Greetings, and welcome to the Newpark Resources Third Quarter Earnings Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ken Dennard.

Thank you, Mr. Dennard. You may begin..

Thanks, operator, and good morning, everyone. We appreciate you joining us for the Newpark Resources conference call and webcast to review third quarter 2019 results. With me today are Paul Howes, Newpark's President and Chief Executive Officer; Gregg Piontek, Chief Financial Officer; and David Paterson, President of The Fluids Business.

Following my remarks, management will provide a high-level commentary on the financial details of the third quarter and outlook before opening the call to Q&A. Before I turn the call over to management, I have a few housekeeping details to run through.

There will be a replay of today's call, and it'll be available by webcast on the company's website at newpark.com. There'll also be a recorded replay available until November 14, 2019, and that information to access it is in yesterday's release.

Please note that the information reported on this call speaks only as of today, October 31, 2019, and therefore, you're advised that time-sensitive information may no longer be accurate as of the - any time of the replay listening or transcript reading.

In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws. These forward-looking statements reflect the current views of Newpark's management.

However, various risks, uncertainties and contingencies could cause Newpark's actual results, performance or achievements to differ materially from those expressed in the statements made by management.

The listener is encouraged to read the annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies. The comments today may also include certain non-GAAP financial measures.

Additional details and reconciliation to the most directly comparable GAAP financial measures are included in the quarterly press release, which will be found on Newpark's website. And now with that being said, I'd like to turn the call over to Newpark's President and CEO, Mr. Paul Howes..

Thank you, Ken, and good morning, everyone. Although the slowdown in the U.S. land market provided a greater headwind to the third quarter than we anticipated, I'm very pleased with the continued execution of our strategic playbook across both segments. In Fluids, our deepwater Gulf of Mexico expansion continues to gain traction.

Last quarter, we announced the award of a third rig with Shell Oil as well as our first award of a combined drilling and completion fluids package. In recent weeks, the first combined fluids project was completed, generating favorable customer feedback.

Building on this initial success, our scheduled combined fluid projects in the Gulf is expanding with four projects currently scheduled to be completed over the next few quarters.

As discussed previously, our expansion into completion fluids is meaningful, not only because it allows us to provide a combined drilling and completion package that customers value, but also because it expands our revenue potential in each well and helps stabilize our revenue stream as operators move between drilling and completion phases.

Furthermore, we continue to build out our completion fluids technology portfolio. As included in yesterday's press release, we are very pleased to announce the acquisition of Cleansorb Limited, a leading global provider of specialty reservoir chemistry based in the United Kingdom, for cash consideration of $19 million.

Over the past 25 years, Cleansorb has become a recognized leader in innovative improvement completion fluids technology, supporting several of Newpark's international contracts and also currently supplying key products into Saudi Arabia.

Cleansorb's line of patented breaker products serves as a value-add to our total fluid solution offering, particularly for deepwater applications, both in the Gulf of Mexico and internationally. I'm also pleased to highlight several key wins on international tenders during the third quarter, which expands our relationships with global operators.

The awards include a three year contract for combined drilling and completion fluids with ENI to support their offshore Cyprus drilling campaign, along with a two year contract with PTT EP in Algeria. Both contracts are expected to begin in the first half of 2020 and combined generate additional revenues of $15 million to $20 million per year.

We were also successful in the latest round of tendering with OMV Petrom in Romania who has been a key customer of ours for several years. The latest contract award extends our work for an additional five years where we expect revenue levels to remain relatively in line with our current contract.

These recent successes, both in the Gulf of Mexico and international markets, are key steps in expanding our role with more stable IOCs and NOCs, which together represent roughly one-third of our Fluids segment revenues. Rounding out our total Fluids solution offering, we're also continuing to advance our organic entry into stimulation chemicals.

And while the pace for these organic commercialization efforts never seem to progress at the rate we prefer, customer conversations continue to be constructive and validate our business model.

In many ways, our entry into stimulation chemicals feels similar to our entry into the deepwater Gulf of Mexico, marked by a slow and methodical qualification process. And although U.S.

market headwinds are impacting the pace of commercialization, we are continuing to work through qualifications and trials with an expanding list of customers and remain confident that the multibillion-dollar stimulation chemical market provides significant long-term expansion opportunity.

In our Mats business, we continue to be encouraged by the progress of our energy infrastructure expansion where rental and service revenues have increased for the fourth consecutive quarter. Against the backdrop of the volatile U.S.

land E&P market, the energy infrastructure space provides a more attractive landscape, both in terms of market stability and growth potential. To further penetrate these markets, we are continuing to transition our rental fleet, both by shifting assets as E&P markets soften and increasing the size of the rental fleet.

As we look ahead, we expect our energy infrastructure growth will continue to provide some buffer for the impact of the softening U.S. E&P land market and drive a shift in the mix of rental and service revenue toward less volatile markets. With that, let me now to touch on a few financial highlights from the quarter.

Despite our strategic progress, the third quarter results were negatively impacted by the challenging U.S. E&P land market, which provided a headwind to both segments.

In the Mats segment, revenues improved 14% sequentially, benefiting primarily from the anticipated rebound in mat sales and modest growth from energy infrastructure, rental and service projects.

The segment's operating margin was 20% for the third quarter as the impact of the higher revenue level was offset by changes in revenue mix and the timing of certain expenses. In Fluids, third quarter revenues declined 12% sequentially, primarily reflecting softness across most U.S.

land markets as well as a $5 million reduction in the Gulf of Mexico related to project timing. Meanwhile, revenues from our international fluid operations decreased 8% sequentially, driven primarily by the continued contract transition with Sonatrach in Algeria. With the rapid decline in revenues within certain U.S.

regions, the Fluids operating margin pulled back to 4% for the third quarter. Meanwhile, our disciplined approach continues to result in positive free cash flow generation during the third quarter.

Through the first 9 months, we've generated $24 million of free cash flow, of which roughly $20 million has been returned to shareholders through share repurchases.

And with that, I'd like to turn the call over to David Paterson, our new President of The Fluids Systems business, to provide some initial thoughts based on his first 3 months with Newpark.

David?.

Thank you, Paul, for the introduction. It's a great honor to join Newpark, and I'm very excited about the opportunity to work with the most dynamic company in the fluids space today.

I've spent most of my career working in and around the fluids space, and although the competitive landscape has changed a lot in recent years, I feel Newpark is ideally placed to capitalize on the evolving market conditions. To date, Newpark is the only truly global independent fluids company, and we're extremely focused on what we do.

This is what attracted me to Newpark. And as I talk to more of our customers, they really appreciate our focus on fluids and the caliber of professionals we have in the Newpark team. Since joining the company in mid-July, I've traveled extensively to meet our team, both internationally and here in the U.S.

We have a fantastic team in place with extensive technical depth and many years of field experience in key locations around the world, some things our customers really value. Our technologies, particularly in the high-performance water-based fluids and deepwater synthetic fluids space are industry-leading in terms of performance.

I've also been extremely impressed with the level of investment that Newpark has made in recent years, building out its capabilities and infrastructure to support its global growth.

Our Technology Center in Katy, Texas sets the global standard in laboratory support and analytical capabilities for drilling, completion and stimulation fluids, and we continue taking steps to bring this capability closer to our customers, recently opening a new laboratory in Abu Dhabi.

Our fluids operating business are also establishing an enviable reputation as the industry flagship facilities in key markets.

I visited a number of our sites, including Port Fourchon, Louisiana as well as the Burgan field in Kuwait, and both of these facilities surpass anything I've seen throughout my career in terms of fluid blending and loading capabilities and in finding that our customers are really starting to appreciate this differentiation.

When I look at the fluids space today, the market is very dynamic and it's imperative we remain agile, responding quickly to the challenges and opportunities. It's clear that there's not one single playbook that fits all fluids markets.

We're refining our tailored strategies by market, selectively expanding our footprint in certain international markets, which have demonstrated greater stability and profitability over the longer term whilst also evaluating the outlook for underperforming areas.

In North America, we're expanding our deepwater business in the Gulf of Mexico, while taking actions to further enable a more efficient and scalable cost structure on U.S. land.

Each market will require a different approach, but what remains common to all is our unrelenting focus on responsiveness to our customer needs and the deployment of leading fluids technologies to drive better performance on our customers' wells. Looking to the future, expanding our global footprint is a high priority for us.

We remain selective on where we go, and we will exercise capital discipline in any new country entry. But we are seeing increasing pull from our customers, particularly the IOCs, who recognize our value as they enter into new markets.

Our recent deepwater win in the Mediterranean with ENI is a fantastic example of this, allowing us to demonstrate the value of our environmentally friendly water-based systems. We also continue to pursue a number of other opportunities in international markets where drilling activity is expected to increase in 2020.

Deepwater expansion in the Gulf of Mexico remains a key strategic growth pillar, and although it's yet to reach critical mass in terms of volume, we are poised to do so in the coming quarters.

Projected market activity in the Gulf remains stable, and our performance pedigree and best-in-class facilities position us very well for future growth in this market. The U.S.

land market also remains extremely important to us, and despite the market headwinds the industry faces, we continue to progress in offering differentiated technologies to address the many challenges that our customers face today.

The latest generation of evolution, our high-performance and environmentally friendly water-based system, continues to gain traction in new multiple basins, but particularly in the Rockies, which further strengthens our position as a technology leader. Meanwhile, our West Texas Permian operation, which remains our largest region in U.S.

land, looks poised for further market expansion. However, the current market is very challenges in several basins, and we're continuing to evaluate opportunities to right size our organization in the areas that have been the hardest hit. But in doing so, maintaining a scalable platform to quickly respond should activity recover.

We also continue to develop our stimulation chemical capabilities and regenerate a lot of customer interest in both our technologies and our unique approach. Although we are primarily focused on the large U.S.

stim market, we have recently secured repeat stim chemicals sales in the Middle East, so we definitely see an opportunity to build a global stimulation chemical business over time. Being a fluids-focused company remains very much at the heart of what we do and how we will operate going forward.

We continue to look at developing our capabilities and expanding our portfolio with new fluids technologies and other complementary offerings within the space. The recent Cleansorb acquisition is a great example of this as we build out our reservoir drilling and completion fluids offering.

Like Newpark, Cleansorb is a recognized technical leader in their space with a strong reputation in stable markets. And we've already received a lot of positive customers' feedback on this strategic acquisition. So despite the market challenges in the U.S.

land business, I remain very excited about the strategy, our focused approach to the Fluids business and our growing momentum in key markets, which are all critical to driving improvements and stability in our financial performance going forward. And with that, I will hand it over to Gregg..

Thanks, David, and good morning, everyone. I'll begin by covering the specifics of the segment and consolidated operating results for the quarter followed by an update on our near-term outlook.

The Fluids Systems segment generated total revenues of $153 million for the third quarter of 2019, reflecting a 12% sequential decrease and a 16% year-over-year decrease. Revenues in the U.S. declined 16% sequentially to $98 million, which compares to a 7% reduction in U.S. rig count.

As Paul touched on, the softness was felt across most basins with West Texas being the only exception. While we've maintained our disciplined approach to pricing, the softer top line performance relative to activity levels was reflective of increasingly competitive conditions in certain regions.

In addition, despite our continued deepwater market share expansion, due to the timing of these large-scale projects within the quarters, revenues in the Gulf of Mexico declined $5 million sequentially. On a year-over-year basis, U.S.

revenues declined 8% from Q3 of 2018, which compares favorably to the 12% reduction in average rig count over the same period. The modest outperformance compared to market activity levels is primarily attributable to a $6 million increase in the Gulf of Mexico, while land revenues have tracked fairly closely to the market rig count.

In Canada, although the market activity levels in 2019 continued to remain well below recent years, revenues followed the typical seasonal trend coming out of spring breakup. Revenues in Canada improved 61% sequentially to $8 million, in line with the 61% sequential increase in rig count.

On a year-over-year basis, Canada revenues declined by 53%, which compares to a 37% reduction in rig count. Outside of North America, although customer activity levels in our key markets remain much more stable than U.S.

land, the third quarter was negatively impacted by the contract transition in Algeria, which has now reached the new contract run rate.

Total international Fluids revenues were $46 million in the third quarter, which reflects an 8% sequential decline, driven primarily by the contract transition in Algeria and project timing in Romania, partially offset by the ramp-up of drilling activity under the new contract in Kuwait.

On a year-over-year basis, revenues from our international regions declined by 19%, largely reflecting the contract transitions in Brazil and Algeria. With the slowdown on activity in certain U.S.

markets, particularly during the back half of the third quarter, the Fluids segment operating margin was impacted by the natural lag in operating cost adjustments as we align our structure to match the softer market conditions.

As a result, the decremental margin associated with the revenue decline was elevated for the quarter, causing a decline in operating margin to 4% for the third quarter compared to 7% in the second quarter and 5% in the third quarter of last year.

Turning to the Mats business, total segment revenues improved to $50 million in the third quarter, representing a 14% sequential improvement and an 8% reduction year-over-year. The sequential improvement was driven by an $8 million increase in direct mat sales, which came in at $15 million for the third quarter.

Mat rental and service revenues declined by $2 million to $36 million for the third quarter, reflecting the continued softening of E&P customer activity, particularly in the gas-focused Northeast region and West Texas completion activity.

Rental and service revenues from E&P markets declined 11% sequentially, somewhat offset by a modest improvement in the energy infrastructure sector, most notably from our ongoing expansion in utility T&D activity.

Comparing to the third quarter of last year, the 8% decline in segment revenues includes a $7 million decrease in rental and service, while direct mat sales improved by $3 million.

On the rental and service side, the year-over-year comparison reflects the continued transition in the business as a 35% decline from E&P markets is partially offset by a 22% increase in non-E&P markets, most notably U.S. energy infrastructure.

Year-to-date, our total rental and service revenues from non-E&P markets is approximately $50 million, which represents roughly 10% year-over-year growth. The Mats segment operating margin was 20% for the third quarter compared to 21% for the second quarter and 24% for the third quarter of last year.

Despite the sequential improvement in revenues, the segment's third quarter operating margin was negatively impacted by a shift in customer mix and elevated level of pass-through costs on service projects as well as the timing of certain expenses.

Turning to our consolidated results, third quarter 2019 revenues were $203 million, representing a 6% decline from the prior quarter and a 14% decline year-over-year. SG&A costs were $27 million in the third quarter compared to $28 million in the second quarter and $30 million in the third quarter of last year.

Corporate office expenses were $9.7 million in the third quarter compared to $10.5 million in the second quarter and $11.2 million in the third quarter of last year.

The sequential decrease in both SG&A and corporate office is primarily attributable to lower spending associated with our strategic planning project and lower performance based incentives, partially offset by elevated costs associated with the Cleansorb acquisition.

On a year-over-year basis, the reduction in SG&A and corporate office expense is primarily attributable to a prior year charge related to the retirement of our former General Counsel, while lower performance based incentive expense was largely offset by higher acquisition and strategic planning costs.

Interest expense was $3.6 million for the third quarter, relatively in line with the previous quarter and down modestly from $3.7 million in the third quarter of last year. The third quarter expense includes $2 million of cash interest, along with $1.6 million of non-cash interest expense, which primarily relates to our convertible bonds.

The third quarter provision for income taxes was $3.3 million, including a $2 million charge, primarily reflecting the impact of an increase in our projected full year 2019 tax rate, which increased significantly as a result of the decline in anticipated earnings in the U.S. relative to our total projected pre-tax income.

Consequently, the third quarter tax rate is significantly elevated from the effective tax rate of 33% in the prior quarter and 44% in the third quarter of 2018.

With the impact of the higher taxes, net loss for the third quarter was $0.02 per share, which compares to net income of $0.05 per diluted share in the second quarter and $0.04 per diluted share in the third quarter of last year.

Turning to cash flow, the third quarter results reflect a continued generation of positive free cash flow, which came in at $8 million for the quarter. Third quarter cash provided by operating activities was $19 million, which includes $15 million of cash from operations, along with $4 million net decrease in working capital.

Cash used in investing activities was $11 million in the quarter, the majority of which was deployed into the Mats business, while cash used in financing activities totaled $6 million.

Our leverage remains modest and with a total debt balance of $162 million and a cash balance of $54 million as of the end of the third quarter, resulting in a total debt-to-capital ratio of 22% and a net debt-to-capital ratio of 16%.

Now turning to our near-term outlook, in Fluids, on the positive note, we continue to see strength in our targeted growth markets. Most notably, with the third Shell deepwater rig starting up and our expanding presence in completion fluids, we expect our Gulf of Mexico revenues to improve in the fourth quarter.

We also expect modest strengthening in our EMEA region, benefiting from increasing activity with ENI and Shell as well as the Cleansorb acquisition, which are expected to more than offset the wind down of the Woodside project in offshore Australia.

However, despite this progress, we anticipate the near-term results will be overshadowed by the weakness in U.S. land where rig counts currently stand 10% below the Q3 average, and customer messaging indicates that we should expect a more pronounced year-end slow down before they reset their activities in January.

Overall, we anticipate Q4 revenues will decline roughly 10% from Q3 levels with an operating margin in the lower single-digit range. Looking beyond Q4, we see several catalysts for improvements in Fluids, including an unexpected modest improvement in U.S.

land, continued penetration and improved stability in the Gulf of Mexico, seasonal strengthening in Canada and the continued ramp-up of activity under contracts in the international markets. We also believe 2020 provides additional opportunities for U.S. stimulation chemical sales as many operators award tenders on an annual basis.

In the Mats segment, we expect the market weakness in the gas focused Northeast as well as in West Texas completions applications will continue providing a headwind to our near-term rental and service revenues, while our ongoing penetration of energy infrastructure markets will remain relatively stable.

Direct mats sales activity is also expected to remain stable following the strong third quarter result as we typically see stronger demand near the end of each year.

So while the timing of direct sales and project start dates is always a bit challenging to predict, we currently expect total Q4 segment revenues to pull back into the low to mid-40s range, generating an operating margin in the low 20s range.

Regarding corporate office spending, with the strategic planning effort and the Cleansorb acquisition cost now behind us, we expect Q4 expense will return to the $8 million to $9 million range.

Regarding cash flow, we are carefully balancing the execution of our strategy while taking appropriate actions to navigate the challenging market environment in the U.S. land, which calls for a more bifurcated view on capital deployment.

On one side, we are continuing to fund our strategic initiatives, which primarily include investments required to support offshore and international fluids growth, along with ongoing investments to support our mats expansion in the energy infrastructure rental market. Meanwhile, investments into the U.S. land market will remain minimal.

Overall, we expect our capital investments will decline somewhat in the near term as we maintain our full year expectation of $40 million to $45 million.

And although we funded the Cleansorb acquisition following the end of the quarter, it's worth noting that we're continuing to repatriate excess cash from our foreign subsidiaries, serving to substantially offset the acquisition's impact on our total debt balance.

Further, I'd like to highlight that as we've seen historically, periods of market softness provide a tailwind to free cash flow generation, driven by reductions in working capital. Regarding taxes, with the continued weakness in U.S. operations, we currently expect our tax rate will remain significantly elevated for the remainder of 2019.

And with that, I'd like to turn the call back over to Paul for his concluding remarks..

to maintain a strong balance sheet, to improve our returns on invested capital by leveraging our existing infrastructure and maintaining a capital light model and to provide increased stability in our long-term cash flow generation through further penetration of more stable markets.

In summary, we continue to build upon our solid foundation, and the recent volatility only reinforces our resolve to execute on our strategy.

With that, I'd like to close the call, as I always do, by thanking our shareholders for investing in us and thanking our employees for their hard work and dedication in Newpark as well as the continued focus on safety. We'll now take your questions.

Operator?.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Praveen Narra, Raymond James. Please proceed with your question..

Good morning, guys..

Good morning..

I guess if we could think through kind of how we should expect fluid margins to kind of trend into 2020, I know it's still a bit early, but it seems like given Q4 has so many headwinds, that we should see some tailwinds there. But I guess I want to understand how much it'll take to see margins get back into the mid- to high single digits.

Do we need to see the U.S.

rig activity increase? Or is there enough cost-cutting and other measures going on that we can see that occur at Q3-ish type activity level?.

All right. It's Gregg. I'll take that one. In terms of the margin profile, what I will say is it's a bit murky right now because you have some more meaningful movements in the overall activity levels. And as you know, Praveen, that's the challenge that you always have is adjusting your cost structure when the volumes are changing.

Now we were obviously making nice progress early in the year with our various margin improvement initiatives. We're seeing nice improvement in the U.S. in Q1 and Q2, obviously, with the top line dropping off to that extent it did in Q3. And that actual lag there that you have in your cost adjustments, we saw that headwind.

Now as we go into Q4 as we framed up a softer top line, particularly in the U.S., but this is where we're continuing to take these cost actions here to right size it and, as David had touched on trying to drive this more towards a variable cost structure to make it more scalable.

Now obviously, as you fast forward then into next year that's where you do see some benefits that do help you that helps strengthen that margin. Obviously, you have your cost actions you're taking, but then also the point of continuing to expand in the Gulf of Mexico, that's a key piece of it because that's a key accretive portion to it as well..

Yes. I think the other thing, as we've talked to around our total fluids solution is the fact that as we move into these adjacent chemistries, we're building momentum on the completion fluids side. That's accretive to margin, the deepwater.

Our beginning success from the stimulation market, as you look out into 2020, as you move into the first half and beyond, we think there's a lot of opportunity to improve margin. But what we really need, I think, more than anything else is some stability in the U.S. land market.

So if it stays relatively stable or uplifts slightly, that gives us more buoyancy with these other product lines that we'll be adding on..

Right. Stability can kind of stop masking some of the benefits that are happening..

Yes. Exactly..

On the mats side, can you talk about the expanding rental projects? One of the things, I guess, we've been talking about for a little while is the potential for some of these larger projects to come through.

Is that something we're seeing in terms of either Q4 or 2020? Or is it project sizes in the utility space staying relatively similar?.

Yes. No, the - we are starting to see that. Here in the third quarter, as we talked in the last quarter. Historically, third quarter had been a weaker period from seasonality, from the demands on the utility grid. We actually saw growth here in the third quarter, and that was because we had a few of these larger-scale projects that were coming on.

We continue to gain traction in that area. We are adding more of these larger scale projects, which is also in part why we're having to deploy additional capital to build out that fleet that's dedicated towards that. So we would expect that to continue to build as we progress into 2020..

Yes. The other thought too, as we look at the tender activity, as you're looking out into 2020, we're currently build out - bidding on tenders that have larger mat requirements than we would traditionally see in the E&P space..

I guess I would just add to it that we still are very early in that penetration..

Absolutely..

Yes, sure. Thank you very much, guys..

[Operator Instructions] Our next question is from Bill Dezellem, Tieton Capital Management. Please proceed with your question..

Thank you. I'm actually going to try to squeeze three questions in. The first one is relative to Sonatrach, you said that they were fully ramped.

Were they fully rammed in the third quarter? Or is there still some movement up into Q4 to reach the current full year ramp level?.

No. The third quarter pretty much reflects the new run rate..

Yes. We are - Sonatrach is ramping down, Bill. Where we're seeing the ramping up of a contract in the EMEA region is with KOC in Kuwait. So that contract is coming up, while the Sonatrach contract in Algeria was ramping down. And now we believe we're at that run rate now for that new contract in Algeria..

Great. And then would you talk a bit more about Cleansorb? Talk to what it adds for you and how far around the globe you believe you can take that or those capabilities. Just as much detail as you can. Feel free to just get on the soapbox and go..

Good morning, Bill. This is David Paterson. So Cleansorb is a supplier of innovative improvement completion fluids technology and leading U.K. company.

And their ORCA line of products, their advanced filter cake breakers, which are designed really in conjunction, tailor designed with the reservoir drilling fluids, or the RDS, that you'll hear us talk about. Its application is an open-hole completions. So this is really the very high-end, reservoir-facing part of the business.

Customers are extremely critical about what it's exposed to the reservoirs, obviously. So it really represents a key component, obviously, in Newpark's total fluid solutions strategy really in the high-value markets. And that really enables us to be a technology leader in the space. Very excited that their biggest footprint is in Saudi Arabia.

Saudi Arabia is a small market today for Newpark, but we're seeing more and more doors open in the Kingdom. And I think Cleansorb's technical standing in the Kingdom really will facilitate business opportunities going forward. So very excited about it. Applications in a lot of key markets around the world..

And then following up on that, is there Saudi penetration on land or offshore? Or is the question even relevant today or equally good on both?.

So most people kind of relate land operations with Saudi Arabia. Most of that location is actually on the offshore fields at the moment. But I think there's increasing awareness on the performance of these products.

And as we look to expand our own fluids offering within the Kingdom, I think you'll see strong opportunities for Cleansorb and other Newpark technologies in the coming years in Saudi Arabia..

Great, thank you.

And then my final question is relative to the Gulf of Mexico and kind of how you see the drilling schedule unfolding for the rigs that you are on, what can you share with us relative to the next couple of quarters?.

So I think Q2 was a pretty strong activity quarter for us in the Gulf of Mexico. Q3, there was some operational rig delays that impacted, really, our business in Q3. Q4, we see it getting back to a more stable revenue stream.

And with the addition of our Fourchon 2 completion fluids plant, this really allows us to stay on these rigs from spud, through drilling, through TD, through completions. So we're really on the full cycle. We get the revenue benefit of staying on the rig longer through that full cycle.

And we do see a return to drilling in Q4, and we're going to see some strong completion fluids activity also with Shell that we haven't seen in prior quarters. Looking forward to Q1, we see similar type of levels that we're expecting in Q4..

And I would add to it, that stability is another key piece of the operating margin story because the cost structure to support that deepwater is a much more fixed cost structure. So as you see variability in the top line, it obviously creates some challenges to your margins.

So getting to that stability, as David touches on, is a key piece of strengthening the Fluids margin as a whole..

Thank you, both..

Thank you, Bill..

This concludes the question-and-answer session, and I will now turn the call back over to management for closing comments..

All right. Thank you once again for joining us on the call and for your interest in Newpark, and we look forward to speaking with you again next quarter..

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day..