Expro Group Holdings N.V. (XPRO) Q3 2015 Earnings Report, Transcript and Summary

Good morning and welcome to the Frank's International Third Quarter 2015 Earnings Call. My name is Brandon and I will be your operator for today. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. And I will now turn it over to Blake Holcomb. You may begin, sir. Blake Holcomb - Director – Investor Relations, Frank's International NV: Thanks, Brandon. Good morning, everyone, and welcome to the Frank's International conference call to discuss third quarter 2015 earnings. I am Blake Holcomb, Director of Investor Relations. Joining me today on the call are Gary Luquette, President and Chief Executive Officer; Jeff Bird, Executive Vice President and Chief Financial Officer, John Walker, Executive Vice President of Operations and Keith Mosing, Executive Chairman. We have posted a presentation on our website that we will refer to throughout this call. If you would like to view this presentation, please go to the Investor's section of our website at franksinternational.com. Gary will begin today's comments with operational highlights and an overview of the quarter. Jeff will then provide a more detailed overview of our operations and financial results. Gary will conclude with his closing remarks. Everyone will be available for questions after prepared comments. In the interest of time, we ask that you limit yourself to one question and one follow-up question during the Q&A session. Before we begin commenting on the third quarter results, there are a few legal items that we would like to cover beginning of Page 3. First, remarks and answers to questions by company representatives on today's call may refer to or contain forward-looking statements. Such remarks or answers are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date, or if different, as of the date specified. The company assumes no responsibility to update any forward-looking statements as of any future date. The company has included in its SEC filings cautionary language identifying important factors that could cause actual results to materially differ from those being set forth in any forward-looking statements. A more complete discussion of these risks is included in the company's SEC filings which may be accessed on the SEC's website, or on our website, at www.franksinternational.com. There you would also find the third quarter earnings press release and a replay of this call. Please note that any non-GAAP financial measures discussed in this call are defined and reconciled to the most directly comparable GAAP financial measures in the third quarter 2015 earnings release which was issued by the company earlier today. I'll now turn the call over to Gary for his comments. Gary P. Luquette - President, CEO & Member-Supervisory Board: Thank you, Blake, and good morning to everyone on the call. Before I get started with my comments on the quarter, I wanted to make a quick announcement regarding some personnel changes that we have planned. John Sinders, our Executive Vice President of Corporate Development and Planning, has decided to leave the company effective at the end of this year. Jose Xavier, Vice President of Corporate Development will be working with John over the coming months to ensure a smooth transition of our M&A group. I want to take this time to thank John for his time at Frank's, specifically stepping in during the time of transition where he served as Interim CFO and later EVP of Administration. We appreciate all the work that John did and he will remain connected to the company on a consultancy basis and available to assist us further if and when needed. Now turning to the results from quarter three. The oilfield services industry faces strong headwinds for the foreseeable future. A decrease in customer capital spending, lower well construction activity and price reductions paint the backdrop of the challenges we face. In light of this climate, our focus as a company continues to center around controlling what we can control. Before Jeff dives deeper into the drivers of our financial results this quarter, I would like to touch on several of the main themes that summarized our performance in the quarter which can be seen on page five. Overall, third quarter performance was a reflection of what we began to see materializing as we exited the second quarter. Our U.S. offshore business saw an uptick in activity and market share as projects recovered from operational and weather-related delays. Our International business, particularly West Africa, held market share, but was adversely impacted by steeper activity declines and pricing concessions. In the areas of our business we can't control, we continue to see good progress. Our lean initiatives and the cost controlling measures we implemented earlier this year are yielding positive results in our U.S. Services segment and the company's cash flow. The next phase of these initiatives will be focused on our International business where activity levels are beginning to slow. Top line revenue fell 6% in the quarter with our International business being hit the hardest by activity decreases. Total company EBITDA fell 8% from the second quarter as the benefits of international cost cutting initiatives could not be realized in time to match revenue declines. However, U.S. Services and Tubular Sales margins both improved in the quarter as cost reductions and manufacturing process improvements took hold. As a result, total company EBITDA margin performance was above 30% and solid positive free cash flow was achieved for the ninth consecutive quarter. This marks the second straight quarter we saw Tubular Sales contributing meaningfully to the overall results for the quarter. In fact, the third quarter was our highest revenue and EBITDA quarter for the Tubular Sales business since turning public. We continue to pursue contracted spot opportunities in this segment, but would expect to see more tempered results as we close out 2015. Turning to page six, you will see a high level overview of how our offshore regions were impacted by price, activity, and rig count during the third quarter. The majority of our operational areas saw declines with the exception of Europe and the Gulf of Mexico. In Latin America and the Middle East, we maintained market share, but began to see reduced activity in the form of projects being pushed to the right. This is a similar impact to what we saw in the U.S. Gulf earlier this year. Top-line revenue in each region was down 20% to 30% quarter-over-quarter as a result of the shift. The pricing and activity impacts also included a combination of customer discounts, currency fluctuations, and the type of work being done. The scope of work we've performed for our customers will likely continue to ebb and flow, but the percent of rigs operating that we participate on is a key indicator for our business. In fact, the percentage of rigs that Frank's worked on in Q3 was flat to Q2 despite a decrease in activity in the majority of the markets we serve. There has been some shifting away from work on higher margin projects to lower margin jobs that may not require some of our highly specialized tools and services we offer. This shift in the mix of work was a key driver in the reduction in our International margins during the quarter. Page seven gives us a closer look at what we saw in our two biggest operating areas during the third quarter. On the positive side, the Gulf of Mexico market share has grown during the year even as fewer rigs remain active. We are working closely with our customers to find the right balance between preserving market share versus pricing concessions and are satisfied with the results we are seeing. As we move through the balance of the year, it is looking more and more as if we are approaching a market bottom in the U.S. Gulf and expect to sustain third quarter market levels. The West Africa market is a different story. While our market share is holding, it is holding in a market that has seen nearly a 20% decline in the number of active rigs. In addition to an overall rig decline, an unsuccessful exploratory campaign in the pre-salt that would have required more complex well construction designs has exaceberated the issue. In other words, it's not only a loss of rigs, but also the type of work we are performing on the remaining rigs that involves less complexity and thus a lower need for Frank's technology. As a result, we anticipate the margin seen in some pre-salt areas of West Africa, particularly Angola, to be the new normal for the fourth quarter and most, if not all, of 2016. However, we believe that the worst is behind us and we would expect more revenue stability as we continue to compete for market shares in other areas of West Africa and margin improvement as we drive our costs lower in the region. Moving to page 8. This provides a high level overview of how our team is evaluating the current M&A market. Despite the poor industry backdrop and it's impact on our business, we remained vigilant to find opportunities to take advantage of the down cycle. While getting leaner and more efficient are priorities, we also want to position the company for appropriate growth well into the future. We have begun to see bid-ask spreads narrow as balance sheets are stretched and value expectations become more realistic. We have the advantage of being a company with good cash flow and a strong balance sheet that allows us to be selective and make a potentially transformative acquisition that would be accretive to the company and support our already industry leading margins. The three key factors among others being considered as we evaluate M&A opportunities are: first, if it allows us to gain market share in an underrepresented market or displace a competitor. Second, if it offers a compelling technology that could be transformative in maintaining our foothold as a leader in technology and/or provide an added benefit to our clients in the form of lower overall cost of ownership and safety. Or third, if it's a complementary business to Tubular running services that allows us to offer additional services to the customer and deliver more of the expertise and professionalism that they have come to expect from Frank's. We will continue to update the market on what we're seeing in the M&A space and how we can best leverage our balance sheet to position Frank's to emerge a stronger company when the market does recover. With our financial strength, we will remain diligent in our evaluation of potential transactions. I will now turn the call over to Jeff Bird for his comments before providing my closing comments. Jeff? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Thank you, Gary. Looking at page 10, we see a summary of the financial highlights from the third quarter. Net income attributable to Frank's International was $17 million or $0.11 per share. Diluted net income, which includes $1.6 million and assumed additional tax impact of conversion of preferred shares was $22 million or $ 0.11 per diluted share. Earnings per share felt the impact of a higher quarterly effective tax rate of 31% due to shifts in the business mix between U.S. and International jurisdictions. We would expect our annual effective tax rate to be between 25% and 28%. Additionally, due to U.S. dollar strength specifically in Norway and Brazil, we incurred a $5 million loss in the quarter. Aside from these impacts, and as Gary touched on, our revenues and adjusted EBITDA were in line with what we expected. As we exited Q2, many of the themes we discussed during the last call came to pass during Q3, primarily as it relates to challenges in West Africa and the timing of projects in the Gulf of Mexico. We also held total company EBITDA margin to above 30% and saw de-leveraging at a rate of 47% in the quarter which I will discuss further in a minute. As we work our way through the trough of the cycle, we will attempt to maintain our industry leading margins with full knowledge that further downside risk exists if our current market thesis doesn't play out and we experience an even more severe and prolonged down cycle. Looking more closely at the different business segments, we will first look at International Services on page 11. International Services revenue from external sales in the third quarter declined 16% sequentially and 28% year-over-year to $103 million. Decreased activity across the majority of our markets was the overwhelming driver. In fact, pricing has been relatively stable and only accounted for about 15% of the revenue declines. Our overall market share was flat quarter-over-quarter, but with a fewer number of exploratory wells being drilled and the overall rig count having declined, we are holding share of an overall smaller pie. Adjusted EBITDA for International Services in the third quarter was $39 million, or 38% of external sales, down 29% sequentially and down 40% year-over-year. The rate of decline in activity as well as the mix of work we conducted in the quarter outpaced our ability to implement cost saving initiatives. We have identified some of the same opportunities we saw in the U.S. Services segment and have already begun taking similar actions in Q4 that will show up more fully in Q1 of 2016. Some of the actions are associated with adjusting to the current activity levels, but roughly one-third are more structural in nature and will carry through as the cycle recovers. We believe that we are still in the early innings of this cost optimization process in the International business and the possibilities to harvest efficiencies abroad are on par or greater than those we've seen within our U.S. operations. Moving to U.S. Services on page 12, the third quarter revenue from sales decreased 5% sequentially and 34% year-over-year to $74 million. Adjusted EBITDA for U.S. Services in the third quarter was $18 million or 24% of external sales, up 9% sequentially and down 60% year-over-year. The incremental pick up in EBITDA shows that the cost cutting actions we have taken during the year are working their way through to the bottom line. Looking closer to our U.S. Services business segment, Gulf of Mexico third quarter revenue was roughly flat sequentially and down 20% year-over-year at $53 million. Revenue held steady as we gained market share in the quarter due to customers moving forward with some previously delayed projects despite the Gulf being down one rig and loop current impacts. While pricing and activity continue to fluctuate, U.S. Offshore margins remained healthy. U.S. Land decreased 15% sequentially and 53% year-over-year to $22 million. The struggles faced in the U.S. Land market have been well documented over the last year and are expected to be in this range until we see a meaningful and sustainable increase in commodity prices. While aggressive pricing in the fragmented market continues, we are seeing market share in key areas grow as competitors exit the market. However, the gains in share are not enough to completely offset expenses and we are now seeing EBITDA margins below breakeven levels. Despite the temporary negative impact on earnings we see in U.S. Land, it remains a strategic area for Frank's as we expect it to return more quickly and more sharply in response to commodity price recovery. Finally, page 13 shows our Tubular Sales performance. This has been a real bright spot for the company here over the last couple of quarters. Revenue from external sales in the third quarter was $62 million, up 17% sequentially and up 53% year-over-year. Adjusted EBITDA for Tubular Sales in the third quarter was $16 million or 26% of external sales, up 100% sequentially and up 71% year-over-year. While we continue to be the go-to-provider our customer's value and trust, we wouldn't expect this segment to perform the way it has the past two quarters. Orders taken and delivered move around from quarter-to-quarter and are often placed with varying amounts of lead time. We do however expect this business to contribute meaningfully going forward, as a reflection of the cost improvements in manufacturing and continued commercial focus. Taking a look at page 14, process improvements have been a priority since becoming a public company after a long and successful history as a family run business. Already this year, we have seen our working capital, excluding cash and equivalents, reduce roughly 19% as a result of new initiatives. Improving invoicing and collections practices have reduced our net accounts receivable by approximately $66 million and a leaner manufacturing function has brought our inventory down roughly $30 million to a more just in time level as opposed to a just in case one. We are also seeing efficiency in our revenue per dollar of capital spent. Our third quarter CapEx spend was $17 million. For the first nine months of 2015, CapEx spend was $88 million. As a continued part of our process improvements and prudent spending, we're revising full year 2015 CapEx downward to $120 million from $150 million. Additionally, we expect full year 2016 CapEx to come down even further to approximately $75 million as we continued to prioritize spending to meeting our customer's needs, maintain equipment, and make the strategic investments to upgrade our business management systems as part of the continued transition from a private to a public company. These capital reductions are sign of the times inappropriate, but our financial strength allows the flexibility to ramp up when the conditions warrant. Page 15 highlights the results we're seeing as our cost savings initiatives work their way through the EBITDA. When we first began implementing our plan, we saw a $0.88 drop in EBITDA for each dollar of lower revenue. From Q2 to Q3, we saw this ratio drop to $0.46 for each dollar of revenue and we would expect to see this trend continue. I want to reiterate that nearly one-third of these controlling what we can control initiatives, are not solely related to industry trends, but lasting improvements that we estimate will save the company $55 million on an annualized basis. This represents an upward revision from the $30 million we discussed in Q2 which will be a key element in our efforts to support our strong margins going forward. Closing with page 16, I would like to follow-up on the announcement yesterday regarding the distribution of approximately 119 million shares from our largest shareholder FWW B.V. to the 12 Mosing family beneficial owners. The governing documents of FWW established prior to the IPO provided the framework to allow the Mosing family members to ultimately take direct ownership of their shares in the company. The distribution accomplishes this end. There is a six-month lock-up period to sell shares outside of the existing Frank's shelf registration. After the six-month period, each owner will be eligible to manage their shares in a manner they deem appropriate within the boundaries of the typical insider transaction filings. We have not been informed of any timetable for the Mosing family to change their ownership position in the company nor are we aware that the family has a target level of total ownership in the company. However, we plan to work closely with the Mosing family if and when the time comes for a change in the total family ownership in an effort to ensure a smooth and orderly transaction in the marketplace. I will now turn the call back over to Gary for some final comments before we open the call up to Q&A. Gary P. Luquette - President, CEO & Member-Supervisory Board: Thanks, Jeff. Before we open the call up to your questions, I would like to talk a bit on our outlook for 2016, which can found on page 17. With the majority of our customers keenly focused on cash flow and responding accordingly with reduced capital budgets, it's unlikely that we would expect to see a recovery in the oilfield services space in 2016. We expect visibility to remain cloudy, activity to be muted, and further discussions around price relief expected in 2016. While painful in the short term, large reductions in capital spending are necessary to balance the oil supply demand fundamentals, and we believe we will begin to see the current imbalance narrow in the latter part of 2016. Even if commodity prices begin to show signs of recovery in the second half of 2016, it is doubtful our customers would have the confidence to increase capital spending that quickly. Therefore, we would not be surprised to see our full year revenues fall from 2015 levels. The amount of activity and the scope of activity lies in the hands of our operating customers around the world, but how we respond in terms of reducing cost, improving efficiency and demonstrating our value to the customers to compete for business is in our control. We are confident that even if 2016 offers additional downward pressure to the top line, we can deliver good margins and be cash flow neutral to positive at the trough of the cycle by controlling what we can control. Thank you for your time and attention. And with that, we will open up the call for questions.

Thank you. We will now begin the question and answer session. And from Credit Suisse, we have Jim Wicklund on line. Please go ahead. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Good morning, guys. Gary P. Luquette - President, CEO & Member-Supervisory Board: Good morning. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Good morning. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): You talked about the Middle East and Brazil as places you'd like to be, and I know that in the past, Brazil hasn't afforded you the pricing and margin opportunity you'd like, but just in general in addition to Exxon and Chevron, it seems that the most complex wells were part of the most complex and expensive projects and those are getting pushed to the right. Is this really the bottom line of what's hitting and are there opportunities really in the next couple of years in those two markets? Gary P. Luquette - President, CEO & Member-Supervisory Board: Jim, I think they are, and I'll tell you these big projects represent the largest accumulations, right. And you can slide those to the right and still preserve the projects, but at some point you're going to have to act and you've got to remember that many of these deepwater developments or pre-salt developments take many years in order to move from the exploration and evaluation phase all the way through development and then eventually first oil. So I think what's happening now is our customers are managing short-term cash flow needs, but at some point, you can't slide it to the right anymore without having lease expiration or some other consequence that would cause the project to move out of the inventory. So we're seeing this sliding to the right, but there is a limit at that. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Okay. We know there are complex wells in Brazil, but is there enough complexity in the Middle East to warrant, or we should expect to see, any meaningful improvement in markets whether it's acquired or not? Gary P. Luquette - President, CEO & Member-Supervisory Board: Well, the Middle East the attraction there is the staying power of the national oil companies and some of the improved economics just because of the lack of geologic, geophysical risk, reservoir risk, as well as well complexity. So not all markets are the same obviously, some markets represent higher margin opportunities, others represent a more stable base and managing the overall portfolio is what we're trying to do to keep top-line revenues at or higher than what we're seeing now.

Okay. And from Barclays we have David Anderson. Please go ahead.

Thank you. You mentioned about a shift of mix in work internationally, you say not as high margin, not requiring much hiring of equipment. Is this just primarily related to exploration activities starting to go away? I was just wondering if you could just kind of help us – kind of understand kind of which region as most pronounced? It looks like West Africa is probably the most. But can you kind of give us a little bit of a walk through on how it's shifting in other regions as well? Gary P. Luquette - President, CEO & Member-Supervisory Board: So it is mostly West Africa in the short-term. Obviously these big projects that are slipping to the right also have some pretty substantial well complexity challenges with them that also represent opportunities for higher margins, but those are ones we think eventually will have to eventually be committed to and executed. But in particular (28:33) we mentioned in my opening remarks the lack of economic success that they've had in the sub-salt play in Angola has really caused a huge shift in well complexity. We're pursuing other opportunities in West Africa to offset some of the loss that we see in this sub-salt play, but those would come with less complex wells and obviously less complex wells typically translates into a lower margin operation.

Understood. If I just shift my attention over to the Gulf of Mexico, the resiliency there was certainly a pleasant surprise this quarter. You had mentioned about in the release about customers are moving past operational delays, I was wondering if you could expand upon that comment a little bit and whether or not you think you've kind of hit this kind of stability level here in the Gulf. I know in the past couple of quarters you've talked about the same shift of business, kind of going away from kind of the drilling to other things. I was just wondering if you could kind of talk about those two elements. Gary P. Luquette - President, CEO & Member-Supervisory Board: Well, in our last quarter call we mentioned there were an abnormal amount of either infrastructure delays associated with installation problems. There were an abnormal high number of loop current impacts that set drilling back, as well as just some well drilling and completion problems. It was abnormal. We felt that, as we would move out of that quarter, we would start seeing some of that work pick up and we have. I'd love to tell you that our confidence that operational issues are going to go away and we're going to see a new normal that is reflected in what we saw this quarter, but it's really impossible to predict that. We'd like to think that our customers learn from some of their challenges and as they drill subsequent wells they build those learnings into their execution plan and avoid those, but it's just hard for us to predict that.

From Jefferies, we have Brad Handler online. Please go ahead.

Thanks. Good morning, guys. I guess I found myself trying to keep track of a couple of things, so if I ask you to repeat a little, forgive me. But I'm trying to sort through in the international markets the aggregate effect of pricing, the aggregate effect maybe of rig count, just in terms of trying to understand the revenue mix and then maybe better the margin impacts. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Sure. So this is Jeff Bird. So if you look at Africa, we saw about $2 million impact in the quarter from a pricing standpoint on a Q-on-Q basis. The rig count decline was specific to the pre-salt falling off and we've seen a little bit of mix there as well that impacted as well. The pre-salts tend to be the higher margin segment of our business; and as we move out of that, we see the margins come down as well, but about $2 million from a pricing standpoint.

Okay. And it sounds like you had a little in Latin America and Asia Pac as well. Was the aggregate impact of pricing just by eyeball regions, is it fairly flat in the quarter sequentially? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Sequentially fairly flat in the quarter on the International side.

From RBC, we have Kurt Hallead online. Please go ahead.

Hi, good morning. Gary P. Luquette - President, CEO & Member-Supervisory Board: Morning. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Morning.

I wanted to do get into maybe tubular services here a little bit. You had obviously a record quarter there, indicating that it'll come down in the fourth quarter. Maybe gauge how you're handicapping the magnitude of that change heading out into the fourth quarter and any initial prognostications on how you think the first quarter of 2016 might set up there? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Yeah. So this is Jeff Bird again. Specifically on the tubular segment, we talked earlier in the year we saw some subpar margins earlier in the year and we talked about those margins coming back to the 20% level. They exceeded that this quarter. They exceeded that this quarter primarily because, as we talked about, Tubular Sales can be pretty lumpy from quarter-to-quarter. So we wouldn't expect to see the level of sales that we had this quarter. It comes down to more of an average. If you really look at the average for the year, you're going to see that business come down to more of the average for the year. Things move sometimes from quarter-to-quarter and makes the numbers look odd there. But you can see the average revenue, if you average those first three quarters, that would be about the average in the fourth quarter with about a 20% margin. And then we're not really looking or commenting right now on 2016 outlook.

Got it. All right. That's good for me, thanks.

From Seaport Global Securities, we have Ken Sill online. Please go ahead.

Yeah. Hey, guys. I was really going to ask some housekeeping questions. We didn't get the guidance here on, with the cost cutting, what might happen to SG&A, what's going on with DD&A with the CapEx coming down, and then get an idea of the magnitude of head count reductions you guys have done so far. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Sure. So if we look through the end of the third quarter, we've eliminated about 1,000 positions from the beginning of the year till now. As I said on the last call, we're not going to make a big bang announcement about those things anymore. You're just going to see them in the releases and you're going to see the benefit of those falling through to the bottom line. You see that in the deleveraging side that we showed earlier that that's starting to go to the bottom line there. As far as CapEx, we're calling a CapEx number of about $75 million for next year. Now, that's down substantially from the $120 million that we're now advertising for this year. We'll continue to evaluate that $75 million and we could go either way with it. We've got a very strong balance sheet. So if we saw opportunistic areas where we needed to invest, we can certainly do that. But right now, $75 million is the target.

And what's going to be the impact on SG&A and DD&A run rate given the head count reductions and lower CapEx? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: So I'll speak specifically around – I think what you're asking if I understand is you're asking specifically around what the cost benefit is of the positions eliminated. And our overall productivity projects, inclusive of that, are base closures and positions eliminated. The annualized benefit of that is around $55 million.

From Simmons, we have Ian Macpherson on line. Please go ahead. Ian Macpherson - Simmons & Company International: Thanks. I appreciate the slides. Those are very helpful. I had a question on the Gulf of Mexico market share. That's a big impressive step-up in this past Q3. Is that a blip or have you taken a significant structural gain there that's going to be sustainable over the coming quarters there towards two-thirds market share? Gary P. Luquette - President, CEO & Member-Supervisory Board: I would like to think that it's a structural shift. But again, many of these projects are individual wells, are competitively bid. Rigs move from region to region. So this has always been kind of our backyard. It's an area where we have great capability, especially when we think about lower tertiary trend wells that require the highest of technology and capacities to be able to execute. So I'd love to think that there is a structural shift there that could be sustained, but it's hard to really be able to say that with any confidence. Ian Macpherson - Simmons & Company International: Okay. Fair enough. Thanks, Gary. And then I had a question separately on your land margins below breakeven currently. Is there a target or any opportunity to bring those up to better than break-even just through cost improvements or do you really need the markets to turn up in order to get margins positive there? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Sure, let me comment on that. I think a couple of things there. One is we continue to look at the cost base there. So we've shut down – year-to-date, we've closed 10 bases and we're continuing to evaluate that as we go forward, but there's certainly a level you reach where we wouldn't want to go below because this is a strategic business for us. And we really look at it over the entire cycle and we recognize that right now we might continue to operate below breakeven. But if you look at it over the entire market cycle, it's a very good business for us, and it's a business we want to be in. So we'll do some cost actions, but candidly we are going to need some market recovery to really get back above breakeven.

And from Goldman Sachs, we have Waqar Syed on line. Please go ahead. Waqar Mustafa Syed - Goldman Sachs & Co.: Thank you for taking my call. On International business line, could you give us a breakdown of how the land versus offshore business kind of tracks on a year-over-year basis and sequentially? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: We really don't break out the International business between land and onshore, so wouldn't want to comment on that. Waqar Mustafa Syed - Goldman Sachs & Co.: Okay. But generally, they were kind of in the same ballpark in terms of changes? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Yeah, I'd say they're in the same ballpark. Waqar Mustafa Syed - Goldman Sachs & Co.: Okay. And then on the M&A side, you mentioned complementary businesses, could you provide us with any color on what kind of business would you be interested in – maybe be interested in and secondly what's the appetite for debts on the balance sheet? Gary P. Luquette - President, CEO & Member-Supervisory Board: Okay. So when we talk about complementary product and service lines, it would be definitely limited to within the well construction space. There's still a lot of opportunities there. For instance, there's a lot of jewelry that is clamped on to casing and tubulars that we run. Obviously, that'd be an opportunity. We are looking at just about anything to increase our time on the rig floor. So when we talk about that sort of thing, we're looking at things that don't move too far out of our sweet spot, but things that would complement what we're good at and what our main business is today. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: And just building then on Gary's comment around debt on the balance sheet, we would up to 2 times trough EBITDA from a debt standpoint; we'd consider something in that range. Obviously, with having $0.5 billion on the balance sheet today, we've got a little bit of room to move before we have to worry about that.

From SunTrust, we have Chase Mulvehill on line. Please go ahead.

Yeah, thank you. Good morning. Gary P. Luquette - President, CEO & Member-Supervisory Board: Good morning. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Good morning.

So, I guess, the first question, I want to come back to Handler's question around pricing. I think prior comments around pricing was that you had given 5% to 10% price discounts. So where do we sit in regards to pricing average kind of across your business right now offshore? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: On the offshore side?

Yeah. Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: The offshore side is probably still in that 5% to 10% range and we talked earlier that – so if we talk about the three markets, U.S. Land's obviously been hit the hardest from a pricing standpoint. Second is Gulf of Mexico. In International, we've seen a little bit of movement, but we've not seen much movement at all on the International side. But overall, offshore is probably in that 5% to 10% range. If you start adding in the U.S. Land, that becomes a larger number.

Right, right, okay. And on the International side, how much did you say that 5% to 10%, is that more International or Gulf of Mexico? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: More weighed towards Gulf of Mexico right now.

Okay. All right. And the reason that you haven't seen it in International is just because that's more of a contracted business or how should we think about that? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: More contracted complex wells where, quite frankly, we've got the right technology and we can continue to maintain those margins. Gary P. Luquette - President, CEO & Member-Supervisory Board: And our national oil company customers and the IOCs that work for them have just not moved as quickly in the price space as we've seen in the U.S.

And from Credit Suisse, we have Jim Wicklund back online. Please go ahead. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Me again, guys. Gary P. Luquette - President, CEO & Member-Supervisory Board: Hey, Jim. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): Over the last couple of years, you guys have won some significant contracts that boosted your regional market share. Are there any material contracts floating around right now in the industry that would give someone a player to gain share in a particular market? Gary P. Luquette - President, CEO & Member-Supervisory Board: Jim, I don't think I would feel comfortable in answering that question just because obviously there's some competitive forces at place at work here, so I think we'll let that one just lie. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): That's okay, but the way you answered it still helped, so I appreciate that. Gary P. Luquette - President, CEO & Member-Supervisory Board: Yes. James Wicklund - Credit Suisse Securities (USA) LLC (Broker): And the last question U.S. onshore, you say, bounces back more quickly and sharply and I take it on a relative basis that at the expense of deepwater. So thinking that things move into balance next year, how much is the delay if U.S. onshore bounces back quickly and sharply, how much is there a delay before deepwater starts to respond? Gary P. Luquette - President, CEO & Member-Supervisory Board: Well, I think the deepwater response, Jim, is going to be more a function of lease obligations, lease schedules, and major capital project schedule than they're going to be pricing related. Obviously, if there is options to defer, because your risk profile is a little more difficult, a little more challenged in the deepwater, I would expect those to be slid to the right as far as the operator can, because those represent the more capital intense projects and if it's exploration or delineation drilling represents your highest risk profile wells. But as I mentioned earlier in response to a question, the fungibility of that program is limited and, at some point, you have to decide whether you're going to let that discovery go and allow it to go back into the till for others to bid on later or whether you're going to go ahead and commit to a project on the premise that you'll see price recovery longer term and that will intersect with the first oil schedule.

From SunTrust, we have Chase Mulvehill. Please go ahead.

Hey, thanks for letting me back in. So if we can kind of just hash out the 4Q outlook, I mean, if we kind of walk through each of them, the Tubular Sales is obviously going to be down, you talked about 20% margins, Gulf of Mexico sounds flattish. Obviously, whatever we think is going to happen here on U.S. onshore we can make our own assumptions there. So that just leaves International, if you can kind of just give us a little bit of color around revenue expectations and maybe margin expectations? Jeffrey J. Bird - Chief Financial Officer & Executive Vice President: Sure. I think that Q3 to Q4 International is going to be flattish as well. From a margin standpoint, we talked about the cost actions we're taking. You won't see a meaningful impact on those. In the fourth quarter, you will likely see that benefit more in the first quarter next year as we work through those, but I think you'd see it flattish from Q3 to Q4.

Okay. Awesome. Thank you.

And we have no further questions at this time. We will now turn it back to Blake Holcomb for final remarks. Blake Holcomb - Director – Investor Relations, Frank's International NV: Thank you, everybody, for joining the call today. If you have any follow-up questions, feel free to reach out to me in my contact information. Thank you very much.

Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.