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Executives

Rich Bajenski - Director of IR

Analysts

Parker Drilling Company (PKD) Deutsche Bank Leveraged Finance Conference October 2, 2013 11:00 AM ET

Unidentified Analyst

Good morning. We'll kick things off this morning with Parker Drilling, from the company I would like to welcome Rich Bajenski, Director of IR.

Rich Bajenski

Well I like all that. Thank you very much and good morning. Welcome to the Parker Drilling presentation. Parker has been a pretty regular presenter here at this conference. This is my first opportunity to address the audience. I want to thank Deutsche Bank and particularly the natural resources team for inviting us to the 2013 Leveraged Finance Conference, and for all the support that they’ve given us over the years.

Before I go along any further, please be aware that any future events that I might describe here today may not necessarily turnout exactly the way that they have been portrayed. There are many uncertainties that may affect our results, some of them created by the industry, some of them specific to our markets and some of them unique to Parker Drilling. As you listen to my remarks today, please keep this note of caution in mind about forward-looking statements, and I encourage you to look at our 10Q and 10K for further forward treatment of these risks and uncertainties.

I frequently have the opportunity to meet and speak with investors both on the debt and equity side and more recently many of them have noted that there appears to be a lack going on in Parker Drilling these days. And they’re asking, is it time for them to take a closer look at the company? Well if you too are curious about what’s going on at Parker, let me offer you four reasons why you might consider taking a closer look at the company. First among the four reasons for considering Parker is the company’s strong competitive position and its key products and service offerings that have some meaningful impact on our customers.

We have two areas of business. We are in the rental tools and drilling services businesses with each accounting for roughly half of our revenue base, this is on a proforma basis, including a full year over the recently acquired ITS operations. Our rental tools business is among the leading suppliers of drill pipe and other tubular, pressure control products and well services products in the U.S. and in international markets. In the U.S. under the Quail Tools brand name, we are the leading supplier to operators in both the primary shale plays as well as many conventional drilling markets. We serve these customers from eight strategically placed locations and we also have a growing presence in the U.S. Gulf of Mexico, that's the offshore drilling market that is growing quite a bit today. Internationally utilizing the ITS brand, we are a leading supplier of rental tools and well services with 21 locations in key fast growing drilling markets, including applications both on land and off shore.

Our drilling services business includes three drilling operations. One supply is drilling services in select international markets with a fleet of 22 primarily high horse powered drilling rigs and four operations and maintenance contracts where we managed a customer owned rig. Another part operates a fleet of 11 barge drilling rigs in the inland waters of the U.S. Gulf of Mexico and a third provides drilling services on the north slope of Alaska with unique new design drilling assets. Now we also provide engineering and advanced technical services to address customer's unique drilling applications and challenges as a service to them. While our rental tools business accounts for about 46% of revenues on a pro forma basis including the 2012 revenues for ITS, it is the more profitable of our two business areas and it accounts for approximately 62% of Parker's consolidated gross margin. And as a result of our confidence in the rental tool business based on its sustainable business model and its very solid performance we recently added to the footprint with the April acquisition of ITS Tubular Services. ITS is an international rental tools business and it fulfills our long standing interest in expanding our very profitable domestic rental tools business into the international market place.

For several years we have examined various ways that we could accomplish the path of growth internationally and during that time we became familiar with ITS. They were a very successful and growing business and one with the customer centric reputation, not unlike what our own coil rental tools business with sale our own for. However, recently as a result of overly aggressive expansion and control issues at the ownership level of the company, the business had gotten into a financial condition that had brought them to the point of a forced receivership.

When they were put up for sale in January, we believed that we would be their ideal partner. With our knowledge and experience in the rental tools business, we were in a position to very quickly asses their potential and we put forward a winning proposal that turned out to be about 4.5 times their 2012 pro forma EBITDA and around 4 times the expected the 2013 EBITDA for the business.

Now as a result of the impasse of the ownership level, the operations had been capital starved and they had found themselves challenged just to maintain their business base or to satisfy their growth opportunities. When they needed to replace equipment that they were using to meet current contract or when they secured a new contract, they were regularly finding themselves having to go to another equipment rental company and rent the required tools. This is a process in the industry known as sub-renting, that’s pretty evident that this practice can be a significant margin killer and it also rose your competitive position in your markets.

When we evaluated the acquisition, we recognized what the impact of lack of capital in the sub branding (ph) was having both on their financial performance and their ability to grow in their marketplace. And so at the outset we committed to invest $20 million of capital in 2013 and another 30 million of capital in 2014 to correct the sub renting condition and also to provide for renewed growth.

That capital has just now beginning to flow into the business. It will begin to have accumulative benefits to them as more and more of it does flow in and we’ll start to improve their operations significantly helping their profitability, their cash flow and also their ability to grow. Now, prior to closing the transaction, we set up an integration team which focused on working within ITS and throughout Parker to capture all of the practical synergies and to do so very quickly. Now they’ve made a lot of progress in that regard. Let me give you a couple of examples.

By integrating their capital spend from ITS into our supply chain system, giving them access to our larger purchasing volumes, our negotiated pricing in terms of service, we’ve been able to significantly reduce ITS’s cost to acquire new tools and equipments. On their very first purchase of drill pipe following the acquisition by using our purchase contract in place of their contract with the very same supplier they were able to save $725,000 or about 15% of their order total due to our more favorable terms and conditions. Now, there are lot of these types of opportunities and cost synergies within ITS.

Now we’re just a few months, approximately six months into the exercise and we’re pretty confident that we’re going to be able to achieve the synergy targets that we set forward in the business. Additionally, in light of the current market that we have in rental tools in the U.S. land drilling marketplace where business is relatively sluggish, we have been able to redeploy some of our assets from the U.S. to some international markets on behalf of ITS. This is allowing them to take advantage of the market opportunities little bit more quickly than what they would get by ordering new and waiting on delivery times and would also relieve some of the oversupply that were experiencing here. So this acquisition truly is a combination of two leading world-class rental tools business. We complement each other’s geographic position and our products and service offerings.

Now the completed deal does give us an international expansion that we have sought for so long for our rental tools business and it will provide significant revenue and earnings growth for Parker and we expect that it will provide solid financial returns on the investment that we have made.

Turning to the drilling services portion of our business, our combined drilling operations accounted for about 54% of annual revenues and approximately 38% of our consolidated gross margin. In recent quarters, our drilling operations have achieved higher revenues and rising profitability and an important contributor to this has been our Gulf of Mexico barge drilling business.

For the second quarter, we reported 100% utilization of our 11 active barges working in the Gulf. We also reported our sixth consecutive increase in the barge rig fleets quarterly average day rate and that adds up to having achieved a daily rate increase in 11 out of the last 12 quarters.

We believe that the Gulf of Mexico in their drilling market is going to continue to grow and we are pretty confident enough in this that we are recently looking to add up 12th barge to our fleet. Now this is a barge that was in the process of being refurbished when the industry slowed in late 2008, so we will complete that work, we expect to have the barge in service sometime in the second quarter of this coming year.

Now a second reason to consider Parker Drilling is the strong position that we have among our customers. For many of our customers we are there preferred provider of rental tools and drilling services. Now I can’t emphasize enough the customer focus that we have at the Company. When they are asked what they need from a service provider, our customers tell us that well price is important to them; reliability and efficiency are their top priorities. They have said to us “if you really give me the confidence that you have the systems, the processes, the products and the people that give me a better chance of reducing my operational risks and managing my operating cost that I am more willing to rent your products and to contract your services and to pay your premium for that relative to someone else who doesn’t give me that same degree of confidence.”

So when we are dealing with our customers, we are looking to be a consistent deliverer of that level of confidence to them so that we can become a partner in their success and we can be a supplier preferred above others in the industry and to do that we focus on being both their preferred supplier by three ways by being innovative, by being reliable and by being efficient.

Now when I say innovative, it’s not that we have a lot of unique products or we technology, rather it’s because our organization is focused on how we can do things differently, how we can do things more effectively and how we can better work it making the customer successful today and more successful today than they were yesterday.

Let me give you an example, here on this picture is our operation in Sakhalin Island Russia, we are very pleased that we have been a contributor to the success of our customer in this environment. The rig here is one which we operate under an O&M contract and includes an offshore platform and also another soon to be completed offshore installation. This rig continues to set drilling records for measured depth. This activity has allowed our customer to access from land subsea resources as much as 8 miles away that otherwise would have required a more costly waterborne approach.

Another example is our two new Arctic design Alaska drilling rigs that recently were put in the service on the North Slope. This design provides for year around drilling in that rather harsh and challenging Arctic environment that also adds improved efficiency, operating consistency and safety. Technically, these rigs are performing very, very well. Our customer is quite pleased with the start up and the performance of those rigs which we consider to be a true measure of how through innovation we can deliver premium performance to our customers.

So throughout our operations we strive to use Parkers innovation to find ways to continuously improve our customers' performance and therefore it helps us improve ours as well.

Now another way that we partner with our customers is by being a reliable supplier of products with reliable quality and reliable performance that gives them the confidence and their ability to execute their operating plan.

Now in the rental tools business we and our competitors all start off with the very same quality drill pipe. What separates our drill pipe business from so many other rest is the processes that we bring and the systems that we have in place to assure that when we deliver a string of pipe to a job site, whether it’s the first time that string has been put to work or its the fifth time or the eight time, the pipe meets the requirements of the job. After all, the drill pipe rental cost are only about 1% of the total cost of drilling a well.

However drill pipe failure down toll can have a very significant impact on the economics of the well, or even cause the loss of a well. So it’s our thorough inspection that its our consistent maintenance procedures, it’s our accurate inventory management, and it’s our service motivated delivery processes that assure that the pipe has delivered is up to the standards required by the job and that differentiates us in the marketplace.

And the customer then has the confidence that our organization consistently meets that need, then our position is strengthened as a valued partner in managing their operating cost and managing their operating risks. And it’s not just about delivering drill pipe, the same rigor that applies to meeting an operator’s need for premium quality drill pipe is the same rigor that we apply to our drilling services and support of assuring safe operations, and protection of the environment including well trained and experienced operating crews and supervisors are well maintained and very capable rig equipment.

The third area I mentioned that we would like customers to recognize us for is the contribution we make to their overall operating performance. Drilling performance is one clear example. Many of you are familiar with this chart. It’s a days versus depth graph showing the progress that’s made in drilling the well.

In this instance the chart that’s shown has on the orange line the customers drilling plan and then the blue line, what we actually accomplished on the drill floor. In this particular well we were about eight days ahead of the plan and on a 70 day well, that’s quite a bit of an improvement.

Now every driller can show you a chart like this. And I am not trying to show -- portrait this as being anything unusual. But what may make us different in the marketplace is our pursuit of doing things like this consistently better. This is nothing earth-shattering. We just try to do it constantly and consistently and make our customers benefit from that process. Now this also includes our investment in the processes in personnel and the assets that help us reduce downtime and improve productivity. We strive to go into a job with well trained experienced crews using well maintained and capable equipment.

And in post operations reviews with customers, we solicit their input on what we can do better to improve on our performance that will contribute to their success. We want our customers to recognize us a partner in helping them to be efficient and productive in a way that benefits both them and us. For a customer it’s all about execution. In our best businesses our people wake up each and every day thinking about what their customers need and how they are going to provide solutions to help them capture opportunities and resolve potential challenges ahead of the curve.

And by doing this we’ve been able to earn their price premium that we believe they’re willing to pay for that kind of attention. Those are pretty grand-sounding words, so do they really mean anything? Well in two of our operations, our U.S. rental tools business and our U.S. barge drilling business, premium performance has been shown to lead to premium results. Now there are no industry reports I can point out to you and show this, but we regularly hear from our customers that Quail, our U.S rental tools brand is the unqualified best among rental tool suppliers and that customers are willing to pay that premium for Quail’s quality and consistency.

The best evidence of that is in the quality and resilience of our U.S. rental tools revenues and earnings. Similarly our U.S. barge drilling business, we see is high praise from their customers for their performance. And here the evidence is that customers will pay a premium for that is a little bit more apparent. Operating day rates appear often enough in the public record for people to see that Parker’s day rates regularly exceed those of other doing comparable work. And this was an important consideration for us when we made the decision to invest in the international expansion of our rental tools business and the expansion of our drilling business with the addition of rig 55B (ph).

Third among the reasons that I think one might consider when looking at Parker Drilling is the position that we hold in the markets that we serve. We are very delivered in the selection of the markets in which we choose to anchor. We are focused on putting ourselves in locales, where the markets are large and growing and that offer us opportunities to grow with the market as well as within the market. And that’s giving us pass to grow our revenues as well as our profitability.

Geographically our revenue sources are equally divided between the U.S. and international markets. In addition the most important areas for us internationally, our forecast to see solid growth in the near-term, here shown as projected growth in footage drill. As an example one of these markets is in the Middle East in Central Asia, which is projected to grow 17% over the next five years. Included in that is the growing demand in the Kurdistan region of Iraq. To take advantage of that opportunity in Kurdistan, we recently moved two rigs from -- into that region, taking them out of our Kazakhstan location where we thought that we had too many rigs for the size of the market.

By doing this we retained the efficiency of the scale that we have in a region that supports the back-office of being in business in the area. Things like IT support, technical services, legal, administrative teams and things of that nature. Yet it also allowed us to position ourselves to participate in the large and growing market opportunity that Kurdistan represents. The two rigs that are going into Kurdistan are onsite and in the process of rigging up. The first two of the two is expected to be on revenue within a few weeks. And the second will begin operating sometime in the fourth quarter exactly when will be determined by the customer.

But we were pleased with the progress that we have made in this Kurdistan region and the prospects with continued growth there and are currently considering bringing in the third and possibly a fourth rig into this marketplace. Now, these two rigs will be one or both of the two rigs that had operated in Algeria for many years and are currently positioned into Tunisia. This larger presence in Kurdistan would enhance our opportunities to operate profitably and make a good return on our rig fleet across the Caspian region.

Similarly, our Rental Tools business is positioned to participate in the growing Gulf of Mexico actually drilling market as well as continue to grow within the very large U.S. land drilling market. During the last five years, we have achieved a 25% compounded annual growth rate in our revenue stream associated with rental tools with the offshore Gulf of Mexico drilling market. We are very pleased with the progress that we've made there and we're encouraged enough by the forecast for continued increases in offshore drilling that we expect to make further commitments of capital to grow with that market.

Now, the U.S. land market though it has not had much growth to speak of over the last year, it’s still is the largest market in the world for oil filled services and equipment including rental tools. As such there is plenty of opportunity to grow within the market even when the market itself is not growing. Recently for example, we opened a new location for our Rental Tools business in Oklahoma. This is our eight location in the lower 48 and while its immediate target is to better serve the customer base in the Mississippian Lime Play, it also gives us another node for servicing customers, working multiple basins across the U.S., and for balancing our inventory across a broader market area. We feel this gives us a distinct competitive advantage in this broad rental tools marketplace.

Now before we leave this topic, let me address this -- the topic of the selectivity of our geographic strategy. For Parker, we don’t believe we can profitably sustain a small presence in widely distributed markets around the globe. In our opinion, one rig or a two rig presence in the market like we had in Algeria and still have in a few other areas is not enough of a presence to profitably support the commercial and infrastructure need of an operation. In addition with that small presence in the market any downturn and utilization leaves one hungry for the next contract while redeployment cost and loss of revenue from the mobilization to another geography make it difficult to turn down marginally profitable local business.

So at Parker that model has been replaced with one more focuses on building a regional presence large enough to accommodate a sufficient number of rigs to achieve scale and with growth prospects that allow us to grow a business profitably. In addition, we want to be in markets where the customer base is diverse and comprised of companies that will well reward us for the value we bring to their operating and commercial success. Until recently too many of our rigs were too widely dispersed for us to achieve operating or commercial scale.

I believe the financial record of our international drilling operations have demonstrated that quite well. The way to better results include in our opinion a regional strategy that leverages size and growth to achieve operational and commercial scale. Our international drilling presence in Latin America region and Caspian region fit that new model. The same can be applied to our Gulf of Mexico Barge Drilling business as well as our large U.S. and international rental tools operations.

Let me now give you a fourth reason why I think Parker represents a good opportunity going forward. We have a strong leadership team that is very intent on delivering sustainable profitability and a rewarding return on capital achieved with a conservative capital structure and the returns focused capital allocation process. While those declined the fundamental benchmarks we are striving to achieve day to day we are focused on four key objectives. The first is to deliver reliable results to our customers and to our investors, said differently its execution, only by delivering reliable results we’ll be able to earn our customers business and get paid the premium that we desire and earn investors commitment and sustain an above average return.

Our plans and programs need to be executable and we need to execute. The second thing we are focused on is the need to increase profitability and that’s not just profit dollars but profit margin percent and return on capital. The third thing we need to do is to strengthen our balance sheet. Right now that means getting our debt down. We believe a baseline capital structure for us a quite still about 30% debt to capital ratio. Prior to the ITS acquisition we were in the low 40% area and we had a path that would lead us back to low 30s; however, before we got there we acquired ITS and we added debt to the balance sheet. And though we are currently at 52% debt to capital ratio, we are absolutely determined to bring that down.

And our final focus point is as an organization is to find paths for growth and do it profitably and with an appropriate return on capital when we execute. So in each of these areas I think we have made a pretty good start. Over the last four quarters we've made -- we've seen our rig fleet utilization improve and we have as a result produced stronger financial results.

A year ago our average quarterly utilization was in the mid 40% range and seemed to be stuck there for our international rig fleet, most recently it passed 75% on a one-month basis. We have some additional work to do there to sustain it, including as I mentioned earlier completing our regional redeployments. The ITS acquisition is going to add nicely to our longer term results. In the short term we have some opportunities that need to be executed on, and these will have a significant impact on our ability to return, to improve the returns and the growth of this business.

And our Gulf of Mexico drilling fleet has produced regular gains and revenue and gross margin including the benefit of having 100% fleet utilization in the second quarter, adding a 12th barge to our fleet can provide further growth and we feel quite bullish about the market in the shallow waters of the Gulf of Mexico for this business.

In Alaska we have both of our drilling rigs working under the five year contracts, and they are performing quite well and have turned out to be solid cash flow contributors. And in the U.S. land drilling market our Quail rental tools business continues to be managed well as they as they address the sluggish pace of activity in the market.

Their operating results at this low point in the business cycle continues strong as they managed the supply, the demand and the pricing conditions that the land market has been experiencing and as they build out the position in the growing Gulf of Mexico offshore drilling market. Altogether than I am pretty excited about the progress that we have made and are very confident in the direction that we're going as an organization.

As I stated earlier we are strongly committed to having a core debt to capital ratio around 30%. At the end of the second quarter we're at 52% adjusting for the note issuances that we did in July of this year. Our net debt to capital ratio excluding cash balances much of which we intend to use early next year when our senior notes become callable was at 47% and our debt to EBITDA multiple including the pro forma EBITDA from ITS was at 3.2 times.

We intend to move the debt to capital ratio towards 30%, and the EBITDA multiple to a more conservative level. This is not because we are uncomfortable or concerned about our ability to service our higher levels of debt that we have, our cash flows are ample as our current recent -- most recent results demonstrate. We are though more interested in that 30% level as a position that allows us appropriate use of debt leverage to enhance returns while at the same it's a good point from which we can step out to finance high return growth opportunities.

Our rising operating performance and strong cash flows are expected to provide the resources to reduce that debt leverage. In addition our 908% notes become callable in April of 2014 and our recent 7.5% note issuance included about $100 million that is intended to be used to retire a portion of those notes when they do become callable next year.

While focus on returning -- reducing our debt load we will also carefully balance the long term effects of debt reduction and the benefits of profitable growth, philosophically though we do want to get down to that 30% debt to capital ratio. So if you have concluded, a lot has changed at Parker, and a lot is still in the process of changing you would be right. In order to deliver results different from what we have had before change was needed.

Starting at the top we have a new CEO, Gary Rich joined Parker Drilling in October of 2013 after 25 career at Baker Hughes, where he had successively increasing commercial responsibilities and was head of global sales immediately prior to joining Parker. We also have a new CFO, bringing aboard a strong financial person with changed management experience.

We have aligned the business structure in installing strong business unit leaders reporting directly to the CEO and we -- in the process we moved an intermediate layer. This will then lead to more direct involvement of our operating business leaders in addressing the challenges that they face but also those challenges facing the organization as a whole, getting them out of the silos that we have operated in the past. We have installed a Chief Commercial Officer, who directs business development across the operations.

We have also changed the management incentive structure of the Company. It used to be that the annual compensation component of the incentive program was primarily an EBITDA metric, with little consideration of the impact on the balance sheet, today the annual compensation metric is primarily focused on EBIT, that is earnings before interest and taxes and return on capital. And the objective here is to ensure that the leadership of the organization is doing things that reward them for doing what should and is beneficial for the investors in the Company.

We're also in the process of implementing a new oracle based operating and financial reporting system. The objective here is to provide better operating performance management tools and capabilities in a more robust and timely information flow that will enable the management team to be more effective. And as important as anything we are in the process of instilling a capital discipline mindset throughout the organization. Today few discussions about business topics occur that include some thought about return on capital, operating budgets, business strategies, capital plans, capital request, asset redeployments, any customer service thoughts, all address return on capital. Before that, they either did not or it was a secondary consideration.

In addition, we are actively deploying and managing a capital deployment alternatives across the Company. We see this as an important contributor to our ability to achieve long term sustainable growth of high returns by having a list of alternatives and opportunities that exceed our resources, we can then prioritize our options, balance our debt reduction objectives against growth potential and drive for better returns over time. We’ve made good progress on this so far but this is an area that will continue to get longer term focus and it will improve overtime.

Looking forward from here I expect to see more predictable reliable revenue growth for the Company including the benefit of the ITS acquisition. our 2014 revenues are expect to show a double digit increase from 2013. Our operating margins as a percent of revenues should expand as we benefit from rising utilization and operational improvements. Both of these should lead to an increase in cash flow from operations that is expected to consistently exceed our maintenance capital needs, provide us the resources to reduce our debt leverage and we expect that our debt to EBITDA multiple then which was at 3.2 times at the end of 2013’s second quarter pro forma should be about two times by the end of 2014 and our consolidated return on capital will show improvements as our incremental returns exceed or meet our corporate objectives.

So in summary then I consider Parker’s key characteristics to be its strong competitive position in both the rental tools and drilling services business each with management teams focused on execution, capital returns and growth. It is standing as preferred provider earned by delivering premium performance for customers by being innovative, efficient and reliable. It is our focus on building and maintaining profitable positions in large and growing markets, leveraging our operational scale to drive for higher earnings and better returns and its leadership team that is committed to returns focused investment management and capital structure discipline.

So my comments here are but a summary of all that we have going on at Parker these days and all the things that we’re looking forward to in terms of our future performance so by picture interest if you gotten a little bit excited about Parker Drilling, I invite you to get to know more about us, give us a call, send us an email, we’d be pleased to hear from you and to share with you more about the future for the Company. Thank you for your time and looks like we’ve got opportunity for maybe a question.

Question-and-Answer Session

Unidentified Analyst

[Question Inaudible]

Rich Bajenski

The question was kind of breakdown our CapEx, certainly can’t [ph] overall CapEx to this year is expected to be in the $170 million to $180 million let me first break that down less than 100 million of that will be for what we would typically call maintenance capital, the remaining part will be primarily for growth. As I mentioned earlier we have committed to about $20 million of capital going to the ITS business as we capitalize them and make some correction towards their sub-renting activity and we will begin to put money into the barge rig 55B initial activities as it goes into its refurbishment mode.

The rental tools business, domestic rental tool business will see about $40 million to $45 million of capital this year which is basically replacement for them. There will be some incremental amount on top of that to take advantage of the kit that’s needed to serve the offshore Gulf of Mexico marketplace that take that probably up into about the 50ish type of range for them and then the remaining part of it will go into our drilling services operations that will include the equipment that’s needed to keep our rig fleet fresh and technologically capable as well as just to meet the contract needs across the business.

And, we’ll take our last question from the back there.

Unidentified Analyst

[Question Inaudible]

Rich Bajenski

I’m sorry I didn’t hear the question could you be a little louder…

Unidentified Analyst

[Question Inaudible]

Rich Bajenski

The question was could I comment on the U.S. market for rental tools and our outlook for that. Well, the market today is certainly a challenging market for our business I’m really pleased with the way our business managers have been handling it. The primary drivers for the market tend to be footage drilled and rig count and I think as most of us have observed throughout this year that’s been more of a soft slide in that marketplace not much improvement on it. We report activity in our business on a monthly basis and as you’ve been watching that, you would see that our utilization has been bouncing around of late within that of late within that marketplace.

The conditions continued to be challenging. Our operating people are out there every day making decisions about pricing and customer service. The net result of it is that while the market remains challenging, they’ve been through this before, they continue to manage the price in the customer service equation and we have managed to maintain our margins for that business in the mid 50% gross margin basis which in this kind of trophy [ph] markets it’s kind a good performance for that business. We don’t expect things will change until we see a firm directional move in rig account and footage drilled and you’ve heard as many people opine about that as I have.

I want to thank you all for your time here today and again if you have further questions about the Company certainly feel free to reach out to us.

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