Oil States International Inc (OIS) 2017 Q3 法說會逐字稿

Welcome to the Oil States International Third Quarter 2017 Earnings Conference Call. My name is Victoria, and I will be your operator for today's call. (Operator Instructions) Please note that this conference is being recorded.

And I'll now turn the call over to Patricia Gil, Investor Relations for Oil States.

Patricia, you may begin.

Thank you, Victoria, and good morning, and welcome to Oil States' Third Quarter 2017 Earnings Conference Call. Our call today will be led by Cindy Taylor, Oil States' President and Chief Executive Officer; Lloyd Hajdik, Oil States' Executive Vice President and Chief Financial Officer; and Chris Cragg, Oil States' Executive Vice President, Operations.

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 10-K along with other SEC filings.

I will now turn the call over to Cindy.

Thank you, Patricia. Good morning, and thank you for joining us today for our third quarter 2017 earnings conference call. Last week, we issued a press release updating our earnings guidance due to impacts from Hurricane Harvey. Hurricane Harvey and historically low levels of deepwater spending impacted our offshore/manufactured products segment during the third quarter. However, we were able to report a 16% EBITDA margin in the quarter and maintained a quarterly book-to-bill ratio of 0.99x. Despite some transitory impacts from the hurricane, our U.S. land completion services revenues increased 6% sequentially, in line with growth in the third quarter average U.S. rig count, and represented 78% of our third quarter completion services revenues.

As further described in our press release, we reported a net loss of $0.27 per share during the quarter after adjusting for $0.01 of severance and other downsizing charges and $0.02 related to a discrete tax item. Lloyd will take you through more details of our consolidated results and also provide highlights of our financial position. I will follow with more details by segment and provide additional comments on our market outlook.

Thanks, Cindy, and good morning, everyone. During the third quarter, we generated revenues of $164 million while reporting an adjusted net loss of $13.7 million or $0.27 per share, which excluded $0.01 per share of severance and other downsizing charges and $1 million of additional tax expense or $0.02 per share due to our decision to carry back our 2016 net operating losses against taxable income reported in 2014, which resulted in a loss of certain of the deductions that we had claimed previously. Third quarter adjusted EBITDA totaled $9.2 million, and our adjusted EBITDA margin was 5.6%. We generated $31 million of cash flow from operations during the third quarter and invested $7 million in capital expenditures.

For the first 9 months of 2017, we invested $20 million in CapEx, and we estimate that our 2017 capital expenditures will range between $30 million and $35 million. We utilized our third quarter free cash flow, which is after CapEx, to pay down our revolving credit facility by $31 million, net of borrowings.

And for the first 9 months of 2017, we generated a total of $56 million of free cash flow, utilizing $13 million for M&A activities, $16 million for share repurchases and $27 million for revolving credit facility repayments, net of borrowings.

As of September 30, our total debt totaled $20 million, while our cash on hand exceeded our total debt by $46 million. We ended the third quarter of 2017 with total liquidity of $213 million, which is comprised of $147 million available under our revolving credit facility plus cash on hand of $66 million. In terms of our fourth quarter 2017 consolidated guidance, we expect depreciation and amortization expense to total $26.2 million, net interest expense to total $1.1 million and corporate cost to total $12.6 million. Our fourth quarter 2017 consolidated effective tax rate benefit is expected to average approximately 28%, resulting in a full year effective tax rate benefit of approximately 26%.

And at this time, I'd like to turn the call back over to Cindy, who will take you through the details of each of our business segments.

Thank you, Lloyd. In the following segment comments, the term adjusted EBITDA excludes severance and other (inaudible) charges. In our well site services segment, we generated another quarter of sequentially improved results, with revenues up 11% quarter-over-quarter, totaling $77 million, and adjusted segment EBITDA up 31%, totaling $7 million. These sequential improvements were driven by a 2% increase in the number of completion services jobs performed, a 3% increase in revenue for our completion services job and improved utilization for our drilling services business, which averaged 34% utilization for the quarter.

Our well site services segment benefited from ongoing well completion activity as evidenced by a 6% sequential increase in U.S. land-based completion services revenue, in line with the increase in the average U.S. rig count for the third quarter.

Our third quarter results in this segment were moderated somewhat by lower international results, partially offset by improvements in Gulf of Mexico despite some storm-related interruptions during the quarter from hurricanes Harvey and Irma.

Our well site services segment incremental adjusted EBITDA margins were 22% in the third quarter but averaged 47% after severance impacts for our completion services business. Lower segment incrementals resulted from our drilling services business, which incurred higher-than-normal mobilization revenues totaling $2.1 million, which contributed essentially no margin in the quarter. Our year-to-date 2017 completion services incremental adjusted EBITDA margins averaged 43%.

Our fourth quarter 2017 results will be dependent on seasonality in customer drilling and well completion activity during the holiday, which can be difficult to predict. However, at this time, we believe U.S. land-based activity will remain steady at current levels. We estimate that revenues for our well site services segment should range between $76 million and $80 million after factoring out the unusually high mobilization revenue in our drilling services business in the third quarter with segment EBITDA margins of 9% to 11%. This implies about 6% sequential revenue growth in completion services at the midpoint of our guidance.

In our offshore/manufactured products segment, we generated revenues of $87 million and adjusted EBITDA of $14 million during the third quarter of 2017. We reported an adjusted EBITDA margin percentage of 16%, which came in at the low end of our guided range, despite impacts from hurricane Harvey. The 15% sequential decrease in total segment revenues was driven predominantly by a decrease in sales of our standard connector drilling products coupled with decreases in our production and subsea product lines, which are largely manufactured in our Houston facility.

Our shorter-cycle product sales, which are largely driven by U.S. land-based activities, comprised 43% of the segment's revenues during the third quarter. Sales of our short-cycle products decreased 6% sequentially as order inflow was temporarily affected by customer delays and logistical issues, which have now returned to previous levels. Orders booked for the quarter totaled $86 million, resulting in a book-to-bill ratio of 0.99x. Backlog totaled $198 million at September 30, essentially unchanged over the last 4 quarters.

Our third quarter bookings included a larger backlog addition involving a multiyear services contract for a customer in Latin America. We continue to believe that our backlog is at trough levels and expect to receive additional awards associated with major project sanctions over the next couple of quarters. Demand for our short-cycle products is expected to remain steady given the outlook for U.S. land completions activity for the remainder of the year.

Major project-driven revenues are expected to improve in the fourth quarter as we return to post-hurricane production levels in Houston with fourth quarter revenues in the segment estimated to increase sequentially and range between $90 million and $100 million, while EBITDA margins are expected to average 15% to 16%.

In conclusion, despite impacts from Hurricane Harvey, our total company results still came in near the low end of our previous guidance. Fourth quarter results for our U.S. land-centric services and manufactured products are expected to remain steady, barring any significant seasonality or holiday downtime. We continue to anticipate improved major project order flow for our offshore/manufactured products segment over the next quarter and into 2018. That completes our prepared comments.

Victoria, would you open up the call for questions and answers at this time.

(Operator Instructions) Our first question comes from Jim Wicklund from Credit Suisse.

Cindy, you talked about customer delays and logistical issues. Can you be a little more detailed or granular on what the logistical issues were? And if the customer delays -- was that due to weather or other issues?

Well, if you're talking about the Houston region broadly, I would kind of focus on 2 things. Number one, we had our own issues, obviously, for roughly 10 days in our 5 manufacturing facilities, one of which was flooded with work relocated to other ones. So most of that -- I really focus on -- is very quantifiable, cost absorption-type issues that virtually anybody that manufactures in the city had. You could see the pictures and I think understand that. When you talk about certain things like supply chain was disrupted that -- and also impacted some of our ongoing major project work.

The one that's harder to define is shorter cycle. Meaning we had a lot of distribution centers in Houston where we ship our short-cycle products. I can't conclusively tell you exactly how much is the deferred revenue related to hurricanes, but I live here. And so common sense tells you if you can't drive in a street of Houston, they're not going to be receiving a lot of products in the distribution facility. And that's why we've been reluctant to specifically quantify a number. The direct impacts are pretty clear. When you pay people for work -- when they're not at work, the indirect effects are a lot harder to quantify. And again, that's kind of why we hadn't put a precise number. But that gives you a little color on major project impacts in our facilities as well as some of the shorter-cycle impacts.

And this is why you think the major project revenues will improve in Q4 and into '18? It's not because of increased activity or business, it's just you won't have those issues in Q4?

Yes. There's 2 things going on in Q4 we're guiding to improve revenues. One is going back to normal operations in our Houston-based manufacturing operations where we know we had revenue deferrals for about 10 days. And so we see improvement in those Houston-based operations, just recovering roughly to 10 days that were lost and catching up on some of the major product work. We also had unrelated timing delays in our standard connectors, which can be lumpy quarter-to-quarter. But we [see I think] some of the shipment from Q3 and Q4 that we expect. Those are the 2 major things that results in our revenue forecast improving fairly considerably from Q3 to Q4.

Okay. You guys had spent $13 million on acquisitions so far. The complaint everybody has is the stocks are back where they were when oil was $26, which is a little ridiculous. I was just wondering if the valuation out there on potential acquisitions is seen as improving. I know that we talked a couple of quarters ago about how private equity and the IPO market was pricing things out of reasonable reach. Now the IPO market appears to be somewhat moribund and the stocks evaluations have come down. Is the M&A market improving any at all? Or do you expect it to?

Well, we are seeing what I would call a higher rate of inbounds. And some of these we probably had ongoing discussions and we do believe that valuation discussions are more reasonable. And I would put this more in line with what we would call normal M&A value discussions. I know you know that I thought we got almost irrational valuation discussions early this year, but I think that sense of normalcy has returned. That doesn't mean you're going to buy a really high-quality operation at basement pricing; that's not the case. But I think the valuation discussions have come into a much more -- a minimal range.

Okay. And my last, if I could. You put several rigs back to work this quarter and we've been hearing for some while that the only rigs that are going back to work are super-spec, high-end, top-of-the-line rigs. And you put 3 back to work. Can you talk to us just a little bit about what the rig market seems to look like?

And we're very versatile. We do have a lower-spec rig fleet, if you want to call that, geared more to our vertical drilling. But they do have high-end, brand-new equipment on there, which allows them to do things like top-hole drilling very efficiently at a much lower cost for even some of the horizontal wells. We're just doing the early work. And so I think a lot of people in this low crude oil price environment are getting very smart on how to optimize their all-in AFE cost.

And so we've got some demand -- while we don't have the high-spec horizontal rigs, we've got some demand and support from 2 things. Number one is a little bit of top-hole horizontal work. We also do saltwater disposal wells, which are facilitating horizontal work. And we've been in business a long time and are good operator at a low cost. And we have legacy customers that tend to take us with them when the work justifies it. And I would just generally say, that's kind of the 3 things I would point to in terms of improved utilization.

I did want to point out the mobilization revenues because that much mode revenues -- and it is indicative, as you say, of incremental rigs going to work and it can be positioning at a greater distance. And while we don't make a profit on that, it's incremental. We get reimbursed for our cost and allows us to improve that utilization. It can, just given the significance in this quarter, hurt our margins a little bit in the quarter. And I don't want to scare everybody in thinking we're not guiding to much of an improvement in Q4 because we don't expect the same rate of mode revenue in Q4 that we had in Q3.

Okay. I'm going to cheat and throw in one more. If I play out on the back of an envelope, your EBITDA guidance for next quarter appears to be a little bit below consensus. Without discussing complete numbers, does that sound rational?

Well, it does. I would almost challenge anybody on the call to tell me what market data point would lend itself to about 10% revenue growth and materially expanded margins from what we've had in 3Q. And so we're progressing well. It's a difficult environment. I look every day at my incrementals. But our incrementals and completion services have been at or above what we guided the market to. We have met or exceeded rig count metrics in the U.S., acknowledging that while fairly small, international has dragged us down a bit this year. Our book-to-bill, we guided to 1 or better. We're at 1 to-date. In our offshore/manufactured products, we expect improved bookings in Q4. And I think the resilience of our offshore/manufactured products in a very difficult environment has been acceptable. And so again --

I think it's exceptional more than acceptable. I think it's more exceptional than acceptable considering the business.

Yes. I appreciate that so very much. But I'm well aware that at the midpoint -- and I'll also point out, we tightened our guidance range for well site services. There has been a tendency for everybody to go at the tight end of a fairly wide range, which may be part of what's leading to, first of all, getting a little bit ahead of us. And so, again, we're trying to respond to that, tighten the range. But nonetheless, I always study my business and we've shown sequential revenue improvement in completion services every quarter since the second quarter of last year, which, as you point out, was a low crude oil price environment. So I think we're getting there. But I'm also very cognizant of the fact that our shareholders need to see some year-over-year improvement in '18, and we're highly focused on that.

Our next question comes from Sean Meakim from JPMorgan.

Cindy, I was just hoping to maybe get a little more detail on the completion services business, just how product mix within the segment is tracking and have any influence in pricing mix? And the negative -- the other part of that equation is how the Gulf of Mexico outlook would be for fourth quarter and into next year? Just thinking about how all those pieces fit together.

Yes. I appreciate the comments. We're continually seeing some migration to our more proprietary product lines. I think that's why you're kind of continually seeing our average price per ticket increase because there's some modest, I'll call it, mix improvement at that time. As it relates specifically to isolation and our frac stack work, both of them saw some improvement in the third quarter. And so I think those trends are occurring. It can always be a little bit -- what company is active in the quarter and what is their preferred completion method. Again, a lot of the conversations this quarter are, are we doing the high-end pad drilling and multistage completions, zipper fracs, so -- regarding it. So we all experience a little bit of give-and-take. But the macro trend towards higher-end equipment I think is continuing.

Okay. Good. Okay. That makes sense. And then just on the product business. I'm just thinking about larger projects -- putting aside from the catch-up that you experienced this quarter, as your customers are getting to budget season for 2018. What are kind of the main factors that you're looking for to get a sense of getting orders in the bank here in the first half of next year? Is it oil prices, kind of where Brent is today? Is it suspicion where you think you'll sort of see good year-over-year improvement at bookings? Just kind of what are the key things you're looking for as we get into 2018?

Well, we're very granular in our products business. and these are very specific projects, specific geographies that, at this point in time, if I've got it in my bookings forecast, it's probably based on lower Brent pricing than what we're seeing today. So the movement -- and again, I'm global with my offshore/manufactured products. So we tend to look more towards global pricing, Brent pricing as the driver there. And so I would say the recent improvement in price is a little bit of an upside. The things that are in our near-term forecast were largely predicated probably on -- $50 Brent would be my guess at this point in time. But I really think a lot of these have come down to reengineering, redesigns with a lower long-term price point. We can all guess as to what that is, because the reality, this production doesn't come on for 4 or 5 years. And so it's not -- these projects are really not dependent on near-term spot pricing for Brent. However, I think optically, the macro environment, as inventory continues to trend down and we see a little bit of improvement not only in Brent but also in WTI prices, I think that will be helpful as we move through what is now becoming deep in our customers' budget cycle.

Our next question comes from Stephen Gengaro from Loop Capital.

The -- on the well site services side, can you just clarify. You talked about the mobilization revenues in the third quarter that had an impact that helped the number. Did you quantify them? Did I miss that? Or did you not want to specifically?

The mobilization revenue in Q3 was $2.1 million at 0 margin or roughly 0 margin. I would say a more normal level is $800,000 or $900,000 in a given quarter. Sometimes you make a few thousand dollars. Sometimes you lose a few thousand on those mobes. But that's a point of reference for drilling services mobes.

Okay that's helpful. And as you kind of look from here -- I mean, obviously the balance sheet's in very good shape. Where do you stand on potential repurchases at these levels?

Well, there's 2 major capital allocation opportunities that we have, that we routinely look at, which are both share repurchases and M&A. And I'll tag into my comments with Jim. We're seeing more M&A inbounds than we think valuations are coming in at, at least a reasonable level. As I've said consistently for 2 years that with our totally reduced size, through this downturn we need scale. And so right now, if we can get a reasonable M&A valuation, our focus is clearly on trying to close some transactions. That doesn't mean we're opting out of share repurchases. But there's a limited amount of liquidity available, again, at trough levels of activity, and so we have to be selective in terms of which way we go. So I still favor share repurchases at certain points, but heavily, heavily focused on growth and scale.

And just one final one. As we think about the completion services side well site, how would you think about growth relative to rig count growth in the next several quarters, given there's backlog of uncompleted wells? I mean, some of which probably don't ever get completed. But it would seem to maybe give you a little bit of a boost relative to the rig count in the next couple of quarters; is that fair? Or would you back me off that thought?

No, Stephen, I think it's very fair. I forget the statistic I read the other day. The rig count has been kind of flat to down in Lower 48 for 10 of the last 16 weeks. That's not a great macro. However, in the process, we -- through the first 9 months, we've built quite a lot of drilled but uncomplete wells. The estimate I was provided was about 7,300 drilled but uncompleted wells. I'm not sure why you said some of those may never be completed. I don't really think that's the case. But what that can do is sustain activity through kind of that flattening of the rig count we've seen over the last 16 or 17 weeks. That would be my view.

Our next question comes from George O'Leary from TPH & Co.

Just curious to expand on Jim's question a little bit on the M&A front. I guess maybe you could characterize the deals you've done so far that Jim has pointed out have been a little bit smaller in nature. If the deals you're looking at now are maybe a little bit larger and then what end markets those transactions would fall into? And then where you would most like to execute M&A, if your desires are matching with what's potentially on the table.

I will not tip my hand to all those sellers and businesses, but I'm joking, of course. So your first question, you're right. We've done, I think, $13 million. These are really very small product line enhancements within our offshore/manufactured products that we think help all -- they're not game changers by any means. We do like tuck-ins in both businesses. And there are some tuck-ins that we're looking in, in Chris's business in the completion services space.

Broadly speaking, as I've said before, we will look at both our major segments or additions there. I would say that the more visible near-term opportunity is going to be in completion services oriented towards shale activities. The visibility there is, obviously, fairly clear. We're very experienced in deepwater markets and in our own product lines. And so we can I think selectively identify opportunities there as well. But we're standing by our criteria in terms of high technology, defensible product lines that generate fairly immediate contribution. And I think today, if I'm being intellectually honest, we're seeing more opportunities geared towards completion services at this point in time.

That's very helpful color. And then you mentioned -- and you can see it in the size of the job tickets, that mix is a little bit of a tailwind for the completion services business. I get the sense that pricing is still kind of stuck in neutral. Any green shoots on the pricing front? Or any thoughts around if this momentum continues? At what point -- about how long the runway is before pricing may kick in, in that business?

Obviously -- it's probably an obvious comment that -- where we have a tightness of equipment and where our people are stretched thin, those are areas where we're going to push for some selected price increases, which we are doing. It's not broad-based at this point in time. But I would say, generally speaking, the market is tightening or had been, again, kind of rig count flattening from here. We've got to evaluate that just a little bit. But there's going to be opportunities. But I -- it would be a mistake to assume that broad-based, significant, double-digit-type pricing is going to occur in the near term. I just don't see that.

Sure. That makes sense. And maybe if I could sneak one more. And I thought the multi-year services contract in Latin America comment was interesting. Could you provide a little bit more color on the nature of that work? Offshore versus onshore? Just any, from a middle quality, could provide? That would be helpful.

Well, it's absolutely offshore. That's in our offshore/manufactured products business, which is leveraged to offshore activity. And I'll just generally say we've made some investments, particularly in Brazil, and we are looking to get a return on those investments. And we love service work. It's -- there's lower risk in service work and generally good margins there. So we're really trying to enhance our global operations. And if not -- hugely material but it's greater than $10 million, so we wouldn't be highlighting it. And so we're pleased to have it.

Our next question comes from Ken Sill from SunTrust.

Jim asked most of the good questions early on. But we've talked about M&A. You're talking about trying to move up the value chain or into higher value-added products on the well site completion production services, but the job tickets only being up 2%. I guess you're kind of looking for rig count plus growth. Should we be inferring that the job ticket number should be going up a little faster Q4 versus Q3 because of hurricanes? Or I don't want to get ahead of reality here.

Our overall guidance was, I believe, up 6% Q3 to Q4 in total. And that is mostly weighted to Lower 48. And so I would say part of that -- there -- in well site, there wasn't broad-based hurricane impacts, but the Gulf of Mexico and the Eagle Ford, plus just personnel dislocations. We had probably 9% to 10% of our workforce that had flooded homes, some of which rotate obviously even into the Permian. And so a little bit of an impact there. But I think more so, it's activity-based and it's generally what we're seeing at the trends right now in the market.

Yes. And then, we don't want you to get out your crystal ball. There's a lot of calls that deepwater is where you want to be now, because it's going to get better. I think some people maybe more optimistic than I am. But you look out several years, it seems like you're going to need more deepwater. Do you kind of have an opinion -- I'm kind of looking at, you know, you got a lease sale in Brazil where Exxon has been in before. Majors are there. Mexico opening up. The Gulf of Mexico's got a lot of people.

What international offshore reasons do you think have the prospect of improving sooner than others, if you were to weigh the probabilities?

Well, that's an interesting question. We -- as I've said on earlier calls, if we're looking at kind of our major project award opportunity -- while smaller and longer-term history, it's up a lot from where we've been the last 2 or 3 years. That has been no single customer or no single geographic basin that's driving kind of the near-term award opportunities. I've always said that if the Gulf of Mexico can get a tailwind, it moves faster because of the operator -- the breadth of operators that are there and the infrastructure that is there. There's a lot of interest in Mexico. I think that's going to take a little while, but there's certainly a lot of interest there.

Brazil is a unique market because they got great rocks. And they -- the operators had good success there. As you mentioned, the lease sale there and they've come in with better economic terms for the operators and they reduced or eliminated some of the local country content requirement. So it's very clear that they're trying to accelerate activity after probably 3 years of the term well that they have been in. So it's hard for me not to favor activity in Brazil over the longer term just because of recent actions and quality rocks. But I don't think that's immediate, although there will be incremental work relative to the levels we've seen before. That's not to penalize any other market, but I would say, it's more -- in the Americas, there are certain things in Asia, but they're more project-specific. But no secret everybody's watching award activity for (inaudible).

Our next question comes from Vaibhav Vaishnav from Cowen.

Just in terms of offshore orders. So let's say that Latin American order was about $10 million, call it $10 million. So base order goes $75 million. Is this a good number? A baseline number to think of going forward?

So I think what I heard you say was -- is the -- or I think, what was our order...

86.

$86 million. Is that a good rate run order flow? And I think our only comment there, we're expecting bookings in Q4 from that level. And even the order, the bookings at this quarter, i.e. third quarter, we felt like there was some hurricane-impacted order delays there as well, part of which we think will pick up in Q4. So it's kind of hard. You never know why did the order you thought would come in, in Q3 not come in yet. But we think that a lot of the disruptions may have caused part of that. But we are clearly forecasting improved order flow in Q4.

Okay. And I guess if you go back to earlier comments like last quarter's comments. There were like couple of awards that you are guys expecting. I'm guessing that's the award you're referring to in the fourth quarter?

I'm not sure I understood the question.

Like if we go back to last quarter's call, it's called -- I think there were like 2 awards that you guys were hoping to get in the second half. And I just want to confirm that. When you speak about fourth quarter orders being higher, those are the 2 awards that you were talking about? Or are there any more in the pipeline?

One of the awards that was forecasted by us came in, in Q3. That is the service order we're talking about. There are 1, possibly 2, that we're looking for in Q4. However, timing is uncertain, but we are counting on at least 1.

And one last question, if I may. Hurricane impacts. Any lingering impact going forward? Or is that all outside that one facility, which is still under water?

We don't really -- embedded in our guidance is the thought that we responded to the activities. That manufacturing facility is still down because we're testing and in some cases replacing machinery that was damaged there. We have the luxury, if you want to call it, of having multiple facilities. And in this case, it's a subsea product offering that we've been able to shift into our other facility temporarily. We got the machining capability, the assembly and testing capability in our South Houston operations. So we believe that we're not going to have lingering impacts, even though one of the facilities is still down at this point. And I don't have a targeted reopening date, but it's not far off. It should be in Q4.

Our last question comes from Chase Mulvehill from Wolfe Research.

This is Harry Pollans stepping in for Chase. So for the 15% to 16% offshore margins, it sounds like the mix is going to have a negative impact in 4Q. Is that fair to say?

Yes. I would say that's it, plus one of our larger facilities is just -- different facilities have different work at given points in time. And one specific facility is a little bit slow right now, that's having a bit of a drag on the margin. But there's no trim line issue there at this point in time. If we get the bookings that we're hoping for, I think our margins will be very resilient going into 2018.

Okay. And would that mean 4Q is kind of the bottom of the margins here in the offshore/manufactured products?

Well, at margin percentage, possibly. But again, we are predicting improved revenue as well. So a little bit of an offset there.

Okay. So on a percentage basis?

Percentage, yes.

Okay. And then, any offshore color you could provide on '18 top line or margins? Or are you not ready to do that

No, not ready to do that. We're already going in our budget cycle. We've had a history of really giving quarterly guidance, simply because so much of our well site services business is a spot business dependent upon the rig count. I wish I were as good as all you guys in predicting the rig count in second half next year. But I'm not quite there yet. So -- but we are in the process of formalizing our budgets and plans, and we'll give you an update on the next call.

All right. And just one more. For completions, you said you're seeing kind of a migration towards your higher-end products or proprietary products. Are you seeing a meaningful improvement in pricing on completion services because of this?

Yes. I think we spoke to that. Right now, it's more of selected basins where they're tightened -- tied. It's not necessarily broad-based. But there is some ability to improve pricing in selected markets.

There are no further questions at this time.

All right. Thank you very much to all of you that dialed into the call. Victoria, thank you for hosting it. And just more on a positive note, beautiful weather in Houston, October is great, and go Astro. Bye-bye.

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