Good day, ladies and gentlemen,and welcome to the Third Quarter 2007, Weatherford International Earnings Call.My name is Latasha, and I will be your coordinator for today. At this time, allparticipants are in a listen-only mode. We will be facilitating aquestion-and-answer session towards the end of this conference. (OperatorInstructions). I would now like to turn the callover to Mr. Bernard Duroc-Danner. Please proceed, sir.

Thank you and good morning. Andy,we will start off with your comments, and I'll follow up with mine.

Okay. Good morning. For our thirdquarter of 2007, we report fully diluted earnings of $0.85 per share. Thecombination of a strong US performance and a seasonally driven improvement inCanada bolstered North American results, while strong international growthcontinued to pace. The ongoing uptake of our younger technologies fueled ourgrowth in both North America and in international markets. EPS comparison. At $0.85,earnings per share grew 25% sequentially from $0.68 in Q2. Our sequentialimprovement of $0.17 represents the largest quarter-on-quarter growth posted byWeatherford in the current up-cycle. The field contributed $0.19 ofincremental EBIT, while non-operational items took back $0.03. R&D,corporate and interest expense were up meaningfully over Q2 levels. A lower taxrate helped earnings by $0.01 as our effective rate for the quarter settled at19% or 100 basis points below Q2's rate. Operating performance. On aconsolidated basis, revenue grew $156 million sequentially or 9%. Year-to-daterevenue is up 18% over the prior year against a 3% increase in average rigcount globally. North America, which accountedfor 50% of total revenue, grew $110 million. Average rig count for the quarterimproved by 235 rigs compared to Q2 with the bulk of the improvement takingplace in Canada,following an exceptionally low level of activity during Q2. Still, Canadian rigcount was down close to 30% compared to year ago levels. On a year-to-datebasis, North American revenue is up $168 million or 6% compared to the firstthree quarters of '06, while average rig count is flat over these two periods. International revenue grew $46million or 5%. Middle East, North Africa and Asia led the way in dollar growthwith Europe and CIS also posting strong gains.Latin America's sequential growth was a modest 3% as equipment moves forpending projects in Venezuelaproduced a temporary flattening. On a year-to-date basis,international revenue is up more than $700 million or 34% compared to the firstthree quarters of…

Thank you. Q3 was a strongquarter in both hemispheres. We posted $0.85, which equates to 25% improvementsequentially and 27% year-on-year. The East continued its strong progression,building on what we expect to be a multiyear high-growth process. North Americadid well. Canada recovered some ground, while the US posted another strongquarter. Western Hemisphere revenues rose$118 million. The growth was driven by North America, which accounted for 110of sequential improvement alone or 12.5% and year-on-year 4.2% in spite ofCanada's decline. The East added $39 million of revenues in the quarter,growing sequentially by 5.3% and year-on-year by 34.4%. Companywide, the EBIToperating income incrementals were 51%. Canadian market recovered fromthe extreme trough of Q2. Rig count increased seasonally to an average of 347rigs, but was 29% below Q3 '06 levels. Basically the market showed signs oflife but remains subdued. Pricing weakened throughout theCanadian oil field hitting the rigs, tubulars and pressure pumping, hard.Pricing for our product service lines was down more modestly, with the dropoccurring essentially in Q2 and Q3. This was in part, in a large part actually,offset by cost and productivity gains. We substantially changed our operating structurein Canada, management, people and equipment. The country leadership was alsochanged early in the quarter, paid dividends. We grew revenues per rig to thehighest level in our Canadian history to $262,000. Our productivity indices showedsome of the highest performance levels in the company. We are running Canada at muchhigher people and equipment productivity than throughout '06. And as a resultand in spite of lower pricing, Canada's EBIT incrementals were sequentiallyvery strong. Our operating structure and portfolio breadth in Canada are real assets. The USdid remarkably well, posting another quarter of good sequential growth, inspite of unfavorable weather patterns in Texas,Oklahoma, aweak Gulf and a meager 1.8% sequential rig count increase. We gained traction in anotherproduct line…

Thank you. (OperatorInstructions). And your first question comes from the line of Bill Herbert withthe Simmons & Company. Please proceed. Bill Herbert - Simmons & Company: Thanks. Good morning.

Good morning.

Good morning. Bill Herbert - Simmons & Company: Not withstanding the fact thatyou have a perfectly commendable and strong outlook for Latin America in 2008,I am surprised it's not actually stronger, given the fact that Mexico for you guys is ramping pretty strongly, Venezuelarecovering, and you will highlight both of those countries as being amongst thebest growing regions or countries in 2008. So, what's driving a similar rateof growth rate '08 versus '07? Because I would have thought that it would havebeen quite a bit bigger actually in '08 for Latin America.

I'll tell you just two things. Bill Herbert - Simmons & Company: Okay.

Which is noise. Numbers fromquarter-to-quarter are not predictable. Bill Herbert - Simmons & Company: Right.

You've got some things that arehigher than you think and lower than you think and they have pushed back intothe next quarter. So, you have some of that. Second, I think the region lagson what we are doing in Latin America. The region lags everywhere really. It alwayshappens. It seems to happen a bit more in Latin America. Net-net, I thinkyou'll be very happy with the performance in '08. I say this simply based onthe backlog of work we have. Andy, you want to add to that?

I don't. Bill, I would remind youin Q2, there were contract rollovers in Brazil. Bill Herbert - Simmons & Company: Yeah.

And, obviously, Orinoco on the heavyoil. The heavy oil has not returned to full speed yet. Planning takes an exceptionallylong time in Venezuela to put projects together and what not. We had somesubstantial contract wins down there during the quarter. We will have tohighlight contract by contract what we have progressed. But we're extremelybullish both on Mexico and Venezuela for '08, and things will slowly ramp inand roll in. But we do think you'll be pleased with the performance next year. Bill Herbert - Simmons & Company: Okay. And then switchinghemispheres with respect to the Eastern Hemisphere, another year of 40% growthin '08 sounds arresting. You highlighted some of the logistical challenges inmeeting that. Do you have the equipment and crews to actually prosecute thatgrowth?

We have the business. Bill Herbert - Simmons & Company: Right.

We have the equipment. I mean,I'll put it in another way, we don't have the equipment in the right locationready now, but as you might have noticed from our CapEx line, the supply chainis on over drive. So, we have the equipment which is on its way, not tooworried about the equipment. Now, the weak link is the peopleaspect. Recruiting and training and now reading my notes, which is alwayscumbersome, I think for everyone on the call to listen to. I tried to add a few commentsthat are not in my prepared notes, and one of the comments I added is that therecruiting and training is extraordinarily important. Well, that's the weaklink in the whole system. How many people we bring in and how well we trainthem and how well we do it on the rig floor is my number one worry. So, when Ihighlight the fact that the growth in '08 is going to be about the same level of40% could be 42%, could be 38%, it's not surgery, but it's about right. And Iactually think '09 is shaping up most likely to be in the same order ofmagnitude. It's too early to tell. What worries me the most is notthe availability of the business. It's not the longevity of the cycle. It's completelywrong to think that these things are about to be aborted. It's actually nonnonsensical. If you spend enough time with clients in Eastern Hemisphere, youunderstand how nonsensical a statement that is. Bill Herbert - Simmons & Company: Right.

What worries me the most is theability to get a minimally quality performance on the job with people that haveonly been trained for three, six, nine, 12, 15 months. That still worries me. Bill Herbert - Simmons & Company: Yet, not withstanding thatchallenge, you must be reasonably comfortable that you are going to be able todo that, given the fact that you are prognosticating?

Yeah. We are committing for it,not so much, not Wall Street I am worried about. It's my clients. Bill Herbert - Simmons & Company: Sure.

We are committing to it towardsour clients. So to the extent we don't disappoint our clients, we won't disappointWall Street. Bill Herbert - Simmons & Company: Sure.

The people issue is everything. There'sone thing I am worried about here, the people issue, now it's not new, Bill. Itwas true a year ago, it was true two years ago. Bill Herbert - Simmons & Company: Right.

It just doesn't get any easierwith time. Bill Herbert - Simmons & Company: Last question, Andy, I thinkCanada cost you $0.25 or thereabouts in the second quarter. What did itcontribute in the third quarter-on-quarter? And can you reveal what percentageof total revs does Canada represent today and where that number stood last yearat this point in time? Thanks.

Yes, I can't go into that, since wehave got those together as one region. I think I would be running outside theboundaries of fair play here to split those out at the EBIT line. But youshould assume that, you know the Canadian numbers well for last year and thatwas at about $1.2 billion of revenue for the year, and US was about $2.5billion. Bill Herbert - Simmons & Company: Yeah.

So, basically one-third of theNAM business was Canada. Bill Herbert - Simmons & Company: Okay.

You can expect that thatdifferential has shifted with the very weak Canadian market, and probably forthe year you are down something on the order of 20% plus year-on-year '07 on '06 in Canada at the top lineagainst some very nice growth in the US markets.

I think, two comments, you shouldtry to take to heart if you can that I'll try to convey is that if NAM did welland NAM with a few exceptions has always done well at our place, a lot of thecredit goes to the quality operations in Canada, more than the market. The marketis not that good, but also the US did tremendously well. Bill Herbert - Simmons & Company: Okay. Thank you very much.

Don't minimize the importance ofthe USin the quarter. It would just be wrong. Bill Herbert - Simmons & Company: Okay. Thank you.

Your next question comes from theline of Jim Crandell with Lehman Brothers. Please proceed.

Good morning, Bernard and Andy.

Good morning.

Good morning, Jim.

What was the impact of the Gulfof Mexico evacuations on third quarter results?

Technically, the exact number oflost days, since one of our larger peers gave it, it was in our case 17 days asopposed to 15. So right. So, that's that. What is the revenues of the shelf inWeatherford right now? It's about $100 million of the shelf business. Deepwateris about twice that number, in the Gulf of Mexicoalone. So, the shelf is 100. The Gulf of Mexico is about 200, 300 in total. This is theyearly number, and not a quarterly number. So, it's not that material of abusiness overall in the end. It used to be enormously material at Weatherford.That got diluted down over the years. Five or six years ago, it was, mygoodness, the Gulf of Mexico was about 10% of what we did. Now it's more like3%, 4% of what we do. So, these are all the numbers.

Okay. Given the projected mix ofearnings out through 2008, what's a good tax rate to project for the full year?

That's always a hard one. Andy,have an [idea]?

Difficult, I would keep 21% to22% for '08.

Why not 20% or less?

Believe me, I have challenged ourfolks to get there. So, we'll give updates if we can. Very structure intensive.

It really depends on the flow ofbusiness in a particular quarter.

Absolutely. 19% this quarter wasexceptionally good. I would say better than we would have even expected giventhe up tick in NAM operating income.

Okay. Bernard, CapEx is runningat $1.6 billion annual rate now based on the most recent quarter. My sense isnumbers are building faster than you projected. What do you look at CapEx for'08 now and where do you see the biggest areas of incremental change versus whatyou might have thought [in 2007].

Yeah. Actually, we do everythingwe can to get the numbers to be as high as possible, as early as possible. Not outof a desire to spend, but because I've got three challenges, one businessdevelopment and sales. Okay. That one, I think, is well covered. The secondchallenge was the supply chain equipment, and the third challenge was people. As for the answer I gave to Billearly on, the people is the one that worries me. The equipment we've doneeverything in our power to bring up in time equipment on the food supply chainas early as we can. Reason being, that these might actually have on and aroundnon-magnetic materials for example. Some of the more sophisticated form ofmanufacturing for high precision tools is extremely long. And so, it worries ustremendously that then we might not get the equipment we need on time. So,there's a purpose for it. It is a purposeful action, is number one. Withrespect to where we are going numbers wise, Andy thinks we would still end upthe year around $1.4 billion even though you are absolutely right. In Q3, itwas closer to $1.6 billion. I would think, my guess is thatwe will run '08 probably closer to $1.6 billion where we are right now to $1.4 millionplus or minus $50 million to $100 million. It depends again on how muchbusiness can we cram into '08 responsibly, as opposed to slipping into '09. Thereis a ratio between the CapEx we spend now and '08. This says, there will be aratio between the CapEx we spend in '08 and '09. Well, that's issue number one.And issue number two is, how well can a supply chain system at Weatherford,which we tend to be very proud of, how well can it function at a higher rate? So,net-net all of this is to say the level of CapEx is purposeful. Actually, itreflects the expectations of volume increase in '08. I mean, there is a directcorrelation. I think it still has a bit further to go out but not much in '08. Thenagain, it depends a little bit on how well we do on the supply chain side.

Okay. Well, one final question.You have a real good durable LWD tool that seems to be able to work where noothers can and you have replaced [Schlumberger] as I think you said on a largenumber of wells in the last bottom of the well. Is this a short-term or alonger-term advantage and then separately, when do you see supply catching upwith demand for LWD and rotary steerables?

First, I did not mention that itwas Schlumberger, and I probably would not for a variety of reasons, some of ithaving to do with being polite, that's one. How durable is the advantage? TheIP we have on and around LWD continues to expand. We filed probably morepatents than any of our -- well, not more than any of our competitors as muchas -- we filed as many patents on and around technology than our larger peers. So,I would have to say that the IP and the technology core advantage on and aroundhigh pressure and high temperature is one that I think you should expect to besustained over the long-term, which is over the next three years. I don't seehow we could not be sustained. These are very difficult things from a designstandpoint to catch up, that's one thing. With respect to supply and demandbalance on LWD and RSS, well the rate of growth of horizontal wells anddirectional wells particularly on land is extremely high. I don't know of a singleIOC or NOC that isn't planning it’s new campaign, be it re-entry or be itfurther development or be it step-out/exploration, which is not doing itprimarily or overwhelmingly horizontal and multilateral. So, remember the factthat the land market traditionally has a little over a third of its businessdirectional and the offshore market a little over 80% of its businessdirectional or horizontal. I think the line is moving to the offshore level. Ihave said this two years ago. I think it’s happening right now and it is goingto happen over the next five to ten years. It's that powerful. So, I am notsure the LWD/RSS supply chain will ever catch up with the market. Ultimately, what will happen isthat we will only be able to do the amount of work we can do and so it will be spacedout over a longer period of time.

Okay. I'll stop there. Thank you.

Your next question comes from theline of Ole Slorer with Morgan Stanley. Please proceed.

Thank you very much. Bernard, yousound a little less concerned about North Americathan I think what other people on the call are expecting. So, again, could yougo back and revisit how Weatherford specific is this particularly on Canada?What have you done to take your cost structure down and how much more is thereto do?

Well, there's just two things inCanada. One, I guess, genetically, if I may say that, we are very heavy oilbased. We always have been. And so, we are more heavy oil based as a percentageof what we do than any of our peers. And now, heavy oil is not immune to upsand downs in Canada.But the production side of heavy oil, just maintaining the wells in production,that one is really completely immune to the ups and downs in Canada. Youwill not shut down a heavy oil well. You will not. It doesn't matter what Canadadoes because the economics just are compelling. So, there is that aspect. Theother aspect is, I guess, one of the attributes of being very Canadian twoyears ago, much less today, is that, it's a little bit like a cold shower. Whenthings go bad on you, it wakes you up and you take action early. We took actionvery early on the operating side. We didn't say anything to anyone. And as oftoday, they were pretty drastic. Simplify the organizational structure, movethe equipment, move people. We actually moved a lot of people that are on loan,as it were, to the rest of the operations acting as trainers and/or as cedingmanagement for deepwater applications around the world. And then we just tooksome people out. On the cost side alone, I thinkit's a moving target. But more recently, I think the best thing I can give youis that we took out about $40 million of cash costs out of Canada. It'sactually a higher number than that. I'm not including the loans and all thatsort of thing, meaning people would be on loan to other regions, becausethey're still on the payroll. And the number that I just gave you just happenedvery recently. And we will take out some more as needed. It's more of aquestion of being proactive early than anything else. Now, the reason I am confident onNorth America is because I don't also expect too much out of North America. I think I said it a long time ago, about a year ago, thatthe USwas in the tunnel. It's not going to go up too much or go down too much. When you enter that kind of anenvironment, two things matter. Your operating cost structure, item one. Itemtwo, how good you are differentiating yourself from a technology standpointand/or if you have new technologies, where you don't have any market shares, whichis our case. So, we are working on the costside and working also on the technology side, particularly in youngtechnologies. What are young technologies? You know them; directional,wireline, ESPs, chemicals, etcetera. And on those particular markets, we havetraction. On the rest, we fight on the operating cost side. And net-net, theregion continues to do well. But it is not where you are going to make yourmoney. You are making money internationally. You just shouldn't worry about North America.

I am not worried about it,Bernard, but I'm just trying to understand how far into this process you are onthe cost side. Are you almost as far as you can push it now?

No. In US, we've got ways to go, whichis actually very good news for us. In Canada, obviously, we have done alot already. The latest number I gave you is just the recent number. We will dosome more as needed. In Canada,it doesn't seem to be needed right now. There is no point in doing things whereit is not needed. Right now, the focus will be more on the US. But the USis a combination of cost, true? Also a combination of growth, which is thoseproducts and service lines where we are gaining traction. It's a combination ofboth.

And how much more do you thinkthere is to go in terms of driving margins higher, because your mix change inthe US?

That I'll let Andy answer.

Just due to mix change, Ole?

Yeah. Obviously, you are talkingabout solid expandable, compact wireline type pressure, high temperature, MLWD,I mean all of those are (inaudible) higher margins?

That's absolutely true, a muchhigher margin. Remember, we are starting-off with very small base with those.I'd like to think of it as something in the 100 to 150 basis points ofimprovement over the next 18 months, just coming out of those growthopportunities and being very reasonable for North America.

So, you could take North America back to a margin of somewhere towards whereyou were a year ago?

That is certainly what our goalis.

That is specifically our internalgrowth.

Okay. And then finally on thephenomenal growth targets that you are outlining of 40% Eastern Hemisphere, 25%Latin America. You hired, if I heard you correctly 1,800 people in the quarter.Was that right?

That's right, net. There arealways some people coming in and out. But net of any -- well, net, okay. Yes,that's correct.

I mean that's 7,000 annualizedmore or less? So, what is your current headcount now as compared to the gains?

35,500, is where we stand at theend of the quarter.

Okay. So, you are growing yourheadcount at a clip of about 20%?

Right. And remember, it's notgrowing in North America in general.

No, it's not. You shouldn'tpresume that. It is lopsided. In other words, it's growing at twice that ratebecause the international market represents 50% of what we do.

If I might try my luck, how muchof that hiring is for people that have very high skills sets and be applied inthese faster growing product lines, but also product lines that --?

No. If you break it down betweena high technical skill, medium technical skills, low technical skills. The hightechnical skills, is only about 10% of that number. The middle technical skillsis the overwhelming, something like 60% of that number. And the balance is thelow technical skills. And it has everything to do with two things, one,academic degrees and second training, prior training. These are rough numbers,but you are close.

Okay. Well, thank you very much.

Thanks, Ole.

Your next question comes from theline of Ken Sill with Credit Suisse. Please proceed.

Yeah. Good morning, guys.

Good Morning, Ken

Good Morning, Ken

Glad to be back on your callagain. Bernard, looking at your growth or your optimism for North America, itseems to me that what you are looking at is, there is growth in the serviceside of things, because of the type of wells and new technology which is ex-rigcount. Is that a fair assumption?

That's absolutely right, Ken. AndI will also say that I wouldn't compare the optimism on NAM with theoptimism of the international market. They are two different skills. You'vedescribed it very well, though. It is exactly what you said.

And how much of this is just likeyou are saying internationally, the growth in directional drilling, logging andmeasurement well drilling is just -- the market is growing faster than there isthe ability to supply. So, is most of this growth, it’s just growing, it's notnecessarily taking share from people?

I think that's also very fair,Ken. That would also be very correct.

Okay.

I mean, I will put it in anotherway, their share is not what we are after particularly, and nor do I think itwould be as easy for us to do so if the market was not growing the way it is.

Okay. Well, I think that's veryimportant to get, because you are in a market where people are focusing on fearnot opportunities.

I was flying from overseas onFriday. So, I wasn't really exposed to the events on Friday. By the time Ilanded, I got quite surprised. So, I understand what you mean.

Okay. And then another question,I mean something that's kind of conspicuous by it’s absence, is the talk aboutpressure pumping and stimulation. I know that, isn't actually that big a businessat Weatherford. But I was wondering if you have any long-term strategic goalthere. Obviously, in North America, it's a very commodity-oriented business,but gas production worldwide has probably grown faster than oil. So, do youguys have plans?

Yeah. We do. I mean we actuallydo. There is only so much I can say on a conference call, but offline I cantell you more. We are doing exactly what we thought we would be doing, whichis, we learned the skill and the trade in the United States. It's a great placeto do that. We have a certain amount of business there. It's not a bigbusiness, and it's not likely to grow. We did see early on two things,which is the fact that barriers to entry are quite low in the United States.And second, there was a number of people who thought their economics were verygood for new equipment at the existing prevailing pricing structure. So, we sawthat the supply curve was basically shifting pretty aggressively upwards, whichwas never a good time. Now, we still went on with our plans to build up ourcapabilities and we did. Together with our R&D center, that supports ourstimulation. And all of this for one purpose, which is the use of thatparticular skill in international markets, which is why we are deploying ourtime and energy, and completely joined at the hip with the other things we aredoing internationally. Now, where are we doing this? Forthe sake of competitive reasons, I would rather not say too much, except to saythat it covers three regions. Yeah, we have three regions internationally. It'sabsolutely nothing actually. Sorry. But I was trying to be more helpful thanthat. We cover three regions of the international markets. We are completely joinedat the hip with the other work we are doing, we are using our skills inpressure pumping. And your assessment of the future of pressure pumping from agas reservoir standpoint and to a lesser degree oil in some markets, you areabsolutely right. It's an important competency, even though the prognosis inthe USis not terribly good for it, because of the supply curve.

Yeah. And one then final question,I mean, you guys are leaving some of the countries under US sanctions, it doesn'tseem like that's having much of an impact on your revenue outlook. Is thatbecause --?

I am terribly constrained of whatI can and cannot say. I will only say that, the size of the business there wasmodest. It didn't grow over the past, whatever, in a couple of years. And Idon't think it ever factored in, in our plans in terms of the growth. It wasjust there and evidently, it won't be there anymore.

Yeah. But in terms of replacingthat revenue, it just doesn't seem like there's much issue given the stronggrowth elsewhere internationally?

It's not a big number, Ken. So,the answer is that, you are absolutely correct.

Okay. Thank you.

Thank you very much.

Your next question comes from theline Kurt Hallead with RBC Capital Markets. Please proceed.

Hey. Good morning.

Good morning, Kurt.

Hey, Bernard, a lot of timesinvestors look at the comments that you make regarding market share and theinitial reaction would be, well, they have got to be doing it on price. Couldyou provide us some color as to what the key driver is to your market sharegains and it looks like they're fairly broad in nature not just client based.There were specific --?

I think the comments to investorswould be very fair if the markets we are selling into were not growing. Becauseif the markets are not growing, even if we, you a fit-for-purpose technologywhich may do a better job than your peers and there is no growth. It's justhard to get traction. But when you have a particular technological edge on theone hand, on the other hand the markets are growing and they're rationed. The international markets, notall of them, there is a sequence, but meaning that they are not growing at thesame time, not at the same stage of growth. But the international market Itraveled to and I travel a lot, they are rationed. There's a shortage. There'sscarcity. And as a consequence, if you have; one, infrastructure and the availabilityof people and equipment; two, your technology not only can do what the clientwants but would be able to do it better. Growth is really what you canfundamentally organize for and do effectively. It is not constrained bycompetitive pressures. And, Kurt, I don't have a single example that I can thinkof. And I said, I do travel a lot, I see and I like it. I don't know of a singleexample of a situation where we have to fight our way pricing wise in theinternational market. Not a single one. Now, maybe the day will come and itwill happen, but certainly for looking into '08 and the part of '09, it wasalready committed to, I don't see no evidence [I can draw]. And pricing isdifferent with every country and so forth and so on. Each country has it’s ownlogic. The pricing is strong in international market. It is not period.

Kurt, I would add one thing. Infact, what we are seeing and I can talk probably more specifically to Latin America, is we ourselves expect certain returns outof assets. I don't have enough equipment in some of my fastest growing productlines to supply everything that everybody wants to do today in both the Westand the East. So, we have got to make intelligent decisions in balancing thatportfolio. We've actually stepped back from some work in a specific market inLatin America, where folks are loading up on backlog in what we believe will bea rising price environment. So, given the amount of capital that we can committo that market, we wait. We wait. So, it would actually be a littlebit different for us. I can understand comments from competitors that aremaking the point that you are making right now. But it's a bit different for uscoming in new to new markets with less capacity than we wish we had. But we areworking hard on getting that.

Now, I hear your comments.Bernard, they are a rationed shortage scarcity that describe the internationalenvironment. So, clearly, you are in a position, where in these markets you'rereally not seeing any influx of tools or equipment from, say, North America, wherethere is a --?

God, no. The only people whocould do that would be the largest three companies and ourselves. And you heardme say, we moved some equipment out of Canada and we moved some people out ofCanada on loan. Presumably, our three largest competitors have done the samething, but it ends up being a drop in the bucket. It's a drop in the bucket inwhat is required in the international markets. The notion that the EasternHemisphere and Latin America are seeing -- [to now the] equipment is fantasy.

And then finally, I believe youreferenced an $80 billion number for investment in heavy oil.

Yeah. The numbers go from $70billion to $110 billion or $120 billion. I mean, it's in the press. Those arenot my numbers. And you have to be careful, much of it is upstream costs inengineering and so forth. When you get down to the drilling in heavy oil, it'sa smaller part of the cost. And the point is not to say there is going to be$70 billion or $80 billion being spent in heavy oil in Canada to beginwith until the Province determines the change in royalty. Nothing will happenin terms of the expansion. The issue is that there are notthat many places around the world left for IOCs and independents to get accessto reservoirs. There just aren't particularly large companies. Okay? There arejust not. Go around the world, every single government has been raising taxes,changing the royalty régimes, etcetera. Start with Algeria and you go around theworld. Those countries that control the reservoirs, don't feel they need IOCsand so forth and so on. So, they are behaving in a very rational way by basicallykeeping the economic rent. Canada is just doing a mildversion, the best I can tell of what the other countries are doing. So, thequestion really is, what are the choices for the IOCs, etcetera and the largeindependents? What are their choices? Can they turn their back on the heavy oilmarket in Canada, which is one of the few places you can have access to lots ofbarrels, albeit there are big [plumbing] challenges. And the answer is, therearen't many choices. And on that basis, I think theindications of expansion of heavy oil are interesting insofar as no doubt theywill be delayed by changes in the decisions of the Province. Of course, they'llbe delayed. But at the same time, I would have to say that a degree of thosecapital investments are almost inevitable. Simply because if not there, Kurt,where will the oil and gas companies go? You tell me? You give me one countrythat has been generous with their tax régimes and royalty régimes in an $80 oilenvironment. No country is. They keep the economic rent.

All right, great. Thanks.

Your next question comes from theline of Brad Handler with Wachovia Capital Markets.

Thanks. Good morning.

Good morning.

I think your name changed a bit.

Yeah. A little bit. A couple ofunrelateds, please. First, could you offer some thoughts on US pricing, justacross a few of -- perhaps lesser technology product lines?

We have two things going on. Let'scall it, I think the term commodity products is always popular. So, I'll useit. In low barriers to entry, more commodity products and services, there havebeen some instances of pricing weakness in the US, and it depends where. On orround the Gulf Coast, definitely. You know all about pressure pumping and coiltubing, although, in the case of pressure pumping, it is more an issue ofsupply curve than anything else, meaning expansion. But there are others. Yes,in the rental tools business, you've had also instances of pricing weakness onand around a number of different districts in the US. It's not monothematic, meaningthat there are other parts of the United States where pricing actually isgetting stronger. It really depends on the dynamics of the local market. Andlet's call it, middle of the pact and higher technology content, products andservices, there has been instances where pricing has gotten higher also. Net-net on a weighted averagebasis in the US looking at the quarter, there is not much of a pricing moveeither way, which is exactly what I would expect. I think, as you move forwardnext two or three or four quarters, you will hear some companies talk aboutpricing weaknesses. It will not be a major issue. It will be a minor issue. Andin the end, you should expect that it should lower your cost structure. And in anon-growing market or low growth market, this is normal. But it's not acrossthe board. It's a few. It's regionally based, and it's on certain products and servicelines, and you should not ignore it, should not make too much of it either. Itis to be expected. You have to move the quality of theservices up. When you stabilize, you can do that. When you grow, you can't. Andsecond, you have got to lower your cost structure and focus on the higher end.But still live with a lower end and lower cost structure and you will be fine.It is not a revolution in the US.It's a normal healthy evolution of a market that has stopped growing is nowgoing to evolve at a very low growth.

Okay. That's very helpful color.I appreciate that. In an unrelated follow up, Andy, your comments on workingcapital, you've commented for awhile now about goals towards reducing theworking capital investment and you've still got a pretty aggressive target forQ4. Can you just speak to the challenges there and some of the steps that youhave put in place recently to help you get there by the end of the year?

Absolutely. High-growthenvironment, very, very difficult to walk around with a big stick on thingslike inventory. With lead times, the capital supply chain, if you will globallyis extremely strained. There is no doubt about it. When I look at folks in thefield who I expect to perform at a very high level and they have 10 to 12 monthlead times on certain items of inventory it is very, very difficult for me tothink that carrying that numbers of days of inventory is consistent with thegrowth. You have got to let people do that. Receivables is a very, very keyfocus area for us, both through software enhancement of our credit function andpushing that responsibility all the way down into the sales force for collections.We have noticed those things in certain regions to be helping out. In the East,okay, again, you have to be realistic with people. Some customers pay a lotless frequently than others. Some of those happened to be customers that youare growing exceptionally quickly with, so this is the cost of growth, not onethat we will sit down and complain about at all. We still expect to performconsiderably better on the working capital side despite those challenges. So, Ithink you will start to see improvement. It takes a while to turn the ship, Ithink we have it turned and I expect substantial improvement in Q4 and thengoing on forward to reach quarter of '08.

I guess, just following-up on thecomment, it sounds like with some of those twice a year payers you will getthat in Q4, right, so that should bring down the receivables a fair amount bythe end of the year?

We certainly are pushing forthat.

That's the point. Okay. Alright,makes sense. Thanks guys.

Sure.

Your next question comes from theline of Mike Urban with Deutsche Bank. Please proceed.

Thanks. Good morning.

Mike, good morning.

I think, I had just a couple ofthings left. One, I think you've kind of indirectly addressed this but, youmentioned the Borets acquisition or taking a stake there as part of thestrategic and part of a broader strategy for Russia. I was wondering if youcould within the bounds of competitive information tell us a little more aboutwhat that strategy entails and how we should expect the grow the play out inthat market?

I can't. What I can tell you itis not really much -- I mean it's not Russia, it is more ESPs. Put another way,the strategic dimension of Borets for us is more ESP-related specifically thanit is Russia-related. On the other hand, Russia in of itself is an area ofgreat focus, okay. So, but that doesn't necessarily involve Borets.

Well, one is not necessarily --

Borets, the strategic comment,which in retrospect I regret I made, has everything to do with ESPs, notparticularly Russia, albeit they are the largest Russian player and so forthand so on, but the comment has to do with ESPs.

Okay, fair enough and anunrelated question but a popular one on the CapEx side, how much to the extentyou can calibrate it, how much of the increment that we have seen -- I guess ayear ago we were looking at $1 billion kind of now $1.4 billion for this yearand going to $1.6 billion. How much of the increase there is based on visible contractsversus a speculative attempt to get--?

100%. So, 100% on visible contracts.

Okay, 100% at that kind of 30%--?

Yeah, 100%, I say 110%, yeah.

Very good. That's all from me. Thankyou.

Okay.

Your next question comes from…

I think this has to be the lastquestion, whomever it is, the last question because there is another call afterus and we don't want to keep people on too long. One last call, whomever thisis.

Alright, your final questioncomes from the line of Robert Mackenzie with Friedman, Billings Ramsey. Pleaseproceed.

Good Morning, guys.

Good Morning.

Good morning.

Bernard, I wanted to understandsome of the thought process in your guidance a little clear. First, you laidout some aggressive guidance region-by-region, can you lay out for us kind ofin order of importance, the bottlenecks or the risks to not be in the guidance,i.e., people, equipment deliveries, project delays? And on the flip side, whatkind of events would lead you to be more optimistic that you would exceed yourguidance there?

Well, the guidance is actuallythe same that it has always been. We have had the same guidance now on aforward-looking basis for the past two years. So, that's one. Two, I think therisk that we have, is not the business being there. I don't think we really seeequipment at this point. I mean there still is always the risk of matchingequipment at the right spec to the project. I think the quintessential risk wehave is having the people side ready and also that the people side willperform. That is, it's significant risk. It was always a risk. It hasn't gottenany easier. Project delays, you areabsolutely right. There are always project delays. That is, if there is onething you can rely upon, in the Eastern Hemisphere and in Latin America, it isproject delays. It is the absence of project delays that should surprise you.There is your upside right there. The numbers that we gave tries, tries thebest we can. And if we are wrong, then we are wrong in good faith. But it triesthe best we can to lay out some sense of cautious, estimate of project delayswithin the per chart of what we have to do. In other words, we try to allow forsome measure of project delays. And if it is worse than we think, then okay. Wewill not be as high. If it is better than we think, then on the contrary wewill be above what we said. So, it is a combination ofwhether we are sufficiently pessimistic on project delays, which alwayshappens. Or put another way, we have got more business, put another way, thatwe could theoretically do in '08 that we are putting forth. As a sort ofaggressive statement as it sounds, it all depends on how late people are andwhether our estimates of how the people are going to be is a reasonableestimate. And the second thing is how decent of a job we continue to do inrecruiting and training which is very, very difficult. That's it.

And my follow-up question wasexactly on that point Bernard, recruiting and training, with the pace ofpersonnel growth in your international markets, how are you managing to keepyour safety record up, keep the operational a success rate up given the very,very rapid growth of almost any historical period in the past if you look atit, service quality suffers when you grow the people that fast.

That's very, very difficult. Andthe answer is that we struggle. When I talk about operational risk, this iswhat I am referring to specifically. We struggled, probably, the way we found tobe the most helpful for us at least is to break down the recruiting and hiringin lots of different efforts. We don't hire 1,000 people out ofone country, two universities or three different sources of labor. We break itdown into 10 different small resources of people and it makes the training andthe exposure to operations to get filled -- it is immediately spreadsthroughout our operations and close to where we hire people. It appeals to makeit more effective in bringing people's talents up a little bit faster asopposed to big numbers out of one place. That's actually a long conversation onthe operational side, probably, best kept to our side of the conference call.

Fair enough. Thanks guys.

Thank you. Thank you very much. Ithink that will be the end of the conference call for us. Thank you all foryour time.

That concludes the presentation.You may all now disconnect. Good day.