NPK International Inc (NPKI) 2005 Q4 法說會逐字稿

Welcome to Newpark Resource's fourth quarter 2005 earnings call.

I'll now turn the call over to Jim Cole and Mr. Matt Hardey.

Go ahead, sir.

Good morning, this is Matt Hardey.

I want to welcome you to the call.

Those of you who follow the Company, of course, I hope have a copy of the earnings release that came out last yesterday.

If you don't have a copy, you can pick one off our website at Newpark.com on the investor relations page.

I've got to remind you, the attorneys forced me at gunpoint to do this, that the disclosures on page 4 of the release immediately preceding the financial tables, talk about the issues related to forward-looking statements.

You will probably hear a few of those today, and we want you have to aware that there are risk factors associated with anything we use, we mention in the way of forward-looking statements.

We will be filing the 10-K at the end of the week, and those of you want to pick one up on the website should be able to have it on the website by Friday, about -- sometime in the mid-afternoon.

Finally, we're glad to say that in this the second year of Sarbanes-Oxley, we will not be reporting any significant weaknesses under section 404.

Last evening, we reported fourth quarter earnings of $0.08 a share.

This was in line with the consensus expectations for the quarter, with revenues coming in at $147 million for the quarter.

For the year, revenue totaled 557 million, and earnings were $0.25 a share, or just under $22 million net to common.

For the purposes of filing the business interruption claim resulting from hurricanes Katrina and Rita, we did retain forensic accountants to assist us in that process, and as we mentioned in the press release, they've identified something in excess of $20 million of revenue loss occurring in the third and fourth quarter, and $0.8 a share, or thereabouts, of net income impact, pretty much divided equally between the third and fourth quarters.

Said another way, while we reported $0.25, we think that there was $0.32 of earnings in the Company this year, and that puts us, we think, in a good posture to enter 2006.

To date, Newpark has recovered almost $10 million of property damage and business interruption losses related to those two storms, and we expect to finalize our business interruption claim sometime if the next few weeks, and resolve that completely by mid-year.

Any additional recoveries, we think, would be reflected in net income, or in income as they are received.

That additional claim could run 5 to 6, perhaps even $7 million more.

When we file the 10-K and you have a chance to read it, you will notice capital expenditures are reported in the 10-K at $36 million.

I want to comment on that, because that's above the range we had laid out all during the year.

The capital expenditure amount related to our three ongoing business segments, the Drilling Fluids, Mat business and Waste business, net of PPP&E sales and financing within those segments totaled just under $19 million, and was in line with our $20 million expectation for the year for the ongoing operations.

We anticipate that the 2006 capital expenditures within those existing operations will be similar in net amount to the 2005 level.

We've completed the investment in Drilling Fluids for the most part, and believe that cash generation is going to pick up nicely in 2006 in all three segments.

With respect to the remaining CapEx, that $11 million amount was in the Water Technology business.

That I includes the Gillette, Wyoming facility, the test units that are up in Canada for the oil sands test that Jim will discuss you in a few minutes, and due to the developing nature of that business, we haven't really forecast a hard and fast number for 2006 capital needs in the Water business, but will adjust it to as the opportunity develops during the year.

Newpark ended the year with $32 million drawn on it $70 million bank revolving credit facility.

Total long-term debt at year end was 186 million, which for the first time in awhile is below 35% of long-term capital.

We believe that 2006 expected earnings are going to produce free cash flow before working capital needs in the $60 million range, now that we've essentially finished building a fluid segment, and our priority for excess cash remains debt reduction throughout the year.

And, I think, we'll see some progress on it in the coming year.

With the numbers out of the way, or most of them out of the way, I'll pass it to Jim to talk about operations.

Thank you, Matt.

Before I talk about the operations, I want to address the -- in general the discussion of the Board's diligent effort to replace me as CEO, and let me focus on the new technology.

And currently I've been doing both, and I think, that I'm very excited about the progress the Board is making, and I think, that they've done an extremely diligent job, and have looked at a number of very qualified candidates.

And hopefully, in the next few weeks or month, they will be able to announce my replacement.

And if it's some of the people, I've got a chance to at least meet, I would be very excited about that, and I think that many of you will, also.

And I'm looking forward to focusing on this emerging technology because I think that it requires a full-time effort.

And I think, that the potential of it is large enough that we can add a lot of value to the Company.

So I just wanted to clear that up.

I don't think I could say any more about it, but I'm hopeful that we'll get through this pretty soon, because I think that the new technology is starting to move forward, and now needs a full-time effort, and I'm prepared and looking forward to doing that.

Matt pointed out that good old Katrina and Rita, which have been beat to death, unfortunately, they're not done yet because there's a lot of things left to do down here in many areas.

Did mask a lot of progress the Company had last year.

I don't want to spend a lot of time on it.

However, I want to maybe this point to you.

We would have been, I think, $0.10 or $0.11 in both the third and fourth quarter, if we wouldn't have had it, but you can't wish away an event, and that's life.

But I think it masked the earning power of the Company and I do believe in some of our operations, particularly Drilling Fluids, that effect of Katrina and Rita will linger into the mid this year.

I don't think we'll ever get back what we would have had, but I think that we'll get back to pre-Katrina levels in the Gulf Coast by mid-year.

And those extra rigs that are no longer in the marketplace, unless something moves back in, and I don't see that happening soon, that was a slice that will be be forever gone.

And I think, we've put that into our numbers and our projections.

If I take you back a few years, and I'm going to discuss this briefly, that we went through the diversification program geographically on products and services, and I think that we will prove, as time rolls out, that that was an extremely good move on this Company's part.

And as I was pointed out to many of you in the past that the -- what we did not really anticipate was the weakness in the Gulf Coast, and it really got hammered when Rita and Katrina game through, which really further let us know that what we did was absolutely right.

And so we basically have followed a path that has led us away from our historic business model into a new one.

Now, our current strategy going forward will be now to really hit the earnings potential of this Company, which I'll describe as we go through our meeting.

Sometimes it's really good to be lucky.

Generally in business, when we have something that really happens well, we say it was part of our plan, and -- but when we established our Drilling Fluids model in business to be a technologically driven Company, and we -- many of you know that we have the FlexDrill, New drills -- excuse me, FlexDrill and DeepDrill products.

Well, really what they are are design products for reactive shale and diversity to allow you to work in these difficult reactive formations.

And our first applications of those were in the Gulf Coast of the United States, and they worked -- have been very effective, and we developed the product line.

As we moved forward, though, we found the applications in other markets around the world, because the shells and clays aren't totally in the Gulf Coast of the United States.

One of the areas,the fastest growing area in the country for natural gas is in the unconventional, the nonconventional gas production, and that includes tight sands, shales, and cobalt methane.

And to give you picture of how that is grown, nonconventional was 32% of the gas production in -- four years ago, and it was 41% in '04, and probably going to 50% by '08.

It's the fastest growing segment.

And what's really neat is that product line that was initially developed for the shales and clays in the Gulf Coast, and offshore is extremely affecting the reactive shales.

And tell me where the gas is coming -- a lot of that gas is coming out of reactive shales.

Horizontal and holding that hole and turning and doing and working in that shale, and we are absolutely penetrating the market very effectively in those shale markets.

And I would like to tell you that five years ago, as we set out to do that we had that in mind.

We really did not.

And the fastest growing segment of the market today, we've got a designer product, and we're not knocking the ball out of the park.

So I just want to tell you sometimes it's better to be lucky, but we built the product, and we built the capability.

And what we have there, and I'm going to talk about high-performance water-based fluid that's inhibitive in reactive shales and has the diversity, and it will hold that hole unless you work in those shales and clays.

And that's to us -- and that's the basis we'll talk about later.

And so basically, if I close out the strategy of the last few years, the diversification, our geographic and our product diversification has been successful.

But we haven't had success is generating the income that we need to to demonstrate that.

So let's talk forward now in 2006.

I believe that the earnings power of the Company is between $0.75 and $0.80 a share, based on the current product line.

If the shales develop further, it could go higher, but that's basically what I believe.

Now, we're talking about a Company that earned $0.25 last year, and you say, well, oops, there's a disconnect.

If you call it 0.32 without Katrina, it's still a big step.

Well, they what we're after.

And the step the Wall Street analysts have us at $0.42 on a consensus this year.

It varies both sides of that by a bit, but $0.42.

We believe it will be closer to 0.48 to $0.50 and that is without contribution, any material contribution from the New Water technologies.

So our revenue growth won't be as strong because we're doing some culling for profit improvement, but we'll be up about 18% to 20% in revenues as a Company this year.

And I think, that the important thing is, we start to demonstrate that this diversification and product -- this diversification program and the products we've developed really do produce the kind of earnings.

I think that if I were sitting as an analyst, I would be probably at $0.42 and let us prove it, and I think that's where we are.

The -- let me talk first about each segment, and get -- and talk about how we think even of those have a job to do in helping us start to prove that we have a right strategy.

Drilling Fluids moved up 113 million from 273 to 386 in the year, up about 41%.

We expect it will be up about 20% this coming year.

Not as rapid growth, but I think there's reasons for that.

But our important price -- the returns will be driven by pricing, and we believe that our pricing will grow up about 10% on the year, on a gross basis.

We think that we'll further penetrate with our product in the mid-continent of the country in the shales, and that's across the West Texas, Arkansas, Oklahoma, Colorado, Wyoming markets in the shales.

And our products are really performing well.

We have a -- and Canada is performing very well, and with New Phase, which is another part of that product family, and drilling wells on a high performance basis faster, and time today on a rig is very important, especially when they cost between $30,000 and $40,000 a day.

And we have new contracts on the international market.

We have a new joint venture that out to be picking up in Brazil as we go into the year.

We haven't generated any revenue in this first quarter, but we think we'll start picking up revenues as we go later in the year.

And I think the Gulf Coast will stabilize and actually outperform last year, but it won't -- of all of the areas, that probably have will have the hardest fight, because it isn't that they don't have the business here or the prospects to drill, the rigs aren't here.

We have a new term in the industry called WOR, waiting on rigs.

The list of ones we're working on are almost the same length as those that are waiting on a rigs to come open.

So I think that will be the lid on the Gulf Coast, not because they can't make money at the gas prices, they're waiting on rigs.

The -- on the income side of the Drilling Fluids, we did 21.8, in '04, million, and 41 million in '05.

I think we'll see an advance of similar proportions, not percentage, but up to a little bit over 60 million this year.

I think the bottom line will grow from '04, 8% to 10.6 in '05, to a bit over 13 million.

So we should see really advance -- what's that?

Percent.

Excuse me.

Matt is correcting me.

I'm confusing dollars with percent.

In my advanced age in senility, you all help me out here.

And we think that we'll net at least close to 3% in our pricing, because while we advance pricing by gross 10, we like to think that -- I read many analyst reports that we are going to hang onto all of it, but we have other folks who want to share in the bounty.

So we'll net 3.

Our shales are high margin, for the most part, because that is designer fluids that are on the high-end of our product margins.

We increased prices in Canada, and it was more than -- a higher level than our average for the Company, substantially, and that's already in effect, rolling in right now.

So I think that if you come across the Company, or move up another $20 million, or up $0.14 a share for the Company, there's no cinch in life, but I give it give it pretty good odds.

I think that most of the initiative that we are playing our are already in place, and we ought to be able to perform it, and if the fluid folks listening on this deal, don't panic, just do it.

The -- I think our other two product lines are more tied to the Gulf Coast, but let me talk about them briefly.

In the Matting business in total in 2005, we earned about $11 million.

I think we'll double it this next year.

And that will come about on the following initiative, which are already in place.

One, it we'll have about 2 million more square feet of rental volume because we were actually down for the storms, the effect of the storms last year.

When people didn't really worry about building location, they just had to go find their people.

And that's worth about 2 million of bottom line to us.

And the rental pricing will be up about $0.20 and that's worth about 4 to 4.5 million.

So where our cost initiatives are in place, we've already done that in prior years, I think there's 6 to 6.5 million in our historic rental business to be made just for getting the pricing and getting back the volume we lost in the storm chaos of last year.

In Mat sales, we sell three type of mats.

We sell the Dura-Base, and the Bravo, and the Wood, and there are applications for each of those.

We sold 11,300 Dura-Base last year.

We'll be up.

Our plans call for about 15,000 this year.

Bravo sold 21.

We'll be up -- I will triple that.

I have assurances from the group that they will be able to meet that, or exceed it.

We sold 17,000 Wood.

We've already sold about 27,000 this year, and we sell all we can ship.

And between the group of Matting, we'll make another $5 million or $6 million in profitability out of that group.

So if you combine that, I think we've got a reasonable shot of doubling that, and that, from 11 to $22 million, is worth $0.8 a share.

So I can add 14 and 8 into a base and say we're on our way.

And in the Environmental field in the Gulf Coast, in '05 we earned $6.4 million.

Almost a double, not quite a double in the year, in that business, and we did 3,070,000 barrels last year.

I don't have to tell you that Katrina and Rita did impact that business.

We'll return between 3.4 and 3.5 this year, million, and that's worth about 2 point -- 2.5 million -- excuse me, about $4 million in income.

Matt's run something numbers for me.

He nodded yes.

And in the last year, in the Environmental segment, we spent about $1.5 million starting NEWS, the new technology.

And I think that while we're not putting a contribution in, I think the contribution will flow that that will be eliminated this year, and hopefully, we'll have some additional plus we haven't put into our numbers.

So we look at about -- that increase of about $5 million plus if that business, which is worth another $0.04 cents.

So we have those initiatives in place.

We're back at Venice on a partial basis, and back in Cameron.

We were first back.

Our fluids were the first back in the industry, we picked up market share for that.

The pricing initiatives that we've put in place are in place.

And this is the year, we have to begin to demonstrate that this diversification program really will pay off for the shareholders.

Frankly, we're about two years late getting there, but I think that we have plenty of alibis and now is the time to perform.

On to our technology and particularly in Water, for a starter and the reason I say that is it has applications in other applications outside of Water, but we're focusing right now on Water.

The -- there are three operations.

The Boulder operations and the Pinedale, I would have to say, has been an adventure.

It's a very complex mall plant, and we found that our partners are excellent in the technology, but weren't so excellent in the mundane parts.

The part that we can do, they weren't that good at in bringing the cultural differences and the design differences into a new market.

So we have actually taken over the plant operations and engineering, and retrofit.

We are producing over the weekend, we're still tweaking the plant, but it is catching -- little by little we're running through it, but we were running about 2500 barrels per day through the plant.

It's rated capacity is 3500.

We're still working on dosages and the correct chemicals and things of that nature, but I think by the end of March, we'll be at the graded capacity of about 35. 33 to 3500 barrels a day, yet to be fully determined, because this is a brand-new technology.

And by June, we hope to be at double that to be 6,000 to 7,000 barrels a day.

We've learned a tremendous amount in that complex small plant.

It has about every feature on it that of all the plants we've looked at or will be looking forward, this is by far the smallest and the most complex, but it does a wonderful job.

The water we turn out, there's no question that the technology works, now the technology has to work 24/7 at capacity, and we're working toward that.

We're optimistic about it, and I think that we'll show that evidence as we go into the year.

The Gillette plant, which is much larger, at 20,000 barrels a day, than the Boulder, has had some of the same deficiencies that I discussed, however, because it's less complex, and because we were doing Boulder ahead of it, we've made adjustments in that plant as we saw the deficiencies.

We're one pump away from full capacity, is what I'm told.

It's an undersized pump that we had -- that was put in incorrectly, and so it will heat up, and so we have to change that pump, and when we do, with some tweaking, by later this month, we ought to be running that plant at full capacity.

In Canada, we have our test units.

We have a number of operators.

Everybody in the industry is watching.

We will -- I believe we'll still sometime this month have a chance for the test, but it still has to be done.

We're dealing with very large oil companies, and we have to do a lot of procedural stuff that could delay it further, but we're going to have a test there in the very near future.

And for many of you that have followed the Company, the BTU equivalency on that, what they do up there, is just literally, if I say 6, $800,000 a day of BTUs are put on the ground or injected and it's that low down water and that's what we're up to there to test, and everybody Company up there has the same problem.

And it is only a starter set of the availability of technology up there, but everything we learned at Boulder and Gillette we applied at that test unit.

That test unit is ready.

It's Americanized, and we are basically ready to go with it.

And so I think that the test, many of you are waiting for -- if you wait for a test result, there will be two results.

One is within hours afterwards, we'll know we have removed this material, and we're not that concern about that, but we also want to run 24/7, because that's required in those type of situations.

So we're hopeful at the conclusion of the successful test and with some evaluations by companies that sometime mid-year that we may have orders there, but that will depend on successful testing.

And I -- with that -- and this is where I'm going to spend full time, because this is where if -- we fold, we have to build an entire Company has to be built.

This isn't about a piece of technical that floats in.

This is about a training operation control setting up what will be a Company that has a potential if we are able to pull it off.

This is where I am delighted to spend the next few years of my life, trying to bring this home for the value of our shareholders.

With that, we will open this for questions.

Marsha, you're on-line.

[OPERATOR INSTRUCTIONS] We'll take our first question from Gary Goldstein with Guilford Securities.

Go ahead, sir.

Congratulations on a fantastic year.

I mean, this appears to really be in the turn and just a great year.

Thank you.

I had a couple of questions.

We didn't hear anything in the comments as to how things are progressing with the Brazil supply JV?

On Brazil supply, the tender on lot C and two other tenders are being reviewed now by -- by the Petroboss, and we're waiting their result.

We found that in all large companies, things move a little more slowly than we do as a company, but we're in constant contact with them over these tenders.

So we'll just have to -- we're waiting on WOB, waiting on Brazil, but they're in, and we're ready to go when they're ready to go.

And we assume that's not in any of the numbers right now?

Not really.

And Venice, can you bring us up to date on the status of the Venice facility?

The Venice facility.

Venice -- there's two.

Both the environmental and -- and fluids are operating.

However, because there's no power, and I think it's -- I hope I say this right, in the last 40 miles of that peninsula, there's no power, so we're on generators.

We don't have enough power there to mix like in fluids liquid mud.

We don't have our recycling equipment at Venice at this point, but we are taking care of customers, and we'll bring our liquid mud out of [indiscernible].

So we are servicing customers, but we are doing it kind of like -- we're doing it in, oh, let's say -- we are doing in a Jerry-rigged fashion, but it is because they want us there and there are operating locally.

We can load out for them equipment and we can take care of their immediate needs, and then we have to plan with them to bring in stuff from -- like liquid muds and other support from other bases, but it's very convenient for them.

So we're getting a lot of let's say, I think, positives for both operations from the customer for actually gutting it out and being there.

So -- did I answer your question on that?

Yes, that pretty much answers it.

We could expect it to be back on when electricity is returned in the last 40 miles of the peninsula.

Any idea?

Mid-year?

I honestly couldn't begin to tell you that.

Gary, I think the only thing we can say that we've concluded about the Venice area is that so much of the drilling has moved west that our rebuilding will probably be a little bit less heavy duty than it was in the past to meet what we expect to be lighter demand on the eastern side of the Gulf.

Apart from that, we'll let you know when the switch is thrown and it's full speed ahead.

Gary, we have about six or seven customers over there that are dedicated with important plays in those marshes, and if that area over there around Venice.

So there's a solid set of book of business over there that we're supplying.

While we might not see it get back to where it was before capacity-wise, it's still going to be an important facility?

Oh, absolutely, you bet.

In spite of the hurricanes, it was just an outstanding year, so again, congrat.

Thanks, Gary.

Thank you.

We'll take our next question from Corey Greendale with First Analysis.

Go ahead, sir.

Hi, good morning.

Good morning, Corey.

A few questions for you.

First of all on the MP waste segment.

There were comments in the release about getting share, because you were back up and running maybe before some other folks, so could you comment on whether you're retaining that share as other people come back into the market?

I think we are.

We had I -- believe we are.

Those are always difficult questions going forward, but we're currently running -- let me just see if I can do this correctly, because -- hold it, I'm just doing a quick calculation.

We're running at the -- about the 3.4 million annualized rate in the first quarter, and -- or a little above that.

So, I think, every indication are that we actually -- I think we -- I think there's a good chance it will, Corey.

Great.

The fluid segment, Jim, I think you mentioned in your comments about a new international contract.

If I hear that right.

Could you say a little more about that?

No, I would rather not, because it's just being kicked off, and we ought to start shipping product on it this month, but I -- I think I would just say that there's many opportunities now, and so I -- oh, I'm sorry.

I was thinking of a whole different one into another market.

Let me go back.

The one that we're talking about, that's really in Algeria, and that is with Sonatrack, and we had 7% of their bid last year.

They evaluate you periodically, and we were hoping to get up to 14 or 15%, and we've been allocated 20% of their business this year.

So that's a very substantial uptick in a good margin market for us.

So that's primarily it, and we've got two or three offshore -- a couple of offshore jobs, that platforms in the north African area, and so there's -- and some new contracts in eastern Europe.

So there's a series of contracts in that European market, and we have another couple of them here that might end up in this hemisphere.

You'll see our foreign business continue to uptick without investment going into those markets.

Okay.

And then on the mat business, what do you think is driving the higher mat sales, and kind of what gives you the confidence that you can see that kind of uptick that you're talking about next year?

Well, one is the -- there's a couple of issues.

Let me take each one of them.

The Bravo mat, let me start with them little ones, just with a rollout last year, and we've been opening that market, so I think that that -- if we don't do that, we'll really missed the boat, because it really is a partial year versus is a full year, so we just get the benefit of a rollout market.

So let's set that one aside.

That's the smallest one.

Let me take the next one, and that's called Wood.

And the wood mat, we have redesigned the wood mat to actually fit the Canadian market.

And let me explain that.

A number of years ago, Newpark sent rental mats to Canada, and they had never used matting, and most of you that follow the industry realize the roller coaster they take in their activity up there up and down.

They shut down and break up in the summer, and then when it's frozen, they work.

And we've introduce the concept the you could -- for those that are -- you could extend the working season with matting.

Well, as we move forward, we ended up selling the rental fleet.

We've sold about 25,000 Dura-Base in Canada and there's still demand for those, but we've sold -- but this year, we'll sell about 100,000 wood mats.

And the -- and this year we're shipping into Canada as rapidly as we can build them, as we can get railcars.

And so every day, we'll have 5, 6, 8, 10 railcars come into the facility and pull them out.

So we'll sell a lot of wood mats this year.

And they're very nice profit, they're nice profit.

And I think that there's a long way to go in the Canadian market.

And we also have now introduced it in Wyoming for ground disturbance in the Pinedale play, which I would never have thought would have happened, because they want spacings, and when they do spacings, they destroy a lot of ground when you pull it down.

So environmentally, they've asked them to -- they've put padding in, and so we've sold our first 8,000 mats into Wyoming in the Pinedale play.

So we're opening new markets for wood, and and we also sell composites in some of those markets.

So that market continues to develop.

And the third is Dura-Base, and we've just continued to move them around the world.

And I think that we ought to see an uptick this year based on some of the markets we've opened.

And I just thing that among those three, matting continues to expand, march forward in many markets.

Okay.

Thank you for that.

And then I just a couple of quick housekeeping questions if I could for Matt.

The first is, I wanted to clarify that this.

The insurance recovers that are talked about.

None of that hit in Q4,; is that right?

It would all be in Q1 or future quarters?

Corey, we in fact recovered a good chunk of that cash in Q4 and reported it in Q4.

It offset the losses to all of the physical facility, their barges and so forth that were damaged in the quarter.

There was only a small amount of business interruption coverage that came in the quarter, and it had very minor effect on the reported results.

Most of the business interruption benefit will be in future periods as its recovered.

Okay.

So the little bit you got would have run through G&A is that right, or how would that work?

That's right.

Okay.

Second one is what tax rate are you assuming for '06?

We're working on something in the 37 to 38% range.

Probably a little bit on the higher end of that range if I had to guess right now.

Okay.

Do you happen to have the quarter-end share count.

I have just been looking for a little bit higher number with the preferred converting?

Quarter-end actual share count.

Right at 89 million.

Okay.

Thanks very much.

Thank you. [OPERATOR INSTRUCTIONS] We'll take our next question from Byron Pope from Pickering Energy.

Go ahead, sir.

Good morning guys.

Good morning, Byron, how are you?

Good, how are you?

Just fine.

I just wanted to circle back, Jim, to your comment about waiting on rigs.

If I look at the schedule of rig count activity in Texas railroad districts two and three, haven't really seen the rig count in those two districts bounce back after the hurricanes, and know that those two districts tend to have deeper drilling activity.

So just was wondering if you could comment on what you're seeing there currently, relative to maybe three, six months ago?

And then what the outlook is for those two important districts?

I -- our activity in Texas, I'll focus on two, the upper coast.

We're up about 40% in activity after the storm.

The rig count hasn't really bounced back, so maybe we're just fortunate.

Our customers are working, or we've penetrated this market, but we're up.

Our Texas count, when you go down the coast, and I -- I won't use three, because it's a little more difficult when you go further down, but we're probably at the highest level of activity in rigs along that Texas coast that we've been in an awfully long time.

Maybe the highest we've ever been.

So our share has increased, along that coast.

I'm not close enough to tell you, there are some rigs being slotted to come into that market, but I don't think it's going to be a whole lot of those 200 rigs -- are supposed to come into the country.

So I think I gummed around that one.

I know -- I actually can't tell you the overall view of those two markets, but if I could dig it out with our people that are a lot closer to it, and Matt and I can get back to you on it.

That's fine.

It sounds like -- it sounds like at least your customers if those two markets are - are working so that your account might not be indicative of what you are saying in regard to your -- your activity.

At this point in time, we're doing pretty well in that Texas coast market.

Okay.

And then just one additional question.

I know the K comes out later this week, but wondering if you could provide us with the regional composition of fluid [indiscernible] in the fourth quarter?

Gulf Coast, central Canada, Mediterranean, other?

Hold on.

Matt is digging.

And then really what I'm curious to see is, is when you talk in the commentary about the strong mid-continent activity, and I was wondering what specific -- are there specific plays that are driving that within the mid-continent?

Or is it just kind of across that region where you're seeing strong activity?

Let me give the ones that I think will impact us the greatest.

Okay.

I think that we've -- we've done extremely well in the Jonah Pinedale play.

Okay.

And we have a good share of those rigs.

I don't really know whether that's 24 or 30%, but we've got -- many times we have all we can handle.

But we're running FlexDrill, so that helps a lot up in that market.

Okay.

Number 2 is West Texas.

Okay.

As you get out into the Loving, Winkler, and those counties out there where they've got that deep shale -- , we're doing extremely well out there.

Okay.

And growing what dramatically.

In fact, it is a push for us to service it, and we've been allocating resource into that to do it.

A new play for us, and we're very excited is the Fayetteville shale that's opening up as we speak.

And then we basically do across and of those shales in Oklahoma, we've been doing well.

We're very pressed in training a lot of people to get into that shale play.

We can actually -- we can get all of the work we can service, and the important deal is let's do it in a profitable manner.

And we use generally use our high-end products if those shale plays.

Okay.

Great.

All right.

And Matt is pulling numbers.

Do you want by the to do it?

Sure.

The Drilling Fluids revenue in the fourth quarter.

Gulf Coast revenue was right at 35 million.

Okay.

Central region, 36.3.

Okay.

Canada, 10 million.

Okay.

Europe, 11.4.

Uh-huh.

And the Fay Wright business 10.9.

Okay.

One comment I would like to make -- the pre-Katrina Gulf Coast would have been probably about $44, $45 million.

That was down around 10 in the fourth quarter.

Fourth quarter was more affected by the storms than was the third quarter.

So it had the biggest negative impact.

We ought to be recovering off of that.

We'll be higher in the first quarter, as we begin our recovery of those storms than we would be -- we were in the fourth quarter.

Great.

Thanks, guys, appreciate it.

Thank you.

We'll take our next question from Robert Holmes will Gilford Partners.

Go ahead, sir.

Good morning.

Good morning.

Could you comment on how the new division is working on gas emissions?

Well, in the air emissions area, it hasn't yet, but we're working currently on a series of meetings with a large utility toward a test with a primary focus on mercury and heavy metals.

And that next meeting will be this week yet, and then a unit will be prepared for that, we hope, later in the year.

And so let's just say that's a focus for the Company, but water is in the first place, and this will come alongside it, we hope, later.

Thank you.

It appears, at this time, we have no further questions.

I would like to turn the meeting back over to your moderator, Mr. Matt Hardey.

Go ahead, sir.

Folks, we appreciate your patience with a a call here that's lasted almost an hour.

We recognize there are going to be some follow-up calls, and Jim and I will be available for part of the day.

But we'll be headed up to New York for some shareholder visits later tomorrow and Thursday.

So we look forward to your calls.

We appreciate your patience, and thank you for joining us this morning.

This concludes today's conference, you may disconnect at any time.