Oil States International Inc (OIS) 2010 Q4 法說會逐字稿

Welcome to the Oil States Q4 earnings conference call. My name is John, and I will be your host.At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note this conference is being recorded.

I will now turn the call over to Mr. Bradley Dodson. You may begin.

Thanks, John. Welcome to the Oil States fourth quarter 2010 earnings conference call. The call today will be led today by Cindy Taylor, Oil States' President and Chief Executive Officer, and myself.

Before we begin, we would like to caution listeners rewarding forward-looking statements. To the extent the remarks today contain information other than historical information, we rely on the Safe Harbor protections afforded by federal law. Any such remarks should be weighed in the context of the many factors that affect our business including those risks disclosed in our Form 10-K and our other SEC filings.

I will now turn it over to Cindy.

Thank you, Bradley, and thanks to all of you for joining our call this morning.

We completed a very success surveillance fourth quarter and full year in 2010 which we believe will position us well for future growth.

Of particular note, we completed the strategic acquisition of the MAC Services Group, thereby expanding our accommodation segment into the growing Australia natural resources sector.

In addition, we completed two other complementary bolt-on acquisitions in our accommodations and offshore products segments.

The MAC acquisition closed on September 30, 2010, and accordingly did not contribute to our fourth quarter 2010 operating results.

Each of our businesses continue to deliver strong results as the oil field services industry and the global economy continue to recover from the recession.

Our accommodations business continued to enjoy high occupancy levels, and generated strong earnings from our Oil Sands Lodges.

Our Well Site Services and Tubular Services businesses capitalized on increased US drilling and completion activities.

Our offshore products segment reported a strong quarter and received record orders of $208 million in the fourth quarter, positioning it for growth in the second half of 2011 and into 2012.

For the fourth quarter of 2010, Oil States generated $697 million of revenue; $105 million of adjusted EBITDA; and earnings of $0.94 per diluted share, excluding acquisition-related cost expensed during the quarter.

Our Well Site Services segment delivered sequential revenue and EBIDTA growth of 11% and 20% respectively, largely due to the 4% sequential improvement in the US rig count, particularly given our leverage to complex horizontal well completion. Our revenues and EBIDTA margins in our offshore product segment during the quarter contributed to 19% sequential growth in EBIDTA.

Our backlog in offshore products increased 34% during the fourth quarter of 2010, to $354 million as of year end.

At this time, Bradley will take you through more details of our consolidated results and financial position, and then I will conclude our prepared remarks with a discussion of each of our segments and will give you our thoughts on the current market outlook.

Thank you, Cindy.

Please note the discussion of fourth quarter 2010 results will exclude the $6.3 million of transaction costs which were largely nontax deductible and the $900,000 of maximum related interest expense incurred prior to closing the transaction.

During the fourth quarter of 2010, we reported operating income of $74 million on revenues of $697 million.

Our net income for the fourth quarter of 2010 totaled $50.6 million or $0.94 per diluted share.

The comparable fourth quarter 2009 results were $59 million of operating income on revenues of $529 million.

Our fourth quarter 2009 net income totaled $39.9 million, or $0.78 per diluted share.

The year-over-year increases in profitability were primarily due to stronger earnings from Well Site Services as a result of increased US completion activity.

Relative to our prior guidance on fourth quarter 2010 expected results, we generally had stronger operating results overall. Well Site Services exceeded our initial expectations due to continued strength in the US horizontal rate count, with limited holiday downtime experienced.

Likewise our accommodations segment exceeded our internal forecasts as significant holiday vacancies did not materialize.

Tubular Services was lower than expected due to increased service costs on certain program work which hurt overall margins.

Depreciation was higher than expected by $0.02 per share.

The fourth quarter tax rate was lower than expected but this was offset by higher diluted shares outstanding given the significant increase in our stock price.

Depreciation and amortization in the fourth quarter of 2010 totaled $32.1 million, compared to $31.2 million in the fourth quarter of 2009.

D&A is expected to be $43.7 million in the first quarter of 2011.

The increase in depreciation and amortization in the first quarter of 2011 is due primarily to the acquisitions closed and the capital expenditures made over the past 12 months.

Our closing valuation of the MAC assets was greater than initially estimated, which increased our forecasted depreciation for the MAC in the first quarter of 2011.

Net interest expense is expected to be approximately $11 million in the first quarter of 2011.

The effective tax rate in the quarter was 29% compared to 28% in the fourth quarter of 2009.

We currently estimate that our effective tax rate to be 27% in the first quarter of 2011.

During the fourth quarter, we reported cash flow from operations of $78 million.

We spent $61 million on capital expenditure and completed three acquisitions for total cash consideration of $710 million.

As previously disclosed, we entered into a $1.05 billion senior credit facility to finance the MAC acquisition, as well as to provide liquidity to fund our expected growth.

As a result, our net debt at the end of the fourth quarter was $817 million, and our debt to cap ratio was approximately 36%.

And as of December 31, 2010, the Company had approximately $368 million of combined availability under our various credit facilities.

We currently expect to spend approximately $535 million in capital expenditures in 2011.

Our planned CapEx is greater than our previous estimate due to anticipated additional expansionary spending in our accommodation segments both in Canada and Australia.

The 2011 budgeted CapEx includes approximately $387 million in CapEx for the accommodation segment; $87 million in the Well Site Services segment; $54 million in the offshore products segment; and $7 million in the Tubular Services segment.

We believe that we will have sufficient availability to fund this growth CapEx through expected strong operating cash flow in 2011, along with amounts available under our existing credit facilities.

At this time, I would like to turn the discussion back over to Cindy, who will view the activities of each of our business segments.

Thanks, Bradley.

I will lead off with our accommodations business. We enjoyed strong occupancy levels in all of our major Oil Sands Lodges during the fourth quarter of 2010, particularly in light of the holiday season.

Strong occupancy levels coupled with increased room capacity in our Oil Sands Lodges were partially offset by lower minimum guaranteed payments year-over-year and lower third party manufacturing sales.

The fourth quarter 2009 results included $10 million of additional manufacturing revenues, and contract-guaranteed revenues which generated $7.4 million of EBIDTA compared to $4.6 million of contract-guaranteed EBIDTA in the fourth quarter of 2010.

Revenues from our major Oil Sands Lodges were up approximately 65% year-over-year.

Sequentially, accommodations results were down $1.5 million in EBIDTA on higher revenue, primarily due to the completion of recovery work associated with the Macondo Well in the Gulf of Mexico, and startup costs incurred for our mobile camp assets.

The ongoing lack of offshore work following the Gulf of Mexico moratorium and startup costs for mobile fleet accommodations in Canada and the Bakken Regions negatively impacted Q4 2010 results by approximately $2 million.

Our offshore product segment generated $118 million of revenue and $21 million of EBIDTA in the fourth quarter of 2010, compared to $102 million of revenues and $17 million of EBIDTA in the third quarter of 2010.

The sequential improvement in revenues was primarily due to higher crane and deck equipment revenues.

Offshore products EBIDTA margin also improved sequentially by 50 basis points, primarily due to increased revenues and operating leverage.

Our orders were extremely strong during the quarter and backlog totaled $354 million at December 31, 2010, up 34% from backlog reported at September 30, 2010.

Our Well Site Services segment generated revenues of $139 million, and EBIDTA of $37 million in the fourth quarter of 2010, compared to $126 million and $31 million respectively in the third quarter of 2010.

Our Rental Tools and Land Drilling Services both contributed to this sequential improvement.

Revenues in EBIDTA from our Rental Tools increased 14% and 16% respectively, when compared to the third quarter of 2010.

These sequential improvements were primarily due to increases in US completion activity, particularly in support of horizontal drilling and complex completions in the shell plays.

We also obtained some pricing and service mix improvement.

On a sequential basis, our drilling revenues in EBIDTA increased 3% and 37% respectively. Our drilling rig utilization was fairly flat, but cash margins did increase by 34%.

During the fourth quarter of 2010, Tubular Services generated revenues of $297 million, and EBIDTA of $9 million compared to revenues and EBIDTA of $233 million and $12 million respectively in the third quarter of 2010.

Tubular Services OCTG shipments increased 25% sequentially to 148,400 tons from 118,500 tons shipped in the third quarter of 2010, significantly outpacing the 4% sequential improvement in US drilling activity.

Gross margins as a percent of revenues in the fourth quarter were down due to a larger portion of service-related costs expensed on certain program work.

The Company's OCTG inventory decreased slightly to $333 million at December 31, 2010.

I will now transition and give you some of our outlook comments for the first quarter of 2011.

Our accommodations business has been transformed by the MAC acquisition, which allows us to expand our accommodations model into the active Australian market where we have highly visible growth opportunities.

We believe we now have two growth platforms positioned well in the Canadian Oil Sands region and the Australian Natural Resources sector.

Primarily in support of the Ontario contract in Canada, we expect to continue to expand our Oil Sands Lodge capacity in the first quarter of 2011.

Our combined Oil Sands Lodge and Australian Village Room Camp is expected to increase from 12,645 rooms available at December 31, 2010, to 13,648 rooms available at March 31, 2011, which is an 8% projected room camp growth rate.

With this organic growth and contributions from the MAC acquisition, we expect accommodations revenues to be $180 million to $200 million in the first quarter of 2011, with EBIDTA margins in the 35% to 37% range.

In our offshore product segment, strong operational execution in the fourth quarter of 2010 coupled with slightly higher shipments fostered sequential EBIDTA margin improvement.

We booked strong orders totaling $208 million in the fourth quarter, setting the segment up for a strong second half revenue recognition in 2011.

We continue to focus on bidding activity, new project awards and building our backlog.

We expect first quarter revenues to total $110 million to $120 million with EBIDTA margins ranging from 15% to 16%.

Activity for our Rental Tools business is primarily tied to completion and production services activity in North America, with particular leverage to high end, multistage completions and will generally track movements in shell drilling and the horizontal rig count.

Our Rental Tool business is expected to be relatively flat sequentially in the first quarter of 2011, as continued strength in the US rig count has been offset by downtime associated with recent severe winter weather in several of our key markets.

First quarter 2011 earnings in the drilling business likewise will be negatively impacted by the disruptive weather in January and early February.

The OCTG market remains fairly well in balance with approximately 5.6-months supply on the ground. Imported product continues to represent more than 50% of the market.

Our OCTG sales generally follow trends in the US rig count with premium grades and high demand currently due to shell play development.

Our gross margin should improve sequentially in the first quarter with projections in the 5% to 5.5% gross margin range.

We are projecting Tubular Services revenues in the $265 million to $280 million range given increased drilling, but a general lack of pricing strength currently.

Overall we remain in a very strong financial position with ample liquidity to take advantage of future investment opportunities which may arise.

This does conclude our prepared comments at this time. John, would you open up the call for questions and answers?

Our first question comes from Stephen Gengaro, from Jeffries.

I guess two things. The first --the offshore products margins you talked about the first quarter down a little bit. Is that just timing and mix, or is there anything there we should be thinking about?

It really is timing and mix, coupled with weather. As you know, there was pretty severe weather early in the quarter in the UK that complicated matters just a bit for us there.

But more importantly, a lot of this backlog build, as you know, is coming in the third quarter and the fourth quarter. We have to do engineering work, procurement work, et cetera, get materials in before we can really commence revenue recognition. So although it's a very positive story overall, it doesn't hit immediately. So those are pretty much what we're looking at there.

And is high teens in the second half reasonable?

Absolutely.

Okay. And then, the other point I wanted to just hit on, as you mentioned, the 8% sequential rise sort of 4Q to Q1, in the accommodations unit, you got some control -- some land in Australia recently. Can you give us your best guess for what the available room count does between now and the end of '11?

Yes. We've had in our investor presentation, at least on the Canadian side, year-over-year, we expected to show 26% growth in our room count. And now on the MAC side, year-over-year, we were looking at similar amounts.

And does that include, Bradley, the land you just bought, or was that a '12 event?

We'll get late -- in Karratha -- we'll get some rooms up and running hopefully by fourth quarter, but there won't be a huge impact to 2011 results.

Okay. Thank you. That's helpful.

Thank you, Stephen.

Our next question comes from Blake Hutchinson from Howard Weil.

Good morning.

Good morning.

Just a couple questions to kind of reset our model as we look into the new year here.

First of all, with the MAC as well as the way things are unfolding in Oil Sands, we should see the potential for some Greenfield Development work. Is there any metric we should be thinking about in terms of the dollars that you have to invest on a per room basis in terms of -- how can you size incrementally your investments and help us think about that?

We really had gotten away from giving capital cost for room. It can vary as I think you are alluding to fairly significantly depending upon whether it is a greenfield startup development, simply because, particularly in Canada, as you know, it's extraordinarily remote, heavily forested tundra environment. There is quite a lot of site preparation cost and we usually phase in these developments, so it doesn't necessarily have the best information for analysts that are out there.

But even when we look at a Phase One development, we're looking at reasonable returns considering the upfront investment that we have to make into the site.

As you know, as we scale up the sites with incremental rooms, we are able to leverage those returns overall, but it can vary fairly significantly between Canada and Australia. And even in Australia, between the East Coast and the West Coast. So, I'm not sure that that's the most helpful information to you.

So, in other words, the initial investment is misleading and the per-room metrics may apply to kind of extensions in a better way?

It can be. It can be.But I think the most important thing for your information and for ours, of course, is our tracking and monitoring of the returns on invested capital that we get on the all-in development which are very strong.

Sure. And then in terms of, I guess, a way in terms of describing the pricing environment, should we be thinking any differently about kind of payback duration on any new investment here? Than the far cycle?

No. I think the paybacks will be very consistent with what we've experienced in the past.

Certainly the targets -- we've always said we think we get about a 4, 4.25 a year payback on our investments there. We've done better than that historically, but that continues to be the target.

Great. Turning to the offshore products business, one of the things that was kind of unexpected as we look at that business is the spate of kind of new-build rigs here.

Can you just kind of, again, resetting the model, give us an idea of whether you are seeing any order flow with regard to rig new-builds and the potential for that to be kind of another leg of offshore products rather than just development work here?

I'll kind of comment on that. I think most of you know that we had projected a decline in drilling-related equipment or capital-equipment orders more than offset by production infrastructure-type orders, a lot of which you're beginning to kind of see come through our order book in Q3 and Q4.

So, to your point, I think these orders would be a pleasant surprise to us relative to kind of what we're looking at.

A rig being announced today is probably not going to hit our backlog for a while, given the type of equipment that we provide, particularly if they are deepwater floaters.

Most of what we'll have there, probably, is drilling riser flex joint work and other ancillary capital equipment orders.

So, in other words, nothing in the current order stream, but maybe something that is potentially additive here?

Yes and no. We get some drilling rig equipment orders, and particularly for drilling riser flex. A lot of times we don't even know which specific rig it's going on. But I can just tell you, I don't think it is these recently announced rigs at this stage and it's not too terribly materialistic.

The new orders for drilling -- that type of drilling rig equipment is not terribly material right now.

Thanks. Then on the OCTG business, I apologize if I missed this, but you mentioned the influence, at least on the margin side, of a large program.

Did you size the -- is that also a factor in the volumes, and if so, did you size that?

No. The issue was really that we took some program work that had additional ancillary expenses that were not expected, and impacted the margins on those programs.

I think we've encompassed the impact of those in our guidance for the first quarter. It was a couple of programs for certain customers, but it didn't impact the volumes, it just impacted the margins.

Okay. Great. That is exactly what I was looking for. Thanks a lot.

And Blake, just for reference, although not terribly material in total, some of those costs did lag during the quarter, so the fourth quarter took a little heavier hit on that. But I think we picked it up, and again, in our guidance, we are calling for improvement in those gross margins in the first quarter.

Great. Thanks. That's very helpful. Appreciate the help.

Our next question comes from Joe Gibney, from Capital One Southcoast.

Thank you. Good morning.

Good morning, Joe.

Bradley, I was just curious if you could put a little breakout on your CapEx there, the $387 million within accommodations. Could you provide the allocation between MAC and Canada?

Sure. Right now we think that we'll spend approximately $267 million, $268 million in Canada, and $115 at the max.

Let me just clarify. That $268 million is largely concentrated in Canada, but we'll also pick up some US spending for the Bakken and a few other projects that are there, but the majority of what Bradley just quoted will be in Canada.

And in terms of accommodations margins going forward, you referenced 35% to 37% in the first quarter, as you guys work MAC into the fold here, has anything substantively changed in terms of their EBIDTA margin at all or is it still you are generally band-widthing in that 45% to 50% range as it's been historically. Is that holding? Is that embedded in your expectations?

It is embedded in our expectations and it is holding.

And last one, along the same lines, in terms of rental margin trajectory, Cindy, I understand we've got a little bit of a weather wobble impact here in the first quarter that's going to impact everyone on shore.

Just curious, are you starting to feel like you are going to get a little bit more pricing traction, little bit of better flow-through on the margin side as you work your way through the first half of the year given the higher intensity angle on the completions that you are seeing?

Yes. And we've seen that kind of steadily late in the year of 2010 and we do project it to continue, I would say, in 2011.

I think the real question that we are trying to assess right now is what the true impact of the weather is in terms of both our revenue generation and our cost structure. Just for this segment, of course, number one.

Then, two, how much can be caught up, if you will, throughout the quarter. Because that makes people generally say we've lost five or six days.

There may be an ability to make up some ground. It's just a little premature to make that call right now.

I understand. Nice quarter. I will turn it back.

Thank you so much.

Our next question comes from the line of Victor Marchon, from RBC Capital Markets. Please go ahead.

Thank you. Many of my questions have been asked.

I wanted to, if I may, just on the CapEx side, is any of that CapEx that you talked about, is that all expansion for outside of the one that you announced in Australia?

Is any of that capital for a new village or a new lodge?

It does include CapEx related to new villages and lodges that we right now are uncontracted, but based on what we see, we are hopeful we will be able to put into place. And given our outlook, we thought it was prudent to go ahead and budget them and include them in the forecast.

And just the second one on the drilling side, maybe you could talk a little bit about what you are seeing on the pricing side there and understanding the weather impact, but from a activity or utilization standpoint, how things have started for you guys this year and how you see things progressing in the next six to nine months.

Drilling, as you know, is a smaller and smaller piece of our business with the growth in the other segments.

But I would say generally pricing has a modest upward bias, although in the first quarter, is the slow quarter for the Rockies rigs seasonally.

And in West Texas we have start-up issues in January. But other than the weather, the trends are generally positive in the segment, and I think we should show good year-over-year growth in the business overall.

And just the last one on the weather. I just want to see if you guys could talk to any impact in the first quarter as it relates to the flooding and the cyclone in Australia.

I would be happy to comment. I just returned from Australia, probably been roughly two weeks ago now. So a lot of my work there was meeting with customers and integration efforts, but it does allow you kind of a firsthand look at what's going on in the countryside.

Although there was quite a lot of very severe flooding, a lot of that was really south of our customers' mines and also south of our operations. So we were relatively unscathed, if you will, from the sense of damage to our operations and our assets, so, nothing significant there.

Of course, everybody is well aware that a cyclone hit kind of at the end of that -- in fact it was the end of my stay there, but it went generally to the north of our operations. Again, no damage there.

We believe that we are roughly in line with our budgets and plans despite all of the weather issues that have been in place in Australia, so they are doing very well.

What we were concerned about and kind of got my arms around was whether our manufacturing room-delivery schedule would be impacted, which it has been, but the beauty of it is they were ahead of schedule coming into the bad weather in January.

They don't plan for a lot of installation work generally in January and February anyway, because it is the rainy season.

So, on balance, they are at or slightly ahead of their room-delivery schedules, so just to give everybody a sense of comfort, if I can, is that things are going very well with the acquisition thus far and very well with the developments in the country.

Thank you. Just the last one on the deliveries for the new expansion or existing expansion in Australia, is that completed by midyear-ish?

To get to the 5670 room count?

Yes.

I would characterize that they finished off 2010, which is obviously prior to our official ownership and closure of the deal, slightly ahead of where they were expecting to be.

If I remember the number off the top of my head, which will be in the 10-K, was 5210 rooms at the MAC at 12/31/2010. Slightly ahead of where we expected.

They don't usually expect to install rooms in the first quarter. This is the rainy season down there, albeit it's been much worse than expected. We are not really behind terribly, they were a little bit ahead to start off, so I think on balance we're in good shape.

Thank you for that. I appreciate it.

Thank you.

Our next question comes from the line of Jeff Spittle from Madison Williams. Please go ahead.

Good morning, Cindy and Bradley. First question with regard to offshore products and as you assess the bid queue currently, could you give us an update on how things are shaping up in terms of mix of those projects and what that might apply for proprietary orders, potentially?

I definitely can. Generally speaking, a lot of the production infrastructure work that we have is a good mix for us, not only in terms of bid margins but in terms of our ability to execute that work.

So several of the projects that we announced in Q4 are kind of in that sweet spot, if you will, in terms of our prime connector products.

So we are obviously excited about not only the absolute backlog build during the quarter and the order rate, but also the mix.

And we do have, still, some very good bid prospects out there relative to where we closed 2010.

Great. And then with regard to the current order trajectory, if that's sustainable and you remain on that trajectory through the first half of the year, can you talk a little bit about potential pricing implications and is there potential for pricing traction in the upside in the second half of 2011?

I am not sure on pricing if you are asking about, in terms of what we're booking to revenues or in terms of what we're bidding in the second half, but I will try my best to address the question as I heard it.

We've have had an exceedingly strong backlog build. Q3 was very good. Q4 was really good.

Again, we are still bidding a lot of work. I'm looking forward to our backlog build in Q1. It's a little premature for me to tell you what it's going to be in the second half of 2011 at this stage.

But overall it's very exciting. As you know, our future forward revenue generation is very much tied to the backlog that we have in place going in.

So, the absolute amount is clearly a positive trend. As I mentioned, the mix is a positive trend.

So, from a revenue-generating standpoint, particularly second half of 2011 and into 2012, that does look pretty attractive.

Great. Thanks very much. Well done this quarter, guys.

Thanks, Jeff.

Our next question comes from Brian Ulmer from Global Hunter.

I want to direct my questions a little bit toward your rental tool completion services.

I was just curious if you could tell me if you feel that you have with the influx of completion equipment -- pressure pumping equipment onto the market, if there's been somewhat of a pent-up demand for services and we should see a pretty good ramp up in that segment, as well as incremental pricing.

And I want to make sure that you think you have the inventory of tools and equipment to actually take advantage of all this new equipment that's hitting the market in terms of pressure-pumping equipment.

I will try to comment to that. There is certainly that potential in the marketplace.

As you talk to the customers, there is a pent-up demand due to equipment shortages in various regions for pressure pumping.

So, if you are able to unlock that with the capacity that's being added, of course, in theory, we could proportionately increase our revenue and EBIDTA generation in excess of the rig count, although we've been doing that generally speaking anyway, even in the fourth quarter.

So it's a very positive trend if it does materialize. We did order equipment in the second half of last year. We have equipment on order currently. So we're certainly doing the best that we can to ensure that we have sufficient equipment available and ready so that we can best serve our customers and take advantage of that trend.

It's hard to pinpoint exactly what is going on, but what we have to watch is our performance, our ticket count, that's in excess of the rig count on a horizontal rig count.

And again, as we noted in our conference call, we saw some of that in Q4, and there's no reason to expect that to stop in the first half of this year based on everything that we're hearing from service companies in terms of capacity adds, and also our customers' activities. So it's clearly a favorable trend.

Okay. So we could see an increase in utilization as well as oil pricing and incremental margins should theoretically be in that 40% -- 30% to 50% range or on the high end of that range?

I think in the long term they'll be in the midpoint of that range and certainly, as you pointed out, the trends suggest that we should be able to do well.

Then one related follow-up involving accommodations. You said that for your new expansion facility in western Australia, that potentially you could see some rooms in 4Q. Did I hear that correctly?

And what does the ramp-up look like there? Is it staged? We'll see 25% of those rooms or half those rooms or it slowly ramps up -- and if I should be looking at it for 2012?

Well, we are talking about the Karratha Facility which is in northwest Australia, which serves the LNG and iron ore market on that area. We're calling it Gap Ridge. That's the area of Karratha that we've got land there.

We still have approvals that are necessary to obtain, but we are confident that we'll be able to do so.

We have -- we're shooting for approval for 1300 rooms on the site. Initial stage installations were for about 200 rooms.

We expect that the average room count available in the fourth quarter will be about 133 rooms there, so a little bit of impact in terms of average available rooms in the fourth quarter of 2011.

Okay. And then the ramp into 2012 is?

We had initial -- will have to see how demand comes through, but initial ideas were maybe adding somewhere between another 300 and 500 rooms in 2012.

Okay. That is it for me. Thank you very much.

Our next question comes from the line of Arun Jayaram from Credit Suisse. Please go ahead.

Good morning.

Good morning, Arun.

I was wondering if you could help us or remind us about the seasonality in the Canadian business, obviously with curl in there.

I just wanted to see, Bradley, if you could walk through, based on your guidance, what the Q4 to Q1 seasonality is in that business, and what we should think about as we think about modeling Q2, just given seasonality in Canada.

Well, I think we gave guidance on revenues in terms of accommodations.

Yes. And guidance on EBIDTA margins, as well.

But the reality is in Canada with the expansion in our Oil Sands Lodges, it's becoming a bigger piece of the pie at the end of the day.

So the seasonality is getting mitigated in terms of Q1. That doesn't mean we don't have contract camps and open camps, because clearly we do.

Most of ours in Canada are tied to that southern Oil Sands Region where mobile camp access will work.

And then also in terms of the northern United States in the Bakken Region, oil predominantly was there, but we just don't have as much of a spike in Q1 or falloff in Q2 as we used to have.

That's what I was just thinking of, but I wanted to see if I could clarify that.

And obviously a record quarter in terms of offshore products. In term of backlog.

Cindy, you cited six, seven projects, over the last few quarters, about opportunities. Can you give us a sense of which orders were perhaps booked of the major projects that you've cited and what else is there to come?

Yes, I can. Realize, we always have ongoing order flow in and out, without what I call some of the big project, kind of shot-in-the-arm type backlog builds.

But in particular during the fourth quarter, we got a very nice connector order in southeast Asia that's helpful to our backlog, largely in the Singapore facility.

We got some content on Mars B, but not all of it. We also got work on Shell's BC10 Phase Two in Brazil. And other than that there was some ongoing other industry work and also defense work that came into our backlog.

As you'll recall, we did put out a press release subsequent to the end of the year announcing a reasonably sized crane order that we will manufacture in Thailand.

So what we're looking at -- twofold, you are asking me what's in backlog of those major projects and what's left out there in terms of big project award. ¶ And again, we still have some content that we are bidding on Jack/St. Malo, Mars B, Big Foot, and Petrobras's [duar] and Tupi projects are more the salient ones that are on our radar screen right now.

Sounds like there is more potential good news to come on that front.

We feel like there is.

Okay./The last question is regarding the Australian segment. I had thought that the margins were a little bit higher in Australia just modeling that segment out.

In Q4, your accommodation margins did come in a little bit. Can you comment a little bit on the sequential decline?

I thought I did that. If you look sequentially, our Q3 was approximately 38% EBITDA margins and they were lifted a bit by recovery work on the Macondo Well in the Gulf of Mexico. We typically will guide to a range of more 34% to 37% depending upon what is going on in the given quarter.

In addition to that lack of Gulf of Mexico Macondo work going from Q3 to Q4, we've obviously been languishing in the Gulf by lack of activity, so our utilization, even though it is not as small, absolute amount, it certainly is a little bit negative on the margin, if you will, particularly compared to a very strong Q3.

We also, as is typical, have quite a lot of what we call start-up expenses, but it's a lot of R&M and mobilizations to get these mobile cap assets in place for the winter season.

Those are always expensed in our business, and we quantified that on the call as being about $2 million.

But when you factor those two things out of the equation, it really does kind of reconcile the margins in Q3 to the margins in Q4.

Obviously we gave you guidance on our projected margins in Q1, which are going to be -- are projected to be up sequentially, which is both a little bit of improvement, i.e., lack of some of these mobilization costs in Q1, and pick up of that seasonal camp work but also contribution from the MAC which does have high margin work.

Okay. Thanks a lot.

Our next question comes from John Lawrence from Tudor Pickering

Good morning.One more on western Australia. Could you quantify maybe the five-year opportunity? Are there more greenfield opportunities besides the new lease that you guys just did?

We're certainly targeting a couple other opportunities there but I think it is a little preliminary for us to try to quantify those.

As we discussed, I think with a lot of investors and analysts, we really thought the MAC was a great deal. A, it got us a platform into Australia which was a target market for us for some time. And they had a lot of kinetic growth opportunities where they had built-in growth in their existing villages and low-hanging-fruit opportunity.

In my mind, the thing that took it from being a good deal to a great deal, was getting a market position in Karratha, which we've done, or we're making some positive steps towards doing.

And then, secondly, getting a growth position in the Gladstone area. It certainly remains the focus for us.

I think it's a little early for us to talk about additional locations in that area, but I am very proud of what the team did to secure the Karratha location because it's been a hard market to crack there for a while and I'm proud that they got the first step towards doing it.

Great. Sounds like there is plenty on your plate already.

There is.

Thanks, guys.

Thank you, John.

Our next question comes from the line of Thad Vayda from Stifel Nicolaus.

One quick follow-up. On the tax rate trajectory over the course of the year, given the MAC and all, any thoughts on that?

Well, we basically make a full year estimated effective tax rate. So, for right now, without having seen what -- it basically bakes in what we expect for the full year, so the trajectory should be flat.

Okay. I didn't get that. Okay, good.And just on opportunity on all these new-build floaters, could you remind us of approximately -- you're sort of all-in opportunity on your average semi or drill ship revenue opportunity.

Well, we have a varied product line from winches to cranes, to drilling riser, flex joints. We do subsea stack integration and repair work.

We typically have not given that kind of guidance on a drilling rig, simply because we're very unsure in terms of what our content might be on that rig.

But I'd kind of say, if I were to average it out, it's probably something more like, for a floater, it's going to be less because those are generally not going to be moored-type assets. So, maybe $2 million- to $6 million-type depending on the vessel. Obviously, it could be more content if we're applying cranes and winches and so some of the subsea BOP stack-up and integration work. It really depends on the nature of the rig itself.

Great. Thank you.

Thanks, Thad.

We have no further questions at this time. Great. Well, I appreciate everybody's time. I know it is a very busy earnings season, particularly given the fourth quarter.

We look forward to visiting with you as we progress throughout the quarter and on our next earnings conference call.

Thanks so much and everybody have a terrific weekend.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.