Oil States International Inc (OIS) 2012 Q3 法說會逐字稿

Welcome to the Oil States International third quarter 2012 earnings conference call. My name is Anthony and I will be your Operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question and answer session. Please note that this conference is being recorded. I would now like to turn the call over to Patricia Gill, Ms. Gill, you may begin.

Thank you, Anthony. Welcome to Oil States' third quarter 2012 earnings conference call. Our call today will be lead by Cindy Taylor, Oil States' President and Chief Executive Officer and Bradley Dodson, Senior Vice President and Chief Financial Officer. Before we begin, we would like to caution listeners regarding forward looking statements. To the extent the remarks today contain information other than historical information please note that we are relying 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 the call over to Cindy.

Thank you, Patricia. Thanks to all of you for joining our call this morning. And to all of friends on the East Coast we wish you the very best is you recover from hurricane Sandy. To get started, Oil States generated another quarter of year-over-year growth with third quarter earnings totaling $1.87 per diluted share reported on $1.1 billion in revenues and $104 million of net income. These results were net of an unfavorable $7.5 million pretax or $0.10 per diluted share after-tax, non-cash, accrual adjustment recorded in our Tubular Services segment. Excluding this non-cash charge, our diluted earnings per share totaled $1.97.

The Accommodations segment was a notable contributor to our strong year-over-year results. Occupancy at our major oil sands lodges and Australian villages remained very high levels during the third quarter, boosting RevPAR in the segment. The number of average available rooms grew 615 rooms or 3% sequentially to 18,644 rooms. We continued to make investments and expand our room count in areas where our activities are generally supported by long-term customer contracts.

In our Offshore Products segment, backlog sets another record, growing to $597 million at September 30, 2012. Bidding and quoting activity continues at an active pace with particularly strong demand for Subsea pipeline and floating production facility products being bid on a global basis.

Our Well Site Services segment performed well during the third quarter and showed improved results on a sequential basis despite reductions in the rig count during the quarter. The number of Rental Tools tickets issued and revenue per ticket generated increased when compared to the second quarter of 2012. 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 we will give you our thoughts on the current market outlook.

Thank you Cindy. During the third quarter 2012, we reported operating income of $154 million on revenues of $1.1 billion. Our net income for the third quarter of 2012 totaled $104 million or $1.87 per diluted share. This included a $7.5 million pretax or $0.10 per diluted share after-tax non-cash accrual adjustment for customer credits and returned inventory caused by ERP system design implementation issues in our Tubular Services segment. The comparable third quarter 2011 results were $144 million of operating income on revenues of $903 million. The third quarter 2011 net income totaled $92 million or $1.67 per diluted share. The year-over-year increase in profitability resulted from our organic growth initiatives in our Accommodations segment. Increased sales of deepwater capital equipment, and growth in our Well Site Services and Tubular Services segments despite softening rig counts.

During the third quarter of 2012 we reported cash flow from operations of $195 million which included $28 million of cash flow generated from working capital reductions. During the quarter we invested $132 million in capital expenditures, primarily related to the ongoing expansion our Accommodations business, the addition of proprietary rental equipment and the acquisition of land in Brazil to expand our Offshore Products segment. Our net debt at the end of the third quarter totaled $1 billion at our debt to cap ratio approximated 33%. As of September 30, 2012, the company had approximately $710 million of combined availability under our credit facility along with $164 million in cash. On the financing front, our Australian credit facility was increased to $300 million from $150 million during the quarter to allow for further financing flexible in to take advantage of organic expansion opportunities in the region.

In terms of our fourth quarter 2012 guidance, we expect depreciation and amortization expense to total $61 million and our net interest expense to approximate $16 million. Diluted shares are expected to total $55.5 million in the fourth quarter of 2012 and we currently forecast our fourth quarter 2012 effective tax rate to be 27.8%. Lastly, we currently expect full-year 2012 CapEx to range from $500 million to $550 million. This is down from our prior estimate of between $600 million to $700 million as the timing of some of our spending is expected to shift into the first half of 2013. At this time I'd like to turn the discussion back over to Cindy who will review the activities in each of our business segments.

I'll start with Accommodations since it's our largest segment. Occupancy levels at our major oil sands lodges and Australian villages remains strong during the third quarter of 2012. Accommodations revenues increased 20% year-over-year and EBITDA improved 23% year-over-year in the segment, primarily due to the 17% increase in average available rooms due to contributions from our new lodge and village investments made in 2011 and year-to-date during 2012. On a sequential basis, our Accommodations segment revenues increased 5% primarily due to strong RevPAR which increased to $126 per day up from $123 per day in the second quarter of 2012, as high occupancy levels continued at our major lodges and villages. Results during the third quarter were partially offset by lower activity at our US accommodations site due to declining rig counts, primarily in the Bakken region. During the third quarter we announced the extension of our contract at our Wapasu Creek Lodge which will keep this key asset contracted through the third quarter of 2015. Additionally, we were awarded a 10 year contract to accommodate permanent staff personnel who will be working on the Kearl project.

In our Offshore Products segment we generated $189 million of revenues and $32 million of EBITDA in the third quarter. Sequentially, EBITDA decreased 23% largely due to a $2.9 million unfavorable margin adjustment on a Subsea pipeline project in Brazil which was substantially completed in 2010 and 2011. Excluding this adjustment, EBITDA margins for the third quarter of 2012 would have been 18%. We booked over $220 million in new orders during the third quarter of 2012 representing a book-to-bill ratio of 1.2 times and achieved a new record backlog level of $597 million at September 30, 2012. During the quarter noteworthy backlog additions included subsea pipeline orders in Qatar and the North Sea, connector products orders for Southeast Asia, the UK and West African markets in addition to several crane orders.

Our Well Site Services segment was able to post sequential growth in the quarter generating revenues of $182 million and EBITDA of $61 million in the third quarter of 2012 compared to $177 million and $59 million, respectively, in the second quarter of 2012. Revenues from our rental tools business increased 5% and EBITDA increased 9% when compared to the second quarter of 2012. Third quarter activity held up well in the Bakken, Eagle Ford and Permian Basin. However, we continued to experience sequential declines in activity and pricing in dry gas basins such as the Marcellus, Haynesville and Barnett due to low natural gas prices. The number of rental tool tickets issued during the third quarter increased 3% sequentially and revenue per ticket improved 1% when compared with the second quarter of 2012 due to the mix of equipment on rental and services provided.

During the third quarter of 2012 Tubular Services generated revenues of $436 million compared to $462 million in the second quarter of 2012, largely due to a 7% sequential reduction in OCTG tonnage shipped. EBITDA decreased 54% quarter-over-quarter due to the unfavorable $7.5 million non-cash accrual adjustment for customer credits and returned inventory that Bradley explained earlier. With the adjustment booked in the quarter, gross margin as a percentage of revenues decreased to 3.6% in the third quarter of 2012. Excluding this non-cash adjustment, gross margin as a percent of revenues would have been 5.3%. The company's OCTG inventory increased by $47 million sequentially to $524 million as of September 30, 2012, supported by incremental customer orders particularly for deepwater OCTG.

Now I'd like to transition and just talk about our outlook as we move forward through the fourth quarter of 2012. In our Accommodations segment we continue to see ongoing customer demand for room count additions in Australia, Canada and the US. During the third quarter we added 615 average lodge and village rooms. We were also very pleased to announce the contract extension at our Wapasu Creek Lodge, which provides contractual coverage for this key asset through the end of the third quarter of 2015. In connection with the contract extension we also signed a 10 year agreement to accommodate permanent staff personnel working on the Kearl project. We will officially open our Three Rivers, Texas location serving the Eagle Ford shale region starting in the fourth quarter of 2012, initially with 84 rooms available. We expect to have 270 rooms available by the first quarter of 2013.

In the fourth quarter of 2012, we expect our average available rooms to grow about 4% sequentially totaling 19,300 rooms available. However, Accommodations revenues are expected to decline sequentially and total roughly $260 million to $270 million in the fourth quarter of 2012, given projected occupancy declines associated with the extended holiday season. EBITDA margins should remain within our long-term margin guidance range of 42% to 43%.

Bidding and quoting activity in our Offshore Products segment continues at a robust pace, particularly for subsea pipeline and floating production facility products on a global basis. The strong bidding activity, coupled with our already high backlog levels, provides good revenue visibility for the fourth quarter and into 2013. We did experience some slippage in the third quarter which should lift revenues in the upcoming quarter. As a result, fourth quarter revenues are projected to total $240 million to $250 million as connector product sales should accelerate in the fourth quarter. EBITDA margins are expected to range between 18% and 20% but will be dependent upon our revenue mix.

As you know, the US rig count has continued to decline as we head towards the end of the year. Our ability to leverage our proprietary equipment and services has mitigated some of the recent weakness in overall US completion activity. However, pricing pressures in certain regions, particularly the dry gas basins, is expected to persist. Despite stronger utilization of our drilling rigs in the third quarter, certain operators are curtailing spending and are beginning to lay down rigs as 2012 budget monies run out. We have already stacked three drilling rigs for likely the remainder of 2012 and expect that this number could increase to as many as seven by the end of November or early December. Fourth quarter revenues for our Well Site Services segment are expected to range between $100 million and $175 million with EBITDA margins of 30% to 31%.

With steady supplies of Tubulars coming from domestic and International Mills coupled with a declining US rig count, industry OCTG inventory levels as measured on a month of supply basis have risen recently and now stand at approximately 5.4 months supply. With increasing OCTG inventories in the US, pricing continued as year long decline in the third quarter and we expect continued softening for the remainder of 2012. Recent indications and orders from our customers suggest weaker land based activity heading into the fourth quarter, partially offset by increased OCTG demand for deepwater, Gulf of Mexico drilling and completion activity. We expect our Tubular Services segment to generate revenues of between $405 million and $415 million in the fourth quarter of 2012 with gross margins ranging from 5.5% to 6%. As of September 30, 2012, approximately 89% of our Tubular inventory was committed to customer orders.

In summary, our third quarter results were strong on a year-over-year basis. Despite ongoing global economic challenges, our near-term outlook remains fairly positive and is supported by term contracts in our Accommodations segment, record deepwater capital equipment backlog in Offshore Products, along with planned organic growth initiatives. That completes our prepared comments. Anthony, would you please open up the call for questions and answers at this time?

Thank you. We will now begin the question-and-answer session.

(Operator Instructions).

Our first question comes from Jeff Tillery of Tudor Pickering and Holt. Please go ahead.

For the offshore products business so revenues in the fourth quarter up a lot? I mean, a $250 million quarter, how tax would you say that your footprint is and how does that compare versus what you could theoretically do from a capacity standpoint?

Well we do have pretty good built-in sequential growth coming out of the third quarter. In my comments I mentioned we did have some slippage. A lot of our activity is POC based or percentages completion based such that, that gives you a more steady trend. However, a lot of large OD Conductor casing orders are booked as revenue upon shipment.

As so really, the swing that we're talking about is not so much capacity or through-put driven, as it is timing of those shipment, which of course is often difficult to predict at a quarter end. So that's going to be the major variation between Q3 and Q4. We are ramping in our Houston and Houma operations, largely because we've been successful building back logs. Those have been areas where we were -- really had slack in our capacity.

Areas like the UK, Singapore, Arlington and others, Brazil, are very tight. So it's kind of hard to measure absolute capacity in this business. But we feel pretty comfortable with our forecast for Q4. Again, as long as the timing of those shipments works out as we forecast they will.

For Accommodations, there's been a lot of [henring] over Australian CapEx and what the exposure -- what your exposure down there does. Is there, are there contracts and contracts wins that you can point to, say even in the last quarter in Australia that have increased your visibility around 2013 and '14 utilization there?

If you think back to our earlier comments Jeff, entering into the year, a lot of our growth in Australia is what we call brownfield expansion. It's expansions of existing facilities, existing customers. So, there's not going to be a notable headline. This is a brand new contract. You see what I'm saying on that? I will tell you that over 50% to maybe 66.66% of our room count expansions in the third quarter, were made in Australia. And so, there's obviously still ongoing growth in the country.

We're about to go deeply into our planning phase. But I'd be remorsed if I didn't acknowledge to you and to everybody else on the call that a lot of the net coal price softening, you know, we're still evaluating the impact. We still expect growth, but I would say growth at a little bit of a reduced pace. And we're just going to have to pull that together in terms of our projected next year's room count adds as well as the CapEx spend to come with that. But again, far if I look across really all my major Accommodations facilities, including those in Australia, we're holding up very well.

We've seen about two facilities in Australia soften just a little bit, in terms of overall utilization. But again, recall, these are subject to long term take or pay type contracts where they're really committed to take the rooms. And the variation in revenue or the top line really comes from actual people that are in the facilities and eating meals on a daily basis.

Can the early look at room count -- is up in all three of the major regions, just not, wanting to talk about this point, quantifying that, is that fair? For 2013.

Well, like Cindy said, we will continue to firm up our plans on 2013. There's still an opportunity to add some rooms in Australia. We'll have to quantify that as we get through the budgeting process. We'll have some room additions in the US as we finish off the expansion of the Three Rivers location. We are hopeful that in the near term we'll get the Permian Basin Pecos location up and running. And we have some preliminary plans on some expansions in the Western Bakken region.

As it relates to Canada, most of the growth as we've highlighted previously, going forward, at least in the near term, is going to be SAGD. A lot of the growth that we've seen out of the mobile camp business year to date in 2012 has been utilizing our mobile camps to support SAGD customers. And we hope to see some continued growth in that area.

On the mining side, we are very pleased to get the Kearl contract extension as well as the permanent staff residents contract which gives very strong utilization and occupancy to the two largest assets or two of the largest assets we have up in the mining section of the Oil Sands region, which is Wapasu and Henday.

So, still a little early for us to nail that down, as you can imagine. It's a fairly dynamic both global economic outlook as well as specific to our region, so we don't want to misguide people as we start to get further clarity as we work through the budget season and we get a little bit more clarity on customer spending forecasts, we will certainly firm that up in February.

That's very helpful from you both. The last question I had just on Well Site Services. The margin decline in the fourth quarter, I would presume it's a little bit more pronounced in the land drilling business, given the utilization falloff. Any color on expectations around pricing and margins for the Rental Tools business?

You're absolutely right in terms of the sequential decline being more tied to drilling, even though drilling is not that terribly significant for us overall. I'm reading my look here, and it looks like -- we're not going to be -- we don't think we're going to be down too much in terms of the Rental Tools business.

We baked in some margin decline in Rental Tools, but most of the margin decline in the guidance is related to drilling.

Okay, thank you very much.

Thank you. Our next question comes from Blake Hutchinson of Howard Weil.

Just getting into the guidance for Accommodations for 4Q, if we look, build up from base up, if we look at the other revenue progression, from Q2 to Q3, I'm assuming your thoughts for Q4 is you don't get much of a seasonal bump or pull-though from Canada. Not much change in the US given that Three Rivers is not going to be doing much for you in 4Q, so is that pretty flat assumption for the other revenue line?

That's right.

Okay. And then, given the room count and where you've been at RevPAR, it would seem that, is the commentary around holiday occupancy more just a follow through of you've been enjoying extended utilization that we shouldn't necessarily bake in. But when does that turn into you calling a more sustained demand at higher levels here. It's been several quarters of enjoying extended occupancy here. Are we just showing room shortages out there in your opinions? So that this continues as we look past the holiday season?

We have enjoyed through the second quarter and third quarter, particularly in Canada very strong occupancy levels. I'd like to say that they can be sustained but in particularly in a couple cases with some certain customers, they had some of their targets they were trying to reach and as such, they were keeping very high occupancy levels in order to achieve their project goals and timing. I don't think that continues into 2013, and so we should see more normalized occupancy levels in Canada.

Cindy commented earlier that we are seeing some lower occupancy levels, particularly at a couple villages in Australia as the Met Coal prices have impacted overall customer activity, particularly late in the third quarter. So, I do expect RevPAR to be down in the fourth quarter.

Okay, that's helpful. Thanks. And just thinking about the OTCG business, refresh us, historically you've talked about the levels of customer commitment. Is there any time in which they're required to take delivery of inventory or time frame once it's on your yard in your possession?

Yes and no. On occasion, there are programs that demand time frame for taking, but on balance, you've got to realize we're turning inventory 3.5 to 4 times a year. So, not so much of a significant issue for us in that term.

I tag onto that. One of the reasons that we didn't see as much deepwater pipe go out in the third quarter was Hurricane Isaac had delayed some of the drilling and completion plans in deepwater in the Gulf of Mexico. We're starting -- we've already started to see some of that deepwater pipe go out here through October. So, expect that the deepwater pipe will start to turn, and we'll start to see some of that inventory move out the door.

Great, appreciate the time, I'll turn it back.

Thank you. Our next question comes from Stephen Gengaro from Sterne Agee.

Two questions really. The first, you guys continue to, for lack of a better word, you kind of buck the trend in the stability of your North American businesses, especially on the rental tools side. Are you seeing signs that persists going forward? I understand the land drilling side but on the rental side, I mean, how are you thinking about that over the next couple quarters?

We're watching it incredibly closely. There's no debate about that. We've always told you guys, we've got a mix of proprietary products where we really haven't seen the -- not only seen the capacity encroachment, but with these high end type completions that we're doing we've seen increased demand. That's a very good mix for us. In a stable pricing environment. There are other, what I will call, more comoditized product lines in our sweep, given that we are so broad. Around completion and production services that have definitely seen activity declines and price pressure.

So we are watching it really closely on a basin by basin look. And we're watching our costs very closely, because if you don't stay ahead of that, you can have some pretty negative surprises. In our guidance embedded and certainly if you go to the midpoint as we mentioned the top line and EBITDA could be down 5% or so, but I still say that on a relative performance basis that's very strong based on everything I'm hearing from a lot of the other service companies that are out there.

But the wild card as we always go into to this fourth quarter is holidays. It's been a question mark now because a lot of the operators are laying down rigs early because of running out of 2012 budget money. But those are really the rigs, but if there are many of these that go down, obviously it is going to impact the service side as well. So it is a bit fluid, but overall, I think we performed exceedingly well and we are just managing it really closely.

Thank you. As an unrelated follow up. To the extent your Accommodations growth is potentially a little delayed and you have obviously you're in a pretty good liquidity position, would you do something more aggressively on either the share repurchase side or other ways to give cash back to shareholders? Has that come up [as delays for shifts], but -- how do we think about that?

I don't necessarily tied the two together. We like to be very opportunistic with our share repurchases. I'm a big believer in the value of share repurchases and it really does depend upon the organic growth possibilities that we have, the acquisition possibilities that we have. So I just would link them and say that growth flows were automatically going to completely shift focus to share repurchases.

But I think it is one alternative and I view it as a very good alternative that we would do, I think, even if we have good growth in our Accommodations, we've got plenty of liquidity to take advantage opportunistically of what we think are good values for buying back our shares.

Very good, thank you.

Thank you. Our next question comes from Marshall Adkins of Raymond James.

On the offshore side, we've had a lot of volatility this quarter and it seems like a lot of stuff just got pushed back a little bit. And is going to hit the fourth quarter. Help me to understand or give us a flavor for '13. I would suspect that Q4 is going to be abnormally high and we shouldn't think of that as a run rate going forward, but overall for the year, it should be up nicely, is that a fair statement?

Yes I think that's clearly a fair statement. When you have a global footprint of manufacturing as we do, you can get tight in some areas and have capacity in other areas, but we've been really working this and working the supply chain now for two or three years and in anticipation of a lot of the backlog build that we been getting. There are still quite a lot of organic initiatives because we are very bullish.

I'm incredibly bullish on the deepwater production infrastructure side of this. It's got a lot of running room in my view. I don't necessarily think of this as that cyclical pot type business because it is complex. These projects are long-term in nature so, a good, steady growth rate on the top line I think it is very reasonable to expect.

Okay. You addressed on the Well Site, obviously, that was a lot stronger than all of us thought you addressed the Rental Tools a minute ago, but land rigs was also a lot better. Yours aren't exactly the highest end rigs and I think you to give some specifics on you're going to stack some and maybe more, but margins have held up. What's going on there?

We like our rigs and I don't know you gave them a little bit of a ding in your comments, but I will tell you, we've got a very new fleet. But, yes they are vertically drilled, generally speaking. We've got a handful, three to four that can drill the horizontals stuff, but as you know, the majority of work in the Permian is still vertical. And we've got a long-standing reputation in that marketplace, long before I was ever associated with this Company or these assets and we've got legacy very strong customers.

A lot of those are the very, very large independents that our customer base and we do have a smattering I'm going to call it, of private businesses, private groups that rent the rigs, particularly some of the smaller ones and right now those are the three that have gone down at this particular stage. And it is hard to call a trend with that. But you're right, we're almost at effectively full utilization of all of our rigs both in the Permian and Rocky Mountain region. But we'd be would be omitting something if we didn't say that it is softening as we head into the end of the year.

So sounds like you have a very niche a opportunity and that's what's been able -- allowed you to -- I would argue outperform here.

Well, that and the fact that earlier in the year and a couple of occasions we took advantage of working with our customers to upgrade a couple rigs that not only got those two rigs under contract, but another four with one customer and then got another two or three under contract with a second customer. And so having, for our business, which as you know has historically been effectively all spot to have somewhere around one-third of your fleet contracted has really helped us this year.

Last one for me. And you might have addressed this already, Bradley, I missed a little part of it. But I'm just a dumb engineer, and when we say non-cash accrual for ERP systems on implementation, that can goes over my head so can you explain that in layman's terms?

Yes. We implemented a new ERP system in our Tubular Services segment at the very end of 2011. There was some change management that obviously needed to take place because the things that, the process as we used to do under the old system needed to be, quite frankly, improved and evolved to suit the new system. In doing so, certain of the processes were -- and part of the implementation, was not perfectly executed. As a result, as we moved about 9 to 12 months after such, we realize that some of the accruals that we were making for customer returns were not appropriate. And had to make an adjustment.

Customers return pipe all the time. Whether it is a dry hole or excess pipe or it didn't inspect out, and as result we were accept the pipe back immediately, but then it takes us some time to determine how much credit the customer should be due back. And we make an accrual every month for that. The process for making that accrual was incorrect and we discovered that in August and then made the adjustment in September.

Very helpful.

If I can just add onto that. What this was is certain accounts were and transactions were mapped into an account that served as a basis for a manual journal entry. And that's a purely non-cash meaning, this was just a journal entry that had the impact of overstating inventory, understating cost of goods sold. Had nothing to do with routine cash transactions at all.

We'll correct the mapping problem and everything should be fine. I think we detected it fairly soon, particularly given the size of the revenue base in this business line. So I'm pretty pleased about that and you shouldn't expect to see this again. I think, again, just being very clear here though, the one path to focus on is the fact that our nine-month gross margin it looks more like 5.5% now. That's really what's the most relevant of all of this.

Right, little more steady-state from where was.

Exactly.

I assume don't read into this anything associated with customers giving you back more pipe?

Absolutely not.

No, these were routine transactions that, to Cindy's point, the basis for making the accrual for unprocessed customer returns was incorrect and that caused us to have to make the correction this quarter.

Awesome. Thank you all.

Thank you. Our next question comes from Daniel Burke of Johnson Rice. Good morning everyone.

Maybe just a couple questions around the periphery of Accommodations. Bradley, any sense for what winter drilling or Canadian winter season occupancy will look like as you step through Q4 into Q1? I know last year you all enjoyed, excuse me, this year you enjoyed a pretty healthy season. Do you have any indications yet?

At this point things look pretty good. We will have to see it is a little early in the sale cycle. Those commitments typically will start to come in this month, meaning November, as people prepare for the winter drilling season. We will have to see then, as it always is in Canada, when does winter come, when do things freeze up and when do the assets get deployed, which is always a timing issue, so I'll caveat that. But so far it looks pretty good.

Okay. And then another one, was curious in terms of the CapEx shift or spillover into first half of '13, any way to bracket what portion of that is Accommodations versus maybe other business lines? Just given I guess, you guys don't build Accommodations unless you've got that customer commitment behind.

I will talk generally and I will ask Bradley maybe to talk specifically to your question, but, we came in with a very robust budget for CapEx. You've heard us on the road; everybody knows that we've had some permitting delays and issues here and there in the US and otherwise.

I'd also say, even in Rental Tools, while we had committed really all of our budget, we did so at a slower pace making those commitments, because we are watching with the US market is doing. We didn't want to go all out and then have a greater correction than what we thought we were going to have.

As a relates to Offshore Products, you know we've got some initiatives underway in Brazil. I would say those were a little bit delayed too. Largely in terms of closing on land acquisition and doing all the due diligence and environmental work that we needed to do before we closed.

But my major message here is, there's really, I don't think, a negative takeaway, I cannot think of a single material project that we had in our thoughts and plans that has been canceled. These are really shifting more from the latter half of this year into the first half of next year. If that helped. My sense is that it is a little bit of every segment, but I'm looking at Bradley to validate that.

From a dollar perspective, the majority of the slippage is again in the Accommodations as you'd expect.

Very helpful answers. Thank you.

Thank you. Our next question comes from Kurt Hallead of RBC.

I just wanted to follow-up, to make sure just I understand and I'm clear on what you're indicating on the Accommodations front. Specifically as it relates to Canada. So I think Bradley you mentioned at room utilization -- make sure I understand this correctly, was it room utilization or room growth was going to be primarily driven by SAGD?

It was room growth.

Room growth. Okay. So I think Suncor was out today. They indicated a couple projects that they were still going to move forward with and couple others they were still evaluating. I'm not quite sure if you had an opportunity to take in or absorb what Suncor has indicated yet, but can you maybe put into context what your expectations might be as it relates to some of the oil sands projects and whether or not the Suncor decides to postpone some of these things what kind of impact that might have?

Suncor/Total, they're in that joint venture, if you will, they've got the notable, really mining projects that are out there Fort Hills, Joslyn and Voyager. We have not had time to digest any information. We typically watch it fairly closely. They have what I would call slow played these projects throughout 2012 with our thinking that they would likely move forward -- and they said so publicly -- move forward with these about mid-year 2013.

So we will honestly, I will have to catch up with and see if there's any new news on these projects that we don't, we're not aware of yet but we don't really see, from discussions with our Ops people up there. We haven't seen any changes.

So if I understand then correctly, what you guys have indicated so far on you call, and placing it in context of discussions we've had over the past six months or so, is the only real potential change that you are seeing out there to the occupancy rates and/or room growth primarily being driven by the Met Coal situation in Australia and you are not that -- there's nothing that's all the disconcerting about what's going on in Canada? Would that be fair assessment?

It is a very fair assessment, and even in Australia, again it is a nominal type utilization decline. Again, we are 93% covered. I think on a take-or-pay basis in the facilities that there's a couple of facilities that have rooms available. I'd say that is in contrast to Canada right now which feels pretty robust. But I think Bradley highlighted -- right now if you're going to look at major mining initiatives, you are going to look to Suncor and Total. They're the big guy on the street. But when you talk about this shift towards SAGD, which we know it is coming, you've got a lot more customers out there in so there's going to be some very good opportunities.

Okay, so not all that concerned about Canada? Okay.

No.

That's it for me.

Thank you

(Operator Instructions).

Our next question comes from Cole Sullivan than of the ISI Group.

What was the revenue guidance on Well Site Services again? I think let me have missed it.

It was $170 million to $175 million.

Okay. Then just a real quick, just a ballpark idea of what the Rental Tools breakout looks like between the oil and gas segments? In the US.

Generally, our rental told business tracks be closely to the overall US rate count. The team has been very adept and flexible at shifting the equipment, as well as personnel between the basins. And so, and given our footprint of over 50 locations that really touched each of the material basins, generally the revenues have tracked fairly closely with the overall US rig count.

Okay. All right, I guess I will turn it back. I appreciate it.

Thank you.

(Operator Instructions).

Our next question comes from the Doug Garber of Dahlman Rose.

I wanted to ask about your long-term guidance range for the Accommodations margin of 42% to 43%. I guess two parts. One is when do you anticipate getting back into that range, and second, what RevPAR does that equate to? The 42% to 43%?

We expect to be in 42% to 43% in the fourth quarter. In terms of RevPAR, it generally, because we can manage our cost effectively, and we have been at lower RevPARs, if we're at a RevPAR and even as low as $110 to $115 on a consolidated basis, we've been able to produce EBITDA margins in that, if you let me widen it, 41% to 43% range. So I think there's -- we can still have RevPAR or specifically occupancy, fall below where we are right now, and still maintain what I feel is a fairly attractive margin in this segment.

All right. And also, I think you touched on this earlier, the fourth quarter Offshore Products revenue guidance, you think that's a good run rate into '13 or do you think it will come back down to a lower level? For a run rate?

I think that there's no such thing as consistency quarter to quarter because we've got a portion of our revenues base that's tight to shipments. What I've encouraged everybody to do is look a little longer term than the quarter, look at the year-over-year, both on top line growth and in terms of margin expansion and I think you'll get a better read of overall activity in the sector. But I'm not ready to tell you that every single quarter would be sustained at this higher level yet. But again, it is still a very favorable environment, very tied to timing of shipments on some of our products.

All right. Thank you, guys. I will turn it back.

At this time I show no further questions.

Great, thanks to all of you for dialing in. I know this is an incredibly busy day and busy week particularly given all the delays coming on the East Coast and as we said earlier, we are thinking about everybody, all of our friends and hope a speedy recovery from the hurricane. And we will be in touch soon. Thank you.

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