Good day ladies and gentlemen, and welcome to the Weatherford Second Quarter 2007 Earnings Conference Call. My name is Lauren and I will be your coordinator for today. At this time all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of this conference. [Operator Instructions]. As a reminder this call is being recorded for reply purposes. I'd like now to turn the presentation over to your host for today's call, Mr. Bernard Duroc Danner, Chairman and CEO.

Thank you. Good morning. As usual Andy will lead his prepared comments and I will do the same, we will go to Q&A. Andy?

Thank you. Good morning. For our second quarter of 2007 we report fully diluted earnings of $0.68 per share before non-recurring items. Our Eastern Hemisphere business continued on its steep growth trajectory well on our way to meeting our 40% year-on-year revenue growth expectations. North America, on other hand, pulled back hard due to decreased activity in Canada. But more moving on to detailed commentary, we should take note of three items. One, our $0.68 excludes an after-tax charge of $9 million related principally to severance charges; two, our reported number excludes an after-tax loss of $11 million related to the discontinuance of E&P operations; and three, we incurred a one-time withholding tax of $50 million on intercompany capital movements and at lowering our after-tax cost of capital. We will achieve an 18 months payback on this plan. EPS Comparison. At $0.68, earnings per share are down 18% sequentially from $0.83 and stand 28% above Q2 of 2006. The sequential drop of $0.15 was comprised of the following: $0.18 of sequential decline from the fields and $0.03 of improvement due to a lower tax rate. The effective rate for the quarter was 20% or 400 basis points below prior guidance due to geographic mix and more effective tax planning. You should expect our rate for the remainder of 2007 and 2008 to stay between 20% and 21%. Finally, non-operational items other than taxes were flat with the prior quarter with increases in interest expense and other expense offset by lower corporate expense. Operating performance consolidated overview. On a consolidated basis, revenue declined $36 million sequentially or 2%. North America, which accounted for 49% of total revenue, was down $123 million. While the average U.S rig count grew 1%, Canadian rig activity fell 72% from Q1 levels. At an average of…

Thank you, Andy. Q2 is as we expected, a tale of two hemispheres. The Western Hemisphere revenues declined a $123 million, driven by Canada's extraordinarily low level of activity. The operating income detrimental is associated with the abrupt decline with a very high 87%. In sharp contrast, the Eastern Hemisphere added $86 million of revenues in the quarter, growing sequentially by 13.5% and year-on-year by 40% EBIT which I suspect will be the industry's highest performance amongst our peers. The growth was broad based across all product lines and EBIT incrementals were strong 32%. Still the Eastern Hemisphere could not overcome in Q2 the one-time abrupt decline in Canadian market, not with the high exposure Weatherford has. The Canadian market was affected by an almost perfect storm combination of seasonal downturn, unforgiving weather, rain, client tactics and the recent change in tax laws. Rig count was down 72% sequentially and 51% year-on-year. The level of activity was identical to Q2 2002 and only about 43 rigs above 1999 levels which defies the imagination. Weatherford has the higher Canadian exposure than any of its peers on and around heavy oil. This is a historic fact and in the aftermarket of Precision acquisition. It's fair to expect, we would be the most affected amongst our peers by end market contraction, and we were very effective. To give you a perspective, let me remind you of some historical data. In Q1 of 2006, this is only 15 months ago, Canada represented about 25% of Weatherford's total business. By Q1 of '07, the number dropped to high teens. In this quarter, the Canadian exposure was pushed down into single digits, combination of Canadian market declines and Eastern Hemisphere growth. Associated detrimentals were predictably very high, which is traditionally the case by a combination of…

[Operator Instructions]. Your first question comes from the line of Bill Herbert with Simmons & Company. William Herbert - Simmons & Company: Thanks, good morning,

Good morning, Bill. William Herbert - Simmons & Company: Hey, a quick question on Borets, largest ESP player in Russia, what kind of exporting capability if you will do you plan for Borets vis-à-vis your ESP endeavors outside of Russia?

One of the strengths of Borets is its engineering and manufacturing. William Herbert - Simmons & Company: Right.

They have a very large scale. In fact, one of the surprising facts is that from a volume standpoint, the best of our assessments are Borets manufactures a bit more than twice the level of its largest Western competitors. So they have very, very large manufacturing infrastructure, and it is not unreasonable to expect us to work with them in order to accelerate facilitate the manufacturing of the ESPs for the international market whether their design or our design. William Herbert - Simmons & Company: Okay. Secondly with respect to Latin America, you prophesied or a relatively vigorous second half of the year yet Orinoco was one of the main reasons why the sequential performance was subdued. Give us some color with regard to the second half of the year in Latin America, does Orinoco come back from your standpoint or is that growth attained notwithstanding a continued sluggish Orinoco?

My comments are ex-Venezuela. William Herbert - Simmons & Company: Okay.

So, the growth will come from Mexico, Brazil, Argentina, Colombia and Equator. It's very, very wide spread, cannot say anything reliable on Venezuela. William Herbert - Simmons & Company: Okay. And then thirdly, I thought one of the singular revelations if you will from last quarter was the degree of success that you are having with respect to the project management business. And I think last quarter we talked about something along the lines of $500 million with the contracts to be realized over two years. Any incremental contract wins on that front if you will?

There are two more contracts that have been essentially completed making it to... making it four. There's another two which are pending whose timing I... is hard to... hard to pin point exactly. I know the math suggests that six, so we expect perhaps in the year that one will drop off. William Herbert - Simmons & Company: Okay.

Butperhaps the number five that we gave is a, just little bit cautious. William Herbert - Simmons & Company: Okay. And can you give us any sense with respect to dollar magnitude from an incremental standpoint, and where these projects might be located?

Projects located all together... North Africa and Asia still remains the focal area. The dollar amount will be closer to $750 million than what we said previously. William Herbert - Simmons & Company: Okay so it's 500... so it's $750 million in total including the last two that you talked about last quarter?

Close enough. William Herbert - Simmons & Company: Okay. Thanks very much.

Thanks.

Your next question comes from the line of Kurt Hallead with RBC Capital Markets.

Hello.

Kurt yes, yes you are on.

Sorry about that. Yes Bernard, it just sounds like your international expectations are pretty consistent with what you've been talking about middle of last year. So I guess that is especially good thing, nothing's really slowed down there. Can you give us some additional color on what you think the differential growth region may be for example like in your Middle East or North Africa region, I think there has been some talk about ability to maybe triple that business in the next couple of years. Can you give us some color around that?

In general, what drives the growth not only North Africa, Middle East but also in the... on the European and the former Soviet Union and sub-Sahara African side is the same thing. It's a combination of infrastructure which pre-existed and what we acquired from Precision and the introduction of a directional wireline, pushing of underbalanced and then all other young technologies at Weatherford. So we did not have the seeding from a product line standpoint two years ago that we are trying to get right now. So you're getting good traction and you will for a couple of more years, probably, disproportionately so, until that's going on. The execution has to be good. And yes, you are right. The expectations that we set up more than a year ago have been fulfilled and the expectations we lay out for the next 18 months are the same. And so, I think you should expect us to be also consistent in our performance. But it's nothing more than execution. It's nothing new as to what is the engine of the growth.

Yes and then... I am sorry Bernard. But some of the questions that I have had that may be related to that the prospects of growing the business in that region to that extent, with Parce or Fab [ph] all the other bigger players that could be within that region. And so I was just wondering if there was some additional color you may be able to provide as to how you can... you provided some of it. Now, the other element is, is it all existing relationship? Is it new relationship, or is it just a function of the relationships plus the expansion of the investment programs in these countries?

I think it's all of that. I think you start first of all from the lower base of our business and lower base of market share in a number of service lines, that's number one. Number two, you do have existing relationships in some of the legacy service and product lines of Weatherford that has been doing very well in those countries for a long time. So it's a combination of both. And I don't think it goes on forever. Differential in growth rates between Weatherford and its larger competitors will not go on forever, we can't. But I do think you've got a period of time during which this... if we have good execution and I insist this is the key risk factor. It's not the marketplace; it's execution. If you have a good execution you should be able to grow in those markets at a higher rate than your larger competitors. I mean it's full load [ph], that's the reason. And then beyond that you should probably look somewhere more comparable.

Right. Now one other thing, probably it doesn't impact you but I want to check anyway is some discussion on the Schlumberger call last week about some pricing issues in Western Siberia and pressure pumping as a lot of North America companies try to move some assets. Is there any effect on your business in some of your product lines in the international markets that are going to impact your incremental margins or pricing ability?

No, Actually it's quite... I mean I can't comment on the stimulation and pressure pumping in Western Siberia because it's not in our business.

Yes, probably that's right.

What I will say is that I think that we are more constructive on the outlook for Russia than we have ever been. We've always been cautious about that market, and we remain cautious. We are more constructive about it than we have ever been, that's one. And I am taking pricing into consideration. Two, pricing in general in Eastern Hemisphere is strong. This is a view which is across all service lines, obviously there are differences by country, by market, by service line but it's strong Kurt, it's not... it is not decelerating. In other words, the rate of increase is very encouraging, and not the case in North America, obviously but clearly the case in Eastern Hemisphere and you should expect this. Forget the next two three years. For no other reason that when a market grows it needs to attract suppliers and the suppliers need to broaden their infrastructure, add people, train people, bring equipment etcetera, it's not easy. This is not a context in which pricing ought to weaken, it's not natural.

Great. Thanks, Bernard.

Thanks.

Your next question comes from the line of Jim Crandall with Lehman Brothers.

Good morning.

Jim,Good morning.

Bernard, what are the core competencies, you think the most critical core competencies that you would have that a) are allowing you to win this integrated management contract internationally? And secondly, what are the core competencies that you would bring to the table to have a customer choose you instead of perhaps the competitor?

Well I'll try to answer on the latter. On the former, I think in general, it's a combination of directional and not to deliver the point on infrastructure but adding the fact that you have larger bases that can either be easily expanded incrementally or just don't need to be expanded because they are larger enough and they are close to the field. All those... all of these are the ingredients that makes a successful project management. With respect to, why does a client choose us as opposed to our peers? I think there's a lot of interests on and around the market of for NOC clients in particular, in different degrees of project management. It's not all the same. There's enough interest in it and I think there is a room for everyone to do well. So I am not sure that we are crowding anyone out. I think that we are just doing what the clients are asking us to do. Don't get a sense that it is a terribly competitive process, meaning there's enough work for everyone.

Okay. Second question I had Bernard is what would you consider to be the most significant technology developments for Weatherford in 2007?

Solidexpandables.

Okay.Can you summarize, what's going on now in that market in which...

Sorry I can't tell you that too much except to say that we are... we've been doing some live applications for solid expandables in a long time Jim. So it's not like we haven't worked on it diligently, but in a long time. But the... we're doing field, live well installations in solid expandables in a number of places around the world and they are very successful. And so, I think in terms of where it opens up, market wise in 2008, and so far it's very encouraging, that would be the single most important, there are others of course.

Okay. And the last question is in operational one, what gives you... you seem to be extraordinarily confident that Canada will be above last year's level if not by Q1 '08 in Q4 '07. What is that specifically that gives you the confidence in that outlook?

I think the... actually the oil and the heavy oil segments where our sense is that activity will be disproportionately strong. The gas is... you are absolutely right, is that was implicit in your question, the gas is more uncertain as it depends really on the gas market in North America, in general. However, the reservoirs whether the deep gas or the shallow gas, the reservoirs that are unattended show... will show a decline in productivity and in production rates. It's not obtainable. We don't have a long-term viable solution without working the gas side. So, I think the worst we could be is maybe off by a quarter or so, maybe two quarters. That's the worst we can could be and I don't think that's going to happen, I really don't.

Okay. And I guess one more quick question is that your U.S revenues seem to be quite good despite with some heavy rains in the Texas, Oklahoma area in June. Any sense as to how much that impacted your business and comments on the U.S business in general being, pretty good relative to the activity that's going on out there?

You're absolutely right. The June for the U.S is no good in simple terms. It probably, not sure how much top line it cost us, it's hard to tell you. But I would say probably in the range of $20 million to $30 million in top line, I don't know that, that's just a guess. But otherwise if you look at just April and May it was remarkable to see the Canadian numbers come in unpredictably being as a challenging as they were. It is remarkable to see just south of the border how well the United States is doing. So U.S is doing well in a sort of a gradual incremental, building up on some few service lines type of business, with decent incrementals and so very predictable. And that's very encouraging notwithstanding the weather.

Okay. Thank you.

Your next question comes from of Robin Shoemaker with Bear Stearns.

Yes Bernard, just... actually following up one of Jim's questions was about young, or new early staged technologies. And you mentioned solid expandables. I wonder if you could say where on your kind of emphasis list you have got drilling with casing.

Just right behind it.

Okay.

Right behind it.

Yes.

In a sense, drilling with casing underbalanced, solid expandables, they are all tied either for drilling house in mitigation which is a one field of application meaning drilling wells with less problems and wasn't drilling today are more prone to problems, drilling problems or putting all these technologies together for the purpose of handling the issue of reservoir productivity at the sand phase. They are all tied from an application standpoint. So, yes DWC, drilling with casing is right behind solid expandables and stop to much a sort of a ranking with an allocation of capital, it's just a where we see the breakthroughs that are taking place or maybe in a couple of quarters if I am asked the same question I will mention DWC as being the number one.

Okay. And so that the... that's still a principally two competitors, yourself and another competitor in that arena, and is the market share roughly have...

It's meaningless, as it is still young, of course, we don't look at... we don't view the other company as the competitor. We view them at a sense as a colleague in the development of something that could be terribly important for the industry. Actually at this stage you have to be... I mean we hope that we continue to dedicate R&D efforts and support in developing their version of the technology. We really do. We try to do it by ourselves, and so they are most welcome. I mean in five years of if DWC becomes something great industry importance there will be time to talk about competitors and market shares, not today. Today we're really... in our mind maybe they view differently, we are colleagues.

Okay. Just one final question on Canada, was... what you were implying is that, that probably the winter season coming up is the first sign of a rebound or will you say possibly sooner?

I think you can just observe the numbers. I think Q3 in Canada appears to be descent. I do not know if Q4 will be up year-on-year, it might as the spiking changed [ph], really depends on the gas side. The oil and heavy oil will be very robust I can tell you that. And if Q4 is not up year-on-year, I am sort of getting reasonably sure that Q1 will be up year-on-year, but we shouldn't be obsessive about the up year-on-year, it's just a marker. The truth is that the prognosis to Canada is a constructive one. It's a that, that market will do well. A lot of the factors that were hitting the Canadian markets are behind us. And so I think what you have is degrees of recovery. That's sort of the choices, the choices that you have is either recovery which is healthy or recovery which is very strong, and sort of the deltas you have and so either one are fine.

Okay. All right. Thank you.

Your next question comes from the line of Geoff Kieburtz with Citigroup.

Thanks. Good morning.

Good morning.

Couple of follow-up questions. We will stick with Canada for a moment. In... with the reduction in revenue and to single digit is a total part, how much is heavy oil and oil related in your Canadian business now?

It's a moving target Geoff, but I would think that 60% and moving up will be the percentage at this point. Or put it another way, I would expect in Q3 it could be 60% and up, maybe two thirds.

Right. And in their recovery that you foresee, is it going to be driven by expansion of that business or are you counting as well on the recovery in the gas related business?

I think it's to the oil Geoff. I think that's the one that I feel very confident on and there's enough to sustain the accession we made on being constructive.

Okay.

Yes, but I think the gas will be no disrespect the icing on the cake.

Okay.

I mean there's a difference between as I said a market which is healthy and a market which is very strong and I think gas becomes the delta.

Got you, okay. And then on the project management contracts, it sounds from what you described earlier that these are all really well construction-related projects, is that correct?

There are two types. You have the re-entry brownfield project and then you have the... step out greenfield project, and they're really quite distinct. And I would say that although things are not penned and finished quite yet but I would say when we... if it's the number of the five projects of management underway here from today proves out to be correct I would guess that three are brownfields and two are greenfields or step out, major step out.

Okay. And does that make a difference in terms of the profitability of these?

No not really.

Okay.

Not really. I am just giving you... I mean obviously brownfields you're growing inside vertical well bores and to infuse the multilateral etcetera, no, not really.

You threw out a number of around $750 million. I assume that was a sort of approximate revenue scale with supply projects?

Yes that's absolutely correct. I would take it with a grain of salt because the numbers are moving.

But in that I mean how much of that $750 million is going to be related to Weatherford content as opposed to...

Geoff,that's a 100%. That is, the final numbers may be different but there will be some passthrough there.

Okay.

That's just what comes back to us. The rest is really noise but you have a good question.

Okay. So we could see more than $750 million...

That's correct but it would not necessarily imply that we've gotten more business because we want to ask, then how much of it is pass-through always important question.

Geoff,it's Andy. On the first two contracts there's no pass-through. On the next several that we look at if there ends up being pass through we will keep you guys posted. So you can understand any kind of differentiation in margins.

And there will be pass-through on the other.

Okay. And then just finally a broad question specific to Canada but be interested your response on a kind of a global scale as well. Where do you feel like you are in terms of cost management? I mean you've had various projects underway at different times in regards to improving supply chain costs and so on. Could you just give us a status report of where you feel you are right now?

I feel I am still in the first set what I have to do. The part of the problem in feeling that we're efficient in that sort of thing is that this is terribly difficult to do in a high growth environment in a sense where... when you grow as much you are trying to grow it is antithesis of being efficient. And that's just the nature of the beast. From the supply chain and manufacturing for procurement standpoint, as Andy was alluding to from a working capital management standpoint on all of them I think we feel we capped by two use. We have... either we can tell you that we are... we think we have a lot of work to get done still and there is a big emphasis on it. On the other side of the coin is I suppose you say we have upside and we do.

Okay.

Biggest emphasis I think today is really on and around manufacturing, in shortening the delivery dates... lowering the cost structure, these sorts of things. And that's actually well underway.

Do you see anything of a step change nature next sort of four, five quarters or is it just going to be a...

No, no. I would never mention anything. We are just...

Okay.

If you find that at some point the margins look a little bit better than you expected, there will be that some of it has to do with manufacturing improvements. But we would not make... we will not make too much stuffs around it. But it is a big area of focus.

Very good. Thanks very much.

Your next question comes from the line of Dan Pickering with Pickering Energy Partners.

Good morning, Bernard.

Good morning, Dan.

Borets, you are a third owner there. Do you have options to buy the remainder? Can you just talk to us about are you the controlling partner now? Just trying to understand how that's going to work.

No. We are not the controlling partner. We do have a let's put it this way precise status of the balance, in terms of an acquirer. Doesn't mean we necessarily will acquire. But we are not the controlling partner. We are very anxious to keep the existing controlling partner in operating control. Why? Because they do an excellent job.

Okay. But there is nothing contractual in terms of the remaining two-thirds of the business. You're a right of first refusal buyer but you are not obligated to purchase the remainder going forward?

That's absolutely correct, Dan.

Okay, thank you. And then with respect to the acquisition, obviously Borets is the biggest one. Can you give us a rough idea in terms of timing of impact that we will see in the income statement and...? Go ahead.

Yes. Andy why don't you have done?

Absolutely, Dan '07 as I said probably in the each of the final two quarters about $10 million revenue ran through with the top line in '07, de minimis EPS impact. In '08 you should expect $0.10 of EPS contribution.

Thanks,all right. And do you anticipate putting incremental capital into these acquisitions of a sort of standalone ready to go as is?

Ready to go as is, nothing meaningful.

Okay, all right. And then you had a pretty good revenue growth sequentially in your chemical stimulation segment. I am just curious there I am assuming that that's your pumping business. Do we have any international pumping business yet or is everything we are seeing there domestic at this point?

We do not have any on the pumping slide any international top line in the number, for chemicals. Do not minimize what the young chemicals people can do. There is a technology that is proving to be very effective but maybe it's an offline discussion Dan for you.

Okay.

On the chemical side which may actually... may get your attention which is driving as much of not more of the growth than the pumping side.

Okay.

To answer your question. And that's chemical top line progression is actually international as much as domestic. The pumping side is purely domestic and will remain that way probably through the balance of the year.

Okay, all right. Last question from me and I apologize if you have talked about it and if I missed it. Bernard, do you have any cost reduction efforts, targeted specifically at Canada at this point or given the product going to terminate [ph]?

No. We are... I think... I mean, two things. At the end of Q1, we had already allocated some equipment and a small number of people out in the Canadian market, and that was done. We did spend I think a large amount of money on the maintenance side in Q2, taking advantage of the fact equipment and tools was back in the yard and that is done. At this point I think we have calibrated the size of the operation in Canada to what we think the business will be, plus or minus. So, I think we are pretty much done, so, actually quite efficient in Canada.

Okay. Thanks, Bernard. Thank you, guys.

Thank you.

Your next question comes from the line of Pierre Connor with Capital One Southcoast.

Good morning Andy and Bernard.

Good morning, Pierre.

Bernard, first my question is about management projects and your strategy... glad to see that you are up and running with a couple and plan to expand it. But the strategy go forward absent the passive type costs, do you see these management projects as primarily margin accretive through product mix that you bring or are they revenue growth opportunities, primarily?

I think really both. It's just a way of doing business that the client welcomes. It's not that we are particularly enamored with project management. We are being more pulled into it than we're pushing into it, pulled into it by our client who is short of management talent. We are short of management talent too, but we have to somehow put it together for the client. So, if I could end up with the same volume of business and marginal business with our project management particularly happy, and not necessarily obsessive about it. But if the number of brownfield, number will step-out, number of greenfields both oil and gas internationally, and the number of unconventionals also internationally, this is all international discussion. And in our case, Eastern Hemisphere, we don't really... not really interested in project management in the West, in Latin America. The number of all these projects is such that you can visualize a mental cut short. That gives you an idea of all the projects out there that ought to get done and are not getting down, not even being planned simply because of management and manpower shortage. The one way in which one can make this project happen for the client is by taking on more of a coordination, logistic efficiency type responsibility and we are doing it.

Does your outlook for next year's international growth include a bit... obviously the projects you have expected to start, but further growth in project management Barnard or...

I'd rather not say, because I think for some time the assessment that we grow 40% and 25... 40% Eastern Hemisphere and 25% Latin America was viewed as not reasonable. Now it is viewed as reasonable, because we have done and it appears that it is likely we are going to do it. Should we do better than that? I'd rather just do it, rather than have you sort of bake it and so forth.

Right, no, the rates show in [ph].

I'd rather leave that little bit in dotted line, just because I think the guidance is good enough as I said.

No, that's fair. Appreciate it very much guys.

Thanks Pierre.

[Operator Instructions] And your next question is a follow-up from the line of Will Herbert with Simmons & Company. William Herbert - Simmons & Company: Thanks. Andy you may have covered this and if you did that, I did not catch it, but Borets' equity income line accounting, what can we expect from a... I mean what is that yield at the equity income line in the second half of this year?

In the second half of this year, not meaningful several pennies perhaps. William Herbert - Simmons & Company: Okay. And you talked about $0.10 in '08, did that include Borets or?

Yes, that's all seven. William Herbert - Simmons & Company: All right.

You're going to see $0.03 or $0.04 running through normal ops, you'll probably see $0.06 or $0.07. William Herbert - Simmons & Company: Okay.

And I am trying to be conservative on those numbers, so you don't runaway with things and get crazy. William Herbert - Simmons & Company: All right, so $0.10 at least in '08 and perhaps something in second half '07.

Correct. William Herbert - Simmons & Company: All right, thank you.

I think probably if there is one last question as we run our full hour, if there's last one question we will be happy to take it. If there isn't that will be end of the call.

Well there are no current questions in the queue.

Then I thank you very much to the audience and we will close the call here. Thank you.

This concludes the presentation. You may now disconnect and have a great day.