NPK International Inc (NPKI) 2008 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by.

Welcome to the Newpark Resources fourth-quarter earnings conference call.

During today's presentation, all parties will be in a listen-only mode.

(Operator Instructions).

This conference is being recorded today, Friday, February 20 of 2009.

I would now like to the conference over to Ken Dennard of DRG&E.

Good morning, everyone.

I appreciate you joining us for the Newpark Resources conference call today to review 2008 fourth-quarter and year-end results.

Also, I'd like to welcome our Internet participants listening to the call as it is being simulcast live over the Web.

Before I turn the call over to management, I have the normal housekeeping details to run through.

For those of you did not receive an e-mail of the release and would like to be added to the distribution list, please call our offices at DRG&E.

That's 713-529-6600 and provide us your contact information, or, of course, you could always contact or e-mail me, which, I think, most of you have my e-mail address.

There is a replay of today's call and it will be available by webcast on the Company's website at www.Newpark.com, and there is also a telephonic recorded replay, which will be available for one week until February 27.

That information is also in the release.

Please note that information reported on this call speaks only as of today, February 20, 2009, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening.

In addition, the comments made by management today of Newpark during this conference call may contain forward-looking statements within the meaning of the U.S.

federal securities laws.

These forward-looking statements reflect the current views of the management of Newpark; however, various risks, uncertainties, and contingencies could cause Newpark's actual results, performance, or achievements to differ materially from those expressed in the statements made by management.

The listener is encouraged to read the Company's 2007 annual report on Form 10-K and subsequently filed quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties, and contingencies.

Also, management will refer to adjusted income from continuing operations and adjusted earnings per share.

These are non-GAAP financial management -- excuse me, financial measures, which management believes are helpful for an understanding of the Company's operations.

Please refer to the Company's earnings release to obtain a full reconciliation of these measures comparable to GAAP.

Now with all that behind us, let me turn the call over to Newpark's President and CEO, Mr.

Paul Howes.

Good morning to everyone.

We would like to take this opportunity to thank all of you for joining us today for our 2008 fourth-quarter conference call.

With me today are Bruce Smith, President of our drilling fluids business, and Jim Braun, our Chief Financial Officer.

Following my remarks, Bruce will provide an update on our fluids business, and Jim will discuss our other operating segments, as well as the total company results for the fourth quarter and full year.

I will then conclude with a discussion of our market outlook before opening the call to Q&A.

I would like to begin by first commenting on our environmental services business, or, as we call it, NESI.

As you may remember, we had intended to sell NESI to CCS last year, but we mutually agreed to terminate the sales agreement in November as a result of litigation from the Federal Trade Commission.

We had previously reported NESI as a discontinued operation.

Starting today and going forward, we will reporting it as a separate operating segment within our continuing operations.

Now turning our attention to the fourth quarter.

I would like to emphasize how pleased I am with our financial results in our fluids and NESI businesses during this increasingly challenging environment for oilfield service companies.

Despite the decline in domestic drilling activity at the end of the quarter, we grew our revenues by 31% to $227 million in the fourth quarter over the same period last year.

Adjusted income from continuing operations for the quarter rose 6% to $10.2 million, or $0.12 per share.

In the international markets, our offshore deepwater operations in Brazil are ramping up nicely under recently signed contracts with major and national oil companies.

To support this new market, our Brazilian fluids plant began deliveries to the deepwater market in September, and we were also recently awarded a new offshore contract with another international oil company.

The contract that we signed with Petrobras in December is expected to contribute to revenues in the first quarter of 2009.

All these developments are strong signs that Newpark is building a reputation as a world-class fluids company.

In the U.S., we saw market share gains in east Texas, west Texas, and the Rockies, despite a decline in rig count from the peak in October.

However, we also saw margin compression.

Our fluids operating margins for the fourth quarter of 2008 were 11.7%, down 120 basis points from last year and down 180 basis points sequentially.

It is important to note that we have responded by reducing headcount and lowering operating expenses.

Now turning to our well site construction business.

We saw a $3 million drop in revenue to $21 million in the fourth quarter from a year ago, and a $2 million decline sequentially, driven by a reduction in the Gulf Coast market.

As this business has relatively high fixed cost, a drop in revenue falls straight to the bottom line and, as a result, the segment experienced a $1.8 million operating loss in the quarter.

This operating loss also included some asset write-down.

Now let me briefly addressed the impact that NESI had on the recent quarter.

NESI reported a 14% increase in revenues to $15 million.

But we incurred charges related to bringing the business back into continuing operations.

Following our decision to abandon the sale of NESI, we wrote off certain properties that we no longer intend to develop, which negatively impacted this segment's operating profit and margin in the fourth quarter.

At the corporate level, we incurred a total of $2 million in legal fees and expenses associated with the NESI transaction and the anticipated resolution of a lawsuit with our former CEO.

Excluding these items, G&A expense was flat, which I believe is noteworthy given our growth in revenues.

With that, let me hand the call over to Bruce Smith, President of our drilling fluids business, for a more in-depth look at the quarter's results.

Thank you, Paul.

This morning, I'll present a review of the Fluid Systems and Engineering segment.

First, I'd like to point out that we had a solid quarter and an excellent year in fluids.

Although the quarter started tailing off in November, we got off to a good start in October and the momentum allowed us to post strong results.

It is important to note that at the first sign of the downturn, we began taking steps to streamline operating costs.

For example, we have reduced our workforce by 15% and are implementing further reductions as the market dictates.

In this difficult environment, we intend to remain vigilant in seeking opportunities to cut costs and enhance operating efficiencies.

Looking at our fourth-quarter results, fluid revenues were $191 million, an increase of 40% over last year.

In the U.S., our Gulf Coast and midcontinent revenues were up 43% and 69%, respectively, contributing an aggregate $110 million, or 58%, of the total revenues.

Customer rig activity and market share gains in east Texas and west Texas, which are part of the Gulf Coast region, contributed to the strong revenue growth.

Canadian revenues were flat at $4.8 million.

Our completion fluids and services business, based in Oklahoma, also reported [positive] results compared to last year, reporting an 8% increase in revenues to $20.4 million.

Our barite wholesale business came in strong, up 40% to revenues of $17.4 million.

Our international business reported strong results as well, growing revenues by 43% to $38 million in the fourth quarter of 2008, compared to a year ago.

The increase was mainly due to continued penetration into the North African and Eastern European markets, and our growing Brazilian business.

Fourth-quarter revenues from our Mediterranean business increased by 20% to $31.5 million year over year.

In Brazil, we saw $6.7 million of new revenue, as there was minimal revenue from this region in last year's fourth quarter, nor did the current quarter include any revenue from our new Petrobras contract.

Sequentially, the fourth quarter looked very similar to the third.

Total fluid revenues were up 1%, where an increase in Brazil revenues was offset by a fall in Canada due to lower rig activity.

In our largest market, U.S.

revenues were flat in fourth quarter compared to the third.

Our European and North Africa business reported a revenue decline driven by weaker foreign currencies.

Operating margins in our fluids segment declined to 11% from 12.9% in the fourth quarter of last year, and down from 13.5% in the third quarter of 2008.

Margins were negatively impacted by industrywide pricing pressure, while we have been working to reduce our operating costs to right-size the business to reflect the market conditions.

Unfavorable product and geographic mix also contributed to the margin decline.

Margins in our European and North Africa business were negatively impacted by foreign exchange rates, which represented about one-third of the margin reduction from the prior quarter.

We also had higher spending associated with the new Petrobras contract as we prepare for this new work in 2009.

I'd like to take a minute to talk a bit more about our international operations.

We recognized a full-quarter benefit from offshore deepwater shipments of fluids from our new Brazilian fluids plant.

Additionally, we were awarded another offshore contract with a European IOC.

In order to support this additional work, we plan a $3.5 million expansion of our fluids plant in Brazil.

Many good things are happening also at Ava, our company that operates in Europe and North Africa.

We began work under a deepwater contract in Libya with Hess Corporation and renewed our contract with Sonatrak in Algeria.

All of this new work is with large oil companies, and these big players typically don't pull back their spending as much in a downturn.

2009, we believe, will be very challenging in the U.S..

The rig count continues to decline as E&P companies are laying down rigs at record pace.

These rigs will likely stay down until market conditions improve and the credit markets start to free up.

Pricing pressure for work is intense and the bidding environment is becoming extremely competitive.

Still, there are some areas of the U.S.

that will fare better.

For instance, the Marcellus gas shale is a new play for us.

We were recently awarded two rigs in the Marcellus, which we expect to be working by the end of the first quarter.

In addition, horizontal drilling in the Haynesville shale, where we already participate, represents additional growth opportunities for us.

Fayetteville shale play in Arkansas remains a consistently strong area for our Company, and the Eagle [thor] horizontal shale gas play in south Texas is gaining interest and we are well positioned to take advantage of any ramp-up in this play.

In closing, I want to say how pleased I am with the progress we have made in our fluids business, both domestically and internationally, over the past few years.

Our international business is more stable and growing and we expect it will represent a larger part of our overall business as it continues to gain traction.

Domestically, we strive to manage our existing operations efficiently, focusing on the target growth areas I mentioned, and we're committed to taking the necessary actions as needed in 2009.

With that, I'll now turn the call over to our CFO, Jim Braun.

Good morning, everyone.

I'd like to discuss our well site construction and environmental services business, before finishing with our consolidated results.

In our well site construction business, revenues were $20.9 million in the quarter, down 11% from the prior year.

Our revenue increase of $1.6 million in the quarter from our Colorado-based business was more than offset by a decline in the Gulf Coast.

On a sequential basis, revenues decreased 7% despite a $1 million increase in composite mat sales.

This business has experienced the same tough market conditions described by Bruce, particularly in its Gulf Coast operations.

Operating margins for the segment were adversely affected by the decline in revenues and asset write-downs.

The fixed-cost structure of this business makes it vulnerable to operating profit volatility when revenues fall significantly.

However, in response to the declines, our reduction in headcount began in mid-November.

It lagged the rapid deterioration in market activity.

In Canada our inventory of wooden mats was written down in the quarter by $600,000 and manufacturing assets specific to the Bravo product line were also written down by $400,000.

The Bravo products are mostly related to the events industry, which is not strategic to our company, and we are looking to exit this offering and dispose of the assets.

As Paul mentioned, NESI reported $15.1 million of revenue in the quarter, up 3% from the third quarter of 2008.

They recovered nicely from hurricanes Ike and Gustav, but the slowing activity impacted them as well.

Operating margins were 2.8% in the quarter, but include a $2.6 million charge to write down injection disposal assets that we do not intend to develop in this market.

Adjusting for this item, operating margins were 20% in the fourth quarter of 2008.

Now turning to the consolidated results, which again will include the results of NESI.

For the fourth quarter of 2008, we reported total revenues of $227 million, up 31% from the fourth quarter of last year.

Income from continuing operations in the fourth quarter of 2008 was $7.2 million, or $0.08 per share.

As we mentioned earlier, our fourth-quarter operating results include $2.6 million of asset write-downs in our NESI business, and in addition, at the corporate level, we expensed a total of $2 million during the quarter, related to the anticipated resolution of claims made by our former CEO and legal expenses associated with the NESI sale.

Adjusted for these two items, income from continuing operations was $0.12 per share.

This is an increase from adjusted income from continuing operations of $0.11 per share in the fourth quarter of 2007.

A non-GAAP reconciliation for these earnings numbers is included in yesterday's press release.

Now let me talk a minute about the annual results.

For the full year of 2008, we reported revenues of $858 million, which were up 28% from 2007.

Income from continuing operations was $0.44 per diluted share for 2008, compared with $0.35 in 2007.

In adjusting for the certain items as set forth in our non-GAAP reconciliation, income from continuing operations was $0.50 per diluted share in 2008, up 25% from $0.40 per diluted share in 2007.

Now turning to our balance sheet.

At December 31, 2008, working capital stood at $253 million with a cash balance of $8 million.

Total debt ended the year at $188 million, leaving our total debt to capital ratio at 33.2%.

As part of the $25 million stock repurchase plan that was approved by our Board last year, we have repurchased 2.6 million common shares at an average price of $5.76 for a total of $15 million.

Although there remains $10 million authorized, we currently do not expect to buy back any more shares in 2009.

Now let me talk a minute about our liquidity position.

Our ability to access cash is primarily through our credit facility.

Important that this facility has almost four full years left to run, expiring in December 2012.

The facility has a $175 million revolver and a $40 million term loan.

The term loan has annual installments of $10 million, the first of which was paid in December of 2008.

At the end of the year, we had $36 million available on our revolver.

With the decline in activity levels, we would expect and we have started to see working capital, mainly receivables, come down and provide a source of cash in 2009.

With cash generated from operations and access to our credit facility, we believe that our liquidity position is strong and we currently have sufficient headroom on our three financial covenants.

Our capital expenditures were $22 million in 2008, as compared to depreciation and amortization expense of $27 million.

Our Board has approved a 2009 capital plan of $28 million, but it contains a number of discretionary-type items that we can easily defer or delay if we don't see the market coming back by midyear.

Now I would like to turn the call back over to Paul for his concluding remarks.

I'm pleased with our performance during the quarter and the year.

We have increased penetration into key markets, particularly overseas, and have been able to reap the benefits of operational efficiencies we have developed in our fluids business.

Within our mats and integrated service segment, I am encouraged by our new leadership in that group.

Finally, I am proud of the employees in NESI for their continued success and focus on their business during the sales process.

Looking forward, our Mediterranean operations are expected to see continued growth, although not at the same rate we saw last year.

In Brazil, we expect to benefit from recently-signed contracts and the potential for new business.

In the U.S., we expect 2009 to be a difficult year as we anticipate continued reductions in the U.S.

rig count.

However, we believe there are opportunities to grow, even during a downturn, by attracting new customers and entering new markets.

We remain open to investing in these additional growth opportunities in 2009.

In closing, I believe the long-term future of Newpark is bright.

The successes we have achieved give us the confidence to pursue new opportunities on a global basis.

With that, we will now take your questions.

(Operator Instructions).

Marshall Adkins, Raymond James & Associates Inc..

Good morning.

A few quick ones here.

First of all, let's hone in on the well site construction.

Obviously, that was very disappointing relative to our model.

It sounds like a chunk of that was asset write-downs.

If I heard you correctly, roughly $1 million of asset write-downs in that area?

That's correct.

So if we back that out, you're still at a negative margin.

What do you do there to turn that around in '09?

Can you cut costs in that area?

Can you get that to a profitable stage for the rest of '09?

Those are the exact things we're doing.

We continue to focus on the costs, but we are also trying to grow and expand that business into some new markets.

There are some opportunities up in Wyoming, there are some opportunities for that business up in the Marcellus shale, as well as, you may remember, we sent 2,000 mats to the UK last quarter.

We have the opportunity to deploy another 2,000 mats to put them in use and work over there.

So a combination of growing that business, but also being very tight and looking at our cost structure in the -- in south Texas as well as southern Louisiana.

So, obviously, we all know that the outlook for North America sucks right now.

Can you get that to a breakeven business in '09 in your mind, or should we be thinking about maybe negative margins there in '09?

The goal is to get that business unit back to profitability.

Even today, fortunately, it's still cash-flow positive.

That business does about -- almost $10 million a year in depreciation, so it continues to generate cash.

But having a business that is not profitable is not our strategy, so we're taking the steps to get that thing turned around.

Mike Harrison, First Analysis Securities.

Good morning.

In terms of the headcount reductions, you did quantify the 15% there, and in terms of the other cost-saving actions, can you quantify how much cost saving you expect to generate in 2009 from those actions?

Let me talk a little bit about the headcount.

We've had a reduction since the end of 2008 of about 145 people.

Most of those have been in Bruce's fluids business.

That represents the 15% of his head reduction.

That translates into just under $7 million annualized salaries for those individuals.

[Really.] But going forward for the full year of 2009, we haven't seen where the bottom is yet in terms of the rig count decline.

So we're going to have to, again, right-size the business as we move forward here in 2009.

So there probably will be additional headcounts going forward.

And then, in terms of the overall E&P activity levels that you're seeing right now, can you give us a sense of how much you're expecting the market could decline during 2009?

And also, maybe, about how you're thinking about the market in the first half as compared to the second half?

It sounded like your CapEx plans assume that there is going to be some kind of recovery in the second half.

Let me take part of that.

I'm not sure where the market is going to go in 2009.

I'm not sure if we've seen the bottom yet.

Certainly, at the present time in our fluids business, our reduction in activity is pretty commensurate with what the market has done.

But there are some bright spots there.

So, in addition to focusing on the cost side and the cost-reduction side, we are still very focused in growing our business into the Marcellus, which is new for us, adding on to what we have in the Haynesville shale, where we have a strong position, remaining strong in the Fayetteville, looking at the Eagle [thor] shale in south Texas, where I feel we have a strong position.

So we're taking a dual approach to this, and certainly we're going to be cognizant of the cost reductions required and we're actively pursuing that.

But we're also actively pursuing new customers and new areas and having some successes along the way.

I think, initially, when we entered this year, we thought we could see some recovery, though, into the third and fourth quarter, but currently, now, we don't really see any real recovery coming, maybe at the end of this year, early next year.

So --

I think the comment about the capital wasn't intended to imply that we were forecasting that recovery.

What we do is we've got the flexibility that if it comes, we can spend capital on projects that make sense, but if it doesn't, we can hold on to that cash and wait till that recovery eventually starts to occur.

(Operator Instructions).

Terese Fabian, Sidoti & Company.

Good morning.

I have a question on your Petrobras contract that extends over a three- to five-year period of time.

Can you give any indication of the ramp-up of revenues for '09?

A little early to tell yet, I think.

We just are now approaching the point where we will begin supplying on that contract.

We haven't physically supplied to it as of this moment in time.

So I really am not in a position, I don't think, to say how it'll ramp up.

But certainly, we will be commencing at the latter part of the first quarter and we expect to be on approximately 13 rigs, quite quickly.

And the ramp-up then will continue from that point.

But as to an exact number, I'm not too sure at this present time.

Do you have any indication of what revenue per rig might be?

No, we don't at this time, as we have basically haven't done any work yet for Petrobras, so it's a little soon for us to be able to establish that, I think.

But -- .

We will need a couple quarters to get behind us on that so we will have better visibility on the longer-term revenue per rig there in that deepwater market.

Karen David-Green, Oppenheimer & Co..

Good morning.

Just wanted to follow up a little bit more on the fluids segment.

Can you talk a little bit about what you're seeing in terms of pricing, both in the U.S.

market as well as the international market?

And then, should we assume that those margins are equal the U.S.

and international, or, going forward, can you give us some indication of how you're viewing the differentials between those two markets?

Certainly in the current U.S.

climate, there is a -- significantly more pricing pressure coming from our customer base, say, today in the U.S.

than there is in the international side of things.

The international side of things also tends to be more long term and contractual.

So you tend to have a better handle on where you are.

I think in the U.S., it's a little too soon yet to tell where the margins are heading, but they're certainly not going up.

But there is a very competitive pricing pressure, but I really cannot quantify that, I don't think, at this moment in time.

Just again, we expect margins to continue down some in the first quarter here in the U.S., but expect to see stronger margins in our international operations.

And then, should we just -- are the U.S.

margins in the fourth quarter, were they equal to the international, or were they even quite a bit weaker in the fourth quarter?

I'm just trying to get an indication of magnitude of change going forward.

They probably ran a couple hundred basis points lower in the U.S.

than international.

Vijay Singh, Janco Partners.

I have a question on the margin -- I mean, the margin decline.

How much of that came from pricing?

You talked about foreign exchange accounting for one-third, but I was wondering if you can tell me how much was it because of pricing.

Of that balance, probably about 10% of it came from pricing, maybe 15%, and then the balance came from a combination of product mix, more of our lower-margin products, as well as the geographic mix.

We had a higher percentage of our business in the fourth quarter in Louisiana Gulf Coast and Texas Gulf Coast, which traditionally carry a little bit lower margins than Oklahoma and the Rockies and the like.

And then, it looks like Accounts Receivable DSOs jumped up a little bit.

Is that just year-end collection process, or is there something more than that?

No, it's not.

It's the year-end phenomenon of our customers holding onto their cash.

It was exacerbated this year by the credit situation.

The good news is, after the first of the year, here in the first seven weeks of the year, we have seen $20 million of cash come in and go to reduction of our debt.

So we anticipate and plan for it to come in, and it, in fact, has been coming in nicely.

Marshall Adkins, Raymond James & Associates Inc..

Coming back at you, guys.

On the fluids, obviously transition year for '09 from U.S.

to international.

As you establish the Brazilian stuff and other areas, what would you envision your percent of international business in '10 versus where we are today?

I think, as we look at it, we think we will be approaching that 70/30 split, 70 North America, 30 international, sometime by the end of '09, maybe beginning of '10.

Versus if you look back over the last year, that was almost nothing, right?

(multiple speakers) Not very much.

5%?

(multiple speakers) It's moved up from maybe 515 to about 80/20 now, so you get a combination of a growing international business and a softening North American business, it can change pretty quick.

Terese Fabian, Sidoti & Company.

I see on the cash-flow statement on acquisition expense for 2008, did you in fact do an acquisition?

In the fourth quarter?

No, what we did is, coming into the year we had -- our Brazilian operation had a -- we had a minority partner, and we purchased or bought them out during the course of the year.

That's what the acquisition includes.

But today, we have 100% of that Brazilian business.

Correct.

The Brazilian entity in which we operate and own the contract is a wholly-owned subsidiary of Newpark.

And on the capital expense guidance for the year, what part of that $28 million, I think you said, would be -- would be something that you would do no matter what?

(multiple speakers) $4.5 million in Brazil.

$3.5 million in Brazil.

There's probably $10 million to $12 million that we would have to spend, regardless, so there is quite a bit of discretion, quite a bit of flexibility in that $28 million number.

(Operator Instructions).

Karen David-Green, Oppenheimer & Co..

I was just wondering if you could give us a little bit more information with regards to the new award in Brazil -- the international oil company -- in terms of possible size, and also when you could see that actually hit the revenue line.

At the present time, it's a one-rig, one-well operation.

And I guess any future follow-up work will be dependent upon what they find or not find when they drill the first well.

We expect that to begin sometime during the second quarter, but we have not received an official starting time yet.

Thanks a lot.

Mike Harrison, First Analysis Securities.

I had another question on Brazil.

This facility expansion, $3.5 million, can you give us some more details on that project?

And also, maybe provide a broader update on your plans to expand your fluids business elsewhere in Latin America, outside of Brazil?

I'll take the first part first.

Because of the existing operation that we have, the first plant that we built in Brazil was pretty well utilized for that customer.

That's going to be ongoing work now.

I imagine they've seen what they've needed to see and they're now formulating subsequent wells.

So, in terms of that original plant, it was pretty well tied up and utilized to its full capacity.

So the expansion really was to be able to handle, A, the new contract that we got and any other work that we will pick up as we go forward and as we hopefully pick up more work in that arena.

Currently in Latin America, we don't have any expansion plans for the Company in Latin America.

We wish to keep the focus fairly and squarely on Brazil until we get the Petrobras contract up and running and functioning efficiently, as the other IOC contract up and running efficiently.

We do, however, have expansion plans over in the European sector through the Ava company, and we're looking now at certain countries that we may enter into later in '09, or we may not, depending upon what we find when we look.

But we're looking at some potential entries into the Middle Eastern area.

Is it fair to say the expansion in Brazil, the new facility, is about a 60% expansion over the current facility that's there?

That's correct.

Question for Jim.

I was wondering if you could walk through your debt covenants and where you stood as of the end of 2008.

We've got a funded debt to capital ratio that has a limit of 45%.

We're at about 33%.

We've got a debt to EBITDA, which is a max of three and we're under two.

And then, we have a funded coverage ratio that has a minimum of 1.2 times, and we're currently at about 2.8.

And we will have those details in the 10-K that we expect to file in about a two-week period of time.

But that's a summary of them.

Terese Fabian, Sidoti & Company.

I have -- a question on the Mediterranean, Eastern Europe area.

You said that you did not expect the same rate of growth, although you did see expansion there.

What is happening in Eastern Europe?

Is that a significant portion of that revenue that Ava is reporting there, and is that in any jeopardy with the events in Eastern Europe now?

No.

It's certainly not a significant part of the Ava company.

It predominantly relates to Romania, where they're into more of a completion mode rather than a drilling mode at the present time.

So the business hasn't gone away, it's just in a slightly different phase at the moment and will rebound at some point during 2009.

But they're in the completion phase now, which takes away from the drilling activity for a few months.

(multiple speakers)

I was going to add in terms of the Middle East, and that's an area that historically Newpark has not competed in, we see that as a real opportunity for us to go forward in terms of our product technology and our services.

So that will be an area that we will be targeting for growth in '09.

A question on the industrial material sales.

They came in the fourth quarter -- pretty strong.

Who is buying, and is that going to be continuing?

That's a business that -- roughly half of it is sale of barite to other fluids companies, and then the other half is to industrial users, companies in the paint, the sound-deadening industry, and the automotive industry.

We would expect in those revenues to come down, not only commensurate with the rig activity that you've seen, but also with just the general recession in some of the other industrial businesses in the country.

At this time, I would like to turn the call back over to management for any closing remarks.

We'd like to thank you once again for joining us on this call, and for your interest in Newpark Resources.

We look forward to talking to you again at the conclusion of our first quarter.

Thank you.

Ladies and gentlemen, this concludes the Newpark Resources fourth-quarter earnings conference call.

This conference will be available for replay after 12 PM Eastern Standard Time today through February 27 of 2009 at midnight.

You may access the replay system at any time by dialing 303-590-3000 and entering the access code of 11124367 #.

Thank you for your participation and at this time, you may now disconnect.