Baker Hughes 3Q16 Earnings Call Notes

Baker Hughes (BHI) Q3 2016 Results

Martin S. Craighead – Baker Hughes, Inc.

Need oil prices in the mid 50s for a sustainable recovery

” As we said in July, and reiterated again in September, we continue to believe that oil prices in the mid to upper 50s are required for a sustainable recovery in North America. Our customers also need to be more confident on the durability of those oil prices before making any significant change to their spending patterns. As we previously projected, the North American market has been continuing to grind slowly upward and we expect that to continue. In order for a broader recovery to take place, a series of milestones need to be reached before the market can respond in a more predictable way.”

$65 needed in west Africa, $55 in North Sea

“We still have a very positive view on a dollar per barrel recovery cost. It makes all the sense in the world, but at these commodity prices, I think my customers in West Africa need about $65. I think it’s probably about $55 in the North Sea, and I think it’s about the same in the Gulf. And until we see that, as we’ve said before, you just have to have some period of stability for them to come back. The nice thing about that market, as you know, is the focus on technology, reliability, quality. That’s right up our alley, so we’re participating in managing our costs until that starts to recover.”

Gulf of Mexico probably wont recover until mid 2017

” I think that our customers, particularly our IOCs, are still struggling with cash flow issues. We have a significant operator there that told us recently the word from headquarters is you’re going to deploy your capital to some better opportunities, one international and one on land. And if you look at the 17 rigs or whatever drilling rigs that are out there today, I think 10 at most have a contract to go beyond Q2, the MODUs. Beyond Q2, I’ve got six or seven rigs that I don’t have visibility to. So I don’t see the Gulf of Mexico getting better until probably mid-2017.”

Core Labs 3Q16 Earnings Call Notes

Core Laboratories NV (CLB) CEO David Demshur on Q3 2016 Results

Crude supply/demand is balancing

“Thanks, Gwen. Core believes that worldwide crude oil supply and demand markets are close to balancing, and will balance by the end of 2016. On the crude oil supply side, U.S. production peaked at 9.7 million barrels a day in March of 2015, and has since fallen by over 1.3 million barrels per day owing to high decline curve rates associated with tight oil reservoirs.”

Avg productivity of a Bakken well is down 26% since peaking in 14

“An excellent example that the decline curve always wins and never sleeps and the difficulty in reversing fall in production totals in tight oil reservoirs is the Bakken [ph] formation. Bakken production is down over 233,000 barrels a day since its peak in December of 2014. Since that peak there have been 1,770 wells added to a producing base of 9,000 wells of production leading to Bakken’s net 12% decline curve rate over that period from December of 2014 up through August production. However, the average productivity for Bakken producing well is down 26% since peaking in 2014. As long as Bakken completions fall below 130 per month, Bakken production will continue to fall in 2017.”

The global production decline curve is approximately 3.3%

“Globally Core estimates that the net crude oil production decline curve is currently at approximately 3.3%. Applying the 3.3% net decline curve rate to the worldwide crude production of approximately 85 million barrels per day means that the planet will need to produce approximately 2.8 million new barrels by this date next year to maintain current worldwide production capacity.”

US production is probably going to be down once again in 17

” each individual well producing in the Bakken, which now number about 10,700, the productivity is down 26%. So to turn that decline out of these tight reservoirs is going to take Herculean effort. We just don’t see that happening in 2017, and hence we see production down in the U.S. once again.”

We don’t see an upward trajectory to US production until the second half of next year

“Yes, Marc, we actually — at the current rig count rates we actually don’t see a change in the trajectory of downward U.S. production. I would say at current levels, probably into second half of next year, maybe fourth quarter…We are — for us to see a significant change in U.S. production we would need to have about 900 rigs drilling for oil for a 12 to 18-month period. And that would get us on a trajectory where we could have strong additions to production.”

Halliburton 3Q16 Earnings Call Notes

Halliburton’s (HAL) CEO Dave Lesar on Q3 2016 Results

NA revs grew for the first time in 7 quarters. Animal spirits are alive if muted

” Our North America revenue grew 9% for the period, representing the first revenue increase in seven quarters. Our results improved as we took advantage of the rig count growth by focusing on increasing utilization and working our surface efficiency model. Our customers’ animal spirits remain alive and well in North America even though for some they may feel caged in a bit by cash flow constraints in the short-term. The average U.S. rig count increased 14% over the quarter, driven primarily by rig additions to smaller operators where we saw a trend of less service intensive wells, which is not activity typically worth chasing at today’s pricing.”

Customers may delay some drilling until 2017 but getting better

“Now, looking ahead to the fourth quarter on North America land, activity levels are difficult to call at this point. Based on current customer feedback, we remain cautious around customer activity due to holiday and seasonal weather related downturns. Our customers may take extended breaks, starting as early as Thanksgiving and push additional work to the first quarter of 2017. As one customer told me, Dave, it doesn’t make any sense for me to rent an efficient high-spec rig, if I have to start and stop all the time for the holidays or the last five weeks of the year. I just can’t get the efficiencies I’m paying for in the rig. I would rather just wait till next year to start drilling. And I believe we will see a lot of that mentality in the fourth quarter. But that being said, it does not change our view that things are getting better for us and our customers.”

International rig count should bottom in 1H17

“We expect to see a bottoming of the international rig count in the first half of 2017. Land-based mature field activity should lead the international recovery, while we expect the deepwater complex to remain so severely challenged for the foreseeable future. Even though the light at the end of the tunnel is getting brighter, there is no question we remain in a very challenging market.”

North America is the swing producer

“As we have said for some time, North America has assumed there role of swing producer in global oil production. Because of this shift away from production discipline, which was historically created by OPEC, our industry will likely experience shorter commodity price cycles going forward. So, we see the future market as a combination of shorter cycles and range-bound commodity prices. ”

The last cycle of $100 oil covered up terrible inefficiencies across the industry

“keep in mind, the last cycle of $100 oil covered up terrible inefficiencies across the industry. In today’s environment, asset utilization will be just as critical to improving margins. And I have full confidence we’re taking the necessary steps to achieve that. Positioning us for success while navigating through this deep cyclical downturn was one of the most intellectually stimulating management challenges we have ever had. ”

Still need oil above $50 to see meaningful increases in activity

“the North America unconventional market has responded the quickest demonstrated by the increase in recent rig count activity. However, we continue to believe meaningful activity increases from our customers will not start until we see sustainable commodity prices above $50 per barrel. “‘

Our customers are smart

“listen, our customers are smart, they see 2017 shaping up to be better and they’re going to try to lock in as much time and price as they can at this point in time.”

Jeff Miller

Still in oversupplied equipment market

“So, let’s start with North America. While the supply and demand balance for U.S. onshore services is heading in the right direction, we are still in an oversupplied equipment market. Our customers remain focused on cost and producing more barrels. ”

Pricing is still a brawl

“Pricing is still, yes, I’ll describe it overall as a brawl. As I said, we’re always pushing on pricing. We’re seeing small increases in different basins, but where we’re most focused around those customers with whom to collaborate the best. And I’ve always said that the tightening of utilization was a critical first step and we are beginning to see that”

The rock is different in every basin

“It’s always important to remember that Halliburton operates in every basin across the whole of North America. And what’s happening just in the Midland or Delaware, in the Permian isn’t — every basin, every rock is different. And so, we go to market where the customer needs to get the best well in those markets. ”

International usually lags North America by 6-9 months

“The international business traditionally lags North America by six to nine months. So, that’s just sort of broadly across all of the markets in terms of activity. And we’re continuing to see and if you look at sort of geographically outside of the resilience in the Middle East business, there’s been a substantial decline in activity commensurate with the commodities”

[Analyst Comment]

rigs going back to work may be driven by PE money

“There has been a lot made about the rigs that have gone to work so far have been low calorie rigs, private companies by private equity sponsor drilling wells, primarily in the Permian and trying to drill as cheap as they can. It would seem that in your market share progression that you’ve gone after bigger companies that work 24/7 that the drill complex wells. Has the move so for off the bottom been a rig count that is not clearly beneficial to you guys and is that one of the issues that will be solved as we get into 2017 and more established companies pick up drilling?”

Halliburton at Barclays Conference Notes

Jeff Miller – President

We’re on the road to recovery but this is the worst downturn we’ve ever seen

” I think the headline reads on the road to recovery. You have to look hard, but if you look at the red line, you’ll see on the road to recovery. But at the same time, I would describe this as sorting through the wreckage of the worst downturn that we’ve ever seen. We see the after-effects just about everywhere that we look. There have been more than 350,000 layoffs in the industry, mostly weighted towards oilfield services, some companies laying off as much as 80% of their workforce. At Halliburton we’ve laid off about 40% of our workforce. Bankruptcies and restructuring are quite commonplace today and CapEx has been radically reduced and asset sales are now strategy.”

We’ve found bottom

“So fundamentally, we’ve found bottom. I would describe it now is that we are in the early innings of a recovery. But what’s important to remember is we study the script every day and we look at oil price and all the other things that we do on a day-to-day basis. It’s important to remember that the starting point is from a 100 year low in activity”

Decline rates with capex spending lead to a 14m barrel per day gap

” The current decline rates, if we conservatively estimate those at 3%, are working on the slide behind me right now. What you’d see is that just a 3% decline rate. Again conservative means about a 14 million barrel per day gap grows over the next 5 years. What this model does not consider is what I like to describe as almost CapEx starvation, which would only serve to exacerbate that gap, meaning more that 14 million barrels per day.”

The unconventional barrel is the fastest barrel to market

“the unconventional barrel is simply put, the fastest incremental barrel of oil to market. That means it will be the first to fill demand, to fill the imaginary supply bucket that I described on the prior slide. In addition though, the unconventional barrel is the shortest cycle return barrel, which makes it an attractive barrel, not only for filling demand, but from a return stand point.”

Deepwater will be slowest to recovery

“The slowest recovery will be Deepwater. That’s really a duration question. It’s 7 to 10 years from discovery to barrels in the tank. It has 2 implications. The first being financial and it’s just as simple as more money upfront and a longer wait for a return, but then also from a demand standpoint in terms of filling that barrel.”

Brazil has stopped declining

” there are a few glimmer spots, I won’t call them bright spots. I’ll call them glimmering spots, but Brazil for example has stopped declining in activity and is doing what it can to make their reserves work in the current economy.”

Differentiation in service companies

“Service Company differentiation has never been clearer. On the one hand we have a competitor moving towards a distribution model, moving away from full service execution in the last mile, while on the other hand a competitor pursuing single source sector integration, basically saying we already know what you need, we’ll define it.”

Baker Hughes 2Q16 Earnings Call Notes

Baker Hughes’ (BHI) CEO Martin Craighead on Q2 2016 Results

The industry will remain in continued uncertainty until there are more foundational changes to supply and demand

“looking back over the past few months, it’s clear to me that the movement of oil prices has been driven more by one-off events such as temporary supply disruptions and not by changing the fundamentals underpinning supply and demand. Therefore, I believe the industry will remain in a period of continued uncertainty at least through the end of this year until more foundational changes to supply and demand create a more stable environment for our customers to plan against.”

We don’t expect to see a meaningful recovery in the second half of the year

“As we said in early May, we don’t expect to see a meaningful recovery in the second half of the year, and that’s still the case. While we’ve seen production edge down, particularly in North America, that has been offset by additional production elsewhere. While our customers have substantially slowed, reduced, or all together canceled a large number of exploratory and field development campaigns, I’ve yet to see an economic catalyst that will create a step change to demand, that would lead to materially higher oil prices. In addition, U.S. crude storage levels are at record highs and there is a significant backlog of crude in the form of drilled, but uncompleted or so-called DUC wells.”

Demand growth is only modestly higher than expectations at the beginning of the year

“On the demand side, growth is only forecasted to be modestly higher than expectations at the beginning of the year. In fact, the economic impact of recent events such as the Brexit vote leading to a stronger dollar and significantly weaker British pound has created more uncertainty and historically there’s been a strong correlation between a strengthening dollar and a weakening oil price, which could continue to be an unfavorable headwind.”

Many customers are planning to ramp activity at $50 but oil prices in upper $50s are required for a sustainable recovery

“Many of our customers, I speak to are standing pat at today’s oil prices. And yes, many say they will ramp activity as oil prices reach the $50 mark. However, like in past cycles, service sector costs will rise with increased activity and that will erode incremental cash margins for the operators. Accordingly, I believe oil prices in the upper $50s at a minimum are required for sustainable recovery in North America.”

Expect rig count to increase modestly in 2H16

“Despite a backlog of drilled but uncompleted wells to work through, we expect the North American rig count to increase modestly in the second half of 2016 driven by seasonal gains in Canada and a slight uptick in the U.S. market. I describe it as a slow grind upwards for North America. Internationally, we expect rig counts to continue slight declines in most countries for the second half of 2016.”

Schlumberger 2Q16 Earnings Call Notes

Schlumberger NV (SLB) Paal Kibsgaard on Q2 2016 Results

We have now reached the bottom of the cycle

“. In the second quarter, market condition worsened further in most parts of our global operations. But in spite of the continuing operational and commercial headwinds, we have now reached the bottom of the cycle.”

The cost of production per barrel has fallen significantly but there has been no major step change in underlying drivers of cost

“The operators have reacted to this crisis by initiating a massive reduction in oilfield activity and by sending unsustainable pricing shock throughout the entire oil industry supply chain. In addition, there is currently also a widespread high-grading of activity taking place in the industry aimed at maximizing short-term production and cash flow. Adding up all of this, the current cost per barrel for the oil producers now appears to be significantly lower than what was the case seven quarters ago. However, this should not be confused with a permanent improvement in the underlying industry performance as there has been little to no fundamental change in technology, quality or efficiency, no major step change in industry collaboration and no general transformation of the industry business model.”

The decline in cost has been a redistribution of profit away from servicers

“What has taken place over the past 21 months is, instead, a redistribution of the profit and cash flow shortfall from previously sitting mostly with the oil producers to now representing an unsustainable burden for the supplier industry even after a massive reduction of costs and capacity.”

We are heading toward significant global supply deficit

” assuming that we continue to see a steady growth in demand, we are heading towards a significant global supply deficit as the E&P spend rate now is down by more than 50%”

The market is underestimating the pricing power of servicers, which will further depress supply growth

“In addition, the market is also underestimating the potential reaction from the supplier industry, which has temporarily accepted financially unviable contracts to support the operators and to keep their options open as the downturn has deepened and extended into uncharted territory. This is seen by the service industry profit levels and also from their ballooning receivables balances caused by operators who are unable or unwilling to provide timely payments. It also means that, inevitably, service industry pricing has to recover and as it does, this will consume a large part of the E&P investment increases intended for additional activity which will further amplify the pending oil supply deficit.”

We have reached a bottom but the pickup will be slow and steady

“Well, that’s quite a broad question, Jim, but I would say that we are clear that we have reached the bottom of activity in North America land, and that activity will increase not in a V shape dramatic fashion but I think there will be a steady increase in rig counts and associated frac activity, both from the rigs as from wells coming out of the DUC inventory. Now again, I think the activity will be more slow and steady”

Halliburton 2Q16 Earnings Call Notes

Halliburton’s (HAL) CEO David Lesar on Q2 2016 Results

Revenue down only 9%

“Our total company revenue declined only 9% sequentially compared to the 19% decline in the global rig count. Our North America revenue was down 15% from the prior quarter, significantly outperforming a 23% decline in the average US rig count.”

Second quarter should mark the trough for our earnings

“despite these continuing headwinds, based on the recent improvements to North American activity, I believe that this second quarter will mark the trough for our earnings.”

Customers are thinking about growing their business again rather than focused on survival

“Now, conventional wisdom coming out of the first quarter was that the rig count would continue to drop. We said we saw North America differently and were the first to call a bottom for the rig count. This is precisely what happened. So let’s talk about the reality of today’s North America market. I can summarize this market in one sentence. Today our customers are thinking about growing their business again rather than being focused on survival.”

There is a growing survivor mentality out there

“I spent a large amount of time with customers late in the quarter taking their pulse and I can tell you there was a growing survivor mentality out there, and you can’t underestimate the positive change in attitude that we’re seeing in our North American customers. There is a spring in their step that I didn’t see earlier in the year and in almost every case, they are talking about adding rigs, buying assets or doing something value accretive. In short they are getting back to business.”

The animal spirits are back

“The psychological factors are getting better. Oil reaching $50 per barrel, even for a brief time, was a critical emotional milestone for our customers as was being able to buy a strip above $50 per barrel. So maybe it can be summed up best by one customer who told me, Dave, it’s actually a light at the end of the tunnel and not an incoming train. To borrow a Keynesian economic term, the animal spirits are back in North America”

Balance sheet repair is still critical for many customers

” understanding the economic reality in North America is equally important. Pricing has helped cash flow but not enough. Hedges rolling off have created cash flow uncertainty. Balance sheet repair is still critical and many customers are looking at severe declines in production as many of them have drilled few wells in the last 18 months. And while there are many customers that have adequate liquidity, there is also a large segment evaluating how to access capital. This evaluation is around whether to do dilutive equity deals, accessing the high yield markets, looking at Reserve Base lending or partnering with private equity”

North American producers know that they will be the first beneficiaries of supply shortages

“But the important point is, they are back in business. Now our North America customer management teams are great to work with. They are creative, adaptive and increasingly confident and I believe they will find the solutions best tailored for their companies. This is also a smart group and they see today’s looming supply shortfall and know that US unconventionals will likely be the first and deepest beneficiary of growing supply shortages. And you can be sure they want to reap some of that benefit.”

We need to find 2 Saudi Arabias worth of production in the next 5 years

” the last 2 years has been a period of significant under investment, where global CapEx has been reduced by nearly $400 billion. As a result, the industry will have to find a lot of new barrels in the next 5 years. Now, you can choose your own energy supply expert and there are many of them out there, but most agree we will need between 18 and 22 million barrels per day of new production by 2021. Meaning we have to find nearly 2 Saudi Arabias worth of production in the next 5 years. ”

To achieve that we need a supportive commodity price and we’re not there yet today

“To achieve this production goal, we believe there will need to be structural changes that have to happen. It clearly starts with a supportive commodity price and we’re not there yet today. The prices will have to get there soon or the supply challenges will be even greater.”

Current service pricing in North America is unsustainable

“Current service pricing in North America is unsustainable. We are in an environment where service providers are unable to meet their cost of capital and many are struggling to recover even their cash costs. Historically, as we reached the bottom, the downward momentum on pricing creates a headwind and margin repair tends to lag activity recovery by a quarter or so.”

We are prepared for the North American upcycle

“We are prepared for the North American upcycle. Our approach to the market remains unchanged. The North American market is turning. It will recovery the fastest and Halliburton will be the biggest beneficiary”

Mark McCollum

$3.5B termination fee associated with BHI

” as we’ve previously disclosed, we recognize the $3.5 billion termination fee associated with the Baker Hughes transaction. We also recognize pretax restructuring and other charges of $423 million”

Deepwater doesn’t work at these prices

“where pricing is today, it just doesn’t work generally in the deep water, especially the new deep water. So we’ve been focused on making sure that we get market share gains, even as the market has shrunk because in the long term, contracting nature of that market, when it does turn back up, you’ve got those contracts in hand and now market share becomes very sticky at that point in time.”

Jeffrey Miller

900 rigs will consume all the available horsepower in the market

“900 is the new 2,000 for US rig activity. Now what I mean by that? I believe it’ll the only take 900 rigs to consume all of the horsepower available in the market. Why? We know the North American market best and we’re in every single part of that market. What’s clear to us is that the increases in rig efficiency, lateral length and sand per well create a compounding effect that consumes increasingly more horsepower per rig.”

4m horsepower has been permanently removed from the market

“We believe up to four million horsepower and maybe even more has been permanently removed from the market, representing about 20% of the horsepower capacity reported at the peak and more is permanently impaired each day.”

It’s sentiment that trumps the oil price right now

” it’s a sentiment that trumps the oil price right now. Based on conversations, they are clearly more positive and constructive than they have been in the past, but realize we were starting at the worst part of the market”

Halliburton at Wells Fargo Conference Notes

Mark A. McCollum

Never been more differentiation between the service companies

“it strikes me at this point in time there is probably more differentiation between the major service companies than there ever has been. And so, if I am an investor in terms of thinking about who I would invest with, I don’t think at any point in time there has been a clear line of sight as to how everybody is attacking the market.”

Coming off the bottom, but lower slope recovery

“We think at this point in time in the cycle the market itself will be – we’re coming off of the bottom and we feel like we have kind of at the bottom at least in North American and approaching a bottom internationally. But that the recovery itself is going to be a lower slope recovery than maybe some others have been.”

This was a supply based downturn

” it’s probably not to going to be a straight line for the fact that this was a supply based downturn that you have a relatively low demand growth overall and the fact that North America is also now the swing producer in the world with relatively little energy policy and a free market at a lot of access to capital that the recovery itself may be somewhat choppy, because you have shorter cycles here, that as your best foot comes in prices modulate around the supply/demand equation.”

Unconventionals in NA are the swing supply

” let me also say that in this recovery we think that unconventionals in North America clearly are the first mover. They are the cheapest, fastest barrel to market and so they become the swing barrel, the incremental barrel out there.”

It is ugly out there from a pricing standpoint

” I mean clearly guys it is ugly right? I mean everybody is underwater at this point in time and there is – that’s you know, that is definition of an unsustainable market. Right? So, they cannot hold here for any of this and so we are going to do need some pricing relief here at some point of time. It’s really going to depend on who you are, where you are right? For us when we are negative, but yet, I mean essentially says you’re not covering your depreciation and may be some of the fixed cost allocation that’s you are making to your business, utilization actually becomes a more important factor than just price. “

Halliburton 1Q16 Earnings Call Notes

Dave Lesar

Obtaining anti-trust approval has become increasingly difficult

“From a regulatory perspective, we completely understood that the transaction would draw regulatory scrutiny and that substantial divestitures would be required to obtain regulatory approval. However, obtaining the U.S. anti-trust approval of large complex business combinations, regardless of the industry, has become increasingly time intensive and difficult, as evidenced by the termination and litigation of several other large proposed transactions over the last 16 months.”

Deterioration of oil prices also decimated the economics of the deal

“In addition to regulatory matters, the unprecedented deterioration of the oil and gas industry decimated the economics of the deal. During the pendency of the deal, the WTI price of oil has gone from over $76 in November of 2014 to a low of just over $26 in February of this year, while the global rig count has gone to a 17 year low and you all know what’s happened in North America, where each week we seem to hit new historical lows.”

People are more optimistic with oil prices higher, Q2 could be bottom for rig count

“I think that clearly they’re marginally more optimistic about things. I don’t think we’ve seen that optimism translated into any set plans to actively increase the rigs in the back half of the year, certainly those discussions are taking place. I think if you look at our release we put out last week, we thought the rig count would bottom in Q2, I think we still believe that’s the fact. But certainly, with the oil prices a little higher, people are more optimistic and we do think that potentially we’ll see an upswing in the rig count in the back half of the year.”

Independents are confident that they’ll get the money they need

“And I think given the nature of these companies and they are independents, they’re very confident in their own skill set, they’re confident in the acreage they have and I think that when they believe that the time is right to start drilling, they will do it. And generally, I think what we’ve seen is they’ll be able to get the money to do that either through commodity prices, or through going back into the equity markets or the debt markets. So, yeah, they are feeling better and I think they’re trying to survive to 2017 and then get on with things.”

Christian A. Garcia – Senior Vice President of Finance & Acting Chief Financial Officer

Jeffrey Allen Miller – President & Director

Lowest cost wins

“Commodity prices in markets will move up and down, but the one thing about which I am certain, one thing that won’t change over time is that the lowest cost per BOE wins.”

International cycles are usually longer than North America

“The international cycles are just longer, and so they are longer on the way down because structurally the contracts are longer, they’re also slower on the uptick as well. So, I don’t expect to see improvement internationally until we see some improvement in North America. That timeframe has usually been six months to a year in terms of the lag between North America and the rest of the world”

National Oilwell Varco 1Q16 Earnings Call Notes

Clay C. Williams – Chairman, President & Chief Executive Officer

The internet of things is coming to the oilfield

“We believe that condition-based remote monitoring of oilfield equipment and predictive data analytics will grow in importance in the next upturn as the industry increasingly employs more sophisticated equipment in more demanding environments. The Internet of Things is coming to the oilfield and NOV will continue to lead the way, and will benefit from the largest installed base of drilling equipment and drilling control systems in the world. Hydraulic fracture simulation is another enabling technology with proven value to the industry.”

Some customers are beginning to think about a potential upturn

“While we are not planning for a recovery in 2016, we are encouraged by reports from some customers that they are beginning to think about a potential upturn in the second half of the year as oil production has finally begun to rollover and demand continues to march upward.”

Business is now down to a subsistence level

“What I would tell you is, although orders are very, very slow now, business is obviously down to sort of subsistence levels, looking out in coming quarters we expect to see a resumption of land rig projects. We have a number of conversations underway around the globe. We expect to see drilling contractors continuing to upgrade their equipment and make their rigs more competitive in a market that’s a little tougher on them.”

M&A has become more of a buyers market

We do think it’s steadily become more of a buyer’s market, frankly, through the past year and half, and so we’re trying to be very selective, very disciplined in our application of capital, and so we’re looking at opportunities but nothing to report yet.”

We have plenty of capacity but you’ll need to see prices rise and stay there for customers to increase activity

“we have an abundance of capacity, so as soon as a purchase order comes in, I think we can respond pretty quickly. From a macro perspective though, I do think commodity prices have to go up and they have to stay there a while before you really see activity and purchasing follow that as customers repair balance sheets and basically get comfortable that commodity prices are going to stay high for a while and so kind of the activity recovery will lag the commodity price recovery, I believe. But when the activity recovery comes though, we are very encouraged and anxious to move forward with a lot of the new ideas that we outlined in the call.”