Blake Holcomb - Frank's International NV Gary P. Luquette - Frank's International NV Jeffrey J. Bird - Frank's International NV Burney J. Latiolais - Frank's International NV.

Sean C. Meakim - JPMorgan Securities LLC James Wicklund - Credit Suisse Securities (USA) LLC (Broker) Kurt Hallead - RBC Capital Markets LLC Igor Levi - Morgan Stanley & Co. LLC Blake Allen Hutchinson - Howard Weil B. Chase Mulvehill - Wolfe Research, LLC.

Good morning and welcome to the Frank's International Third Quarter 2016 Earnings Call. My name is Brandon, and I'll 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 would now turn it over to Blake Holcomb.

You may begin, sir..

Thanks, Brandon. Good morning, everyone and welcome to the Frank's International conference call to discuss the third quarter 2016 earnings. I'm 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; and B.J.

Latiolais, Executive Vice President of Global Operations. We have posted a presentation on our website that we will refer to throughout this call. If you'd like to view this presentation, please go to the Investors section of our website at franksinternational.com. Gary will begin today's call with operational highlights and an overview of the quarter.

Jeff will then provide additional detail on our operations and financial results. Gary will then conclude with his closing remarks. Everyone will be available for questions after the 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're a few legal items we'd like to cover beginning on page three. 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 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 franksinternational.com. There you may also access both the third quarter earnings press release and a replay of this call.

Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in the third quarter 2016 earnings release, which was issued by the company earlier today. With that, I will turn the call over to Gary for his comments..

Thank you, Blake, and good morning to everyone on the call. After a deep and extensive down cycle for our industry, we are beginning to see the signs of improvement in commodity prices and in turn, a recovery in our business. While our top-line revenues may have further to go in finding a trough, it appears that we have found a bottom in the U.S.

onshore activity and a bottom in the international and offshore activity is in sight, possibly as early as mid to second half of 2017.

During this down period, we have made progress in executing on our strategy to maintain share in deepwater markets, expand to underrepresented markets, diversify our offering through acquisitions and control what we can through cost reductions.

The complex deepwater well construction market has been and will always be where Frank's has the most competitive advantages in terms of applying our differentiated technology and expertise.

These opportunities have seen steep declines as the project economics have become disadvantaged compared to less capital intensive and shorter cycle unconventional onshore and shelf wells.

However as part of our strategy to expand to underrepresented markets beyond the deepwater, Frank's is executing on its strategy to become more fully diversified and lower our dependence on the deepwater complex well segment.

The recent acquisition of Blackhawk and our market segmentation strategy to target the global onshore and shelf market where we are underrepresented, has diversified our service offering and begun to shift the narrative away from Frank's being simply a play awaiting a deepwater recovery.

Although many of these opportunities may not have the same margin profile as the deepwater projects in our portfolio, they are not entirely lacking complexity and can still offer competitive returns on capital and increased utilization of our equipment and our personnel.

The execution of our strategy to maintain our share in core markets while expanding our presence in underrepresented markets will enhance our earnings potential and profitability during the current down cycle and position us well in strategic markets in anticipation of a market recovery.

Moving on to page five, we'll take a look at the highlights of the third quarter. For the first time since the fourth quarter 2014, we saw sequential total company adjusted EBITDA increase quarter-over-quarter.

Despite a 15% revenue decline due to lower tubular sales and activity declines in the European market, Frank's adjusted EBITDA, excluding bad debt expense recorded in the second quarter, improved $1 million or 6% from the second quarter.

This increase can be primarily attributed to the cost actions we've taken in previous quarters beginning to work their way through to the bottom-line. Although we have lowered our costs significantly, we have ensured that our ability to respond to a recovery has not been adversely impacted.

Since we began taking cost actions in early 2015, we have taken out or will have taken out more than $140 million in costs from base closures, improved supply chain management and by adjusting to a leaner and more efficient workforce.

While Frank's has had to play catch-up in some respects to gaining operational efficiencies and lowering its cost, we now believe we have an effective plan in place to better balance our cost with activity levels going forward.

In further reference to reducing cost, the results for the third quarter do not reflect any of the approximately $40 million of additional cost actions we announced in September.

The incremental cost reductions are more focused on a restructuring of our organization and lowering SG&A while continuing our efforts to adjust in global locations to reflect lower activity levels and reduce margins. Initially these actions were limited to our U.S.

onshore locations, but recently we've expanded our base consolidations and related cost savings to international locations. Taking these actions will enable us to maintain a strategic foothold in these important areas but at a overall lower cost structure.

We are confident that when the market recovers, we will be able to re-staff and redeploy assets to capture opportunities when they materialize.

As previously stated, we expect an additional $40 million-plus in cost actions to be materially completed by the end of the year and we remain on track to deliver these savings that will be more fully reflected in the first half 2017 results. The third quarter also marked early signs of success in our market segmentation and repositioning strategy.

For several quarters, we have highlighted our push to expand market share and underrepresented markets to offset some of the decline we've seen in our core markets. As a result of this initiative, we achieved revenue growth in excess of 30% sequentially in the Middle East and Latin America, and in the U.S.

onshore segment, we saw revenue growth for the first time in seven quarters as rig counts rebounded off of previous lows. We are optimistic that a return to profitability in the U.S. onshore business is near as our improved cost structure begins to align with some rate increases and growth in rig count.

We are pleased to report that we completed our acquisition of Blackhawk Specialty Tools on Tuesday, November 1st.

This closing represents an important moment in Frank's history, not only is it our largest acquisition to date but it also offers the next growth story as we diversify our well construction product and service offering beyond tubular services.

Page six shows further detail on Blackhawk's recent financial performance and what we believe we can achieve during our integration of the company across Frank's global footprint in quarters to come. During the last 12 months, Black Hawk generated roughly $80 million in revenue and $20 million of EBITDA or 25% of revenue.

This compares to Frank's revenue of roughly $580 million and $80 million of adjusted EBITDA or 14% of revenue over the same time period.

Although this is below Blackhawk's historic 30% to 40% margin levels and full year 2016 margins are likely to trend down to the lower 20%s or even high-teens, they are still very competitive and will immediately contribute to Frank's cash flow in 2017. A large percentage of Blackhawk's previous earnings were generated in the U.S.

as the company did not have the global infrastructure to expand beyond limited opportunities at the request of IOC customers. The mix between rental equipments such as rotating cement heads and diverter subs and product sales such as centralizer subs has been relatively balanced and slightly favor the higher margin rentals.

We expect to see a similar trend in product mix as we expand abroad. Another area growth within Blackhawk is in well intervention, which currently represents less than 10% of the company sales.

The company's Trinity product line acquired in June of 2014 offers best-in-class bridge plugs, cement retainers, packers and wireline setting tools with applications both offshore and onshore. These tools will also benefit from the opportunity to expand across Frank's global footprint.

Ultimately, we see the potential to expand Blackhawk's products and services to approach or equal Frank's global market share in all of the markets we participate in.

Over the next few years, we plan to roll out Blackhawk's suite of products and services onshore, on shelf and in the deepwater beginning with select markets in 2017 and 2018 and then to the remaining markets thereafter.

Once integration and roll out is completed, we forecast that Blackhawk's contribution to Frank's at mid-cycle levels would be an additional $200 million to $250 million in revenue and 30% to 40% EBITDA margins.

We view this as achievable not only through the integration of Blackhawk with Frank's tubular running services business, but also by winning work that are currently being served by competitor TRS providers because of the unique combination of products and services the new company offers to the customer.

The Blackhawk acquisition adds diversification in well construction and intervention space and takes advantage of the extensive Frank's global footprint without requiring a significant amount of capital investment to accomplish.

As the two companies have their origins in South Louisiana and share many of the same values and principles, we're optimistic that the integration process will move seamlessly and that full integration will occur prior to the year-end 2017.

With that, I will turn the call over to Jeff to expand on the financial and operational results during the quarter.

Jeff?.

Thanks, Gary. Turning to page eight, I will begin with providing additional detail on changes in the global offshore market we saw during the quarter. Overall, market share fell during the quarter from 19% to 17% of total offshore rig count, excluding platform rigs. 37 rigs left the market in the quarter and Frank's was working on 13 of those rigs.

The leading driver of Frank's' slide in global market share is attributed to the floating rig count declining further than the more resilient shelf. Frank's share has grown on the shelf but still remains underrepresented at just north of 11%. In Latin America, Canada and Middle East, we saw revenues increase for the first time in 2016.

Increased activity in Trinidad and Eastern Canada boosted revenues despite three Frank's rigs exiting the market. In the Middle East, offshore share remained flat, but the continued ramp-up in land work and the commencement of increased activity in Azerbaijan drove revenues to near third quarter 2015 levels. Share held flat in Europe.

However, revenue was down $6 million driven by projects ending ahead of schedule or deferred. While there is an opportunity for increased activity with three new tenders expected in the fourth quarter, current contractor work will likely continue to slow during the remainder of 2016.

In West Africa and the Gulf of Mexico, we saw share hold or increase as additional rigs left the market. Both regions have likely not yet reached a bottom, but the declines appear to be slowing towards stabilization based on current discussions with customers on their 2017 plans.

Asia Pacific was the only region to see declines in revenue, share and rig count. Reduced work scope and deferrals across the region were responsible for a 15% decline in revenues and some work-offs in Australia negatively impacted market share in the quarter.

However, we do expect to see three new rigs to come online in the first quarter of 2017 in Brunei. On page nine is a comparison of our third quarter 2016 financial results to the previous quarter. Revenues from the International and U.S.

Services segments combined fell roughly 10% from the second quarter of 2016 to $85 million, mostly in line with our expectations. The Tubular Sales segment dropped 24% as timing of orders were pushed out into the fourth quarter.

We still anticipate booking orders in the fourth quarter that will bring the segment flat to slightly down first half over second half of 2016. Adjusted EBITDA for the quarter increased by almost $11 million sequentially or roughly $1 million when excluding the Venezuela bad debt reserve taken in Q2.

The increase was attributed to improved margins in Latin America and U.S. onshore from previously completed cost actions. These were partially offset by higher ramp up cost in the Middle East and lower margin work in Europe. This led to a total company incremental margin of 6% in the quarter.

CapEx for the quarter increased to $11 million and roughly $30 million year-to-date. In the fourth quarter, we plan to spend another $20 million, of which the majority will be related to the completion of facilities. The total of $50 million for 2016 is another revision downward from the previously stated $60 million.

In 2017, we expect operating capital spending excluding facilities to fall below $25 million including spending expectations related to Blackhawk.

Operating cash flow turned negative for the first time as a public company as the strong tailwind from improved receivable collection practices began to normalize and roughly $20 million in severance payments were made.

Even with the sequential decrease in operating cash flow in Q3, the cash payment related to the Blackhawk acquisition earlier this week and the anticipated dividend payment in December, we still expect to have more than $400 million in total liquidity at the end of 2016. Turning to page 10, we see a more detailed look at the International segment.

The 11% decline in the segment can primarily to be attributed to Europe and Asia where projects finished ahead of schedule and less complex work hurt both revenues and margins.

As previously mentioned, we saw upticks in activity and revenue in the Middle East and Latin America, but the revenues in the Middle East continue to lag the cost of mobilizing teams and equipment. We expect this trend to reverse in the fourth quarter with acceleration into Q1 2017.

West Africa revenue declined less severely in the third quarter and our share of the market was stable, but persistent challenges to project economics in the region suggest that we have further to go before we see a floor in activity. However, margins have begun to stabilize as cost actions are taking hold. Looking at the U.S.

Services on page 11, we saw an 8% decline in the segment to roughly $34 million. The U.S. offshore business was supported by only losing two of the six rigs on average, that left the market during the quarter.

In the onshore segment, we saw share in our addressable market fall slightly with an influx of rigs, but remain near the 30% level for our addressable market. In addition, revenues increased slightly quarter-over-quarter for the first time in seven quarters on a pickup in activity and some rate increases with certain customers.

Adjusted EBITDA in the segment was a loss of $8 million compared to a loss of $11 million in the second quarter. The improvement was a result of lower corporate costs and improvement in U.S. onshore business margins. The onshore business cost actions are taking hold and will accelerate in Q4 and the start of 2017.

The offshore margins held up in the quarter remain some of the best across our footprint primarily due to the higher complexity of the projects in the Gulf. Finishing the business segments with Tubular Sales on page 12, we saw revenues fall $20 million or 25% quarter-over-quarter.

While we have seen some international quoting activity gain momentum, our core Gulf of Mexico market continues to see softness. Adjusted EBITDA also dropped in the quarter to just below $200,000 as some favorable product mix was offset by fewer deliveries and higher manufacturing costs in the quarter.

Looking at the remainder of 2016 excluding Blackhawk, we believe that our global TRS revenues could decline roughly 10% from the third quarter as activity declines in the Gulf of Mexico and West Africa persist. Tubular Sales revenues based on backlog and anticipated deliveries will likely see some sequential improvement.

Given these expectations, it would be reasonable to expect our total company revenues to be down another 6% to 8% sequentially with roughly 50% decremental margins until the full impact of the additional cost actions are realized in Q1 2017. Finally, let me address a couple of financial housekeeping items.

First, we expect acquisition costs of roughly $15 million to show up in the fourth quarter. These costs include $9 million related to a non-compete agreement settlement. We will also have roughly $10 million in cash severance costs in Q4 associated with the organizational changes.

Second, our share count will increase to roughly $220 million by the end of the fourth quarter. This includes the 12.8 million shares related to Blackhawk transaction and the roughly 54 million preferred shares converted to common by Mosing Holdings, Inc. With that, I will now turn the call back over to Gary for final comments.

Gary?.

Thanks, Jeff. Before we open the line for questions, I'd like to turn to page 13 and summarize some of the reasons for optimism about the future of oilfield services in general and specifically Frank's.

First, the acquisition of Blackhawk provides an opportunity to increase our time on the rig and substantial growth potential across our global footprint. The well construction and well intervention applications bring differentiated technologies and expertise that span beyond deepwater.

Second, the pace of declines in the offshore areas we operate in are showing signs of slowing and could potentially bottom in the second half of 2017. In conjunction with this, we're starting to see results of efforts in gaining share in the underrepresented markets.

These wins, while taking time to ramp up, will not only begin to improve our earnings but serve as a growth platform for making Frank's less levered to deepwater recovery and a more balanced well construction company. Market segmentation exercises have given us the blueprint to achieve this without overly diluting our margin profile.

By going after the global shelf and onshore opportunities that involve more complex wells, and thus, Frank's more advanced technologies, we can complement our deepwater business with more diversification and competitive margins. Third, rig count in the U.S.

onshore business is steadily increasing and it appears that a recovery is underway with commodity prices averaging $45 to $50 a barrel the past few weeks. Because of the depth and the length of the downturn, it is easy to forget that this was a 20%-plus margin business just two years ago.

With the adjustments made to lower our costs, more rigs coming back online and some early signs of rate increases that should carry over into 2017, we are confident that we are on the path to profitability once again. Finally, our journey to improve operationally is ongoing both in terms of lowering our cost structure and increasing efficiency.

We have built and retained a talented workforce that is focused on improving the way we deliver services to our customers and engage with our suppliers.

Although we still have opportunities in front of us, we have invested in the right procedures and infrastructure and are taking the appropriate actions to reap benefits for the remainder of the downturn and into the recovery.

In closing, 2017 will not be without challenges, but our strategy to diversify our offerings through acquisition, expand our share in underrepresented markets both geographically and across well types and maintaining our leadership in providing technology advanced solutions for our customers will lead us through the trough of the cycle and position us to outperform in the up-cycle.

With that, I'd like to now open up the call for questions..

Thank you. And we will now begin the question-and-answer session. And from JPMorgan, we have Sean Meakim. Please go ahead..

Hi. Good morning..

Good morning..

So, I was hoping to talk a little bit more about the underrepresented markets.

It was interesting to see growing top-line in some of them even while the macro picture is still pretty challenging in some cases, but on the slides it sounds like you're not actually taking share, some cases maybe you're still losing share and something maybe you could just elaborate a little more on the puts and takes for what happened in the quarter in the Middle East and Latin America specifically?.

Yes. Well, with our market segmentation exercise that we undertook earlier in 2016, we identified certain markets and countries that we wanted to address very quickly and move into. So it's a gain of market share in some of these regions is what you're seeing as a result of our early successes coming into play now..

Is there a little more you can offer, I guess, in terms of customer mix or job mix, things like that, to kind of give us a little more understanding of how that's working under the surface?.

Yes. So we have targeted more of the NOC customers as well as small mix of IOCs, but it's typically more of the NOC customers that are coming into play as well as we're targeting more of a shelf type market and some increase in land operations also..

From Credit Suisse, we have Jim Wicklund. Please go ahead..

Good morning guys and congratulations on the improvement again in the underserved markets. A question on tubulars. I've been asked a question this morning whether or not tubular should be kind of an internal elimination item and questions as to how much of that business – how much of the tubular sold actually Frank's puts in wells.

Can you talk about why or why not that needs to be a standalone business and not just an internal elimination for the rest of Frank's?.

Yeah. In some cases – I'll answer the question as far as the elimination, Jim and then I'll let B.J. answer the question around how often the tubulars we sell we actually are the ones installing it. The tubulars is separate standalone segment. It's primarily Gulf of Mexico right now.

In many cases we actually are providing the tubular for someone else to run as opposed to us running it. So we view it very much as a standalone business, but understand your point about it could be elimination, but it's a pretty small percent actually I think that we run.

B.J.?.

Yes. That is correct, as more of the larger size tubular that we sell, that we currently run. Also, remember we have fabrication services lumped into tubulars also which handles riser fabrication and connections for other companies too, not just the running services but the tubulars..

Perfect. You saved me making 15 calls to answer that question, so I appreciate it. My follow-up, if I could. Everybody is complaining about the slow pay by customers. Chevron Angola is one that people point at a lot. You guys have operated in Angola.

I'm not asking who is slow paying, but are any of the customers such that you think any of this will actually turn into a bad debt expense, or is this just a run up of DSOs until people start paying?.

Yeah. My view, Jim, is that it's a combination actually of a run-up of DSOs and mix. So if you think about it as our Gulf of Mexico business has fallen off, those are some of our shortest terms that we have across our entire enterprise. And as we grow in the Middle East and some of the international regions, those tend to be longer-term items.

So it's a little bit of run-up in DSO as a result of slower pay but it's just as much mix as it is a run-up in DSO..

And I'd just add, we watch very closely our receivables and the customer's ability to pay, Jim, and we watch that very carefully and don't allow that to build too much or start being selective in what jobs we bid..

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

Hey, good morning..

Good morning..

I just wanted to follow-up to make sure I understood some of the commentary as it related to the fourth quarter in particular. You referenced that total company revenues would be down around 6%.

Was that excluding Blackhawk?.

Yeah, that was excluding Blackhawk. That's Frank's as a standalone entity ex-Blackhawk..

Right.

And then Blackhawk would be contributing about how much in revenue in the fourth quarter?.

Yes. So if you look at the Blackhawk revenue, we would expect the fourth quarter to be probably our share of it, which is two of the three months of the quarter, to be around $10 million and it runs around $1 million a month in EBITDA..

Okay. That's great. All right. Thank you..

From Morgan Stanley, we have Igor Levi. Please go ahead..

Hey, good morning..

Morning..

Morning..

So we are hearing quite a bit about these super laterals in the Permian which in certain cases are using very high-end drilling technology and even offshore grade drill pipes. So would you be able to talk a bit about whether you're seeing any demand for premium casing services in which case maybe you could start to bridge the gap between U.S.

onshore margins and the ones you have offshore?.

Yes. We have participated in some of these super laterals as they're being called, and we currently have differentiating technologies that we offer both from our drilling tools line as well as our premium tubular running services line which we're starting to see slight increases in being able to provide those services at better margins..

Great. Thank you.

And lastly would you mind splitting out the corporate cost or the manufacturing cost as you have done the last two quarters?.

Yeah, we can. On the corporate costs, we're a total of – hold on a second let me grab that number. Corporate costs are a total of $17.7 million, so roughly $18 million in the quarter. And inclusive in those corporate costs are a couple million dollars for ongoing FCPA.

That runs about $1 million to $2 million a quarter, roughly, it's a little lumpy and then we've got some investment that we're making as well in HRIS systems. And then from a manufacturing standpoint, third quarter was $1.5 million, so let's call it $2 million in the quarter..

Okay. From Howard Weil, we have Blake Hutchinson. Please go ahead..

Good morning, guys..

Good morning..

Good morning..

I want to make sure I understand your commentary around the – quote unquote addressable market share – in the U.S. basins.

Is this simply a reference to what you feel after consolidating you can touch geographically or is that also a comment on work that you'll actually go after in terms of pricing?.

Yeah. It's really the basins that we operate in today. There're some areas that we've looked at and said they're not strategic from our standpoint. So it's more the basins we can touch and the rigs that we can touch as opposed to the entire market..

Okay. That's helpful. And then a lot of talk I want to just ask a follow-up in terms of the under-representative market commentary because I guess in the past it's been an avenue for growth, but perhaps not the level of confidence expressed with regard to traction in this quarter.

I guess, if we just broadly kind of bucket what you would qualify as under-representative, if we take a snapshot of the company today so this can help us with the go forward, what would you qualify as, I guess, non-tubular overall percentage of revenue.

Are we talking something that we're starting at a 10% or 20% or is it less than that just because your comment in the past have been about that being helpful but kind of lower colorant (33:35) content..

Yeah. So if you look at the entire shelf market and that's one of the underrepresented markets that we talk about, we're at around 10%, 11% market share today compared to a much greater market share from a deepwater standpoint.

We would look for that to expand over the course of 2017 and could even see double that from a market share standpoint as we exit 2017. We've got some early wins.

We're not talking about customers right now because we're in the process of ramping up with those customers and the same thing holds true for land and actually the international landside is about the same, about an 8% to 10% market share and we see expansion there as well going forward..

And from Wolfe Research, we have Chase Mulvehill online. Please go ahead..

Hey, good morning..

Good morning, Chase..

Good morning..

Good morning.

So I guess the first question, I was unclear whether you had any bad debt expense during the quarter, sorry if I missed that during the call but did you have any bad debt expense during 3Q?.

No. It would be de minimis..

Okay. All right. And how big was the favorable inventory adjustment in Tubular Sales.

Was that material?.

$400,000..

Okay. All right.

And then so when we think about – you talked about decrementals in 4Q that's sequential versus 3Q, correct?.

Yes..

What's the 3Q number we should be using, it's negative $3.1 million?.

Yes..

Okay. All righty.

Last one, when we look out to 2017 can you kind of walk us through kind of the puts and takes as you see it for the offshore TRS business?.

Sure. I'll give the macro view, I guess, from that standpoint and then I'll let Gary and B.J. jump in with a little bit more color. So if we look at the deepwater side offshore, we really see that continuing to decline off the fourth quarter run rate. And I don't think that surprise.

I think most folks are saying that by mid-year, that'll start to stabilize and bottom out and then we'll start to see some recovery in the back half of 2017. Shelf has been resilient. We think shelf will continue to be resilient. We're looking more at share gains there, if you will, in 2017. And likewise you didn't ask but I'll comment.

On the land, on both U.S. land and international land, we're starting to see activity increases and we're actually starting to see some price recovery as well there. Our challenge is obviously balancing that deepwater decline with the gains that we expect in the shelf and land..

Thank you..

I might just add what you have just said. Yeah, our visibility right now in 2017 is very limited only because our major customers are in the early stages of budgets.

And although we pickup through all of our customer contacts kind of what the optimism or pessimism is for 2017 commodity prices until those budgets get finalized, we're not going to know for sure, but I think the way Jeff characterized the macro setup that's generally how we are planning our business.

The real opportunity set for us next year in changing our own internal dynamics is the success we have in penetrating those underrepresented markets and the ramp-up of the Blackhawk product and service line across our international footprint. Those are the x factors..

And from Credit Suisse, we have a follow-up from Jim Wicklund. Please go ahead..

I was going to ask a question about the deepwater, but it got answered. So thanks..

Okay. Thanks, Jim..

We have a follow-up from Chase Mulvehill. Please go ahead..

All right. Thanks. I'll squeeze one more in. Sorry..

Yeah. No worries..

On the cost cuts, $40 million that's annualized, right? And so that's $10 million a quarter?.

That's correct. Yes..

So that kind of starts flowing through in 1Q.

Can you talk about if that's a fixed number, if we should just take that, basically add that back to EBITDA? And how do we think about splitting that between the different segments?.

Yeah. We'll have to come back to you on how it splits out to the different segments, but broadly speaking, the $40 million would be an add back in 2017. It'll ramp throughout 2017. So we'll have a large chunk of that $40 million in Q1 and then be in full mode by Q2.

If I think about the break between International and U.S., it's probably about 50/50 actually between International and U.S. Services. Most of it is being executed in the fourth quarter..

And we have a follow-up from Sean Meakim. Please go ahead..

Hi. Just one more point of clarification on the cash burn in the quarter. There're several moving parts and I was just hoping you could help us bridge the gap from the adjusted EBITDA number to the reconciliation on free cash in the release. Collections were slowing that's a big drag, but working capital seemed like there was an overall a net benefit.

Just trying to tie all those pieces together, Jeff, maybe you could help us with that?.

Yeah. I mean I'll give you a couple of the highlights and then I might – maybe with Blake you can go back and work that reconciliation a little more offline. I think a couple of the elements that are in there right now is the $20 million in restructuring in the quarter is a fairly sizable adjustment in the quarter. You're right.

Net receivables was a $20 million drag. That's a little bit of the mix shift that we talked about in the quarter. And then overall if you look at working capital, there's some improvement. Some of the EDC burn that we had or coming out that we had kind of offsets the working capital decline in DSOs..

Okay. Yeah. Will talk to Blake. Great. Thank you..

And we have no further questions at this time. We will now turn the call back to Gary Luquette for closing remarks..

Okay. Thank you, Brandon, and thanks to all on the call today for your interest in Frank's and for participating in today's call and we'll disconnect now. Thanks..

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