NPK International Inc (NPKI) 2009 Q2 法說會逐字稿

Welcome to the Newpark Resources second quarter earnings conference call.

Following the presentation, the conference will be opened for questions.

(Operator Instructions).

As a reminder, the conference is being recorded today, Friday, July 31, 2009.

I'll now turn the conference over to Ms.

Carol Coale with DRG&E.

Please go ahead.

Thank you, Michael.

Good morning, everyone.

We appreciate you joining us for the Newpark Resources conference call today to review 2009 second quarter results.

We would also like to welcome our Internet participants listening to the call simulcast live over the Internet.

Before I turn the call over to management, I have a few housekeeping items to cover.

For those of you who did not receive an e-mail of the release this morning and would like to be added the distribution list, please call us at the DRG&E offices at 713-529-5600 to provides us with your contact information.

Or you can email me at the address shown on the contact section of the press release.

There will be a replay of the today's and it will be available via Webcast on the Company's Website at www.newpark.com.

There will also be a recorded replay available by phone, which will be available until August 7, 2009.

That information is in yesterday's release.

Please note, that the information reported on this call speaks only as of today, July 31, 2009 and therefore, you're advised that time sensitive information may no longer be accurate as of the time of the replay.

In addition, the comments may by the management, today, of Newpark during this conference call may contain forward-looking statements within the meaning of the United States federal securities laws.

These forward-looking statements reflect the current views of 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 2008 annual report on Form 10-K, its quarterly reports on Form 10-Q and current reports on Form 8-K to understand certain of those risks, uncertainties and contingencies.

Management will also refer to EBITDA, which is a non-GAAP financial measure and is calculated as income before taxes and interest, plus depreciation and amortization.

Management believes EBITDA is used by financial analysts and helpful for an understanding of the Company's operations.

And now, with all of that said, I'd like to turn the Company -- to turn the call over to Newpark's President and CEO, Mr.

Paul Howes.

Paul?

Thank you, Carol.

And good morning to everyone.

We'd like to thank all of you for joining us today for our 2009 second quarter conference call.

With me today is 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 the mats and environmental businesses, as well as the financial details of the quarter.

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

Now, turning our attention to the second quarter.

The North American oil fields service market continues to be an extremely challenging and difficult environment, with weakness in all regions weighing heavily on our results, as natural gas prices have remained at depressed levels.

The US rig count averaged 934 during the quarter, which was down 50% from the second quarter a year ago.

These dramatically reduced activity levels made their presence felt in our results, as we saw significant revenue declines in all three of our business segments.

As was the case during the first quarter, aggressive bidding for new and existing projects compressed operating margins.

Although our environmental service business saw a sequential margin improvement of over 200 basis points.

Principally due to these facts, our consolidated revenues were $110 million for the second quarter of 2009, representing a decline of 48% from a year ago but only a 14% drop from the first quarter of 2009.

We continued to aggressively pare costs and reduce head count during the second quarter to help counter lower drilling activity levels in our domestic markets.

Our North American work force was reduced by 15% during the second quarter.

Bringing our total year-to-date reduction to 485 employees or 33% of our North American work force.

We reduced salaries and wages for substantially all North American employees and aggressively sought out opportunities to reduce our discretionary spending and manage through the downturn with a leaner cost structure.

Based on the actions we have taken to date, we estimate annual cost savings of approximately $80 million.

However, depressed gas prices and the resulting lower drilling activity in North America, combined with more aggressive pricing in our markets, have weighed on our second quarter results, as we are reporting a consolidated net loss of $8.8 million or $0.10 a share, compared with net income of $10 million or $0.11 a share a year ago.

The quarter includes several charges that were recorded to position the business for the future, totaling $4.8 million pretax or $3.1 million after tax related to employee termination costs, the nonrenewal of barge leases and asset writedowns.

Our second quarter results were also negatively impacted by a tax rate of 20%.

We also implemented a plan last month to combine the management of our environmental services business and mats and integrated services division.

This decision was a direct result of the significant decline in the activity levels of our mats business, along with future prospects of a protracted recovery of activity levels in southern Louisiana.

We believe that by consolidating administrative and support functions of these two businesses, we can realize additional cost savings that can help benefit our profitability going forward.

In addition, we continue to evaluate further actions to improve the profitability of the mats business if market conditions decline further.

In North America, we are committed to managing costs and optimizing cash flow, as there are no certainty in predicting when activity will pick up in a meaningful manner.

The recent stabilization and slight uptick in the US rig count is encouraging but we do not expect to see significantly higher drilling activity over the next several quarters.

Despite a struggling North American market, we are optimistic about our international business.

Our Mediterranean revenue levels were relatively stable on a local currency basis, although a strengthening dollar had a negative impact on the year-over-year comparisons.

In Romania, we were awarded two new wells in the Black Sea and we are preparing to enter Turkey.

In Brazil, our operations are well underway but we are disappointed with the rate of revenue growth to date.

Despite the pervasive weakness in North American markets, there are more favorable areas that we are targeting, specifically some of the horizontal shale plays, from Marcellus to the Haynesville.

I will let Bruce Smith, President of our Drilling Fluids Business, elaborate on both Brazil and the new shale plays, as he walks you through an in-depth look at the quarter's results in a moment.

Before doing that, however, one recent development that I want to mention is the amendment to our credit agreement that was executed and announced last week.

The amendment waved financial covenant violations as of the end of the second quarter and modifies our covenant requirements for the next four quarters.

Importantly, we have continued to focus on cash management, which has resulted in a $43 million reduction in debt since the beginning of 2009 and $18 million in the second quarter.

We have right sized the Company to reflect current market conditions.

And with our modified credit facility in place, we believe that we are positioned for further growth in our international businesses, as well as to take advantage of any recovery in North America.

With that, now, let me turn the call over to Bruce.

Thank you, Paul.

And good morning, everyone.

This morning, I will present a review of the fluids systems and engineering segment.

First, looking at our second quarter results on the year-over-year basis.

Our fluids and engineering segment revenue was $89.6 million, a decrease of 47% from last year.

The bulk of this decrease was the result of weakness in our North American markets, where there was a 58% decrease in revenue to $56.7 million, driven by a 50% decline in North American drilling activity.

As in the first quarter, falling natural gas prices continued to surpass drilling activity, which in turn, heightened intense price competition in our market segment.

Our completion fluids and service business in Oklahoma was also particularly hard hit, with revenues being down 65% year-over-year and revenue for Excalibur, our wholesale barite and industrials minerals group was down 57% year-over-year.

Relative to the North American market, our operations in Mediterranean performed considerably better.

The Mediterranean area year-over-year revenue decline of 5% to $25.9 million was due to a stronger US dollar.

In local currency terms, our Mediterranean revenues were stable.

Our Brazilian revenue of $3.5 million was flat with the revenue achieved a year ago.

On a sequential basis, total fluids segment revenues were down only 16%.

In the second quarter, the North American rig count was down 39% sequentially but our North American revenues were down only 28% over the same period.

We were very pleased with our Mediterranean revenues, which were up nearly 18% from the first quarter.

Of note, we have been awarded our next two wells in the Black Sea area of Romania.

And have gained the necessary approvals for bidding on projects in Turkey, which is a new market for us.

Brazil remains a future bright spot for the Company but results to date have been disappointing.

As we have previously reported, we executed the five year Lot B contract with Petrobras in late 2008.

To meet the requirements of that contract, the Company has put in place the necessary infrastructure of personnel, operating bases, warehouses, inventory and capital equipment in-country.

However due to a combination of factors, expected revenues under that contract have not yet materialized.

Those issues include environmental regulatory approval for use of our products offshore, licensing and registration of operating bases with appropriate governmental authorities, and the simple fact of Petrobras working off existing stockpiles of product inventory supplied by incumbents and others.

The ramp up of expenses prior to the realization of meaningful revenues, has meant that we have not been profitable in the country.

While we cannot predict the rate at which Petrobras will ramp up purchases under the contract, we can report that the administrative hurdles to make product sales have been almost entirely cleared.

Petrobras remains very active and we expect increases in revenue over the coming quarters under our contract.

A promising development with Petrobras was obtaining technical approval to introduce our environmentally friendly water-based technology into their drilling program.

Currently, Petrobras uses synthetic-based drilling fluids in the more critical phases of the wells.

However, they have recently approved the use of our high performance water-based technology for field trials, both on and offshore.

This represents an important opportunity for us to further demonstrate the value of our water-based technology.

Besides Petrobras, we have completed our second well for Exxon during the quarter and we anticipate further work under this contract.

We are also beginning work with two other customers, which is expected to further augment results in Brazil in the third quarter.

The operating loss in our fluids segment was $1.7 million in the second quarter, compared to an operating profit of $18.1 million in the second quarter of last year.

The drop in North American rig activity and more aggressive pricing contributed to the significant reduction.

However, on a sequential basis, the second quarter operating loss was lower, for an improvement of $3.9 million, as compared to the first quarter of 2009.

That improvement came despite a decrease in revenues of $17 million, indicative of the positive impact of our cost cutting measures.

An item I'd like to point out is that we incurred about $1 million in pretax severance costs as a result of a 13% personnel reduction in the quarter.

This represents a 37% reduction in North American head count in the fluids segment since the beginning of the year.

Although North America is clearly very weak at this time, some of the US shale plays hold particular promise for us.

In the Marcellus shale, we have recently increased to six rigs and expect to continue this growth going forward.

To better service our customers in this region, we are opening a new facility in Elmira, New York next month.

The horizontal drilling projects in the Haynesville shale remains an important area for Newpark.

It is an area that traditionally uses oil-based drilling fluids where we are now introducing our high performance water-based technology.

The Eagle Ford shale is developing well and we are currently on three rigs, with opportunities for additional wells in the third quarter.

Across the US shale plays, there are approximately 254 working rigs, of which, we are on 46.

Giving us an approximate market share of 18%.

With that, I'll now turn the call over to our CFO, Jim Braun, to discuss our outlook for the segments and financial results.

Well, thank you, Bruce.

And good morning, everyone.

I'd now like to discuss our mats and environmental service businesses, before finishing with our consolidated results.

In our mats and integrated services segment, revenues were $8.6 million in the quarter, down 65% from the prior year but only down 3% sequentially.

There was a $9.4 million year-over-year decrease in the mats and integrated services business, that was largely attributable to Gulf Coast market weakness.

This is being driven by both decreased drilling activity in the Gulf Coast region, including a continuing shift in focus from coastal drilling toward more inland locations, and intensifying price competition.

In addition, concessions to customers on disputed billings during the quarter, totaling $1.2 million, negatively impacted the quarter's revenues.

The operating loss for the segment was $4.8 million, compared to operating income of $2.4 million a year ago and an operating loss of $3.4 million in the first quarter of 2009.

Here again, operating margins suffered as a result of reduced activity, pricing pressures and concessions to customers.

We are continuing to implement cost reduction initiatives in mats, paring head count by 72 employees, with an associated severance cost of $600,000.

We also took an $800,000 noncash impairment charge on our inventory of wooden mats in Canada.

In addition, we've recently decided to exit the low margin oil site construction business in northern Louisiana.

This market is extremely competitive and does not typically include the rental of mats, which is what helped differentiate us in the marketplace.

We will continue to offer our mats as needed but our significantly reduced presence in the area is expected to help our profitability in this segment.

Now, let me discuss briefly our environmental services business.

Environmental service reported $111.3 million in revenue for the quarter, down 31% year-over-year but down only 2% sequentially.

The bulk of the decline in the year-over-year comparison is a result of a 46% reduction in the volume of waste processed in the Gulf Coast.

This volume decrease was offset, to an extent, by changes in sales mix, as well as pricing increases.

Our revenue from NORM saw marked improvement, rising 23% from last year to $2.8 million.

Sequentially, waste volumes processed in the Gulf Coast were down only 2%.

Operating income for environmental services segment was $1.4 million in the quarter, down $1.1 million from last year.

On a sequential basis, operating income was up $228,000 due primarily to reductions in our operating and personnel expense, which more than offset $1 million in pretax one-time charges related to the plan return of 28 lease barges to their owner.

The return of the barges are part of our right sizing the business and cost reduction program and is expected to generate savings of roughly $1 million over the last six months of 2009.

Before turning to our consolidated results, I'd like to address the strategic development that Paul touched on earlier.

We've decided to consolidate our mats and environmental services business under one administrative structure.

This will allow functions, such as human resources accounting, sales and so forth, to be combined for the two segments going forward.

At one time, these these business units had annual revenues of $80 in the case of environmental services and $100 million in the case of mats and integrated services.

Today, annualizing their half year 2009 results, they are at a combined revenue run rate of just over $80 million.

Clearly, something more was needed and we believe that this step is the right move at this time.

Now, moving to our consolidated results.

For the second quarter of 2009, we reported total revenues of $109.6 million, down 48% from a year ago.

The net loss in the second quarter was $8.8 million or $0.10 per share.

As mentioned earlier, our second quarter operating results include a total of $4.8 million of pretax charges related to severance costs, asset writedowns and reducing idle capacity in our barge fleet.

On an after tax basis, these charges equate to $3.1 million or about $0.035 per share.

Now, let me address our balance sheet and amended credit facility.

On July 21, we announced the completion of an amendment to our credit agreement that provided a waiver of certain financial covenant violations as of June 30, 2009 and modifies the covenant requirements for the fixed charge coverage and leverage ratios in future periods.

Specifically, for the next three quarters, covenant calculations will be based on annualized results, rather than trailing four quarters, beginning with the third quarter of 2009.

Beginning with the second quarter of 2010, the calculations will revert back to a trailing four fiscal quarter measurement.

The fixed charge coverage and the leverage ratio covenants will have more relaxed requirements initially and they will become more stringent with each passing quarter.

Ultimately, reverting back to the original requirement in the second quarter of 2010, as it relates to the leverage ratio, and then the third quarter of 2010, for the fixed charge coverage ratio.

As part of this amendment, we agreed to reduce the revolving credit facility from $175 million to $150 million.

As of the end of June, we had $49 million of availability under this facility after giving effect to the $25 million reduction in the revolver.

There were no changes to the amount or maturity of our term loan, which currently has $40 million outstanding.

Our interest costs will increase to reflect market conditions, with the margin on our LIBOR based borrowings rising to a range of 400 to 750 basis points depending upon the Company's leverage ratio.

The margin will initially be 750 basis points but can be reduced as our leverage decreases.

A waiver and amendment fee of $866,000 was paid to the bank group.

As Paul mentioned, even though we've violated two of our financial covenants as of June 30, we continued to generate cash and pay down debt.

Total debt was $145 million at the end of the second quarter, down $18 million during the quarter.

And since the beginning of the year, we've reduced debt by $43 million.

The reduction in debt has lowered our debt to capital ratio to 29%, from 31% at the end of March 2009.

And our cash balance at June 30 was $6.7 million.

Our capital expenditures were $6.6 million in the second quarter, the majority of which was spent outside of North America in growth markets, where we recently completed the expansion to our Brazilian fluids plant.

Our depreciation and amortization expense was $7.2 million in the second quarter.

We expect capital expenditures to be roughly $8 million over the last half of the year, again directed to our international businesses.

Resulting in a total 2009 CapEx of about $22 million.

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

Thank, Jim.

While this was another tough quarter, we have managed to make the best of a difficult environment and mitigated a good deal of the damage from falling rig counts by reducing our cost structure, redeploying assets and finding way to operate more efficiently.

Like the first quarter, we have aggressively pared head count to reduce our operating expenses.

And the additional severance costs we incurred this quarter should yield relief in the coming quarters, if rig counts remain at or better than current levels.

And we've already seen many of the cost cutting actions from the first quarter take hold.

While we have seen North American activity levels stabilize over the past several weeks, we plan to continue looking for opportunities to reduce costs and drive operational efficiencies.

Given the actions we have already taken to date, we are better able to handle a prolonged downturn.

And if conditions remain stable, expect to be cash flow positive at the current level.

Our international markets have provided us a good measure of stability from domestic market turbulence.

And our efforts to diversify geographically have put Newpark in an excellent position to benefit from these growth markets well into the future.

With personnel and infrastructure in place in Brazil, we expect to see revenue growth as our products are utilized.

In the Mediterranean region, we will pursue new opportunities in areas near our current base of operations.

The diversification benefits and attractive growth prospects of the international markets have gone a long way towards helping us through a difficult economic environment and will remain the cornerstone of our long-term strategy.

Looking forward, in the US, we do not expect the rig count to rebound meaningfully before the end of the year.

Low natural gas prices, driven by high supply and low demand, make meaningful increases in domestic drilling activity unlikely.

With that, we'll now take your questions.

Operator.

Thank you.

(Operator Instructions).

Our first question is from the line of Jim Rollyson with Raymond James.

Please go ahead.

Good morning, guys.

Hi, Jim.

On the fluids side of the business, you kind of, obviously, talked about the difficulties going on with the rig count where it is in North America.

But also, it sounds like you're anticipating second quarter -- or third quarter to pick up in Brazil.

So you kind of weigh those two factors plus, maybe getting rid of some of the costs that you've worked on reducing and some of the one-time items, do you think you're making money there in the third quarter or do you still think you're slightly in the red?

Jim, I think when you look at our fluids business, I think we're going to be close in the US on a break even basis but we will be cash flow positive there.

The international business, we've got expectations to be at break even in Brazil and our [Ava] business will continue to do well, both profitability and cash flow-wise.

So it will be close.

And on the cost cutting initiatives, you've been working diligently on that all year.

Are you thinking that we'll see the brunt of some of the latest cost cuts show up in third quarter or do you think there's still further time for more cost cuts to show up in the numbers?

Well, you're right.

We've been very busy the first half of the year and the significant actions have all been taken.

As we see this rig count appear to be bottoming out, we're starting to feel comfortable with our work force and our level of employment that we can, as I said, be cash flow positive as we move forward.

We'll continue to work on -- around the fringes in continuing to pare back costs but the actions that we've taken should start to come to benefit.

You should see those in full in the third and fourth quarter.

Great.

Thanks, guys.

All right.

Thank you.

And our next question is from the line of Mike Harrison with First Analysis.

Please go ahead.

Good morning.

Morning, Mike.

If I could just take another swipe at the cost saving question and get a better sense of the timing.

I believe you said, on the last call, that you were at a $40 million annual cost savings rate.

And now, you're talking about an $80 million number.

If I could just get a better sense of how much of those savings you realized during the second quarter?

Was it actually something close to $10 million?

And then, what kind of incremental savings you expect in Q3?

And when you would expect to hit that full $80 million annual run rate or $20 million per quarter?

The $80 million run rate should be on an annualized basis.

That should start be reflecting fully a quarter's worth in the third quarter.

In terms of thinking about the $40 million to $80 million, I think the answer there is that we've obviously taken a lot more action from the last time we had our call, in terms of what we've done in response to the market.

So that $40 million was identified at that point in time.

And as we saw things -- rig counts continue to fall in the second quarter, we continues to take further actions to now, where we're at that $80 million number.

Okay.

And then, the main question I have on Brazil is, these delays that were related to the regulatory approval and licensing issues, are those delays that could have been avoided?

And do you feel like you learned some lessons there or how should we think about that?

Part of it could be that we were new to Petrobras and new to the country and trying to figure out how things worked there.

But there's also a massive bureaucracy that you just have to go through within that country.

So, perhaps it would have been a combination of both.

But I think we've now worked through all of that and we're now I think in the position to be able to move forward quite quickly from this point.

I think one of the things that occurred, as well, is that Petrobras was running off some of the inventory of product they had from their incumbents as well.

And we probably didn't anticipate that as well as we should have.

And the ball is entirely in Petrobras court right now, all of these other issues have been ironed out?

Is that correct.

As far as we are aware, all these other issues are now solved and the ball is back in their court now.

Right.

Thanks very much.

All right.

Thank you.

(Operator Instructions) Our next question is from the line of Terese Fabian with Sidoti & Company.

Please go ahead.

Thank you.

And good morning.

I have a question following up on the previous ones.

With operating margin, you have the cost cuts, you have maybe revenue stabilizing or increasing a little bit.

Do you expect to see margin improvements?

What is your target for this in the last half of the year?

Well, Terese, as we said, our target for the last half of the year is not only return -- to be cash flow positive but return to profitability.

And that's going to start up slowly in terms of percentage terms.

And it will take us some time until the market recovers to get back to the double digits that we previously experienced in 2008.

Okay.

And obviously you'll be expanding in the Marcellus and probably the Haynesville.

You have the new technology.

Is this unique to you or is this, the water-based technology, being used by others also?

The technology is certainly unique to these shale plays.

Generally speaking, they have historically use oil-based fluids in the horizontal sections of these shale plays.

We are introducing our high performance water-based technology, which has the environmental benefits.

So, it is new in terms of, historically, they've never used water-based fluids on the horizontal sections.

And what has the reception been?

So far, so good.

We have several companies interested and we'll be conducting field trials in the Haynesville for shortly.

Okay.

And with Brazil, are you experiencing any attempt to renegotiating your contract or are you also being asked to provide more for the same amount of money that you are contracted for?

Neither.

But interesting developments in Brazil too are the fact that they are interested in looking at the high performance water-based technology.

And we're looking forward to moving that forward with Petrobras in the coming weeks.

So, we believe that we'll get back on track with our contract with Petrobras.

The upside potential there for us, if we can switch them from their typical fluids, which is synthetic-based, to our deep drilled water-based technology, there's opportunities obviously for increased revenue and improved margin there.

Okay.

And just one last question on Brazil.

You've said that you were working with two new customers -- last call, you said that that you had a contract, I think, with Exxon that was going to be starting in the second quarter for a second well.

Did that begin?

And you have some new customers you said lined up.

Can you talk about that?

Yes.

We just completed the second well for Exxon under the contract.

And the contract is still in place, so we expect further business and revenues coming from the Exxon contract.

We are about to start a contract with Maersk Oil, a Danish company.

And another company up north called Alvarado.

That work is beginning within the next few weeks.

All right.

Thank you.

Thank you.

All right.

Thank you.

(Operator Instructions).

We have a follow up from Mike Harrison with First Analysis.

Please go ahead.

Bruce, I was hoping that maybe you could talk a little bit broadly about the competitive dynamics you're seeing right now in the fluids market.

Looking back to last year, a big piece of your strong performance and fluids was related to share gains.

I was just wondering if you could talk about what's happening during this downturn in terms of market share?

And also, maybe touch on the condition you're seeing in pricing and your expectations for pricing going into the third quarter.

Pricing certainly is competitive at the moment.

As the rig count declined, people were actively seeking business to keep rig counts alive and keep the percentages that they had alive.

We've retained the same percentage pretty much as we had before the market decline.

So, we were about 18% before, we're about 18% now.

We are finding, though, that people have a little more time now to listen to our technology and how our technology might make them more efficient and might improve their drilling operations.

So, we're actually getting a better reception currently in providing our new technologies to these different areas of drilling that are currently going on.

So we're feeling quite positive really about some of the developments we're seeing in the Marcellus, in the Haynesville, in the Bakken shale, in the Eagle Ford and various other places around the country.

So although the rig count has come down, our rig count has stabilized.

And we are still at the 18% or so that we had previously.

And now, we're beginning to have possibilities to introduce our new technologies, which when everyone was busy, a lot people really didn't have time to sit and listen and work through those types dynamics.

So, I think we're in a positive place right now.

And you talk about the new technology, the water-based fluids as being -- it sounds like the primary focus is that these are not only friendly fluids, is there a value proposition there as well?

Do they cost more but work better?

Do they cost less and work just as well?

Give us a sense of what the other selling points are for that product.

They probably cost about the same as the conventional oil muds that are running.

Historically, our margins are higher with the water-based fluids.

And in some instances, the costs actually run a little higher than they do with oil-based fluids.

However, the oil companies benefit from not having the expense of the environmental handling of the waste that's created.

And of course, we feel the performance of the water-based fluids is as good, if not better in some instances than the current oil-based muds in use.

A couple of points too.

If you look at the shale plays, the Haynesville and then up into Marcellus, those are environmentally sensitive areas.

In the Haynesville, I believe the approximate cost to dispose of the oil-based cuttings per well runs about $250,000.

With water-based technology, you can eliminate the vast majority of that cost.

And then, as you go up into the Marcellus shale again, a lot of environmental pressure coming from the state governments.

And we believe there's some real opportunities there.

If you look six months ago in the Marcellus, Bruce's business, we didn't have any rigs running there.

Today we've got six and hopefully, by the end of August, we could have eight rigs running.

So we're already starting to gain traction there in a meaningful way.

And then, I was also hoping that you can discuss the new business potential in Turkey and maybe compare that to the potential opportunity you see in Brazil?

Is it a comparable size or a smaller opportunity in Turkey?

It is a smaller opportunity but there is business going on in Turkey.

A major operator -- the major integrated companies are looking at going in there very shortly.

Exxon is one that's moving potentially into Turkey.

Petrobras is potentially moving into Turkey.

So we hope to be able to lever some of our relationships, say, that we have with those companies in Brazil into that Turkish market.

And Turkey, geographically, is very close to where we operate and have a -- currently.

So it's not too much of a stretch to move into Turkey with our existing infrastructure and existing staffing.

All right.

Thanks very much.

Thank you.

All right, thank you.

And there are no further questions at this time.

Management, please continue with any closing comments you may have.

I'm sorry.

We do have --.

Thank you.

Pardon me.

We do have a follow up that just came up.

Terese Fabian, please go ahead.

I'm sorry.

I thought I had punched it in earlier.

I just have a brief question on the Mediterranean area.

I know you had mentioned before that you were approved for work in Egypt, that you had some trials there.

Do you see any possibility for that happening?

And what is the level of tender activity that you're seeing in the Mediterranean area?

The tendering is quite active in that whole area.

We hopefully, will be renewing our contracts in Algeria later this year.

And within Egypt itself, we have done two follow ups to the first two trial wells that we did in Egypt, which is part of the qualification process.

We are now an accepted Company in Egypt and are able to bid and respond to all tenders within Egypt now.

So, the situation at the moment is we're waiting for the tenders now in Egypt so that we can participate.

All right.

Thank you.

All right.

Thank you.

And with that, there are no further questions.

Please continue with any closing comments.

Thank you.

I'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 on the conclusion of our third quarter.

Have a great day.

All right.

Thank you.

And ladies and gentlemen, this does conclude the Newpark Resources second quarter earnings conference call.

If you would like to listen to a replay of today's conference, you can do so by dialing 1-800-406-7325 or 303-590-3030.

Input the access code 4110135.

We would like to thank you very much for your participation today.

And you may now disconnect.

Have a very pleasant rest of your day.