of customers I have, there's just a pretty broad runway in terms of upside and downside on that market. But nonetheless, it is obviously an exciting market, a growing market. I was just at a meeting yesterday, and somebody projected, I will call insane rig count growth in that market. Hope it happens, but it didn't come from my mouth.

Okay. And Bradley, just a couple of quick cleanups for you. Depreciation expense, we went up here in the third quarter, we're going down again in the fourth. Any particular reason there?

We went down in the third quarter, and that was exchange rate. Because that obviously changes that, primarily, obviously, in Accommodations. And then in the fourth quarter, we are adding some equipment. We'll start to have the full depreciation of things like Boggabri, and some of the additions we did at Anzac and at Beaver River during the third quarter. So nothing material in terms of odd things happening in depreciation, by any means.

Okay. And then, lastly, on exit rate for the room counts in Canada and Australia?

We're projecting to add -- get up to about 21,000 rooms for the quarter. Maybe we might do a little bit better for the fourth quarter. And will also be, which will imply a lower RevPAR for the fourth quarter. Again, we'll have the full quarter impact of primarily the lower Australian exchange rates. Now if we get an uptick and rates recover, we'll benefit from that. But right now, we're looking for a little bit over 21,000 rooms and a RevPAR that would be lower sequentially third quarter to fourth quarter.

And your next question comes from John Daniel with Simmons & Company. John M. Daniel - Simmons & Company International, Research Division: Bradley, I don't know if you guys covered this or not, I apologize, but in terms of just room count growth for next year, are there, and specifically, are there enough projects on the board today where you could see similar room count growth in '14 as '13?

Yes, year end to year end, yes. As was kind of alluded to earlier in response to a question, if we're fortunate enough to get, and that largely will be dependent on winning some work on Fort Hills. We'll have some singles and doubles, if you will, in terms of opportunities and adding to existing locations. And again, it's mostly going to be Canada. We don't see a lot of growth opportunities in Australia right now, absent being able to execute on our longer-term goal of getting some iron ore exposure in WA. So net-net, I think year end to year end, that's certainly possible. I don't see a lot more than that, though, at this point. John M. Daniel - Simmons & Company International, Research Division: Okay. And then, just a follow-up to Stephen's question on the buyback. I understand limitations and all that, but can you say if you've been able to buy any shares in October?

As you know, we don't buy during quiet period, when we're making that decision ourselves. And only way we could do that is to have entered into a 10b5 program, as a company. John M. Daniel - Simmons & Company International, Research Division: Okay. But you guys don't have a 10b5 in place, just, do you?

We've not executed under one, no.

And your next question comes from Kurt Hallead with RBC Capital Markets.

So I guess I'll start off as well, just to stay on the general theme about room count growth dynamics. Assume, wondering if you can give us an update on your -- if there's been any changes to what you could, would consider it long-term growth opportunities for room count? I think you guys have outlined, I think something along the lines of a couple of thousand rooms per year on average over 3, 4, 5-year period or whatever it might have been. Just looking for an update on your perspective there?

Well, I -- this morning feels better than it has maybe 3 -- a quarter ago, just because Fort Hills has been announced, and we've been waiting on that announcement for quite some time. And, but it comes through -- there's just so many different factors that influence my thinking there. I'm still fairly bullish on Canada, the Canadian oil sands. We saw a nice movement on the WCS to WTI Brent differentials early in the year. They've widened again, partially because our customers are successful, and they're getting their production up. There's a lot of refinery maintenance going on. I think that has an impact. I always think that we'll deal with the transportation logistics around the Canadian oil sands. But certainly, our government's not helping that with the Keystone XL pipeline, but there are other avenues that are being addressed there. But I think there's still always a little overhang. But again, I can't say that I'm a raging bull on the Canadian oil sands, but I have a positive outlook. Australia has been tempered for us, just because of the met coal -- well, large commodity price pressure, but particularly met coal price pressures this year. Still bullish on it. But there is a macro out there that has impact on our customers' activity levels. And that's the best answer I can give you. We are in a great position with the assets deployed. I think the quality of service, our capital structure around the Accommodations business, our fully integrated approach, to react positively when the market does come. But with the macro overhang that we see right now, we've got to adjust to that. And I do still feel good about the long term. But 2013 has tempered our expectations just a bit for the near term.

And then, in terms of the completion combination here, you talk about greater service intensity, particularly, especially in the Rockies and Gulf Coast. And with completion tickets up 9% sequentially, can you just give us a little bit of a feel or color around what degree, where are we in terms of the increased service intensity as it relates to your businesses, and where do you think we can -- when you think about completion dynamics on a year-on-year basis, what kind of growth in completion tickets do you think we might be able to look for in 2014?

A lot of this has to do with the geology and the way the plays develop, one of those initial, early, very positive impacts for us were the extent of the laterals and the number of stages completed in the Bakken region. We've seen expansion in the Eagle Ford as an example, but not to the degree of what we previously or, and currently witness in the Bakken, and I think the Permian is still at early stages around that. But I always think of the best way I can think of it is wells completed, extent of the horizontal footage and number of zones. And that's going to be the driver of the activity. There's some new shale plays developing, which are positive. But I have always, I mean, if you look, we've got a chart. We quantified well intensity as best we can measure it, in our investor presentation. It's been growing at a rapid rate. I think it, we're going to continue to see growth, but at a lower overall rate of growth. Still growth, but a lower overall. Because I just don't know that we can do too much more with the current technology, in terms of the extent of the laterals and the number of stages. And I'd be, I'm just chiming in with everybody else, what our customers are looking for is reservoir optimization. And so a lot of what they're doing is not necessarily extending the number, the footage drilled, or the number of zones, they're looking at placement targeting and optimization -- recovery optimization. And so obviously, for us to be competitive, our technology has to keep up with those trends.

And the last question comes from Jim Wicklund, Crédit Suisse.

It's actually Jonathan. Just quickly, nitty-gritty. RevPAR in '14, Bradley, historically, I think you guys may have commented kind of a 108 is a good, warm area to be. Given where we are now in '13, is that still kind of a good guide post?

Well, I think we'll have to -- I'll -- we'll have to firm that up as we get closer to year end. So, but I think that what's happened since we gave that guidance is, the currencies generally, and specifically, Australia have weakened. And so, I'm reticent to affirm that, until we get a little better insight and get a little closer to year end, and see where the currencies are and what we think we can do operationally in both places, so...

And we have no further questions at this time.

Thank you so much. Thanks, everybody, who tuned in to the call. I know it's a very busy earnings day today. We appreciate your support and your following of the company, and look forward to talking to each of you over the next quarter. Have a good remainder of the week.

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