Oil States International Inc (OIS) 2013 Q1 法說會逐字稿

Welcome to the Oil States International Incorporated first-quarter 2013 earnings conference call. My name is Christine and I will be your operating 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 will now turn the call over to Patricia Gill investor relations. You may begin.

Thank you Christine. Welcome to Oil States' first quarter 2013 earnings conference call. Our call today will be led 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 that our 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 10K and other SEC filings. I will now turn the call over to Cindy.

Thank you Patricia. Good morning to all of you and thanks for joining our earnings conference call.

As most of you know 2012 was a record year for our company both operationally and financially. However, we entered 2013 with an uncertain economy and a clouded outlook for our businesses. Despite these conditions we reported higher sequential earnings in the first quarter of 2013 due largely to it improved accommodations results partially offset by lower tubular services and offshore products contribution.

Our accommodation segment reported seasonally stronger activity in the Canadian mobile camp business partially offset by weak US accommodations demand. While our accommodations growth rate appears to have slowed in 2013 relative to very high levels in previous years we recently announced the construction of Boggabri Village in Australia and the opening of Anzac Lodge in the Canadian Oil Sands region. We will discuss both of these organic investments later in the call.

Offshore products generated solid results and enjoyed strong order flow with the book to bill ratio greater than 1X during the quarter. As a result backlog at the end of the quarter was up slightly totaling $564 million.

In our completion services business revenue and EBITDA were up 5% and 1% respectively largely due to contributions from the Tempress acquisition which closed in December 2012 along with a seasonal uplift in Canada.

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

Thank you Cindy. For the first quarter of 2013 we reported operating income of $161 million on revenues of $1.1 billion. Which included a pretax gain of $4 million from the reversal of an estimated earn-out liability associated with contingent acquisition consideration in the US accommodations business.

Our net income for the first quarter of 2013 totaled $102 million or $1.85 per diluted share which included this after-tax gain of $0.05 per diluted share related to the liability reversal. The comparable first-quarter 2012 results were $204 million of operating income on revenues of $1.1 billion which included a pretax benefit of $17.9 million related to a favorable contract settlement in our US accommodations business. First-quarter 2012 net income totaled approximately $122 million or $2.20 per share net of the after-tax gain of $0.23 from the contract settlement.

The year-over-year decrease in profitability was a result of lower US drilling and completion activity coupled with lower OCTG prices and margins partially offset by organic growth initiatives in our accommodations business, contributions from the Piper Valve, and Tempress acquisitions, and increased drilling and subsea product sales within our offshore products segment.

Relative to our quarterly guidance we reported operating performance in each segment which was within our guidance ranges, as was consolidated depreciation, and interest expense. During the first quarter of 2013 we reported very strong cash flow from operations of $219 million which included $59 million from working capital reductions. We invested $107 million in capital expenditures during the quarter primarily related to the ongoing expansion of our accommodations business.

With our strong operating cash flow we were able to reduce our net debt by 11% sequentially to $946 million at the end of the quarter. Our debt-to-cap ratio is 33% and trailing leverage ratio was 1.4 times. As of March 31, 2013 we had liquidity of approximately $1 billion under our credit facilities along with $326 million in cash.

In terms of our second-quarter 2013 guidance, we expect depreciation and amortization expense to total $69 million and net interest expense to approximate $19 million. Diluted shares are expected to total $55.3 million in the second quarter of 2013 and we currently forecast our 2013 effective tax rate to approximate 28%.

At this time I'd like to turn the call back over to Cindy who will review the activities in each of our business segments providing outlook and guidance for the second quarter of 2013.

Thanks Bradley. I am going to lead off with our accommodations segment, it is our largest statements.

On a sequential basis our accommodations segment revenues increased 7% to $297 million primarily due to contributions from seasonal Canadian mobile camp activity partially offset by weak activity in the United States. The US market would characterize by competitive pricing and an over capacity of equipment particularly impacting our bakken business. Our large and village revenue was about flat sequentially with gains in Canada offset by occupancy declines in Australia. EBITDA increased 11% quarter-over-quarter to $132 million after excluding the earn-out liability reduction.

During the first quarter we announced the opening of a new Canadian Lodge, our Anzac Lodge located South of Fort McMurray in the Athabasca oil sands region of Alberta Canada. Initial capacity at this location totaled 338 rooms and Lodge operations began in January. Construction of the Anzac Lodge was backed by an initial one-year contract for the majority of the initial capacity and support of an in-situ oil sands projects. Longer terms Anzac Lodge is expected to support other in-situ projects in the southern oil sands play along with pipeline and infrastructure expansions in the region.

Additionally we announced a new Australian village the Mac Boggabri Village located in the Gunnedah Basin in New South Wales Australia. The village is expected to be ready for occupancy during the fourth quarter of 2013 and will have an initial capacity of 508 rooms. The Boggabri Village investment is backed by multiple customer contracts with initial durations of up to five years and provide for essentially full occupancy of the rentable rooms for the first year and a half of operations. Boggabri were primarily support our customers metallurgical coal projects in the region.

Our average available rooms increased by 631 lodge and village rooms during the first quarter of 2013 averaging 20,009 rooms for the first quarter with a rest par of $119. Remaining room additions in 2013 are likely to be weighted more towards the end of the year.

Accommodations revenues are expected to decline sequentially as a result of the breakup in Canada and continuing softer occupancy levels at certain villages in Australia. We expect to see improvements in Canada and Australia by the third quarter of 2013. However, at this point, we are not forecasting a material improvement in our US accommodations utilization.

Total revenues for the second quarter showed range between $250 million and $260 million. EBITDA margins are expected to range from 38% to 40% due to seasonally lower utilization of our mobile camp access, although full-year margins should be within our long-term margin guidance of 41% to 43%.

I might transition to offshore products in this segment we generated $201 million of revenue and $36 million of EBITDA during the first quarter. Sequentially revenues and EBITDA decreased 15% and 12% respectively primarily due to a high level of connector products shipments in the fourth quarter of 2012 which normalized during the first quarter of 2013. Our EBITDA margin for the first quarter was 18%.

We booked $260 million in new orders during the first quarter of 2013. And reported backlog of $564 million at March 31 2013, up slightly from year end. Noteworthy backlog additions in the quarter included large subsea pipeline equipment orders for Brazil and West Africa.

The global outlook for our offshore products business continues to be strong. Particularly for subsea pipeline and floating production facility products. Active bidding and quoting activity coupled with our healthy backlog levels provide good revenue visibility for the remainder of 2013. Pipeline product sales are expected to accelerate in the second quarter and revenues are projected to increase in total $205 million to $215 million. EBITDA margins will be dependent upon the revenue mix, but are projected to be 18% to 19%.

In our well site services segment we generated revenues of $178 million and EBITDA of $54 million in the first quarter of 2013 compared to $172 million and $56 million respectively in the fourth quarter of 2012. Revenues exceeded our first quarter guidance and were driven by a seasonal uplift in our Canadian completion services business and contributions from the Tempress acquisition completed in December 2012 partially offset by lower utilization in our land drilling business. US drilling and completion activity was soft during the first quarter of 2013 which had a negative impact on our drilling rig utilization. Revenues from our completion services business increased 5% sequentially to $137 million and EBITDA increased 1% to $44 million when compared to the fourth quarter of 2012.

The number of tickets issued during the first quarter increased 3% sequentially and revenue per ticket improved 2% when compared with the fourth quarter 2012. We are seeing signs of improved activity in certain basins that should help our completion services business contribute to sequential growth in the second quarter.

We did add a new rig to our Rockies drilling plate under a long-term contract during the first quarter. However, a total of five drilling rigs remain stacked primarily in the Permian Basin. We estimate that second quarter revenues for our well site services segment will range between $185 million and $200 million with EBITDA margin of 32% to 33%.

During the first quarter of 2013 tubular services generated revenues of $394 million compared to $455 million in the fourth quarter of 2012 which is typically our strongest quarter. This sequential decrease was primarily due to fewer deep-water shipments in the first quarter and a competitive pricing environment given industry inventory levels. However, tonnage shipped was only down 3% sequentially. Gross margin as a percent of revenue was sequentially flat at 5.1%.

Industry inventory levels as measured by the OCTG situation report now stand at approximately six months supply. We have witnessed pricing and margin pressure due to higher levels of industry inventory, strong import volume, and increasing US mill capacity. The company's OCTG inventory decreased by $29 million on a sequential basis, totaling $422 million as of March 31, 2013, almost entirely due to decreases in mill pricing. As of March 31, 2013 approximately 87% of our tubular inventory was committed to customer orders. We expect our tubular services segment to generate revenues of between $375 million and $400 million in the second quarter of 2013 with gross margins ranging from 5% to 5.5%.

In summary our first-quarter results showed some improvement on a sequential basis, despite a soft economic environment. Our results in the second quarter of 2013 will be impacted by seasonal decline and accommodations activity in Canada which is expected to be temporary.

Our medium-term outlook remains positive as we continue to seek room count expansion opportunity in our accommodations segment which are supported by longer-term customer contracts. With our ongoing capacity expansions and strong backlog levels in our offshore products segment, we are well-positioned to benefit from secular growth in deep-water spending. Demand for our proprietary completion services equipment continues to outpace the US rig count and we're optimistic that activity will improve as the year progresses. Particularly given higher activity levels late in the first quarter of 2013. We remain disciplined in our allocation of capital and are focused on achieving the best return on investment for our shareholders.

That does complete our prepared comments. Christine would you open up the call for questions and answers at this time?

Thank you we will now begin the question and answer session.

(Operator Instructions)

Blake Hutchinson, Howard Weil.

Good morning.

Hello, Blake.

Hi. Cindy, just want to get a little deeper clarification on your comments around the second-quarter accommodations weakness and mainly in Australia we always know it's calming in Canada. It would appear if we take past years that maybe the commentary around weakness is maybe 80%. Just you know the typical Canadian seasonality with another 20% from Australia is that something ballpark?

Well I am going to kind of elaborate around the major message there as a relates to Australia. We're really focused, I'd say, primarily on two villages in the region. We talked about one obviously starting about third quarter or fourth quarter, I forget which, which was related to what I'm going to call a more marginal operating mind that did shutdown. Most of the other Met coal mines are highly prolific and profitable at current Met coal pricing and that particular facility just because of that closure we are not really seeing, expecting a ramp back up certainly in the second quarter and unsure of the third. The second facility right now is in the Gladstone region around LNG and I just view this as very transitional where we've ended some of the initial contracts that were associated with early work.

We are in conversations with another major customer that we think is likely to solidify into a contract and kick off in the third quarter. So again, we are going to see softer utilization in Australia, but right now I'd tell you I see some improvement coming by the third quarter, in that market. But most of what we are assessing right now is that one facility because of the mine closure, would like to see higher Met coal pricing to get that to firm up, but again we are not talking about a huge variation just because it is limited to those two facilities right now. Your comments are right. You know most of what we are talking about is Canadian seasonality and with a little bit of a shift more towards in-situ and sagd you are going to see a little more seasonality in the numbers that we have kind of moderated a bit once we acquired the Mac. I don't have that quote-unquote broken out between the two, but I will just say directionally what you're saying makes sense.

Okay. The commensurate drop in margins is simply reflective of the fact that you actually do see visibility further out in those Canada and Australia and so you really cannot make the changes temporarily to manage to your typical margin range around those.

Well, that is exactly right. Well obviously we're highly attentive to the cost at any time. As you drop that seasonal element a lot of the seasonal is more rental oriented and less of the fully integrated facility. So they carry pretty high margins quite frankly, so I am going to say part of that is just mix oriented as much as anything else.

Okay and then lastly, the US commentary was the weakness centered around kind of just under utilization at your new major open camps? Or is it just kind of a general commentary on sluggishness of the business in the US in general?

Again it's more focused in the Bakken region it's centered around mobile camp assets that actually go out with the rigs to the drilling sites. Less so around lodge facilities in the US. There is a distinction for us. And what happened in 2012 the Bakken was a pretty strong market and it attracted quite frankly a lot of capacity. What we are seeing is obviously modestly down rig count that's exasperated by capacity which is led to both utilization weakness and pricing decline. It won't surprise you to know that we are all over it trying to sustain our utilization and if that means moving some of those assets into other markets to accomplish that, we will do so.

Thanks I appreciate the time and I'll turn it back.

Thank you, Blake.

Jeff Spittel, Global Hunter Securities.

Thanks, good morning, all. Maybe if we could start off in the rental tools aspect of the business. Things have obviously been holding up pretty well relative to the rig count owing your mix of products and the portfolio I guess. Is it conceivable with a little bit of an uptick in activity from the second quarter forward that we could have seen the bottom in terms of EBITDA margin from the first quarter on that business?

We will have a little bit of impact in the second quarter of the Canadian seasonality but generally I would think that from a margin perspective, the second quarter will be our weakest.

Okay. And switching over sorry to make you address this again, but there still seem to be some differing opinions. I know you answered the question on the last quarterly call with respect to evaluating MLP a REIT structure something along those lines, my interpretation of your answer on the last call was, your conceptually receptive to it but the timing given the growth trajectory the accommodations business didn't necessarily lead you to conclude that it made a lot of sense from a timing perspective now. Has anything changed over the course of the last few months? Or is that still a pretty accurate assessment?

That is generally true. There are really two issues that we've addressed and that is one, we've grown the business pretty successfully over the last three years, and so and that hits on your timing point. We didn't think it was the appropriate time, that being said as I mentioned on the last call, when we have been presented, or discovered, or become aware of possible structures that would be advantageous to the shareholders we've evaluated those and that has not changed. Thus far we have not found a structure that readily works for various reasons for our business. That would be either an MLP or a REIT but again as we become aware of possibilities as you'd hope and expect us to do, we evaluate those. So the short answer I guess Jeff is it has not changed. But we continue to be focused on doing what we can to improve and provide returns to the shareholders.

Thanks appreciate the color guys.

Jim Wicklund of Credit Suisse

Good morning.

Hello, Jim.

Cindy, everybody was falling all over themselves to jam assets of all kinds in oil fill service into the Bakken a year ago. And building permits were delayed in all, what's happened to the Bakken? Is this spreading to the Eagle Ford?

I do not see speeding to the Eagle Ford at this stage, and we talked to a lot of our customers in the Bakken and most people are kind of calling for a flattish market. We started off in, I'd say the first quarter with it a little weaker than flattish in my opinion. Again a lot of what's impacting us specifically is more capacity than it is activity. Activity's not terrible, but in my own view I think we optimized a lot of the play in terms of extended lateral number of stages completed, and now we are just carrying out the plan. I do not know how much more incremental improvements that our customers can make in the play relative to what they have seen over the last 18 months or two years. Is still a very strong market overall, and one that we're obviously going to be heavily participating in. But is just kind of hard to say that it's growing at this point. And I just don't see that with my customers, Jim.

These are mobile camps, can you move them, would you move them, and if you did where?

Oh no absolutely I try to address that on the call. What's impacting our results more specifically in the Bakken are the mobile assets that actually follow the rigs, if we see continuing over capacity in pricing pressure the obvious way to tighten that up is number one, everybody quit building the assets and two relocate it to markets where there is more demand and that is part of our focus this year.

Let me switch gears from my last question. On the land rig side I know this is a huge business for you guys, but what is your outlook for rigs and rates through the course of the year with all of the discussion we've had over the last several months about US rig count?

Well as you know the large majority of our rigs are concentrated in the Permian Basin. That is a basin that is very exciting it is undergoing growth right now, but it is very transitional as well. Whereas what was historical a vertically drilled shallow market is transitioning into a deeper horizontal play and there is a lot of obviously new and exciting areas to drill out there. Because of that transitional nature, I think operators are refocusing capital, they're re-looking at new areas of play, new leases, and they're demanding a different type of equipment, the new equipment that's generally being bid and ordered in that play are 1500 horsepower rigs where as a lot of the equipment that is out there is typically lower horsepower, more shallow, and a decent amount is vertical.

What I expect to see right now, again these, will be largely work for the large independents and some of the majors in that market. I think they're capital dollars aren't going to continue to go to the high-end work and then there is generally a shift back to footage drilling and private companies that will, I think focus on the vertical play. I kind of think of it as somewhat transitional, but as we said in our notes, we've got five rigs stacked, they are our more shallow rigs, and we don't have visibility yet of those going back to work, so we are guiding to a soft Q2 for those drilling assets. It is hard for me to give you a lot of color for the larger drilling companies simply because we are narrowly focused in two markets with our assets.

Okay. Cindy thank you very much, thanks Bradley, thank you very much.

Thank you Jim.

Collin Gerry, Raymond James.

Hello, good morning, all.

Hello Colin.

Just to follow-up on the accommodation side, you've kind of talked the last couple of quarterly conference calls, the activity shift in Canada going for the mining to the more sagd development, and your business following suit. Just curiously, does the same margin pricing kind of timing of a return or payback period exist in the sagd market versus the mining market? Or are there any competitive issues that change with that move?

Just a couple of comments there, the margins are very good, and this is a business that we are very good at. I will say it's a little more competitive at times both from customers owning their own facilities, and other competitors if you have to deploy a 200 to 500 bed facility it's a little easier to manage than 5000. That's kind of the landscape. I will say there is a little bit of a mix impact from a Rev PAR stand point, just because there is a lot more capital deployed in our major lodge and village rooms because of the extent of the infrastructure; i.e. spending, capital investment, and the site that occurs that you have less of that with a mobile facility obviously. Therefore the rates are a bit lower to get the same economic impact and rate of return for us. Both are very good aspects of the business.

Okay. And then just switching gears. I am always intrigued about what is going in the OCTG market as a barometer for the market's expectation for rig counts and so forth. Your inventory has been coming down handsomely since the third quarter, obviously I would think that is a source of cash for you guys, maybe talk a little bit about your spending anticipation. Do you think inventories would start rising? Or are we going to continue to bleed them a little bit lower? And maybe just, what the overall feel on the OCTG distribution market is right now?

Yes, I will comment on that, and then ask Bradley to tag in, but as you know I think we said on our call, our inventory was down about $30 million sequentially almost all of that was price driven. We do not know when we are going to find a floor on OCTG pricing you know I've got to think it's not far away because the mills are announcing price increases and have been for the last three months. They are just not sticking. I think what that means is everybody is kind of vying for market share i.e. I'm talking about the mills right now. With that they're willing to accept lower pricing right now. At some point they have to focus on profitability and return. And I think you are going to find a floor on that. Right now you've got two dynamics that could impact it, but I would say, generally our inventory is likely to be flat to down certainly in Q2 because of the pricing. However, that could be offset by the need for some deep-water strings depending upon timing of our customer's order activity. Those are the two major dynamics that we'd be looking at Bradley do you have any other comments?

No, just further to your point, we did generate about $90 million worth of operating cash flow out of tubulars in the first quarter and that's typically what happens it's a little bit of countercyclical. The earnings usually proceed the cash flow, and up cycle that is what you saw from '12 to '13, it's going to be the EBITDA was stronger in '12 than it likely will be '13, but the cash flow in a '13 tubulars will be very strong.

And then that actually brings up a interesting point I wanted to ask about, from a financial perspective. Obviously last two or three years for you guys have been colored by high growth, high CapEx were kind of dialing that back this year. And when markets kind of flatten out I tend to think that working capital becomes a source of cash for you guys. Long-winded way of asking, does this provide any opportunity to go to the debt markets to do any refinancing? Any there any sort of balance sheet kind of switching around or paying down debt? Anything over the next 12 months that you foresee?

Well we have really, we've got three revolvers one in the US, Canada and Australia. The Australian revolver was the only one that had any draws on it at the end of the third quarter or I'm sorry first quarter. That will get paid off in the second quarter. Then you've got the two term loans one in the US, one in Canada. Those are very inexpensive floating rate debt. I think we certainly could, we have evaluated that but at borrowing at somewhere between 2.25% and 3.25% depending on whether it's US or Canada.

I don't think the shareholders would generally want us to pay down that cheap debt as it's a permanent reduction in overall availability. Then we've got the two senior notes the first one's not callable until 2014. The next one is not callable until; let me think probably, 2016 or '17, so I forget off the top of my head. I think in terms of capital allocation, our first priority has always been organic growth provides the best returns, that being said, in a flattish market environment those opportunities may be sparse. But we will certainly, that would be our first choice we continue to look for acquisitions that fit into our strategic direction. If we can price those appropriately we'd look at that. We weigh that very consistently against the opportunity to buy back stock. We have $187 million left on our share repurchase program we've always been a big fan of being opportunistic and buying back stock.

Very good color. Thank you very much. I will turn it back.

Stephen Gengaro, Sterne Agee.

Thanks, good morning.

Good morning, Stephen.

I guess two things, one as it pertains to the US businesses on the completion side. Are you seeing any signs and may have missed a little bit of the beginning of the call, but any signs of improvement in the market since the beginning of the year and sort of year end to now?

Yes, Stephen and I will comment on that and I tried to touch on that in my prepared comments. You know everybody I see on the street, and us included January and February were uninspiring months for this business, and we visibly saw some improvement I will call it late in the quarter. I don't know if that was early March or of that timeframe, and so again as we progress throughout the quarter, we were improving. That is just factually correct. As we stand in April, we are kind of continuing the trend that we saw in March. That leads me to say, if these market conditions do continue throughout the second quarter, we are likely to be up sequentially just a bit.

Okay. That is helpful. And then the other one was just as you think about the opportunities up in Canada from a growth perspective and I guess the accommodations in general, how do you think about the next 12 to 18 months from a backdrop perspective? And what you're hearing from customers? You know we have seen a project up there canceled, but there is a couple more which seem to be moving forward. Can you frame your thought process on the next several quarters?

Yes, the best that I can. I think that we'll be improving stronger activity in the in-situ region; again it's not just our thinking and our bidding you hear that commentary from the major players up there. The economic return are more sound and obviously the capital deployed is a little bit easier to do. And so that is going to an active area that continues in my view certainly next year or two. It is hard to say otherwise. SunCor continues to focus on Fort Hill. The best information I have is what the street has they talked about a potential, I hate to say likely, because we have been talking about this a long time. But a Q3 sanction is what is being at least contemplated at this stage.

And you know in the region that we are talking about, there's quite a list of projects that are there that do cause us to continue to be fairly opportunistic about continued growth in the region, so that's the landscape for Canada. But obviously there's a lot of discussion, also around LNG and won't surprise you that we are focused on that. And are going to try to benefit from that if and when it does develop. If we go down to Australia, you know I think the announcement that we had on the Boggabri Village, is indicative that are, there has always been a landscape of investment opportunities in that country that is attractive and it's very visible, the question is, when do you kick them off? That was delayed just a bit because of the reduction in Met coal pricing not too surprising, but some customers are moving forward, and as we told you that is contracted work. It makes us feel pretty good. One may say, well gee why are you adding capacity when you have softer utilization in another one? My answer is they our 1100 km away. (laughter) When you operating obviously in the regions we do, you take advantage of the growth opportunities when they come. And obviously we'll do what we can to stabilize and improve utilization in the other facilities. The way I look at it, we are growing that asset base and the earnings power of that asset base is favorable long-term for us.

Okay. Great. That is helpful. Thank you.

Thank you Stephen.

Daniel Burke, Johnson Rice.

Good morning everyone.

Good morning Daniel.

The offshore's products business has escaped scrutiny so far, so I guess I will focus there. Really two questions, first of all, if I heard correctly it looked like you took the 20% end of the EBITDA margin long-term target off for Q2. Was curious what would be a driver of that? Then more practically in terms of backlog and mix in the press release, did not see much reference to floating production related items. So was wondering how floating production related projects are now flowing through both current revenue and what the proportion of backlog mix they comprise?

I will take the first half and comment a little bit on the second half. And then see if Cindy has any color. That was the 18% to 19% guidance for the second quarter is the lower end of our long-term guidance. But still within it. That doesn't change our long-term guidance of 18% to 20%. This quarter it is more mix related of what is going to flow through. We expect to flow through the revenue stream in the quarter. And, tried to give a little bit tighter range this quarter so we did not have the group kind of expecting the high end of the range and ultimately being disappointed when we thought it is probably more likely we're going to be in that 18% to 90% range. We tightened it up a little bit that doesn't change our long-term view.

I think you've hit the nail on the head in terms of what's happened over the last couple or several quarters. And that is that late 2010 early 2011 we saw a lot of major floating production facilities get sanctioned. I won't give an exhaustive list, Big Foot, Jack St. Malo, Mars B, Tompi Tierra, and BC 10 phase II, and so we did have a lot of that work kind of earlier in this part of the cycle, it is non-shifted more to subsea we have not seen a lot of floating production facilities get sanctioned here recently. They are still out there, as we've cautioned people I think for several quarters, these are major projects they are going to be more internationally focused. And ultimately this is more probably my opinion I won't speak for the group is that, because they are larger, because they're more international they are more susceptible to timing slippage. I think that's fairly consistent with what are peers have said and seen. We are still optimistic on the floating production facility outlook, as Cindy said in the past I think the outlook is so robust that is probably more likely we are to see some of these timing delays. But we are still optimistic on what we think we can garner in terms of work over the next several years. As the production facilities activity start to pick back up. Cindy do you --

I think the only thing Daniel I might add to that, Bradley hit on it very well. A lot of the floating production facility awards came late 2010, 2011. We've talked in the past that in 2012 there were less of that and more of the kind of the deck equipment, subsea product type activity coming in our backlog. I will only comment that a lot of those are highly engineered projects that you have to go through the engineering phase and the procurement phase before that translates into revenue. What you are seeing with us hitting the lower end of that margin range the last couple of quarters, I think can be attributed to you can call it mix, you can also just call it the lead time necessary for engineering and procurement. Again, we're still very optimistic very bullish about it long-term, there just some unique dynamics to the business because of the nature of what we do.

Very helpful. And then if I could append a simpler second question. On the accommodations progression from Q1 to Q2 normal Canadian camp seasonality I think you all did a great job describing what's going on in the US market and Australian market, but then to be clear in the Canadian Lodge market is your expectation outlook consistent with where it was last quarter?

I would have to say yes to that. We've got, -- if I look across the major lodge facilities we've got continuity of our customer base, in those lodge facilities; BREL, Athabasca, Wapasu, Henday there will be seasonal impacts at Conklin and Anzec. Just want to make sure your focused on that, but in terms of customer base and contracts in place that type of thing, very consistent in my view I'm kind of looking for Bradley to see if I missing anything.

No. I think we are right on track. As I gave last quarter kind of full year Rev PAR numbers on the total Lodge and village business in the $111, $112 per day range that stays consistent with $119 in the first quarter that implies the Rev PAR will be lower in the last three quarters and that is consistent. I do not think there's been any, there has not been any change other than a good first quarter, generally for the lodge and village business. With a caveat of some softer occupancy in Australia that Cindy mentioned, and we anticipated. Generally the story is playing out thus far as expected. To be honest, I was pleased to get Boggabri announced as early as we did. And at a number that was at the upper end of my expectation, so in terms of rates.

Okay great, well thank you very much.

Thank you.

Cole Sullivan of ISI group

Hello, good morning.

Hello, Cole.

Most of my questions have been answered. The only one that I just wanted some clarity on, as we look at the rest of the sort of 1200 to 1500 room expectation for this year of incremental room growth, A, is that still valid, and then two, do you see some more of these additional incremental lodges or villages? Or is it more expansionary sort of projects that you see to get since you are already about 850 rooms into that with the announcement so far this year? Is it kind of some smaller projects out there that you can see? How do you think about that?

Our guidance hasn't changed I'll confirm it. The guidance for room growth this year, year-end to year-end is still 1200 to 1500 rooms across in total across Canada and Australia. There are a couple opportunities for what I think you are referring to as add on rooms to existing locations that we are working on. Then as a mentioned on the last call there's still opportunity we are working on for a new location in the in-situ region that we're still optimistic we will be able to get done and announced. As Cindy mentioned, as a result of, the net result of that is, most of the room additions including the Boggabri additions are back end weighted so it's going to be a lot of fourth-quarter additions.

Okay. And then just a follow-up on that, the, as we look at the 2Q sort of average rentable rooms. That probably ticks slightly higher but generally flattish?

Yes we are basically getting the benefit of a full quarter availability of a handful of rooms. So the number is 20,100.

All right. That is it for me. I will turn it back.

Thanks Cole.

(Operator Instructions)

John Ellison BB&T Capital Markets.

Good morning thank you for taking my questions. I wanted to start off you know we are seeing a lot of increase service intensity of active rigs essentially more wells per rig. I wanted to know if that is offsetting any of your price degradation?

Well so we have seen greater rig efficiency over the last several years, and as a result you have seen volumes both for our completion services and our tubular services business generally out paced the changes in the US rig count, and I think that is a combination of just that rig efficiency as well as growth in the overall complexity of the completion and that is more of a completion services comment. That being said, I would generally say that as we moved into '13 we had been cautioning people that the rate of that efficiency gain and our specific ability to outpace the rig count was slowing. I think Cindy made some comments earlier just to that effect. That you know the ability to outpace the rig count for those businesses is starting to tick down. But generally, we are benefiting from the increases in complexity.

In terms of the pricing comments, you know our pricing position in completion services has been very strong really, quite frankly. We have had revenue per ticket in 2012 that bounced due to mix somewhere between 10,200 and 10,800 this quarter was pretty strong at over 11,000. And so that is generally indicative of a pretty good mix it's not universal across all of the markets you can imagine the dry gas markets have been pretty challenging. But because of our ability and our footprint to move equipment and personal around, fairly efficiently, we have been able to maintain and move to areas where the pricing was better. Because of our proprietary mix of products we have been able to hold that pricing pretty firm, so.

Got you. All right. Thank you. Lastly in accommodations we have been seeing a lot of cost issues in Australia especially on LNG projects. Causing some delays in some cancellations. I wanted to know if this is pressuring room rates for new builds in the region?

You know I think you are talking specifically about Browse which is on the Northwest shelf that Woodside made the announcement over the last month or so, and just realize we have only one small facility open on the northwest shelf, it will support a large variety of activity in the region, and we have actually it's in the Karratha region we've seen our occupancy improve. We just opened that last year. Right now, I mean I don't know what to comment on that, it certainly not impacting I think you are saying new build capital cost, or room rate, but the answer's no there is enough offsetting demand from other activities in the region, and realize that Browse was very much prospective work, now I think the industry as a whole we are going to say we are disappointed with that cancellation, but it has no I think short-term or really long-term impact on that one small facility that we have open on the shelf. That area is a very remote, high-cost area to do business. And so I don't anticipate that you know you are going to see a change in our revenue generating capability in the region. I just have a tough time seeing that because we have got to get enough economic return for the investment that we make as well.

Okay. Thank you so much for the color.

Thank you John.

We have no further questions at this time. I will turn the call back over to Oil States.

Well I want to thank all of you for joining us on the call today. It's a complicated quarter and -- but our outlook is firming I think as we move forward and we appreciate all of the familiar names on the call and your interest in our company. We will be talking to you soon. Thanks so much.

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