Welcome to the Oil States International Third Quarter 2014 Earnings Conference Call. My name is Alexandra, 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, Alexandra, and welcome to Oil States' Third Quarter 2014 Earnings Conference Call. Our call today will be led by Cindy Taylor, Oil States' President and Chief Executive Officer; Lloyd Hajdik, Senior Vice President and Chief Financial Officer; and we are also joined by Chris Cragg, Senior Vice President, Operations. 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 filings with the SEC. I will now turn the call over to Cindy.

Thank you, Patricia. Good morning to all of you, and thank you for joining our earnings conference call today. Our consolidated third quarter 2014 results reflected strong operational performance for both our Well Site Services and Offshore Products segment. We reported meaningful sequential improvements and new records in both businesses. In our Well Site Services segment, we reported sequential improvements that included record quarterly revenues and EBITDA. Activity in the U.S. accelerated during the third quarter as new completion services equipment was deployed into the active basins and well completion intensity continued. Our completion services jobs increased 7% quarter-over-quarter, and a favorable service mix afforded us a 4% quarter-over-quarter increase in revenue per ticket. In our Offshore Products segment, we reported record quarterly EBITDA of $61 million and a record EBITDA margin percentage of 24.6%. Order flow was healthy, but our book-to-bill ratio declined to 0.82x in the quarter, bringing the year-to-date ratio to 0.99x. Our backlog totaled $543 million at September 30. The outlook and opportunity set for major production facility and subsea project awards remains positive, and we expect a higher level of bookings in the fourth quarter compared to the order flow book in the current quarter. At this time, Lloyd will take you through more details about our consolidated results and financial position, and then I will provide a detailed discussion of our business segments and give you our thoughts on the current market outlook.

Thanks, Cindy. During the third quarter, we generated revenues of $471 million and reported net income of $58.4 million or $1.07 per diluted share. EBITDA for the third quarter ended September 30, 2014, was $123 million. In regards to our balance sheet and debt capital structure, we had total liquidity of approximately $462 million, comprised of $392 million available under our revolving credit facility after the reduction for standby letters of credit of $36 million plus $70 million of cash on hand. Our gross and net debt levels at September 30, 2014, totaled $179 million and $109 million respectively, representing a net debt-to-book capitalization ratio of approximately 8%. At September 30, our leverage ratio, using adjusted EBITDA, was 0.4x. During the third quarter 2014, we invested $59.3 million in capital expenditures for our continuing operations. Spending primarily related to the addition of incremental completion services equipment, deployed to service the active U.S. shale plays and ongoing facility expansions in the Offshore Products segment. We expect to spend approximately $200 million to $225 million in capital expenditures during the full year of 2014. In the third quarter, we repurchased 308,000 shares of our common stock under our authorized share repurchase program at an average price of $62.10 per share. In October, we repurchased an additional 843,000 shares of our common stock at an average price of $59.28 per share and we have -- we currently have $163 million remaining available under our share repurchase authorization, which is scheduled to expire on September 1, 2015. In terms of our third quarter 2014 consolidated guidance, we expect depreciation and amortization expense to approximate $31.5 million, net interest expense to approximate $1.7 million and corporate cost to approximate $14.5 million. Our 2014 consolidated effective tax rate for continuing operations is expected to average approximately 35% for the full year as a greater proportion of our earnings post spin-off come from our 2 business segments with significant domestic operations. And at this time, I'd like to turn the call back over to Cindy who will take you through the business segments.

Thank you. In our Offshore Products segment, we generated $247 million of revenues during the third quarter of 2014 compare to $251 million in the second quarter of 2014. Third quarter revenue was slightly lower compared to the second quarter due to the timing of customer acceptance of certain product orders. However, EBITDA increased 8% sequentially to total $61 million, and we achieved a record EBITDA margin percentage of 24.6%. The strength in EBITDA was primarily due to strong contributions from production facility, product sales and continued robust demand for services on a global basis, along with margin improvement coming from a favorable product mix, operational efficiencies and strong project execution by our major division. We booked $203 million in new orders during the quarter, resulting in a backlog decline of 9% sequentially. We booked no individual project awards in excess of $15 million during the third quarter of 2014 due to award timing and contract negotiation. Backlog additions in the fourth quarter of 2014 are currently expected to exceed third quarter 2014 bookings, and we continue to believe that the full year book-to-bill ratio for 2014 should approximate 1x. As it relates to our fourth quarter forecast, we believe that revenue in our Offshore Products segment will range between $250 million and $260 million, with EBITDA margins of 20% to 22%. In our Well Site Services segment, our third quarter results benefited from additional completion services equipment deployed to the active shale plays, particularly in the Permian and Eagle Ford basins, both of which had experienced some job delays in the prior quarter. For the third quarter, we reported a 7% sequential increase in revenues, which totaled $224 million. EBITDA increased 15% sequentially and totaled $77 million. These sequential improvements for both revenues and EBITDA were largely attributable to…

[Operator Instructions] And the first question comes from Stephen Gengaro from Sterne Agee. Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division: Two questions. I guess I'd start with -- on the Offshore Products side. Obviously, the margins were exceptional. When you look at the orders in the quarter and your confidence in the order flow for the fourth quarter, how does that mix look? And how do you think the mix looks as you kind of end '14 into '15 based on what you see right now?

Well, we are trying to convey to you that our bidding and quoting activity -- and again, when we talk about contract negotiations, once you get towards the end of the process, you do a lot of work on Ts and Cs, as we call them, terms and conditions. And so we've got pretty good visibility of what we're expecting to book in Q4. And the larger driver for those expected bookings right now really had to do with floating production facility work, both FPSOs, TLPs and subsea-pipeline-related bids, all of which we do perform fairly well on and that is what we consider to be a favorable mix. So again, I would just say more of the same. If you look back over the last several quarters, it's been characterized by a fairly level of strong bookings, increasing growth on the top line, as you know, and a pretty good mix with good throughput through the global footprint that we have. But again, all these things, I would say, are trending consistently. Stephen D. Gengaro - Sterne Agee & Leach Inc., Research Division: And then as we look at your balance sheet, obviously good cash flow, you're buying back stock. How do things look on the acquisition front? I know you're always looking. How does the bid ask look there and how should we think about that as we go into next year?

As you know, we're highly selective. We try not to do it scatter shot and just look at everything that comes in the door. But there are some smaller tuck-in opportunities that we are looking at currently and it all comes down, as you know, whether we get comfortable through the due diligence process and negotiate a price range that looks good. But at this point in time, we do see at least a handful of attractive candidates that we would be interested in evaluating, I'll say, over the course of the next 12 months.

And the next question comes from Kurt Hallead from RBC.

I know the million-dollar question without a million-dollar answer is what's the crystal ball say for 2015 at a $75 or $80 WTI environment. What would be your take on that question?

Well, I'll give you my take. I think, quite frankly, you've got a million analysts in the market that are trying to get their minds around what the answer to that is. But first of all, I'm not going to go to the lower end of your average price range. I think we're going to stay above $80 on an average basis in 2015. That's simply my opinion at this point in time. I tend to look at -- as we have always said, they're different markets, offshore and onshore. The one that's more responsive to short-term moves in crude oil prices is, of course, Well Site Services and more particularly, really, it's even our drilling operations. But we don't see major changes here. Wellington City is not going to get -- the well's not going to get easier to drill. We're going to continue to have strong levels of activity. My caveat there is where I've seen in the past, trend line changes that start, normally start with smaller-based companies, particularly those who are carrying a bit too much leverage. And so we're kind of on watch there, I would say, but these are smaller players that aren't necessarily really driving the totality of the activity at this point in time. But as you know, Kurt, you and I have been doing this a long time. And there will be cycles, and we'll have to be responsive to them. But just for everybody else's benefit on the phone, we think we'll be less impacted in Offshore Products. That's been our history, given that we have a strong backlog position, number one. Number two, we're more global in nature. These projects are of long duration and therefore, they typically do not respond to shorter-terms moves, and the commodity price is really more driven by the longer-term view, i.e. 5-year, 10-year outlook for the commodity. So that kind of rounds out my thinking at this point in time. We'll just watch it like everybody else does as we progress into the budget time frame for our customers.

Yes, and then -- and maybe in terms of utilizing the current environment, when thinking about it from an opportunistic standpoint, how do you think about use of cash? I know you guys have done some very astute acquisitions over time. I believe you have a very disciplined approach to that. And I'm just curious if the recent decline in oil prices have shaken some of the potential sellers and provided some opportunity.

Well, again, go back through the course of time, and I would say in a commoditized business, you can't be afraid of the cycle, you need to embrace the cycle. And typically, this is the time where opportunities are created, whether those are M&A opportunities or share repurchase opportunities. And we really evaluate them somewhat one against the other, depending upon what the market looks like from a valuation standpoint and how we are trading. Because oftentimes, the market will react and sometimes overreact, and it creates some good opportunities for share repurchases. As it relates to M&A, first of all, we just reported absolute records in every business line. We're not unlike many companies, meaning activity is still really strong. M&A perspective and valuation ranges don't change this quick. And so -- and in fact, sometimes I think you see almost share repurchase opportunities ahead of M&A valuation opportunities. But again, I'll just say time will tell, but very much fact-specific, negotiation-specific. But again, you can't have this kind of a stock market correction and not think there are some opportunities developing.

How do you balance those opportunities with the prospect of share repurchase?

Well, a lot of it comes down with how we are trading on a business line basis that I'm [ph] realizing, in my view, Offshore Products commands a significantly higher multiple than Well Site Services. But given that we are very familiar and with how we think those business lines should trade, a lot of times we do weigh one against the other, what's the multiple on paying, what's the quality of the candidate, what's their IP portfolio and how does that compare to Oil States, with one caveat. I like growth. I like top line growth. And share repurchases are not going to afford that. They certainly can be very good in terms of creating residual value to the shareholders that want to stay with us. So if there's not a silver bullet there, it's a lot of times that you have to go with your gut instincts on those decisions.

The next question comes from Jim Wicklund from Crédit Suisse. James Knowlton Wicklund - Crédit Suisse AG, Research Division: If we could talk about the Offshore a little bit more. We've had National Oilwell Varco report, and they're seeing a slowdown in, at least, rig construction. Oceaneering reported and they talked about the much-publicized slowdown expected in spending growth. I was just wondering, have you all started to see any kind of slower-than-expected order intake or request-for-proposal type work in the subsea business before this quarter to [ph] the end of this quarter?

I'm going to say no to that broadly. But I do want to clarify just a little bit more. We are much less exposed to rig construction equipment. And if we look at either backlog or trailing revenue streams for the last 4 quarters, my best estimate of kind of new rig construction content is somewhere in the range of 10% to 15%. So that -- you have to always look at that. The 2 you happened to name have a greater weighting towards the that, i.e. NOV and to a lesser extent, I'd say, Oceaneering, whereas a lot of our emphasis right now are on floating production facilities, subsea pipelines. And we do have what I call in-and-out work, our ballast product line, our large OD conductor casing product line, that are really rig consumables and then some elastomer downhole consumables as well that are more -- you have some backlog, but it's a lot more in-and-out type revenue streams. And so I would have to say, you always have to differentiate a company by its product line to really get your arms around that. But again, I also think this is the area you're less likely to cut, meaning a lot of these fields are fields that were drilled and explored 3, 4, 5 years ago. They need to get this production on. So when we talk about FPSOs, TLPs, subsea pipelines, it's a head scratcher for me to think that this is the area where you're going to have spending reductions. I just don't think it is. Now again for that portion, i.e. the 10% to 15% that would be exposed to drilling rig construction, we do expect a softening there over time, but we think it will be more than offset by production facility increases. And that's kind of been our mantra, and we don't see any biddings, floating activity, order activity that suggests that it's different than that. James Knowlton Wicklund - Crédit Suisse AG, Research Division: Okay. Let me -- one more subsegment, if I could. LNG, we're winding down a lot of the global LNG facilities. Mozambique's getting pushed to the right. Prince -- the Rupert facility in British Columbia is now being paused. And of course, we saw what happened when rig rates got paused. How much exposure do you have to the offshore LNG business?

I was -- my knee jerk is to say none. Now, I will tell you there was last year, a significant bidding opportunity offshore Australia, around 2 to 3 TLPs that were going to support LNG facilities. But that was taken -- that project was canceled and taken out of the view a very long time ago. But honestly, I'm just trying to think of anything that I would say is tied to LNG at this point, and I can't think of anything. James Knowlton Wicklund - Crédit Suisse AG, Research Division: That's a very good thing. Last, if I could. I know none of us know what's going to happen next year to capital budgets. I get that. Do you guys typically, in slower markets, lose market share or expand market share because of the breadth of your services?

Which segment are we talking about, I'm sorry? James Knowlton Wicklund - Crédit Suisse AG, Research Division: Onshore U.S. We don't know what's going to happen next year, but if we slow down and if you assume that oil prices are lower over the next 12 months than the previous 12 months, E&Ps will have less to spend. And I'm just curious to know whether you guys, in slower periods, do better or worse than in improving periods. Is there any difference?

Yes, I'm not going to tell you that we're not impacted because in a declining rig price environment -- or a rig count environment, most people are to some degree. I'll go back to my earlier comment where I expect to see -- if we see, I'm always -- I hate predicting the future when the future is ways off here, but if we see some kind of softening, I think it's going to be the smaller cap companies that have fairly significant leverage. What I don't really think is that a lot of the really high-end, high-quality, high-intensity drilling activity will be the first to make an adjustment. Because again, the type of companies there are a little larger, their capital structures are different. Obviously, the ROIC a bit [ph] on some of these preeminent-type developments are very strong. So I think you're going to see it kind of at the lower end, which again, think about our product offering that is more weighted towards high-intensity, high-demand type activity. I think that holds up better. And so I don't know if I'd say that we're gaining market share or not losing market share. I just think the mix will still continue to be in our favor.

The next question comes from Marshall Adkins from Raymond James. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Cindy, the -- you mentioned on the completion side that a lot of that was being driven by proprietary products. Give us some sense of specifically what you're talking about there.

And again, we've always said that maybe like half of our business line has more proprietary-type backing. But in particular, our wellhead isolation equipment, i.e. the Stinger product line carries IP with it. That's one of the bigger ones we have developed internally and organically, ball drop systems that have some technology, our recent acquisition of Tempress, which is extended-reach technology, has some IP behind it. And those are kind of the primary areas. But even in the ones that are not necessarily IP-backed, we have some of the higher pressure, higher temperature and fairly strong market share at -- particularly in areas like our pressure control equipment around wireline support activities. We're not wireline companies, but we partner very well with the majors who do provide that service. Did that give you some added color? J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Yes, that's helpful. And I know you all have done pretty well on the frac stack business. That seems to be a growing area. Help us with what are margins like in that business? And it seems like you all have pretty big share there as well?

I think we have a pretty good share, but I'll tell you -- I'll never tell you my price or my margin, Marshall, but what we do have -- and I view this as a key alternative, not all of our customers want to use isolation equipment. And so you're going to oftentimes -- they may want an alternative to that one, of which is frac stack equipment. And so we want to be there to support the unique and differing needs of all of our customer base. And so we're active in the field and importantly, we've got over 2,000 people in this division servicing our companies with great expertise in both of these alternative completion equipment options that you have. And so it is a big part of our business, but again, I look at that as driven by customer preference in many cases. J. Marshall Adkins - Raymond James & Associates, Inc., Research Division: Right. Okay. Last one for me. If you're not going to tell me margins, how about pricing on a lot of those products you're talking about? Is that moving up, stagnant or could you set the facts?

I don't like the word "stagnant," but we're not pushing prices in this environment. However, again, as you go up the chain on higher-pressure, higher-temperature equipment, that's really what differentiates the price. And maybe it's -- I try to put it in my notes. We have had a 4% sequential increase, but a lot of that can just be the type of equipment that you're running more so than it is a price book increase.

The next question comes from Jeff Tillery from Tudor, Pickering, Holt. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: For the completion services business, certainly, margins were very strong here in the third quarter. We think about just the current environment we're in, mix normalizes. Is something 34%, 35% sustainable in kind of the current activity environment? Maybe you don't exactly repeat 36% but anything -- any reason why something near what you achieved in the third quarter wouldn't sustain kind of through the course of kind of normal fluctuations and mix?

Well as always, we're trying to guide you through our most visible activity, which is Q4. And the only thing that could surprise us there would be holiday downtime. We don't see it coming, but a lot of times, you get towards the Thanksgiving or Christmas holidays and you can have a change there. But really, I'd say, we're pretty comfortable with the guided range that we gave you. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: And then some of the capital investments you've made in the Offshore Products business this year, as we step through next year, how does that impact results from either kind of an efficiency or margin standpoint? How should we think about that?

Well, particularly the one that is -- the new facility that we plan to bring online in the first quarter of 2015 is our new U.K. facility. And one of the strategic reasons for adding that facility, one of course, is the age of our -- Offshore Products business has been around for 80 years, 80-plus years. And so it's a very dated facility that needed some new capacity and modernization. But more importantly, we do view that the workforce access is going to by greater and at a lower cost. But it's hard to expand your top line if you can't hire people, which, averaging, is a very tight market particularly in the energy services arena. And so I do think, with time, that will be additive to our top line but also to our efficiencies because of a lower-cost workforce. Jeff Tillery - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Great. And then the last question I had, just around the outlook for your drilling fleet. It's not a huge part of the EBITDA, but setting aside potentially downtime around holidays, what is the look and feel for the asset base currently?

Well, if you'll recall, and for everybody else's benefit, our drilling contributions, although you could calculate it, I think is about 10% of our EBITDA. So as you'd pointed out, it is a bit smaller. But we did enjoy about 90% utilization, which modestly surprised us to the upside, because we were beginning to see some permitting gaps that really just closed up and the rigs were very active during the quarter. This is a business that can change very quickly. That's my only answer to that. And honestly, if we were to see holiday downtime, it would be more likely to become visible in the rig fleet because we are so highly efficient that we're drilling rigs -- and drilling wells, excuse me, in 5, 6, 7 days. So just know that, that we have a very high-quality consistent customer base, and we just don't really see anything. But I would focus on this small portion of our business, again, about 10%, and say that's the one that will respond more quickly if we see an activity change.

The next question comes from Jeff Spittel from Clarkson Capital.

Maybe I know we've covered, I think, a lot of this ground, but another way to think about it, maybe, Cindy, if we get into 2015 and maybe the E&Ps are a little bit more judicious about the way they're deploying capital, it sounds like there's no reason to believe that, that would manifest itself in lower-stage intensity or people trying to reduce an AFE in a given well. Maybe they're drilling fewer wells, maybe they aren't putting as many rigs out in the field. But it sounds like that end of the business, where you have the best market share, would still hold up relatively well. Is that a fair assumption?

I think a good way to look at it is the environment that we saw in 20 -- was it 2013? Sometimes I lose track of my time where we had a -- actually had about 130 rig count decline. And our business, I felt like our top line was impaired just modestly. During the net [ph] environment, our margins held up. And I'd say that's kind of my best way to look at being -- and I'm going to still call it the what-if scenario around 2015.

Sure. No, that makes sense. And appreciating that drilling is relatively small in the grand scheme of things, you're knocking out these wells very efficiently. But particularly, I guess, the vertical ones in West Texas, I would imagine the breakeven rates are pretty low. So -- and maybe if we are in a little bit more of a sensitive spending climate, is there any reason to believe that people would be running for the hills from that end of the business when the economic...

I don't think it has to do with well economics, and we are, in my view, one of the lowest-cost providers for the class and type of rigs that we provide. I've done some independent studies. Our utilization, again, for the class and types of rigs we provide is a good bit higher than the average for the industry as a whole. And so it's testament to me that we do, in fact, do a good job on that end of the business, and I think it's going to come back to -- and again, we have some very large independents that use these rigs. Not all of these are the smaller private companies you might assume that they are. But it's going to come down to what's the size of the company, what's the leverage profile and is it in their cash-flow impact. Those will be the ones that are going to start having to make some modifications to their drilling profile. I don't think it has anything to do with well economics.

Our next question comes from Michael LaMotte from Guggenheim.

Cindy, if I could come back to the question of mix within Offshore Products and specifically looking at drilling and production, obviously, I'm curious if there is a big difference in the margin between the drilling-related products and the production-related products and services?

It's a good question, and I'm going to give you the perfect answer which is [indiscernible] and so we have differing things that we put on drilling rigs. Again, just to be clear, it's in the range of 10% to 15% of our content. But one of the products that we have is, of course, our Drilling Riser FlexJoint, which is so highly proprietary that I think it's on every floating drilling rig in the world. And so it enjoys strong margins. There are other products that we had provided in the past and could provide in the future that are more competitively bid and therefore, lower margin. So on balance, if you were to say half was proprietary in my backlog and half was nonproprietary, I'd say the margins are comparable. If we're weighted only towards FlexJoint, those are high-margin pieces of our business.

Okay. Great. That's helpful. And then if I look at -- you mentioned that in terms of the booking visibility on the production side, it's the typical FPSO, TLP, et cetera. I'm curious if there's a big difference in the revenue contribution for, say, smaller satellite type of work versus the big infrastructure greenfield development?

We all participate on both. I would say -- and that's -- it's hard to answer. I mean, I like big TLPs, I like big FPSOs a lot, when you credit miles and miles of export pipelines. That would be great. Certainly, we're going to participate on smaller field satellite developments as well. But the bigger, the better, because it normally...

More lines, the better.

Yes, the more import lines, export lines going into a host facility, I'm really speaking of connections to TLPs and FPSOs. But again, export pipelines are very good as well.

And I know this is a very difficult question to answer, but if we look at 2015 and the visibility that you see for potential bookings on the production side, if we assume that next year's a difficult year on the drilling side, can the production business get you to a book-to-bill of 1x or greater in 2015?

Based on what we think and see in the bidding pipeline, I'm going to generally say yes to that. Again, I fully expect a slowdown in rig newbuilds. I think that's pretty consistent with everybody's thinking. It's not a large piece of our content. It's counterintuitive to me. I think I said it earlier that you're going to cut back production facility or pipeline spending when it's necessary to bring identified reserves online.

[Operator Instructions] The next question comes from Pike Howard from Johnson Rice. Pike Howard - Johnson Rice & Company, L.L.C., Research Division: Actually, all of my questions have been answered.

And we have no further questions at this time.

Okay. Great. Well, I just want to say thanks to all of you for dialing in and joining our call today and spending the time to follow our company. I know it's an incredibly busy week with a lot of companies releasing, and so I appreciate your time and attention and look forward to catching up with all of you as we progress through the fourth quarter. Thank you.

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